Company: OCEA
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-011080
Chunk: 11

Company: Ocean Biomedical, Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 2
Chunk 11
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 the date of
cancellation.

Cash Flows

To date, we have not generated
any revenue. Cash flows to date have resulted from financing activities, including payments made on behalf of the Company by related parties
and net proceeds from issuance of shares of common stock consisting of friends and family of our employees and short-term borrowings,
including the initial Note from the Ayrton Convertible Note Financing. As of March 31, 2025, our restricted cash balance of $0.8 million is held in an escrow account. We do not have
any cash equivalents. Cash used in operating activities was primarily used to pay legal and accounting fees. Our outstanding accounts
payable and accrued expenses of $17.0 million as of March 31, 2025, are expected to be paid off utilizing future proceeds from current and future
financings, including proceeds from future debt and equity financings.

Critical Accounting Estimates

Our consolidated
financial statements are prepared in accordance with generally accepted accounting principles in the United States of America, or
U.S. GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, costs and expenses. We base our estimates on historical
experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates
under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2, Summary
of Significant Accounting Policies, to our condensed consolidated financial statements appearing elsewhere in this Report, we
believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our
consolidated financial statements.

45

Valuation Methodologies

Valuation of Backstop Put
Option Liability and Fixed Maturity Consideration

We utilized
a Monte-Carlo simulation to value the Backstop Put Option Liability and Fixed Maturity Consideration. The key inputs and assumptions used
in the Monte-Carlo Simulation, including volatility, expected term, expected future stock price, and various simulated paths, were utilized
to estimate the fair value of the associated derivative liabilities. The value of the Backstop Put Option Liability and Fixed Maturity
were calculated as the average present value over