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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-39927

 

SEASTAR MEDICAL HOLDING CORPORATION

(Exact name of Registrant as specified in its Charter)

 

Delaware

85-3681132

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3513 Brighton Blvd., Suite 410

Denver, CO

80216

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (844) 427-8100

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value

 

ICU

 

The Nasdaq Stock Market LLC

Warrants, each whole warrant exercisable for one share of Common Stock for $11.50 per share

 

ICUCW

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act ). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of August 4, 2023, the registrant had 18,570,971 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets (Unaudited)

1

Condensed Consolidated Statements of Operations (Unaudited)

2

Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited)

3

Condensed Consolidated Statements of Cash Flows (Unaudited)

4

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

PART II.

OTHER INFORMATION

25

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

28

Signatures

29

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SeaStar Medical Holding Corporation

Condensed Consolidated Balance Sheets

(in thousands, except for share and per-share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

Current assets

 

 

 

 

 

 

Cash

 

$

13

 

 

$

47

 

Other receivables

 

 

 

 

 

12

 

Prepaid expenses

 

 

2,319

 

 

 

2,977

 

Total current assets

 

 

2,332

 

 

 

3,036

 

Forward option-prepaid forward contracts, net

 

 

-

 

 

 

1,729

 

Other assets

 

 

2

 

 

 

2

 

Total assets

 

$

2,334

 

 

$

4,767

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

4,355

 

 

$

1,927

 

Accrued expenses

 

 

1,095

 

 

 

2,245

 

Contingent upfront payment for license agreement

 

 

100

 

 

 

 

Notes payable, net of deferred financing costs

 

 

5,907

 

 

 

1,178

 

Convertible notes

 

 

2,230

 

 

 

 

Warrants liability

 

 

95

 

 

 

 

Total current liabilities

 

 

13,782

 

 

 

5,350

 

Notes payable, net of deferred financing costs

 

 

-

 

 

 

7,652

 

Total liabilities

 

 

13,782

 

 

 

13,002

 

Commitments and contingencies (see Note 10)

 

 

 

 

 

 

Stockholders' deficit (1)

 

 

 

 

 

 

Common stock - $0.0001 par value per share; 100,000,000 shares authorized;
   
18,121,238 and 12,699,668 shares issued and outstanding at June 30, 2023 and
   December 31, 2022, respectively

 

 

2

 

 

 

1

 

Additional paid-in capital

 

 

96,806

 

 

 

91,089

 

Accumulated deficit

 

 

(108,256

)

 

 

(99,325

)

Total stockholders' deficit

 

 

(11,448

)

 

 

(8,235

)

Total liabilities and stockholders' deficit

 

$

2,334

 

 

$

4,767

 

(1) Retroactively restated to give effect to the reverse recapitalization

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1


 

SeaStar Medical Holding Corporation

Condensed Consolidated Statements of Operations

(in thousands, except for share and per-share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

2,007

 

 

$

596

 

 

$

3,791

 

 

$

951

 

General and administrative

 

 

1,743

 

 

 

716

 

 

 

4,540

 

 

 

1,173

 

Total operating expenses

 

 

3,750

 

 

 

1,312

 

 

 

8,331

 

 

 

2,124

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(3,750

)

 

 

(1,312

)

 

 

(8,331

)

 

 

(2,124

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(225

)

 

 

(191

)

 

 

(658

)

 

 

(360

)

Change in fair value of convertible notes

 

 

(100

)

 

 

 

 

 

 

 

 

 

Change in fair value of warrants liability

 

 

480

 

 

 

 

 

 

480

 

 

 

 

Change in fair value of notes payable derivative liability

 

 

 

 

 

601

 

 

 

 

 

 

578

 

Change in fair value of forward option-prepaid forward contracts

 

 

(69

)

 

 

 

 

 

(1,723

)

 

 

 

Gain on sale of recycled shares

 

 

 

 

 

 

 

 

1,306

 

 

 

 

Total other income (expense), net

 

 

86

 

 

 

410

 

 

 

(595

)

 

 

218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

 

(3,664

)

 

 

(902

)

 

 

(8,926

)

 

 

(1,906

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

5

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(3,669

)

 

$

(902

)

 

$

(8,931

)

 

$

(1,906

)

Net loss per share of common stock, basic and diluted

 

$

(0.25

)

 

$

(0.12

)

 

$

(0.64

)

 

$

(0.26

)

Weighted-average shares outstanding, basic and diluted (1)

 

 

14,932,866

 

 

 

7,238,767

 

 

 

13,984,625

 

 

 

7,238,767

 

(1) Retrospectively restated to give effect to the reverse recapitalization

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2


 

SeaStar Medical Holding Corporation

Condensed Consolidated Statements of Changes in Stockholders' Deficit

(in thousands, except for share and per-share amounts)

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Shares

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares (1)

 

 

Amount

 

 

Paid-In Capital

 

 

Deficit

 

 

Deficit

 

Balance, January 1, 2022

 

 

7,238,767

 

 

$

1

 

 

$

73,495

 

 

$

(76,312

)

 

$

(2,816

)

Stock-based compensation

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

4

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,004

)

 

 

(1,004

)

Balance, March 31, 2022

 

 

7,238,767

 

 

 

1

 

 

 

73,499

 

 

 

(77,316

)

 

 

(3,816

)

Stock-based compensation

 

 

 

 

 

 

 

 

345

 

 

 

 

 

 

345

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(902

)

 

 

(902

)

Balance, June 30, 2022

 

 

7,238,767

 

 

$

1

 

 

$

73,844

 

 

$

(78,218

)

 

$

(4,373

)

 

Balance, January 1, 2023

 

 

12,699,668

 

 

$

1

 

 

$

91,089

 

 

$

(99,325

)

 

$

(8,235

)

Issuance of shares - equity line of credit

 

 

378,006

 

 

 

 

 

 

1,108

 

 

 

 

 

 

1,108

 

Issuance of shares - commitment
   fee for equity line of credit

 

 

218,842

 

 

 

 

 

 

1,000

 

 

 

 

 

 

1,000

 

Stock-based compensation

 

 

 

 

 

 

 

 

505

 

 

 

 

 

 

505

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,262

)

 

 

(5,262

)

Balance, March 31, 2023

 

 

13,296,516

 

 

 

1

 

 

 

93,702

 

 

 

(104,587

)

 

 

(10,884

)

Issuance of shares - equity line of credit

 

 

26,993

 

 

 

 

 

 

55

 

 

 

 

 

 

55

 

Issuance of shares - conversion of convertible notes

 

 

3,088,167

 

 

 

1

 

 

 

1,936

 

 

 

 

 

 

1,937

 

Issuance of shares - vesting of RSUs

 

 

153,405

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares - prepaid forward contracts

 

 

1,096,972

 

 

 

 

 

 

558

 

 

 

 

 

 

558

 

Stock-based compensation

 

 

459,185

 

 

 

 

 

 

555

 

 

 

 

 

 

555

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,669

)

 

 

(3,669

)

Balance, June 30, 2023

 

 

18,121,238

 

 

$

2

 

 

$

96,806

 

 

$

(108,256

)

 

$

(11,448

)

(1) Retroactively restated to give effect to the reverse recapitalization

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

3


 

SeaStar Medical Holding Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands, except for shares and per-share amounts)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(8,931

)

 

$

(1,906

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

Amortization of discount on notes payable

 

 

 

 

 

208

 

Amortization of deferred financing costs

 

 

23

 

 

 

 

Non-cash accrued interest related to notes payable

 

 

 

 

 

151

 

Non-cash conversion of accrued expenses into notes payable

 

 

 

 

 

96

 

Non-cash fair value of discount on issuance of notes payable

 

 

 

 

 

(52

)

Non-cash fair value of derivative liability on issuance of notes payable

 

 

 

 

 

52

 

Change in fair value of notes payable derivative liability

 

 

 

 

 

(578

)

Change in fair value of warrants liability

 

 

(480

)

 

 

 

Change in fair value of forward option - prepaid forward contracts

 

 

1,723

 

 

 

 

Gain on sale of recycled shares

 

 

(1,306

)

 

 

 

Stock-based compensation

 

 

1,060

 

 

 

349

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Other receivables

 

 

12

 

 

 

 

Prepaid expenses

 

 

658

 

 

 

(777

)

Accounts payable

 

 

2,428

 

 

 

584

 

Accrued expenses

 

 

350

 

 

 

295

 

Net cash used in operating activities

 

 

(4,463

)

 

 

(1,578

)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of convertible notes

 

 

5,000

 

 

 

 

Payment of convertible notes

 

 

(258

)

 

 

 

Proceeds from issuance of shares

 

 

1,163

 

 

 

 

Payment of commitment fee - equity line of credit

 

 

(500

)

 

 

 

Proceeds from sale of recycled shares

 

 

1,870

 

 

 

 

Proceeds from notes payable

 

 

100

 

 

 

1,681

 

Payment of notes payable

 

 

(2,946

)

 

 

 

Net cash provided by financing activities

 

 

4,429

 

 

 

1,681

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

(34

)

 

 

103

 

 

 

 

 

 

 

 

Cash, beginning of period

 

 

47

 

 

 

510

 

 

 

 

 

 

 

 

Cash, end of period

 

$

13

 

 

$

613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

675

 

 

$

 

 

 

 

 

 

 

 

Supplemental disclosure of noncash financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued as payment of convertible notes

 

$

1,937

 

 

$

 

Shares issued to settle forward option-prepaid forward contracts

 

$

558

 

 

$

 

Issuance of convertible note warrants

 

$

575

 

 

$

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4


Notes to the Condensed Consolidated Financial Statements

(in thousands, except for shares and per-share amounts)

 

Note 1. Description of Business

Organization and description of business

SeaStar Medical, Inc. was incorporated as a Delaware corporation in June 2007, and it is headquartered in Denver, Colorado. The Company is principally engaged in the research, development, and commercialization of a platform medical device technology designed to modulate inflammation in various patient populations. The primary target of this technology is for the treatment of acute kidney injuries.

SeaStar Medical, Inc. is in the pre-revenue stage focused on product development.

On October 28, 2022, LMF Merger Sub, Inc., a wholly owned subsidiary of LMF Acquisition Opportunities, Inc., (“LMAO”) merged with and into SeaStar Medical, Inc. (the "Business Combination"), with SeaStar Medical, Inc. surviving the Business Combination as a wholly owned subsidiary of LMAO. Following the consummation of the Business Combination, LMAO was renamed to "SeaStar Medical Holding Corporation" ("the Company", "we", "SeaStar Medical").

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules and regulations, certain notes or other financial information normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual condensed consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments that are necessary to present fairly the Company’s results for the interim periods presented. The results from operations for the three and six months ended June 30, 2023, are not necessarily indicative of the results to be expected for the year ended December 31, 2023, or for any future annual or interim period.

The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the annual condensed consolidated financial statements and the related notes for the year ended December 31, 2022. There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2022.

The interim unaudited condensed consolidated financial statements include the consolidated accounts of the Company's wholly owned subsidiary, SeaStar Medical, Inc. All significant intercompany transactions have been eliminated in consolidation.

Segment information

The Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein.

Liquidity and Going Concern

As of June 30, 2023, the Company has an accumulated deficit of $108,256 and cash of $13. We do not believe that will be sufficient to enable us to fund our operations, including clinical trial expenses and capital expenditure requirements for at least 12 months from the issuance of these unaudited condensed consolidated financial statements. We believe that these conditions raise substantial doubt about our ability to continue as a going concern.

Our need for additional capital will depend in part on the scope and costs of our development activities. To date, we have not generated any revenue from the sales of commercialized products. Our ability to generate product revenue will depend on the successful development and eventual commercialization of our product. Until such time, if ever, we expect to finance our operations through the sale of equity or debt, borrowing under credit facilities, or through potential collaborations, other strategic transactions or government and other grants. Adequate capital may not be available to us when needed or on acceptable terms.

 

5


Notes to the Condensed Consolidated Financial Statements

(in thousands, except for shares and per-share amounts)

 

If we are unable to raise capital, we could be forced to delay, reduce, suspend, or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results and financial condition. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.

Risks and uncertainties

The Company is subject to risks common to early-stage companies in the medical technology industry including, but not limited to, new medical and technological innovations, regulatory approval requirement, lack of funding and capital resources, protection of proprietary technology, and product liability. There can be no assurance that the Company's products or services will be accepted in the marketplace, nor can there be any assurance that any future products or services can be developed or deployed at an acceptable cost and with appropriate performance characteristics, or that such products or services will be successfully marketed, if at all. These factors could have a materially adverse effect on the Company's future financial results, financial position, and cash flows.

Note 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the period. Significant estimates include the valuation of the forward option on prepaid forward contracts, derivative liability, warrants, provision for income taxes, convertible debt measured at fair value, and the amount of stock-based compensation expense. Although actual results could differ from those estimates, such estimates are developed based on the best information available to management and management's best judgments at the time.

Concentrations of credit risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. The Company has not experienced any losses on deposits since inception.

Fair value option of accounting

Generally, when financial instruments are first acquired and are not required to be recorded at fair value, ASC 825, Financial Instruments (“ASC 825”), allows an entity to elect the fair value option (“FVO”). The FVO may be elected on an instrument-by-instrument basis only at the time of acquisition and once elected is irrevocable. The FVO allows an entity to account for the entire financial instrument at fair value with subsequent changes in fair value recognized in earnings through the condensed consolidated statements of operations at each reporting date. A financial instrument is generally eligible for the FVO if, amongst other factors, no part of the financial instrument is classified in stockholders’ equity.

Based on the eligibility assessment discussed above, the Company concluded that its convertible notes (see Note 7) were eligible for the FVO and accordingly elected the FVO for those debt instruments. This election was made because of operational efficiencies in valuing and reporting for these debt instruments at fair value in their entirety at each reporting date. The convertible notes contain certain embedded derivatives that otherwise would require bifurcation and separate accounting at fair value.

The convertible notes, inclusive of their respective accrued interest at the stated interest rates (collectively referred to as the “FVO debt instruments”) were initially recorded at fair value as liabilities on the condensed consolidated balance sheets and subsequently re-measured at fair value at the end of each reporting period presented within the condensed consolidated financial statements. The changes in fair value of the FVO debt instruments are recorded in changes in fair value of convertible notes, included as a component of other income (expense), net, in the condensed consolidated statements of operations.

 

6


Notes to the Condensed Consolidated Financial Statements

(in thousands, except for shares and per-share amounts)

 

Fair value measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Inputs used to measure fair value are classified into the following hierarchy:

Level 1 – quoted prices in active markets for identical assets and liabilities.

Level 2 – other significant observable inputs (including quoted prices for similar assets and liabilities, interest rate, credit risk, etc.).

Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of assets and liabilities).

The fair value of the forward option on prepaid forward contracts, convertible notes, and the warrants liability, are classified as Level 3 in the fair value hierarchy.

The following table presents the changes in the forward option-prepaid forward contracts, convertible notes measured at fair value, warrants liability, and the notes derivative liability for the six months ended June 30, 2023 and 2022 (in thousands):

 

 

 

Forward Option-

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid

 

 

 

 

 

 

 

 

 

Notes Payable

 

Level 3 Rollforward

 

Forward Contracts

 

 

Convertible Notes

 

 

Warrants Liability

 

 

 

Derivative Liability

 

Balance January 1, 2022

 

$

 

 

$

 

 

$

 

 

 

$

(526

)

Additions

 

 

 

 

 

 

 

 

 

 

 

 

(52

)

Changes in fair value