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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 March 31, 2024

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 April 30, 2024, the registrant had 75,419,458 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Condensed Consolidated 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 Consolidated Financial Statements

5

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

26

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

27

Signatures

28

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

SeaStar Medical Holding Corporation

Condensed Consolidated Balance Sheets

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

 

 

 

 

 

 

 

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

Current assets

 

 

 

 

 

 

Cash

 

$

5,019

 

 

$

176

 

Prepaid expenses

 

 

1,518

 

 

 

2,132

 

Total current assets

 

 

6,537

 

 

 

2,308

 

Other assets

 

 

1,203

 

 

 

1,205

 

Total assets

 

$

7,740

 

 

$

3,513

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

3,879

 

 

$

4,372

 

Accrued expenses

 

 

1,544

 

 

 

1,523

 

Contingent upfront payment for license agreement

 

 

100

 

 

 

100

 

Notes payable, net of deferred financing costs

 

 

357

 

 

 

565

 

Convertible notes, current portion

 

 

1,135

 

 

 

4,179

 

Liability classified warrants

 

 

2,633

 

 

 

2,307

 

Total current liabilities

 

 

9,648

 

 

 

13,046

 

Notes payable, net of deferred financing costs

 

 

2,565

 

 

 

4,143

 

Convertible notes, net of current portion

 

 

 

 

 

194

 

Total liabilities

 

 

12,213

 

 

 

17,383

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders' deficit

 

 

 

 

 

 

Preferred stock - $0.0001 par value, 10,000,000 shares authorized at March 31, 2024 and December 31, 2023; no shares issued and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock - $0.0001 par value per share;
500,000,000 shares authorized; 75,419,458 and 47,615,285 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

8

 

 

 

5

 

Additional paid-in capital

 

 

122,950

 

 

 

100,859

 

Accumulated deficit

 

 

(127,431

)

 

 

(114,734

)

Total stockholders' deficit

 

 

(4,473

)

 

 

(13,870

)

Total liabilities and stockholders' deficit

 

$

7,740

 

 

$

3,513

 

 

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

 

1


 

SeaStar Medical Holding Corporation

Condensed Consolidated Statements of Operations

(unaudited)

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

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

Research and development

 

$

1,697

 

 

$

1,730

 

General and administrative

 

 

2,253

 

 

 

2,851

 

Total operating expenses

 

 

3,950

 

 

 

4,581

 

Loss from operations

 

 

(3,950

)

 

 

(4,581

)

Other income (expense)

 

 

 

 

 

 

Interest expense

 

 

(143

)

 

 

(433

)

Change in fair value of convertible notes

 

 

(5,758

)

 

 

100

 

Change in fair value of warrants liability

 

 

(2,846

)

 

 

36

 

Change in the fair value of the forward purchase agreement derivative liability

 

 

 

 

 

(2,218

)

Total other income (expense), net

 

 

(8,747

)

 

 

(2,515

)

Loss before provision for income taxes

 

 

(12,697

)

 

 

(7,096

)

Provision for income taxes

 

 

 

 

 

 

Net loss

 

$

(12,697

)

 

$

(7,096

)

Net loss per share of common stock, basic and diluted

 

$

(0.19

)

 

$

(0.54

)

Weighted-average shares outstanding, basic and diluted

 

 

67,106,081

 

 

 

13,025,852

 

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

 

2


 

SeaStar Medical Holding Corporation

Condensed Consolidated Statements of Changes in Stockholders' Deficit

(unaudited)

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

 

 

 

Stockholders' Deficit (unaudited)

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Accumulated Deficit

 

 

Total Stockholders' Deficit

 

Balance, December 31, 2022

 

 

12,699,668

 

 

$

1

 

 

$

67,739

 

 

$

(88,502

)

 

$

(20,762

)

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

 

Issuance of shares - prepaid forward contracts

 

 

 

 

 

 

 

 

1,870

 

 

 

 

 

 

1,870

 

Stock-based compensation

 

 

 

 

 

 

 

 

505

 

 

 

 

 

 

505

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,096

)

 

 

(7,096

)

Balance, March 31, 2023

 

 

13,296,516

 

 

$

1

 

 

$

72,222

 

 

$

(95,598

)

 

$

(23,375

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2023

 

 

47,615,285

 

 

$

5

 

 

$

100,859

 

 

$

(114,734

)

 

$

(13,870

)

Issuance of shares - conversion of convertible notes

 

 

12,697,792

 

 

 

1

 

 

 

9,389

 

 

 

 

 

 

9,390

 

Issuance of shares - exercise of warrants

 

 

8,801,836

 

 

 

1

 

 

 

3,959

 

 

 

 

 

 

3,960

 

Issuance of shares - equity offering, net of issue costs

 

 

6,304,545

 

 

 

1

 

 

 

8,309

 

 

 

 

 

 

8,310

 

Stock-based compensation

 

 

 

 

 

 

 

 

434

 

 

 

 

 

 

434

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(12,697

)

 

 

(12,697

)

Balance, March 31, 2024

 

 

75,419,458

 

 

$

8

 

 

$

122,950

 

 

$

(127,431

)

 

$

(4,473

)

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

(unaudited)

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

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(12,697

)

 

$

(7,096

)

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

 

 

 

 

 

 

Amortization of deferred financing costs

 

 

27

 

 

 

4

 

Change in fair value of convertible notes (issued, converted and outstanding)

 

 

5,758

 

 

 

2,218

 

Change in fair value of forward purchase agreement derivative liability

 

 

 

 

 

(100

)

Change in fair value of liability classified warrants (exercised and outstanding)

 

 

2,846

 

 

 

(36

)

Stock-based compensation

 

 

434

 

 

 

505

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Other receivables

 

 

 

 

 

12

 

Prepaid expenses

 

 

614

 

 

 

318

 

Other assets

 

 

2

 

 

 

 

Accounts payable

 

 

(493

)

 

 

1,095

 

Accrued expenses

 

 

21

 

 

 

 

Other liabilities

 

 

 

 

 

786

 

Net cash used in operating activities

 

 

(3,488

)

 

 

(2,294

)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of convertible notes

 

 

979

 

 

 

3,000

 

Payment of convertible notes

 

 

 

 

 

(10

)

Proceeds from issuance of shares

 

 

4,543

 

 

 

1,108

 

Proceeds from exercise of convertible note warrants

 

 

853

 

 

 

 

Proceeds of Pre-Funded warrants

 

 

3,769

 

 

 

 

Payment of commitment fee - equity line of credit

 

 

 

 

 

(500

)

Proceeds from sale of recycled shares

 

 

 

 

 

1,870

 

Proceeds from notes payable

 

 

 

 

 

100

 

Payment of notes payable

 

 

(1,813

)

 

 

(2,596

)

Net cash provided by financing activities

 

 

8,331

 

 

 

2,972

 

Net increase in cash

 

 

4,843

 

 

 

678

 

Cash, beginning of period

 

 

176

 

 

 

47

 

Cash, end of period

 

$

5,019

 

 

$

725

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

508

 

Exercise of pre-funded warrants

 

$

3,106

 

 

$

 

Shares issued as payment of convertible notes

 

$

9,387

 

 

$

 

Issuance of convertible note warrants

 

$

586

 

 

$

500

 

 

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

 

4


Notes to the Unaudited 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 Holding Corporation, a Delaware corporation ("SeaStar", "we") and its wholly owned subsidiary, SeaStar Medical, Inc., are collectively referred to as the "Company". 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.

 

The Company 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."

 

Basis of presentation and consolidation

 

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 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 months ended March 31, 2024, are not necessarily indicative of the results to be expected for the year ended December 31, 2024, or for any future annual or interim period.

 

The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the related notes for the year ended December 31, 2023. 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, 2023.

 

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 March 31, 2024, the Company has an accumulated deficit of $127.4 million and cash of $5.0 million. 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 interim condensed consolidated financial statements. We believe that these conditions raise substantial doubt about our ability to continue as a going concern.

 

 

5


Notes to the Unaudited Condensed Consolidated Financial Statements

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

 

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.

 

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, dependence on key personnel, 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 interim 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 consolidated financial statements and reported amounts of revenues and expenses during the period. Significant estimates include the valuation of the liability classified warrants, prepaid forward purchase agreement derivative liability, 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. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows.

 

Fair value of financial instruments

 

The following provides a summary of those assets or liabilities for which the Company is required to measure at fair value either on a recurring basis, the valuation techniques and summary of inputs used to arrive at the measure of fair value. Changes in fair value of these assets or liabilities are recognized as a component of net income in the consolidated statement of operations. Changes in fair value of these assets or liabilities are considered unrealized gains or losses and therefore are classified as non-cash adjustments to reconcile net income to operating cash flows. Significant increases (decreases) in unobservable inputs used in fair value measurements could, in isolation, potentially result in a significantly lower or higher valuation for those assets or liabilities requiring recurring fair value measurements at each reporting date.

 

The Company uses a Black-Scholes option pricing model to fair value Warrants, using standard option pricing inputs such as the strike price of each warrant tranche, estimated volatility, time to maturity, and the risk-free interest rate. The risk-free interest rate is the U.S. Treasury rate at the date of issuance, and the time to maturity is based on the contractual life at the date of issuance, which is an interpolated value based on the remaining term of each individual instrument. The change in fair value of the liability classified warrants each reporting period is recorded to the change in fair value of warrants liability in the consolidated statement of operations.

 

 

6


Notes to the Unaudited Condensed Consolidated Financial Statements

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

 

Emerging growth company status

 

The Company is an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"). Under the JOBS Act, emerging growth companies can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (1) no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

 

Recently issued accounting standards

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures. ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures. The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently assessing the impact of this guidance on our disclosures.

Note 3. Accrued Expenses

Accrued expenses consisted of the following amounts as of March 31, 2024 and December 31, 2023:

($ in thousands)

March 31,
2024

 

 

December 31,
2023

 

Accrued bonus

$

671

 

 

$

501

 

Accrued director compensation

 

519

 

 

 

427

 

Accrued research and development

 

308

 

 

 

507

 

Accrued legal

 

 

 

 

43

 

Accrued interest

 

29

 

 

 

19

 

Other

 

17

 

 

 

26

 

Total accrued expenses

$

1,544

 

 

$

1,523

 

 

Note 4. Notes Payable

Notes payable activity was as follows for the three month period ended March 31, 2024:

($ in thousands)

 

 

 

LMFA

 

 

LMFAO

 

 

Maxim

 

 

Insurance Financing

 

 

Unamortized deferred financing costs

 

Balance as of December 31, 2023

 

 

 

$

296

 

 

$

1,128

 

 

$

2,771

 

 

$

565

 

 

$

(52

)

Payments

 

 

 

 

(296

)

 

 

(1,128

)

 

 

(181

)

 

 

(208

)

 

 

 

Amortization of costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

 

Balance as of March 31, 2024

 

 

 

$

 

 

$

 

 

$

2,590

 

 

$

357

 

 

$

(25

)

 

Future maturities of principal repayment of the notes payable as of March 31, 2024 are as follows:

 

 

7


Notes to the Unaudited Condensed Consolidated Financial Statements

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

 

($ in thousands)

 

 

 

 

 

 

 

2024 (remaining)

 

 

 

 

 

$

357

 

2025

 

 

 

 

 

 

2,590

 

 

 

 

 

 

 

$

2,947

 

 

 

Senior Secured LMFA Note Payable

 

The company entered into a senior secured note with LMFA in September 2022. The interest rate on the loan was 7.0% and was to mature on March 27, 2025. The Company paid this note in full during Q1 2024.

 

Senior Secured LMFAO Note Payable

 

The company entered into a senior secured note with LMFAO in October 2022. The interest rate on the loan was 7.0% and was to mature on March 27, 2025. The Company paid this note in full during Q1 2024.

 

Unsecured Maxim Note Payable

 

In October 2022, the Company entered into an unsecured promissory note with Maxim, for an aggregate principal amount of $4.2 million. The interest rate on the note is 7% and matures on May 8, 2025.

 

Insurance Financing

 

In October 2023, the Company entered into a financing arrangement with a lender to finance a portion of the annual premium of an insurance policy in the amount of $0.7 million. The Company will pay the remaining five monthly installments of principal and interest with the last payment being made in August 2024.

Note 5. Convertible Notes

The activity for the convertible notes is disclosed in the table below for the period ended March 31, 2024. See our Annual Report on Form 10-K for the year-ended for December 31, 2023, for all other details relating to the Investor D convertible notes issued prior to December 31, 2023. During the quarter-ended March 31, 2024, the Company entered into two additional Investor D note issuances:

The Company completed Additional Closings related to the Second Amendment to the Investor D SPA on January 12, 2024 and January 24, 2024, issuing notes in principal amounts of $0.3 million and $0.8 million, respectively, each at 7.00% per annum (the "Fifth Investor D Note" and "Sixth Investor D Note", collectively called the "2024 Investor D Notes"). The 2024 Investor D Notes mature on April 12, 2025 and April 24, 2025, respectively. The 2024 Investor D Notes have an initial conversion price of $0.56 per share and are convertible into shares of the Company's common stock, par value $0.0001 (the "common stock"), beginning on the earlier of June 11, 2024 (or earlier upon mutual written agreement of the Company and the purchaser), or the date of an event of default, as defined in the note. The Company also issued warrants to purchase up to 131,927 and 395,781 shares of common stock, respectively, with an exercise price of $0.56 per share, and an additional warrants to purchase up to 131,927 and 395,781 shares of common stock, respectively, with an exercise price of $0.56 per share.

 

8


Notes to the Unaudited Condensed Consolidated Financial Statements

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

 

($ in thousands)

 

3rd Investor D Note
3-1

 

 

3rd Investor D Note
3-2

 

 

3rd Investor D Note
3-3

 

 

3rd Investor D Note
3-4

 

 

4th Investor D Note

 

 

5th Investor D Note

 

 

6th Investor D Note

 

 

Total

 

Balance as of December 31, 2023

$

 

1,012

 

 

 

999

 

 $

 

972

 

 $

 

568

 

 $

 

822

 

 $

 

 

 $

 

 

 

$

4,373

 

Issuance (Face Value)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

272

 

 

 

815

 

 

 

1,087

 

Fair value of detachable warrants at issuance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(147

)

 

 

(439

)

 

 

(586

)

(Gain)/Loss on conversion

 

 

1,201

 

 

 

636

 

 

 

615

 

 

 

381

 

 

 

77

 

 

 

482

 

 

 

2,005

 

 

 

5,397

 

Conversion to common stock

 

 

(2,213

)

 

 

(1,635

)

 

 

(1,587

)

 

 

(949

)

 

 

(125

)

 

 

(607

)

 

 

(2,381

)

 

 

(9,497

)

(Gain)/Loss on reporting period remeasurement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

361

 

 

 

 

 

 

 

 

 

361

 

Balance as of March 31, 2024

$

 

 

 

 

 

 $

 

 

 $

 

 

 $

 

1,135

 

 $

 

 

 $

 

 

 

 

1,135

 

Future maturities of principal repayment of convertible Notes as of March 31, 2024, was as follows:
 

($ in thousands)

 

 

 

 

 

 

 

2024 (remaining)

 

 

 

 

 

$

 

2025

 

 

 

 

 

 

1,135

 

 

 

 

 

 

 

$

1,135

 

 

On January 30, 2024, the institutional investor agreed to waive its Optional Redemption Rights and any event of default that may arise thereunder with respect to this offering and suspend the Optional Redemption Rights for a period of sixty (60) days following the closing of this offering (the “Suspension Period”), and the Company granted the institutional investor a right to redeem all or a portion of the then outstanding Conversion Amount (as defined in the Note Documents) within three (3) trading days after the Suspension Period at an amount equal to 200% of the Conversion Amount.

 

During the quarter-ended March 31, 2024, the institutional investor converted approximately $3.3 million (face value) of outstanding debt, by converting the outstanding debt into approximately $9.5 million of the Company's common stock. As of March 31, 2024, the Company still owed the institutional investor approximately $1.0 million (face value) in convertible debt, with a fair value of approximately $1.1 million.

 

The Company incurred a loss of approximately $5.8 million as a result of the following: (i) $4.7 million loss on conversion into equity as a result of the difference between the fair value of the convertible notes being converted and the equity being delivered, (ii) $0.7 million losses on issuance of the Investor D convertible notes issued during the three-months ended March 31, 2024, as a result of the combination of the fair value of detachable warrants issued in conjunction to the Investor D Notes issues during the three-months ended March 31, 2024, and the excess fair value over the proceeds received for the Investor D convertible notes issues during the three-months ended March 31, 2024, and (iii) $0.4 million loss on the change in fair value of those Investor D convertible notes still outstanding as of March 31, 2024.

Note 6. Equity Transactions

On January 26, 2024, the Company entered into a Securities Purchase Agreement with a single institutional investor, pursuant to which the Company issued to the Purchaser (the "Q1 2024 SPA"), (i) in a registered direct offering, 6,304,545 shares of the Company’s common stock, par value $0.0001 per share, and pre-funded warrants to purchase 4,536,216 shares of Common Stock with an exercise price of $0.0001 per share, and (ii) in a concurrent private placement, series A warrants to purchase 10,840,761 shares of common stock (the "Series A Common Warrants") and series B warrants to purchase 5,420,381 shares of common stock each with an exercise price of $0.8302 (the "Series B Common Warrants" and together with the Series A Common Warrants, the "Investor E Warrants". Such registered direct offering and concurrent private placement are referred to herein as the “Transactions.”

The Company received aggregate gross proceeds from the Transactions of approximately $9.0 million, before deducting fees to the Placement Agent and other estimated offering expenses payable by the Company. The Shares were declared effective on December 22, 2023. The Investor E Warrants will be exercisable commencing on the effective date of stockholder approval for the issuance of the shares of common stock issuable upon exercise of the Investor E Warrants. The Series A Common Warrants will expire on the fifth anniversary of the Stockholder Approval

 

9


Notes to the Unaudited Condensed Consolidated Financial Statements

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

 

Date and the Series B Common Warrants will expire on the 12 month anniversary of the Stockholder Approval Date. The Pre-Funded Warrants will not expire and will be exercisable commencing on January 26, 2024, and at any time until all of the Pre-Funded Warrants are exercised in full. All Pre-Funded Warrants were exercised during the first quarter ended March 31, 2024.

The Company paid approximately $0.7 million in fees to the Placement Agent and issued 542,038 warrants (the "PA Warrants") to purchase shares of the Company's common stock, with a fair value of approximately $0.3 million at issuance. The exercise price of these warrants is $0.9132 and the warrants became exercisable on January 30, 2024, expiring one year after the grant date.

Tumin Equity Line of Credit

During the year ended December 31, 2023, the Company sold 6,500,000 shares of common stock to Tumim for proceeds of approximately $4.7 million as part of the Tumin Equity Line of Credit (see the Company's Annual Report on Form 10-K for the year-ended December 31, 2023, for additional information on the structure and purpose). As of December 31, 2023, approximately $95.3 million was available to draw. In February 2024, the Company and Tumim agreed to terminate the Purchase Agreement.

 

Note 7. Warrants

 

Warrants Issued in FY 2024
 

As discussed in Note 7, as part of the Q1 2024 SPA, the Company issued on January 26, 2024 the following warrants to purchase the Company's common stock:

Pre-Funded Warrants - warrants to purchase 4,536,216 shares of common stock with an exercise price of $0.0001. The Pre-Funded Warrants had no expiration date and were exercisable commencing on the date of issuance and at any time until all of the Pre-Funded Warrants are exercised in full. The Pre-Funded Warrants were exercised in full during the first quarter-ended March 31, 2024
Series A and Series B Warrants - in a concurrent private placement, Series A Common Warrants to purchase 10,840,761 shares of Common Stock and Series B Common Warrants to purchase 5,420,381 shares of common stock each with an exercise price of $0.8302.
Investor E Warrants will be exercisable commencing on the effective date of stockholder approval for the issuance of the shares of common stock issuable upon exercise of the Investor E Warrants. The Series A Common Warrants will expire on the fifth anniversary of the Stockholder Approval Date and the Series B Common Warrants will expire on the 12-month anniversary of the Stockholder Approval Date.

 

Maxim Group LLC acted as the placement agent in connection with the Transactions pursuant to the Placement Agency Agreement, dated January 26, 2024, by and between the Company and the Placement Agent. The Placement Agent will receive warrants to purchase common stock covering a number of shares equal to 5% of the total number of shares of common stock sold in the Transactions. The PA Warrants will be exercisable commencing six months after the Closing and will expire five years after such date. The PA Warrants are exercisable at a price equal to 110.0% of the offering price in connection with the placement.

In accordance with ASC 815-40, Derivatives and Hedging-Contracts in Entity’s own Equity, the Company determined the Investor E and PA Warrants meet the conditions for equity classification, and should be carried on the consolidated balance sheets as a component of stockholders equity (deficit). The initial fair value of the convertible note warrants was determined using a Black-Scholes option pricing model, which considers variables such as estimated volatility, time to maturity, and the risk-free interest rate. The risk-free interest rate is the U.S. Treasury rate at the date of issuance, and the time to maturity is based on the contractual life at the date of issuance, which is five years.

The Company had the following warrants outstanding at March 31, 2024 and December 31, 2023:

 

 

10


Notes to the Unaudited Condensed Consolidated Financial Statements

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

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Liability Classified Warrants

 

 

 

 

 

 

Investor D Warrants

 

 

3,158,086

 

 

 

6,368,289

 

Private Placement Warrants

 

 

5,738,000

 

 

 

5,738,000

 

PIPE Investor Warrants

 

 

500,000

 

 

 

500,000

 

Subtotal

 

 

9,396,086

 

 

 

12,606,289

 

 

 

 

 

 

 

 

Equity Classified Warrants

 

 

 

 

 

 

Investor E Warrants

 

 

16,261,142

 

 

 

 

Placement agent Warrants

 

 

542,038

 

 

 

 

Public Stockholders' Warrants

 

 

10,550,000

 

 

 

10,550,000

 

Legacy Warrants

 

48,914

 

 

 

48,914

 

Subtotal

 

 

27,402,094

 

 

 

10,598,914

 

Grand Total

 

 

36,798,180

 

 

 

23,205,203

 

 

The following tables provides the weighted-average strike price and time to maturity for each warrant tranche as of March 31, 2024 and December 31, 2023:

 

March 31, 2024

 

Warrant Share Equivalents

 

 

Weighted-Average Strike Price

 

 

Weighted-Average Time to Maturity

 

Liability Classified Warrants

 

 

 

 

 

 

 

 

 

Investor D Warrants

 

 

3,158,086

 

 

$

0.50

 

 

 

4.40

 

Private Placement Warrants

 

 

5,738,000

 

 

$

11.50

 

 

 

3.57

 

PIPE Investor Warrants

 

 

500,000

 

 

$

11.50

 

 

 

3.57

 

 

 

 

 

 

 

 

 

 

 

 Equity Classified Warrants

 

 

 

 

 

 

 

 

 

Investor E Warrants

 

 

16,261,142

 

 

$

0.83

 

 

 

4.45

 

Placement Agent Warrants

 

 

542,038

 

 

$

0.91

 

 

 

5.25

 

Public Stockholders' Warrants

 

 

10,550,000

 

 

$

11.50

 

 

 

3.57

 

Legacy SeaStar Inc. Warrants

 

 

48,914

 

 

$

10.00

 

 

 

2.13

 

 

December 31, 2023

 

Warrant Share Equivalents

 

 

Weighted-Average Strike Price

 

 

Weighted-Average Time to Maturity

 

Liability Classified Warrants

 

 

 

 

 

 

 

 

 

Investor D Warrants

 

 

6,368,289

 

 

$

0.50

 

 

 

4.65

 

Private Placement Warrants

 

 

5,738,000

 

 

$

11.50

 

 

 

3.82

 

PIPE Investor Warrants

 

 

500,000

 

 

$

11.50

 

 

 

3.82

 

 

 

 

 

 

 

 

 

 

 

 Equity Classified Warrants

 

 

 

 

 

 

 

 

 

Public Stockholders' Warrants

 

 

10,550,000

 

 

$

11.50

 

 

 

3.82

 

Legacy SeaStar Inc. Warrants

 

 

48,914

 

 

$

10.00

 

 

 

2.38

 

 

Below is the warrant activity for the period ended March, 31, 2024:

 

 

11


Notes to the Unaudited Condensed Consolidated Financial Statements

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

 

 

 

Investor D Warrants

 

 

Investor E Warrants

 

 

Placement Agent Warrants

 

 

Private Placement Warrants

 

 

PIPE Investor Warrants

 

 

Public Stockholders' Warrants

 

 

Legacy Warrants

 

Outstanding as of December 31, 2023

 

 

6,368,289

 

 

 

 

 

 

-

 

 

 

5,738,000

 

 

 

500,000

 

 

 

10,550,000

 

 

 

48,914

 

Issuance

 

 

1,055,416

 

 

 

20,797,358

 

 

 

542,038

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(4,265,619

)

 

 

(4,536,216

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited / cancelled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of March 31, 2024

 

 

3,158,086

 

 

 

16,261,142

 

 

 

542,038

 

 

 

5,738,000

 

 

 

500,000

 

 

 

10,550,000

 

 

 

48,914

 

 

During the quarter-ended March 31, 2024, the Company incurred $1.6 million from losses on exercises of certain Investor D Warrants, and a loss of approximately $1.2 million from the mark-to-market adjustment for all remaining liability classified warrants; which are required to be remeasured at fair value at each reporting period, including March 31, 2024.

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Note 8. Stock-Based Compensation Awards

The following table sets forth the total stock-based compensation cost included in the Company's condensed consolidated statements of operations for the period indicated:

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Three Months Ended March 31,

 

($ in thousands)

 

 

 

 

 

2024

 

 

2023

 

Research and development

 

 

 

 

 

$

119

 

 

$

39

 

General and administrative

 

 

 

 

 

 

315

 

 

 

466

 

Total stock-based compensation

 

 

 

 

 

$

434

 

 

$

505

 

Equity incentive plan - summary

2022 Omnibus Incentive Plan

The Company's Board of Directors adopted, and the shareholders approved the 2022 Omnibus Incentive Plan to provide long-term incentive for its employees and non-employee service providers. The vesting of stock options is stated in each individual grant agreement, which is generally either one or four years. Options granted expire 10 years after the date of grant.

2019 Stock Incentive Plan

The Company’s Board of Directors adopted the 2019 Stock Incentive Plan on February 25, 2019, to provide long-term incentive for its employees and non-employee service providers. The Stock Incentive Plan was terminated on October 28, 2022, and no further awards were granted under such plan.

Equity incentive plan - stock options

 

12


Notes to the Unaudited Condensed Consolidated Financial Statements

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

 

Option activity for the periods ended March 31, 2024, is as follows:

2022 Omnibus Incentive Plan - Options

 

 

 

 

Options

 

 

Weighted-Average Exercise Price

 

 

Total Intrinsic Value

 

 

Weighted-Average Remaining Contractual Life (Years)

 

Outstanding at December 31, 2023

 

 

 

 

351,029

 

 

$

1.84

 

 

$

 

 

 

9.1

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited / cancelled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

 

 

351,029

 

 

$

1.84

 

 

$

 

 

 

8.8

 

Vested and exercisable at March 31, 2024

 

 

 

 

-

 

 

$

 

 

$

 

 

 

8.8

 

2019 Omnibus Incentive Plan - Options

 

 

 

 

Options

 

 

Weighted-Average Exercise Price

 

 

Total Intrinsic Value

 

 

Weighted-Average Remaining Contractual Life (Years)

 

Outstanding at December 31, 2023

 

 

 

 

244,792

 

 

$

1.84

 

 

$

 

 

 

6.4

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued