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Item 5. Market for Registrant’s Common Equity

2023-03-30 compared with 2022-04-06 · 387 added, 13 removed, 1 unchanged (100% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our units, Class A common stock and warrants are listed on the Nasdaq Capital Market under the symbols “LMAOU”, “LMAO” and “LMAOW”, respectively.

Securities Authorized for Issuance Under Equity Compensation Plans

On December 31, 2021 there were 1 holders of record of our units, 2 holders of record of our Class A common stock, and 1 holders of record of our warrants.

We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends in the foreseeable future.

The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our business combination.

The payment of any cash dividends subsequent to our business combination will be within the discretion of our board of directors at such time.

In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future.

Further, if we incur any indebtedness in connection with our business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.

Securities Authorized for Issuance Under Equity Compensation Plans

See “Equity Compensation Plan Information” in Part III, Item 12 of this Annual Report on Form 10-K.

Recent Sales of Unregistered Securities

Purchases of Equity Securities by the Issuer

Our Common Stock trades on The Nasdaq Capital Market under the symbol ICU (formerly LMAO).

As of March 25, 2023, there were 13,296,516 stockholders of record of our Common Stock.

The number of record holders is based upon the actual number of holders registered on our books at such date and does not include holders of shares in street name or persons, partnerships, associations, corporations, or other entities identified in security position listings maintained by depository trust companies.

Dividend Policy

We have not paid any cash dividends on Common Stock to date.

Our Board may from time to time consider whether or not to institute a dividend policy.

It is our present intention to retain any earnings for use in our business operations and accordingly, we do not anticipate the Board declaring any dividends in the foreseeable future.

The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition.

The payment of any cash dividends will be within the discretion of our Board.

Recent Sales of Unregistered Securities and Use of Proceeds

PIPE Financing

On August 23, 2022, following the execution of the Merger Agreement, LMAO entered into subscription agreements with three institutional investors (the “PIPE Investors”) whereby, the PIPE Investors collectively subscribed for an aggregate of 700,000 shares of Common Stock at $10.00 per share, and 700,000 warrants for aggregate gross proceeds of $7.0 million (the “PIPE Financing”).

The PIPE Financing was consummated concurrently with the Closing of the Business Combination.

The shares of Common Stock issued to the PIPE Investors were issued in accordance with the exemption from registration under the Securities Act, under Section 4(a)(2) promulgated under the Securities Act.

The issuance of Class A Common Stock upon the automatic conversion of the Class B Common Stock and the issuance of Common Stock upon the automatic conversion of the Class A Common Stock at the Closing has not been registered under the Securities Act in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.

Convertible Note Financing

On March 15, 2023, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an institutional investor (the “Purchaser”), whereby the Company agreed to sell and issue to the Purchaser, in a series of up to four closings, senior unsecured convertible notes (the “Notes”), convertible into shares of the Company’s Common Stock, par value $0.0001 per share, in a principal amount of up to approximately $9.8 million and warrants (the “Warrants”) to purchase shares of the Company’s Common Stock.

On March 15, 2023 (the “Initial Closing Date”), the Company issued a Note, convertible into 1,207,729 shares of Common Stock at an initial conversion price of $2.70, in a principal amount of $3,260,869.57, and a Warrant to purchase up to 328,352 shares of Common Stock.

At the second closing, the Company will issue and sell to the Purchaser (i) an additional Note in a principal amount of $2,173,913.04 and (ii) additional Warrants to purchase up to 218,901 shares of Common Stock.

At each of the third and fourth closings, the Company may, at its option, issue and sell to the Purchaser (i) additional Notes, each in a principal amount of $2,173,913.04 and (ii) additional Warrants to purchase shares of Common Stock equal to 25% of the Purchaser’s shares of Common Stock issuable upon conversion of the Notes on the applicable closing date.

Pursuant to the Securities Purchase Agreement, the Company must satisfy certain additional conditions in order to sell and issue the additional Notes and additional Warrants at the second, third and fourth closings.

Such additional conditions include, but are not limited to, the effectiveness of a registration statement to be filed by the Company with the SEC to register shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants, and for the third and fourth closings, the approval by stockholders of the Company to issue more than 19.99% of issued and outstanding shares pursuant to applicable Nasdaq Rules.

If the third closing and fourth closing do not occur within the one-year anniversary of the Initial Closing Date, the Company’s right to affect the third and fourth closings shall automatically terminate.

The Notes will be issued at an 8% original issue discount and bear an interest rate of 7%.

The Notes mature fifteen (15) months after their issuance, or June 15, 2024, unless accelerated due to an event of default.

The Notes are redeemable, in whole or in part, at any time at the discretion of the Company.

At the Initial Closing Date, the Company received net proceeds, after the original issue discount and the Purchaser’s counsel fees, of $2.4 million.

The Notes contain standard and customary covenants and events of default.

Such events of default include, but are not limited to, failure to make payments when due, failure to observe or perform covenants or agreements contained in the Notes, the breach of any material representation or warranty contain therein, the bankruptcy or insolvency of the Company, the suspension of trading of Common Stock, and the Company’s failure to file required reports with the SEC.

If any such event of default occurs, subject to any cure period, the Purchaser shall have the right to redeem any portion of the Note for a redemption price, with a certain dollar amount available for conversion, at the Purchaser’s option, into shares of Common Stock.

The Warrants have an initial exercise price of $2.97 per share of Common Stock, are exercisable at any time before the close of business on the day five (5) years after their issuance and contain cashless exercise provisions.

The Notes, Warrants, and shares of Common Stock issuable upon conversion of the Notes and upon exercise of such Warrants, have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and were issued and sold to an accredited investor in reliance upon the exemption from registration contained in Regulation D promulgated under the Securities Act.

Issuer Purchases of Equity Securities and Affiliated Purchases

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

The following discussion and analysis are intended to help you understand our business, financial condition, results of operations, liquidity, and capital resources.

You should read this discussion in conjunction with the Company’s consolidated financial statements and related notes included elsewhere in this Annual Report.

In connection with the Business Combination, SeaStar Medical, Inc.

was determined to be the accounting acquirer.

In addition to historical financial analysis, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions, as described under the heading “Cautionary Note Regarding Forward Looking Statements.”

Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, risks and uncertainties, including those set forth under “Risk Factors”

included elsewhere (or incorporated by reference) in this Annual Report.

Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

to “SeaStar Medical,“

“we,“

“us,”

“our,”

and “the Company”

are intended to mean the business and operations of SeaStar Medical Holding Corporation and its consolidated subsidiaries following the Business Combination.

On October 28, 2022, LMAO consummated a series of transactions that resulted in the combination of LMF Merger Sub, Inc.

and SeaStar Medical, Inc.

pursuant to an Agreement and Plan of Merger.

The Company is a medical technology company developing a platform therapy to reduce the consequences of hyperinflammation on vital organs.

In a normal inflammatory response, neutrophils are the first immune cells to arrive at the site and are key to the entire immune response that kills pathogens and promotes tissue repair.

If the inflammatory response becomes excessive and dysregulated, normal neutrophil die off may be delayed, altering feedback mechanisms that regulate the immune system.

This results in damaging hyperinflammation spreading uncontrollably to other parts of the body, often leading to acute chronic solid organ dysfunction or failure, including heart, lung, kidney and liver diseases.

This hyperinflammatory response is also known as the cytokine storm, referring to the body’s reaction to the category of small-secreted proteins released by hyperinflammatory cells that affect communication between cells.

The cytokine storm, when left uncontrolled, can lead to organ damage and even death.

We are initially using our proprietary SCD technology platform to clinically validate several acute organ injury indications, including kidneys and lungs.

Our investigational SCD is an extracorporeal synthetic membrane device designed to be easily integrated into existing CRRT systems that are commonly installed in hospitals, including in ICUs throughout the United States.

Once approved and commercialized, the SCD would initially target acute kidney injury in both the pediatric CRRT population as well as adults on CRRT.

In addition, we are developing our SCD to address inflammation associated with chronic dialysis and chronic heart failure.

We have incurred net losses in each year since our inception in 2007.

As of December 31, 2022 and 2021, we had an accumulated deficit of $99.3 million and $76.3 million, respectively.

Our net losses were $23.0 million and $4.6 million for the years ended December 31, 2022 and 2021, respectively.

Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

For the year ended December 31, 2022, additional losses were related to the Business Combination, including costs to obtain the forward contracts and the change in fair value of the forward option derivatives.

As of December 31, 2022 and 2021, we had cash of $0.0 million and $0.5 million, respectively.

Our accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business.

Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The recurring losses, working capital deficiency, the need for capital to fund our operations, including clinical trial and regulatory approval expenses, and the amount of cash reserve are factors that raise substantial doubt about our ability to continue as a going concern for the twelve-month period from the date the consolidated financial statements are made available.

See Note 1 to our audited consolidated financial statements for the year ended December 31, 2022 included elsewhere in this Annual Report for additional information on our assessment.

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 significant revenue from the sale of commercialized products.

Our ability to generate product revenue will depend on the successful development and eventual commercialization of our products.

Until such time, if ever, we expect to finance our operations through the sale of equity or debt, borrowings under credit facilities, potential collaborations, other strategic transactions or government and other grants.

Adequate capital may not be available to us when needed or on acceptable terms.

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.

See Part I, Item 1A “Risk Factors”

for additional information.

Key Components of Results of Operations

To date, we have not generated any revenue from the sale of commercialized products.

Revenue has been primarily derived from government and other grants.

We may generate revenue in the future based on payments from future license or collaboration agreements and government and other grants, and, if our products receive regulatory approval for commercialization, from product sales.

We expect that any revenue we generate will fluctuate from quarter to quarter.

If we fail to complete the development of or obtain regulatory approval for commercialization of our products in a timely manner, our ability to generate future revenue and our results of operations and financial position, would be materially adversely affected.

Research and Development Expenses

Since our inception, we have focused our resources on our research and development activities, including conducting preclinical studies and clinical trials, and developing our process and activities related to regulatory filings for our products.

Subject to the availability of additional funding, we plan to further increase our research and development expenses for the foreseeable future as we continue the development of our products.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for employees in executive and finance roles, which also include stock-based compensation expenses and benefits for such employees.

Other significant general and administrative expenses include facilities costs, professional fees for accounting and legal services and expenses associated with obtaining and maintaining patents.

As we continue to expand and grow our operations, we expect that our general and administrative expenses will increase, including for additional expenses relating to new hires, travel, a new enterprise resource planning platform, and branding.

Origination Cost of Forward Contracts

Origination cost of forward contracts consists primarily of consideration related to the forward purchase agreements.

Loss from Operations and Operating Margin

Loss from operations consists of the Company’s gross profit less its operating expenses.

Operating margin is loss from the Company’s operations as a percentage of its net sales.

Other Income (Expense), Net

Total other income (expense), net primarily consists of interest expense relating to interest incurred on our convertible notes, gains from the forgiveness of Paycheck Protection Program (“PPP”) loans under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, gains from early extinguishment of convertible notes changes in fair value of the derivative liability related to the conversion option of convertible notes and changes in fair value of the derivative liability related to the forward option on the prepaid forward agreements.

Net loss consists of the Company’s loss from operations, less other expense.

Factors Affecting the Company’s Operating Results

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges.

Please see the factors discussed elsewhere in this Annual Report, including those discussed in Part I, Item 1A, “Risk Factors,”

for additional information.

Results of Operations

Comparison of Year Ended December 31, 2022 to Year Ended December 31, 2021

The following table sets forth a summary of our results of operations.

This information should be read together with our consolidated financial statements and related Notes included elsewhere in this Annual Report.

($ in thousands)

Operating expenses

Research and development

General and administrative

Origination cost of forward contracts

Total operating expenses

Loss from operations

Total other income (expense)

Loss before income tax provision

Income tax provision (benefit)

Research and Development Expenses

The following table discloses the breakdown of research and development expenses:

($ in thousands)

Clinical trials

External services

Payroll and personnel expenses

Other research and development expenses

General and Administrative Expenses

General and administrative expenses for the years ended December 31, 2022 and 2021 were $6.6 million and $1.7 million, respectively.

The increase in general and administrative expenses of $4.9 million, or 292%, was driven by an increase in payroll expense of $1.9 million, commitment fees for equity line of credit of $2.5 million, an increase in legal fees of $0.2 million, and an increase in insurance of $0.3 million.

Other Income (Expense)

Other income (expense) for the years ended December 31, 2022 and 2021 was expense of $11.4 million and expense of $0.2 million, respectively.

The increase of $11.2 million primarily resulted from a loss in change in fair value of forward option of $10.2 million, a loss in change in fair value of convertible notes derivative liability of $0.6 million, and an increase in interest expense of $0.4 million.

Income Tax Provision (Benefit)

SeaStar Medical recorded a provision for income taxes of $0.0 million for the year ended December 31, 2022, and an income tax benefit of $0.0 million for the year ended December 31, 2021.

Under Accounting Standards Codification (“ASC”) 740-10-30-5, Income Taxes, deferred tax assets should be reduced by a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not (i.e., a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized.

SeaStar Medical considers all positive and negative evidence available in determining the potential realization of deferred tax assets including, primarily, the recent history of taxable earnings or losses.

Based on operating losses reported during 2022 and 2021, the Company concluded there was not sufficient positive evidence to overcome this recent operating history.

As a result, we believe that a valuation allowance continues to be necessary based on the more-likely-than-not threshold noted above.

A valuation allowance of $23.8 million and $18.2 million was recorded for the years ended December 31, 2022 and 2021, respectively.

During the year ended December 31, 2022, SeaStar Medical had a net loss of $23.0 million compared to a net loss of $4.6 million for the year ended December 31, 2021.

The increased net loss of $18.4 million primarily resulted from increases in general and administrative expenses of $4.9 million, increases in research and development expenses of $0.1 million, origination cost of forward contracts of $2.2 million, and increases in other expense of $11.2 million during the year ended December 31, 2022.

Liquidity and Capital Resources

Sources of Liquidity

To date, we have financed our operations primarily through the sale of equity securities and convertible debt and, to a lesser extent, through grants from governmental and other agencies.

Since our inception, we have incurred significant operating losses and negative cash flows.

As of December 31, 2022 and December 31, 2021, we had an accumulated deficit of $99.3 million and $76.3 million, respectively.

As of December 31, 2022 and December 31, 2021, we had cash of $0.0 million and $0.5 million, respectively.

We expect that our existing cash will be insufficient to fund our operations, including clinical trial expenses and capital expenditure requirements.

We believe that this raises doubt about our ability to continue as a going concern.

To finance our operations beyond that point, we would need to raise additional capital, which cannot be assured.

We have concluded that these circumstances raise doubt about our ability to continue as a going concern within one year after the issuance date of this Annual Report.

See Note 1 to our audited consolidated financial statements for the period ended December 31, 2022.

In April 2021 we received loan proceeds in the amount of $0.1 million, under the PPP as established under the CARES Act.

The loan and accrued interest were forgivable as long as we used the loan proceeds for eligible

purposes, including payroll, employee benefits, rent and utilities, and maintained its payroll levels.

During the year ended December 31, 2021, $0.1 million of our PPP loan was forgiven.

During the year ended December 31, 2021, we issued convertible notes totaling $2.9 million pursuant to certain note purchase agreements, including notes issued to our major stockholders, the Dow Pension Funds.

During the year ended December 31, 2022, we issued convertible notes totaling $1.7 million to certain existing holders of our issued and outstanding preferred stock, including six convertible notes in the aggregate principal amount of $1.2 million to the Dow Pension Funds.

The maturity dates for the convertible notes range from one to three years from their respective issuance dates.

These notes are unsecured obligations of SeaStar Medical and borrowings on the convertible notes bear interest at 8.0 %.

Immediately prior to the Closing, all principal amounts and accrued interest under the convertible notes were converted into shares of our Common Stock at a conversion price of $10.00 per share.

Upon consummation of the Business Combination, we received $17.0 million in cash, primarily due to $7.0 million in gross proceeds from the PIPE Investment and $10.0 million in proceeds from the trust account, partially offset by cash payments that were disbursed at the closing of the Business Combination which included Maxim’s deferred fee, professional service fees for the legal counsels, transfer agent, consultants, and auditors, a commitment fee, director and officer insurances, and prepayments to the forward purchase agreement sellers totaling approximately $16.6 million.

In connection with the Business Combination, over 8 million shares were submitted for redemption for an aggregate redemption amount of approximately $92.0 million.

The proceeds we received in connection with the Business Combination were significantly less than the total potential proceeds of $103.5 million (assuming no redemptions).

The reduction in available cash upon the Closing due to share redemptions has negatively impacted our growth initiatives, our revenue and net loss projections prepared in connection with LMAO’s evaluation of the Business Combination, and our liquidity, including the likelihood that holders of warrants will exercise their warrants and the Company will receive cash proceeds from the warrants.

Warrant Proceeds

We would receive the proceeds from any exercise of any warrants that are exercised for cash pursuant to their terms.

Assuming the exercise in full of all of the warrants for cash, we would receive an aggregate of approximately $185.0 million, but would not receive any proceeds from the sale of the shares of common stock issuable upon such exercise.

To the extent any warrants are issued on a “cashless basis,”

the amount of cash we would receive from the exercise of the warrants will decrease.

We would expect to use any such proceeds received from warrants that are exercised for cash in the future for general corporate and working capital purposes, which would increase our liquidity.

However, we will only receive such proceeds if and when the warrant holders exercise the warrants.

The exercise of the warrants, and any proceeds we may receive from their exercise, are highly dependent on the price of our Common Stock and the spread between the exercise price of the warrant and the price of our Common Stock at the time of exercise.

There is no assurance that the warrant holders will elect to exercise for cash any or all of such warrants, and we believe that any such exercise currently is unlikely to occur as described below.

As of the date of this Annual Report, we have neither included nor intend to include any potential cash proceeds from the exercise of our warrants in our short-term or long-term liquidity projections.

We will continue to evaluate the probability of warrant exercise over the life of our warrants and the merit of including potential cash proceeds from the exercise in our liquidity projections.

We do not expect to rely on the cash exercise of warrants to fund our operations.

Instead, we intend to rely on our primary sources of cash discussed elsewhere in this Annual Report to continue to support our operations.

The exercise price of the warrants is $11.50 per share and the closing price of our Common Stock was $4.10 as of December 31, 2022.

Accordingly, we believe that it is currently unlikely that warrant holders will exercise their warrants.

The likelihood that warrant holders will exercise the warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our Common Stock.

If the trading price for our Common Stock remains less than $11.50 per share, we believe our warrant holders will be unlikely to exercise their warrants.

There is no guarantee that the warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the warrants may expire worthless, and we may not receive any proceeds

from the exercise of the warrants.

To the extent that any of the warrants are exercised on a “cashless basis,”

the amount of cash we would receive from the exercise of the warrants will decrease.

On March 15, 2023, the Company entered into a securities purchase agreement with an institutional investor, whereby the Company will issue a series of four senior unsecured convertible notes, with principal amounts totaling up to $9.8 million, and warrants to purchase shares of the Company’s Common Stock.

On March 15, 2023, the Company issued the first senior unsecured convertible note in the amount of $3.3 million and warrants to purchase 328,352 shares of Common Stock.

The senior unsecured convertible notes will be issued at an 8.0% discount and bear interest at 7.0% per annum and mature on June 15, 2024.

The senior unsecured convertible notes are redeemable, in whole or in part, at any time at the discretion of the Company.

The warrants have an initial exercise price of $2.97 per share of Common Stock, expire 5 years from their issuance date, and contain cashless exercise provisions.

At the second closing, the Company will issue and sell to the Purchaser (i) an additional Note in a principal amount of $2.2 million and (ii) additional Warrants to purchase up to 218,901 shares of Common Stock.

At each of the third and fourth closings, the Company may, at its option, issue and sell to the Purchaser (i) additional Notes, each in a principal amount of $2.2 million and (ii) additional Warrants to purchase shares of Common Stock equal to 25% of the shares issuable upon conversion of the Notes on the applicable closing date.

On March 15, 2023, the Company amended its LMFA notes, LMFAO note and Maxim note, extending their maturity dates to June 15, 2024.

In consideration for such extension, the Company agrees to pay the note holders an aggregate amount of $0.1 million in cash upon receipt of proceeds from the issuance of the notes at the second closing under the securities purchase agreement.

On March 13, 2023, the Company entered into a $0.1 million promissory note with LM Funding America Inc.

with an interest rate of 7.0% per annum.

The promissory note was payable on demand at any time after April 13, 2023 and had no prepayment penalty.

The Company repaid the loan on March 24, 2023.

Future Funding Requirements

We expect to incur significant expenses in connection with our ongoing activities as we seek to (i) continue clinical development of our SCD product for FDA approval, and (ii) if regulatory approval is obtained, to launch and commercialize our product in the U.S.

market, including subsequent launches in key international markets.

We will need additional funding in connection with these activities.

Our future funding requirements, both short-term and long-term, will depend on many factors, including:

our ability to receive cash proceeds from our existing funding sources, including equity line of credit;

the progress and results of our clinical trials and interpretation of those results by the FDA and other regulatory authorities;

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

the costs of operating as a public company, including hiring additional personnel as well as increased director and officer insurance premiums, audit and legal fees, investor relations fees and expenses related to compliance with public company reporting requirements under the Securities Exchange Act of 1934, as amended, and rules implemented by the SEC and Nasdaq.

Until such time, if ever, as we are able to successfully develop and commercialize our products, we expect to continue financing our operations through the sale of equity, debt, borrowings under credit facilities or through potential collaborations with other companies, other strategic transactions or government or other grants.

Adequate capital may not be available to us when needed or on acceptable terms.

Based on our results of operations and liquidity as of December 31, 2022, we believe our cash and cash equivalents, including the cash we obtained from the Business Combination and the PIPE Investment, as well as potential proceeds available under the Purchase Agreement with Tumim and from the Forward Purchase Agreements ("FPA"), are not sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of our audited consolidated financial statements for the year ended December 31, 2022.

In addition, we do not expect to receive any cash proceeds from the exercise of warrants in the near term, because the trading price of our Common Stock is currently below the exercise price of such warrants.

We are seeking additional cash to fund our growth through future debt or equity financing transactions;

however, there can be no assurance that we will be able to obtain additional capital on terms acceptable to us, if at all, or that we will generate sufficient future revenues and cash flows to fund our operations.

Our estimates of our results of operations, working capital and capital expenditure requirements may be different than our actual needs, and those estimates may need to be revised if, for example, our actual revenue is lower, and our net operating losses are higher, than we project and our cash and cash equivalents position is reduced faster than anticipated.

We do not currently have any committed external source of funds.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of stockholders.

Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures.

Debt financing would also result in fixed payment obligations.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required 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.

See the section titled “Risk Factors”

for additional risks associated with our substantial capital requirements.

The following table shows a summary of our cash flows for each of the periods shown below:

($ in thousands)

Statement of cash flow data:

Total cash (used in)/provided by:

Operating activities

Investing activities

Financing activities

Cash Flow from Operating Activities

Net cash used in operating activities for the year ended December 31, 2022 was $7.8 million compared to $5.1 million for the year ended December 31, 2021.

The increase in cash used for operating activities of $2.7 million is primarily due to the increase of accounts payable and accrued expenses of as of December 31, 2022.

Cash Flow from Financing Activities

Net cash provided by financing activities for the year ended December 31, 2022 was $7.3 million, primarily related to the Business Combination in the fourth quarter of 2022.

Cash provided by financing activity for the year ended December 31, 2021 was $2.8 million, primarily from the issuance of convertible notes.

Critical Accounting Policies and Estimates

The preparation of the consolidated financial statements and related disclosures in conformity with U.S.

GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported.

Although actual results could materially differ from those estimates, such estimates are developed based on the best information available to management and management's best judgments at the time.

Significant estimates include the valuation of the forward option on forward purchase agreement, derivative liability, warrants, and the amount of share-based compensation expense.

Forward Option on Forward Purchase Agreement

The forward option in the forward purchase agreements is remeasured each reporting period using a Monte-Carlo Simulation in a risk-neutral framework (a special case of the Income Approach).

Specifically, the future stock price is simulated assuming a Geometric Brownian Motion (“GBM”).

For each simulated path, the forward purchase value is calculated based on the contractual terms and then discounted at the term-matched risk-free rate.

Finally, the value of the forward is calculated as the average present value over all simulated paths.

Convertible Notes Derivative Liability

The convertible notes derivative liabilities are remeasured each reporting period using a probability-weighted model and assumption related to the conversion price and timing of conversion.

The put option liability is valued based on the calculated returns as a result of the various discounts included in the Company’s convertible notes and the related probability assessments of the various settlement scenarios.

The convertible notes derivative liability was extinguished as of the Closing, as a result of the conversion of the convertible notes.

Share-Based Compensation Expense

The fair value of stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model, which requires the use of the following assumptions:

The expected term is based on the “simplified method”

described in the U.S.

Securities and Exchange Commission’s Staff Accounting Bulletin Topic 14 which is determined as the midpoint between the vesting date and the contractual end of the option grant.

Stock Price volatility was estimated based on the estimated stock price volatility of a peer group of publicly traded companies over a similar term.

The risk-free interest rate for periods within the contractual life of the option is based on the U.S.

Treasury yield in effect at the time of grant.

The dividend yield was zero as the Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

The determination of fair value of restricted stock units is valued based on the value of the Company's Common Stock on the grant date.

Emerging Growth Company Status

We are an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups (“JOBS”) Act.

The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies.

We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.

In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act.

Since we intend to rely on such exemptions, we are not required to, among other things:

(i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

(ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act;

(iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis);

and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.

We will remain an EGC under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the closing of this offering, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the date on which we are deemed to be a “large-accelerated filer”

under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three-years.

Business Combination

On October 28, 2022, LMAO consummated a series of transactions that resulted in the combination of LMF Merger Sub, Inc.

and SeaStar Medical, Inc.

pursuant to an Agreement and Plan of Merger as described further in this Annual Report.

LMAO was renamed to "SeaStar Medical Holding Corporation." The Business Combination was treated as the equivalent of SeaStar Medical, Inc.

issuing shares for the net assets of LMAO, accompanied by a recapitalization.

The net assets of LMAO were stated at historical cost.

Operations prior to the Business Combination are those of SeaStar Medical, Inc.

The aggregate consideration payable to the stockholders of SeaStar Medical, Inc.

at the Closing was $85.4 million.

The consideration consisted of $85.0 million;

minus any SeaStar Medical, Inc.

indebtedness;

minus SeaStar Medical, Inc.

transaction expenses in excess of a cap of $0.8 million;

plus the aggregate exercise price of unexercised SeaStar Medical, Inc.

warrants and options issued and outstanding immediately prior to the Closing;

less the value of the shares of Common Stock underlying the assumed equity (the “Closing Consideration”).

The Closing Consideration was payable solely in shares of LMAO Common Stock, par value $0.0001 per share, valued at $10.00 per share, resulting in the issuance of 8,540,552 shares of Common Stock to holders of stock of SeaStar Medical, Inc., immediately prior to the Closing.

At the Closing, shares of class B Common Stock, par value $0.001 per share, of LMAO (“Class B Common Stock”) automatically converted into shares of class A Common Stock, par value $0.001 per share, of LMAO (“Class A Common Stock”) on a one-to-one basis, and pursuant to the charter of LMAO after the Business Combination, Class A and Class B Common Stock was reclassified as Common Stock.

At the Closing, each of SeaStar Medical, Inc.’s issued and outstanding convertible notes automatically converted into shares of SeaStar Medical Holding Corporation Common Stock.

Immediately prior to the effectiveness of the Business Combination, each share of SeaStar Medical, Inc.’s issued and outstanding preferred stock automatically converted into shares of SeaStar Medical Holding Corporation Common Stock and those SeaStar Medical, Inc.

warrants that would be exercised or exchanged in connection with the Business Combination were exercised for shares of SeaStar Medical, Inc.

Common Stock.

At Closing, the (i) SeaStar Medical, Inc.

warrants that would not be exercised or exchanged in connection with the Business Combination were assumed by LMAO and converted into warrants to purchase Common Stock, (ii) outstanding options for shares of SeaStar Medical, Inc.

Common Stock under SeaStar Medical, Inc.’s equity plan were assumed by LMAO and converted into options to purchase Common Stock, and (iii) issued and outstanding restricted stock unit awards under SeaStar Medical, Inc.’s current equity plan were assumed by LMAO and converted into LMAO restricted stock units.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2022:

($ in thousands)

Contractual Obligations:

LMFA note payable

LMFAO note payable

Maxim note payable

Insurance Financing

Total contractual obligations

Forward Purchase Agreements

On October 17 and October 25, 2022, LMAO and SeaStar Medical, Inc.

entered into forward purchase agreements (“FPA”) with Vellar Opportunity Fund SPV LLC –

Series 4 (“Vellar”) and HB Strategies LLC (“HB Strategies”

and together with Vellar, the “FPA Sellers”).

According to the terms of the FPAs, the FPA Sellers purchased, through a broker in the open market, shares of Class A Common Stock from holders other than LMAO or affiliates of LMAO, including from holders who had previously elected to redeem shares pursuant to the redemption rights in connection with the Business Combination (such purchased shares, the “Recycled Shares”).

The FPA Sellers were paid directly, from LMAO’s trust account, a cash amount (the “Prepayment Amount”) equal to the number of shares purchased multiplied by the per-share redemption price.

In addition to the Prepayment Amount, the FPA Sellers were repaid, directly from LMAO's trust account, for the purchase of 200,000 Shares of LMAO Common Stock bought from third parties in the open market, through a broker.

The FPA Sellers may in its discretion sell Recycled Shares they purchased, (the "Terminated Shares").

The Company is entitled to proceeds from sales of Terminated Shares equal to the number of Terminated Shares multiplied by the Reset Price (the "Reset Price").

Following the closing of the Business Combination (the "Closing"), the Reset Price will initially be $10.00 per Share, but will be adjusted on the last scheduled trading day of each month commencing on the first calendar month following the Closing to the lowest of (a) the then-current Reset Price, (b) $10.00 and (c) the volume weighted average price (“VWAP Price”) of the Shares of the last ten (10) trading days of the prior calendar month, but not lower than $5.00.

The maturity date of the FPA (the “Maturity Date”) will be the earliest of (a) the third anniversary of the Closing, and (b) after any occurrence during any 30 consecutive trading-day period, the VWAP Price for 20 trading days is less than $3.00 per Share, at the FPA Seller decision.

At the Maturity Date, the FPA Sellers will be entitled to retain a cash amount equal to the number of unsold Recycled Shares multiplied by $2.50, and the FPA Sellers will deliver to the Company the unsold Recycled Shares.

As of December 31, 2022, the FPA Sellers have paid the Company proceeds from sales of Terminated Shares of $0.0 million.

While the Company may receive cash proceeds from sales of Terminated Shares by FPA Sellers, the FPA Sellers may not have any incentive to sell Terminated Shares unless the trading price of our Common Stock is above the Reset Price.

The Reset Price on February 10, 2023 was $5.00 per share, and there is no guarantee that the trading price of our Common Stock will equal or exceed the current Reset Price, or that the future trading price of our Common Stock may equal or exceed the Reset Price in subsequent applicable periods.

In such a case, the FPA Sellers may not sell Terminated Shares, in which case we will not be able to receive any cash proceeds from the FPAs.

In addition, if the FPA Sellers decide to sell their shares into the market, it may cause the trading price of our Common Stock to decline significantly.

Director Nomination Agreement

On October 28, 2022, the Sponsor and LMAO entered into the Director Nomination Agreement, providing the Sponsor certain director nomination rights, including the right to appoint or nominate for election to the Board, as applicable, two individuals, to serve as Class II directors of the Company, for a certain period following the Closing (the “Director Nomination Agreement”).

Equity Line of Credit

On August 23, 2022, SeaStar Medical, Inc., LMAO, and Tumim Stone Capital LLC ("Tumim") entered into an equity line financing arrangement through a Common Stock Purchase Agreement providing the right to sell Tumim up to $100 million worth of shares of Common Stock.

The Common Stock Purchase Agreement is subject to certain limitations and conditions and provided for a $2.5 million commitment fee payable to Tumim.

The Company paid $1.0 million of the commitment fee in cash at Closing.

The Company has recorded an accrued expense for the remaining $1.5 million of the commitment fee as of December 31, 2022, of which $1.0 million will be paid in newly issued shares of Common Stock.

The $2.5 commitment fee was recorded in general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2022.

LMFA Notes Payable

On September 9, 2022, SeaStar Medical, Inc.

entered into a Credit Agreement (“LMFA Note”) with LM Funding America, Inc.

(“LMFA”) whereby LMFA agreed to make advances to SeaStar Medical, Inc.

of up to $0.7 million for general corporate purposes at an interest rate of 15% per annum.

All advances made to SeaStar Medical, Inc.

under the LMFA Note and accrued interest were due and payable to LMFA on the maturity date, which is the earlier of (a) October 25, 2022, (b) the consummation of the Business Combination, and (c) the termination of the Merger agreement.

As of December 31, 2022, the Company has borrowed $0.7 million under the LMFA Note.

On October 28, 2022, SeaStar Medical Holding Corporation and LMFA entered into the First Amendment to Credit Agreement, dated September 9, 2022 between LMFA and SeaStar Medical Holding Corporation whereby (i) the maturity date of the loan under the LMFA Note was extended to October 30, 2023;

(ii) the Company is required to use 5.0% of the gross cash proceeds received from any future debt and equity financing to pay outstanding balance of LMFA Note, provided that such repayment is not required for the first $0.5 million of cash proceeds;

(iii) the interest rate of the LMFA Note is reduced from 15% to 7% per annum;

and (iv) the default interest rate is reduced from 18% to 15%.

Subsequent to December 31, 2022, the maturity date was extended to June 15, 2024 (Note 16).

As such, the Company has classified the LMFA Note as long-term in the consolidated balance sheets as of December 31, 2022.

The LMFA Note contains customary representations and warranties, affirmative and negative covenants and events of default.

In addition, on October 28, 2022, the parties entered into a security agreement, pursuant to which SeaStar Medical Holding Corporation granted LMFA a security interest in substantially all of the assets and property of the Company, subject to certain exceptions, as collateral under the amended LMFA Note.

In addition, the Company entered into a guaranty, dated October 28, 2022, whereby SeaStar Medical Holding Corporation unconditionally guarantees and promises to pay to LMFA the outstanding principal amount under the LMFA Note.

On November 2, 2022, The Company entered into an additional promissory note in the amount of $0.3 million with LMFA.

The promissory note is noninterest bearing and is due on demand at any time on or after March 31, 2023.

The note was paid in full in January 2023.

LMFAO Note Payable

On October 28, 2022, the Company entered into a consolidated amended and restated promissory note with LMFAO Sponsor, LLC, LMAO’s sponsor and the sole holder of founding shares as the lender, for an aggregate principal amount of $2,785 (the “LMFAO Note”) to amend and restate in its entirety (i) the promissory note, dated July 29, 2022, for $1,035 in aggregate principal amount issued by LMAO to the Sponsor and (ii) the Amended and Restated Promissory Note, dated July 28, 2022, for $1,750 in aggregate principal amount, issued by LMAO to the Sponsor (collectively, the “Original Notes”).

The LMFAO Note amended the Original Notes to:

(i) extend maturity dates of

the Original Notes to October 30, 2023;

(ii) permit outstanding amount due under the LMFAO Note to be prepaid without premium or penalty;

and (iii) require the Company to use 20.0% of the gross cash proceeds received from any future debt and equity financing to pay the outstanding balance of LMFAO Note, provided that such repayment is not required for the first $500 of cash proceeds.

Subsequent to December 31, 2022, the maturity date was extended to June 15, 2024 (Note 16).

As such, the Company has classified the LMFAO Note as long-term in the consolidated balance sheets as of December 31, 2022.

The LMFAO Note carries an interest rate of 7% per annum and contains customary representations and warranties and affirmative and negative covenants.

The LMFAO Note is subject to events of default, which may result in the LMFAO Note becoming immediately due and payable, with interest of 15.0% per annum.

In addition, on October 28, 2022, the parties entered into a security agreement whereby the Company granted the Sponsor a security interest in substantially all of the assets and property of the Company, subject to certain exceptions, as collateral to secure the Company’s obligations under the LMFAO Note.

Maxim Note Payable

On October 28, 2022, the Company entered into a promissory note with Maxim as the lender, for an aggregate principal amount of $4.2 million (the “Maxim Note”).

The Maxim Note had a maturity date of October 30, 2023 and any outstanding amount may be prepaid without premium or penalty.

If the Company receives any cash proceeds from a debt or equity financing transaction prior to the maturity date, then the Company is required to prepay the indebtedness equal to 25.0% of the gross amount of the cash proceeds, provided that such repayment obligation does not apply to the first $0.5 million of the cash proceeds received by the Company.

Subsequent to December 31, 2022, the maturity date was extended to June 15, 2024 (Note 16).

As such, the Company has classified the Maxim Note as long-term in the consolidated balance sheets as of December 31, 2022.

Interest on the Maxim Note is due at 7.0% per annum.

The Maxim Note contains customary representations and warranties, and affirmative and negative covenants.

The Maxim Note is subject to events of default, which may result in the Maxim Note becoming immediately due and payable, with interest of 15.0% per annum.

Insurance Financing

In October 2022, the Company entered into a financing agreement with a lender to finance a portion of the annual premium of an insurance policy in the amount of $0.9 million.

Interest on the financing agreement is due at 7.35% per annum.

The Company made payments of principal and interest of $0.1 million and $0.1 million in January 2023 and February 2023, respectively.

Intercreditor Agreement

On October 28, 2022, Maxim, LMFA, the Sponsor (collectively, the “Creditors”), SeaStar Medical, Inc.

and the Company entered into the Intercreditor Agreement in order to set their relative rights under the LMFA Note, LMFAO Note and Maxim Note, including the payments of amounts by the Company upon an event of default under such notes.

Each Creditor agrees and acknowledges that LMFA and the Sponsor have been granted liens on the collateral as set forth in the applicable LMFA security agreement and the sponsor security agreement.

Each creditor also agrees and acknowledges that Maxim’s indebtedness under the Maxim Note is unsecured.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity