Ocean Biomedical(OCEA) - 2024 Q2 - Quarterly Report

Financial Performance and Losses - Net loss for the three months ended June 30, 2024, was $17.234 million, compared to$11.431 million for the same period in 2023[390] - Net loss per common share for the three months ended June 30, 2024, was $0.63, compared to$0.43 for the same period in 2023[390] - The company's net loss for the six-month period ended June 30, 2024 was $17,234, contributing to an accumulated deficit of$200,290[59] - Net loss for the three months ended June 30, 2024, was $17.234 million, compared to$11.431 million in the same period in 2023[65] - Total operating expenses for the three months ended June 30, 2024, were $682 thousand, down from$2,832 thousand in the same period in 2023[65] Equity and Stock Issuances - The company issued 13,257 shares of common stock with a fair value of $83 thousand as consideration for a Marketing Services Agreement in Q2 2023[383] - The company had 34,868,628 shares of common stock outstanding as of June 30, 2024[5] - The company's weighted-average shares of common stock outstanding for the three months ended June 30, 2024, were 27,487,283[390] - The company issued warrants for 511,712 shares of common stock at an exercise price of$8.06 per share and 102,342 shares at $7.47 per share[226] - The company has 600,000 stock options outstanding as of June 30, 2024, with a weighted average exercise price of$10.00 and a remaining contractual life of 1.7 years[55] Licensing and Agreements - The company must raise at least $10.0 million in equity financing by May 1, 2024, to avoid termination of certain license agreements[391] - The company recorded annual license maintenance fees of$12,000 for the six-month periods ended June 30, 2024, and 2023[397] - As of June 30, 2024, the company had $0.1 million in accrued expenses related to license fees[397] - The company entered into an amendment with Virion in September 2024, agreeing to contribute$9.0 million in cash and/or shares to increase its ownership interest to 22%[412] Debt and Financing - The Company received a notice of default for $2.1 million, including$1.6 million in unpaid principal and $0.5 million in accrued interest[413] - The principal amount of the Existing Note is$9.7 million, including Event of Default Interest and Redemption Premium[418] - The Company's available cash must equal or exceed $3.0 million at each Additional Closing, and the ratio of outstanding principal to market capitalization must not exceed 35$27.0 million in Senior Secured Convertible Notes, with an initial note of $7.6 million[200] - The principal amount outstanding under the 2023 Convertible Note was$7.6 million as of June 30, 2024[201] - The Company is required to pay $0.5 million and$1.2 million towards outstanding loans upon the first and second Additional Closings, respectively[204] - The Company recognized $0.1 million and$0.2 million of interest expense on the McKra Loan for the three and six months ended June 30, 2024, respectively[205] - The Company borrowed $0.7 million under the March Second Street Loan with a 15$0.5 million towards outstanding loans upon certain closings[195] - The company borrowed $1.0 million from McKra Investments III in March 2023, with a 15$0.2 million loan fee[193] - The company recognized $0.1 million in interest expense on Second Street Loans for the three months ended June 30, 2024, compared to$0.3 million in the same period in 2023[192] Investments and Acquisitions - The Company acquired a 50% membership interest in Virion for an initial contribution of $4.1 million or 750,000 shares of common stock[40] - The Company increased the liability for the post-closing true-up to$3.2 million and recorded a $1.9 million expense for the change in fair value of the Virion Contribution Liability[40] - Virion incurred a net loss of$1.1 million for the three-month period and $5.6 million for the six-month period ended June 30, 2024, with the company recording its share of the loss as$0.6 million and $2.8 million respectively[41] - The company acquired all outstanding capital stock of Legacy Ocean for approximately$240.0 million in aggregate consideration before transaction and other fees[85] Revenue and Expenses - The company has not generated any revenue since its inception and does not expect to generate revenue from product sales in the foreseeable future[95] - Research and development expenses for the three and six months ended June 30, 2024 included costs for stock-based compensation, initial license fees, annual maintenance license fees, and services agreements[104] - The company incurred $0.1 million in reimbursed patent costs for the six months ended June 30, 2024, down from$0.2 million in the same period in 2023[229] - Stock-based compensation expense for the three-month and six-month periods ended June 30, 2024 was $0.2 million and$0.4 million respectively[54] Cash and Liquidity - The company had minimal cash or cash equivalents as of June 30, 2024 and December 31, 2023[100] - Net cash used in operating activities for the six-month period ended June 30, 2024 was $775, compared to$7,433 in the same period in 2023[71] - The company expects to use proceeds from the Backstop Agreement and future debt and equity financings to fund operations[87] Fair Value and Liabilities - The fair value of the Ayrton Note Purchase Option was recorded at $0.3 million initially but was determined to be zero as of December 31, 2023[209] - The Company recorded a liability of$0.5 million for the Ayrton Note Purchase Option, measured using the Black-Scholes Merton model[139] - Total financial liabilities measured at fair value were $68.4 million as of June 30, 2024[180] - The Backstop Put Option Liability had a fair value of$55.9 million as of June 30, 2024[184] - The company measures the fair value of the Backstop Put Option Liability on a recurring basis, with any fair value adjustment recorded within other income (expense)[120] - The company elected to account for the Notes at fair value under the fair value option, with changes in fair value reflected within other income (expense)[130] Legal and Compliance - The company received notices from Nasdaq regarding non-compliance with the timely filing requirement for continued listing[215] - The company filed the delinquent Form 10-K on November 25, 2024 and intends to file the delinquent 10-Qs as soon as practicable[216] - Vellar claims $6.7 million in Maturity Consideration due to alleged failure to register shares[158] Shareholder and Backstop Agreements - The company is obligated to pay the Backstop Parties an amount equal to the product of 8,000,000 shares less Terminated Shares multiplied by$2.50 upon the Maturity Date[112] - The Backstop Parties have purchased a fixed total of 4,885,466 shares of the company's common stock[113] - The Backstop Parties purchased 3,535,466 shares of AHAC's Class A common stock for $10.56 per share, totaling$37.3 million[154] - The Company issued 1,350,000 newly issued shares to Polar at a per share purchase price of approximately $10.56, totaling$14.3 million[154] - The Prepayment amount was $51.6 million, consisting of$37.3 million for the Recycled Shares and $14.3 million for the Polar Subscription shares[155] - Vellar agreed to purchase up to 8,000,000 shares of AHAC's Class A common stock for$80.0 million[161] - The Company has the right to sell up to $75.0 million in newly issued shares to White Lion[168] - The Company received net proceeds of$1.4 million after selling 143,261 Backstop Shares and paying related fees[157] - The Company may issue up to 19,000,000 Earnout Shares to Legacy Ocean Stockholders based on VWAP triggers[151] Other Financial Metrics - Total assets decreased from $5,501 in 2023 to$1,851 in 2024, with a significant reduction in the investment in Virion from $3,392 to$574[63] - Accounts payable and accrued expenses increased to $17,180 thousand as of June 30, 2024, up from$16,185 thousand at December 31, 2023[185] - The Company recognized a loss on extinguishment of debt of $13.6 million for the issuance of the Sponsor Extension Shares[172] - The Company issued 1,365,000 shares of Class A common stock to the Sponsor in consideration for obtaining extensions beyond the September 2022 deadline[148] - The Company issued Converted Ocean Warrants exercisable for 511,712 shares at$8.06 per share and 102,342 shares at $7.47 per share[149] - The Company converted$1.6 million of the Underwriter Promissory Note into 169,582 restricted shares[174] - The Company recorded $0.3 million in interest expense for the six months ended June 30, 2024[173] - The Company has not included future milestone payments in its condensed consolidated balance sheets[30] - AHAC issued approximately 23,355,432 shares of Class A common stock with an aggregate value of$233.6 million to Legacy Ocean's security holders[147] - The company is evaluating the effect of adopting ASU No. 2023-09, which enhances income tax disclosures, effective for fiscal years beginning after December 15, 2024[134] - The company has recorded a full valuation allowance to reduce its net deferred income tax assets to zero, with no provision for income taxes due to operating losses[106]