OCEA 10-K & 10-Q changes, risk factors and insider trading

Ocean’s independent registered public accounting firm included an explanatory paragraph in its audit report on Ocean’s consolidated financial statements asfor ofthe year ended December 31, 2023,2024, stating that Ocean’s working capital deficit and anticipated losses from operations and Ocean’s need to obtain additional capital raised substantial doubt about Ocean’s ability to continue as a going concern.

To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, your ownership interest will be diluted. In addition, any debt financing may subject us to fixed payment obligations and covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable intellectual property or other rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. We also may be required to seek collaborators for any of our product candidates at an earlier stage than otherwise would be desirable or relinquish our rights to product candidates or technologies that we otherwise would seek to develop or commercialize ourselves. Market volatility and unforeseen events, such as the COVID-19 pandemic and the conflict between Russia and Ukraine, could also adversely impact our ability to access capital as and when needed. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or one or more of our other research and development initiatives. Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline.

Any third parties conducting aspects of our preclinical studies, clinical trials or manufacturing process will not be our employees and, except for remedies that may be available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our preclinical studies and clinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the preclinical or clinical data they obtain is compromised due to the failure to adhere to our protocols or regulatory requirements or for other reasons or if due to federal or state orders or absenteeism due to the COVID-19 pandemic or other such crises they are unable to meet their contractual and regulatory obligations, our development timelines, including clinical development timelines, may be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory approval of or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

Our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such a material system failure, accident or security breach could result in a disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data from an of our clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Additionally, during the COVID-19 pandemic, there have beenwere a number of security breaches relating to companies providing or developing treatments or vaccines related to COVID-19. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed.

We identified a material weaknessweaknesses in the Company’s internal control over financial reporting. If our remediation of thisthese material weaknessweaknesses is not effective, or if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal internal controls over financial reporting in the future, we may not be able to accurately report our financial condition or results of operations.

In connection with Legacy Ocean’s preparation and the audits of its historical financial statements, and the Company’s preparation and the audit of its financial statements as of December 31, 2024 and 2023, the Company identified a material weaknessweaknesses as defined under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and by the Public Company Accounting Oversight Board (United States) in its internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s financial statements will not be prevented or detected on a timely basis.

The Company is working to remediate the material weaknessweaknesses and is taking steps to strengthen its internal control over financial reporting such as the Company’s hiring of Jolie Kahn as its Chief Financial Officer in the first quarter of 2024. Additionally, the Company plans to further develop and implement formal policies, processes and documentation procedures relating to financial reporting, including the oversight of third-party service providers. The actions that the Company is taking are subject to ongoing executive management review. If the Company is unable to successfully remediate the material weakness,weaknesses, or if in the future, we identify further material weaknesses in our internal controls over financial reporting, we may not detect errors on a timely basis, and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, as a public company, we will be required to file accurate and timely quarterly and annual reports with the SEC under the Exchange Act. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from Nasdaq or other adverse consequences that would materially harm our business. In addition, we could become subject to investigations by Nasdaq, the SEC, and other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation and our financial condition, or divert financial and management resources from our core business.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually. InIf addition,we ourare independentno registeredlonger publicconsidered accountingan firmEGC, then we will be required to attesthave an toaudit of the effectiveness of our internal controls over financial reporting pursuant to Section 404, however they will not be required to do so for so long as we are an EGC.reporting. We could be an EGC for up to five years. An independent assessment of the effectiveness of our internal controls over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls over financial reporting could lead to restatements of our financial statements and require us to incur the expense of remediation.

Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Various portions of the ACA are currently undergoing legal and constitutional challenges in the United States Supreme Court. It is unclear how such litigation and other efforts to repeal and replace the ACA will impact the ACA and our business. In addition, the formerfirst Trump administration issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Additionally, Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA. It is unclear whether the ACA will be overturned, repealed, replaced, or further amended. We cannot predict what affect further changes to the ACA would have on our business.

Our principal stockholders and management own a significant percentage of our Commoncommon stock and are able to exert significant control over matters subject to stockholder approval.

Additionally, we qualify as a “smaller reporting company” as defined in Item 10(f)(1)7A of Regulation S-K promulgated by the SEC. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company for so long as the market value of its common stock held by non-affiliates is less than $250.0 million measured on the last business day of its second fiscal quarter, or its annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of its common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of its financial statements with other public companies difficult or impossible.

We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date we give notice of redemption. If and when the public warrants become redeemable by us, we may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding public warrants could force the holders (i) to exercise their public warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, (ii) to sell their public warrants at the then-current market price when you might otherwise wish to hold your public warrants or (iii) to accept the nominal redemption price which, at the time the outstanding public warrants are called for redemption, is likely to be substantially less than the market value of their public warrants. None of the private placement warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.

Our private placement warrants are exercisable for 5,411,000 shares of common stock at $11.50 per share and our public warrants are exercisable for 5,250,000 shares of common stock at $11.50 per shares.share. The Second Street Warrants are exercisable for 511,712 shares of common stock at an exercise price of $8.06 per share, 102,342 shares of common stock at an exercise price of $7.47 per share and 75,000 shares of common stock at an exercise price of $10.34. The additional shares of our common stock issued upon exercise of our warrants will result in dilution to the then existing holders of our common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On February 14, 2023, the registrant consummated the previously announced business combination (the “Business Combination”) pursuant to that certain Agreement and Plan of Merger, dated August 31, 2022, as amended on December 5, 2022 by Amendment No. 1 (as amended, the “Business Combination Agreement”), by and among Ocean Biomedical, Inc., formerly known as Aesther Healthcare Acquisition Corp. (the “Company”), AHAC Merger Sub, Inc., a Delaware corporation (“Merger Sub”), Aesther Healthcare Sponsor, LLC (the “Sponsor”), in its capacity as purchaser representative, Ocean Biomedical Holdings, Inc., formerly known as Ocean Biomedical, Inc., a Delaware corporation (“Legacy Ocean”), and Dr. Chirinjeev Kathuria, in his capacity as seller representative. In connection with the closing of the Business Combination (the “Closing”), the Company changed its name from “Aesther Healthcare Acquisition Corp.” to Ocean Biomedical, Inc.” References to the “Company”, “Ocean Biomedical”, “we”, “us” and “our” refer to the Legacy Ocean prior to the Closing of the Business Combination and Ocean Biomedical, Inc., formerly known as Aesther Healthcare Corp., on a consolidated basis with Legacy Ocean, for periods after the Closing of the Business Combination.

In February 2022, we entered into a Loan Agreement (the “Second Street Loan”) with Second Street Capital, LLC (“Second Street Capital”), pursuant to which we borrowed $0.6 million. The Second Street Loan accrues interest at the rate of 15% per annum, with principal and interest due at maturity. We issued to Second Street Capital a warrant to purchase 312,500 shares of Legacy Ocean common stock, with an exercise price of $11.00 per share, exercisable until February 22, 2026. For a period of 180 days from the closing of our next financing, Second Street Capital has the right to put the warrants to the Company in exchange for a payment of $0.3 million. We were originally required to repay the Second Street Loan on the earlier of (i) 5 business days after our next financing or (ii) November 18, 2022. We recognized as interest expense in Other income/(lossexpense) $0.3 million for the put option in the first quarter of 2022.

In MayApril 2022, we entered into a second the Second Street Loan Agreement2 with Second Street Capital (the “Second Street Loan 2”), Capital, pursuant to which the Company borrowed $0.2 million. The Second Street Loan 2 accrues interest at the rate of 15% per annum, with principal and interest due at maturity. We issued to Second Street Capital a warrant to purchase 62,500 shares of Legacy Ocean common stock, with an exercise price of $11.00 per share, exercisable until February 22, 2026. There is no put option associated with this loan. We were originally required to repay the Second Street Loan 2 on the earlier of (i) 5 business days after our next financing or (ii) November 18, 2022. We recognized as interest expense in Other income/(lossexpense) $0.4 million in the second quarter of 2022 for the warrants issued based on the estimated fair value of the awards on the date of grant.

On September 30, 2022, the Second Street Loan and Second Street Loan 2 were amended whereas the maturity dates were extended from November November 18, 2022 to December 30, 2022. We were required to repay the principal and accrued interest of the Second Street Loan and Second Street Loan 2 the earlier of (i) 5 business days after our next financing or closing of the Business Combination or (ii) December 30, 2022. In consideration of the extensions, we issued to Second Street Capital a warrant to purchase 75,000 shares of Legacy Ocean common stock with an exercise price of $10.20 per share exercisable until September 30, 2026. WeIn September 2022, we recognized as interest expense in Otherother income/(lossexpense) $0.4 million for the warrants issued based on the estimated fair value of the awards on the date of grant.

We recognized a total expense in the amount of $1.1 million as interest expense in Otherother income/(lossexpense) for the fiscal year ended December 31, 2022 for the put option and warrants issued to Second Street Capital of which $0.3 million was for the put option and $0.8 million was for the warrants issued for the year ended December 31, 2022. The warrants issued to Second Street Capital were converted into warrants to purchase our common stock, post-closing of the Business Combination, as described below under “Closing of Business Combination.”

Effective February 15, 2023, the Second Street Loan and Second Street Loan 2 were further amended whereas the maturity dates were extended from February 15, 2023 to March 31, 2023. We were required to repay the principal and accrued interest of the Second Street Loan and Second Street Loan 2 the earlier of (i) 5 business days after our next financing or (ii) March 31, 2023. In consideration of the extensions, we issued to Second Street Capital a warrant to purchase 75,000 shares of our common stock with an exercise price of $10.34 per share exercisable until March 31, 2028. An extension fee of $0.1 million was recorded and $0.2 million was recognized as interest expense in Otherother income/(lossexpense) in our consolidated financial statements for the quarter ended March 31, 2023.

Effective March 29, 2023, we entered into a Loan Agreement with Second Street Capital (the “March Second Street Loan”) pursuant to which we could borrow up to $1.0 million to pay certain accrued expenses. Of this amount, we borrowed $0.7 million. The loan bears interest at 15% per annum and is due as described under “Short-Term Loans” below. We issued a warrant to the lender for 200,000 shares of our common stock, exercisable for five years at an exercise price of $10.34 and will pay up to $0.2 million in loan fees at maturity. Since the Company only borrowed $0.7 million, the loan fee due is $0.1 million at maturity. The estimated fair value of the warrant was $0.7 million that is amortized over the term of the loan. The Company recognized $50 thousand as interest expense in Otherother income/(lossexpense) in its consolidated financial statements for the fiscal year ended December 31, 2023.

Effective March 31, 2023, the Second Street Loan and the Second Street Loan 2 were further amended to extend the maturity dates to May 31, 2023, and we are currently required to repay the loans as described under “Short-Term Loans” below. In addition, an additional warrant was issued to purchase 150,000 shares of our common stock with an exercise price of $11.50 and a loan fee of $0.1 million was charged. We recognized as interest expense in Otherother income/(lossexpense) $0.5 million for the warrants issued based on the estimated fair value of the awards on the date of grant in our consolidated financial statements for the fiscal year ended December 31, 2023.

Effective March 28, 2023, we entered into a Loan Agreement (the “McKra Loan”) with McKra Investments III (“McKra”) pursuant pursuant to which we borrowed $1.0 million. We issued a warrant to purchase 200,000 shares of our common stock, with an exercise price of $10.34 per share, exercisable until March 27, 2028. We are required to pay a $0.2 million loan and convenience fee due upon repayment of the loan. Repayment of the loan is due as described under “Short-Term Loans” below. The Company has to amortize the fair value calculation over the term of the loan on a straight-line basis by days. The estimated fair value of the warrant was $0.8 million that is amortized over the term of the loan. The Company recognized $0.3 million as interest expense in Other other income/(lossexpense) in its consolidated financial statements for the fiscal year ended December 31, 2023, including $0.2 million related to the amortization of debt issuance costs.

We have incurred significant operating losses since inception. Our ability to generate product revenues sufficient to achieve profitability will depend heavily upon the successful development and eventual commercialization of one or more of our current products or any future products. Our net operating losses were $10.2$9.5 million and $16.1$114.5 million for the fiscal year ended December 31, 20232024 and 2022,2023, respectively. As of December 31, 20232024 and December 31, 2022,2023, we had an accumulated deficit of $196.1$205.5 million and $81.6$196.1 million, respectively. Our current current liabilities are $30.0$33.9 million and $12.7$30.0 million as of December 31, 20232024 and December 31, 2022,2023, respectively. The current liabilities consisted of accrued expenses including transaction costs, accounting and legal fees, accrued research and development costs, and short-term loans. We expect that our expense and capital requirements will increase substantially in connection with ongoing activities to commercialize our products in the future.

At Closing, the underwriters for AHAC’s initial public offering (“IPO”) agreed to defer payment of $3.2 million of deferred underwriting discounts otherwise due to them until November 14, 2023, pursuant to the terms of a promissory note (the “Underwriter Promissory Note”). The deferred amounts bear interest at 9% per annum and 24% per annum following an event of default under the promissory note. The Company has a right to pay up to fifty percent (50%) of the principal and interest due on this promissory note using the common stock of the Company at a price per share of $10.56. The remaining fifty percent (50%) of the principal and interest due on this promissory note must be paid in cash. As of December 31, 2023 the Company had not repaid the Underwriter Promissory Note and the outstanding balance of $3.2 million is recorded as a short-term loan in the consolidated financial statements. The Company recorded $0.4 million and $0.3 million of interest expense on the outstanding balance in the Company’s consolidated financial statements for the fiscal yearyears ended December 31, 2023.2024 and 2023, respectively.

We will also pay Elkurt developmental and commercialization milestone payments for each of the Initial Brown License Agreements ranging from $50,000 for the filing of an IND, or the equivalent outside of the United States, to $0.3 million for enrollment of the first patient in a Phase 3 clinical trial in the United States or the equivalent outside of the United States. We are also responsible for reimbursement of patent costs. We recorded reimbursement of patent costs as general and administrative costs in the statements of operations as incurred. For the fiscal years ended December 31, 20232024 and 2022,2023, the Company incurred reimbursed patent costs expenses to Brown University in the amount of $0.1 million andeach $0.2 million, respectively.year. As of December 31, 2024 and 2023, the Company reflected a balance due of $0.1 million in accrued expenses – related parties on its consolidated balance sheet.sheets.

The contract term for the Brown Anti-PfGARP Small Molecules License Agreement continues until the later of the date on which the last valid claim expires or ten years. Either party may terminate the Brown Anti-PfGARP Small Molecules License Agreement in certain situations, including Elkurt being able to terminate the Brown Anti-PfGARP Small Molecules License Agreement at any time and for any reason after NovemberDecember 1,31, 20232025 if we have not raised at least $10 million in equity financing by then.

For the Rhode Island License Agreement, we are required to pay Elkurt $0.1 million, due within 45 days of an equity financing of at least $10 million or May 1, 2022, whichever comes first, and beginning on January 1, 2022, an additional $3,000 annual maintenance fee thereafter, until January 1, 2028, at which point the annual maintenance fee will become $4,000 per year. We are also required to pay Elkurt 1.5% of net sales under the Rhode Island License Agreement. In addition, we must pay Elkurt 25% of all non-royalty sublicense income prior to the first commercial sale, and 10% of non-royalty sublicense income thereafter, in the event that we enter into sublicenses for the subject intellectual property. If net sales or non-royalty sublicense income are generated from know-how products, the amounts otherwise due (royalty or non-royalty sublicense income) shall be reduced by 50%. We will also pay Elkurt developmental and commercialization milestone payments under the Rhode Island License Agreement, ranging from $50,000 for the filing of an IND, or the equivalent outside of the United States, to $0.3 million for enrollment of the first patient in a Phase 3 clinical trial in the United States or the equivalent outside of the United States. For the fiscal years ended December 31, 20232024 and 2022, 2023, the Company has incurred reimbursed patent costs expenses to Rhode Island Hospital in the amount of $0.1 million andeach $0.3 million, respectively.year. As of December 31, 2024 and 2023, the Company reflected a balance due of $0.1 million and $0.2 millionmillion, respectively in accrued expenses – related parties on its consolidated balance sheet. With respect to a July 19, 2024 amendment, we paid Rhode Island Hospital $0.1 million.

The contract term for the Rhode Island License Agreement began February 1, 2020 and will continue until the later of the date on which the last valid claim expires or fifteen years. Either party may terminate the Rhode Island License Agreement in certain situations, including Elkurt being able to terminate the license agreement at any time and for any reason by May 1, 2022, if we have not raised at least $10 million in equity financing by then. Currently, the Rhode Island License Agreement is still in effect and the license agreement has been sublicensed to our subsidiary, Ocean Sihoma, Inc. On July 1, 2022, we amended the Elkurt/Rhode Island License Agreement to extend the termination date to November 1, 2022, to extend the termination dates of the commercialization plan of the Rhode Island License Agreement to an additional one year, and acknowledge the accounts payable due and terms of payment. On AugustJuly 26,18, 2022,2024, we amended the Rhode Island License Agreement to extendeliminate the termination date with respect to Novemberthe 1,equity 2023financing requirement and to extend the termination dates of the commercialization plan of the Rhode Island License Agreement from an additional onethree yearyears to threefive years.

General and administrative expenses for the fiscal years ended December 31, 20232024 and 20222023 included stock-based compensation expense related to the grant by Poseidon, our controlling shareholder, of profits interests in Poseidon to our executives and employees in 2022, the grant of a warrant to purchase common stock to a consultant in 2023, and stock option grants to all of our non-employee directors as of February 15, 2023, accounting, legal and public relations fees, and deferred offering costs from the Business Combination.

Research and development expenses for the fiscal year ended December 31, 20232024 decreased by approximately $7.7$0.7 million compared to the fiscal year ended December 31, 20222023 driven by (i) a decrease ofin stock-basedlicense compensation expensefees of approximately $8.2$0.4 million related to the grant by Poseidon, our controlling shareholder, of profits interests in Poseidon to our executives and employees in 2021, 60% of the profits interests granted were immediately vested and the remaining 40% of the profits interests were amortized over 18 months that were 100% amortized as of August 31, 2022 and (ii) ana increasedecrease in non-employee compensation and other costs of approximately $0.5$0.3 million for license fees and non-employee compensation.million.

General and administrative expenses for the fiscal year ended December 31, 20232024 increaseddecreased by approximately $1.8$5.7 million, compared to the fiscal fiscal year ended December 31, 2022,2023, primarily driven by (i) ana increase in accounting fees of approximately $1.3 million; (ii) an increasedecrease in legal fees of approximately $1.6$2.8 million; (ii) a decrease in accounting fees of approximately $0.7 million; (iii) ana increasedecrease in insurance expense of approximately $0.7$0.2 million; (iv) an increasea decrease in compensation expense of approximately $1.0 million; and (v) ana increasedecrease in stock-based compensation of approximately $0.5 million; and (vi) a decrease in outside services of approximately $0.6 million, partially offset by a decrease of stock-based compensation expense of approximately $2.9 million and other expenses of approximately $0.4$0.5 million.

Other Income/income (Lossexpense)

Since our inception, we have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of products for several years, if at all. To date, we have funded our operations from the proceeds from the issuance of common stock and debt, proceeds from the Backstop Agreement and through self-funding by our founder and have limited current cash on hand to fund our operations. Based on our current operational plans and assumptions, we expect that the net proceeds from the Ayrton Convertible Note Financing and future debt and equity financings which total net proceeds we estimate need to be at least $45.0 million, as well as further deferrals of certain of our accrued expenses and contingency payments due upon the closing of future financings, are required to fund operations through the fourth quarter of 2025. The Company borrowed an additional $1.7 million in March 2023, the proceeds of which were used to pay certain accrued expenses. We consummated the closing for the sale of (i) the initial Note in the principal amount of $7.6 million and (ii) a warrant to initially acquire up to 552,141 additional shares of our 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 “Ayrton Warrant”), which is subject to customary closing conditions, on May 25, 2023.We have up to an additional $7.7 million under the amended Ayrton financing from July 2024. We intend to obtain further equity financing as soon as our financials are fully current. The Company is currently out of compliance with Nasdaq standards due to its failure to file this report and the 10-Q reports for the first and second quarters of 2024.

WeAs of December 31, 2024 and 2023, we also havehad $1.0 million of contingent vendor payments, which are also contingently payable based only upon our first cumulative capital raise of at least $50 million.

These amounts will not be paid if the contingencies do not occur. Since the payment of obligations under these agreements are contingent upon these future events, which are not considered probable as such future events are deemed outside of our control, we have not included these amounts in our consolidated financial statements. During the fiscal year ended December 31, 2023, $0.9 million of contingent compensation was paid and recorded in general and administrative expenses on the Company’s consolidated statement of operations. There were no payments of operations.contingent compensation paid during the year ended December 31, 2024.

We have entered and anticipate we will continue to enter into contracts in the normal course of business with external organizations such as CMOs, CROs and other third parties for the manufacture of our product candidates and to support clinical trials and preclinical research studies and testing. We expect that these contracts will be generally cancelable by us, and we anticipate that payments due upon cancellation will consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. We accrued CMO services in the amount of $0.6$8 thousand and $0.5$0.1 million for the fiscal years ended December 31, 2023 2024 and 2022, 2023, respectively, under the Development and Manufacturing Services Agreement with Lonza in developing the product OCX-253.

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. As of December 31, 2023,2024, our restricted cash balance of approximately $1.0$0.2 million is held in an escrow account .account. We do not have any cash equivalents. Cash used in operating activities was used to pay legal and accounting fees. Accounts payable and accrued expenses of $17.1$16.5 million and $11.9$17.1 million as of December 31, 20232024 and 2022,2023, respectively, were recorded.

In addition to those the risk factors set forth in Part I “Item 1A: Risk Factors” in our Annual Report on Form 10-K for the year ended December,December 31, 2023, 2024, and other reports we filed with the SEC, below are certain risk factors related to the Company and its operations.

As of SeptemberMarch 30,31, 2024,2025, we had $15.6 $10.5 million in principal of indebtedness outstanding, including $9.7$5.2 million in principal amount of a convertible promissory note issued in July2024 2023.and the first quarter of 2025. We have very limited cash resources from which to repay any obligations that a lender requires requires to be paid in cash. Our level of indebtedness could have important negative consequences to you and us, including:

Our ability to meet our payment obligations under our debt instruments depends on our ability to generate significant cash flows or obtain external financing in the future. And, in certain cases our debt obligations may be satisfied by way of a conversion into our common stock, and therefore, our ability to satisfy certain debt obligations is dependent, in part, on the performance of our common stock. In each case, to some extent this is subject to market, economic, financial, competitive, legislative, and regulatory factors as well as other factors that are beyond our control. There can be no assurance that our business will generate cash flow from operations, or that additional capital will be available to us, in amounts sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs. Additionally, events and circumstances may occur which would cause us to not be able to satisfy applicable draw-down conditions and utilize additional funds under the securities purchase agreement entered into in May 2023.2023 and amended and restated in July 2024. If we are unable to generate sufficient cash flows, or the value of our common stock is insufficient to facilitate conversions of debt obligations as may be necessary to service our debt payment obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may be unable to meet our debt payment obligations, which could have a material adverse effect on our business, results of operations, or financial condition.

Our ability to make payments on and to refinance our indebtedness, including our outstanding notes, and to fund intended research and development efforts will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that our business when or if our operations will ultimately generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule or that future borrowings or another source of liquidity will be available to us u in an amount sufficient to enable us to pay our obligations, or to fund our other liquidity needs. If our cash flows and capital resources are insufficient to fund our debt service obligations, or we are unable to identify and execute on another source of outside liquidity, we may be forced to reduce or delay capital expenditures, sell material assets or operations, attempt to obtain additional equity capital or refinance all or a portion of our indebtedness, including the 2023 Convertible Note, on or before maturity. In the absence of such operating results and resources, we could face substantial cash flow problems and might be required to sell material assets or operations to meet our debt service and other obligations. We cannot assure you as to the timing of such asset sales or the proceeds which we could realize from such sales and we cannot assure you that we will be able to refinance any of our indebtedness, including amounts owed under the securities purchase agreement entered into in May 2023 2023,and amended and restated in July 2024, on commercially reasonable terms or at all.

We have funded various of our operations through convertible debt obligations. From time to time we have also issued a number of shares and warrants to acquire services and assets from third parties. To the extent that our debt obligations are satisfied by way of conversions conversions, and we issue additional shares of our common stock to satisfy obligations or in consideration for assets or services these issuances would have a dilutive effect on our existing stockholders.

You should read the following discussion and analysis of our financial condition and results of operations together with Ocean Biomedical, Inc.’s (the “Company,” “Ocean Biomedical,” “we,” “us” and “our”) condensed consolidated financial statements and related notes included elsewhere in this Report and the audited consolidated financial statements and related notes thereto included in Exhibit 99.2 our Amendment No. 2 to Form 8-K10-K filed with the SEC on MarchApril 31,8, 2023.2025. The information contained in this discussion and other parts of this Report include forward-looking statements that involve risks, uncertainties, and assumptions in our business plans, strategy, and related financing. Our actual results could differ materially from the results discussed in or implied by these forward-looking statements. Factors that could contribute or cause such differences include, but are not limited to, the information below and the information discussed in the section titled “Cautionary Note Regarding Forward-looking Statements.”

Our goal is to optimize value creation for each of our product candidates, and we intend to continuously assess the best pathway for each as it progresses through the preclinical and clinical development process—including through internal advancement, partnerships with established companies and spin-outs spinouts or other strategic transactions—in order to benefit patients through the commercialization of these products. Our current active assets are licensed from Brown University and Rhode Island Hospital. Our scientific co-founders and members of our Board of Directors (“Board”), Dr. Jack A. Elias and Dr. Jonathan Kurtis, are both affiliated with Brown University and with Rhode Island Hospital. Our strategy is to accelerate the flow of the academic discoveriesdiscoveries, and the required clinical development required for these product candidates and advance them commercially. The number of potential opportunities at research universities and medical centers is large, but only a small fraction of these opportunities is currently tapped in the market. The gap remains wide wide, and we believe this presents an attractive opportunity for us to become an industry leader by addressing a need to accelerate the advancement of therapeutics that can address significant unmet medical needs. The core elements that we believe differentiate our business model include:

We have incurred significant operating losses since inception. Our ability to generate product revenues sufficient to achieve profitability will depend heavily upon the successful development and eventual commercialization of one or more of our current products or any future products. Our net losses were $5.5 million and $14.1$8.2 million for the three months ended SeptemberMarch 30,31, 20242025. andWe 2023,reflected respectively,net and $9.8income millionof and $97.6$13.0 million for the ninethree months ended SeptemberMarch 31, 30,2024, 2024primarily due to a gain recognized in connection with the Backstop Put Option Liability and 2023,Fixed respectively.Maturity Consideration. As of SeptemberMarch 30,31, 20242025 and December 31, 2023,2024, we had a stockholders’ deficit of $98.1$92.4 million and $90.8$97.6 million, respectively. Our current liabilities are $33.6$26.6 million and $30.0$33.9 million as of SeptemberMarch 30,31, 20242025 and December 31, 2023,2024, respectively. Our current liabilities consisted of accrued expenses including transaction costs, accounting and legal fees, accrued research and development costs, and short-term loans. We expect that our expense and capital requirements will increase substantially in connection with ongoing activities to commercialize our products in the future.

We recognize external development costs based on an evaluation of the progress to completion of specific milestones using information provided to us by our service providers. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. Such amounts are expensed as the related goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivereddelivered, or the services rendered.

Our direct external research and development expenses consist of (or are expected to consist) primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses also include fees incurred under license agreements. We have not allocated and do not expect to allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to specific programs because these costs are or will be deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery as well as for managing our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track their costs by program.

Comparison of the Three months Ended March 31, 2025 and Nine months ended September 30, 2024 and 2023

Research and development expense for the three months ended SeptemberMarch 30,31, 20242025 decreasedwere bybasically $0.3 million,unchanged, as compared to the three months ended September 30,March 2023.31, 2024.

General and administrative expense for the three months ended SeptemberMarch 30,31, 20242025 decreasedincreased by $1.6$0.4 million, as compared to the three months ended September 30,March 2023.31, 2024. The $1.6$0.4 million decrease increase was primarily driven by decreasesincreases in the costs associated with our year-end audit and the filing of (i)our $0.7Form million10-K, since those services were not completed in professionalthe services,prior (ii)year $0.6 million in salaries and wages, and (iii) $0.3 million in insurance and public relations.period.

Other expense for the three months ended SeptemberMarch 30,31, 20242025 decreasedincreased by $6.7 $20.9 million, as compared to the three months ended SeptemberMarch 30,31, 2023.2024. The decreaseincrease of $6.7$20.9 million was primarily driven by (i) a $9.8$18.1 million decrease in the changes in fair values of the Fixed Maturity Consideration and Backstop Put Option Liability,Liability; (ii) $2.7 million increase in transaction costs; and (iii) $1.7 million of redemption premium on debt conversions, partially offset by (i) $0.6a $1.3 million related to loss on issuance of put options; (ii) $0.2 million expense related to the change in fair value of the Virion2024 contribution liability,Convertible (iii) the net loss attributable to equity interest in Virion of $0.5 millionNotes and (iv)SPA $1.8 million related to the loss on exchange of notes.warrants.

Since our inception, we have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of products for several years, if at all. We had no cash inflows from operating activities for the ninethree months ended March 31, 2025. September 30, 2024. Further, as of SeptemberMarch 30,31, 2024,2025, we had minimalno cash and a working capital deficiency of $32.6$23.1 million.

To date, we have funded our operations from the proceeds from the issuance of common stock and debt, proceeds from the Backstop Agreement and through self-funding by our founder and have limited current cash on hand to fund our operations. Based on our current operational plans and assumptions, we expect that the net proceeds from the Backstop Agreement, the Ayrton Convertible Note Financing and future debt and equity financings, including possibly under the Common Stock Purchase Agreement, as well as further deferrals of certain of our accrued expenses and contingency payments due upon the closing of future financings, are required to fund operations into the third quarter of 2024.2025. As of SeptemberMarch 30,31, 20242025, we received $1.4 million in cumulative proceeds from the Backstop Agreement.

Our contractual obligations are expected to have an effect on our liquidity and cash flows in future periods. Under our license agreements with our academic research institution partners, fixed license maintenance fees of $0.3 million are due within 15 days of financing of at least $10.0 million and $0.1 million are due within 30 days of financing of at least $10.0 million. In addition, under these license agreements, we are also required to make payments upon successful completion and achievement of certain milestones as well as royalty payments upon sales of products covered by such licenses. The payment obligations under the license fees are recorded in accounts payable. The payment obligations under the collaboration agreements are contingent upon future events such as our achievement of specified development, clinical, regulatory, and commercial milestones. As the timing of these future milestone payments are not known, we have not included these fees in our condensed consolidated balance sheets as of SeptemberMarch 30,31, 2024.2025. None of these were paid as of SeptemberMarch 30,31, 2024.2025.

Under the management employment agreements, we have salaries and bonuses that are contingently payable upon financing, collectively called contingent compensation, that are contingently payable based only upon our first cumulative capital raise of at least $50.0 million. As of SeptemberMarch 30,31, 2024,2025, we have contingent compensation and bonuses in the amount of $14.8$16.9 million to certain members of senior management as well as $1.0 million in contingent vendor payments. These amounts will not be paid if the contingencies do not occur. Since the payment of obligations under the employment agreements are contingent upon these future events, which are not considered probable as such future events are deemed outside of our control, we have not included these amounts in our condensed consolidated financial statements. None of these were paid as of SeptemberMarch 30, 2024.31, 2025.

We have entered and anticipate we will continue to enter into contracts in the normal course of business with external organizations such as CMOs, CROs and other third parties for the manufacture of our product candidates and to support clinical trials and preclinical research studies and testing. We expect that these contracts will be generally cancelable by us, and we anticipate that payments due upon cancellation will consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. We accrued CMO services in the amount of $0.6 million for the three and nine months ended September 30, 2024 and 2022 under the Development and Manufacturing Services Agreement with Lonza in developing the product OCX-253.

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 SeptemberMarch 30,31, 2024, our unrestricted cash balance was minimal and2025, our restricted cash balance of $0.2$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 $16.6$17.0 million as of SeptemberMarch 30,31, 20242025, willare expected to be paid off utilizing future proceeds from current and future financings, including proceeds from additional closings under the 2024 Convertible Note and future debt and equity financings.

Our consolidated consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America, or orU.S. GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments 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.

We utilized utilized a Monte-Carlo simulation to value the Backstop Put Option Liability and Fixed Maturity Consideration. The key inputs and assumptions used used in the Monte-Carlo Simulation, including volatility, expected term, expected future stock price, and various simulated paths, were utilized utilized to estimate the fair value of the associated derivative liabilities. The value of the Backstop Put Option Liability and Fixed Maturity Maturity were calculated as the average present value over 50,000 simulated paths. We measure the fair value at each reporting period, with subsequent of fair values to be recorded within other income (expense) in our condensed consolidated statements of operations.

Valuation of 20232024 Convertible Note and SPA WarrantWarrants