Company: OCEA
Filing Date: 2025-04-08
Form Type: 10-K
Source: 0001641172-25-003155
Chunk: 1901

Company: Ocean Biomedical, Inc.
Filing Date: 2025-04-08
Form: 10-K
Item: Item 13
Chunk 1901
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 upon issuance, the fair value of the debt issuance is amortized over the set term. The estimated fair value
for the equity-classified warrants is determined utilizing the Black-Scholes Merton model, as described below. For the warrant with a
put option, the Company recorded a corresponding liability in its consolidated balance sheets as discussed above.

In
addition, the Company has Public Warrants and Private Warrants that were assumed in connection with the closing of the Business Combination.
They are treated as equity-classified instruments, as discussed below.

The
use of the Black-Scholes Merton model requires management to make the following assumptions:

Expected
volatility: The Company estimates volatility for warrants issued by evaluating the average historical volatility of a peer group
of companies for a period of time equal to the expected term of the warrants.

Expected
term: Derived from the life of the warrants issued and is based on the simplified method which is essentially the weighted average
of the vesting period and contractual term.

Risk-Free
Interest Rate: The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues,
with a term that is equal to the warrants’ expected term at the grant date.

Dividend
Yield: The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend
yield has been estimated to be zero.

The
fair value is recognized on a straight-line basis over the requisite service periods but accelerated to the extent that grants vest sooner
than on a straight-line basis. Forfeitures are accounted for as they occur and requires management to make a number of other assumptions,
including the volatility of the underlying shares, the risk-free interest rate, and expected dividends. Expected volatility is based
on the historical share volatility of a set of comparable publicly traded companies over a period of time equal to the expected term
of the grant.

Prior
to the Business Combination, Legacy Ocean estimated the fair value of its common stock considering, among other things, contemporaneous
valuations for its common stock prepared by third-party valuation firms and prices set forth in Legacy Ocean’s previous filings
with the SEC for a proposed IPO of its common stock that was not pursued by Legacy Ocean. Upon execution of the Business Combination
Agreement in September 2022, the value of the Second Street Warrants was based on the closing price of AHAC’s Class A common stock
as reported on the Nasdaq Global Select Market on the grant date.

Following