Company: OCEA
Filing Date: 2025-04-08
Form Type: 10-K
Source: 0001641172-25-003155
Chunk: 1502

Company: Ocean Biomedical, Inc.
Filing Date: 2025-04-08
Form: 10-K
Item: Item 10
Chunk 1502
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discussed within Note 7, Senior Secured Convertible Notes, in May 2023, the Company entered into a securities purchase agreement
with an accredited investor for the sale of up to three Senior Secured Convertible Notes (each, a “Note” and collectively,
the “Notes”), which Notes are convertible into shares of the Company’s common stock, in an aggregate principal amount
of up to $27.0 million, in a private placement. On May 25, 2023, the Company consummated the closing for the sale of (i) the initial
Note in the principal amount of $7.6 million (referred to in this Report as the “2023 Convertible Note”) and (ii) a warrant
to initially acquire up to 552,141 additional shares of the Company’s common stock with an initial exercise price of $11.50 per
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