Company: OCEA
Filing Date: 2025-04-08
Form Type: 10-K
Source: 0001641172-25-003155
Chunk: 2393

Company: Ocean Biomedical, Inc.
Filing Date: 2025-04-08
Form: 10-K
Item: Item 1A
Chunk 2393
---

share of common stock, subject to adjustment, exercisable immediately and expiring five years from the date of issuance (the “SPA
Warrant”).

The
Company has elected to account for the Notes at fair value under the fair value option, under which the Notes are initially measured
at fair value and subsequently remeasured during each reporting period. Changes in fair value will be reflected within other income
(expense) in the consolidated financial statements, except for the portions, if any, related to the instrument specific credit risk
which would be recorded in other comprehensive income.

Further,
the Company concluded that the investor’s right to acquire additional Notes is separately exercisable from the 2023 Convertible
Note and the SPA Warrant. If and when the additional Notes are issued, the Company will evaluate whether to account for such additional
Notes at (a) fair value under the fair value option or (b) an amortized cost. Refer to Note 7, Senior Secured Convertible Notes,
for further detail on the terms of the Notes and potential future issuances.

In
addition, the Company determined that the SPA Warrant was (i) freestanding from the 2023 Convertible Note and (ii) classified as a
derivative liability. Accordingly, upon issuance the SPA Warrant was measured at fair value with an offset to cash proceeds from the
2023 Convertible Note, with the remainder recorded to other income (expense) on the consolidated statements of operations. The
Company reassess the classification of the SPA Warrant at each reporting period and record any changes to fair value as necessary.
To date, there have been no changes in classification.

In
addition to the liabilities recorded for the 2023 Convertible Note and the SPA Warrant, the Company also recorded a liability for
the purchase option within the SPA in favor of the investor (the “Ayrton Note Purchase Option”), which gives the
investor, at its option through 2025, the right to purchase from the Company additional Notes (up to the sum of the aggregate
principal amount) at one or more additional closings. The initial recognition of this liability was measured at fair value utilizing
the Black-Scholes Merton model and the fair value of $0.5
million was recorded to other income (expense) on the consolidated statements of operations. The liability is recorded within
current liabilities on the Company’s consolidated balance sheet as of December 31, 2024 and 2023.