S-4 1 d625879ds4.htm FORM S-4 Form S-4
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As filed with the U.S. Securities and Exchange Commission on May 16, 2022.

Registration No. 333-        

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

LMF ACQUISITION OPPORTUNITIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   6770   85-3681132

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

1200 W. Platt St., Suite 100

Tampa, Florida 33606

Telephone: (813) 222-899

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Bruce M. Rodgers

Chief Executive Officer

1200 W. Platt St., Suite 100

Tampa, Florida 33606

(813) 222-899

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

 

Copies to:

Curt P. Creely, Esq.

Kevin M. Shuler, Esq.

Garrett F. Bishop, Esq.

Foley & Lardner LLP

100 North Tampa Street, Suite 2700

Tampa, Florida 33602

(813) 229-2300

 

Albert Lung, Esq.

Morgan, Lewis & Bockius LLP

1400 Page Mill Road

Palo Alto, California 94304

(650) 843-4000

 

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this registration statement and the satisfaction or waiver of all other conditions under the Merger Agreement described herein.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine

 

 

 


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The information in the proxy statement/prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. The proxy statement/prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY - SUBJECT TO COMPLETION, DATED MAY 16, 2022

PROPOSED MERGER

YOUR VOTE IS VERY IMPORTANT

Dear Stockholders:

You are cordially invited to attend the special meeting in lieu of the 2022 annual meeting of the stockholders (the “Meeting”) of LMF Acquisition Opportunities, Inc. (“LMAO”) to be held at [location] located at [address], at [●] [●].m. Eastern Time, on [●], 2022. LMAO is a Delaware blank check company established for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. Holders of LMAO’s Common Stock will be asked to approve, among other things, the Agreement and Plan of Merger, dated as of April 21, 2022 (the “Merger Agreement”), by and among LMAO, LMF Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of LMAO (“Merger Sub”) and SeaStar Medical, Inc., a Delaware corporation (“SeaStar Medical”), and the other related Proposals.

Upon the closing of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into SeaStar Medical (the “Business Combination”) with SeaStar Medical surviving the merger as a wholly-owned subsidiary of LMAO. In addition, in connection with the consummation of the Business Combination, LMAO will be renamed “SeaStar Medical Holding Corporation.” LMAO will apply to continue listing its common stock and warrants on the Nasdaq Capital Market under the symbols “ICU” and “ICUW,” respectively, upon the closing of the Business Combination. The transactions contemplated under the Merger Agreement relating to the Business Combination are referred to in the proxy statement/prospectus as the “Business Combination” and the combined company after the Business Combination is referred to in the proxy statement/prospectus as the “Combined Company.”

Pursuant to the terms of the Merger Agreement, the following actions will be taken, and the following consideration will be paid, in connection with the Business Combination:

Convertible Notes. Immediately prior to the Preferred Stock Conversion, each convertible note of SeaStar Medical shall be converted into shares of common stock, par value $0.001 per share, of SeaStar Medical (“SeaStar Medical Common Stock”) in accordance with the terms of such convertible notes (the “Convertible Note Conversion”).

Preferred Stock. Immediately after the Convertible Note Conversion but immediately prior to the Effective Time, each issued and outstanding share of SeaStar Medical’s Series A-1, Series A-2 and Series B convertible preferred stock, par value $0.001 (collectively, the “SeaStar Medical Preferred Stock”) shall be converted into shares of the SeaStar Medical Common Stock at the then-applicable conversion rates (the “Preferred Stock Conversion”).

Warrants. Each SeaStar Medical warrant to purchase shares of SeaStar Medical Common Stock or SeaStar Medical Preferred Stock (“SeaStar Medical Warrant”) that is outstanding and unexercised immediately prior to the Effective Time and that would automatically be exercised or otherwise exchanged in full in accordance with its terms by virtue of the Business Combination, without any election or action by SeaStar Medical or the holder of the SeaStar Medical Warrant shall automatically be exercised or exchange in full for the applicable shares of SeaStar Medical Common Stock. Each SeaStar Medical Warrant that is outstanding and unexercised immediately prior to the Effective Time and that is not automatically exercised in full shall be converted into a warrant to purchase common stock, par value $0.0001 per share, of LMAO (the “Common Stock”), in accordance with its terms. From and after the Effective Time: (i) each SeaStar

Medical Warrant assumed by LMAO may be exercised solely for shares of Common Stock (rounded down to the nearest whole share); (ii) the number of shares of Common Stock subject to each SeaStar Medical Warrant assumed by LMAO will be determined by multiplying (A) the number of shares of SeaStar Medical


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Common Stock (as calculated on as converted to SeaStar Medical Common Stock basis) subject to such SeaStar Medical Warrant immediately prior to the Effective Time, by (B) the Exchange Ratio and (iii) such assumed warrant shall have an exercise price per share (which shall be rounded up to the nearest whole cent) equal to the exercise price per share of such SeaStar Medical Warrant immediately prior to the Effective Time divided by the Exchange Ratio. The Exchange Ratio is defined in the Merger Agreement to be the quotient of (1) (A) (i) $85,000,000 minus any SeaStar Medical indebtedness minus any SeaStar Medical transaction expenses in excess of $800,000 (which the cap of $800,000 shall not apply to transaction bonuses payable to executives or the financial advisory fee payable to Maxim Group LLC by SeaStar Medical) plus (ii) the aggregate exercise price of unexercised SeaStar Medical Warrants and SeaStar Medical Options all divided by (B) Aggregate Fully Diluted Company Common Stock (as defined in the Merger Agreement), all divided by (2) $10.00.

Common Stock. At the Effective Time, following the Convertible Note Conversion and Preferred Stock Conversion, each share of SeaStar Medical Common Stock (including shares of SeaStar Medical Common Stock outstanding as a result of the Convertible Note Conversion and Preferred Stock Conversion, but excluding shares the holders of which perfect rights of appraisal under Delaware law) will be converted into the right to receive such number of shares of Common Stock equal to the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement).

Stock Options. At the Effective Time, each outstanding option to purchase shares of SeaStar Medical Common Stock (a “SeaStar Medical Option”), whether or not then vested and exercisable, will be assumed and converted into an option to purchase shares of Common Stock with the same terms and conditions as were applicable to such SeaStar Medical Option immediately prior to the Effective Time, except that each SeaStar Medical Option will relate to such number of Common Stock as is equal to the product of (i) the number of shares subject to such option prior to the Effective Time, multiplied by (ii) the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement), with the per share exercise price equal to the exercise price prior to the Effective Time divided by the Exchange Ratio.

Restricted Stock Units. At the Effective Time, each award of restricted stock units based on SeaStar Medical Common Stock (a “SeaStar Medical Restricted Stock Unit Award”) that is outstanding immediately prior to the Effective Time will be converted into the right to receive restricted stock units based on Common Stock (each, an “Assumed Restricted Stock Unit Award”) with the same terms and conditions as were applicable to such SeaStar Medical Restricted Stock Unit Award immediately prior to the Effective Time, except that each Assumed Restricted Stock Unit Award will relate to such number of Common Stock as is equal to the product of (i) the number of shares of SeaStar Medical Common Stock subject to such SeaStar Medical Restricted Stock Unit Award immediately prior to the Effective Time, multiplied by (ii) the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement). For purposes of any SeaStar Medical Restricted Stock Unit Awards with a liquidity vesting condition, SeaStar Medical will be permitted to treat the occurrence of the Effective Time as an initial public offering under the terms of any such award for purposes of the vesting of such award.

It is anticipated that upon completion of the Business Combination, LMAO’s public stockholders (other than the shares issued to the Dow Employees’ Pension Plan Trust and Union Carbide Employees’ Pension Plan (collectively, “the Dow Pension Funds”) in connection with a commitment letter dated April 21, 2022) would retain an ownership interest of approximately 48.7% in the Combined Company, LMFAO Sponsor, LLC, LMAO’s sponsor and the sole holder of founder shares, will retain an ownership interest of approximately 12.1% of the Combined Company and the SeaStar Medical stockholders (which includes the minimum $5,000,000 worth of Class A Common Stock that will be issued to the Dow Pension Funds, an existing shareholder of SeaStar Medical, in connection with the commitment letter dated April 21, 2022 by the Dow Pension Funds to purchase such shares) will own approximately 39.2% of the Combined Company. The ownership percentage with respect to the Combined Company (A) does not take into account (i) the redemption of any shares by the LMAO public stockholders, (ii) the issuance of any additional shares upon the closing of the Business Combination under the Incentive Plan or ESPP, and (iii) the withholding of shares of Common Stock to pay future exercises under the SeaStar Medical warrants and options assumed by LMAO or the settlement of SeaStar Medical restricted stock units assumed by LMAO and (B) assumes (i) that the Dow Pension Funds only purchase the minimum amount under the commitment letter dated April 21, 2022 ($5,00,000) and (ii) that SeaStar Medical neither has any indebtedness to be repaid at Closing nor


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incurs transaction expenses in excess of the transaction expenses cap. If the actual facts are different from these assumptions, the percentage ownership retained by the LMAO stockholders will be different. See “Unaudited Pro Forma Condensed Combined Financial Information.”

As of [            ], 2022, there was approximately $[105.6] million in LMAO’s trust account (the “Trust Account”).

LMAO’s shares of Class A Common Stock are listed on the Nasdaq Stock Market under the symbol “LMAO.” On [●], 2022, the record date for the Meeting, the last sale price of the Class A Common Stock was $[●].

Each stockholder’s vote is very important. Whether or not you plan to participate in the Meeting, please submit your proxy card without delay. Stockholders may revoke proxies at any time before they are voted at the meeting. Voting by proxy will not prevent a stockholder from voting at the Meeting if such stockholder subsequently chooses to participate in the Meeting.

We encourage you to read the proxy statement/prospectus carefully. In particular, you should review the matters discussed under the caption “Risk Factors” beginning on page 30.

LMAO’s board of directors unanimously recommends that LMAO stockholders vote “FOR” approval of each of the Proposals.

 

/s/ Bruce M. Rodgers

Bruce M. Rodgers

Chief Executive Officer and Chairman of the Board

LMAO Acquisition Opportunities, Inc.

[●], 2022

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in the Business Combination or otherwise, or passed upon the adequacy or accuracy of the proxy statement/prospectus. Any representation to the contrary is a criminal offense.

HOW TO OBTAIN ADDITIONAL INFORMATION

The proxy statement/prospectus incorporates important business and financial information about LMAO that is not included or delivered herewith. If you would like to receive additional information or if you want additional copies of this document, agreements contained in the appendices or any other documents filed by LMAO with the SEC, such information is available without charge upon written or oral request. Please contact our proxy solicitor:

ALLIANCE ADVISORS

200 Broadacres Drive, Suite 300

Bloomfield, New Jersey 07003

Toll Free: 855-935-2548

Collect: 1-520-524-4921

Email: lmao@allianceadvisors.com

To obtain timely delivery of the documents, you must request them no later than five business days before the date of the Meeting, or no later than [], 2022. Please be sure to include your complete name and address in your request. Please see “Where You Can Find Additional Information” to find out where you can find more information about LMAO and SeaStar Medical. You should rely only on the information contained in the proxy statement/prospectus in deciding how to vote on the Business Combination. Neither LMAO nor SeaStar Medical has authorized anyone to give any information or to make any representations other than those contained in the proxy statement/prospectus. Do not rely upon any information or representations made outside of the proxy statement/prospectus. The information contained in the proxy statement/prospectus may change after the date of the proxy statement/prospectus. Do not assume after the date of the proxy statement/prospectus that the information contained in the proxy statement/prospectus is still correct.


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LMF ACQUISITION OPPORTUNITIES, INC.

1200 W. Platt St., Suite 100

Tampa, Florida 33606

Telephone: (813) 222-899

NOTICE OF SPECIAL MEETING IN LIEU OF THE 2022 ANNUAL MEETING OF

LMF ACQUISITION OPPORTUNITIES, INC. STOCKHOLDERS

To Be Held on []

To LMF Acquisition Opportunities, Inc. Stockholders:

NOTICE IS HEREBY GIVEN, that you are cordially invited to attend a special meeting in lieu of the 2022 annual meeting of the stockholders of LMF Acquisition Opportunities, Inc. (“LMAO,” “we”, “our”, or “us”) to be held at [location] located at [address], at [●] [●].m. Eastern Time, on [●], 2022 (the “Meeting”).

During the Meeting, LMAO’s stockholders will be asked to consider and vote upon the following proposals, which we refer to herein as the “Proposals”:

 

  1.

To consider and vote upon a Proposal to approve the transactions contemplated under the Merger Agreement, dated as of April 21, 2022 (the “Merger Agreement”), by and among LMAO, MLF Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of LMAO (“Merger Sub”) and SeaStar Medical, Inc., a Delaware corporation (“SeaStar Medical”), (the “Business Combination”), a copy of which is attached to the proxy statement/prospectus as Annex A. This Proposal is referred to as the “Business Combination Proposal” or “Proposal 1.”

 

  2.

To consider and vote upon a Proposal to approve the Second Amended and Restated Certificate of Incorporation of LMAO, a copy of which is attached to the proxy statement/prospectus as Annex B (the “Proposed Charter”) to, among other things, change LMAO’s name to “SeaStar Medical Holding Corporation,” and amend certain provisions related to authorized capital stock, reclassification of Class A Common Stock and Class B Common Stock, the classification of the Board, and director removal, to be effective upon the consummation of the Business Combination. This Proposal is referred to as the “Charter Approval Proposal” or “Proposal 2.”

 

  3.

To consider and vote upon, on a non-binding advisory basis, four separate governance proposals relating to the following material differences between the Existing Charter and the Proposed Charter:

 

  (a)

increase the number of shares of (i) common stock LMAO is authorized to issue from 120,000,000 shares to 160,000,000 shares and (ii) preferred stock LMAO is authorized to issue from 1,000,000 shares to 10,000,000 shares (Proposal 3A);

 

  (b)

change the classification of the Board from two classes of directors with staggered two-year terms to three classes of directors with staggered three-year terms (Proposal 3B);

 

  (c)

require the vote of at least two-thirds (66 and 2/3%) of the outstanding shares of capital stock, voting together as a single class, rather than a simple majority, to remove a director from office (Proposal 3C); and

 

  (d)

remove certain provisions related to LMAO’s status as a special purpose acquisition company that will no longer be relevant following the Business Combination (Proposal 3D).

This Proposal is referred to as the “Governance Proposals” or “Proposals 3A-3D.”

 

  4.

To consider and vote upon a Proposal to approve the LMF Acquisition Opportunities, Inc. 2022 Omnibus Incentive Plan (the “Incentive Plan”, a copy of which is to be attached to the proxy statement/prospectus as Annex D), to be effective on the later of the date on which it is approved by our stockholders and the closing of the Business Combination. This Proposal is referred to as the “Stock Plan Proposal” or “Proposal 4.”


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  5.

To consider and vote upon a Proposal to approve the LMF Acquisition Opportunities, Inc. 2022 Employee Stock Purchase Plan (the “ESPP”, a copy of which is to be attached to the proxy statement/prospectus as Annex E), to be effective on the later of the date on which it is approved by our stockholders and the closing of the Business Combination. This Proposal is referred to as the “ESPP Proposal” or “Proposal 5.”

 

  6.

To consider and vote upon a Proposal to approve for purposes of complying with Nasdaq Listing Rule 5635 (a) and (b), the issuance of more than 20% of the issued and outstanding shares of LMAO Common Stock and the resulting change in control in connection with the Business Combination. This Proposal is referred to as the “Nasdaq Proposal” or “Proposal 6.”

 

  7.

To consider and vote upon a Proposal to elect seven (7) directors to serve staggered terms on the Board until the 2023, 2024 and 2025 annual meetings of our stockholders, as applicable, or until their respective successors are duly elected and qualified, or until their earlier death, resignation, retirement or removal. This Proposal is referred to as the Director Election Proposal or “Proposal 7.”

 

  8.

To consider and vote upon a Proposal to approve the adjournment of the Meeting by the chairman thereof to a later date, if necessary, under certain circumstances, including for the purpose of soliciting additional proxies in favor of the foregoing Proposals, in the event LMAO does not receive the requisite stockholder vote to approve the Proposals. This Proposal is called the “Adjournment Proposal” or “Proposal 8.”

The Business Combination Proposal is conditioned upon the approval of Proposal 2 and Proposal 6. Proposals 2, 4, 5, 6 and 7 are dependent upon approval of the Business Combination Proposal. It is important for you to note that in the event that the Business Combination Proposal is not approved, LMAO will not consummate the Business Combination. If LMAO does not consummate the Business Combination and fails to complete an initial business combination by July 25, 2022, LMAO will be required to dissolve and liquidate, unless our sponsor, LMFAO Sponsor, LLC, deposits into the Trust Account $1,035,000 on or prior to July 25, 2022 to extend the date by which the Business Combination may be consummated to October 25, 2022.

Approval of the Business Combination Proposal, the Governance Proposals, the Stock Plan Proposal, the ESPP Proposal, the Nasdaq Proposal and the Adjournment Proposal will each require the affirmative vote of the holders of a majority of the votes cast by LMAO stockholders present in person or represented by proxy at the Meeting and entitled to vote thereon. Approval of the Director Election Proposal requires a plurality vote of the shares of Common Stock cast in respect of that Proposal and entitled to vote thereon at the Meeting. Approval of the Charter Approval Proposal will require the affirmative vote of a majority of the issued and outstanding shares of Common Stock. “Plurality” means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. Consequently, any shares not voted “FOR” a particular nominee (whether as a result of an abstention, a direction to withhold authority or a broker non-vote) will not be counted in the nominee’s favor.

As of [●], 2022, there were [10,453,500] shares of Class A Common Stock issued and outstanding and entitled to vote and [2,587,500] shares of class B common stock, par value $0.0001 per share (“Class B Common Stock” and, together with Class A Common Stock, “Common Stock”)) issued and outstanding and entitled to vote. Only holders of Common Stock of record as of the close of business on [●], 2022 are entitled to vote at the Meeting or any adjournment of the Meeting. The proxy statement/prospectus is first being mailed to LMAO stockholders on or about [●], 2022.

Investing in LMAO’s securities involves a high degree of risk. See “Risk Factors” beginning on page 30 of the proxy statement/prospectus for a discussion of information that should be considered in connection with an investment in LMAO’s securities.


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YOUR VOTE IS VERY IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY.

Whether or not you plan to participate in the Meeting, please complete, date, sign and return the enclosed proxy card without delay in order to ensure your representation at the Meeting no later than the time appointed for the Meeting or adjourned meeting. Voting by proxy will not prevent you from voting your shares of Common Stock in person if you subsequently choose to participate in the Meeting. Please note, however, that if your shares are held of record by a broker, bank or other agent and you wish to vote at the Meeting, you must obtain a proxy issued in your name from that record. Only stockholders of record at the close of business on the record date may vote at the Meeting or any adjournment or postponement thereof. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not participate in the Meeting, your shares will not be counted for purposes of determining whether a quorum is present at, and the number of votes voted at, the Meeting.

You may revoke a proxy at any time before it is voted at the Meeting by executing and returning a proxy card dated later than the previous one, by participating in the Meeting and casting your vote by hand or by ballot (as applicable) or by submitting a written revocation to Alliance Advisors, that is received by the proxy solicitor before we take the vote at the Meeting. If you hold your shares through a bank or brokerage firm, you should follow the instructions of your bank or brokerage firm regarding revocation of proxies.

LMAO’s board of directors unanimously recommends that LMAO stockholders vote “FOR” approval of each of the Proposals. When you consider LMAO’s board of directors’ recommendation of these Proposals, you should keep in mind that LMAO’s directors and officers have interests in the Business Combination that may conflict or differ from your interests as a stockholder. See the section titled “The Business Combination Proposal - Interests of Certain Persons in the Business Combination.”

On behalf of LMAO’s board of directors, I thank you for your support and we look forward to the successful consummation of the Business Combination.

By Order of the Board of Directors,

 

/s/ Bruce M. Rodgers

Bruce M. Rodgers

Chief Executive Officer and Chairman of the Board

LMF Acquisition Opportunities, Inc.

[●], 2022


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TABLE OF CONTENTS

 

FREQUENTLY USED TERMS

     1  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     3  

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

     5  

SUMMARY OF THE PROXY STATEMENT

     15  

SELECTED HISTORICAL FINANCIAL DATA OF LMAO

     28  

SELECTED HISTORICAL FINANCIAL DATA OF SEASTAR MEDICAL

     29  

RISK FACTORS

     30  

THE MEETING

     65  

PROPOSAL 1 - THE BUSINESS COMBINATION PROPOSAL

     69  

PROPOSAL 2 - THE CHARTER APPROVAL PROPOSAL

     100  

PROPOSALS 3A-3D - THE GOVERNANCE PROPOSALS

     103  

PROPOSAL 4 - THE STOCK PLAN PROPOSAL

     104  

PROPOSAL 5 - THE ESPP PROPOSAL

     114  

PROPOSAL 6 - THE NASDAQ PROPOSAL

     119  

PROPOSAL 7 - THE DIRECTOR NOMINATION PROPOSAL

     121  

PROPOSAL 8 - THE ADJOURNMENT PROPOSAL

     122  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     123  

LMAO’S BUSINESS

     129  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF LMAO

     133  

SEASTAR MEDICAL’S BUSINESS

     137  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SEASTAR MEDICAL

     157  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     164  

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     170  

COMPARATIVE SHARE INFORMATION

     174  

DESCRIPTION OF LMAO’S SECURITIES

     176  

COMPARISON OF STOCKHOLDERS’ RIGHTS

     190  

TRADING MARKET AND DIVIDENDS

     193  

LMAO’S DIRECTORS AND EXECUTIVE OFFICERS

     194  

 

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DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY AFTER THE BUSINESS COMBINATION

     200  

EXECUTIVE COMPENSATION OF SEASTAR MEDICAL

     207  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     213  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     216  

LEGAL MATTERS

     224  

EXPERTS

     224  

APPRAISAL RIGHTS

     224  

DELIVERY OF DOCUMENTS TO STOCKHOLDERS

     224  

TRANSFER AGENT AND REGISTRAR

     224  

SUBMISSION OF STOCKHOLDER PROPOSALS

     225  

FUTURE STOCKHOLDER PROPOSALS

     225  

WHERE YOU CAN FIND MORE INFORMATION

     225  

INDEX TO FINANCIAL STATEMENTS

     F-1  

 

ANNEX A    Agreement and Plan of Merger
ANNEX B    Second Amended and Restated Certificate of Incorporation
ANNEX C    Amended and Restated Bylaws
ANNEX D    LMF Acquisition Opportunities, Inc. 2022 Omnibus Incentive Plan
ANNEX E    LMF Acquisition Opportunities, Inc. 2022 Employee Stock Purchase Plan
ANNEX F    Form of Director Nomination Agreement

 

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FREQUENTLY USED TERMS

Unless otherwise stated in this proxy statement/prospectus, the terms, “we,” “us,” “our” or “LMAO” refer to LMF Acquisition Opportunities, Inc., a Delaware corporation. Further, in this document:

 

   

“Board” means the board of directors of LMAO.

 

   

“Business Combination” means the merger contemplated by the Merger Agreement.

 

   

“Certificate of Incorporation” or the “Proposed Charter” means LMAO’s Second Amended and Restated Certificate of Incorporation, a copy of which is attached to this proxy statement/prospectus as Annex B.

 

   

“Class A Common Stock” means Class A common stock, par value $0.0001 per share, of LMAO.

 

   

“Class B Common Stock” means Class B common stock, par value $0.0001 per share, of LMAO.

 

   

“Closing Date” means the date of the consummation of the Business Combination.

 

   

“Code” means the Internal Revenue Code of 1986, as amended.

 

   

“Combined Company” means LMAO after the consummation of the Business Combination, renamed SeaStar Medical Holding Corporation.

 

   

“Combined Company Bylaws” means LMAO’s Amended and Restated Bylaws, a copy of which is attached to this proxy statement/prospectus as Annex C.

 

   

“Common Stock” means (i) prior to the filing of the Proposed Charter, collectively, Class A Common Stock and Class B Common Stock, and (ii) at and after the filing of the Proposed Charter, LMAO’s common stock, par value $0.0001 per share. For the avoidance of doubt, each share of Class A Common Stock (including each share issued or issuable upon conversion of Class B Common Stock) and each share of Class B Common Stock shall be reclassified into such single class of common stock of LMAO in connection with the filing of the Proposed Charter with the Secretary of State of the State of Delaware.

 

   

“Continental” means Continental Stock Transfer & Trust Company, LMAO’s transfer agent.

 

   

“Dow Commitment Letter” means that certain commitment letter dated April 21, 2022 by and among LMAO, Dow Employee’s Pension Plan Trust, Union Carbide Employee Pension Plan and SeaStar Medical.

 

   

“Dow Pension Funds” means collectively, the Dow Employees’ Pension Plan Trust and Union Carbide Employees’ Pension Plan.

 

   

“Effective Time” means the time at which the Business Combination becomes effective.

 

   

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

   

“Existing Bylaws” means LMAO’s Bylaws.

 

   

“Existing Charter” means LMAO’s Amended and Restated Certificate of Incorporation.

 

   

“founder shares” means the outstanding shares of Class B Common Stock issued to the Sponsor.

 

   

“GAAP” means accounting principles generally accepted in the United States of America.

 

   

“Initial Stockholders” means the Sponsor and other initial holders of Class B Common Stock.

 

   

“IPO” refers to the initial public offering of 10,350,000 units consummated on January 28, 2021.

 

   

“IRS” means the United States Internal Revenue Service.

 

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“Merger Agreement” means that certain Agreement and Plan of Merger, dated as of April 21, 2022, by and among LMAO, Merger Sub and SeaStar Medical.

 

   

“Merger Sub” means LMF Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of LMAO.

 

   

“Private Placement Warrants” mean the warrants issued to our Sponsor in a private placement simultaneously with the closing of our IPO.

 

   

“public shares” means shares of Class A Common Stock sold in the IPO, whether they were purchased in the IPO or thereafter in the open market.

 

   

“public stockholders” means holders of public shares of Class A Common Stock.

 

   

“SEC” means the U.S. Securities and Exchange Commission.

 

   

“Securities Act” means the Securities Act of 1933, as amended.

 

   

“SeaStar Medical” means SeaStar Medical, Inc., a Delaware corporation, prior to the consummation of the Business Combination.

 

   

“Sponsor” means LMFAO Sponsor, LLC, a Florida limited liability company.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains forward-looking statements, including statements about the parties’ ability to close the Business Combination, the anticipated benefits of the Business Combination, and the financial condition, results of operations, earnings outlook and prospects of LMAO and/or SeaStar Medical and may include statements for the period following the consummation of the Business Combination. Forward-looking statements appear in a number of places in this proxy statement/prospectus including, without limitation, in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SeaStar Medical” and “SeaStar Medical’s Business.” In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on the current expectations of the management of LMAO and SeaStar Medical as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in “Risk Factors,” those discussed and identified in public filings made with the SEC by LMAO and the following:

 

   

expectations regarding SeaStar Medical’s strategies and commercialization plans, including its future business plans or objectives, regulatory approval of product candidates, prospective performance and opportunities and competitors, revenues, backlog conversion, products and services, pricing, operating expenses, market trends, liquidity, cash flows and uses of cash, capital expenditures, and ability to invest in growth initiatives and pursue acquisition opportunities;

 

   

risks related to SeaStar Medical’s technology, intellectual property and regulatory approval and process;

 

   

risks related to SeaStar Medical’s ability to secure additional financing to execute its growth strategies;

 

   

risks related to SeaStar Medical’s reliance on suppliers, vendors, partners and third parties;

 

   

risks related to the general economic and financial market conditions; political, legal and regulatory environment; and the industries in which SeaStar Medical operates;

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

   

the outcome of any legal proceedings that may be instituted against LMAO or SeaStar Medical following announcement of the Merger Agreement and the transactions contemplated therein;

 

   

the inability to complete the Business Combination due to, among other things, the failure to obtain LMAO or SeaStar Medical stockholder approval;

 

   

the risk that the announcement and consummation of the proposed Business Combination disrupts SeaStar Medical’s current plans;

 

   

the ability to recognize the anticipated benefits of the Business Combination;

 

   

unexpected costs related to the proposed Business Combination;

 

   

the amount of any redemptions by existing holders of Common Stock being greater than expected;

 

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limited liquidity and trading of LMAO’s securities;

 

   

geopolitical risk and changes in applicable laws or regulations;

 

   

the possibility that LMAO and/or SeaStar Medical may be adversely affected by other economic, business, and/or competitive factors;

 

   

operational risks;

 

   

the risks that the COVID-19 pandemic, and local, state, and federal responses to addressing the pandemic, may have an adverse effect on SeaStar Medical’s business operations, as well as SeaStar Medical’s financial condition and results of operations;

 

   

litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on SeaStar Medical’s resources; and

 

   

the risks that the consummation of the Business Combination is substantially delayed or does not occur.

Should one or more of these risks or uncertainties materialize or should any of the assumptions made by the management of LMAO and SeaStar Medical prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

All subsequent written and oral forward-looking statements concerning the Business Combination or other matters addressed in this proxy statement/prospectus and attributable to LMAO, SeaStar Medical or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement/prospectus. Except to the extent required by applicable law or regulation, LMAO and SeaStar Medical undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

The following are answers to some questions that you, as a stockholder of LMAO, may have regarding the Proposals being considered at the Meeting. We urge you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the Proposals and the other matters being considered at the Meeting. Additional important information is also contained in the annexes to and the documents incorporated by reference into this proxy statement/prospectus.

Q: What is the purpose of this document?

A:

LMAO, Merger Sub and SeaStar Medical have agreed to the Business Combination under the terms of the Merger Agreement, which is attached to this proxy statement/prospectus as Annex A, and is incorporated into this proxy statement/prospectus by reference. The Board is soliciting your proxy to vote for the Business Combination and other Proposals at the Meeting because you owned Common Stock at the close of business on [●], 2022, the “Record Date” for the Meeting, and are therefore entitled to vote at the Meeting. This proxy statement/prospectus summarizes the information that you need to know in order to cast your vote.

Q: What is being voted on?

A:

Below are the Proposals that the LMAO stockholders are being asked to vote on:

 

   

Proposal 1 - The Business Combination Proposal to approve the Merger Agreement and the Business Combination.

 

   

Proposal 2 - The Charter Approval Proposal to approve the Proposed Charter attached to this proxy statement/prospectus as Annex B.

 

   

Proposals 3A-3D - The Governance Proposals to approve, on a non-binding advisory basis, separate governance proposals relating to certain material differences between the Existing Charter and the Proposed Charter attached to this proxy statement/prospectus as Annex B.

 

   

Proposal 4 - The Proposal to approve the Incentive Plan.

 

   

Proposal 5 - The Proposal to approve the ESPP.

 

   

Proposal 6 - The Nasdaq Proposal to approve the issuance of more than 20% of the issued and outstanding shares of Common Stock in connection with the terms of the Merger Agreement, which will result in a change of control, as required by Nasdaq Listing Rule 5635(a) and (b).

 

   

Proposal 7 - The Proposal to elect seven directors.

 

   

Proposal 8 - The Adjournment Proposal to approve the adjournment of the Meeting.

Q: What vote is required to approve the Proposals?

A:

Proposal 1 - The Business Combination Proposal requires the affirmative vote of the majority of the votes cast at the Meeting. Abstentions and broker non-votes will have no effect on the vote for Proposal 1.

Proposal 2 - The Charter Approval Proposal requires the affirmative vote of the majority of the issued and outstanding shares of Common Stock. Abstentions and broker non-votes will have the effect of a vote “AGAINST” Proposal 2.

 

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Proposals 3A-3D - The Governance Proposals requires the affirmative vote of the majority of the votes cast at the Meeting. Abstentions and broker non-votes will have no effect on the vote for Proposals 3A-3D.

Proposal 4 - The Stock Plan Proposal requires the affirmative vote of the majority of the votes cast at the Meeting. Abstentions and broker non-votes will have no effect on the vote for Proposal 4.

Proposal 5 - The ESPP Proposal requires the affirmative vote of the majority of the votes cast at the Meeting. Abstentions and broker non-votes will have no effect on the vote for Proposal 5.

Proposal 6 - The Nasdaq Proposal requires the affirmative vote of the majority of the votes cast at the Meeting. Abstentions and broker non-votes will have no effect on the vote for Proposal 6.

Proposal 7 - The Director Election Proposal requires plurality of the votes cast by the LMAO stockholders present in person or represented by proxy at the Meeting and entitled to vote thereon. This means that the director nominees will be elected if they receive more affirmative votes than any other nominee for the same position. A “withhold” vote will have no effect on the vote’s outcome, because the candidates who receive the highest number of “for” votes are elected.

Proposal 8 - The Adjournment Proposal requires the affirmative vote of the majority of the votes cast at the Meeting. Abstentions and broker non-votes will have no effect on the vote for Proposal 8.

Q: Are any of the Proposals conditioned on one another?

A:

The Business Combination Proposal is conditioned upon the approval of Proposal 2 and Proposal 6. Proposals 2, 4, 5, 6 and 7 are dependent upon approval of the Business Combination Proposal. It is important for you to note that in the event that the Business Combination Proposal is not approved, LMAO will not consummate the Business Combination. If LMAO does not consummate the Business Combination and fails to complete an initial business combination by July 25, 2022, LMAO will be required to dissolve and liquidate, unless our sponsor, LMFAO Sponsor, LLC, deposits into the Trust Account $1,035,000 on or prior to July 25, 2022 to extend the date by which the Business Combination may be consummated to October 25, 2022. The Governance Proposals and the Adjournment Proposal are not conditioned on, and therefore do not require the approval of, the Business Combination Proposal and Business Combination to be effective.

Q: What will happen in the Business Combination?

A:

At the closing of the Business Combination, Merger Sub will merge with and into SeaStar Medical, with SeaStar Medical surviving such merger as the surviving entity. Upon consummation of the Business Combination, SeaStar Medical will become a wholly-owned subsidiary of LMAO. In connection with the Business Combination, the cash held in the Trust Account after giving effect to any redemption of shares by LMAO’s public stockholders and the proceeds from investment by the Dow Pension Funds pursuant to the Dow Commitment Letter will be used to pay certain fees and expenses in connection with the Business Combination, and for working capital and general corporate purposes. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A.

Immediately prior to the Preferred Stock Conversion, each convertible note of SeaStar Medical shall be converted into shares of common stock, par value $0.001 per share, of SeaStar Medical (“SeaStar Medical Common Stock”) in accordance with the terms of such convertible notes (the “Convertible Note Conversion”). Immediately after the Convertible Note Conversion but immediately prior to the Effective Time, each issued and outstanding share of SeaStar Medical’s Series A-1, Series A-2 and Series B convertible preferred stock, par value $0.001 (collectively, the “SeaStar Medical Preferred Stock”) shall be converted into shares of the SeaStar Medical Common Stock at the then-applicable conversion rates (the “Preferred Stock Conversion”).

 

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Q: What is the consideration being paid to SeaStar Medical security holders?

A:

Warrants. Each SeaStar Medical warrant to purchase shares of SeaStar Medical Common Stock or SeaStar Medical Preferred Stock (“SeaStar Medical Warrant”) that is outstanding and unexercised immediately prior to the Effective Time and that would automatically be exercised or otherwise exchanged in full in accordance with its terms by virtue of the Business Combination, without any election or action by SeaStar Medical or the holder of the SeaStar Medical Warrant shall automatically be exercised or exchange in full for the applicable shares of SeaStar Medical Common Stock. Each SeaStar Medical Warrant that is outstanding and unexercised immediately prior to the Effective Time and that is not automatically exercised in full shall be converted into a warrant to purchase common stock, par value $0.0001 per share, of LMAO (the “Common Stock”), in accordance with its terms. From and after the Effective Time: (i) each SeaStar Medical Warrant assumed by LMAO may be exercised solely for shares of Common Stock (rounded down to the nearest whole share); (ii) the number of shares of Common Stock subject to each SeaStar Medical Warrant assumed by LMAO will be determined by multiplying (A) the number of shares of SeaStar Medical Common Stock (as calculated on as converted to SeaStar Medical Common Stock basis) subject to such SeaStar Medical Warrant immediately prior to the Effective Time, by (B) the Exchange Ratio and (iii) such assumed warrant shall have an exercise price per share (which shall be rounded up to the nearest whole cent) equal to the exercise price per share of such SeaStar Medical Warrant immediately prior to the Effective Time divided by the Exchange Ratio. The Exchange Ratio is defined in the Merger Agreement to be the quotient of (1) (A) (i) $85,000,000 minus any SeaStar Medical indebtedness minus any SeaStar Medical transaction expenses in excess of $800,000(which the cap of $800,000 shall not apply to transaction bonuses payable to executives or the financial advisory fee payable to Maxim Group LLC by SeaStar Medical) plus (ii) the aggregate exercise price of unexercised SeaStar Medical Warrants and SeaStar Medical Options all divided by (B) Aggregate Fully Diluted Company Common Stock (as defined in the Merger Agreement), all divided by (2) $10.00.

Common Stock. At the Effective Time, following the Convertible Note Conversion and Preferred Stock Conversion, each share of SeaStar Medical Common Stock (including shares of SeaStar Medical Common Stock outstanding as a result of the Convertible Note Conversion and Preferred Stock Conversion, but excluding shares the holders of which perfect rights of appraisal under Delaware law) will be converted into the right to receive such number of shares of Common Stock equal to the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement).

Stock Options. At the Effective Time, each outstanding option to purchase shares of SeaStar Medical Common Stock (a “SeaStar Medical Option”), whether or not then vested and exercisable, will be assumed and converted into an option to purchase shares of Common Stock with the same terms and conditions as were applicable to such SeaStar Medical Option immediately prior to the Effective Time, except that each SeaStar Medical Option will relate to such number of Common Stock as is equal to the product of (i) the number of shares subject to such option prior to the Effective Time multiplied by (ii) the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement), with the per share exercise price equal to the exercise price prior to the Effective Time divided by the Exchange Ratio.

Restricted Stock Units. At the Effective Time, each award of restricted stock units based on SeaStar Medical Common Stock (a “SeaStar Medical Restricted Stock Unit Award”) that is outstanding immediately prior to the Effective Time will be converted into the right to receive restricted stock units based on Common Stock (each, an “Assumed Restricted Stock Unit Award”) with the same terms and conditions as were applicable to such SeaStar Medical Restricted Stock Unit Award immediately prior to the Effective Time, except that each Assumed Restricted Stock Unit Award will relate to such number of Common Stock as is equal to the product of (i) the number of shares of SeaStar Medical Common Stock subject to such SeaStar Medical Restricted Stock Unit Award immediately prior to the Effective Time, multipled by (ii) the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement). For purposes of any SeaStar Medical Restricted Stock Unit Awards with a liquidity vesting condition, SeaStar Medical will be permitted to treat the occurrence of the Effective Time as an initial public offering under the terms of any such award for purposes of the vesting of such award.

 

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Q: What equity stake will current stockholders of LMAO and SeaStar Medical stockholders hold in the Combined Company after the closing?

A:

It is anticipated that upon completion of the Business Combination, LMAO’s public stockholders (other than the shares issued to the Dow Pension Funds in connection with the Dow Commitment Letter) would retain an ownership interest of approximately 48.7% in the Combined Company, LMFAO Sponsor, LLC, LMAO’s sponsor and the sole holder of founder shares, will retain an ownership interest of approximately 12.1% of the Combined Company and the SeaStar Medical stockholders (which includes the minimum $5,000,000 worth of Class A Common Stock that will be issued to the Dow Pension Funds in connection with the Dow Commitment Letter as the Dow Pension Funds are current shareholders of SeaStar Medical) will own approximately 39.2% of the Combined Company.

The ownership percentage with respect to the Combined Company (A) does not take into account (i) the redemption of any shares by the LMAO public stockholders, (ii) the issuance of any additional shares upon the closing of the Business Combination under the Incentive Plan or ESPP, and (iii) the withholding of shares of Common Stock to pay future exercises under the SeaStar Medical warrants and options assumed by LMAO or the settlement of SeaStar Medical restricted stock units assumed by LMAO and (B) assumes (i) that the Dow Pension Funds only purchase the minimum amount under the Dow Commitment Letter and (ii) that SeaStar Medical neither has any indebtedness to be repaid at Closing nor incurs transaction expenses in excess of the transaction expenses cap. If the actual facts are different from these assumptions (which they are likely to be), the percentage ownership retained by the LMAO stockholders will be different. See “Unaudited Pro Forma Condensed Combined Financial Information.”

Q: Are there any arrangements to help ensure that LMAO will have sufficient funds, together with the proceeds in its Trust Account, to fund the consideration?

A:

Yes. LMAO entered into a commitment letter with the Dow Pension Funds, dated as of April 21, 2022 (the “Dow Commitment Letter”), pursuant to which, among other things, LMAO agreed to issue and sell, in a private placement to close immediately prior to the closing of the Business Combination, at least $5,000,000 worth of Class A Common Stock. To the extent not utilized to consummate the Business Combination, the proceeds from the Trust Account will be used for general corporate purposes, including, but not limited to, working capital for operations, capital expenditures and future acquisitions. LMAO expects that it (or its successor) will file with the SEC a registration statement registering the resale of the shares issued in connection with the private placement contemplated by the Dow Commitment Letter and use its commercially reasonable efforts to have the registration statement declared effective as soon as practicable.

Q: Do any of LMAO’s directors or officers have interests that may conflict with my interests with respect to the Business Combination?

A:

In considering the recommendation of the Board to approve the Merger Agreement, LMAO stockholders should be aware that certain LMAO executive officers and directors may be deemed to have interests in the Business Combination that are different from, or in addition to, those of LMAO stockholders generally. These interests, which may create actual or potential conflicts of interest, include (i) the limited amount of time in which LMAO has to complete an initial business combination, (ii) the ability LMAO’s directors and officers to change or waive terms of the transaction, (iii) the Sponsor’s right to designate two directors to the Combined Company’s board of directors and (iv) the engagement of a financial advisor whose Chairman, Marty Traber, is a board member of LMAO. These actual or potential conflicts of interest are, to the extent

 

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material, described in the section entitled “The Business Combination Proposal - Interests of Certain Persons in the Business Combination” beginning on page 95.

Q: When and where is the Meeting?

A:

The Meeting will take place at [location] located at [address] on [●], 2022, at [●] [●].m. Eastern Time, or at such other time, on such other date and at such other place to which the Meeting may be adjourned.

Q: Who may vote at the Meeting?

A:

Only holders of record of common stock as of the close of business on [●], 2022 may vote at the Meeting. As of [●], 2022 there were [13,041,000] shares of Common Stock outstanding and entitled to vote. Please see “The Meeting - Record Date; Who is Entitled to Vote” for further information.

Q: What is the quorum requirement for the Meeting?

A:

Stockholders representing a majority of the voting power of all outstanding shares of capital stock of LMAO as of the Record Date and entitled to vote at the Meeting shall constitute a quorum for the transaction of business at the Meeting. This is called a quorum. Shares of our Common Stock will be counted for purposes of determining if there is a quorum if the stockholder (i) is present and entitled to vote at the meeting, or (ii) has properly submitted a proxy card or voting instructions through a broker, bank or custodian. In the absence of a quorum, the chairman of the Meeting may adjourn the meeting until a quorum is present.

Q: How will the Initial Stockholders vote?

A:

Pursuant to a letter agreement, the Initial Stockholders, who as of [●], 2022 owned [2,587,500] shares of Class B Common Stock, or approximately 20% of the outstanding shares of Common Stock, agreed to vote their respective shares of Common in favor of the Business Combination Proposal (“Letter Agreement”). In addition, in connection with the execution of the Merger Agreement, the Sponsor entered into a support agreement (the “Sponsor Support Agreement”) with LMAO and SeaStar Medical pursuant to which it agreed, among other things, to vote all shares of Common Stock beneficially owned by it in favor of the Business Combination Proposal.

As of [●], 2022, a total of [2,587,500] shares of Common Stock, or approximately 20% of the outstanding shares, were subject to the Letter Agreement or the Sponsor Support Agreement. As a result, only [3,933,001] shares of Common Stock held by the public stockholders will need to be present and entitled to vote to satisfy the quorum requirement for the Meeting. In addition, as the vote to approve the Business Combination Proposal is a majority of the votes cast by the stockholders represented in person or by proxy and entitled to vote thereon at a meeting at which a quorum is present, assuming only the minimum number of shares of Common Stock to constitute a quorum is present, only [672,751] shares of Common Stock, or approximately [6.4]% of the [10,453,500] shares of Common Stock held by the public stockholders, must vote in favor of the Business Combination Proposal for it to be approved.

 

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Q: How many votes do I and others have?

A:

You are entitled to one vote for each share of LMAO’s Common Stock that you held as of the Record Date. As of the close of business on the Record Date, there were [13,041,000] outstanding shares of Common Stock.

Q: Am I required to vote against the Business Combination Proposal in order to have my public shares redeemed?

A:

No. You are not required to vote against the Business Combination Proposal in order to have the right to demand that LMAO redeem your public shares for cash equal to your pro rata share of the aggregate amount then on deposit in the Trust Account (currently anticipated to be no less than approximately $[10.20] per share of Class A Common Stock for stockholders) net of taxes payable. These rights to demand redemption of public shares for cash are sometimes referred to herein as “redemption rights.” If the Business Combination is not completed, holders of public shares electing to exercise their redemption rights will not be entitled to receive such payments and their shares of Common Stock will be returned to them.

Q: How do I exercise my redemption rights?

A:

If you are a public stockholder and you seek to have your public shares redeemed, you must (i) demand, no later than 5:00 p.m., Eastern Time on [●], 2022 (at least two business days before the Meeting), that LMAO redeem your shares into cash; and (ii) submit your request in writing to Continental, at the address listed at the end of this section and deliver your shares to Continental physically or electronically using the Depository Trust Company’s (“DTC”) DWAC (Deposit/Withdrawal at Custodian) System at least two business days before the Meeting.

Any corrected or changed written demand of redemption rights must be received by Continental two business days before the Meeting. No demand for redemption will be honored unless the holder’s shares have been delivered (either physically or electronically) to Continental at least two business days before the Meeting.

LMAO stockholders may seek to have their public shares redeemed regardless of whether they vote for or against the Business Combination and whether or not they are holders of common stock as of the Record Date. Any public stockholder who holds shares of Common Stock on or before [●], 2022 (two business days before the Meeting) will have the right to demand that his, her or its shares be redeemed for a pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid, at the consummation of the Business Combination.

The actual per share redemption price will be equal to the aggregate amount then on deposit in the Trust Account (before payment of deferred underwriting commissions and including interest earned on their pro rata portion of the Trust Account, net of taxes payable), divided by outstanding number of public shares. Please see the section titled “The Meeting - Redemption Rights” for the procedures to be followed if you wish to redeem your public shares for cash.

Q: What are the U.S. federal income tax consequences of exercising my redemption rights?

A:

In the event that a holder elects to redeem its Common Stock for cash, the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale or exchange of Common Stock under Section 302 of the Code or is treated as a distribution under Section 301 of the Code. Whether the redemption qualifies as a sale or exchange or is treated as a distribution will depend on the facts and circumstances of each particular holder at the time such holder exercises his, her, or its redemption

 

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rights. See “Material U.S. Federal Income Tax Consequences - Certain Material U.S. Federal Income Tax Consequences of Exercising Redemption Rights” for a more detailed discussion of the U.S. federal income tax consequences of a holder electing to redeem its Common Stock for cash.

Q: What do I need to do now?

A:

You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

Q: How can I vote?

A:

If you were a holder of record of Common Stock on [●], 2022, the record date for the special meeting of LMAO stockholders, you may vote with respect to the Proposals in person at the Meeting, or by submitting a proxy by mail so that it is received prior to [9:00 a.m., Eastern Time, on [●], 2022], in accordance with the instructions provided to you under “The Meeting.” If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, your broker or bank or other nominee may provide voting instructions (including any telephone or Internet voting instructions). You should contact your broker, bank or nominee in advance to ensure that votes related to the shares you beneficially own will be properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the Meeting and vote in person, obtain a proxy from your broker, bank or nominee.

Signed and dated proxies received without an indication of how the stockholder intends to vote on a Proposal will be voted in favor of each Proposal presented to the stockholders.

Q: If my shares are held in “street name” by my bank, brokerage firm or nominee, will they automatically vote my shares for me?

A:

No. If you are a beneficial owner and you do not provide voting instructions to your broker, bank or other holder of record holding shares for you, your shares will not be voted with respect to any Proposal for which your broker does not have discretionary authority to vote. If a Proposal is determined to be discretionary, your broker, bank or other holder of record is permitted to vote on the Proposal without receiving voting instructions from you. If a Proposal is determined to be non-discretionary, your broker, bank or other holder of record is not permitted to vote on the Proposal without receiving voting instructions from you. A “broker non-vote” occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a non-discretionary Proposal because the holder of record has not received voting instructions from the beneficial owner.

Each of the Proposals to be presented at the Meeting is a non-discretionary Proposal. Accordingly, if you are a beneficial owner and you do not provide voting instructions to your broker, bank or other holder of record holding shares for you, your shares will not be voted with respect to any of the Proposals. A broker non-vote would have the same effect as a vote “AGAINST” the Charter Approval Proposal.

Q: What if I abstain from voting or fail to instruct my bank, brokerage firm or nominee?

A:

LMAO will count a properly executed proxy marked “ABSTAIN” with respect to a particular Proposal as present for the purposes of determining whether a quorum is present at the Meeting. For purposes of approval,

 

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an abstention on the Charter Approval Proposal will have the same effect as a vote “AGAINST” such Proposal. For all other Proposals (other than the Charter Approval Proposal), an abstention will have no effect on the vote for such Proposal.

Q: If I am not going to attend the Meeting, should I return my proxy card instead?

A.

Yes. Whether you plan to attend the Meeting in person or not, please read the enclosed proxy statement/prospectus carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Q: Can I change my vote after I have mailed my proxy card?

A:

Yes. You may change your vote at any time before your proxy is voted at the Meeting. You may revoke your proxy by executing and returning a proxy card dated later than the previous one, or by attending the Meeting and casting your vote in person, or by submitting a written revocation stating that you would like to revoke your proxy that our proxy solicitor receives prior to the Meeting. If you hold your shares of common stock through a bank, brokerage firm or nominee, you should follow the instructions of your bank, brokerage firm or nominee regarding the revocation of proxies. If you are a record holder, you should send any notice of revocation or your completed new proxy card, as the case may be, to:

Alliance Advisors

Toll Free: 855-935-2548

Collect: 1-520-524-4921

Email: lmao@allianceadvisors.com

Unless revoked, a proxy will be voted at the Meeting in accordance with the stockholder’s indicated instructions. In the absence of instructions, proxies will be voted FOR each of the Proposals.

Q: What will happen if I return my proxy card without indicating how to vote?

A:

If you sign and return your proxy card without indicating how to vote on any particular Proposal, the shares of Common Stock represented by your proxy will be voted in favor of each Proposal. Proxy cards that are returned without a signature will not be counted as present at the Meeting and cannot be voted.

Q: Should I send in my share certificates now to have my shares of Common Stock redeemed?

A:

LMAO stockholders who intend to have their public shares redeemed should send their certificates to Continental at least two business days before the Meeting. Please see “The Meeting - Redemption Rights” for the procedures to be followed if you wish to redeem your public shares for cash.

Q: Who will solicit the proxies and pay the cost of soliciting proxies for the Meeting?

A:

LMAO will pay the cost of soliciting proxies for the Meeting. LMAO has engaged Alliance Advisors to assist in the solicitation of proxies for the Meeting. LMAO has agreed to pay Alliance Advisors a fee of $10,000, plus disbursements, and will reimburse Alliance Advisors for its reasonable out-of-pocket

 

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expenses and indemnify Alliance Advisors and its affiliates against certain claims, liabilities, losses, damages, and expenses. LMAO will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of Common Stock for their expenses in forwarding soliciting materials to beneficial owners of the Common Stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Q: What happens if I sell my shares before the Meeting?

A:

The Record Date for the Meeting is earlier than the date of the Meeting, as well as the date that the Business Combination is expected to be consummated. If you transfer your shares of Common Stock after the Record Date, but before the Meeting, unless the transferee obtains from you a proxy to vote those shares, you would retain your right to vote at the Meeting, but will transfer ownership of the shares and will not hold an interest in LMAO after the Business Combination is consummated.

Q: When is the Business Combination expected to occur?

A:

Assuming the requisite regulatory and stockholder approvals are received, LMAO expects that the Business Combination will occur as soon as possible following the Meeting.

Q: Are SeaStar Medical’s stockholders required to approve the Business Combination?

A:

Yes. The Business Combination requires the affirmative approval of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, by each of (i) a majority of issued and outstanding shares of SeaStar Medical stock, with preferred stock voting based on the number of whole shares of SeaStar Medical Common Stock into which the shares of preferred stock are convertible into, voting together as a single class and (ii) a majority of issued and outstanding shares of SeaStar Medical Series B Preferred Stock voting separately as a class. In connection with the execution of the Merger Agreement, certain stockholders of SeaStar Medical owning approximately 90% of the voting power of SeaStar Medical entered into the SeaStar Medical support agreement with LMAO and SeaStar Medical pursuant to which the SeaStar Medical stockholders agreed to vote all shares of SeaStar Medical Common Stock (including shares of SeaStar Medical Common Stock received in connection with the Convertible Note Conversion and Preferred Stock Conversion) beneficially owned by them in favor of the Business Combination and related matters.

Q: Are there risks associated with the Business Combination that I should consider in deciding how to vote?

A:

Yes. There are a number of risks related to the Business Combination and other transactions contemplated by the Merger Agreement, that are discussed in this proxy statement/prospectus. Please read with particular care the detailed description of the risks described in “ Risk Factors” beginning on page 30 of this proxy statement/prospectus.

Q: May I seek statutory appraisal rights or dissenter rights with respect to my shares?

A:

No. Appraisal rights are not available to holders of shares of Common Stock in connection with the proposed Business Combination. For additional information, see the section titled “The Meeting - Appraisal Rights.”

 

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Q: What happens if the Business Combination is not consummated?

A:

If LMAO does not complete a business combination within 18 months from the closing of the IPO (or 21 months from the closing of the IPO, if we extend the period of time to consummate a business combination, as described in more detail in this proxy statement/prospectus), we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay liquidation expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 18-month time period (or 21-month period).

Q: What happens to the funds deposited in the Trust Account following the Business Combination?

A:

Following the closing of the Business Combination, holders of public shares of LMAO exercising redemption rights will receive their per share redemption price out of the funds in the Trust Account. The balance of the funds will be released to SeaStar Medical to fund working capital needs of the Combined Company. As of [            ], 2022, there was approximately $[105.6] million in the Trust Account. LMAO estimates that approximately [$10.20] per outstanding public share will be paid to the investors exercising their redemption rights.

Q: Who will manage the Combined Company after the Business Combination?

A:

As a condition to the closing of the Business Combination, all of the officers and directors of LMAO will resign. For information on the anticipated management of the Combined Company, see the section titled “Directors and Executive Officers of the Combined Company after the Business Combination” in this proxy statement/prospectus.

Q: Who can help answer my questions?

A:

If you have questions about the Meeting, the Proposals or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact LMAO’s proxy solicitor at:

Alliance Advisors

Toll Free: 855-935-2548

Collect: 1-520-524-4921

Email: lmao@allianceadvisors.com

You may also obtain additional information about LMAO from documents filed with the SEC by following the instructions in the section titled “Where You Can Find More Information.”

 

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SUMMARY OF THE PROXY STATEMENT

This summary highlights selected information from this proxy statement/prospectus but may not contain all of the information that may be important to you. Accordingly, LMAO encourages you to read carefully this entire proxy statement/prospectus, including the Merger Agreement attached as Annex A. Please read these documents carefully as they are the legal documents that govern the Business Combination and your rights in the Business Combination.

Unless otherwise specified, all share calculations assume no exercise of the redemption rights by LMAO’s stockholders.

The Parties to the Business Combination

LMF Acquisition Opportunities, Inc.

LMAO was incorporated in Delaware on October 28, 2020 and was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. LMAO has until July 25, 2022 to consummate a business combination, unless the Sponsor deposits into the Trust Account $1,035,000 on or prior to July 25, 2022 to extend the date by which the Business Combination may be consummated to October 25, 2022.    

On January 28, 2021 LMAO consummated the IPO of 10,350,000 units (which included the public shares), at $10.00 per unit, generating gross proceeds of $103,500,000. Simultaneously with the closing of the IPO, LMAO consummated the sale of 5,738,000 private placement warrants at a price of $1.00 per private placement warrant in a private placement to the Sponsor, generating gross proceeds of $5,738,000.

Following the closing of the IPO on January 28, 2021, an amount of $105,570,000 ($10.20 per unit) from the net proceeds of the sale of the units in the IPO and the sale of the private placement warrants was placed in the Trust Account and was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by LMAO.

LMAO’s shares of Class A Common Stock are listed on the Nasdaq Stock Market under the symbol “LMAO”.

LMAO’s principal executive offices are located at 1200 W. Platt Street, Suite 100, Tampa, FL 33602 and its telephone number is (813) 222-899.

SeaStar Medical, Inc.

SeaStar Medical was initially incorporated in Delaware under the name Nephrion, Inc. on June 6, 2007. On August 3, 2007, it changed its name CytoPherx, Inc. On June 19, 2019 and in connection with a merger transaction, CytoPherx, Inc. changed its corporate name to SeaStar Medical, Inc. SeaStar Medical is a medical technology company focused primarily on developing and commercializing its lead product candidate, the Selective Cytopheretic Device (“SCD”), for pediatric and adult acute kidney injury (“AKI”) indications. SeaStar Medical is currently completing a submission of the Humanitarian Device Exemption (“HDE”) for SCD for the treatment of pediatric patients with AKI on continuous renal replacement therapy (“CRRT”), and finalizing the design of a pivotal trial for adult patients with AKI on CRRT. The SCD received a Breakthrough Device Designation from the U.S. Food and Drug Administration (“FDA”) on April 29, 2022 for the proposed use in the treatment of immunomodulatory dysregulation in adult patients who are 18 years and older with AKI. It has not obtained regulatory approval to commercialize or sell any of its products candidates.

 

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Its principal executive offices are located at 3513 Brighton Boulevard, Suite #410, Denver, Colorado 80216 and its telephone number is 844-427-8100.

For more information on SeaStar Medical, please see the sections titled “SeaStar Medical’s Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SeaStar Medical.”

Merger Sub

Merger Sub is a wholly-owned subsidiary of LMAO formed to consummate the Business Combination. Following the consummation of the Business Combination, Merger Sub will have merged with and into SeaStar Medical, with SeaStar Medical surviving the merger as a wholly-owned subsidiary of LMAO.

The Merger Agreement

On April 21, 2022, LMAO entered into the Merger Agreement by and among LMAO, Merger Sub and SeaStar Medical. Pursuant to the terms of the Merger Agreement, a business combination between LMAO and SeaStar Medical will be effected through the merger of Merger Sub with and into SeaStar Medical, with SeaStar Medical surviving the merger as a wholly-owned subsidiary of LMAO. The board of directors of LMAO (the “Board”) has unanimously (i) approved and declared advisable the Merger Agreement, the Business Combination and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and related matters by the stockholders of LMAO.

Treatment of SeaStar Medical Securities

Convertible Notes. Immediately prior to the Preferred Stock Conversion, each convertible note of SeaStar Medical shall be converted into shares of SeaStar Medical Common Stock in accordance with the terms of such convertible notes.

Preferred Stock. Immediately after the Convertible Note Conversion but immediately prior to the Effective Time, each issued and outstanding share of SeaStar Medical Preferred Stock shall be converted into shares of the SeaStar Medical Common Stock at the then-applicable conversion rates.

Warrants. Each SeaStar Medical Warrant that is outstanding and unexercised immediately prior to the Effective Time and that would automatically be exercised or otherwise exchanged in full in accordance with its terms by virtue of the Business Combination, without any election or action by SeaStar Medical or the holder of the SeaStar Medical Warrant shall automatically be exercised or exchanged in full for the applicable shares of SeaStar Medical Common Stock. Each SeaStar Medical Warrant that is outstanding and unexercised immediately prior to the Effective Time and that is not automatically exercised in full shall be converted into a warrant to purchase Common Stock, in accordance with its terms. From and after the Effective Time: (i) each SeaStar Medical Warrant assumed by LMAO may be exercised solely for shares of Common Stock (rounded down to the nearest whole share); (ii) the number of shares of Common Stock subject to each SeaStar Medical Warrant assumed by LMAO will be determined by multiplying (A) the number of shares of SeaStar Medical Common Stock (as calculated on as converted to SeaStar Medical Common Stock basis) subject to such SeaStar Medical Warrant immediately prior to the Effective Time, by (B) the Exchange Ratio and (iii) such assumed warrant shall have an exercise price per share (which shall be rounded up to the nearest whole cent) equal to the exercise price per share of such SeaStar Medical Warrant immediately prior to the Effective Time divided by the Exchange Ratio. The Exchange Ratio is defined in the Merger Agreement to be the quotient of (1) (A) (i) $85,000,000 minus any SeaStar Medical indebtedness minus any SeaStar Medical transaction expenses in excess of $800,000(which the cap of $800,000 shall not apply to transaction bonuses payable to executives or the financial advisory fee payable to Maxim Group LLC by SeaStar Medical) plus (ii) the aggregate exercise price of unexercised SeaStar Medical Warrants and SeaStar Medical Options all divided by (B) Aggregate Fully Diluted Company Common Stock (as defined in the Merger Agreement), all divided by (2) $10.00.

 

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Common Stock. At the Effective Time, following the Convertible Note Conversion and Preferred Stock Conversion, each share of SeaStar Medical Common Stock (including shares of SeaStar Medical Common Stock outstanding as a result of the Convertible Note Conversion and Preferred Stock Conversion, but excluding shares the holders of which perfect rights of appraisal under Delaware law) will be converted into the right to receive such number of shares of Common Stock equal to the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement).

Stock Options. At the Effective Time, each outstanding SeaStar Medical Option, whether or not then vested and exercisable, will be assumed and converted into an option to purchase shares of Common Stock with the same terms and conditions as were applicable to such SeaStar Medical Option immediately prior to the Effective Time, except that each SeaStar Medical Option will relate to such number of Common Stock as is equal to the product of (i) the number of shares subject to such option prior to the Effective Time multiplied by (ii) the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement), with the per share exercise price equal to the exercise price prior to the Effective Time divided by the Exchange Ratio.

Restricted Stock Units. At the Effective Time, each award of restricted stock units based on SeaStar Medical Common Stock (a “SeaStar Medical Restricted Stock Unit Award”) that is outstanding immediately prior to the Effective Time will be converted into the right to receive restricted stock units based on Common Stock (each, an “Assumed Restricted Stock Unit Award”) with the same terms and conditions as were applicable to such SeaStar Medical Restricted Stock Unit Award immediately prior to the Effective Time, except that each Assumed Restricted Stock Unit Award will relate to such number of Common Stock as is equal to the product of (i) the number of shares of SeaStar Medical Common Stock subject to such SeaStar Medical Restricted Stock Unit Award immediately prior to the Effective Time, multiplied by (ii) the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement). For purposes of any SeaStar Medical Restricted Stock Unit Awards with a liquidity vesting condition, SeaStar Medical will be permitted to treat the occurrence of the Effective Time as an initial public offering under the terms of any such award for purposes of the vesting of such award.

Representations and Warranties

SeaStar Medical has made representations and warranties relating to, among other things, corporate organization, subsidiaries, due authorization, no conflict, governmental authorities and consents, current capitalization of SeaStar Medical, financial statements, undisclosed liabilities, litigation and proceedings, compliance with laws, contracts and no defaults, SeaStar Medical benefit plans, labor matters, taxes, insurance, permits, tangible property, real property, intellectual property and IT security, environmental matters, absence of changes, brokers’ fees, healthcare matters, insurance regulatory matters, related party transactions, a registration statement, government contracts and U.S. Food and Drug Administration matters.

LMAO and Merger Sub have made representations and warranties relating to, among other things, corporate organization, due authorization, no conflict, litigation and proceedings, governmental authorities and consents, financial ability and trust account, brokers’ fees, SEC reports, financial statements and the Sarbanes-Oxley Act, undisclosed liabilities, business activities, tax matters, capitalization, stock exchange listing, the Sponsor Support Agreement, related party transactions, applicability of the Investment Company Act of 1940, as amended, LMAO stockholders, contracts, and no alternative transactions.

Covenants and Agreements

SeaStar Medical has made covenants relating to, among other things, SeaStar Medical’s conduct of business during the Interim Period (as defined in the Merger Agreement), rights to inspection, waiver of claims against the Trust Account, proxy solicitation and other actions, Code Section 280G, and SeaStar Medical stockholder approval and the Support Agreements (as defined in the Merger Agreement).

 

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LMAO has made covenants relating to, among other things, indemnification and insurance, LMAO’s conduct during the Interim Period, certain transactional agreements, rights to inspection, Section 16 matters, LMAO’s stock exchange listing, LMAO’s public filings, the Incentive Plan and the ESPP, and its qualification as an emerging growth company.

Each of SeaStar Medical and LMAO have also jointly made covenants relating to, among other things, jointly preparing a preliminary registration statement containing a prospectus/proxy statement on Form S-4, using its reasonable best efforts to cause the registration statement to be declared effective under the Securities Act as promptly as practicable, keeping the registration statement effective as long as is necessary to consummate the Business Combination, using its commercially reasonable efforts to obtain the approval of the matters specified herein at the Meeting, and using its commercially reasonable efforts to do and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Business Combination.

Conditions to Closing

The consummation of the Business Combination is conditioned upon, among other things, (i) the parties receiving the clearances, authorizations and other approvals from governmental authorities, (ii) no governmental authority having issued any order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, enjoining or otherwise prohibiting the consummation of the Business Combination and no law or regulation having been adopted that makes consummation of the Business Combination illegal or otherwise prohibited, (iii) the completion of the LMAO stockholder redemption, (iv) the Available Closing Acquiror Cash (as defined in the Merger Agreement) not being less than $15,000,000, (v) LMAO having at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) remaining upon the consummation of the Closing (after giving effect to the LMAO stockholder redemption), (vi) the registration statement having been declared effective under the Securities Act, (vii) the approval of the stockholders of LMAO and the Company Requisite Stockholders (as defined in the Merger Agreement) being obtained, (viii) the LMAO Common Stock to be issued in connection with the Business Combination having been approved for listing on Nasdaq, and (ix) SeaStar Medical having amended its Company Options, Company Warrants and Company Restricted Stock Unit Awards (each as defined in the Merger Agreement) to permit their assignment to, and assumption by, LMAO.

The obligations of LMAO and Merger Sub to consummate the Business Combination are further conditioned upon, among other things, (i) the representations and warranties of SeaStar Medical being true and correct to applicable standards, (ii) each of the covenants of SeaStar Medical having been performed or complied with in all material respects, (iii) no Material Adverse Effect (as defined in the Merger Agreement) occurring and continuing immediately prior to the Closing, (iv) SeaStar Medical delivering the Reviewed Financials (as defined in the Merger Agreement) no later than May 15, 2022, (v) the termination of certain indebtedness (along with any liens related thereto) and agreements set forth on SeaStar Medical’s disclosure schedules, and (vi) SeaStar Medical delivering evidence of consents set forth on its disclosure schedules. The obligations of SeaStar Medical to consummate the Business Combination are further conditioned upon, among other things, (i) the representations and warranties of LMAO and Merger Sub being true and correct to applicable standards, (ii) each of the covenants of LMAO and Merger Sub having been performed or complied with in all material respects, and (iii) the Available Closing Cash not being less than $15,000,000.

Termination

The Merger Agreement may be terminated and the Business Combination abandoned:

 

   

by written consent of SeaStar Medical and LMAO;

 

   

by SeaStar Medical or LMAO if the Closing has not occurred on or before July 29, 2022, as such date will be extended to October 29, 2022 in the event that the Sponsor elects, in its sole discretion, to extend the time

 

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period by which LMAO must consummate a business combination by depositing additional funds into the Trust Account on or prior to July 29, 2022 pursuant to LMAO’s Letter Agreement, dated January 25, 2021;

 

   

by SeaStar Medical or LMAO if the Closing is permanently enjoined or prevented by the terms of a final, non-appealable order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any governmental authority, or a statute, rule, or regulation;

 

   

By SeaStar Medical or LMAO if the approval of the stockholders of LMAO is not obtained at the Special Meeting (as defined in the Merger Agreement) and vote of LMAO stockholders, subject to any adjournment, postponement, or recess of the meeting;

 

   

by SeaStar Medical or LMAO if the other party has breached any of its representations, warranties, covenants or agreements set forth in the Merger Agreement such that the conditions to the Closing would not to be satisfied at the Closing (a “Terminating Breach”), except that, if such Terminating Breach is curable through the exercise of the other party’s commercially reasonable efforts, then, for a period of 30 days after the other party receives written notice from such party of such breach (the “Cure Period”), such termination will not be effective, and such termination will only become effective if the Terminating Breach is not cured within the Cure Period, provided that this termination right will not be available if such party’s failure to fulfill any obligations under the Merger Agreement has been the proximate cause of the failure of the Closing to occur;

 

   

by LMAO if SeaStar Medical and each of the Company Requisite Stockholders have not executed and delivered to LMAO the SeaStar Medical stockholder approval and the Support Agreements within three (3) business days after the execution and delivery of the Merger Agreement;

 

   

by SeaStar Medical in the event that the LMAO Board changes its recommendation that LMAO stockholders vote in favor of the Business Combination; or

 

   

by SeaStar Medical, prior to LMAO obtaining the approval of the stockholders of LMAO, if the LMAO Board fails to include its recommendation that LMAO stockholders vote in favor of the Business Combination in the proxy statement contained in the registration statement distributed to LMAO stockholders.

The Merger Agreement and other agreements described below have been included to provide investors with information regarding their respective terms. They are not intended to provide any other factual information about LMAO, SeaStar Medical or the other parties thereto. In particular, the assertions embodied in the representations and warranties in the Merger Agreement were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed as material to investors, or may have been used for the purpose of allocating risk between the parties. Accordingly, the representations and warranties in the Merger Agreement are not necessarily characterizations of the actual state of facts about LMAO, SeaStar Medical or the other parties thereto at the time they were made or otherwise and should only be read in conjunction with the other information that LMAO makes publicly available in reports, statements and other documents filed with the SEC. LMAO and SeaStar investors and securityholders are not third-party beneficiaries under the Merger Agreement.

Certain Related Agreements

Support Agreements. In connection with the execution of the Merger Agreement, the Sponsor entered into the Sponsor Support Agreement with LMAO and SeaStar Medical pursuant to which the Sponsor has agreed, among other things, to vote or cause to be voted (or express consent or dissent in writing, as applicable) all its shares of Common Stock that are entitled to vote to approve and adopt the Merger Agreement and the Business Combination.

In addition, in connection with the execution of the Merger Agreement, the directors and officers and stockholders who held more than 5% of the equity securities of SeaStar Medical owning approximately 90% of

 

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the total voting power of SeaStar Medical (the “Requisite Stockholders”) entered into the Support Agreements with LMAO and SeaStar Medical pursuant to which the Requisite Stockholders agreed to, among other things, (i) consent to, and vote to approve and adopt, the Merger Agreement and the Business Combination, (ii) waive any dissenters’ or approval rights under applicable law in connection with the Business Combination, and (iii) not transfer, subject to certain permitted exceptions, any of such Requisite Stockholder’s SeaStar Medical shares until expiration of the Support Agreements.

Dow Commitment Letter. On April 21, 2022, LMAO entered into the Dow Commitment Letter with Dow pursuant to which Dow agreed to purchase, and LMAO has agreed to sell to it, at least $5,000,000 worth of LMAO Class A Common Stock. The obligation to consummate the transaction contemplated by the Dow Commitment Letter is conditioned upon the consummation of the transactions contemplated by the Merger Agreement.

Amended and Restated Registration Rights Agreement. On April 21, 2022, LMAO, Sponsor and certain stockholders of SeaStar Medical who will receive shares of LMAO Common Stock pursuant to the Merger Agreement, entered into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”), which will become effective upon the consummation of the Business Combination. Pursuant to the Amended and Restated Registration Rights Agreement, among other things, LMAO will be obligated to file, not later than 30 days after the Closing, a registration statement covering the shares of Common Stock issued or issuable to the parties thereto.

In addition, the Sponsor and the Requisite Stockholders agreed that they will not transfer shares of Common Stock held by them prior to the earlier of (x) twelve (12) months after the Closing and (y) the date on which the last sales price of Common Stock equals or exceeds $12.00, subject to adjustment as provided therein, for any 20 trading days within any 30-consecutive-day trading period commencing at least 150 days after the Closing. The Sponsor also agreed that it will not transfer its private placement warrants that it obtained in connection with the IPO (or any Common Stock issued upon the exercise of such warrant) until 30 days after Closing.

Director Nomination Agreement. At the Closing, the Sponsor and LMAO will enter into the Director Nomination Agreement, substantially in the form attached as Annex F to this proxy statement/prospectus, 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 Combined Company, for a specified period following the Closing.

Regulatory Approval

Neither LMAO nor SeaStar Medical is aware of any federal or state regulatory requirements that must be complied with or approval that must be obtained in connection with the Business Combination.

Management

Effective as of the Closing, the Combined Company board of directors will have seven directors, two of which will be appointed by LMAO pursuant to the Merger Agreement and the Director Nomination Agreement, and the remainder of which will be appointed by SeaStar Medical. Effective as of the Closing, all of the executive officers of SeaStar Medical immediately prior to the Closing shall resign and the individuals serving as executive officers of the Combined Company immediately after the Closing will be the same individuals (in the same offices) as those of SeaStar Medical immediately prior to the Closing.

See “Directors and Executive Officers of the Combined Company after the Business Combination” for additional information.

 

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Voting Securities

As of the Record Date, there were [13,041,000] shares of Common Stock issued and outstanding. Only LMAO stockholders who hold shares of Common Stock of record as of the close of business on [●], 2022 are entitled to vote at the Meeting or any adjournment thereof. Approval of the Business Combination Proposal, the Governance Proposals, the Stock Plan Proposal, the ESPP Proposal, the Nasdaq Proposal and the Adjournment Proposal will each require the affirmative vote of the holders of a majority of the votes cast by LMAO stockholders present in person or represented by proxy at the Meeting and entitled to vote thereon. Approval of the Director Election Proposal requires a plurality vote of the shares of Common Stock cast in respect of that Proposal and entitled to vote thereon at the Meeting. Approval of the Charter Approval Proposal will require the affirmative vote of a majority of the issued and outstanding shares of Common Stock. “Plurality” means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. Consequently, any shares not voted “FOR” a particular nominee (whether as a result of an abstention, a direction to withhold authority or a broker non-vote) will not be counted in the nominee’s favor.

Attending the Meeting either in person or by submitting your proxy and abstaining from voting will have no effect on the Proposals, other than the Charter Approval Proposal, where abstentions will count as votes “AGAINST” the Charter Approval Proposal and, assuming a quorum is present, broker non-votes will have no effect on the Proposals, other than the Charter Approval Proposal, for which it will have the same effect as voting against the Proposal.

As of [●], 2022, a total of [2,587,500] shares of Common Stock, or approximately 20% of the outstanding shares, were subject to the Letter Agreement or the Sponsor Support Agreement. As a result, only [3,933,001] shares of common stock held by the public stockholders will need to be present and entitled to vote to satisfy the quorum requirement for the Meeting. In addition, as the vote to approve the Business Combination Proposal is a majority of the votes cast by the stockholders represented in person or by proxy and entitled to vote thereon at a meeting at which a quorum is present, assuming only the minimum number of shares of common stock to constitute a quorum is present, only [672,751] shares of Common Stock, or approximately [6.4]% of the [10,453,500] shares of Common Stock held by the public stockholders, must vote in favor of the Business Combination Proposal for it to be approved.

Appraisal Rights

Appraisal rights are not available to holders of shares of Common Stock in connection with the proposed Business Combination under Delaware law.

Redemption Rights

Pursuant to the Existing Charter, holders of public shares may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest (net of taxes payable), by (ii) the total number of then-outstanding public shares. As of [        ], 2022, this would have amounted to approximately $[10.20] per share.

You will be entitled to receive cash for any public shares to be redeemed only if you:

 

  (i)

hold public shares; and

 

  (ii)

prior to 5:00 p.m., Eastern Time, on [●], 2022, (a) submit a written request to Continental that LMAO redeem your public shares for cash and (b) deliver your public shares to Continental, physically or electronically through DTC.

 

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If a holder of Common Stock exercises his or her redemption rights, then such holder will be exchanging his or her public shares for cash and will no longer own shares of the Combined Company. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to Continental in accordance with the procedures described herein. Please see the section titled “The Meeting - Redemption Rights” for the procedures to be followed if you wish to redeem your public shares for cash.

Ownership of the Combined Company After the Closing

As of [●], 2022, there are [10,453,500] shares of Class A Common Stock issued and outstanding, and [2,587,500] shares of Class B Common Stock issued and outstanding. There is outstanding an aggregate of [16,088,000] warrants, which includes [5,738,000] private placement warrants and [10,350,000] public warrants. Each warrant entitles the holder thereof to purchase one share of Class A Common Stock and, following the Business Combination, will entitle the holder thereof to purchase one share of Common Stock of the Combined Company.

It is anticipated that, upon the closing of the Business Combination, under the “no redemptions” scenario, LMAO’s public stockholders (other than the shares issued to the Dow Pension Funds in connection with the Dow Commitment Letter) would retain an ownership interest of approximately 48.7% in the Combined Company, the Sponsor, the sole holder of founder shares would retain an ownership interest of approximately 12.1% in the Combined Company and the SeaStar Medical stockholders (which includes the minimum $5,000,000 worth of Class A Common Stock that will be issued to the Dow Pension Funds in connection with the Dow Commitment Letter as the Dow Pension Funds are current shareholders of SeaStar Medical) would own approximately 39.2% of the outstanding Common Stock of the Combined Company.

Under the “maximum redemptions” scenario, LMAO’s public stockholders (other than the shares issued to the Dow Pension Funds in connection with the Dow Commitment Letter) would retain an ownership interest of approximately 13.4% in the Combined Company, the Sponsor, the sole holder of founder shares would retain an ownership interest of approximately 20.4% in the Combined Company and the SeaStar Medical stockholders (which includes the minimum $5,000,000 worth of Class A Common Stock that will be issued to Dow in connection with the Dow Commitment Letter as Dow is a current shareholder) would own approximately 66.2% of the outstanding Common Stock of the Combined Company. The following summarizes the pro forma ownership of Common Stock following the Business Combination and the issuance of shares to the Dow Pension Funds pursuant to the Dow Commitment Letter assuming no redemptions, 50% redemptions and maximum redemptions scenarios.

The ownership percentages reflected in the table are based upon the number of shares of SeaStar Medical Common Stock and Common Stock issued and outstanding as of April 21, 2022 and are subject to the following additional assumptions:

 

   

all SeaStar Medical equity is computed on a fully-diluted basis including all outstanding options, warrants and restricted stock units, and assumes the Convertible Note Conversion and the Preferred Stock Conversion have occurred;

 

   

the shares to be issued to SeaStar Medical stockholders (A) does not account for (i) the issuance of any additional shares upon the closing of the Business Combination under the Incentive Plan and ESPP and (ii) the withholding of shares of Common Stock to pay future exercises under the SeaStar Medical warrants and options assumed by LMAO or the settlement of SeaStar Medical restricted stock units assumed by LMAO, and (B) assumes (i) that the Dow Pension Funds only purchase the minimum amount under the Dow Commitment Letter and (ii) that SeaStar Medical neither has any indebtedness to be repaid at Closing nor incurs transaction expenses in excess of the transaction expenses cap;

 

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no exercise of LMAO warrants; and

 

   

no issuance of additional securities by LMAO prior to the Closing of the Business Combination.

If any of these assumptions are not correct, these percentages will be different.

For purposes of the table:

No Redemptions: This scenario assumes that no LMAO public stockholders exercise their redemption rights with respect to their Class A Common Stock upon consummation of the Business Combination.

50% Redemptions: This scenario assumes that LMAO public stockholders holding approximately 5,278,500 shares of Class A Common Stock will exercise their redemption rights upon consummation of the Business Combination.

Maximum Redemptions: This scenario assumes that public stockholders holding approximately 8,750,000 shares of Class A Common Stock will exercise their redemption rights upon consummation of the Business Combination.

 

     No
Redemption
    50%
Redemption
    Maximum
Redemption
 

Shares:

      

LMAO Public Stockholders

     10,453,500       5,278,500       1,703,000  

Sponsor

     2,587,500       2,587,500       2,587,500  

SeaStar Stockholders(1)

     8,407,774       8,407,774       8,407,774  
  

 

 

   

 

 

   

 

 

 
     21,448,774     16,273,774     12,698,274  

Ownership Percentage

      

LMAO Public Stockholders

     48.7     32.4     13.4

Sponsor

     12.1     15.9     20.4

SeaStar Stockholders(1)

     39.2     51.7     66.2

 

(1)

Includes 500,000 shares issued to the Dow Pension Funds pursuant to the Dow Commitment Letter.

Interests of Certain Persons in the Business Combination

When you consider the recommendation of the Board in favor of adoption of the Business Combination Proposal and other Proposals, you should keep in mind that LMAO’s directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder, including:

 

   

If an initial business combination is not completed within 18 months from the closing of the IPO (or 21 months from the closing of the IPO, if we extend the period of time to consummate a business combination, as described in more detail in this proxy statement/prospectus), LMAO will be required to liquidate. In such event, [2,587,500] shares of Class B Common Stock held by the Sponsor, which were acquired prior to the IPO for an aggregate purchase price of $25,000, will be worthless. Additionally, if an initial business combination is not completed within 18 months from the closing of the IPO (or 21 months from the closing of the IPO, if we extend the period of time to consummate a business combination, as described in more detail in this proxy statement/prospectus), the private placement warrants held by the Sponsor will expire worthless.

 

   

The exercise of LMAO’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the transaction may result in a conflict of interest when determining whether such changes or waivers are appropriate and in our stockholders’ best interests.

 

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If the Business Combination with SeaStar Medical is completed, pursuant to the Director Nomination Agreement, the Sponsor will have a right to designate two (2) directors of the Combined Company board of directors.

 

   

In connection with the determination of the valuation of SeaStar Medical, LMAO engaged Skyway Capital Markets, LLC (“Skyway”) to act as financial advisor to LMAO. One of LMAO’s board members, Marty Traber, is the Chairman of Skyway. The Board was made aware of Mr. Traber’s connection to Skyway, discussed that Mr. Traber could derive directly or indirectly a pecuniary benefit given the fee paid by LMAO to Skyway in connection with their services and ultimately the remainder of the Board (other than Mr. Traber) unanimously approved the engagement of Skyway to act as financial advisor to LMAO.

See “Proposal 1 - The Business Combination Proposal - Interests of Certain Persons in the Business Combination” for additional information.

Anticipated Accounting Treatment

The Business Combination will be accounted for as a “reverse recapitalization” in accordance with GAAP. Under this method of accounting LMAO will be treated as the “acquired” company for financial reporting purposes. This determination is primarily based on the fact that subsequent to the Business Combination, the SeaStar Medical stockholders are expected to have a majority of the voting power of the Combined Company, SeaStar Medical will comprise all of the ongoing operations of the Combined Company, SeaStar Medical will comprise a majority of the governing body of the Combined Company, and SeaStar Medical’s senior management will comprise all of the senior management of the Combined Company. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of SeaStar Medical issuing shares for the net assets of LMAO, accompanied by a recapitalization. The net assets of LMAO will be stated at historical costs. No goodwill or other intangible assets will be recorded. Operations prior to the Business Combination will be those of SeaStar Medical.

Material U.S. Federal Income Tax Consequences of the Business Combination

In the event that a holder elects to redeem its Common Stock for cash, the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale or exchange of Common Stock under Section 302 of the Code or is treated as a distribution under Section 301 of the Code. Whether the redemption qualifies as a sale or exchange or is treated as a distribution will depend on the facts and circumstances of each particular holder at the time such holder exercises his, her, or its redemption rights. See “Material U.S. Federal Income Tax Consequences - Certain Material U.S. Federal Income Tax Consequences of Exercising Redemption Rights” for a more detailed discussion of the U.S. federal income tax consequences of a holder electing to redeem its Common Stock for cash.

Recommendations of the Board and Reasons for the Business Combination

After careful consideration of the terms and conditions of the Merger Agreement, the Board has determined that the Business Combination and the transactions contemplated thereby are fair to, and in the best interests of, LMAO and its stockholders. In reaching its decision with respect to the Business Combination and the transactions contemplated thereby, the Board reviewed various industry and financial data and the evaluation of materials provided by SeaStar Medical. The Board supported the decision to enter into the Business Combination because SeaStar Medical has (i) a unique and highly disruptive business model, (ii) an attractive opportunity for growth, (iii) strong institutional backing, and (iv) an experience management team. The Board did not obtain a fairness opinion on which to base its assessment. The Board recommends that LMAO stockholders vote:

 

   

FOR the Business Combination Proposal;

 

   

FOR the Charter Approval Proposal;

 

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FOR the Governance Proposals;

 

   

FOR the Stock Plan Proposal;

 

   

FOR the ESPP Proposal;

 

   

FOR the Nasdaq Proposal;

 

   

FOR the Director Nomination Proposal; and

 

   

FOR the Adjournment Proposal.

Emerging Growth Company

LMAO is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in LMAO’s periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. LMAO has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, LMAO, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of LMAO’s financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

LMAO will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of LMAO’s initial public offering, (b) in which it has total annual gross revenue of at least $1.07 billion or (c) in which LMAO is deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Summary Risk Factors

In evaluating the Business Combination and the Proposals to be considered and voted on at the Meeting, you should carefully review and consider the risk factors set forth under the section entitled “Risk Factors” beginning on page 30 of this proxy statement/prospectus. Some of these risks related to are summarized below. References in the summary below to “SeaStar Medical” generally refer to SeaStar Medical in the present tense or to the Combined Company from and after the Business Combination.

The following summarizes certain principal factors that make an investment in the Combined Company speculative or risky, all of which are more fully described in the “Risk Factors” section below. This summary should be read in conjunction with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing LMAO’s, SeaStar Medical’s and/or the Combined Company’s business.

 

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Risks Related to SeaStar Medical’s Financial Condition

 

   

SeaStar Medical has incurred significant losses since its inception and anticipates that it will continue to incur significant losses for the foreseeable future.

 

   

SeaStar Medical has not generated any significant revenue and may never be profitable and SeaStar Medical has a limited operating history, which makes it difficult to forecast its future results of operations.

 

   

If SeaStar Medical fails to obtain additional financing, it would be forced to delay, reduce or eliminate its product development program, which may result in the cessation of its operations.

 

   

SeaStar Medical’s ability to use its net operating losses to offset future taxable income may be subject to certain limitations.

Risks Related to SeaStar Medical’s Business Operations

 

   

SeaStar Medical has not received, and may never receive, approval from the FDA to market its product in the United States or abroad and SeaStar Medical is subject to certain risks relating to pursuing an FDA approval via the HDE pathway, including limitations on the ability to profit from sales of the product.

 

   

SeaStar Medical will initially depend on revenue generated from a single product and in the foreseeable future will be significantly dependent on a limited number of products.

 

   

If SeaStar Medical fails to comply with extensive regulations of United States and foreign regulatory agencies, the commercialization of its products could be delayed or prevented entirely.

 

   

Delays in successfully completing SeaStar Medical’s planned clinical trials could jeopardize its ability to obtain regulatory approval and delays, interruptions or the cessation of production by its third-party suppliers of important materials or delays in qualifying new materials, may prevent or delay SeaStar Medical’s ability to manufacture or process its SCD device.

 

   

Difficulties in manufacturing SeaStar Medical’s SCD could have an adverse effect upon its revenue and expenses.

 

   

SeaStar Medical faces intense competition in the medical device industry and its SCD technology may become obsolete.

 

   

If SeaStar Medical or its contractors or service providers fail to comply with laws and regulations, it or they could be subject to regulatory actions, which could affect its ability to develop, market and sell its product candidates and any other future product candidates and may harm its reputation.

 

   

SeaStar Medical intends to outsource and rely on third parties for the clinical development and manufacturing, sales and marketing of its SCD or any future product candidates that it may develop, and its future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.

 

   

SeaStar Medical is and will be exposed to product liability risks, and clinical and preclinical liability risks, which could place a substantial financial burden upon it should it be sued.

 

   

Should SeaStar Medical’s products be approved for commercialization, a lack of third-party coverage and reimbursement for SeaStar Medical’s devices could delay or limit their adoption or adverse changes in reimbursement policies and procedures by payors may impact SeaStar Medical’s ability to market and sell its products.

 

   

A small number of SeaStar Medical’s shareholders, including its major stockholder, the Dow Pension Funds, could significantly influence its business.

 

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Risks Related to SeaStar Medical’s Intellectual Property

 

   

SeaStar Medical relies upon exclusively licensed patent rights from third parties which are subject to termination or expiration. If licensors terminate the licenses or fail to maintain or enforce the underlying patents, SeaStar Medical’s competitive position could be materially harmed.

 

   

If SeaStar Medical is unable to obtain and maintain sufficient patent protection for its products, if the scope of the patent protection is not sufficiently broad, or if the combination of patents, trade secrets and contractual provisions upon which it relies to protect its intellectual property are inadequate, its competitors could develop and commercialize similar or identical products, and SeaStar Medical’s ability to commercialize such products successfully may be adversely affected.

 

   

Intellectual property rights do not necessarily address all potential threats to SeaStar Medical’s competitive advantage.

 

   

SeaStar Medical may obtain only limited geographical protection with respect to certain patent rights, which may diminish the value of its intellectual property rights in those jurisdictions and prevent it from enforcing its intellectual property rights throughout the world.

Risks Related to Being a Public Company

 

   

The Combined Company does not have experience operating as a United States public company and may not be able to adequately develop and implement the governance, compliance, risk management and control infrastructure and culture required for a public company, including compliance with the Sarbanes Oxley Act.

 

   

The Combined Company may not be able to consistently comply with all of Nasdaq’s Listing Rules.

 

   

SeaStar Medical identified a material weakness in its internal control over financial reporting. If the Combined Company is unable to develop and maintain an effective system of internal controls over financial reporting, the Combined Company may not be able to accurately report its financial results in a timely manner, which may materially and adversely affect the Combined Company’s business, results of operations and financial condition.

Risks Related to LMAO’s Business and the Business Combination

 

   

LMAO will be forced to liquidate the Trust Account if it cannot consummate a business combination by July 25, 2022 or, if the Sponsor deposits into the Trust Account $1,035,000 on or prior to July 25, 2022, October 25, 2022.

 

   

If the conditions to the Merger Agreement are not met, the Business Combination may not occur.

 

   

If third parties bring claims against LMAO, the proceeds held in the trust could be reduced and the per-share redemption amount received by LMAO’s stockholders may be less than [$10.20] per share and LMAO’s stockholders may be held liable for claims by third parties against LMAO to the extent of distributions received by them upon redemption of their shares.

 

   

LMAO is requiring stockholders who wish to redeem their public shares in connection with a proposed business combination to comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.

 

   

LMAO’s directors and officers may have certain conflicts in determining to recommend the acquisition of SeaStar Medical, since certain of their interests, and certain interests of their affiliates and associates, are different from, or in addition to, your interests as a stockholder.

 

   

LMAO’s stockholders will experience immediate dilution as a consequence of, among other transactions, the issuance of Common Stock as consideration in the Business Combination and the shares to Dow pursuant to the Dow Commitment Letter. Having a minority share position may reduce the influence that LMAO’s current stockholders have on the management of LMAO.

 

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SELECTED HISTORICAL FINANCIAL DATA OF LMAO

LMAO’s consolidated statement of operations data for the period from October 28, 2020 (inception) through December 31, 2020 and the year ended December 31, 2021 and consolidated balance sheet data as of December 31, 2020 and December 31, 2021 are derived from LMAO’s consolidated audited financial statements included elsewhere in this registration statement.

The historical results of LMAO included below and elsewhere in this proxy statement/prospectus are not necessarily indicative of the future performance of LMAO. You should read the following selected financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of LMAO” and the financial statements and the related notes appearing elsewhere in this proxy statement/prospectus.

 

Statement of Operations Data:

   For the
Period from
October 28, 2020
(inception)
through
December 31,
2020
     Year
Ended
December 31, 2021
 

Revenues

   $ —        $ —    

Loss from operations

     5,236        1,122,443  

Gain on warrant liability revaluation

     (5,236      1,185,940  

Interest earned on investments held in Trust Account

     —          11,820  

Net income (loss)

     (5,236      (75,317

Weighted average shares outstanding - basic and diluted

     

Class A Common Stock

     —          9,651,587  

Class B Common Stock

     2,156,250        2,554,418  

Basic and diluted net income (loss) per share

     

Class A Common Stock

     —          0.02  

Class B Common Stock

     —          0.02  

 

Balance Sheet Data:

   As of
December 31,
2020
     As of
December 31, 2021
 

Cash

   $ 38,388      $ 51,567  

Trust Account

     —          105,581,820  

Total assets

     262,208        105,934,441  

Total liabilities

     249,444        10,929,942  

Value of Class A Common Stock subject to redemption

     —          105,570,000  

Stockholders’ equity

     19,764        (10,565,501

 

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SELECTED HISTORICAL FINANCIAL DATA OF SEASTAR MEDICAL

SeaStar Medical’s statement of operations data for the years ended December 31, 2020 and 2021 and balance sheet data as of December 31, 2020 and December 31, 2021 are derived from SeaStar Medical’s audited financial statements included elsewhere in this registration statement.

The historical results of SeaStar Medical included below and elsewhere in this proxy statement/prospectus are not necessarily indicative of the future performance of SeaStar Medical. You should read the following selected financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SeaStar Medical” and the financial statements and the related notes appearing elsewhere in this proxy statement/prospectus.

 

     Year
Ended
December 31,
 
     2020      2021  

Operating expenses:

     

Research and development

     4,025,172        2,766,394  

General and administrative

     2,427,725        1,682,279  
  

 

 

    

 

 

 

Total operating expenses

     6,452,897        4,448,673  
  

 

 

    

 

 

 

Loss from operations

     (6,452,897      (4,448,673
  

 

 

    

 

 

 

Other income (expense), net:

     84,450        91,402  

Interest expense

     (3,308,635      (212,436

Change in fair value of derivative liability

     —          (26,961

Gain on sale of assets and liabilities held for sale

     71,114        —    

Loss on disposal of other assets

     (5,658      —    

Gain on early extinguishment of convertible notes

     6,344,993        —    

Total other income (expense), net

     3,186,263        (147,209
  

 

 

    

 

 

 

Loss before income tax provision

     (3,266,634      (4,596,668

Income tax provision (benefit)

     9,000        (787
  

 

 

    

 

 

 

Net loss

     (3,275,634      (4,595,882
  

 

 

    

 

 

 

Net loss per share of common stock, basic and diluted

   $ —        $ —    
  

 

 

    

 

 

 

Weighted-average shares outstanding, basic and diluted

     —          —    
  

 

 

    

 

 

 

 

     2020      2021  

Balance Sheet Data:

     

Cash

   $ 2,806,585      $ 509,874  

Total assets

     2,909,196        603,384  

Accumulated deficit

     (71,716,455      (76,311,857

Total stockholders’ deficit

     (71,583,884      (76,164,540

 

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RISK FACTORS

You should consider carefully the following risk factors, as well as the other information set forth in this proxy statement/prospectus, before making a decision on the Business Combination. Risks related to SeaStar Medical, including risks related to SeaStar Medical’s business, financial position and capital requirements, development, regulatory approval and commercialization, dependence on third parties, intellectual property and taxation, will continue to be applicable to the Combined Company after the closing of the Business Combination.

Risks Related to SeaStar Medical’s Financial Condition

SeaStar Medical has incurred significant losses since its inception and anticipates that it will continue to incur significant losses for the foreseeable future.

SeaStar Medical is a medical technology company focused primarily on developing and commercializing its lead product candidate, the SCD, for pediatric and adult acute kidney injury (“AKI”) indications. SeaStar Medical is currently finalizing the design of a pivotal trial with AKI on continuous renal replacement therapy (“CRRT”) as well as a submission of the HDE for pediatric patients with AKI on CRRT. It received a Breakthrough Device Designation from the FDA on April 29, 2022 for the proposed treatment of immunomodulatory dysregulation in adult patients who are 18 years and older with acute kidney injury, but it has not obtained regulatory approval to commercialize or sell any of its SCD product candidates, and it does not expect to generate any significant revenue for the foreseeable future. It has incurred significant net losses since its inception and had an accumulated deficit of approximately $76.3 million and $71.7 million, for fiscal years ending December 31, 2021 and 2020, respectively.

SeaStar Medical has devoted most of its financial resources to research and development, including clinical trials and non-clinical development activities, and to obtain regulatory approval of its SCD product candidates. To date, SeaStar Medical has financed its operations primarily through the sale of equity and debt securities, including issuance of convertible promissory notes. The size of its future net losses will depend, in part, on the rate of future expenditures and its ability to generate revenues. To date, none of its product candidates have generated significant revenue, and if its product candidates are not successfully developed or commercialized, or if revenues are insufficient following marketing approval, it will not achieve profitability and its business may fail. Even if SeaStar Medical successfully obtains regulatory approval to market its product candidates in the United States, its revenues are also dependent upon the size of the markets outside of the United States, regulatory approval outside of the United States, and its ability to obtain market approval and achieve commercial success.

SeaStar Medical expects to continue to incur substantial and increased expenses as it expands research and development activities and advances clinical programs through the regulatory approval process. SeaStar Medical also expects an increase in its expenses associated with preparing for the potential commercialization of its products and creating additional infrastructure to support operations as a public company. As a result of the foregoing, it expects to continue to incur significant and increasing losses and negative cash flows for the foreseeable future.

SeaStar Medical has not generated any significant revenue and may never be profitable.

SeaStar Medical’s ability to generate revenue and achieve profitability depends on its ability, alone or with collaborators, to successfully complete the development, obtain the necessary regulatory approvals of and commercialize its lead product candidate, the SCD. It does not anticipate generating revenues from its product candidates’ sales for the foreseeable future. Its ability to generate future revenues from product sales depends heavily on its success with the following items:

 

   

completing the submission of HDE and Premarket Approval (“PMA”) for its SCD programs for children and adults, respectively;

 

   

completing the clinical development of SCD, initially for the treatment of adult AKI in the hospital setting;

 

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obtaining regulatory approval for its SCD for the designated indication, including the HDE in pediatrics and PMA for adults;

 

   

launching and commercializing its SCD, including building a hospital-directed sales force and collaborating with third parties;

 

   

obtaining third party reimbursement status from government agencies and insurance carriers; and

 

   

entering into collaboration agreement and partnerships to commercialize its products.

Because of the numerous risks and uncertainties associated with medical device product development, SeaStar Medical is unable to predict the timing or amount of increased expenses, when, or if, it will be able to achieve or maintain profitability. In addition, its expenses could increase beyond expectations if it is required by the FDA to perform additional, unanticipated studies.

Even if its product candidates are approved for commercial sale, SeaStar Medical anticipates incurring significant costs associated with commercializing any approved product candidate. In the case of its SCD product candidate for the treatment of pediatric AKI, even if SeaStar Medical receives approval from the FDA for its HDE application, SeaStar Medical will be limited in its ability to sell and distribute its SCD units due to certain restrictions under HDE requirements that limit the number of units that can be sold on an annual basis further limiting the amount of revenue that could be generated by SeaStar Medical. Even if it is able to generate revenues from the sale of its products, SeaStar Medical may not become profitable and may need to obtain additional funding to continue operations.

SeaStar Medical has a limited operating history, which makes it difficult to forecast its future results of operations.

SeaStar Medical has not received approval from the FDA and other regulatory authorities to sell its SCD product candidates and therefore it has a limited commercial operating history. According, SeaStar Medical’s ability to accurately forecast future results of its operations is limited and subject to a number of uncertainties and risks, including its ability to plan for and model future growth. After SeaStar Medical receives regulatory approval to market and sell its SCD product candidates, its revenue growth could slow in the future, or its revenue could decline or fluctuate for a number of reasons, including slowing demand for its products, increasing competition, changing demand in the markets, new scientific or technological developments, a decrease in the growth of its overall market, its failure to attract more customers, the inability to obtain reimbursement for its products by government agencies and insurers, or its failure, for any reason, to continue to take advantage of growth opportunities. If its assumptions regarding these risks and uncertainties and its future revenue growth are incorrect or change, or if it does not address these risks successfully or forecast its results accurately, SeaStar Medical’s operating and financial results could differ materially from its expectations, and its business could suffer.

If SeaStar Medical fails to obtain additional financing, it would be forced to delay, reduce or eliminate its product development program, which may result in the cessation of its operations.

Developing medical device products, including conducting preclinical studies and clinical trials, is expensive. SeaStar Medical expects its research and development expenses to substantially increase in connection with its ongoing activities, particularly as it advances its clinical programs. As of December 31, 2021, SeaStar Medical had negative working capital of approximately $2.5 million, and its audit report in its 2021 financial statements contains an emphasis-of-matter paragraph, stating that its recurring losses from operations and cash used in operating activities raise substantial doubt as to SeaStar Medical’s ability to continue as a going concern. If SeaStar Medical does not have sufficient capital following the Business Combination or is otherwise not able to raise additional capital, SeaStar Medical will need to seek alternative financing in order to continue its operations. Even if the PIPE offering is successful, SeaStar Medical will need to raise additional funds to support its operations and complete its planned regulatory approval process, and such funding may not be available on acceptable terms, or at all.

 

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Even if SeaStar Medical receives sufficient capital following the Business Combination, SeaStar Medical will be required to raise additional funds to support its own operations and complete its planned regulatory approval process, and such funding may not be available in sufficient amounts or on acceptable terms to SeaStar Medical, or at all. If it is unable to raise additional capital when required or on acceptable terms, SeaStar Medical may be required to:

 

   

significantly delay, scale back or discontinue the development or commercialization of its product candidates;

 

   

seek corporate partners on terms that are less favorable than might otherwise be available;

 

   

relinquish or license on unfavorable terms, its rights to technologies or product candidates that it otherwise would seek to develop or commercialize itself.

If it is unable to raise additional capital in sufficient amounts or on acceptable terms, SeaStar Medical will be prevented from pursuing development and commercialization efforts, including completing the clinical trials and regulatory approval process for its SCD programs, which would have a material adverse impact on its business, results of operations and financial condition.

SeaStar Medical’s ability to use its net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2021, SeaStar Medical had NOL carryforwards for federal and California state income tax purposes of approximately $78.1 million and $23.1 million, respectively, which may be available to offset taxable income in the future, and which expire in various years beginning in 2027 for federal purposes and 2039 for state purposes if not utilized. SeaStar Medical’s federal net operating losses include $25.2 million which can also be carried forward indefinitely. A lack of future taxable income would adversely affect SeaStar Medical’s ability to utilize these NOLs before they expire. Under the Tax Cuts and Jobs Act, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, federal net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal net operating losses in tax years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” (as defined under Section 382 of the Code and applicable Treasury Regulations) is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. SeaStar Medical may experience a future ownership change (including, potentially, in connection with the Business Combination) under Section 382 of the Code that could affect its ability to utilize the NOLs to offset its income. Furthermore, SeaStar Medical’s ability to utilize NOLs of companies that it may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, SeaStar Medical’s existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes. For these reasons, SeaStar Medical may not be able to utilize a material portion of the NOLs reflected on its balance sheet, even if it attains profitability, which could potentially result in increased future tax liability to SeaStar Medical and could adversely affect its business, results of operations and financial condition.

Risks Related to SeaStar Medical’s Business Operations

SeaStar Medical has not received, and may never receive, approval from the FDA to market its product in the United States or abroad.

SeaStar Medical may encounter various challenges and difficulties in its application to seek approval from the FDA to sell and market its SCD product candidates, including the application for HDE for pediatric AKI indication and the pivotal trial for adult AKI indication. SeaStar Medical is required to submit a substantial amount of supporting documentation for its HDE application to demonstrate the eligibility of the SCD to treat

 

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pediatric patients. There is no guarantee that the FDA will approve SeaStar Medical’s application or agree with its position that its SCD meets all regulatory criteria for HDE. In addition, SeaStar Medical may encounter numerous challenges and difficulties in the HDE application process and the pivotal trial, which include but are not limited to:

 

   

an inability to secure and obtain support and references from collaborators and suppliers required by the FDA;

 

   

a disagreement with the FDA regarding the number of clinical study subjects and other data, which may require SeaStar Medical to conduct additional testing or increase the size and complexity of its pivotal study;

 

   

a failure to obtain a sufficient supply of filters to conduct its trials;

 

   

an inability to enroll a sufficient number of subjects;

 

   

a shortage of raw materials, such as calcium; and

 

   

delays and failures to train qualified personnel to operate the SCD therapy.

Even if SeaStar Medical obtains approval, the FDA or other regulatory authorities may require expensive or burdensome post-market testing or controls. Any delay in, or failure to receive or maintain, clearance or approval for its future products could prevent SeaStar Medical from generating revenue from these products or achieving profitability. Additionally, the FDA and other regulatory authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny on SeaStar Medical, could dissuade some physicians from using its products and adversely affect its reputation and the perceived safety and efficacy of its products.

Delays or rejections may occur based on changes in governmental policies for medical devices during the period of product development. The FDA can delay, limit or deny approval of a PMA application for many reasons, including:

 

   

SeaStar Medical’s inability to demonstrate the safety or effectiveness of the SCD or any other product it develops to the FDA’s satisfaction;

 

   

insufficient data from its preclinical studies and clinical trials, including for its SCD, to support approval;

 

   

failure of the facilities of its third-party manufacturers or suppliers to meet applicable requirements;

 

   

inadequate compliance with preclinical, clinical or other regulations;

 

   

its failure to meet the FDA’s statistical requirements for approval; and

 

   

changes in the FDA’s approval policies, or the adoption of new regulations that require additional data or additional clinical studies.

If SeaStar Medical is not able to obtain regulatory approval of its SCD in a timely manner or at all, it may not be able to continue to operate its business and may be forced to shut down its operations.

We are subject to certain risks relating to pursuing an FDA approval via the HDE pathway, including limitations on the ability to profit from sales of the product.

Except in certain circumstances, products approved under an HDE cannot be sold for an amount that exceeds the costs of the research and development, fabrication, and distribution of the device (i.e., for profit). Currently, under section 520(m)(6)(A)(i) of the FD&C Act, as amended by the Food and Drug Administration Safety and Innovation Act, an HUD is only eligible to be sold for profit after receiving HDE approval if the device (1) is intended for the treatment or diagnosis of a disease or condition that occurs in pediatric patients or in a pediatric subpopulation, and such device is labeled for use in pediatric patients or in a pediatric subpopulation in which the disease or condition occurs; or (2) is intended for the treatment or diagnosis of a

 

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disease or condition that does not occur in pediatric patients or that occurs in pediatric patients in such numbers that the development of the device for such patients is impossible, highly impracticable, or unsafe. If an HDE-approved device does not meet this eligibility criteria, the device cannot be sold for profit. With enactment of the FDA Reauthorization Act of 2017, Congress provided that the exemption for HUD/HDE profitability is available as long as the request for an exemption is submitted on or before October 1, 2022. Not receiving an exemption for HUD/HDE profitability would have a material adverse effect on SeaStar Medical’s business, results of operations and financial condition.

In addition, if the FDA subsequently approves a PMA or clears a 510(k) for the Humanitarian Use Device (“HUD”) or another comparable device with the same indication, the FDA may withdraw the HDE. Once a comparable device becomes legally marketed through PMA approval or 510(k) clearance to treat or diagnose the disease or condition in question, there may no longer be a need for the HUD and so the HUD may no longer meet the requirements of section 520(m)(2)(B) of the Food, Drug, and Cosmetic Act (“FD&C Act”).

SeaStar Medical plans to expand its operations and it may not be able to manage its growth effectively, which could strain its resources and delay or derail implementation of its business objectives.

SeaStar Medical will need to significantly expand its operations to implement its longer-term business plan and growth strategies, including building and expanding its internal organizational infrastructure to complete the regulatory approval process with the FDA. SeaStar Medical will also be required to manage and form new relationships with various strategic partners, technology licensors, customers, manufacturers and suppliers, consultants and other third parties. This expansion and these new relationships will require SeaStar Medical to significantly improve or replace its existing managerial, operational and financial systems, and procedures and controls; to improve the coordination between its various corporate functions; and to manage, train, motivate and maintain a growing employee base. The time and costs to effectuate these steps may place a significant strain on its management personnel, systems and resources, particularly if there are limited financial resources and skilled employees available at the time. SeaStar Medical cannot assure that it will institute, in a timely manner or at all, the improvements to its managerial, operational and financial systems, procedures and controls necessary to support its anticipated increased levels of operations and to coordinate its various corporate functions, or that it will be able to properly manage, train, motivate and retain its anticipated increased employee base. If it cannot manage its growth initiatives, SeaStar Medical will be unable to commercialize its products on a large-scale in a timely manner, if at all, and its business could fail.

SeaStar Medical will initially depend on revenue generated from a single product and in the foreseeable future will be significantly dependent on a limited number of products.

After receiving approval from the FDA and other regulatory authorities, SeaStar Medical will initially depend on revenue generated from its SCD product candidate for pediatric and adult patients with AKI and in the foreseeable future will be significantly dependent on a single or limited number of products. Given that, for the foreseeable future, SeaStar Medical’s business will depend on a single or limited number of products, to the extent a particular product is not well-received by the market, SeaStar Medical’s sales volume, prospects, business, results of operations and financial condition could be materially and adversely affected.

If SeaStar Medical fails to comply with extensive regulations of United States and foreign regulatory agencies, the commercialization of its products could be delayed or prevented entirely.

SeaStar Medical’s SCD product candidate and research and development activities are subject to extensive government regulations related to its development, testing, manufacturing and commercialization in the United States and other countries. The determination of when and whether a product is ready for large-scale purchase and potential use in the United States will be made by the United States government through consultation with a number of governmental agencies, including the FDA, the National Institutes of Health (“NIH”) and the Centers for Disease Control and Prevention (“CDC”). SeaStar Medical’s SCD has not received regulatory approval from the FDA, or any

 

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foreign regulatory agencies, to be commercially marketed and sold. The process of obtaining and complying with FDA and other governmental regulatory approvals and regulations in the United States and in foreign countries is costly, time consuming, uncertain and subject to unanticipated delays. Obtaining such regulatory approvals, if any, can take several years. Despite the time and expense exerted, regulatory approval is never guaranteed. SeaStar Medical is also subject to the following risks and obligations, among others:

 

   

the FDA may refuse to approve an application if it believes that applicable regulatory criteria are not satisfied;

 

   

the FDA may require additional testing for safety and effectiveness;

 

   

the FDA may interpret data from pre-clinical testing and clinical trials in different ways than SeaStar Medical interprets them;

 

   

if regulatory approval of a product is granted, the approval may be limited to specific indications or limited with respect to its distribution; and

 

   

the FDA may change its approval policies and/or adopt new regulations.

Failure to comply with these or other regulatory requirements of the FDA may subject SeaStar Medical to administrative or judicially imposed sanctions, including:

 

   

warning letters, untitled letters or other written notice of violations;

 

   

civil penalties;

 

   

criminal penalties;

 

   

injunctions;

 

   

product seizure or detention;

 

   

product recalls; and

 

   

total or partial suspension of productions.

Delays in successfully completing SeaStar Medical’s planned clinical trials could jeopardize its ability to obtain regulatory approval.

SeaStar Medical’s business prospects will depend on its ability to complete studies, clinical trials, including its planned pivotal trials of its SCD for adult AKI indication, obtain satisfactory results, obtain required regulatory approvals and successfully commercialize its SCD product candidate. The completion of SeaStar Medical’s clinical trials, the announcement of results of the trials and its ability to obtain regulatory approvals could be delayed for a variety of reasons, including:

 

   

slow patient enrollment;

 

   

serious adverse events related to its medical device candidates;

 

   

unsatisfactory results of any clinical trial;

 

   

the failure of principal third-party investigators to perform clinical trials on SeaStar Medical’s anticipated schedules;

 

   

different interpretations of SeaStar Medical’s pre-clinical and clinical data, which could initially lead to inconclusive results; and

 

   

delays resulting from the COVID-19 pandemic.

SeaStar Medical’s development costs will increase if it has material delays in any clinical trial or if it needs to perform more or larger clinical trials than planned. If the delays are significant, or if any of its product candidates do

 

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not prove to be safe or effective or do not receive regulatory approvals, SeaStar Medical’s financial results and the commercial prospects for its product candidates would be harmed. Furthermore, SeaStar Medical’s inability to complete its clinical trials in a timely manner could jeopardize its ability to obtain regulatory approval.

The approval requirements for medical products used to fight pandemics, including the COVID-19 pandemic, are still evolving, and SeaStar Medical’s product for such uses may not meet these requirements.

SeaStar Medical intends to pursue FDA market clearance to treat infectious pandemic threats, including applications to treat patients with COVID-19 diseases, although it is often not feasible to conduct human studies against these deadly, high-threatening pathogens. SeaStar Medical continues to investigate the potential uses of the SCD in viral diseases under an open Investigational Device Exemption (“IDE”). Based on its studies to date, the SCD can potentially modulate the immune system from proinflammatory conditions to reparative conditions in COVID-19 patients, and SeaStar Medical has generated clinical data suggesting that it could reduce mortality rates in critically ill COVID-19 patients. However, such preliminary data is based on a small group of patients and SeaStar Medical currently does not have the resources and capabilities to conduct additional studies and tests to establish proof of concept for COVID-19 treatments. Even if SeaStar Medical is able to perform such studies, there is not guarantee that it will produce positive results and enhance the benefits of its SCD platform.

Thus, SeaStar Medical may not be able to demonstrate the effectiveness of its treatment through controlled human efficacy studies. Moreover, a change in government policies could impair SeaStar Medical’s ability to obtain regulatory approval and the FDA may not approve any of its product candidates.

Delays, interruptions or the cessation of production by its third-party suppliers of important materials or delays in qualifying new materials, may prevent or delay SeaStar Medical’s ability to manufacture or process its SCD device.

SeaStar Medical currently relies on a single supplier for the filters used in the SCD device for the pediatric AKI indications pursuant to a supply agreement. In the event the current supplier is unable to provide filters for the SCD device or otherwise fails to meet its obligations under the agreement, SeaStar Medical may not be able to obtain a sufficient amount of filters to conduct its trials and commercialize its products. In addition, the supplier may decide to discontinue or terminate the specific type of filters that are required for its SCD for reasons beyond SeaStar Medical’s control, in which case SeaStar Medical will be forced to identify and secure an alternative source that may not be available immediately or at all. FDA review and approval of a new supplier may be required if these materials become unavailable from SeaStar Medical’s current suppliers. Although there may be other suppliers that have equivalent materials that would be available to SeaStar Medical, FDA review of any alternate suppliers, if required, could take several months or more to obtain, if it is able to be obtained at all. Any delay, interruption or cessation of production by SeaStar Medical’s third-party suppliers of important materials, or any delay in qualifying new materials, if necessary, would prevent or delay SeaStar Medical’s ability to manufacture its SCD.

SeaStar Medical believes that it has sufficient access to the SCD inventory to conduct its current and near future clinical trials, but it is possible that the need for its SCD could increase that may require SeaStar Medical to acquire more filters than it is currently able to purchase under its agreement with its supplier, and SeaStar Medical may not be able to negotiate a new supply agreement successfully. If SeaStar Medical is unable to find alternative sources of supply in a timely manner, any such delay could limit SeaStar Medical’s ability to meet demand for the SCD and delay its ongoing clinical trials, which would have a material adverse impact on its business, results of operations and financial condition.

 

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SeaStar Medical has limited experience in identifying and working with large-scale contracts with medical device manufacturers.

To achieve the levels of production necessary to commercialize its SCD and any other future products, SeaStar Medical will need to secure large-scale manufacturing agreements with contract manufacturers that comply with the manufacturing standards prescribed by various federal, state and local regulatory agencies in the United States and any other country of use. SeaStar Medical has limited experience coordinating and overseeing the manufacturing of medical device products on a large-scale. Manufacturing and control problems could arise as SeaStar Medical attempts to commercialize its products and manufacturing may not be completed in a timely manner or at a commercially reasonable cost. In addition, SeaStar Medical may not be able to adequately finance the manufacturing and distribution of its products on terms acceptable to SeaStar Medical, if at all. If SeaStar Medical cannot successfully oversee and finance the manufacturing of its products after receiving regulatory approval, it may not generate sufficient revenue to become profitable.

Difficulties in manufacturing SeaStar Medical’s SCD could have an adverse effect upon its revenue and expenses.

SeaStar Medical currently outsources all of the manufacturing of its SCD. The manufacturing of its SCD is difficult and complex. To support its current clinical trial needs, SeaStar Medical complies with and intends to continue to comply with current Good Manufacturing Practice (“cGMP”) in the manufacturing of its products. SeaStar Medical’s ability to adequately manufacture and supply its SCD in a timely matter is dependent on the uninterrupted and efficient operation of its third-party manufacturers, and those of the third parties producing raw materials and supplies upon which it relies on for the manufacturing of its products. The manufacturing of SeaStar Medical’s products may be impacted by:

 

   

the availability or contamination of raw materials and components used in the manufacturing process, particularly those for which it has no other supplier;

 

   

its ability to comply with new regulatory requirements and cGMP;

 

   

potential facility contamination by microorganisms or viruses;

 

   

updating of its manufacturing specifications;

 

   

product quality success rates and yields; and

 

   

global viruses and pandemics, including the current COVID-19 pandemic.

If efficient manufacture and supply of its SCD is interrupted, SeaStar Medical may experience delayed shipments or supply constraints. If it is at any time unable to provide an uninterrupted supply of its products, SeaStar Medical’s ongoing clinical trials may be delayed, which could materially and adversely affect its business, results of operations and financial condition.

SeaStar Medical’s SCD technology may become obsolete.

SeaStar Medical’s SCD product candidates may become obsolete prior to commercialization by new scientific or technological developments, or by others with new treatment modalities that are more efficacious and/or more economical than SeaStar Medical’s products. Any one of SeaStar Medical’s competitors could develop a more effective product which would render SeaStar Medical’s technology obsolete. In addition, it is possible that competitors may use similar technologies, equipment or devices, including using certain “off-the-shelf” filters unauthorized by the FDA, to attempt to create a similar treatment mechanism as the SCD. Further, new technological and scientific developments within the hospital setting could cause SeaStar Medical’s SCD product candidates to become obsolete. For example, the SCD relies on the existing footprint of CRRT pump systems in ICUs, as well as the growing use and adoption of regional citrate as an anticoagulant. Further developments in these areas could require SeaStar Medical to reconfigure its SCD product candidates, which

 

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may not be commercially feasible, or cause them to become obsolete. Lastly, SeaStar Medical’s ability to achieve significant and sustained growth in its key target markets will depend upon its success in hospital penetration, utilization, publication, its SCD’s reimbursement status and medical education. SeaStar Medical’s products may not remain competitive with products based on new technologies. If it fails to sell products that satisfy its customers’ demands, or respond effectively to new product announcements by its competitors, then market acceptance of SeaStar Medical’s products could be reduced and its business, results of operations and financial condition could be adversely affected.

SeaStar Medical faces intense competition in the medical device industry.

SeaStar Medical competes with numerous United States and foreign companies in the medical device industry, and many of its competitors have greater financial, personnel, operational and research and development resources than SeaStar Medical. SeaStar Medical believes that multiple competitors are or will be developing competing technologies to address cytokine storms. Progress is constant in the treatment of the immune system, which may reduce opportunities for the SCD. SeaStar Medical’s commercial opportunities will be reduced or eliminated if its competitors develop and market products for any of the diseases it targets that:

 

   

are more effective;

 

   

have fewer or less severe adverse side effects;

 

   

are better tolerated;

 

   

are easier to administer; or

 

   

are less expensive than SeaStar Medical’s products or its product candidates.

Even if SeaStar Medical is successful in developing the SCD and any other future products and obtains FDA and other regulatory approvals necessary for commercializing them, its products may not compete effectively with other products. Researchers are continually learning more about diseases, which may lead to new technologies for treatment. SeaStar Medical’s competitors may succeed in developing and marketing products that are either more effective than those that it may develop or that are marketed before any SeaStar products. SeaStar Medical competitors include fully integrated pharmaceutical & medical device companies and biotechnology companies, universities, and public and private research institutions. Many of the organizations competing with SeaStar Medical have substantially greater capital resources, larger research and development staffs and facilities, greater experience in product development and in obtaining regulatory approvals, and greater marketing capabilities. If SeaStar Medical’s competitors develop more effective treatments for infectious disease or hyperinflammation or bring those treatments to market before SeaStar Medical can commercialize the SCD for such uses, it may be unable to obtain any market traction for its products, or the diseases it seeks to treat may be substantially addressed by competing treatments. If SeaStar Medical is unable to successfully compete against larger companies in the pharmaceutical industry, it may never generate significant revenue or be profitable.

If SeaStar Medical’s products, or the malfunction of its products, cause or contribute to a death or a serious injury, SeaStar Medical will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to a death or serious injury. If SeaStar Medical fails to report these events to the FDA within the required timeframes, or at all, the FDA could take enforcement action against SeaStar Medical. Any such adverse event involving SeaStar Medical’s products could also result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending against potential lawsuits, will require the dedication of SeaStar Medical’s time and capital, distract management from operating its business, and may harm SeaStar Medical’s reputation and financial results.

 

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SeaStar Medical outsources many of its operational and development activities for which it may not have full control.

SeaStar Medical relies on third-party consultants or other vendors to manage and implement much of the day-to-day responsibilities of conducting clinical trials and manufacturing its current product candidates. Accordingly, SeaStar Medical is and will continue to be dependent on the timeliness and effectiveness of the efforts of these third parties. SeaStar Medical’s dependence on third parties includes key suppliers and third-party service providers supporting the development, manufacturing and regulatory approval of its SCD, as well as support for its information technology systems and other infrastructure. While its management team oversees these vendors, the failure of any of these third parties to meet their contractual, regulatory and other obligations, or the development of factors that materially disrupt the performance of these third parties, could have a material adverse effect on SeaStar Medical’s business, results of operations and financial condition. It is possible that the current COVID-19 pandemic might constrain the ability of third-party vendors to provide services that SeaStar Medical requires.

If a clinical research organization that SeaStar Medical utilizes is unable to allocate sufficient qualified personnel to its studies in a timely manner or if the work performed by it does not fully satisfy the requirements of the FDA or other regulatory agencies, SeaStar Medical may encounter substantial delays and increased costs in completing its development efforts. Any manufacturer of SeaStar Medical’s products may encounter difficulties in the manufacturing of enough new product to meet demand, including problems with product yields, product stability or shelf life, quality control, adequacy of control procedures and policies, compliance with FDA regulations and the need for FDA approval of new manufacturing processes and facilities. If any of these occur, the development and commercialization of SeaStar Medical’s product candidates could be delayed, curtailed or terminated because SeaStar Medical may not have sufficient financial resources or capabilities to continue such development and commercialization on its own.

If SeaStar Medical or its contractors or service providers fail to comply with laws and regulations, it or they could be subject to regulatory actions, which could affect its ability to develop, market and sell its product candidates and any other future product candidates and may harm its reputation.

If SeaStar Medical or its manufacturers or other third-party contractors fail to comply with applicable federal, state or foreign laws or regulations, SeaStar Medical could be subject to regulatory actions, which could affect its ability to successfully develop, market and sell its SCD product candidate or any future product candidates under development and could harm its reputation and lead to reduced or non-acceptance of its proposed product candidates by the market. Even technical recommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make the manufacturing of a clinical product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost-efficient manner. The mode of administration or the required testing of the product candidate may make that candidate no longer commercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional Biosafety Committee, which may delay or make impossible the clinical testing of a product candidate. For example, the Institutional Review Board for a clinical trial may stop a trial or deem a product candidate unsafe to continue testing. This would have a material adverse effect on the value of the product candidate and SeaStar Medical’s business, results of operations and financial condition.

If SeaStar Medical obtains approval for its products, SeaStar Medical may still be subject to enforcement action if it engages in improper marketing or promotion of its products.

SeaStar Medical is not permitted to promote or market its product candidates until FDA approval is obtained. After approval, its promotional materials and training methods must comply with the FDA and other applicable laws and regulations, including the prohibition of the promotion of unapproved or off-label use. Practitioners may use SeaStar Medical’s products off-label, as the FDA does not restrict or regulate a practitioner’s choice of treatment

 

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within the practice of medicine. However, if the FDA determines that SeaStar Medical’s promotional materials or training constitutes promotion of an off-label use, it could request that SeaStar Medical modify its training or promotional materials or subject SeaStar Medical to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine, or criminal penalties. Other federal, state, or foreign enforcement authorities might also take action if they consider SeaStar Medical’s promotional or training materials to constitute promotion of an off-label use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, SeaStar Medical’s reputation could be damaged, which may lead to reduced or non-acceptance of its proposed product candidates by the market. In addition, the off-label use of SeaStar Medical’s products may increase the risk of product liability claims. Product liability claims are expensive to defend and could divert the attention of SeaStar Medical’s management, result in substantial damage awards against SeaStar Medical, and harm its reputation.

SeaStar Medical intends to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of its SCD or any future product candidates that it may develop, and its future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.

SeaStar Medical does not have the required financial and human resources to carry out on its own all the pre-clinical and clinical development for its SCD product candidate or any other or future product candidates that it may develop, and do not have the capability and resources to manufacture, market or sell its SCD product candidate or any future product candidates that it may develop. SeaStar Medical’s business model calls for the partial or full outsourcing of the clinical, development, manufacturing, sales and marketing of its product candidates in order to reduce its capital and infrastructure costs as a means of potentially improving its financial position. SeaStar Medical’s success will depend on the performance of these outsourced providers. If these providers fail to perform adequately, SeaStar Medical’s development of product candidates may be delayed and any delay in the development of SeaStar Medical’s product candidates may have a material and adverse effect on its business, results of operations and financial condition.

SeaStar Medical is and will be exposed to product liability risks, and clinical and preclinical liability risks, which could place a substantial financial burden upon it should it be sued.

SeaStar Medical’s business exposes it to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing of medical devices. Claims may be asserted against it. A successful liability claim or series of claims brought against it could have a material adverse effect on SeaStar Medical’s business, results of operations and financial condition. SeaStar Medical may not be able to continue to obtain or maintain adequate product liability insurance on acceptable terms, if at all, and such insurance may not provide adequate coverage against potential liabilities. Claims or losses in excess of any product liability insurance coverage that SeaStar Medical may obtain could have a material adverse effect on its business, results of operations and financial condition.

SeaStar Medical’s SCD product candidate may be used in connection with medical procedures where those products must function with precision and accuracy. If medical personnel or their patients suffer injury as a result of any failure of SeaStar Medical’s products to function as designed, or its products are designed inappropriately, SeaStar Medical may be subject to lawsuits seeking significant compensatory and punitive damages. The risk of product liability claims, product recalls and associated adverse publicity is inherent in the testing, manufacturing, marketing and sale of medical products. SeaStar Medical intends to obtain general clinical trial liability insurance coverage; however, its insurance coverage may not be adequate or available. In addition, SeaStar Medical may not be able to obtain or maintain adequate product liability insurance on acceptable terms, if at all, and such insurance may not provide adequate coverage against potential liabilities. Any product recall or lawsuit in excess of any product liability insurance coverage that SeaStar Medical may obtain could have a material adverse effect on its business, results of operations and financial condition. Moreover, a product recall could generate substantial negative publicity about SeaStar Medical’s products and business and inhibit or prevent commercialization of other future product candidates.

 

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United States legislative or FDA regulatory reforms may make it more difficult and costly for SeaStar Medical to obtain regulatory approval of its product candidates and to manufacture, market and distribute its products after approval is obtained.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect SeaStar Medical’s business and its products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of future products. It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations will be changed, and what the impact of such changes, if any, may be on SeaStar Medical’s new product development efforts.

SeaStar Medical is subject to stringent and changing privacy laws, regulations and standards as well as policies, contracts and other obligations related to data privacy and security.

SeaStar Medical collects, receives, stores, processes, uses, generates, transfers, discloses, makes accessible, protects and shares personal information and other information (“Process” or “Processing”), including information it collects in connection with clinical trials, as necessary to operate its business, for legal and marketing purposes, and for other business-related purposes.

There are numerous federal, state, local and international laws, regulations and guidance regarding privacy, information security and Processing, the number and scope of which is changing, subject to differing applications and interpretations, and which may be inconsistent. SeaStar Medical is subject, and may become subject in the future, to certain of these laws, regulations, and guidance, and it is also subject to the terms of its external and internal privacy and security policies, representations, certifications, standards, publications, frameworks, and contractual obligations to third parties related to privacy, information security and Processing.

If SeaStar Medical fails, or is perceived to have failed, to address or comply with such obligations, it could:

 

   

increase its compliance and operational costs;

 

   

expose it to regulatory scrutiny, actions, fines and penalties;

 

   

result in reputational harm; interrupt or stop its clinical trials;

 

   

result in litigation and liability; result in an inability to process personal data or to operate in certain jurisdictions; or

 

   

harm its business operations or financial results or otherwise result in a material harm to its business.

Additionally, given that these obligations impose complex and burdensome obligations and that there is substantial uncertainty over the interpretation and application of these obligations, SeaStar Medical may be required to incur material costs, divert management attention, and change its business operations, including its clinical trials, in an effort to comply, which could materially adversely affect its business, results of operations and financial condition.

The California Consumer Privacy Act of 2018 (“CCPA”) is an example of the increasingly stringent data protection legislation in the United States. The CCPA gives California residents expanded rights to access and require deletion of their personal information, opt-out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA created civil penalties for violations, as well as a private right of action for data breaches and statutory damages ranging from $100 to $750 per violation, which is expected to increase data breach class action litigation and result in significant exposure to costly legal judgements and settlements. Although there are limited exemptions for clinical trial data under the CCPA, the CCPA and other similar laws could impact SeaStar Medical’s business activities depending on how they are interpreted.

 

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SeaStar Medical’s business operations will be adversely affected if its security measures, or those maintained on its behalf, are compromised, limited or fails.

In the ordinary course of its business, SeaStar Medical handles and processes proprietary, confidential and sensitive information, including personal data, intellectual property, trade secrets, and proprietary business information owned or controlled by ourselves or other third parties, or collectively. SeaStar Medical may use and share such sensitive information with service providers and other third parties. If SeaStar Medical, its service providers, partners, or other relevant third parties have experienced, or in the future experience, any security incident or incidents that result in any data loss; deletion or destruction; unauthorized access to; loss, unauthorized acquisition, disclosure, or exposure of, confidential and sensitive information, it may adversely affect SeaStar Medical’s business, results of operations and financial condition, including the diversion of funds to address the breach, and interruptions, delays, or outages in its operations and development programs.

Cyberattacks, malicious internet-based activity and online and offline fraud are prevalent and continue to increase, including the possibility that the ongoing conflict between Russia and Ukraine could result in cyber-attacks or cybersecurity incidents that may have a direct or indirect impact on our operations. In addition to threats from traditional computer “hackers,” threat actors, software bugs, malicious code (such as viruses and worms), employee theft or misuse, denial-of-service attacks (such as credential stuffing) and ransomware attacks, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions). SeaStar Medical may also be the subject of phishing attacks, viruses, malware installation, server malfunction, software or hardware failures, loss of data or other computer assets, or other similar issues any of which could have a material and adverse effect on its business, results of operations and financial condition.

Should SeaStar Medical’s products be approved for commercialization, a lack of third-party coverage and reimbursement for SeaStar Medical’s devices could delay or limit their adoption.

In both the United States and international markets, the use and success of medical devices is dependent in part on the availability of reimbursement from third-party payors, such as government and private insurance plans. Healthcare providers that use medical devices generally rely on third-party payors to pay for all or part of the costs and fees associated with the medical procedures being performed or to compensate them for their patient care services. Should SeaStar Medical’s products under development be approved for commercialization by the FDA, reimbursement may not be available in the United States or other countries or, even if approved, the amount of reimbursement may not be sufficient to allow sales of SeaStar Medical’s future products, including the SCD, on a profitable basis. The coverage decisions of third-party payors will be significantly influenced by the assessment of SeaStar Medical’s future products by health technology assessment bodies. These assessments are outside SeaStar Medical’s control, and any such evaluations may not be conducted or have a favorable outcome.

If approved for use in the United States, SeaStar Medical expects that any products that it develops, including the SCD, will be purchased primarily by medical institutions through their operations budget. Payors may include the Centers for Medicare & Medicaid Services (“CMS”), which administers the Medicare program and works in partnership with state governments to administer Medicaid, other government programs and private insurance plans. The process involved in applying for coverage and incremental reimbursement from CMS is lengthy and expensive. Further, Medicare coverage is based on SeaStar Medical’s ability to demonstrate that the treatment is “reasonable and necessary” for Medicare beneficiaries. Even if products utilizing SeaStar Medical’s SCD technology receive FDA and other regulatory clearance or approval, they may not be granted coverage and reimbursement by any payor, including by CMS. For some governmental programs, such as Medicaid, coverage and adequate reimbursement differ from state to state and some state Medicaid programs may not pay adequate amounts for the procedure products utilizing SeaStar Medical’s technology system, or any payment at all. Moreover, many private payors use coverage decisions and payment amounts determined by CMS as guidelines in setting their coverage and reimbursement policies and amounts. However, no uniform policy for coverage and reimbursement of medical devices exists among third-party payors in the United States. Therefore, coverage and

 

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reimbursement can differ significantly from payor to payor. If CMS or other agencies limit coverage or decrease or limit reimbursement payments for doctors and hospitals, this may affect coverage and reimbursement determinations by many private payors for any future SeaStar Medical products.

Should any of its future products, including the SCD, be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact SeaStar Medical’s ability to market and sell its products.

Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and third-party payors to decrease costs. Third-party payors are increasingly challenging the prices charged for medical products and services and instituting cost containment measures to control or significantly influence the purchase of medical products and services.

For example, in the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), among other things, reduced and/or limited Medicare reimbursement to certain providers. However, on December 14, 2018, a Texas United States District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act of 2017. Additionally, on June 17, 2021, the United States Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA remains in effect without the “individual mandate.”

Further, prior to the United States Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021 and remained open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and litigation, and the healthcare reform measures of the Biden administration will impact the ACA and SeaStar Medical’s business. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments to providers by two percent through fiscal year 2031. However, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2022. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase new technologies.

Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. In addition, Congress is considering additional health reform measures. Legislation could be adopted in the future that limits payments for SeaStar Medical’s products from governmental payors. It is also possible that additional governmental action is taken in response to the COVID-19 pandemic. Furthermore, commercial payors such as insurance companies, could adopt similar policies that limit reimbursement for medical device manufacturers’ products. Therefore, it is possible that SeaStar Medical’s products or the procedures or patient care performed using its products will not be reimbursed at a cost-effective level.

SeaStar Medical faces similar risks relating to adverse changes in reimbursement procedures and policies in other countries where it may market its products. Reimbursement and healthcare payment systems vary significantly among international markets. SeaStar Medical’s inability to obtain international reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect its ability to sell its products in foreign markets and have a material adverse effect on its business, results of operations and financial condition.

 

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SeaStar Medical depends on key personnel and its inability to attract and retain qualified personnel could impede its ability to achieve its business objectives.

SeaStar Medical’s success depends on the continuing service of key employees, especially its Chief Executive Officer, Eric Schlorff. The loss of any of these individuals could have a material and adverse effect on SeaStar Medical’s business, results of operations and financial condition. SeaStar Medical will also be required to hire and recruit highly skilled managerial, scientific and administrative personnel to fully implement its business plan and growth strategies. Due to the specialized scientific nature of its business, SeaStar Medical is highly dependent upon its ability to attract and retain qualified scientific, technical and managerial personnel. Competition for these individuals is intense and SeaStar Medical may not be able to attract, assimilate or retain additional highly qualified personnel in the future. SeaStar Medical may not be able to engage the services of qualified personnel at competitive prices or at all, particularly given the risks of employment attributable to its limited financial resources and lack of an established track record. Also, if SeaStar Medical is required to attract personnel from other parts of the United States or abroad, it may have significant difficulty doing so because of the costs associated with moving personnel to the area. If SeaStar Medical cannot attract and retain qualified staff and executives, it may be unable to develop its products and achieve regulatory clearance, and its business could fail.

SeaStar Medical’s products may in the future be subject to product recalls.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in their design or manufacture. For the FDA, the authority to require a recall must be based on a finding that there is reasonable probability that the device would cause serious injury or death. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. The FDA requires that certain classifications of recalls be reported to the FDA within ten working days after the recall is initiated. A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of SeaStar Medical’s products would divert managerial and financial resources and have an adverse effect on SeaStar Medical’s reputation, business, results of operations and financial condition, which could impair its ability to produce its products in a cost-effective and timely manner in order to meet its customers’ demands.

SeaStar Medical may also be subject to liability claims, be required to bear other costs, or take other actions that may have a negative impact on its future sales and its ability to generate profits. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA or the competent authority of another country. SeaStar Medical may initiate voluntary recalls involving its products in the future that it determines do not require notification of the FDA or the competent authority of another country. If the FDA disagrees with SeaStar Medical’s determinations, they could require SeaStar Medical to report those actions as recalls. A future recall announcement could harm SeaStar Medical’s reputation with customers and negatively affect its sales. Moreover, the FDA could take enforcement action for failing to report recalls. SeaStar Medical is also required to follow detailed recordkeeping requirements for all firm-initiated medical device corrections and removals.

SeaStar Medical’s business is subject to risks arising from the recent COVID-19 pandemic.

The current COVID-19 worldwide pandemic has presented substantial public health and economic challenges and is affecting SeaStar Medical’s employees, patients, communities and business operations, as well as the United States and global economy and financial markets. International and United States governmental authorities in impacted regions are taking actions in an effort to slow the spread of COVID-19.

SeaStar Medical expects that COVID-19 precautions may directly or indirectly impact the timeline for the launch of its SCD product candidate. As the COVID-19 pandemic continues, SeaStar Medical may experience disruptions that could severely impact its business, clinical trials, and manufacturing and supply chains, including:

 

   

further delays or difficulties in enrolling patients in its clinical trials;

 

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delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

 

   

the diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospital staff supporting the conduct of its clinical trials;

 

   

the interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints;

 

   

the interruption of, or delays in receiving, supplies of its product candidates from its contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems;

 

   

delays in clinical sites receiving the supplies and materials needed to conduct its clinical trials and interruptions in global shipping may affect the transport of clinical trial materials;

 

   

limitations on employee resources that would otherwise be focused on the conduct of its clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

 

   

delays in receiving feedback or approvals from the FDA or other regulatory authorities with respect to future clinical trials or regulatory submissions;

 

   

changes in local regulations as part of a response to the COVID-19 pandemic, which may require it to change the ways in which its clinical trials are conducted, resulting in unexpected costs, or discontinuing the clinical trials altogether;

 

   

delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations on employee resources or the forced furlough of government employees;

 

   

the refusal of the FDA to accept data from clinical trials in affected geographies; and

 

   

difficulties launching or commercializing products, including due to reduced access to doctors as a result of social distancing protocols.

In addition, the spread of COVID-19 may negatively impact SeaStar Medical’s ability to raise additional capital on a timely basis or at all.

The COVID-19 pandemic continues to rapidly evolve. The extent to which the COVID-19 pandemic may impact SeaStar Medical’s business, including its clinical trials, manufacturing and supply chains and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the continued geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, continued business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

A small number of SeaStar Medical’s shareholders, including its major stockholder, the Dow Pension Funds, could significantly influence its business.

SeaStar Medical has a few significant shareholders who own a substantial percentage of its outstanding shares of common stock, including the Dow Pension Funds, which beneficially owns approximately 79 % of the voting power of SeaStar Medical (or approximately 65% on a fully diluted basis) prior to the Business Combination, and are expected to be the largest stockholders of the Combined Company following the Business Combination. These few significant shareholders, either individually or acting together, may be able to exercise significant influence over matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of SeaStar

 

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Medical or its assets. This concentration of ownership may make it more difficult for other shareholders to effect substantial changes in SeaStar Medical, may have the effect of delaying, preventing or expediting, as the case may be, a change in control of SeaStar Medical and may adversely affect the market price of the Common Stock after the Business Combination. Further, the possibility that one or more of these significant shareholders may sell all or a large portion of their Common Stock in a short period of time could adversely affect the trading price of our Common Stock after the Business Combination.

SeaStar Medical’s forecasted operating and financial results rely in large part upon assumptions and analyses developed by SeaStar Medical. If these assumptions and analyses prove to be incorrect, SeaStar Medical’s actual operating and financial results may be significantly below its forecasts.

The projected financial and operating information appearing elsewhere in this proxy statement/prospectus reflects current estimates of future performance. Whether actual operating and financial results and business developments will be consistent with SeaStar Medical’s expectations and assumptions as reflected in its forecast depends on a number of factors, many of which are outside SeaStar Medical’s control, including, but not limited to:

 

   

whether SeaStar Medical can obtain sufficient capital to develop and commercialize its SCD product candidate and grow its business;

 

   

whether SeaStar Medical can manage relationships with key suppliers;

 

   

the ability to obtain necessary regulatory approvals;

 

   

demand for SeaStar Medical’s products;

 

   

the timing and costs of new and existing marketing and promotional efforts;

 

   

competition, including from established and future competitors;

 

   

SeaStar Medical’s ability to retain existing key management, to integrate recent hires and to attract, retain and motivate qualified personnel;

 

   

the overall strength and stability of the economies in the markets in which it operates or intends to operate in the future; and

 

   

regulatory, legislative and political changes.

Unfavorable changes in any of these or other factors, most of which are beyond SeaStar Medical’s control, could materially and adversely affect its business, results of operations and financial condition.

Industry data, projections and estimates relied upon by SeaStar Medical are inherently uncertain, subject to interpretation and may not have been independently verified.

Information concerning the SeaStar Medical’s industry and the markets in which SeaStar Medical intends to operate, including industry projections and estimates, is obtained from publicly available information released by independent industry and research organizations and other third party sources. SeaStar Medical has not independently verified any such third-party information. In addition, projections, assumptions and estimates of the future performance of the industry in which SeaStar Medical operates are subject to uncertainty and risk due to a variety of factors. As a result, inaccuracies in third-party information, or in the projections, may adversely impact the assumptions that are relied upon for SeaStar Medical’s internal business planning and in the analysis of investors.

 

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Risks Related to SeaStar Medical’s Intellectual Property

SeaStar Medical relies upon exclusively licensed patent rights from third parties which are subject to termination or expiration. If licensors terminate the licenses or fail to maintain or enforce the underlying patents, SeaStar Medical’s competitive position could be materially harmed.

SeaStar Medical relies in part upon exclusively licensed patent rights for the development of its SCD technology. For example, SeaStar Medical co-owns with, and exclusively licenses from, the University of Michigan (“UOM”) patents related to the SCD technology. If UOM were to terminate its license with SeaStar Medical, it would no longer have exclusive rights to the co-owned patents and UOM would be free to license UOM’s interest in the co-owned patents to a competitor of SeaStar Medical.

SeaStar Medical may become reliant in the future upon licenses to certain third party patent rights and proprietary technologies necessary to develop and commercialize its SCD technology or other technologies. If SeaStar Medical is unable to timely obtain these licenses on commercially reasonable terms, if at all, its ability to commercially exploit such products may be inhibited or prevented. If these licenses do not provide exclusive rights to use the subject intellectual property in all relevant fields of use and all territories in which SeaStar Medical chooses to develop or commercialize its technology and products, it may not be able to prevent competitors from developing and commercializing competitive products in such territories. Even if SeaStar Medical is able to obtain necessary licenses, it may be required to pay significant licensing fees in order to market its products.

Should any of SeaStar Medical’s current or future licenses be prematurely terminated for any reason, or if the patents and intellectual property owned by its licensors are challenged or defeated by third parties, SeaStar Medical’s research and commercialization efforts could be materially and adversely affected. SeaStar Medical’s licenses may not continue in force for as long as is required to fully develop and market its products. It is possible that if the licenses are terminated or the underlying patents and intellectual property are challenged or defeated, suitable replacements may not be obtained or developed on terms acceptable to SeaStar Medical, if at all. There is also the related risk that SeaStar Medical may not be able to make the required payments under any patent license, in which case the licensor may terminate the license.

Further, SeaStar Medical’s licensors may not successfully prosecute the patent applications which it has licensed and on which SeaStar Medical’s business depends or may prosecute them in a manner not in the best interests of SeaStar Medical. Further, licensors may fail to maintain licensed patents, may decide not to pursue litigation against third-party infringers, may fail to prove infringement or may fail to defend against counterclaims of patent invalidity or unenforceability.

In addition, in spite of SeaStar Medical’s best efforts, a licensor could claim that SeaStar Medical has materially breached a license agreement and terminate the license, thereby removing SeaStar Medical’s ability to obtain regulatory approval for and to market any product covered by such license. If SeaStar Medical’s licenses are terminated, or if the underlying patents fail to provide the intended market exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, identical products.

Disputes may arise regarding intellectual property subject to a licensing agreement, including:

 

   

the scope of rights granted under the license agreement and other interpretation related issues;

 

   

the extent to which SeaStar Medical’s technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

 

   

the sublicensing of patent and other rights under any collaboration relationships SeaStar Medical might enter into in the future;

 

   

SeaStar Medical’s diligence obligations under the license agreement and what activities satisfy those diligence obligations;

 

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the ownership of inventions and know how resulting from the joint creation or use of intellectual property by SeaStar Medical and its licensors; and

 

   

the priority of invention of patented technology.

If disputes over intellectual property that SeaStar Medical has licensed prevent or impair its ability to maintain its current licensing arrangements on acceptable terms, it may be unable to successfully develop and commercialize the affected product candidates.

If SeaStar Medical is unable to obtain and maintain sufficient patent protection for its products, if the scope of the patent protection is not sufficiently broad, or if the combination of patents, trade secrets and contractual provisions upon which it relies to protect its intellectual property are inadequate, its competitors could develop and commercialize similar or identical products, and SeaStar Medical’s ability to commercialize such products successfully may be adversely affected.

SeaStar Medical’s success depends in large part on its ability to protect its proprietary rights to the technologies incorporated into its products, including its ability to obtain and maintain patent protection in the United States and other countries related to its SCD technology and other technologies that it deems important to its business. SeaStar Medical relies on a combination of patent protection, trade secret laws and nondisclosure, confidentiality and other contractual restrictions to protect its proprietary technology. If SeaStar Medical does not adequately protect its intellectual property, competitors may be able to erode or negate any competitive advantage it may have, which could harm its business, result of operations and financial condition. To protect SeaStar Medical’s proprietary technologies, it has pursued patent protection in the United States and abroad related to its SCD technology and other technologies that are important to its business. The patent application and approval process is expensive and time-consuming. SeaStar Medical may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Failure to protect, obtain, maintain or extend adequate patent and other intellectual property rights could materially adversely affect SeaStar Medical’s ability to develop and market its products. The enforcement, defense and maintenance of such patents and other intellectual property rights may be challenging and costly.

SeaStar Medical cannot be certain that any patents that it has been issued or granted will not later be found to be invalid and/or unenforceable. SeaStar Medical cannot be certain that pending patent applications will be issued in a form that provides it with adequate protection to prevent competitors from developing competing products. As a medical device technology company, SeaStar Medical’s patent position is uncertain because it involves complex legal and factual considerations. The standards applied by United States Patent and Trademark Office (“USPTO”), and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable as methods of medical treatment. For example, one of SeaStar Medical’s co-owned patent applications is on appeal from a refusal of its claims at the European Patent Office. Consequently, patents may not be issued from any applications that are currently pending or that are filed in the future. As such, SeaStar Medical does not know the degree of future protection that it will have for its technology. As a result, the issuance, scope, validity, enforceability and commercial value of SeaStar Medical’s patent rights are highly uncertain.

Only issued patents can be enforced against third parties practicing the technology claimed in such patents. Pending patent applications cannot be enforced unless and until patents get issued from such applications. Assuming the other requirements for patentability are met, currently, patents are granted to the party who was the first to file a patent application. However, prior to March 16, 2013, in the United States, patents were granted to the party who was the first to invent the claimed subject matter. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, SeaStar Medical cannot be certain that it was the first to make the inventions claimed in its patents or pending patent applications, or that it was the first to file for patent protection of such inventions.

 

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Moreover, because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, SeaStar Medical patents or pending patent applications may be challenged in the courts or by the USPTO or by foreign patent offices. For example, SeaStar Medical may be subject to a third party pre-issuance submission of prior art to the USPTO, or become involved in post-grant review procedures such as oppositions, derivations, reexaminations, inter partes review or interference proceedings, in the United States or elsewhere, challenging its patent rights or the patent rights of third parties. An adverse determination in any such challenges may result in the loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit SeaStar Medical’s ability to stop others from using or commercializing similar products, or limit the duration of SeaStar Medical’s patent protection. In addition, given the amount of time required for the development, testing and regulatory review of medical devices, SeaStar Medical’s patents might expire before or shortly after such products receive FDA approval and are commercialized, or before it receives approval to market its products in a foreign country.

Patent applications may not result in patents being issued which protect any current and future product candidates, in whole or in part, or which effectively prevent others from commercializing competitive products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of SeaStar Medical’s patents or narrow the scope of its patent protection. In addition, the laws of foreign countries may not protect SeaStar Medical’s rights to the same extent or in the same manner as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States patent law.

Although SeaStar Medical believes that certain of its patents and applications, if they are granted, will help protect the proprietary nature of its SCD technology, this protection may not be sufficient to protect SeaStar Medical during the development of that technology. Even if SeaStar Medical’s patent applications are issued as patents, they may not be issued in a form that will provide it with any meaningful protection, prevent competitors from competing with it or otherwise provide it with any competitive advantage. SeaStar Medical’s competitors may be able to circumvent its patents by developing similar or alternative technologies or products in a non-infringing manner. SeaStar Medical’s competitors may also seek approval to market their own products similar to or otherwise competitive with any of SeaStar Medical’s products. Thus, even if SeaStar Medical has valid and enforceable patents, these patents still may not provide protection against competing products or technologies sufficient to achieve its business objectives.

If SeaStar Medical does not obtain protection under the Hatch-Waxman Act and similar non-United States legislation for extending the term of patents covering its products, its business, results of operations and financial condition may be materially harmed.

Patents have a limited duration. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest United States non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents related to SeaStar Medical’s products, or their uses are obtained, once the patent life has expired, SeaStar Medical may be open to competition from competitive products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting SeaStar Medical’s products might expire before or shortly after such products received FDA approval and are commercialized. As a result, SeaStar Medical’s patent portfolio may not provide the company with sufficient rights to exclude others from commercializing similar or identical products.

Depending upon the timing, duration and requirements of FDA marketing approval of SeaStar Medical’s product candidates, its United States patents, if issued, may be eligible for a limited patent term extension under the Hatch-Waxman Act, or under similar legislation in other countries. However, SeaStar Medical’s patent and patent applications are only eligible for a patent term extension under the Hatch Waxman Act if they relate to a medical device classified by the FDA as a Class III device. Therefore, if SeaStar Medical’s product candidates are not classified as Class III devices, it will not be able to apply for an extension of term for any patents covering such

 

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approved products. If eligible, the Hatch-Waxman Act permits a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. The patent term extension cannot extend the remaining term of a patent beyond 14 years from the date of product candidate approval, and only one patent related to an approved product candidate may be extended. However, SeaStar Medical may not receive an extension if it fails to apply within applicable deadlines, fails to apply prior to expiration of relevant patents or otherwise fails to satisfy applicable requirements. Moreover, the length of the extension could be less than requested.

Accordingly, if SeaStar Medical is unable to obtain a patent term extension or the term of any such extension is less than requested, the period during which SeaStar Medical can enforce its patent rights for that product will be shortened and competitors may obtain approval to market competing products sooner than expected. As a result, SeaStar Medical’s business, results of operations and financial condition could be adversely and materially affected.

SeaStar Medical could become involved in intellectual property litigation that could be costly, result in the diversion of management’s time and efforts, require SeaStar Medical to pay damages, prevent it from selling its commercially available products and/or reduce the margins it may realize from its products.

SeaStar Medical’s commercial success depends, in part, on its ability to develop and market its SCD technology, as well as any future technologies that it develops, without infringing the intellectual property and other proprietary rights of third parties.

The medical device industry is characterized by extensive litigation and administrative proceedings over patent and other intellectual property rights. Whether a product infringes a patent involves complex legal and factual issues, and the determination is often uncertain. There may be existing patents of which SeaStar Medical is unaware that its products under development may inadvertently infringe. The likelihood that patent infringement claims may be brought against SeaStar Medical increases as the number of competitors increases, as it introduces new products and achieves more visibility in the marketplace.

Any infringement claim against SeaStar Medical, even if without merit, may cause SeaStar Medical to incur substantial costs, and would place a significant strain on its financial resources, divert the attention of management from its core business, and harm its reputation. In some cases, litigation may be threatened or brought by a patent holding company or other adverse patent owner who has no relevant product revenues and against whom SeaStar Medical’s patents may provide little or no deterrence. If SeaStar Medical is found to infringe any patents, SeaStar Medical could be required to pay substantial damages, including triple damages if an infringement is found to be willful. SeaStar Medical also could be forced, including by court order, to cease developing, manufacturing, or commercializing infringing products. SeaStar Medical also could be required to pay royalties and could be prevented from selling its products unless it obtains a license or is able to redesign its products to avoid infringement. SeaStar Medical may not be able to obtain a license enabling it to sell its products on reasonable terms, or at all. If SeaStar Medical fails to obtain any required licenses or makes any necessary changes to its technologies or the products, SeaStar Medical may be unable to commercialize one or more of its products or may have to withdraw products from the market, either of which would have a material adverse effect on its business, results of operations and financial condition.

In the event a competitor infringes upon any of SeaStar Medical’s patents or other intellectual property rights, enforcing its rights may be difficult, time consuming and expensive, and would divert management’s attention from managing its business. SeaStar Medical may not be successful on the merits in any enforcement effort. In addition, SeaStar Medical may not have sufficient resources to litigate, enforce or defend its intellectual property rights.

 

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Issued patents covering one or more of SeaStar Medical’s products could be found invalid or unenforceable if challenged in patent office proceedings, or in court.

Competitors may infringe SeaStar Medical’s patents, trademarks or other intellectual property. To counter infringement or unauthorized use of its intellectual property, SeaStar Medical may be required to initiate legal proceedings against a third party to enforce its intellectual property rights. If SeaStar Medical were to file a claim against a third party to enforce a patent covering one of its products, the defendant could counterclaim that SeaStar Medical’s patent rights are invalid and/or unenforceable (a common practice in the United States).

Grounds for a validity challenge could be an alleged failure to meet one or more statutory requirements for patentability, including, for example, lack of novelty, obviousness, lack of written description or non-enablement. In addition, patent validity challenges may, under certain circumstances, be based upon non-statutory obviousness-type double patenting, which, if successful, could result in a finding that the claims are invalid for obviousness-type double patenting or the loss of patent term, including a patent term adjustment granted by the USPTO, if a terminal disclaimer is filed to obviate a finding of obviousness-type double patenting. Grounds for an unenforceability assertion could be based on an allegation that someone connected with prosecution of the patent intentionally withheld relevant information from the USPTO or made a misleading statement, during prosecution.

In any patent infringement proceeding, there is a risk that a court will decide that a SeaStar Medical patent is invalid or unenforceable, in whole or in part. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that SeaStar Medical does not have the right to stop the other party from using the invention at issue on the grounds that SeaStar Medical’s patent claims do not cover the invention at issue. An adverse outcome in a litigation or proceeding involving SeaStar Medical’s patents could limit its ability to assert its patents against those other parties and other competitors, which may curtail or preclude its ability to exclude third parties from selling similar products. Any of these occurrences could adversely and materially affect SeaStar Medical’s business, results of operations and financial condition.

Even if SeaStar Medical establishes infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of SeaStar Medical’s confidential information could be compromised by disclosure during litigation.

Additionally, third parties are able to challenge the validity of issued patents through administrative proceedings in the patent offices of certain countries, including the USPTO and the European Patent Office.

Although SeaStar Medical believes that it has conducted its patent prosecution in accordance with the duty of candor and in good faith, the outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, SeaStar Medical cannot be certain that there is no invalidating prior art, of which it and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, SeaStar Medical would lose some or all of the patent protection for one or more of its products. Such a loss of patent protection could have a material adverse impact on its business, results of operations and financial condition. Further, intellectual property litigation could lead to unfavorable publicity that could harm SeaStar Medical’s reputation.

Other parties may challenge certain of SeaStar Medical’s foreign patent applications. If any such parties are successful in opposing its foreign patent applications, SeaStar Medical may not gain the protection afforded by those patent applications in particular jurisdictions and may face additional proceedings with respect to similar patents in other jurisdictions, as well as related patents. The loss of patent protection in one jurisdiction may influence SeaStar Medical’s ability to maintain patent protection for the same technology in other jurisdictions.

 

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Further, disputes may arise regarding the ownership or inventorship of SeaStar Medical’s patents. While SeaStar Medical has entered into assignment of intellectual property agreements with its employees, consultants, and collaborators and believes that it owns its patents and applications, the assignment and other ownership agreements that it relies on could be challenged. If a court or administrative body determined that SeaStar Medical’s does not own certain of its patents or patent applications, or that inventorship of certain of its patents its incorrect, SeaStar Medical’s title to its patents could be invalidated and its ability to develop and commercialize its technology could be materially harmed.

If SeaStar Medical is unable to protect the confidentiality of its trade secrets, the value of its technology could be adversely and materially affected and its business could be harmed.

SeaStar Medical has also entered into non-disclosure and confidentiality agreements with all of its employees, advisors, consultants, contract manufacturers, clinical investigators and other third parties involved in the development and commercialization of its technology in order to protect its intellectual property and other proprietary technologies some of which may not be amenable to patent protection. However, these agreements may not be enforceable or may not provide meaningful protection for SeaStar Medical’s trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements. For example, trade secrets and confidential know-how can be difficult to maintain as confidential. Although SeaStar Medical uses reasonable efforts to protect its trade secrets, any party with whom it has executed a confidentiality agreement could breach that agreement and disclose SeaStar Medical’s confidential information.

Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time consuming, and the outcome is unpredictable. Accordingly, SeaStar Medical may not be able to obtain adequate remedies for such breaches, despite any legal action it might take against persons making such unauthorized disclosure. In addition, courts outside the United States sometimes are less willing than in the United States to protect trade secrets.

If any of SeaStar Medical’s trade secrets were to be lawfully obtained or independently developed by a competitor, it would have no right to prevent such third party, or those to whom the third party communicates such technology or information, from using that technology or information to compete with SeaStar Medical. If any of its trade secrets were to be disclosed to or independently developed by a competitor, its business, results of operations and financial condition.

Those with whom SeaStar Medical collaborates on research and development related to current and future technologies and products may have rights to publish data and other information to which SeaStar Medical has rights. In addition, SeaStar Medical sometimes engages individuals or entities to conduct research relevant to its business. The ability of these individuals or entities to publish or otherwise publicly disclose data and other information generated during the course of their research is subject to certain contractual limitations. But these contractual provisions may be insufficient or inadequate to protect SeaStar Medical’s confidential information. If SeaStar Medical does not apply for patent protection prior to such publication, or if it cannot otherwise maintain the confidentiality of its proprietary technology and other confidential information, then its ability to obtain patent protection or to protect its trade secret information may be jeopardized.

New technology may lead to SeaStar Medical’s competitors developing superior products which would reduce demand for its products regardless of any patent protection it may have.

Research into technologies similar to SeaStar Medical’s technologies is proceeding at a rapid pace, and companies and research institutions are actively engaged in the development of products similar to SeaStar Medical’s products. These new technologies may, if successfully developed, offer significant performance or price advantages when compared with SeaStar Medical’s technologies. SeaStar Medical’s existing patents or its pending and proposed patent applications may not offer meaningful protection if a competitor develops a novel product based on a new technology.

 

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The United States government may exercise certain rights with regard to some of SeaStar Medical’s inventions, or licensors’ inventions, developed using government funding.

The United States federal government retains certain rights in inventions produced with its financial assistance under the Patent and Trademark Law Amendments Act, or the Bayh-Dole Act. Certain of SeaStar Medical’s exclusively owned patents and patent applications and those patents and applications that it co-owns with and licenses from the University of Michigan were developed using federal funding from the National Institutes of Health and/or the U.S. Department of Defense. As a result, the U.S. government has certain rights, including so-called march-in rights, to any patent rights that were funded in part by the U.S. government and any products or technology developed from such patent rights. When new technologies are developed with U.S. government funding, the U.S. government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the U.S. government to use the invention for non-commercial purposes. These rights may permit the U.S. government to disclose SeaStar Medical’s confidential information to third parties and to exercise march-in rights to use or to allow third parties to use SeaStar Medical’s licensed technology. The U.S. government can exercise its march-in rights if it determines that action is necessary because SeaStar Medical fails to achieve the practical application of government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, SeaStar Medical’s rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the U.S. government of such rights could harm SeaStar Medical’s business, results of operations and financial condition.

SeaStar Medical also sometimes collaborates with academic institutions to accelerate its research or development. While SeaStar Medical tries to avoid engaging its academic partners in projects in which there is a risk that federal funds may be co-mingled, it cannot be sure that any co-developed intellectual property will be free from government rights pursuant to the Bayh-Dole Act. If, in the future, SeaStar Medical co-owns or licenses technology which is critical to its business that is developed in whole or in part with federal funds subject to the Bayh-Dole Act, its ability to enforce or otherwise exploit patents covering such technology may be adversely and materially affected.

Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing SeaStar Medical’s ability to protect its products.

As is the case with other medical device companies, SeaStar Medical’s success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the medical device industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, signed into law in September 2011, could increase those uncertainties and costs. The Leahy-Smith Act included a number of significant changes to United States patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents, such as through post grant and inter partes review proceedings at the USPTO. In addition, the Leahy-Smith Act transformed the United States patent system into a “first to file” system effective March 2013. The Leahy-Smith Act and its implementation could make it more difficult for SeaStar Medical to obtain patent protection for its inventions and increases the uncertainties and costs surrounding the prosecution of SeaStar Medical’s patent applications and the enforcement or defense of its issued patents, all of which could harm its business, results of operations and financial condition.

The United States Supreme Court has ruled on several patent cases, either narrowing the scope of patent protection available or weakening the rights of patent owners in certain circumstances. Additionally, there have been proposals for additional changes to the patent laws of the United States and other countries that, if adopted, could impact SeaStar Medical’s ability to enforce its proprietary technology. Depending on future actions by Congress, the United States courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in ways that would weaken SeaStar Medical’s ability to obtain new patents or to enforce its existing and future patents.

 

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Intellectual property rights do not necessarily address all potential threats to SeaStar Medical’s competitive advantage.

The degree of future protection afforded by SeaStar Medical’s intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect its business, or permit it to maintain its competitive advantage. The following examples are illustrative:

 

   

others may be able to make products that are the same as or similar to SeaStar Medical’s products but that are not covered by the claims of patents that it owns or has rights to;

 

   

SeaStar Medical or its licensors or any current or future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by its patents or pending patent applications;

 

   

SeaStar Medical or its licensors or any future strategic partners might not have been the first to file patent applications covering the inventions in SeaStar Medical’s patents or applications;

 

   

others may independently develop similar or alternative technologies or duplicate any of SeaStar Medical’s technologies without infringing SeaStar Medical’s intellectual property rights;

 

   

SeaStar Medical’s pending patent rights may not lead to issued patents, or the patents, if granted, may not provide it with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by its competitors;

 

   

SeaStar Medical’s competitors might conduct research and development activities in countries where it does not have patent rights and then use the information learned from such activities to develop competitive products for sale in SeaStar Medical’s major commercial markets;

 

   

third parties manufacturing or testing SeaStar Medical’s products or technologies could use the intellectual property of others without obtaining a proper license;

 

   

SeaStar Medical may not develop additional technologies that are patentable; and

 

   

third parties may allege that SeaStar Medical’s development and commercialization of its products infringe their intellectual property rights, the outcome of any related litigation may have an adverse effect on SeaStar Medical’s business, result of operations and financial condition.

Obtaining and maintaining SeaStar Medical’s patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and its patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance fees on any issued patent are owed to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies also require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or the lapse of a patent or patent application, resulting in the partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If SeaStar Medical or its licensors fail to maintain the patents and patent applications covering SeaStar Medical’s products, its competitive position would be adversely affected.

SeaStar Medical may obtain only limited geographical protection with respect to certain patent rights, which may diminish the value of its intellectual property rights in those jurisdictions and prevent it from enforcing its intellectual property rights throughout the world.

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive. Accordingly, SeaStar Medical has not and in the future may not file for patent protection in

 

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all national and regional jurisdictions where such protection may be available. In addition, it may decide to abandon national and regional patent applications before grant, or to not pay maintenance fees on granted patents in certain jurisdictions. Finally, the grant proceeding of each national/regional patent office is an independent proceeding that may lead to situations in which applications in some jurisdictions are refused by the relevant patent offices, while other applications are granted. It is also quite common that depending on the country, the scope of patent protection may vary for the same product candidate or technology.

Competitors may use SeaStar Medical’s technologies to develop their own products in jurisdictions where SeaStar Medical has not obtained patent protection and, further, may export otherwise infringing products to territories where SeaStar Medical has patent protection, but where patent enforcement is not as strong as that in the United States. These products may also compete with SeaStar Medical’s products in jurisdictions where it does not have any issued or licensed patents or where SeaStar Medical’s patent or other intellectual property rights are not effective or sufficient to prevent these products from competing with SeaStar Medical.

Additionally, some countries do not afford intellectual property protection to the same extent as the laws of the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries do not favor the enforcement of patents and other intellectual property rights. This could make it difficult for SeaStar Medical to stop the infringement of its patents or the misappropriation of its other intellectual property rights in these countries. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If SeaStar Medical or any of its licensors is forced to grant a license to third parties with respect to any patents relevant to its business, its competitive position may be impaired and its business, results of operations and financial condition may be adversely affected. Consequently, SeaStar Medical may not be able to prevent third parties from practicing its inventions in certain countries outside the United States and Europe. Competitors may use SeaStar Medical’s technologies to develop their own products in jurisdictions where SeaStar Medical has not obtained patent protection. Furthermore, they may export otherwise infringing products to jurisdictions where SeaStar Medical has patent protection, if SeaStar Medical’s ability to enforce its patents to stop the infringing activities in those jurisdictions is inadequate.

Proceedings to enforce SeaStar Medical’s patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert its efforts and resources from other aspects of its business. Furthermore, while SeaStar Medical intends to protect its intellectual property rights in major markets for its products, it may not be able to initiate or maintain similar efforts in all jurisdictions in which it wishes to market its products. Accordingly, SeaStar Medical’s efforts to protect its intellectual property rights in such countries may be inadequate.

Risks Related to Being a Public Company

The Combined Company does not have experience operating as a United States public company and may not be able to adequately develop and implement the governance, compliance, risk management and control infrastructure and culture required for a public company, including compliance with the Sarbanes Oxley Act.

The Combined Company does not have experience operating as a United States public company. None of the Combined Company’s proposed executive officers have experience in managing a United States public company, which makes their ability to comply with applicable laws, rules and regulations uncertain. The Combined Company’s failure to comply with all laws, rules and regulations applicable to United States public companies could subject the Combined Company and its management to regulatory scrutiny or sanction, which could harm its reputation and share price.

SeaStar Medical has not previously been required to prepare or file periodic or other reports with the SEC or to comply with the other requirements of United States federal securities laws applicable to public companies. SeaStar

 

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Medical has not previously been required to establish and maintain the disclosure controls and procedures, and internal controls over financial reporting applicable to a public company in the United States, including the Sarbanes-Oxley Act. Although SeaStar Medical is in the process of developing and implementing its governance, compliance, risk management and control framework and culture required for a public company, the Combined Company may not be able to meet the requisite standards expected by the SEC and/or its investors. The Combined Company may also encounter errors, mistakes and lapses in processes and controls resulting in failures to meet the requisite standards expected of a public company.

As a United States public reporting company, the Combined Company will incur significant legal, accounting, insurance, compliance, and other expenses. The Combined Company cannot predict or estimate the amount of additional costs it may incur or the timing of such costs. Compliance with reporting, internal control over financial reporting and corporate governance obligations may require members of its management and its finance and accounting staff to divert time and resources from other responsibilities to ensure these new regulatory requirements are fulfilled.

If it fails to adequately implement the required governance and control framework, the Combined Company could be at greater risk of failing to comply with the rules or requirements associated with being a public company. Such failure could result in the loss of investor confidence, could harm the Combined Company’s reputation, and cause the market price of the Combined Company’s securities to decline. Other challenges in complying with these regulatory requirements may arise because the Combined Company may not be able to complete its evaluation of compliance and any required remediation in a timely fashion. Furthermore, any current or future controls may be considered as inadequate due to changes or increased complexity in regulations, SeaStar Medical’s operating environment or other reasons.

Due to inadequate governance and internal control policies, misstatements or omissions due to error or fraud may occur and may not be detected, which could result in failures to make required filings in a timely manner and make filings containing incorrect or misleading information. Any of these outcomes could result in SEC enforcement actions, monetary fines or other penalties, as well as damage to the Combined Company’s reputation, business, financial condition, operating results and share price.

The Combined Company may not be able to consistently comply with all of Nasdaq’s Listing Rules.

As a public company, the Combined Company will be subject to Nasdaq listing rules. If it fails to meet the requirements of the applicable listing rules, such failure may result in the Combined Company not being listed by Nasdaq, a suspension of the trading of its shares or delisting in the future. This may further result in legal or regulatory proceedings, fines and other penalties, legal liability for the Combined Company, the inability for the Combined Company’s stockholders to trade their shares and negatively impact the Combined Company’s share price, reputation, operations and financial position, as well as its ability to conduct future fundraising activities.

SeaStar Medical identified a material weakness in its internal control over financial reporting. If the Combined Company is unable to develop and maintain an effective system of internal controls over financial reporting, the Combined Company may not be able to accurately report its financial results in a timely manner, which may materially and adversely affect the Combined Company’s business, results of operations and financial condition.

As a private company, SeaStar Medical has not been required to document and test its internal controls over financial reporting nor has its management been required to certify the effectiveness of its internal controls and its auditors have not been required to opine on the effectiveness of its internal controls over financial reporting.

SeaStar Medical’s management is responsible for establishing and maintaining adequate internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. SeaStar Medical’s management also evaluates

 

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the effectiveness of its internal controls and SeaStar Medical discloses any changes and material weaknesses identified through such evaluation of its internal controls. A material weakness is a deficiency, or a combination of deficiencies, in the internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of SeaStar Medical’s annual or interim financial statements will not be prevented or detected on a timely basis.

In the course of preparing the financial statements that are included in this proxy statement/prospectus, SeaStar Medical has identified a material weakness in its internal controls over financial reporting as of December 31, 2021, which relates to a deficiency in the design and operation of its financial accounting and reporting controls. Specifically, the material weakness resulted from a lack of segregation of duties within the financial accounting and reporting processes, including the absence of an independent review and approval process in recording transactions to the financial statements and inappropriate access to the general ledger, disbursement and payroll systems. While the Combined Company intends to implement measures to remediate the material weakness including hiring additional accounting staff with requisite experiences and skills, there is no guarantee that it can be remediated in a timely fashion or at all. The Combined Company’s failure to correct this material weakness could result in inaccurate financial statements and could also impair its ability to comply with the applicable financial reporting requirements on a timely basis. These compliance issues could cause investors to lose confidence in SeaStar Medical’s reported financial information and may result in volatility in and a decline in the market price of the Combined Company’s securities.

Upon completion of this Business Combination, SeaStar Medical will become a wholly owned subsidiary of the Combined Company, and the Combined Company will be renamed as “SeaStar Medical Holding Corporation.” Prior to the filing of the registration statement of which the proxy statement/prospectus is a part, SeaStar Medical was not subject to the Sarbanes-Oxley Act, and Section 404 thereof will require that the Combined Company include a report from management on the effectiveness of its internal control over financial reporting in its annual report on Form 10-K. It may take the Combined Company time to develop the requisite internal control framework. The Combined Company’s management may conclude that its internal control over financial reporting is not effective, or the level at which the Combined Company’s controls are documented, designed, or reviewed is not adequate, and may result in the Combined Company’s independent registered public accounting firm issuing a report that is qualified. In addition, the reporting obligations may place a significant strain on the Combined Company’s management, operational and financial resources and systems for the foreseeable future. The Combined Company may be unable to complete its evaluation testing and any required remediation in a timely manner.

During the course of documenting and testing the Combined Company’s internal control procedures, in order to satisfy the requirements of Section 404, the Combined Company may subsequently identify deficiencies in its internal control over financial reporting. Moreover, if the Combined Company fails to maintain the adequacy of its internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, it may not be able to conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404. If the Combined Company fails to achieve and maintain an effective internal controls environment, it could result in material misstatements in its financial statements and a failure to meet its reporting obligations, which may cause investors to lose confidence in its reported financial information. This could in turn limit SeaStar Medical’s access to capital markets and harm its results of operations. The Combined Company may also be required to restate its financial statements from prior periods if such deficiencies are identified. Additionally, ineffective internal control over financial reporting could expose it to increased risk of fraud or misuse of corporate assets and subject it to potential delisting from Nasdaq, regulatory investigations and civil or criminal sanctions. All of these consequences could adversely impact the Combined Company’s reputation, business, results of operations, financial condition and share price.

 

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Risks Related to LMAO’s Business and the Business Combination

LMAO will be forced to liquidate the Trust Account if it cannot consummate a business combination by July 25, 2022 or, if the Sponsor deposits into the Trust Account $1,035,000 on or prior to July 25, 2022, October 25, 2022.

If LMAO is unable to complete a business combination by July 25, 2022 and is forced to liquidate, the per-share liquidation distribution will be $[10.20]. If the Sponsor deposits into the Trust Account $1,035,000 on or prior to July 25, 2022, the deadline to complete a business combination would be extended to October 25, 2022 and if it is unable to complete a business combination by October 25, 2022 and is forced to liquidate, the per-share liquidation distribution will be $[10.30].

You must tender your shares of Common Stock in order to validly seek redemption at the Meeting.

In connection with tendering your public shares for redemption, you must elect either to physically tender your share certificates to Continental or to deliver your Common Stock to Continental electronically using DTC’s DWAC (Deposit/Withdrawal At Custodian) System, in each case at least two business days before the Meeting. The requirement for physical or electronic delivery ensures that a redeeming holder’s election to redeem is irrevocable once the Business Combination is consummated. Any failure to observe these procedures will result in your loss of redemption rights in connection with the vote on the Business Combination.

If the conditions to the Merger Agreement are not met, the Business Combination may not occur.

Even if the Merger Agreement is approved by SeaStar Medical’s stockholders, specified conditions must be satisfied or waived before the parties to the Merger Agreement are obligated to complete the Business Combination. For a list of the material closing conditions contained in the Merger Agreement, see the section titled “Proposal 1 - The Business Combination Proposal - Conditions to the Closing of the Business Combination.” LMAO and SeaStar Medical may not satisfy all of the closing conditions in the Merger Agreement. If the closing conditions are not satisfied or waived, the Business Combination will not occur, or will be delayed pending later satisfaction or waiver, and such delay may cause LMAO and SeaStar Medical to each lose some or all of the intended benefits of the Business Combination.

If third parties bring claims against LMAO, the proceeds held in the trust could be reduced and the per-share redemption amount received by LMAO’s stockholders may be less than [$10.20] per share.

LMAO’s placing of funds in the Trust Account may not protect those funds from third-party claims against LMAO. Although LMAO has received from many of the vendors, service providers (other than certain of its service providers, including, for example, its independent registered public accounting firm), prospective target businesses, and other entities with which it does business executed agreements with waiving right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of LMAO’s public stockholders, such parties may not still bring claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against LMAO’s assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, LMAO’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to it than any alternative.

Examples of possible instances where LMAO may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no

 

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guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with LMAO and will not seek recourse against the Trust Account for any reason. Upon redemption of LMAO’s public shares, if it is unable to complete its initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with LMAO’s initial business combination, LMAO will be required to provide for payment of claims of creditors that were not waived that may be brought against it within the ten (10) years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the [$10.20] per share initially held in the Trust Account, due to claims of such creditors.

Pursuant to the letter agreement, the Sponsor has agreed that it will be liable to LMAO if and to the extent any claims by a third party for services rendered or products sold to it, or a prospective target business with which LMAO has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of: (i) [$10.20] per public share; and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than [$10.20] per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under LMAO’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, LMAO has not asked the Sponsor to reserve for such indemnification obligations, nor has it independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Sponsor’s only assets are securities of LMAO. Therefore, LMAO cannot assure you that the Sponsor would be able to satisfy those obligations. None of LMAO’s officers or directors will indemnify LMAO for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

LMAO’s stockholders may be held liable for claims by third parties against LMAO to the extent of distributions received by them upon redemption of their shares.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of the Trust Account distributed to LMAO’s public stockholders upon the redemption of LMAO’s public shares in the event that it does not complete its initial business combination within 18 months from the closing of the IPO (or 21 months from the closing, if it extends the period of time to consummate a business combination) may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is LMAO’s intention to redeem its public shares as soon as reasonably possible following the 18th month from the closing of the IPO in the event it does not complete its initial business combination and, therefore, LMAO do not intend to comply with the foregoing procedures.

Because LMAO will not be complying with Section 280, Section 281(b) of the DGCL requires it to adopt a plan, based on facts known to it at such time that will provide for LMAO’s payment of all existing and pending claims or claims that may be potentially brought against it within the 10 years following its dissolution. However, because LMAO is a blank check company, rather than an operating company, and its operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from LMAO’s vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If LMAO’s plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to

 

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the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. LMAO cannot assure you that it will properly assess all claims that may be potentially brought against it. As such, LMAO’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of LMAO’s stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of the Trust Account distributed to LMAO’s public stockholders upon the redemption of its public shares in the event LMAO does not complete its initial business combination within 18 months from the closing of the IPO (or 21 months from the closing, if it extends the period of time to consummate a business combination) is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.

The announcement of the Business Combination could disrupt the Combined Company’s relationships with its customers, members, providers, business partners and others, as well as its operating results and business generally.

Whether or not the Business Combination and related transactions are ultimately consummated, as a result of uncertainty related to the proposed transactions, risks relating to the impact of the announcement of the Business Combination on the Combined Company’s business include the following:

 

   

its employees may experience uncertainty about their future roles, which might adversely affect the Combined Company’s ability to retain and hire key personnel and other employees;

 

   

customers, business partners and other parties with which the Combined Company maintains business relationships may experience uncertainty about its future and seek alternative relationships with third parties, seek to alter their business relationships with the Combined Company or fail to extend an existing relationship or subscription with the Combined Company; and

 

   

the Combined Company has expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the Business Combination.

If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact the Combined Company’s results of operations and cash available to fund its business.

Stockholder litigation and regulatory inquiries and investigations are expensive and could harm LMAO’s business, financial condition and operating results and could divert management attention.

In the past, securities class action litigation and/or stockholder derivative litigation and inquiries or investigations by regulatory authorities have often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction, such as the Business Combination. Any stockholder litigation and/or regulatory investigations against LMAO, whether or not resolved in LMAO’s favor, could result in substantial costs and divert LMAO’s management’s attention from other business concerns, which could adversely affect LMAO’s business and cash resources and the ultimate value LMAO’s stockholders receive as a result of the Business Combination.

Since the Sponsor, and LMAO’s officers and directors will lose their entire investment in LMAO if its initial business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for LMAO’s initial business combination.

On November 6, 2020, the Sponsor purchased an aggregate of 2,156,250 founder shares for an aggregate purchase price of $25,000, or approximately $0.012 per share. In January 2021, LMAO effected a stock dividend, resulting in the Sponsor holding an aggregate of 2,587,500 founder shares (up to 337,500 of which are subject to forfeiture by the Sponsor). The founder shares will be worthless if LMAO does not complete an initial

 

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business combination prior to July 25, 2022 (unless such date has been extended as described herein). In addition, the Sponsor has purchased an aggregate of 5,738,000 warrants at a price of $1.00 per warrant, for an aggregate purchase price of $5,738,000 that will also be worthless if LMAO does not complete an initial business combination. Holders of founder shares have agreed (A) to vote any shares owned by them in favor of any proposed initial business combination and (B) not to redeem any founder shares in connection with a stockholder vote to approve a proposed initial business combination or in connection with a tender offer. In addition, LMAO may obtain loans from the Sponsor, affiliates of the Sponsor or an officer or director. The personal and financial interests of LMAO’s officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the Combined Company.

LMAO is requiring stockholders who wish to redeem their public shares in connection with a proposed business combination to comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.

LMAO is requiring stockholders who wish to redeem their Common Stock to either tender their certificates to Continental or to deliver their shares to Continental electronically using the DTC’s DWAC (Deposit/Withdrawal At Custodian) system in each case at least two business days before the Meeting. In order to obtain a physical certificate, a stockholder’s broker and/or clearing broker, DTC and Continental will need to act to facilitate this request. It is LMAO’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from Continental. However, because LMAO does not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks to obtain a physical stock certificate. While LMAO has been advised that it takes a short time to deliver shares through the DWAC System, it cannot assure you of this fact. Accordingly, if it takes longer than LMAO anticipates for stockholders to deliver their Common Stock, stockholders who wish to redeem may be unable to meet the deadline for exercising their redemption rights and thus may be unable to redeem their Common Stock.

LMAO will require its public stockholders who wish to redeem their public shares in connection with the Business Combination to comply with specific requirements for redemption described above, such redeeming stockholders may be unable to sell their public shares when they wish to in the event that the Business Combination is not consummated.

If LMAO requires public stockholders who wish to redeem their public shares in connection with the proposed Business Combination to comply with specific requirements for redemption as described above and the Business Combination is not consummated, LMAO will promptly return such certificates to its public stockholders. Accordingly, investors who attempted to redeem their public shares in such a circumstance will be unable to sell their securities after the failed acquisition until LMAO has returned their securities to them. The market price for shares of LMAO Common Stock may decline during this time and you may not be able to sell your securities when you wish to, even while other stockholders that did not seek redemption may be able to sell their securities.

The grant of registration rights to LMAO’s initial stockholders may make it more difficult to complete its initial business combination, and the future exercise of such rights may adversely affect the market price of Class A Common Stock.

Pursuant to an agreement entered into concurrently with the issuance and sale of the securities in the IPO, LMAO’s initial stockholders and their permitted transferees can demand that LMAO register the Private Placement Warrants and the shares of Class A Common Stock issuable upon conversion of the founder shares and exercise of the Private Placement Warrants held by them and holders of warrants that may be issued upon conversion of working capital loans may demand that LMAO register such warrants or the Class A Common Stock issuable upon exercise of such warrants. LMAO will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have

 

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an adverse effect on the market price of Class A Common Stock. In addition, the existence of the registration rights may make LMAO’s initial business combination more costly or difficult to conclude. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of Class A Common Stock that is expected when the securities owned by LMAO’s initial stockholders or holders of working capital loans or their respective permitted transferees are registered.

LMAO will not obtain an opinion from an unaffiliated third party as to the fairness of the Business Combination to its stockholders.

LMAO is not required to obtain an opinion from an unaffiliated third party that the price it is paying in the Business Combination is fair to its public stockholders from a financial point of view. LMAO’s public stockholders therefore, must rely solely on the judgment of the Board.

LMAO’s directors and officers may have certain conflicts in determining to recommend the acquisition of SeaStar Medical, since certain of their interests, and certain interests of their affiliates and associates, are different from, or in addition to, your interests as a stockholder.

LMAO’s management and directors have interests in and arising from the Business Combination that are different from, or in addition to, your interests as a stockholder, which could result in a real or perceived conflict of interest. These interests include the fact that founder shares and Private Placement Warrants owned by the Sponsor, would become worthless if the Business Combination Proposal is not approved and LMAO otherwise fails to consummate a business combination prior to July 25, 2022 (unless such date has been extended as described herein).

LMAO and SeaStar Medical have incurred and expect to incur significant costs associated with the Business Combination. Whether or not the Business Combination is completed, the incurrence of these costs will reduce the amount of cash available to be used for other corporate purposes by the Combined Company if the Business Combination is completed or by LMAO if the Business Combination is not completed.

LMAO and SeaStar Medical expect to incur significant costs associated with the Business Combination. Whether or not the Business Combination is completed, LMAO expects to incur approximately $4.4 million in expenses excluding deferred underwriting fees. These expenses will reduce the amount of cash available to be used for other corporate purposes by the Combined Company if the Business Combination is completed or by LMAO if the Business Combination is not completed. If the Business Combination is not consummated, LMAO may not have sufficient funds to seek an alternative business combination and may be forced to liquidate and dissolve.

The ability of the public stockholders to exercise redemption rights with respect to a large number of shares of Common Stock could increase the probability that the Business Combination will be unsuccessful and that LMAO’s stockholders will have to wait for liquidation in order to redeem their public shares.

Since the Merger Agreement requires that LMAO have, in the aggregate, cash that is equal to or greater than $15.0 million, the probability that the Business Combination will be unsuccessful is increased if a large number of the public shares are tendered for redemption. If the Business Combination is unsuccessful, the public stockholders will not receive their pro rata portion of the Trust Account until the Trust Account is liquidated. If the public stockholders are in need of immediate liquidity, they could attempt to sell their public shares in the open market; however, at such time, the Common Stock may trade at a discount to the pro rata per share amount in the Trust Account. In either situation, LMAO’s stockholders may suffer a material loss on their investment or lose the benefit of funds expected in connection with the redemption until LMAO is liquidated or LMAO’s stockholders are able to sell their public shares in the open market.

 

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In the event that a significant number of public shares are redeemed, our Common Stock may become less liquid following the Business Combination.

If a significant number of public shares are redeemed, LMAO may be left with a significantly smaller number of stockholders. As a result, trading in the shares of the Combined Company may be limited and your ability to sell your shares in the market could be adversely affected. The Combined Company intends to apply to list its shares on Nasdaq, and Nasdaq may not list the Common Stock on its exchange, which could limit investors’ ability to make transactions in LMAO’s securities and subject LMAO to additional trading restrictions.

The Combined Company will be required to meet the initial listing requirements to be listed on Nasdaq. However, the Combined Company may be unable to maintain the listing of its securities in the future.

We cannot guarantee that the Combined Company’s securities will continue to be listed on Nasdaq following the Business Combination. If Nasdaq delists the Combined Company’s securities from trading on its exchange and it is not able to list its securities on another national securities exchange, we expect that the Combined Company’s securities could be quoted on an over-the-counter market. If this were to occur, the Combined Company could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for its securities;

 

   

reduced liquidity for its securities;

 

   

a limited amount of news and analyst coverage for the company; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

LMAO may waive one or more of the conditions to the Business Combination without resoliciting stockholder approval for the Business Combination.

LMAO may agree to waive, in whole or in part, some of the conditions to its obligations to complete the Business Combination, to the extent permitted by applicable laws. The Board will evaluate the materiality of any waiver to determine whether amendment of this proxy statement/prospectus and resolicitation of proxies is warranted. In some instances, if the Board determines that a waiver is not sufficiently material to warrant resolicitation of stockholders, LMAO has the discretion to complete the Business Combination without seeking further stockholder approval.

LMAO’s stockholders will experience immediate dilution as a consequence of, among other transactions, the issuance of Common Stock as consideration in the Business Combination and the shares to Dow pursuant to the Dow Commitment Letter. Having a minority share position may reduce the influence that LMAO’s current stockholders have on the management of LMAO.

It is anticipated that upon completion of the Business Combination, LMAO’s public stockholders (other than the shares issued to the Dow Pension Funds in connection with the Dow Commitment Letter) would retain an ownership interest of approximately 48.7% in the Combined Company, LMFAO Sponsor, LLC, LMAO’s sponsor and the sole holder of founder shares, will retain an ownership interest of approximately 12.1% of the Combined Company and the SeaStar Medical stockholders (which includes the minimum $5,000,000 worth of Class A Common Stock that will be issued to the Dow Pension Funds in connection with the Dow Commitment Letter as the Dow Pension Funds are current shareholders of SeaStar Medical) will own approximately 39.2% of the Combined Company.

The ownership percentage with respect to the Combined Company does (A) not take into account (i) the redemption of any shares by the LMAO public stockholders, (ii) the issuance of any additional shares upon the closing of the Business Combination under the Incentive Plan or ESPP, and (iii) the withholding of shares of Common Stock to pay future exercises under the SeaStar Medical warrants and options assumed by LMAO or

 

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the settlement of SeaStar Medical restricted stock units assumed by LMAO, and (B) assumes (i) that the Dow Pension Funds only purchase the minimum amount under the Dow Commitment Letter ($5,00,000) and (ii) that SeaStar Medical neither has any indebtedness to be repaid at Closing nor incurs transaction expenses in excess of the transaction expenses cap. If the actual facts are different from these assumptions (which they are likely to be), the percentage ownership retained by the LMAO stockholders will be different. See “Unaudited Pro Forma Condensed Combined Financial Information” for additional information.

If the Adjournment Proposal is not approved, and an insufficient number of votes have been obtained to authorize the consummation of the Business Combination, the Board will not have the ability to adjourn the Meeting to a later date in order to solicit further votes, and, therefore, the Business Combination will not be completed.

The Board is seeking approval to adjourn the Meeting to a later date or dates if, at the Meeting, there is insufficient votes to approve the Business Combination Proposal. If the Adjournment Proposal is not approved, the Board will not have the ability to adjourn the Meeting to a later date and, therefore, the Business Combination would not be completed.

 

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THE MEETING

General

LMAO is furnishing this proxy statement/prospectus to the LMAO stockholders as part of the solicitation of proxies by the Board for use at the Meeting of LMAO stockholders to be held on [●], 2022 and at any adjournment or postponement thereof. This proxy statement/prospectus is first being furnished to our stockholders on or about [●], 2022 in connection with the vote on the Proposals. This proxy statement/prospectus provides you with the information you need to know to be able to vote or instruct your vote to be cast at the Meeting.

Date, Time and Place

The Meeting will be held at [location] located at [address], at [●] [●].m., Eastern Time, on [●], 2022 and conducted exclusively in person, or such other date, time and place to which such meeting may be adjourned or postponed, for the purposes set forth in the accompanying notice.

Record Date; Who is Entitled to Vote

LMAO has fixed the close of business on [●], 2022, as the record date for determining those LMAO stockholders entitled to notice of and to vote at the Meeting. As of the close of business on [●], 2022, there were [13,041,000] shares of Common Stock issued and outstanding and entitled to vote, of which 10,453,500 are shares of Class A Common Stock (public shares) and 2,587,500 are shares of Class B Common Stock (founder shares) held by the Initial Stockholders. Each holder of shares of Common Stock is entitled to one vote per share on each Proposal. If your shares are held in “street name,” you should contact your broker, bank or other nominee to ensure that shares held beneficially by you are voted in accordance with your instructions.

In connection with our IPO, we entered into certain letter agreements pursuant to which the Initial Stockholders agreed to vote any shares of Common Stock owned by them in favor of our initial business combination. The Sponsor also entered into the Sponsor Support Agreement, pursuant to which it agreed to, among other things, vote in favor of the Business Combination Proposal. As of the date of this proxy statement/prospectus, the Initial Stockholders hold approximately 20% of the outstanding Common Stock.

Quorum and Required Vote for Proposals

A quorum of LMAO stockholders is necessary to hold a valid meeting. Stockholders representing a majority of the voting power of all outstanding shares of capital stock of LMAO as of the Record Date and entitled to vote at the Meeting shall constitute a quorum for the transaction of business at the Meeting. Shares of our Common Stock will be counted for purposes of determining if there is a quorum if the stockholder (i) is present and entitled to vote at the meeting, or (ii) has properly submitted a proxy card or voting instructions through a broker, bank or custodian.

Approval of the Business Combination Proposal, the Governance Proposals, the Stock Plan Proposal, the ESPP Proposal, the Nasdaq Proposal and the Adjournment Proposal will each require the affirmative vote of the holders of a majority of the votes cast by LMAO stockholders present in person or represented by proxy at the Meeting and entitled to vote thereon. Approval of the Director Election Proposal requires a plurality vote of the shares of Common Stock cast in respect of that Proposal and entitled to vote thereon at the Meeting. Approval of the Charter Approval Proposal will require the affirmative vote of a majority of the issued and outstanding shares of Common Stock. “Plurality” means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. Consequently, any shares not voted “FOR” a particular nominee (whether as a result of an abstention, a direction to withhold authority or a broker non-vote) will not be counted in the nominee’s favor.

The Business Combination Proposal is conditioned upon the approval of the Charter Approval Proposal and the Nasdaq Proposal. If the Charter Approval Proposal and the Nasdaq Proposal are not approved, the Business

 

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Combination Proposal will have no effect (even if approved by the requisite vote of our stockholders at the Meeting of any adjournment or postponement thereof) and the Business Combination will not occur. The Charter Approval Proposal, the Stock Plan Proposal, the ESPP Proposal, the Nasdaq Proposal and the Director Nomination Proposal are dependent upon approval of the Business Combination Proposal. It is important for you to note that in the event that the Business Combination Proposal is not approved, LMAO will not consummate the Business Combination. The Governance Proposals and the Adjournment Proposal are not conditioned on, and therefore do not require the approval of, the Business Combination Proposal and Business Combination to be effective.

Voting Your Shares

Each share of Common Stock that you own in your name entitles you to one vote on each Proposal for the Meeting. Your proxy card shows the number of shares of Common Stock that you own.

There are two ways to ensure that your shares of Common Stock are voted at the Meeting:

 

   

You can vote your shares by signing, dating and returning the enclosed proxy card in the pre-paid postage envelope provided. If you submit your proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted, as recommended by our Board. Our Board recommends voting “FOR” each of the Proposals. If you hold your shares of Common Stock in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided to you by your broker, bank or nominee to ensure that the votes related to the shares you beneficially own are properly represented and voted at the Meeting.

 

   

You can participate in the Meeting and vote during the Meeting even if you have previously voted by submitting a proxy as described above. However, if your shares are held in the name of your broker, bank or another nominee, you must get a proxy from the broker, bank or other nominee. That is the only way LMAO can be sure that the broker, bank or nominee has not already voted your shares.

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF THE BUSINESS COMBINATION PROPOSAL (AS WELL AS THE OTHER PROPOSALS).

Revoking Your Proxy

If you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

 

   

you may send another proxy card with a later date;

 

   

if you are a record holder, you may notify our proxy solicitor, Alliance Advisors, in writing before the Meeting that you have revoked your proxy; or

 

   

you may participate in the Meeting, revoke your proxy, and vote during the Meeting, as indicated above.

Who Can Answer Your Questions About Voting Your Shares

If you have any questions about how to vote or direct a vote in respect of your shares of Common Stock, you may contact Alliance Advisors, our proxy solicitor as follows:

Alliance Advisors

Toll Free: 855-935-2548

Collect: 1-520-524-4921

Email: lmao@allianceadvisors.com

 

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No Additional Matters May Be Presented at the Meeting

This Meeting has been called only to consider the approval of the Business Combination Proposal, the Charter Approval Proposal, the Governance Proposals (on an advisory basis), the Stock Plan Proposal, the ESPP Proposal, the Nasdaq Proposal, the Director Nomination Proposal and the Adjournment Proposal. Under the Existing Charter, other than procedural matters incident to the conduct of the Meeting, no other matters may be considered at the Meeting if they are not included in the notice of the Meeting.

Redemption Rights

Pursuant to the Existing Charter, a holder of public shares may demand that LMAO redeem such shares for cash in connection with a business combination. You may not elect to redeem your shares prior to the completion of a business combination.

If you are a public stockholder and you seek to have your shares redeemed, you must submit your request in writing that we redeem your public shares for cash no later than 5.00 p.m., Eastern Time on [●], 2022 (at least two business days before the Meeting). The request must be signed by the applicable stockholder in order to validly request redemption. A stockholder is not required to submit a proxy card or vote in order to validly exercise redemption rights. The request must identify the holder of the shares to be redeemed and must be sent to Continental at the following address:

Continental Stock Transfer & Trust Company

1 State Street, 30th floor

New York, NY 10004

Attention: Mark Zimkind, Senior Vice President & Director of Shareholder Services

Email: mzimkind@continentalstock.com

You must tender the public shares for which you are electing redemption at least two business days before the Meeting by either:

 

   

Delivering certificates representing shares of Common Stock to Continental, or

 

   

Delivering the shares of Common Stock electronically through the DWAC system.

Any corrected or changed written demand of redemption rights must be received by Continental at least two business days before the Meeting. No demand for redemption will be honored unless the holder’s shares have been delivered (either physically or electronically) to Continental at least two business days prior to the vote at the Meeting.

Public stockholders may seek to have their shares redeemed regardless of whether they vote for or against the Business Combination and whether or not they are holders of shares of common stock as of the Record Date. Any public stockholder who holds shares of LMAO on or before [●], 2022 (at least two business days before the Meeting) will have the right to demand that his, her or its shares be redeemed for a pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid, at the consummation of the Business Combination.

In connection with tendering your shares for redemption, you must elect either to physically tender your share certificates to Continental or deliver your shares to Continental electronically using DTC’s DWAC (Deposit/Withdrawal At Custodian) System, in each case, at least two business days before the Meeting.

If you wish to tender through the DWAC system, please contact your broker and request delivery of your shares through the DWAC system. Delivering shares physically may take significantly longer. In order to obtain

 

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a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC, and Continental will need to act together to facilitate this request. It is LMAO’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from Continental. LMAO does not have any control over this process or over the brokers or DTC, and it may take longer than two weeks to obtain a physical stock certificate. Stockholders who request physical stock certificates and wish to redeem may be unable to meet the deadline for tendering their shares of Common Stock before exercising their redemption rights and thus will be unable to redeem their shares of Common Stock.

In the event that a stockholder tenders its shares of Common Stock and decides prior to the consummation of the Business Combination that it does not want to redeem its shares of Common Stock, the stockholder may withdraw the tender. In the event that a stockholder tenders shares of Common Stock and the Business Combination is not completed, these shares will not be redeemed for cash and the physical certificates representing these shares will be returned to the stockholder promptly following the determination that the Business Combination will not be consummated. LMAO anticipates that a stockholder who tenders shares of Common Stock for redemption in connection with the vote to approve the Business Combination would receive payment of the redemption price for such shares of Common Stock soon after the completion of the Business Combination.

If properly demanded by LMAO’s public stockholders, LMAO will redeem each share into a pro rata portion of the funds available in the Trust Account, calculated as of two business days prior to the anticipated consummation of the Business Combination. As of [        ], 2022, this would amount to approximately $[10.20] per share. If you exercise your redemption rights, you will be exchanging your shares of Common Stock for cash and will no longer own the shares of Common Stock.

Notwithstanding the foregoing, a holder of the public shares, together with any affiliate of his or her or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)-(3) of the Exchange Act) will be restricted from seeking redemption rights with respect to more than 20% of the shares of Common Stock.

If too many public stockholders exercise their redemption rights, we may not be able to meet certain closing conditions, and as a result, would not be able to proceed with the Business Combination.

Appraisal Rights

Appraisal rights are not available to holders of shares of Common Stock in connection with the proposed Business Combination.

Proxies and Proxy Solicitation Costs

LMAO is soliciting proxies on behalf of the Board. This solicitation is being made by mail but also may be made by telephone or in person. LMAO and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. Any solicitation made and information provided in such a solicitation will be consistent with the written proxy statement/prospectus and proxy card. LMAO will bear the cost of solicitation. Alliance Advisors, a proxy solicitation firm that LMAO has engaged to assist it in soliciting proxies, will be paid its customary fee of approximately $10,000 and be reimbursed out-of-pocket expenses.

LMAO will ask banks, brokers and other institutions, nominees and fiduciaries to forward its proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. LMAO will reimburse them for their reasonable expenses.

 

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PROPOSAL 1 - THE BUSINESS COMBINATION PROPOSAL

We are asking our stockholders to adopt the Merger Agreement and approve the Business Combination and the other transactions contemplated thereby. Our stockholders should read carefully this proxy statement/prospectus in its entirety, including the subsection below titled “The Merger Agreement,” for more detailed information concerning the Business Combination and the terms and conditions of the Merger Agreement. We also urge our stockholders to read carefully the Merger Agreement in its entirety before voting on this Proposal. A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus.

General

On April 21, 2022, LMF Acquisition Opportunities, Inc., a Delaware corporation (“LMAO”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among LMAO, LMF Merger Sub, Inc. a Delaware corporation and a wholly-owned subsidiary of LMAO (“Merger Sub”), and SeaStar Medical, Inc., a Delaware corporation (“SeaStar Medical”). Pursuant to the terms of the Merger Agreement, a business combination between LMAO and SeaStar Medical will be effected through the merger of Merger Sub with and into SeaStar Medical, with SeaStar Medical surviving the merger as a wholly-owned subsidiary of LMAO (the “Business Combination”). The board of directors of LMAO (the “Board”) has unanimously (i) approved and declared advisable the Merger Agreement, the Business Combination and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and related matters by the stockholders of LMAO.

The Merger Agreement

The following is a summary of the material terms of the Merger Agreement. The following summary does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached as Annex A to this proxy statement/prospectus.

The Merger Agreement contains representations and warranties that LMAO and Merger Sub, on the one hand, and SeaStar Medical, on the other hand, have made to one another as of specific dates. The assertions embodied in the representations and warranties are qualified by information in confidential disclosure schedules exchanged by the parties to the Merger Agreement. Some of these schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement. You should not rely on the representations and warranties described below as current characterizations of factual information about LMAO or SeaStar Medical, because they were made as of specific dates, may be intended merely as a risk allocation mechanism between LMAO and Merger Sub, and SeaStar Medical and are modified by the disclosure schedules.

Consideration to SeaStar Medical Stockholders in the Business Combination

At the Effective Time, following the Convertible Note Conversion and Preferred Stock Conversion, each share of SeaStar Medical Common Stock (including shares of SeaStar Medical Common Stock outstanding as a result of the Convertible Note Conversion and Preferred Stock Conversion, but excluding shares the holders of which perfect rights of appraisal under Delaware law) will be converted into the right to receive such number of shares of Common Stock equal to the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement). The Exchange Ratio is defined in the Merger Agreement to be the quotient of (1) (A) (i) $85,000,000 minus any SeaStar Medical indebtedness minus any SeaStar Medical transaction expenses in excess of $800,000 (which the cap of $800,000 shall not apply to transaction bonuses payable to executives or the financial advisory fee payable to Maxim Group LLC by SeaStar Medical) plus (ii) the aggregate exercise price of unexercised SeaStar Medical Warrants and SeaStar Medical Options all divided by (B) Aggregate Fully Diluted Company Common Stock (as defined in the Merger Agreement), all divided by (2) $10.00.

 

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Representations and Warranties

The Merger Agreement contains customary representations and warranties of the parties thereto. The representations and warranties are, in many respects, qualified by materiality and knowledge, and will not survive the Business Combination, but their accuracy forms the basis of some of the conditions to the obligations of LMAO, Merger Sub, and SeaStar Medical to complete the Business Combination.

Representations and Warranties of SeaStar Medical

SeaStar Medical has made representations and warranties relating to, among other things, corporate organization, subsidiaries, due authorization, no conflict, governmental authorities and consents, current capitalization of SeaStar Medical, financial statements, undisclosed liabilities, litigation and proceedings, compliance with laws, contracts and no defaults, SeaStar Medical benefit plans, labor matters, taxes, insurance, permits, tangible property, real property, intellectual property and IT security, environmental matters, absence of changes, brokers’ fees, healthcare matters, insurance regulatory matters, related party transactions, a registration statement, government contracts and U.S. Food and Drug Administration matters.

Representations and Warranties of LMAO and Merger Sub

LMAO and Merger Sub have made representations and warranties relating to, among other things, corporate organization, due authorization, no conflict, litigation and proceedings, governmental authorities and consents, financial ability and trust account, brokers’ fees, SEC reports, financial statements and the Sarbanes-Oxley Act, undisclosed liabilities, business activities, tax matters, capitalization, stock exchange listing, the Sponsor Support Agreement (as defined in the Merger Agreement), related party transactions, applicability of the Investment Company Act of 1940, as amended, LMAO stockholders, contracts, and no alternative transactions.

Covenants and Agreements

SeaStar Medical has made covenants relating to, among other things, SeaStar Medical’s conduct of business during the Interim Period (as defined below), rights to inspection, waiver of claims against the Trust Account, proxy solicitation and other actions, Code Section 280G, and SeaStar Medical stockholder approval and the Support Agreements (as defined in the Merger Agreement).

LMAO has made covenants relating to, among other things, indemnification and insurance, LMAO’s conduct during the Interim Period (as defined below), certain transactional agreements, rights to inspection, Section 16 matters, LMAO’s stock exchange listing, LMAO’s public filings, the Incentive Plan and the ESPP, and its qualification as an emerging growth company.

Conduct of Business by SeaStar Medical

SeaStar Medical has agreed that from the date of the Merger Agreement until the earlier of the Closing or the termination of the Merger Agreement (the “Interim Period”), it will, except as contemplated by the Merger Agreement, as set forth on SeaStar Medical’s disclosure schedule, or as consented to in writing by LMAO (which consent will not be unreasonably conditioned, withheld, delayed or denied) (a) use its commercially reasonable efforts to operate its business only in the ordinary course of business consistent with past practices and (b) use its commercially reasonable efforts to continue to accrue and collect accounts receivable, accrue and pay accounts payable and other expenses, establish reserves for uncollectible accounts and manage inventory in accordance with past custom and practice.    

 

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During the Interim Period, SeaStar Medical has also agreed not to, except as contemplated by the Merger Agreement, as required by applicable law, as set forth on SeaStar Medical’s disclosure schedule, or as consented to in writing by LMAO (which consent will not be unreasonably conditioned, withheld, delayed or denied):

 

   

change or amend the Company Certificate of Incorporation (as defined in the Merger Agreement), bylaws or other organizational documents of SeaStar Medical, except as otherwise required by law, except for any amendment to the Company Certificate of Incorporation in order to facilitate the closing of the Merger;

 

   

make, declare, set aside, establish a record date for or pay any dividend or distribution, other than any dividends or distributions from any wholly owned subsidiary of SeaStar Medical to SeaStar Medical or any other wholly owned subsidiary of SeaStar Medical;

 

   

enter into, assume, assign, partially or completely amend any material term of, modify any material term of or terminate (excluding any expiration in accordance with its terms or any modification or amendment that is not adverse to SeaStar Medical) any material contract or any lease, sublease, or license related to the leased real property, other than entry into such agreements in the ordinary course of business;

 

   

issue, deliver, sell, transfer, pledge, dispose of or place any lien (other than a permitted lien) on any shares of capital stock or any other equity or voting securities of SeaStar Medical;

 

   

sell, assign, transfer, convey, lease, license, abandon, allow to lapse of expire, subject to or grant any lien (other than permitted liens) on or otherwise dispose of any material assets, rights or properties of SeaStar Medical (other than owned intellectual property), other than the sale or other disposition of assets or equipment deemed by SeaStar Medical in its reasonable business judgment to be obsolete or no longer material to the business of SeaStar Medical, in each such case, in the ordinary course of business;

 

   

(i) cancel or compromise any claims or indebtedness owed to SeaStar Medical, (ii) settle any pending or threatened action (A) if such settlement would require payment by SeaStar Medical in an amount greater than $200,000 or (B) to the extent such settlement includes an agreement to accept or concede injunctive relief, or (C) to the extend such settlements involve a governmental authority or alleged criminal wrongdoing, or (iii) agree to modify in any respect materially adverse to SeaStar Medical any confidentiality or similar contract to which SeaStar Medical is a party;

 

   

transfer, sell, assign, license, sublicense, encumber, impair, abandon, permit to lapse or expire, dedicate to the public, cancel, subject to any lien, fail to diligently maintain, or otherwise dispose of any right, title or interest in any Owned Intellectual Property, other than non-exclusive licenses granted to customers in the ordinary course of business;

 

   

disclose any confidential information or trade secrets (other than in the ordinary course of business subject to appropriate written obligations with respect to confidentiality, non-use and non-disclosure) or source code to any person;

 

   

except as otherwise required by law or the terms of any existing SeaStar Medical benefit plans set forth in SeaStar Medical’s disclosure schedule as in effect on the date of the Merger Agreement, (i) increase the compensation or benefits of any employee of SeaStar Medical except for increases made in the ordinary course of business consistent with past practice, (ii) make any grant of any severance, retention, or termination payment to any person with a base salary of more than $100,000, (iii) hire additional officers or terminate existing officers, (iv) hire any employee of SeaStar Medical or any other individual who is providing or will provide services to SeaStar Medical other than any employee or individual with an annual base salary or annual compensation of less than $100,000, (v) accelerate or commit to accelerate the funding, payment or vesting of any benefit or compensation to any current or former employee, director, officer or other service provider, or (vi), establish, adopt, enter into, amend, or terminate any SeaStar Medical benefit plan or any plan, agreement, program, policy, trust, fund or other arrangement that would be a SeaStar Medical benefit plan if it were in existence as of the date of the Merger Agreement;

 

   

directly or indirectly acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by purchasing all of or any substantial equity interest in, or by any other manner, any business or any corporation, partnership, limited liability company, joint venture, association or other entity or person or division thereof;

 

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make any loans or advance any money or other property to any person, except for (i) advances in the ordinary course of business, consistent with past practice, to employees or officers of SeaStar Medical for expenses not to exceed $10,000 individually or $50,000 in the aggregate, (ii) prepayments and deposits paid to suppliers of SeaStar Medical in the ordinary course of business and (iii) trade credit extended to customers of SeaStar Medical in the ordinary course of business;

 

   

redeem, purchase or otherwise acquire any shares of capital stock (or other equity interests) of SeaStar Medical or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of capital stock (or other equity interests) of SeaStar Medical;

 

   

adjust, split, combine, subdivide, recapitalize, reclassify or otherwise effect any change in respect of any shares of capital stock or other equity interests or securities of SeaStar Medical;

 

   

make any change in its customary accounting principles or methods of accounting materially affecting the reported consolidated assets, liabilities or results of operations of SeaStar Medical, other than as may be required by applicable law, GAAP, or regulatory guidelines;

 

   

shorten or lengthen the customary payment cycles for any of its payables or receivables or otherwise engage in unusual efforts to accelerate the collection of accounts receivable or unusually delay the payment of accounts payable or participate in activity of the type sometimes referred to as “trade loading” or “channel stuffing” or any other activity that reasonably could be expected to result in an increase, temporary or otherwise, in the demand for the products offered by SeaStar Medical before the Closing;

 

   

adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of SeaStar Medical (other than the Business Combination);

 

   

make, change or revoke any material tax election, adopt or change any material accounting method with respect to taxes, file any material amended tax return, file any material tax return prepared in a manner that is inconsistent with the past practices of SeaStar Medical with respect to the treatment of items on such tax return, settle or compromise any material tax liability, enter into any material closing agreement with respect to any tax, surrender any right to claim a material refund of taxes or consent to any extension or waiver of the limitations period applicable to any material tax, claim, or assessment, enter into any tax sharing, tax allocation, tax assumption, or tax indemnification agreement, fail to pay any material taxes when due (including estimated taxes), or take any actions with respect to taxes (including deductions or credits) pursuant to the CARES Act;

 

   

directly or indirectly, incur, or modify in any material respect the terms of any indebtedness, or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person for indebtedness;

 

   

make any loans, advances or capital contributions to, or guarantees for the benefit of, or any investments in, any person, other than the reimbursement of expenses of employees in the ordinary course of business;

 

   

fail to maintain in full force and effect material insurance policies covering SeaStar Medical and its properties, assets and businesses in a form and amount consistent with past practices;

 

   

enter into any contract with any broker, finder, investment banker or other person under which such person is or will be entitled to any brokerage fee, finders’ fee or other commission in connection with the Business Combination;

 

   

enter into any transaction or amend in any material respect any existing agreement with any person that, to the knowledge of SeaStar Medical, is an affiliate of SeaStar Medical (excluding ordinary course payments of annual compensation, provision of benefits or reimbursement of expenses in respect of members or stockholders who are officers or directors of SeaStar Medical);

 

   

enter into any agreement that restricts the ability of SeaStar Medical to (i) engage or compete in any line of business, or (ii) enter into any new line of business;

 

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terminate, amend, fail to review or preserve or otherwise fail to maintain in full force and effect any material permit, except for amendments contemplated in the ordinary course of business;

 

   

make individual commitments for capital expenditures or construction of fixed assets in excess of $200,000; or

 

   

enter into any agreement, or otherwise become obligated, to do or take any action prohibited by any of the foregoing.

Conduct of LMAO During the Interim Period

During the Interim Period, LMAO has agreed not to, and will not permit any of its subsidiaries to, except as set forth on SeaStar Medical’s disclosure schedule, as contemplated by the Merger Agreement, or as consented to by SeaStar Medical in writing (which consent will not be unreasonably conditioned, withheld, or delayed, except in certain cases as described in the Merger Agreement as to which SeaStar Medical’s consent may be granted or withheld in its sole discretion):

 

   

change, modify, or amend the trust agreement, LMAO’s organizational documents or the organizational documents of Merger Sub, other than as strictly necessary to facilitate the closing of the Merger in accordance with the terms and conditions of the Merger Agreement;

 

   

declare, set aside or pay any dividends on, or make any other distribution in respect of any outstanding capital stock of, or other equity interests in, LMAO;

 

   

split, combine or reclassify any capital stock of, or other equity interests in, LMAO;

 

   

other than in connection with redemptions of LMAO’s Class A Common Stock or as otherwise required by LMAO’s organizational documents in order to consummate the Transactions, repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any capital stock of, or other equity interests in, LMAO;

 

   

make, change or revoke any material tax election, adopt or change any material accounting method with respect to taxes, file any material amended tax return, file any material tax return prepared in a manner that is inconsistent with the past practices of SeaStar Medical with respect to the treatment of item son such tax returns, settle or compromise any material tax liability, enter into any material closing agreement with respect to any tax, surrender any right to claim a material refund of taxes or consent to any extension or waiver of the limitations period applicable to any material tax, claim, or assessment, enter into any tax sharing, tax allocation, tax assumption, or tax indemnification agreement, fail to pay any material taxes when due (including estimated taxes), or take any actions with respect to taxes (including deductions or credits) pursuant to the CARES Act;

 

   

enter into, renew, or amend in any material respect, any transaction or contract with an affiliate of LMAO (including, for the avoidance of doubt, (i) the Sponsor or anyone related by blood, marriage or adoption to any Sponsor and (ii) any person in which any Sponsor has a direct or indirect legal, contractual or beneficial ownership interest of 5% or greater);

 

   

voluntarily sell, lease, license, sublicense, abandon, divest, transfer, cancel, abandon or permit to lapse or expire, dedicate to the public, or otherwise dispose of, or agree to do any of the foregoing, or otherwise dispose of material assets or properties of LMAO or Merger Sub;

 

   

waive, release, compromise, settle or satisfy any pending or threatened material claim (which shall include, but not be limited to, any pending or threatened action) or compromise or settle any liability in excess of $250,000 individually or $1,500,000 in the aggregate;

 

   

incur, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any indebtedness, provided, however, and notwithstanding the foregoing, LMAO shall be permitted to incur indebtedness of $1,035,000 (without seeking or obtaining prior consent of SeaStar Medical) if Sponsor

 

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elects to loan such amount to LMAO in connection with an extension to the deadline for LMAO to, pursuant to LMAO’s certificate of incorporation, consummate an initial business combination; provided further, that any such loan, if made, (i) shall be evidenced by a non-interest bearing promissory note repayable at Closing and (ii) shall be made in accordance with, and pursuant to, the terms and conditions of LMAO’s Letter Agreement, dated January 25, 2021, LMAO’s certificate of incorporation and the trust agreement;

 

   

offer, issue, deliver, grant or sell, or authorize or propose to offer, issue, deliver, grant or sell, any capital stock of, other equity interests, equity equivalents, stock appreciation rights, phantom stock ownership interests or similar rights in, LMAO or any of its subsidiaries or any securities convertible into, or any rights, warrants or options to acquire, any such capital stock or equity interests;

 

   

amend, modify or waive any of the terms or rights set forth in any LMAO warrant or LMAO’s warrant agreement, including any amendment, modification or reduction of the warrant price set forth therein; or

 

   

agree in writing or otherwise agree, commit or resolve to take any of the actions described in the foregoing.

During the Interim Period, LMAO has also agreed to, and will cause its subsidiaries to, comply with, and continue performing under, as applicable, LMAO’s organizational documents, the trust agreement, and all other agreements or contracts to which LMAO or its subsidiaries may be a party.

Covenants of LMAO

Pursuant to the Merger Agreement, LMAO has agreed, among other things, to:

 

   

during the Interim Period, subject to confidentiality obligations and similar restrictions that may be applicable to information furnished to LMAO or its subsidiaries by third parties that may be in LMAO’s or its subsidiaries’ possession from time to time, and except for any information which in the opinion of LMAO’s legal counsel would result in the loss of attorney-client privilege or other privilege from disclosure, (i) afford SeaStar Medical and its representatives reasonable access to its and its subsidiaries’ properties, books, contracts, commitments, tax returns, records and appropriate officers and employees and (ii) furnish such representatives with all financial and operating data and other information concerning its affairs that are in its possession, in each case as SeaStar Medical and its representatives may reasonably request solely for purposes of consummating the Business Combination;

 

   

after the Effective Time, indemnify and hold harmless each present and former director, manager and officer of SeaStar Medical and LMAO and each of their respective subsidiaries against any costs, expenses, judgments, fines, losses, damages or liabilities incurred in connection with any action, to the fullest extent that it, SeaStar Medical or its subsidiaries would have been permitted under applicable law and their respective certificate of incorporation, bylaws, or other organization documents in effect on the date of the Merger Agreement to indemnify such person;

 

   

cause LMAO and its subsidiaries to maintain, for a period of six years from the Effective Time, provisions in its certificate of incorporation, bylaws and other organizational documents concerning the indemnification and exoneration of officers and directors/managers that are no less favorable to those persons than the provisions of such certificate of incorporation, bylaws and other organizational documents as of the date of the Merger Agreement;

 

   

maintain, and cause one or more of its subsidiaries to maintain, for a period of six years from the Effective Time, a directors’ and officers’ liability insurance policy covering those persons who are currently covered by SeaStar Medical’s directors’ and officers’ liability insurance policies on terms not less favorable than the terms of such current insurance coverage, except that in no event will it be required to pay an annual premium for such insurance in excess of 400% of the aggregate annual premium payable by SeaStar Medical for such insurance policy for the year ended December 31, 2021; provided that LMAO may cause coverage to be extended under the current directors’ and officers’ liability insurance by obtaining a six-year “tail” policy containing terms not materially less favorable than the terms of such current insurance coverage with respect to claims existing or occurring at or prior to the Effective Time;

 

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Unless otherwise approved in writing by SeaStar Medical, neither LMAO or Merger Sub shall permit any amendment or modification to be made to, any waiver (in whole or in part) or provide consent to (including consent to termination), of any provision or remedy under, or any replacement of, the Sponsor Support Agreement. LMAO shall take, or cause to be taken, all reasonable actions and use all reasonable efforts to do, or cause to be done, all things necessary, proper or advisable to satisfy in all material respects on a timely basis all conditions and covenants applicable to LMAO in the Sponsor Support Agreement and otherwise comply with its obligations thereunder and to enforce its rights under each such agreement. LMAO will give SeaStar Medical prompt written notice: (i) of any breach or default (or any event or circumstance that, with or without notice, lapse of time or both, could give rise to any breach or default) by any party to the Sponsor Support Agreement; and (ii) of the receipt of any written notice or other written communication from any other party to the Sponsor Support Agreement with respect to any actual, potential, threatened or claimed expiration, lapse, withdrawal, breach, default, termination or repudiation by any party under any such agreement or any provisions thereof;

 

   

during the Interim Period, use commercially reasonable efforts to ensure it remains listed as a public company on, and for shares of Class A Common Stock and LMAO warrants (but, in the case of its warrants, only to the extent issued as of the date of the Merger Agreement) to be listed on, Nasdaq;

 

   

during the Interim Period, use commercially reasonable efforts to keep current and timely file all reports required to be filed or furnished with the SEC and to otherwise comply in all material respects with its reporting obligations under applicable securities laws;

 

   

prior to the Effective Time, take all reasonable steps as may be required or permitted to cause any acquisition or disposition of Common Stock that occurs or is deemed to occur by reason of or pursuant to the Business Combination by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to LMAO to be exempt under Rule 16b-3 promulgated under the Exchange Act;

 

   

use commercially reasonable efforts to prepare (i) a long-term incentive plan which shall initially reserve shares of Common Stock equal to ten percent (10%) of the Post-Closing Fully-Diluted Share Amount (as defined in the Merger Agreement) (the “LMAO LTIP”) and (ii) an employee stock purchase program which shall initially reserve shares of Common Stock equal to three percent (3%) of the Post-Closing Fully Diluted Share Amount (the “LMAO Employee Stock Purchase Program”) and LMAO shall prior to the Closing, obtain the approval of the LMAO LTIP and LMAO Employee Stock Purchase Program from LMAO stockholders;

 

   

during the Interim Period, use commercially reasonable efforts to (i) take all actions necessary to continue to qualify as an “emerging growth company” within the meaning of the JOBS Act and (ii) not take any action that would cause it to not qualify as an “emerging growth company” within the meaning of the JOBS Act; and

 

   

during the Interim Period, not take, and not permit any of its affiliates or representatives to take, whether directly or indirectly, written or oral, any action to (i) solicit, initiate, continue or engage in any discussions or negotiations with, or enter into any agreement with, or encourage, respond, provide information to or commence due diligence with respect to, any person (other than SeaStar Medical and/or any of its affiliates or representatives) concerning, relating to or which is intended or is reasonably likely to give rise to or result in, any offer, inquiry, proposal or indication of interest, written or oral relating to any business combination involving LMAO (a “business combination proposal”) other than with SeaStar Medical and its affiliates and representatives and (iii) immediately cease and cause to be terminated, and cause its affiliates and representatives to do the same, any and all existing discussions, conversations, negotiations, or other communications with any person conducted prior to the date of the Merger Agreement with respect to, or which is reasonably likely to give rise to or result in, a business combination proposal.    

 

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Covenants of SeaStar Medical

Pursuant to the Merger Agreement, SeaStar Medical has agreed, among other things, to:

 

   

during the Interim Period, subject to confidentiality obligations and similar restrictions that may be applicable to information furnished to SeaStar Medical by third parties that may be in SeaStar Medical’s possession from time to time, and except for any information which (i) relates to the negotiation of the Merger Agreement or the Business Combination, (ii) is prohibited from being disclosed by applicable law or (iii) in the opinion of SeaStar Medical’s legal counsel would result in the loss of attorney-client privilege or other privilege from disclosure, SeaStar Medical will (A) afford LMAO and its representatives reasonable access during normal business hours with reasonable advance notice to its properties, books, contracts, commitments, tax returns, records and appropriate officers and employees and (B) use its commercially reasonable efforts to furnish LMAO and such representatives with all financial and operating data and other information concerning the affairs of SeaStar Medical that are in its possession, in each case as LMAO or its representatives may reasonably request solely for the purposes of consummating the Business Combination;

 

   

on behalf of itself and its affiliates, waive any past, present or future claim of any kind against, and any right to access, the trust account, trustee, and LMAO or to collect from the trust account any monies that may be owed to them by LMAO or any of its affiliates for any reason whatsoever, and will not seek recourse against the trust account at any time for any reason whatsoever;

 

   

at the Closing, deliver to LMAO a FIRPTA certification and notice as well as an IRS Form W-9 executed by SeaStar Medical;

 

   

deliver to LMAO evidence of the SeaStar Medical stockholder approval and Support Agreements executed by the Company Requisite Stockholders (as defined in the Merger Agreement) within three (3) business days of the execution of the Merger Agreement, which will acknowledge that the adoption and approvals are irrevocable and result in the waiver of any rights of the Company Requisite Stockholders to demand appraisal in connection with the Merger pursuant to the DGCL;

 

   

to the extent required by the DGCL, SeaStar Medical will promptly (and, in any event, within 15 Business Days of the date of SeaStar Medical stockholder approval) deliver to any SeaStar Medical stockholder who has not executed the SeaStar Medical stockholder approval (i) a notice of the taking of the actions described in the SeaStar Medical stockholder approval in accordance with Section 228 of the DGCL, and (ii) the notice in accordance with Section 262 of the DGCL;

 

   

promptly after the delivery of the SeaStar Medical stockholder approval to LMAO, SeaStar Medical will prepare and mail to each SeaStar Medical stockholder an information statement regarding the transactions contemplated by the Merger Agreement, which shall solicit the consent of SeaStar Medical stockholders (other than the Company Requisite Stockholders) with respect to the adoption and approval of the Merger Agreement and shall include (i) a statement to the effect that the SeaStar Medical’s board of directors had unanimously recommended that SeaStar Medical’s stockholders vote in favor of the adoption and approval of the Merger Agreement; and (ii) such other information as LMAO and SeaStar Medical reasonably agree is required or advisable under applicable Law to be included therein;

 

   

prior to the Closing Date, if required to avoid the imposition of taxes under Section 4999 of the Code or the loss of deduction under Section 280G with respect to any payment or benefit in connection with any of the transactions contemplated by the Merger Agreement, SeaStar Medical will (i) solicit and use reasonable best efforts to obtain from each person who SeaStar Medical reasonably believes is a SeaStar Medical “disqualified individual” who would otherwise receive or retain any payment or benefits that could constitute a “parachute payment” as a result of or in connection with the consummation of the Business Combination, a waiver of such disqualified individual’s rights to some or all of such payments or benefits (the “Waived 280G Benefits”) so that no payments and/or benefits shall be deemed to be “excess parachute payments”; (ii) submit to a SeaStar Medical stockholder vote the right of any such “disqualified individual” to receive the Waived 280G Benefits and (iii) deliver to LMAO evidence that a vote of SeaStar Medical’s stockholders was soliciting regarding the right of a “disqualified individual” to receive the Waived 280G

 

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Benefits and that either (a) the requisite number of votes of SeaStar Medical stockholders was obtained with respect to the Waived 280G Benefits (the “280G Approval”) or (b) the 280G Approval was not obtained, and, as a consequence, the Waived 280G Benefits shall not be retained or provided;

 

   

use commercially reasonable efforts to provide LMAO, as promptly as reasonably practicable but no later than May 15, 2022, reviewed financial statements, including consolidated condensed balance sheets and consolidated condensed statements of income and comprehensive income, stockholder’s equity and cash flows, of SeaStar Medical as at and for the three (3) months ended March 31, 2022, prepared in accordance with GAAP and Regulation S-X (the “Reviewed Financials”), and any other audited or unaudited consolidated balance sheets and the related audited or unaudited consolidated statements of comprehensive (loss) income, stockholder’s equity and cash flows of the Company as of and for a year-to-date period ended as of the end of any other different fiscal quarter or fiscal year that is required to be included in the registration statement;

 

   

be available and will use reasonable best efforts to make SeaStar Medical’s officers, managers, representatives and employees available to, in each case, during normal business hours and upon reasonable advance notice, to LMAO and its counsel in connection with (i) the drafting of the registration statement and (ii) responding in a timely manner to comments on the registration statement from the SEC;

 

   

will reasonably cooperate with LMAO in connection with the preparation for inclusion in the registration statement of pro forma financial statements that comply with the requirements of Regulation S-X under the rules and regulations of the SEC;

 

   

after the date on which the proxy statement contained in the registration statement is mailed to LMAO’s stockholders, SeaStar Medical will give LMAO prompt written notice of any action taken or not taken by SeaStar Medical, or of any development regarding SeaStar Medical, which is or becomes known by SeaStar Medical, that would cause the registration statement to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements not misleading; provided, that if any such action shall be taken or fail to be taken or such development shall otherwise occur, LMAO and SeaStar Medical will cooperate fully to cause an amendment or supplement to be made promptly to the registration statement, such that the registration statement no longer contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, not misleading; and

 

   

(i) during the Interim Period, not, and not permit any of its affiliates and representatives to take, whether directly or indirectly, written or oral, any action to (A) solicit, initiate, continue or engage in discussions or negotiations with, or enter into any agreement with, or encourage, respond, provide information to or commence due diligence with respect to, any person (other than LMAO and/or any of its affiliates or representatives) concerning any purchase of any of SeaStar Medical’s equity securities or the issuance and sale of any securities of, or membership interests in, SeaStar Medical or its subsidiaries (other than any purchases of equity securities by SeaStar Medical from employees of SeaStar Medical or its subsidiaries) or any merger, recapitalization or similar business combination transaction, or sale of substantial assets involving SeaStar Medical of its subsidiaries, other than immaterial assets or assets sold in the ordinary course of business (each such acquisition transaction, but excluding the Business Combination, an “Acquisition Transaction”), or (B) commence, continue or renew any due diligence investigation regarding, or that is reasonably likely to give rise to or result in, any offer, inquiry, proposal, indication of interest, written or oral, with respect to, or which is reasonably likely to give rise to or result in, an Acquisition Transaction, and (ii) immediately cease and cause to be terminated, and direct its affiliates and representatives to do the same, any and all discussions, conversations, negotiations, or other communications with any person conducted prior to the date of the Merger Agreement with respect to, or which is reasonably likely to give rise to or result in, an Acquisition Transaction.

 

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Joint Covenants of LMAO and SeaStar Medical

In addition, each of LMAO and SeaStar Medical has agreed, among other things, to take certain actions set forth below:

 

   

use, and will cause its respective subsidiaries to use (i) commercially reasonable efforts to assemble, prepare and file any information as may be reasonably necessary to obtain as promptly as practicable all governmental and regulatory consents required to be obtained in connection with the Business Combination, (ii) commercially reasonable efforts to obtain all material consents and approvals of third parties that any of LMAO, SeaStar Medical, or their respective affiliates are required to obtain in order to consummate the Business Combination, provided that SeaStar Medical shall not be required to seek any such required consents or approvals of third party counterparties to material contracts to the extent such material contract is terminable at will, for convenience or upon or after the giving of notice of termination by a party thereto unless otherwise agreed in writhing by SeaStar Medical and LMAO and (iii) take such other action as may be necessary or reasonably requested by the other party to satisfy the closing conditions and consummate the Business Combination;

 

   

jointly prepare, and LMAO will file with the SEC, a preliminary registration statement containing a prospectus/proxy statement on Form S-4 concerning the Business Combination to be sent to LMAO stockholders in advance of the Special Meeting (as defined in the Merger Agreement) for the purposes of the matters specified herein;

 

   

use their reasonable efforts to (i) cause the registration statement when filed with the SEC to comply in all material respects with all legal requirements applicable thereto, (ii) respond as promptly as reasonably practicable to and resolve all comments received from the SEC, (iii) to be declared effective under the Securities Act as promptly as practicable, (iv) to keep the registration statement effective as long as is necessary to consummate the Business Combination, and (v) otherwise ensure that the information contained therein contains no untrue statement of material fact or material omission;

 

   

in regards to LMAO, as promptly as practicable following the Proxy Clearance Date (as defined in the Merger Agreement), cause the proxy statement contained in the registration statement to be mailed to its stockholders of record;

 

   

in regards to LMAO, prior to or as promptly as practicable after Proxy Clearance Date, establish a record date (which date will mutually be agreed with SeaStar Medical) for, duly call and give notice of the Special Meeting in accordance with the DGCL for the purposes of obtaining approval for the matters specified herein, which will be held not more than 25 days after the date on which LMAO commences mailing of the proxy statement to its stockholders proxy statement/prospectus to the LMAO stockholders;

 

   

in regards to LMAO, use its commercially reasonable efforts to obtain the approval of the matters specified herein at the Special Meeting, including by soliciting proxies as promptly as practicable in accordance with applicable law;

 

   

not make any public announcement or issue any public communication regarding the Merger Agreement or the Business Combination without first obtaining the prior consent of SeaStar Medical or LMAO, as applicable, except if such announcement or other communication is required by applicable law or legal process; and

 

   

use its commercially reasonable efforts to take, or cause to be take, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Business Combination.

 

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Conditions to Closing of the Transactions

Conditions to the Obligations of All Parties

The obligations of each party to the Merger Agreement to consummate, or cause to be consummated, the Transactions are subject to the satisfaction of the following conditions, any one or more of which may be waived (if legally permitted) in writing by all such parties:

 

   

the parties shall have received the clearances, authorizations and other approvals from governmental authorities;

 

   

no governmental authority will have issued any order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any governmental authority enjoining or otherwise prohibiting the consummation of the Business Combination and no law or regulation has been adopted that makes consummation of the Business Combination illegal or otherwise prohibited;

 

   

The completion of LMAO offering its stockholders with the opportunity to redeem shares of LMAO Class A Common Stock in accordance with LMAO’s organizational documents, which such stockholders may elect by delivering such shares for redemption no later than two (2) business days prior to the date of the Special Meeting (the “LMAO Stockholder Redemption”);

 

   

the Available Closing Acquiror Cash (as defined in the Merger Agreement) will not be less than $15,000,000;

 

   

LMAO will have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) remaining upon the consummation of the Closing (after giving effect to the LMAO Stockholder Redemption, and the other transactions contemplated to occur on the Closing Date, including the payment of LMAO’s and SeaStar Medical’s expenses);

 

   

the registration statement will have been declared effective under the Securities Act, no stop order suspending the effectiveness of the registration statement will be in effect and no proceedings for purposes of suspending the effectiveness of the registration statement shall have been initiated or be threatened by the SEC;

 

   

approval of the stockholders of LMAO will have been obtained;

 

   

approval by the Company Requisite Stockholders will have been obtained;

 

   

The LMAO Common Stock to be issued in connection with the Business Combination will have been approved for listing on Nasdaq, subject only to official notice of issuance thereof, and no revocation or suspension thereof shall have occurred; and

 

   

SeaStar Medical will have amended its Company Options, Company Warrants and Company Restricted Stock Unit Awards (each as defined in the Merger Agreement) in a manner reasonably acceptable to LMAO in order to, to the extent necessary, permit their assignment to, and assumption by, LMAO.

Conditions to the Obligations of LMAO and Merger Sub

The obligations of LMAO and Merger Sub to consummate, or cause to be consummated, the Business Combination are subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by LMAO:

 

   

certain of the representations and warranties of SeaStar Medical pertaining to its corporate organization, due authorization, and brokers’ fees will be true and correct in all respects as the date of the Merger Agreement and as of the Closing Date (except that such representations and warranties that by their terms speak specifically as of the date of the Merger Agreement or another date will be true and correct in all respects as of such date);

 

   

certain of the representations and warranties of SeaStar Medical pertaining to its current capitalization will be true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date (except

 

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that such representations and warranties that by their terms speak specifically as of the date of the Merger Agreement or another date will be true and correct in all respects as of such date), in each case other than de minimis inaccuracies;

 

   

each of the remaining representations and warranties of SeaStar Medical will be true and correct (without giving any effect to any limitation as to “materiality” or “Material Adverse Effect” or any similar limitation set forth therein) as of the date of the Merger Agreement and as of the Closing Date (except that such representations and warranties that by their terms speak specifically as of the date of the Merger Agreement or another date will be true and correct in all respects as of such date), in all respects, except where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to result in, a Material Adverse Effect (as defined in the Merger Agreement);

 

   

each of the covenants, agreements, and obligations of SeaStar Medical to be performed or complied with as of or prior to the Closing will have been performed in all material respects;

 

   

Since the date of the Merger Agreement, no Material Adverse Effect and be continuing as of immediately prior to the Closing;

 

   

SeaStar Medical will have delivered the Reviewed Financials no later than May 15, 2022;

 

   

SeaStar Medical will have delivered to LMAO a certificate signed by an officer of SeaStar Medical, dated the Closing Date, certifying that, to the knowledge and belief of such officer, the foregoing conditions have been fulfilled;

 

   

SeaStar Medical will have delivered to LMAO executed counterparts of each transaction agreement to which SeaStar Medical is a party;

 

   

SeaStar Medical will have delivered to LMAO evidence as to (i) the payment of certain indebtedness set forth on SeaStar Medical’s disclosure schedule, (ii) the termination of any liens related thereto, and (iii) the termination of each agreement set forth on SeaStar Medical’s disclosure schedule; and

 

   

SeaStar Medical will have delivered evidence of consents from certain counterparties set forth on SeaStar Medical’s disclosure schedules.

Conditions to the Obligations of SeaStar Medical

The obligations of SeaStar Medical to consummate, or cause to be consummated, the Business Combination are subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by SeaStar Medical:

 

   

certain of the representations and warranties of LMAO and Merger Sub pertaining to corporate organization, due authorization, and brokers’ fees will be true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date (except that such representations and warranties that by their terms speak specifically as of the date of the Merger Agreement or another date will be true and correct in all respects as of such date);

 

   

certain of the representations and warranties of LMAO and Merger Sub regarding capitalization will be true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date (except that such representations and warranties that by their terms speak specifically as of the date of the Merger Agreement or another date will be true and correct in all respects as of such date), in each case other than de minimis inaccuracies;

 

   

each of the remaining representations and warranties of LMAO and Merger Sub will be true and correct (without giving any effect to any limitation as to “materiality” or “material adverse effect” or any similar limitation set forth therein) as of the date of the Merger Agreement and as of the Closing Date (except that such representations and warranties that by their terms speak specifically as of the date of the Merger

 

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Agreement or another date will be true and correct in all respects as of such date), in all respects, except, where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to result in, a material adverse effect;

 

   

each of the covenants, agreements, and obligations of LMAO and Merger Sub to be performed or complied with as of or prior to the Closing will have been performed in all material respects;

 

   

the Available Closing Acquiror Cash will not be less than $15,000,000;

 

   

LMAO will have delivered to SeaStar Medical a certificate signed by an officer of LMAO, dated as of the Closing Date, certifying that, to the knowledge and belief of such officer, the foregoing conditions have been fulfilled; and

 

   

LMAO will have delivered to SeaStar Medical executed counterparts of each transaction agreement to which LMAO or Merger Sub is a party.

Waiver

Any party to the Merger Agreement may, at any time prior to the Closing, by action taken by its board of directors or equivalent governing body, or officers thereunto duly authorized, waive any of the terms or conditions of the Merger Agreement. Notwithstanding the foregoing, pursuant to LMAO’s current certificate of incorporation, LMAO cannot consummate the proposed business combination if it has less than $5,000,001 of net tangible assets remaining after the Closing.

Termination

The Merger Agreement may be terminated and the Business Combination abandoned:

 

   

by written consent of SeaStar Medical and LMAO;

 

   

by SeaStar Medical or LMAO if the Closing has not occurred on or before July 29, 2022, as such date will be extended to October 29, 2022 in the event that the Sponsor elects, in its sole discretion, to extend the time period by which LMAO must consummate a business combination by depositing additional funds into the Trust Account on or prior to July 29, 2022 pursuant to LMAO’s Letter Agreement, dated January 25, 2021;

 

   

by SeaStar Medical or LMAO if the Closing is permanently enjoined or prevented by the terms of a final, non-appealable order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any governmental authority, or a statute, rule, or regulation;

 

   

By SeaStar Medical or LMAO if the approval of the stockholders of LMAO is not obtained at the Special Meeting and vote of LMAO stockholders, subject to any adjournment, postponement, or recess of the meeting;

 

   

by SeaStar Medical or LMAO if the other party has breached any of its representations, warranties, covenants or agreements set forth in the Merger Agreement such that the conditions to the Closing would not to be satisfied at the Closing (a “Terminating Breach”), except that, if such Terminating Breach is curable through the exercise of the other party’s commercially reasonable efforts, then, for a period of 30 days after the other party receives written notice from such party of such breach (the “Cure Period”), such termination will not be effective, and such termination will only become effective if the Terminating Breach is not cured within the Cure Period, provided that this termination right will not be available if such party’s failure to fulfill any obligations under the Merger Agreement has been the proximate cause of the failure of the Closing to occur;

 

   

by LMAO if SeaStar Medical and each of the Company Requisite Stockholders have not executed and delivered to LMAO the SeaStar Medical stockholder approval and the Support Agreements within three (3) business days after the execution and delivery of the Merger Agreement;

 

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by SeaStar Medical in the event that the LMAO Board changes its recommendation that LMAO stockholders vote in favor of the Business Combination; or

 

   

by SeaStar Medical, prior to LMAO obtaining the approval of the stockholders of LMAO, if the LMAO Board fails to include its recommendation that LMAO stockholders vote in favor of the Business Combination in the proxy statement contained in the registration statement distributed to LMAO stockholders.

Effect of Termination

In the event of termination, the Merger Agreement will become void and have no effect, without any liability on the part of any party thereto or its respective affiliates, officers, directors, employees or stockholders, other than liability of SeaStar Medical, LMAO, or Merger Sub, as the case may be, for a willful and material breach of any covenant or agreement set forth in the Merger Agreement or fraud, and with respect to certain exceptions contemplated by the Merger Agreement (including the terms of the confidentiality agreement by and between SeaStar Medical and LMAO) that will survive any termination of the Merger Agreement.

Fees and Expenses

If the Closing does not occur, each party to the Merger Agreement will bear its own transaction expenses and any other fees and expenses it or its affiliates incurred in connection with the Merger Agreement and the Business Combination. If the Closing occurs, LMAO will pay the transaction expenses of LMAO and SeaStar Medical at Closing.

Amendments

The Merger Agreement may be amended or modified in whole or in part, only by a duly authorized agreement in writing that is executed in the same manner as the Merger Agreement and which makes reference to the Merger Agreement. The approval of the Merger Agreement by the stockholders of any of the parties thereto will not restrict the ability of the LMAO Board or the board of directors of SeaStar Medical (or other body performing similar functions) to terminate the Merger Agreement or to cause such party to enter into an amendment to the Merger Agreement, in each case, in accordance with its terms and conditions.

Governing Law; Consent to Jurisdiction

The Merger Agreement, and all claims or causes of action based upon, arising out of, or related to the Merger Agreement or the Business Combination, will be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to its principles or rules of conflict of laws. The parties to the Merger Agreement have irrevocably submitted to the exclusive jurisdiction of the federal and state courts located in the State of Delaware.

Certain Related Agreements

Support Agreements. In connection with the execution of the Merger Agreement, the Sponsor entered into the Sponsor Support Agreement with LMAO and SeaStar Medical pursuant to which the Sponsor has agreed, among other things, to vote or cause to be voted (or express consent or dissent in writing, as applicable) all its shares of Common Stock that are entitled to vote to approve and adopt the Merger Agreement and the Business Combination.

In addition, in connection with the execution of the Merger Agreement, the Requisite Stockholders entered into the Support Agreements with LMAO and SeaStar Medical pursuant to which the Requisite Stockholders agreed to, among other things, (i) consent to, and vote to approve and adopt, the Merger Agreement and the

 

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Business Combination, (ii) waive any dissenters’ or approval rights under applicable law in connection with the Business Combination, and (iii) not transfer, subject to certain permitted exceptions, any of such Requisite Stockholder’s SeaStar Medical shares until expiration of the Support Agreements.

Dow Commitment Letter. On April 21, 2022, LMAO entered into the Dow Commitment Letter with Dow pursuant to which Dow agreed to purchase, and LMAO has agreed to sell to it, at least $5,000,000 worth of LMAO Class A Common Stock. The obligation to consummate the transaction contemplated by the Dow Commitment Letter is conditioned upon the consummation of the transactions contemplated by the Merger Agreement.

Amended and Restated Registration Rights Agreement. On April 21, 2022, LMAO, Sponsor and certain stockholders of SeaStar Medical who will receive shares of LMAO Common Stock pursuant to the Merger Agreement, entered into the Amended and Restated Registration Rights Agreement, which will become effective upon the consummation of the Business Combination. Pursuant to the Amended and Restated Registration Rights Agreement, among other things, LMAO will be obligated to file, not later than 30 days after the Closing, a registration statement covering the shares of Common Stock issued or issuable to the parties thereto.

In addition, the Sponsor and the Requisite Stockholders agreed that they will not transfer shares of Common Stock held by them prior to the earlier of (x) twelve (12) months after the Closing and (y) the date on which the last sales price of Common Stock equals or exceeds $12.00, subject to adjustment as provided therein, for any 20 trading days within any 30-consecutive-day trading period commencing at least 150 days after the Closing. The Sponsor also agreed that it will not transfer its private placement warrants that it obtained in connection with the IPO (or any Common Stock issued upon the exercise of such warrant) until 30 days after Closing.

Director Nomination Agreement. At the Closing, the Sponsor and LMAO will enter into the Director Nomination Agreement, substantially in the form attached as Annex F to this proxy statement/prospectus, 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 Combined Company, for a certain period following the Closing.

Background of the Business Combination

The following is a discussion of the proposed Business Combination and the Merger Agreement. This is a summary only and may not contain all of the information that is important to you. This summary is subject to, and qualified in its entirety by reference to, the Merger Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A. LMAO stockholders are urged to read this entire proxy statement/prospectus carefully, including the Merger Agreement, for a more complete understanding of the Business Combination.

LMAO is a Delaware corporation formed on October 28, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. The proposed Business Combination with SeaStar Medical is the result of an active search for a potential transaction utilizing the network and investment experience of LMAO’s management team and board of directors. The terms of the Merger Agreement and the other ancillary agreements are the result of arm’s-length negotiations between SeaStar Medical and LMAO and their respective representatives and advisors. The following is a discussion of the background of these negotiations, the Merger Agreement (and certain related agreements) and the Business Combination. The following chronology summarizes the key meetings and events that led to the signing of the Merger Agreement, but it does not purport to catalogue every conversation and correspondence by and among representatives of LMAO, SeaStar Medical and their respective advisors.

On January 28, 2021 LMAO consummated its IPO of 10,350,000 units. Each unit consisted of one share of Class A Common Stock and one warrant to purchase one share of Class A Common Stock. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $103,500,000. Simultaneously with the closing

 

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of the IPO, LMAO consummated the sale of 5,738,000 private placement warrants at a price of $1.00 per private placement warrant in a private placement to the Sponsor, generating gross proceeds of $5,738,000. Following the closing of the IPO on January 28, 2021, an amount of $105,570,000 ($10.20 per unit) from the net proceeds of the sale of the units in the IPO and the sale of the private placement warrants was placed in the Trust Account.

Prior to the pricing of the IPO, neither LMAO, nor any authorized person on its behalf, initiated any substantive discussions, formal or otherwise, with respect to a business combination involving SeaStar Medical. After the closing of IPO, LMAO’s officers and directors commenced an active search for prospective businesses or assets to acquire in an initial business combination. Representatives of LMAO were contacted by, and representatives of LMAO contacted, numerous individuals, financial advisors and other entities who offered to present ideas for business combination opportunities. LMAO’s officers and directors and their affiliates also brought to LMAO’s attention target business candidates.

During that period, LMAO’s directors and officers:

 

   

Developed a list of more than 150 potential acquisition targets;

 

   

Entered into preliminary discussions with approximately 117 of those companies in the period from January 28, 2021, through April 22, 2022;

 

   

Entered into non-disclosure agreements with approximately 31 target companies from the period February 1, 2021 to March 2, 2022;

 

   

Had in person, telephonic or email discussions with all of those target companies under NDA, each of which were actively pursued (including SeaStar) by engaging in significant due diligence and detailed discussions directly with senior executives and/or stockholders;

 

   

Submitted indications of interest or intent to ten (10) acquisition candidates (including SeaStar) and

 

   

Discussed various targets at LMAO’s regularly scheduled board meetings.

Of the approximately 117 potential targets with which LMAO engaged in preliminary discussions, approximately 86 were eliminated prior to conducting substantive due diligence due to the potential target companies’ financial profile, growth and profitability metrics, valuation of the company, industry trends or lack of public company readiness.

Below is a summary of ten (10) acquisition candidates to whom LMAO submitted an indication of interest or letter of intent after conducting financial and business due diligence.

The first company seriously evaluated, Company A, operates a direct to consumer market for vehicle protection plans. Following preliminary discussions with Company A’s financial advisor, LMAO entered into a non-disclosure agreement with the potential target on February 17, 2021 and on February 22, 2021, LMAO’s management team held an initial videoconference with Company A’s management team and its financial advisors to learn more about the target. After the initial call, LMAO conducted further due diligence which included industry research, expert calls, and review of company materials. After several more discussions internally and with Company A and its financial advisors, LMAO sent to Company A a non-binding draft letter of intent on March 4, 2021. LMAO, Company A and its financial advisors proceeded to have several more discussions regarding the terms of the proposal. On March 10, 2021, Company A, through its financial advisor, informed LMAO of its decision to proceed with a different business combination, and LMAO ceased further discussions with Company A.

Following preliminary conversations with Company B’s financial advisor, on February 20, 2021, LMAO entered into a non-disclosure agreement with Company B, a company that operates a cryptocurrency exchange. LMAO conducted due diligence which included industry research, expert calls, and review of company

 

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materials. After several more discussions internally and with Company B and its financial advisor, LMAO sent to Company B a non-binding letter of intent on March 18, 2021. LMAO, Company B and Company B’s financial advisor proceeded to have several more discussions regarding the terms of the proposed offer before Company B informed LMAO on April 27, 2021, that it would instead proceed with a private round of funding and that it would remain a private company for the foreseeable future.

Following preliminary conversations with Company C’s financial advisor, on February 23, 2021, LMAO entered into a non-disclosure agreement with Company C, a technology driven business finance company. LMAO’s management team held an initial videoconference with Company C’s management team and its financial advisor on February 24, 2021 to introduce the LMAO team to Company C and to learn more about Company C. After the initial call, LMAO conducted further due diligence which included industry research, expert calls, and review of company materials. After several more discussions internally and with Company C and its financial advisors, LMAO sent to Company C a non-binding letter of intent on April 7, 2021. LMAO, Company C and Company C’s financial advisor proceeded to have several more discussions regarding the terms of the proposed offer before Company C informed LMAO on September 29, 2021, that it would remain a private company for the foreseeable future.

Following preliminary conversations with Company D’s financial advisor, on March 12, 2021, LMAO entered into a non-disclosure agreement with Company D, a company that operates a financial services platform and private investment business. LMAO’s management team held an initial videoconference with Company D’s management team and its financial advisor on March 26, 2021 to introduce the LMAO team to Company D and to learn more about Company D. After the initial call, LMAO conducted further due diligence which included industry research, expert calls, and review of company materials. After several more discussions internally and with Company D and its financial advisors, LMAO sent to Company D a non-binding letter of intent on April 7, 2021. LMAO, Company D and Company D’s financial advisor proceeded to have several more discussions regarding the terms of the proposed offer before Company D informed LMAO on August 11, 2021, that it would pursue an alternative transaction route, and therefore, LMAO ceased further discussions with Company D.

Following preliminary conversations with Company E’s financial advisor, on March 12, 2021, LMAO entered into a non-disclosure agreement with Company E, a company that operates a foreign currency exchange. LMAO’s management team held an initial videoconference with Company E’s management team and its financial advisor on March 23, 2021 to introduce the LMAO team to Company E and to learn more about Company E. After the initial call, LMAO conducted further due diligence which included industry research, expert calls, and review of company materials. After several more discussions internally and with Company E and its financial advisors, LMAO sent to Company E a non-binding letter of intent on April 25, 2021. LMAO, Company E and Company E’s financial advisor proceeded to have several more discussions regarding the terms of the proposed offer before the parties executed the non-binding letter of intent on May 3, 2021. Although the parties held further negotiations towards a definitive agreement, LMAO ultimately notified Company E on August 23, 2021 that it was terminating the letter of intent and LMAO thereafter ceased further discussions with Company E.

Following preliminary conversations with Company F’s financial advisor, on June 21, 2021, LMAO entered into a non-disclosure agreement with Company F, a European-based financial technology company. LMAO’s management team held an initial videoconference with Company F’s management team and its financial advisor on June 22, 2021 to introduce the LMAO team to Company F and to learn more about Company F. After the initial call, LMAO conducted further due diligence which included industry research, expert calls, and review of company materials. After several more discussions internally and with Company F and its financial advisors, LMAO sent to Company F a non-binding letter of intent on August 24, 2021. LMAO, Company F and Company F’s financial advisor proceeded to have several more discussions regarding the terms of the proposed offer before Company F informed LMAO on September 21, 2021, that it would remain a private company for the foreseeable future.

 

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Following preliminary conversations with Company G’s financial advisor, on October 17, 2021, LMAO entered into a non-disclosure agreement with Company G, a Canadian financial technology company. LMAO’s management team held an initial videoconference with Company G’s management team and its financial advisor on October 19, 2021 to introduce the LMAO team to Company G and to learn more about Company G. After the initial call, LMAO conducted further due diligence which included industry research, expert calls, and review of company materials. After several more discussions internally and with Company G and its financial advisors, LMAO sent to Company G a non-binding letter of intent on October 28, 2021. LMAO, Company G and Company G’s financial advisor proceeded to have several more discussions regarding the terms of the proposed offer before Company G informed LMAO on November 11, 2021, that it ultimately decided that it did not want to become a US public company and would remain a Canadian-listed issuer for the foreseeable future, at which time LMAO thereafter ceased further discussions with Company G.

On February 8, 2021, an LMAO board member contacted Company H, which develops blockchain technology for the financial services industry. LMAO entered into a non-disclosure agreement with Company H on February 9, 2021 and on February 15, 2021, LMAO’s management team held an initial teleconference with the Company H’s management team to learn more about Company H. After the initial call, LMAO conducted further due diligence which included industry research, expert calls, and review of company materials. After several more discussions internally and with the target, LMAO sent to Company H a non-binding letter of intent on November 30, 2021. LMAO and Company H proceeded to have several more discussions regarding the terms of the proposal before Company H informed LMAO on April 8, 2022, that it intended to remain a private company for the foreseeable future.

On April 10, 2021, an LMAO board member contacted Company I, which operates a real estate transaction technology platform. LMAO entered into a non-disclosure agreement with Company I on October 22, 2021 when LMAO’s management team met Company I’s management team in-person to learn more about it. After the initial meeting, LMAO conducted further due diligence which included industry research, expert calls, and review of company materials. After several more discussions internally and with the target, LMAO sent to Company I a non-binding letter of intent on February 11, 2022. LMAO and Company I proceeded to have several more discussions regarding the terms of the proposal before Company I informed LMAO on February 24, 2022, that it intended to remain a private company for the foreseeable future.

On September 23, 2021, a representative of Maxim Group LLC (“Maxim”) contacted LMAO about the merits of a potential business combination with SeaStar Medical. Maxim, which had been serving as SeaStar Medical’s exclusive investment banker, had served separately as the sole manager to LMAO in the IPO and had served as LMAO’s investment banker for its target search process, but did not advise LMAO in connection with the business combination discussions involving SeaStar Medical (and LMAO’s formal engagement with Maxim was terminated in connection with the execution of the Merger Agreement between LMAO and SeaStar Medical with no fees due or payable in connection with the proposed Business Combination). LMAO did not engage in any substantive discussions with Maxim or SeaStar Medical at such time, as it continued discussions and diligences with the above target companies. On February 8, 2022, Maxim contacted LMAO again as to a potential business combination transaction with SeaStar Medical, and provided the LMAO management team with further information about SeaStar Medical and its lead product candidate, the Selective Cytopheretic Device.

LMAO entered into a non-disclosure agreement with SeaStar Medical on February 10, 2022, and on February 10, 2022, LMAO’s management team held an initial videoconference with SeaStar Medical’s executive management team and representatives from Maxim. On February 10, 2022, SeaStar Medical’s executive management team presented the potential transaction with LMAO to a special committee of the board of directors of SeaStar Medical (the “SeaStar Special Committee”), during which the members discussed the potential transaction with LMAO as well as other strategic and financing opportunities, including the advantages and disadvantages of each such opportunity. The SeaStar Special Committee instructed the executive management team to pursue the opportunity with LMAO further, and authorized the executive management to continue the due diligence process with LMAO.

 

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On February 11, 2022, SeaStar Medical granted LMAO access to SeaStar Medical’s data room, after which LMAO commenced its initial due diligence process, which included industry research, expert calls, and review of company materials. After the Board held several informal meetings to discuss SeaStar Medical and its proposed SCD product candidates, as well as additional meetings with the larger Maxim and SeaStar Medical teams, LMAO sent SeaStar Medical a non-binding letter of intent on February 23, 2022, which such initial offer proposed a valuation of SeaStar Medical at $85 million and a minimum closing cash consideration requirement of $15 million. The non-binding letter of intent included a 120-day exclusivity period with respect to SeaStar Medical, a twelve-month lock-up for identified SeaStar Medical stockholders and registration rights afforded to the Sponsor and certain SeaStar Medical stockholders. The letter of intent also provided that SeaStar Medical’s existing executive management team would serve as the management team for the Combined Company post-closing and that Sponsor would be entitled to appoint at least two representatives to the Combined Company’s post-closing board of directors. Matters pertaining to the specific composition of the Board, the specific SeaStar Medical stockholders to whom the lock-up would be applied, and the treatment of SeaStar Medical’s existing option grants and outstanding warrants were deferred to the definitive agreements.

On February 23, 2022, SeaStar Medical’s executive management and SeaStar Medical’s counsel reviewed and discussed the non-binding letter of intent with members of the SeaStar Special Committee, with particular discussions around valuation, capital structure, allocation of expenses and treatment of convertible notes and stock options. SeaStar Medical’s executive management team also continued to work with Maxim to revise and finalize the letter of intent.

On February 28, 2022 and March 1, 2022, LMAO management met with representatives from SeaStar Medical and Maxim, during which the parties discussed SeaStar Medical’s business model, product candidates and regulatory timeline. On March 1, 2022, LMAO management also discussed the proposed transaction, as well as the corporate history of SeaStar Medical, with representatives of SeaStar Medical’s largest stockholder, Dow. Following that conversation, representatives from Dow agreed to commit an additional $5 million of equity financing to the Combined Company upon closing of a business combination (in addition to any funds remaining in the Trust Account following any LMAO stockholder redemptions). On March 2, 2022, the Board unanimously authorized the execution of the letter of intent, and on March 2, 2022 both SeaStar Medical and LMAO executed the foregoing letter of intent.

On March 3, 2022, LMAO had a call with SeaStar Medical and its financial and legal advisors to discuss business combination planning and the parties’ respective responsibilities. Preliminary business diligence requests were agreed between LMAO and SeaStar Medical in early March 2022, and from March 3, 2022, until the signing of the Merger Agreement, representatives of LMAO and its advisors conducted further analysis and held conference calls with representatives of SeaStar Medical regarding its business plan, regulatory approval process, financial projections and technology and continued their business, financial, accounting, tax and legal due diligence investigations of SeaStar Medical. LMAO management met Eric Schlorff, SeaStar Medical’s Chief Executive Officer, and representatives from Maxim in person from March 7 through March 8, 2022, to discuss the proposed Business Combination and related business and diligence concerns.

Commencing on March 9, 2022, the date on which LMAO’s advisors were granted access to materials in accordance with the non-disclosure agreement and continuing through the signing of the Merger Agreement, representatives of LMAO and its legal counsel, Foley & Lardner LLP (“Foley”) conducted due diligence of SeaStar Medical through document review and numerous telephone conference calls with SeaStar Medical and its representatives. In particular, throughout March and April 2022, representatives of LMAO reviewed both the materials provided by SeaStar Medical as well as public filings related to SeaStar Medical’s regulatory status and procedures to-date, as well as its intellectual property assets and overall intellectual property strategy. LMAO representatives also held several telephonic meetings with SeaStar Medical and its representatives to discuss regulatory and intellectual property diligence. During this period, LMAO management also held multiple telephonic meetings with the SeaStar Medical’s management team to discuss SeaStar Medical’s product roadmap, commercialization strategy, technology, and manufacturing plans, as well as other relevant business

 

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topics. LMAO also engaged Skyway Capital Markets, LLC (“Skyway”) in mid-April 2022 to specifically review SeaStar Medical’s financial models and projections, and to provide valuation and financial advice to the Board. During this period, in addition to having its regular board meeting on March 29, 2022, the Board and management team held informal meetings frequently to discuss the respective diligence findings and reviewed them in light of the overall business model for the Combined Company. From March 10, 2022 through April 22, 2022, the parties and their advisors held weekly all hands calls to discuss the transaction, diligence and related matters.

On March 10, 2022, Foley sent the initial draft of the Merger Agreement and the Stockholder Support Agreement to Morgan, Lewis & Bockius LLP (“Morgan Lewis”), counsel to SeaStar Medical. On March 11, 2022, Morgan Lewis provided a revised draft of the Support Agreements to Foley. On March 17, 2022, Morgan Lewis circulated a revised draft of the Merger Agreement, which included, among other items, (i) significant revisions to the representations and warranties of the parties, (ii) removal of the proposed transaction expense cap, (iii) changes to the treatment of the options and warrants and their resulting impact on the overall merger consideration calculation, (iii) changes to the pre-closing covenants of the parties and (iv) modifications to the parties’ respective closing conditions. During the remainder of March and continuing through April, Foley and Morgan Lewis negotiated and finalized various terms of the Merger Agreement (and related disclosure schedules), as well as the terms of the other related agreements, and held calls to resolve the remaining significant open points in the transaction documents, including, among other things: (a) treatment of SeaStar Medical’s existing convertible notes, options, RSUs and warrants at closing; (b) the overall suite of representations, warranties and covenants to be provided by each party under the Merger Agreement; (c) nature of a transaction expenses cap, and what SeaStar Medical expenses counted towards the cap; (d) the number of SeaStar Medical stockholders required to enter into the Support Agreements and the Amended and Restated Registration Rights Agreement (including which stockholders would thereby be subject to the lock-up in the Amended and Restated Registration Rights Agreement); (e) the structure and composition of the Combined Company’s board of directors; and (f) the Nasdaq listing application process and the related determination of corporate governance requirements for listing on Nasdaq. During the course of the negotiations, LMAO ultimately designated Messrs. Bruce Rodgers and Richard Russell, its Chief Executive Officer and Chief Financial Officer, respectively, and each members of its current Board, as its two initial designees to the Combined Company’s board of directors, and SeaStar Medical designated Eric Schlorff, Kenneth Van Heel, Rick Barnett, Andres Lobo and Allan Collins, M.D. each of whom serve on SeaStar Medical’s current board, as its five initial designees to the Combined Company’s board of directors.

During the days preceding the execution of the Merger Agreement, the board of directors of SeaStar held several discussions regarding the Merger Agreement and the results of the negotiations between the two parties. On April 4, 2022, the board of directors of SeaStar Medical met to discuss the proposed Business Combination, including the status of the Merger Agreement and material outstanding issues under the Merger Agreement, input and analysis from Maxim, as well as the process and timing of the execution of the Merger Agreement. The board of directors of SeaStar Medical instructed the executive management team and Morgan Lewis to continue to negotiate and finalize the Merger Agreement, and to consult with Maxim regarding the terms of the Merger Agreement. The board of directors of SeaStar Medical also approved several corporate proposals to facilitate the Business Combination, including certain ancillary agreements and bridge financing transactions. Following the April 4, 2022 meeting, the executive management team of SeaStar Medical continued to update members of the SeaStar Medical board of directors frequently on the progress of the Merger Agreement while working with LMAO and its counsel to finalize the Merger Agreement. On April 12, 2022, the executive management team of SeaStar Medical presented the final form of Merger Agreement to the board of SeaStar Medical. Following its review of the terms, conditions and resulting impact on the SeaStar Medical stockholders, the SeaStar Medical board determined that it was in the best interest of SeaStar Medical and its stockholders to enter into the Merger Agreement, and thereafter voted to approve the Merger Agreement pursuant to a unanimous written consent dated April 12, 2022.

 

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On April 20, 2022, the Board held a conference call with representatives from Skyway and representatives from Foley. During the call, Skyway presented the Board with its financial analysis regarding SeaStar Medical, SeaStar Medical’s potential market opportunities and the valuation of the proposed Business Combination in line with the projections provided by SeaStar Medical and other comparable companies. The LMAO board then discussed the Merger Agreement and the related agreements before outlining the respective business and legal considerations raised by the Business Combination as well as the operational, financial and commercial opportunities and risks resulting from the proposed Business Combination. Following its discussion, the board thereafter unanimously adopted resolutions (i) determining that it is in the best interests of LMAO and its stockholders for LMAO to enter into the Merger Agreement, (ii) adopting the Merger Agreement and approving LMAO’s execution, delivery and performance of the same and the consummation of the transactions contemplated by the Merger Agreement including the entry into the related agreements, and (iii) approving the filing of the proxy statement/prospectus with the SEC, subject, in each case, to changes to the Merger Agreement and documentation acceptable to the duly elected officers of LMAO.

On April 21, 2022 the parties executed the Merger Agreement and certain of the related agreements. LMAO then filed a Current Report on Form 8-K on April 22, 2022, which contained the press release announcing the transaction. LMAO also filed a Current Report on Form 8-K on April 26, 2022, describing and attaching the Merger Agreement as an exhibit thereto.

LMAO’s Board’s Reasons for the Approval of the Business Combination

In reaching its decision with respect to the Business Combination, the Board considered the views of LMAO management regarding the opportunity represented by the proposed transaction, and evaluated a diligence report on SeaStar Medical conducted by LMAO management and counsel, which included materials provided by SeaStar Medical. LMAO’s diligence process included a review of the following:

 

   

Public research on the medical device industry and its prospects in review of SeaStar Medical’s historical financial performance and forecast;

 

   

Conference call meetings with SeaStar Medical’s management and representatives regarding operations, company services, technology, intellectual property, major suppliers, partners and customers, and growth prospects, both organic and through possible acquisitions, among other customary due diligence matters;

 

   

Review of SeaStar Medical’s potential customer base and sales pipeline, including existing material contracts, near-term prospects and potential for further expansion;

 

   

Review of competitive landscape and SeaStar Medical’s potential for achieving further market penetration; and

 

   

Review of certain other legal, regulatory, intellectual property and financial due diligence.

Based on the Board’s review of the above diligence prepared by LMAO management, the Board supported the decision to enter into the Merger Agreement. The key factors supporting their decision included the following:

 

   

Unique and Highly Disruptive Business Model: SeaStar Medical’s SCD product presents a highly disruptive opportunity in connection with the treatment of patients with AKI and presents SeaStar Medical with the ability to scale its technology to additional indications, including and not limited to: acute respiratory distress syndrome, chronic dialysis, cardiorenal syndrome and hepatorenal syndrome.

 

   

Attractive Opportunity for Growth: SeaStar Medical has attractive growth strategies focused on executing on its clinical plan through key relationships, differentiating through medical education, utilizing business development and out-licensing activities and scaling production with manufacturing partners.

 

   

Strong Institutional Backing: SeaStar Medical is supported by several large, institutional investors, including the Dow Pension Funds. The Board believes that the continued support by large institutional investors demonstrates the confidence of insiders in the company and its business model.

 

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Experienced Management Team: SeaStar Medical’s senior management team and board of directors have an average of more than 19 years of experience in the healthcare industry, including expertise in medical affairs, commercialization and distribution in SeaStar Medical’s initial therapeutic priority areas. SeaStar Medical is also supported by a group of well-respected scientific advisors who are experts in the development of its technology and products.

The Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:

 

   

Benefits Not Achieved. The risk that the potential benefits of the Business Combination may not be fully achieved, or may not be achieved within the expected timeframe.

 

   

Liquidation of LMAO. The risks and costs to LMAO if the Business Combination is not completed, including the risk of diverting management focus and resources from other businesses combination opportunities, which could result in LMAO being unable to complete a business combination by July 25, 2022 (or October 25, 2022 if extended) and force LMAO to liquidate and the warrants to expire worthless.

 

   

Stockholder Vote. The risk that LMAO’s stockholders may fail to provide the votes necessary to effect the Business Combination.

 

   

Lack of Third Party Valuation or Fairness Opinion: We are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm that the price we are paying is fair to LMAO from a financial point of view. Our Board did not obtain a fairness opinion in connection with their determination to approve the Business Combination. In analyzing the Business Combination, our Board and our management conducted due diligence on SeaStar Medical and researched the industry in which SeaStar Medical operates and concluded that the Business Combination was in the best interest of our stockholders. Accordingly, our stockholders will be relying solely on the judgment of our Board in determining the value of the Business Combination, and our Board may not have properly valued the business. The lack of third-party fairness opinion may also lead an increased number of stockholders to vote against the Business Combination or demand redemption of their shares, which could potentially impact our ability to consummate the Business Combination.

 

   

Closing Conditions. The fact that completion of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within LMAO’s control.

 

   

Litigation. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Business Combination.

 

   

Fees and Expenses. The fees and expenses associated with completing the Business Combination.

 

   

Other Risks. Various other risks associated with the Business Combination, the business of LMAO and the business of SeaStar Medical described under the section entitled “Risk Factors.”

Based on the financial analysis of SeaStar Medical considered in approving the Business Combination, including a comparison of comparable companies, the Board determined that SeaStar Medical had a pre-money valuation of approximately $85 million. As of April 21, 2022, the date the Merger Agreement was executed, the balance of funds in the Trust Account (excluding any deferred underwriters’ fees and taxes payable on the income earned on the Trust Account) was approximately $105.6 million and the threshold amount for satisfaction of the 80% test was therefore approximately $84.5 million. Accordingly, the Board determined that at the time the Merger Agreement was entered into, SeaStar Medical had a fair market value of at least 80% of the value of the Trust Account. In addition to considering the factors described above, the Board also considered that some officers and directors of LMAO may have interests in the Business Combination as individuals that are in addition to, and that may be different from, the interests of LMAO’s stockholders (see “Proposal 1 - The Business Combination Proposal - Interests of Certain Persons in the Business Combination”). LMAO’s independent directors reviewed and considered these

 

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interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the Board, the Merger Agreement and the Business Combination:

The Board concluded that the potential benefits that it expected LMAO and its stockholders to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, the Board unanimously determined that the Merger Agreement and the Business Combination were advisable, fair to, and in the best interests of, LMAO and its stockholders.

Summary of LMAO Financial Analysis

SeaStar Medical provided LMAO with its internally prepared projections for the fiscal years ending December 31, 2022 through December 31, 2025 in connection with LMAO’s evaluation of SeaStar Medical. The prospective financial information was not prepared with a view towards compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, but, in the view of SeaStar Medical’s management, was prepared on a reasonable basis and reflects the best available estimates and judgments at the time they were prepared. SeaStar Medical does not, as a matter of general practice, publicly disclose long-term forecasts or internal projections of SeaStar Medical’s future performance, revenue, financial condition or other results. These projections were prepared solely for internal use in connection with SeaStar Medical management’s review of fundraising transactions, the proposed Business Combination and other management purposes, and are subjective in many respects and are therefore susceptible to varying interpretations and the need for periodic revision based on actual experience and business developments. You are cautioned that the projections may be materially different than actual results.

The projections reflect the consistent application of the accounting policies of SeaStar Medical and should be read in conjunction with the significant accounting policies included in Note 2 accompanying the historical audited financial statements of SeaStar Medical included in this proxy statement/prospectus.

The projections were developed by SeaStar Medical’s management, using inputs and assumptions from internal SeaStar Medical personnel and Maxim, with detailed oversight from SeaStar Medical’s board of directors. The projections were reviewed and approved by SeaStar Medical’s board of directors and were also reviewed by Maxim.

The financial projections, including Revenue, Gross Profit, EBITDA and Net Income after taxes are forward-looking statements that are based on growth assumptions that are inherently subject to significant uncertainties and contingencies, many of which are beyond SeaStar Medical’s control.

While all projections are necessarily speculative, SeaStar Medical believes that the prospective financial information covering multiple years by its nature is more uncertain with each successive year. There will be differences between actual and projected results, and actual results may be materially greater or materially less than those contained in the projections. The inclusion of the projections in this proxy statement/prospectus should not be regarded as an indication that SeaStar Medical, we or our respective representatives considered or consider the projections to be a reliable prediction of future events.

The projections were requested by, and disclosed to, LMAO and to our Board for use as a component in its overall evaluation of SeaStar Medical. Additionally, the projections were provided by us to Skyway Capital LLC for its use in connection with its financial analyses and valuation presentation to our Board. Accordingly, such projections are included in this proxy statement/prospectus on that account.

Neither we nor SeaStar Medical has warranted the accuracy, reliability, appropriateness or completeness of the projections to anyone, including to our Board. Neither we, SeaStar Medical’s management nor any of our or SeaStar Medical’s representatives has made or makes any representation to any person regarding the ultimate

 

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performance of the Combined Company compared to the information contained in the projections, and none of them intends to or undertakes any obligation to update or otherwise revise the projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events in the event that any or all of the assumptions underlying the projections are shown to be in error. Accordingly, the projections should not be looked upon as “guidance” of any sort. The Combined Company will not refer back to these projections in its future periodic reports filed under the Exchange Act.

Furthermore, the financial projections do not take into account any circumstances or events occurring after the date they were prepared. While SeaStar Medical has provided certain additional historical financial information to the management of LMAO, including financial information prior to 2020, such information was not deemed to have a material impact on the financial projection presented herein due to the fact that SeaStar Medical’s business operations and financial performance during such prior periods did not materially represent its core operations since 2020.

EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES LAWS, BY INCLUDING IN THIS PROXY STATEMENT/PROSPECTUS A SUMMARY OF THE FINANCIAL PROJECTIONS FOR SEASTAR MEDICAL, LMAO UNDERTAKES NO OBLIGATIONS AND EXPRESSLY DISCLAIMS ANY RESPONSIBILITY TO UPDATE OR REVISE, OR PUBLICLY DISCLOSE ANY UPDATE OR REVISION TO, THESE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THESE FINANCIAL PROJECTIONS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FINANCIAL PROJECTIONS ARE SHOWN TO BE IN ERROR OR CHANGE.

The projected financial information included in this proxy statement/prospectus has been prepared by, and is the responsibility of, SeaStar Medical’s management. None of MaloneBailey, LLP, LMAO’s independent registered public accounting firm, or Armanino LLP, the independent registered public accounting firm of SeaStar Medical has audited, reviewed, examined, compiled or applied agreed-upon procedures with respect to the accompanying prospective financial information presented herein and, accordingly, MaloneBailey, LLP and Armanino LLP express no opinion or any other form of assurance on it. Armanino LLP’s report included in this proxy statement/prospectus relates to SeaStar Medical’s previously issued historical financial statements. It does not extend to the financial projections and should not be read to do so.

 

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The key elements of the projections are summarized below, which were prepared by SeaStar Medical’s management:

 

($ in thousands)   Historical     Projected  
    2020     2021     2022     2023     2024     2025  

Revenues

  $ —       $ —       $ —       $ 1,715.0     $ 6,247.5     $ 47,223.8  

Cost of goods sold

  $ —       $ —         $ 164.2     $ 598.0     $ 5,031.9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  $ —       $ —       $ —       $ 1,550.8     $ 5,649.5     $ 42,191.9  

Operating expenses

    6,453.0       4,449.0       6,601.1       15,259.3       19,888.0       22,214.6  

Depreciation and amortization

        1.80       1.80       1.80       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

    6,453.00       4,449.00       6,602.90       15,261.10       19,889.80       22,214.60  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss (income)

    (6,453.00     (4,449.00     (6,602.90     (13,710.30     (14,240.30     19,977.30  

Other income (loss)

    6,494.00       64.00          

Interest expense

    (3,308.00     (212.00     —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) before income taxes

    (3,267.00     (4,597.00     (6,602.90     (13,710.30     (14,240.30     19,977.30  

Discontinued operations

           

Income taxes (benefit)

    9.0       (1.0     —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net operating profit after tax

    (3,276.0     (4,596.0     (6,602.9     (13,710.3     (14,240.3     19,977.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

    3,308.00       212.00          

Income taxes (benefit)

    9.0       (1.0     —          

Depreciation and amortization

    —         —         1.8       1.8       1.8       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA (1)

    41.0       (4,385.0     (6,601.1     (13,708.5     (14,238.5     19,977.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBIT

    (6,453.0     (4,449.0     (6,602.9     (13,710.3     (14,240.3     19,977.3  

 

(1)

EBITDA represents net income (loss) before interest expense, provision for income taxes, depreciation and amortization. EBITDA does not represent net income, as that term is defined under GAAP, and should not be considered as an alternative to net income (loss) as an indicator of operating performance.

Revenue Projections Approach and Methodology

The projections were developed by SeaStar Medical’s management, using inputs and assumptions from internal SeaStar Medical personnel and Maxim, with detailed oversight from SeaStar Medical’s board of directors. The projections were reviewed and approved by the SeaStar Medical’s board of directors, and were also reviewed by Maxim.

SeaStar Medical’s revenue projections are prepared using a “top-level-down” methodology, meaning that SeaStar Medical utilizes general assumptions to create a strategic build to revenue rather than utilizing a bottoms-up methodology year-over-year growth rate assumptions. This “top level-down” methodology, in SeaStar Medical’s view, reasonably accounts for, among other factors, historical data, market data, SeaStar Medical’s historical relative performance against peers, and detailed data inputs from the management of SeaStar Medical, each factor of which is described in further detail below and in the section titled “Material Assumptions Underlying the Financial Projections,” and better ensures that the projections are internally consistent. SeaStar Medical’s revenue projections are based on revenue streams from two sources:

 

   

New SCD product candidate sales to pediatric hospitals based on a HDE approval for pediatric acute kidney injury patients on continuous renal replacement therapy; and

 

   

New SCD product candidate sales to adult hospitals based on a PMA approval for adult acute kidney injury patients on continuous renal replacement therapy.

 

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Revenue Projections

The projected revenue generated from the new SCD pediatric sales is estimated by using:

 

   

United States Government Agency for Healthcare Research data to estimate the annual number of pediatric acute kidney injury patients on continuous renal replacement therapy;

 

   

The number of SCD treatments per patient based on pediatric clinical study length of treatment; and

 

   

The price per SCD based on current pricing of extracorporeal therapies used today.

The projected revenue generated from the new SCD adult sales is estimated by using:

 

   

United States Government Agency for Healthcare Research data to estimate the annual number of adult acute kidney injury patients on continuous renal replacement therapy;

 

   

The number of SCD treatments per patient based on adult clinical study length of treatment; and

 

   

The price per SCD based on current pricing of extracorporeal therapies used today.

SeaStar Medical believes its revenue projections are reasonable because they are based on SeaStar Medical’s historical financial data, third party market data, and detailed data inputs from the management of SeaStar Medical. SeaStar Medical has further confidence in the reasonableness of its projections because they were reviewed and approved by the SeaStar Medical board of directors, and were also reviewed by Maxim.

Material Assumptions Underlying the Financial Projections

The financial projections set forth in the table of full year SeaStar Medical financial projections from 2022 - 2025 above reflect numerous assumptions, including SeaStar’s plan for commercialization of its product candidates, potential revenue opportunities of SCD product candidates, the market acceptance of SCD product candidates, the timing of FDA regulatory approval process, current discussion with potential customers of SCD product candidates, the ability to scale the production and distribution SCD solutions, general business, economic, market, regulatory and financial conditions and various other factors, all of which are difficult to predict and many of which are beyond SeaStar Medical’s control, such as SeaStar Medical’s limited operating history, the timing and process for obtaining FDA approval of SCD product candidates, the variability of SeaStar Medical’s results period-to-period, and the other risks and uncertainties discussed in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of SeaStar Medical” and Cautionary Note Regarding Forward-Looking Statements.”

 

   

Projected growth in SeaStar Medical’s SCD from 2022 to 2025 has several key assumptions, which include and are not limited to:

 

   

Obtaining FDA HDE regulatory approval in the first quarter of 2023;

 

   

Enrolling patients for SCD 006 (Adult AKI Pivotal Study) beginning in the first quarter of 2023; and

 

   

Obtaining FDA PMA regulatory approval in the first half of 2025.

Additionally, the projections included herein are subject to certain assumptions regarding the overall market in which the Combined Company plans to operate, including, but not limited to:

 

   

Market growth assumptions for 2022 through 2025. Historically, the acute kidney market has grown 7.8% per annum from 2012 to 2016 and current internal estimates see that trend continuing at a similar rate through 2027. This is based on an aging population where adults over 45 years of age tend to have higher comorbidities that are correlated with acute kidney injury. The growth of sales during this time period is based solely on market share gains, and not by increase of pricing or number of occurrences.

 

   

Growth in headcount. Currently, SeaStar Medical’s headcount is three full time employees and a network of external consultants that have enabled it to achieve certain milestones. SeaStar Medical will hire key executives, financial, clinical, medical, operations, regulatory and commercial roles over the next 12 months

 

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in support of the pediatric commercial launch and patient enrollment for SCD 006 in the first quarter of 2023. Additional hires will be added to continue to support the growth of sales, advancement of medical education program and future growth opportunities.

 

   

Large available market. Given SeaStar Medical projects it will have ample room to grow into the adult AKI target market (patients on CRRT), it believes the scope of the market opportunity will justify its assumptions regarding increasing use of its SCD product. As the financial projections do not include an annual growth in either number of patients or pricing, SeaStar Medical believes this presents future opportunity growth not contemplated in the current financial projections.

 

   

Expansion into new markets. The majority of projected new revenue will be derived from the top 50 pediatric hospitals, where 20% of those hospitals have personnel with experience using the SCD product. SeaStar Medical believes that targeting the top 20% of these pediatric hospitals initially will build a customer base that will continue to grow as case reports and additional studies support using the SCD product. The adult AKI expansion will follow a similar approach as the pediatric commercial launch and growth, despite the fact that the adult AKI market has a significantly larger market size.

Interests of Certain Persons in the Business Combination

When you consider the recommendation of the Board in favor of the approval of the Business Combination Proposal and each of the other Proposals, you should keep in mind that LMAO’s directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder, including:

 

   

If an initial business combination is not completed within 18 months from the closing of the IPO (or 21 months from the closing of the IPO, if we extend the period of time to consummate a business combination, as described in more detail in this proxy statement/prospectus), LMAO will be required to liquidate. In such event, [2,587,500] shares of Class B Common Stock held by the Sponsor, which were acquired prior to the IPO for an aggregate purchase price of $25,000, will be worthless. Additionally, if an initial business combination is not completed within 18 months from the closing of the IPO (or 21 months from the closing of the IPO, if we extend the period of time to consummate a business combination, as described in more detail in this proxy statement/prospectus), the private placement warrants held by the Sponsor will expire worthless.

 

   

The exercise of LMAO’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the transaction may result in a conflict of interest when determining whether such changes or waivers are appropriate and in our stockholders’ best interests.

 

   

If the Business Combination with SeaStar Medical is completed, pursuant to the Director Nomination Agreement, the Sponsor will have a right to designate two (2) directors of the Combined Company board of directors.

 

   

In connection with the determination of the valuation of SeaStar Medical, LMAO engaged Skyway to act as financial advisor to LMAO. One of LMAO’s board members, Marty Traber, is the Chairman of Skyway. The Board was made aware of Mr. Traber’s connection to Skyway, discussed that Mr. Traber could derive directly or indirectly a pecuniary benefit given the fee paid by LMAO to Skyway in connection with their services and ultimately the remainder of the Board (other than Mr. Traber) unanimously approved the engagement of Skyway to act as financial advisor to LMAO.

Certain Engagements in Connection with the Business Combination and Related Transactions

Maxim was engaged by SeaStar Medical to act as a financial advisor in connection with a business combination with a SPAC and will receive compensation in connection therewith. Maxim was engaged by LMAO to act as sole manager to LMAO for their IPO and is entitled to a deferred underwriting fee of $3,622,500 upon the completion of the Business Combination. Maxim communicated with LMAO and other potential merger candidates on behalf of SeaStar Medical and assisted SeaStar Medical with evaluating the commercial

 

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terms of the letters of intent submitted by LMAO. Maxim did not provide to the Board advice, an appraisal, valuation report, fairness opinion or other report related to the potential valuation of SeaStar Medical. On March 4, 2021, LMAO had engaged Maxim to act as its exclusive advisor with respect to the identification and evaluation of potential business acquisition opportunities. On April 21, 2022, LMAO and Maxim formally terminated their relationship set forth in the March 4, 2021 letter. Pursuant to the termination letter, LMAO will not owe Maxim any fees in connection with the March 4, 2021 letter should the Business Combination be completed. LMAO also engaged Maxim to act as sole placement agent in connection with a potential private investment in public equity. Maxim will receive fees and expense reimbursements in connection therewith. Maxim’s fees (including their deferred underwriting fee) are contingent upon the closing of the Business Combination. Maxim’s fees with respect to its engagement as sole placement agent are contingent upon the completion of a private investment in public equity. Maxim provided the Board with a description of Maxim’s relationship with SeaStar Medical prior to Maxim’s engagement by LMAO for a possible private investment in public equity transaction]. For more information regarding the role of Maxim in the transaction negotiations, please read “Background of the Business Combination.”

Maxim (together with its affiliates) is a full-service financial institution engaged in various activities, which may include sales and trading, investment banking, advisory, investment research, market making, brokerage and other activities and services. Maxim and its affiliates may provide investment banking services to LMAO, SeaStar Medical and their respective affiliates in the future, for which they would expect to receive customary compensation. In addition, in the ordinary course of its business activities, Maxim and its affiliates, officers, directors and employees may hold a broad array of investments and actively trade securities (or related derivative securities) that may involve securities and/or instruments of LMAO or SeaStar Medical, or their respective affiliates.

Appraisal Rights

There are no appraisal rights available to our stockholders in connection with the Business Combination.

Total Shares of Common Stock Outstanding Upon Consummation of the Business Combination

As of [●], 2022, there are [10,453,500] shares of Class A Common Stock issued and outstanding, and [2,587,500] shares of Class B Common Stock issued and outstanding. There is outstanding an aggregate of [16,088,000] warrants, which includes [5,738,000] private placement warrants and [10,350,000] public warrants. Each warrant entitles the holder thereof to purchase one share of Class A Common Stock and, following the Business Combination, will entitle the holder thereof to purchase one share of Common Stock of the Combined Company.

It is anticipated that, upon the closing of the Business Combination, under the “no redemptions” scenario, LMAO’s public stockholders (other than the shares issued to the Dow Pension Funds in connection with the Dow Commitment Letter) would retain an ownership interest of approximately 48.7% in the Combined Company, the Sponsor, the sole holder of founder shares would retain an ownership interest of approximately 12.1% in the Combined Company and the SeaStar Medical stockholders (which includes the minimum $5,000,000 worth of Class A Common Stock that will be issued to the Dow Pension Funds in connection with the Dow Commitment Letter as the Dow Pension Funds are current shareholders of SeaStar Medical) would own approximately 39.2% of the outstanding Common Stock of the Combined Company.

Under the “maximum redemptions” scenario, LMAO’s public stockholders (other than the shares issued to the Dow Pension Funds in connection with the Dow Commitment Letter) would retain an ownership interest of approximately 13.4% in the Combined Company, the Sponsor, the sole holder of founder shares would retain an ownership interest of approximately 20.4% in the Combined Company and the SeaStar Medical stockholders (which includes the minimum $5,000,000 worth of Class A Common Stock that will be issued to Dow in connection with the Dow Commitment Letter as Dow is a current shareholder) would own approximately 66.2% of the outstanding Common Stock of the Combined Company. The following summarizes the pro forma

 

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ownership of Common Stock following the Business Combination and the issuance of shares to the Dow Pension Funds pursuant to the Dow Commitment Letter assuming no redemptions, 50% redemptions and maximum redemptions scenarios.

The ownership percentages reflected in the table are based upon the number of shares of SeaStar Medical Common Stock and Common Stock issued and outstanding as of April 21, 2022 and are subject to the following additional assumptions:

 

   

all SeaStar Medical equity is computed on a fully-diluted basis including all outstanding options, warrants and restricted stock units, and assumes the Convertible Note Conversion and the Preferred Stock Conversion have occurred;

 

   

the shares to be issued to SeaStar Medical stockholders (A) does not account for (i) the issuance of any additional shares upon the Closing under the Incentive Plan or ESPP and (ii) the withholding of shares of Common Stock to pay future exercises under the SeaStar Medical warrants and options assumed by LMAO or the settlement of SeaStar Medical restricted stock units assumed by LMAO, and (B) assumes (i) that Dow Pension Funds only purchase the minimum amount under the Dow Commitment Letter and (ii) that SeaStar Medical neither has any indebtedness to be repaid at Closing nor incurs transaction expenses in excess of the transaction expenses cap;

 

   

no exercise of LMAO warrants; and

 

   

no issuance of additional securities by LMAO prior to the Closing of the Business Combination.

If any of these assumptions are not correct, these percentages will be different.

For purposes of the table:

No Redemptions: This scenario assumes that no LMAO public stockholders exercise their redemption rights with respect to their Class A Common Stock upon consummation of the Business Combination.

50% Redemptions: This scenario assumes that LMAO public stockholders holding approximately 5,278,500 shares of Class A Common Stock will exercise their redemption rights upon consummation of the Business Combination.

Maximum Redemptions: This scenario assumes that public stockholders holding approximately 8,750,000 shares of Class A Common Stock will exercise their redemption rights upon consummation of the Business Combination.

 

     No
Redemption
    50%
Redemption
    Maximum
Redemption
 

Shares:

      

LMAO Public Stockholders

     10,453,500       5,278,500       1,703,000  

Sponsor

     2,587,500       2,587,500       2,587,500  

SeaStar Stockholders(1)

     8,407,774       8,407,774       8,407,774  
  

 

 

   

 

 

   

 

 

 
     21,448,774     16,273,774     12,698,274  

Ownership Percentage

      

LMAO Public Stockholders

     48.7     32.4     13.4

Sponsor

     12.1     15.9     20.4

SeaStar Stockholders(1)

     39.2     51.7     66.2

 

(1)

Includes 500,000 shares issued to the Dow Pension Funds pursuant to the Dow Commitment Letter.

 

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Anticipated Accounting Treatment

The Business Combination will be accounted for as a “reverse recapitalization” in accordance with GAAP. Under this method of accounting LMAO will be treated as the “acquired” company for financial reporting purposes. This determination is primarily based on the fact that subsequent to the Business Combination, the SeaStar Medical stockholders are expected to have a majority of the voting power of the Combined Company, SeaStar Medical will comprise all of the ongoing operations of the Combined Company, SeaStar Medical will comprise a majority of the governing body of the Combined Company, and SeaStar Medical’s senior management will comprise all of the senior management of the Combined Company. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of SeaStar Medical issuing shares for the net assets of LMAO, accompanied by a recapitalization. The net assets of LMAO will be stated at historical costs. No goodwill or other intangible assets will be recorded. Operations prior to the Business Combination will be those of SeaStar Medical.

Redemption Rights

Pursuant to our Existing Charter, holders of public shares may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest (net of taxes payable), by (ii) the total number of then-outstanding public shares. As of [        ], 2022, this would have amounted to approximately $[10.20] per share.

You will be entitled to receive cash for any public shares to be redeemed only if you:

 

  (i)

hold public shares and

 

  (ii)

prior to 5.00 p.m., Eastern Time, on [•], 2022, (a) submit a written request to Continental that LMAO redeem your public shares for cash and (b) deliver your public shares to Continental, physically or electronically through DTC.

If a holder exercises its redemption rights, then such holder will be exchanging its public shares for cash and will no longer own shares of the Combined Company. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to Continental in accordance with the procedures described herein. Please see the section titled “The Meeting - Redemption Rights” for the procedures to be followed if you wish to redeem your public shares for cash.

Vote Required for Approval

Along with the approval of the Charter Approval Proposal and the Nasdaq Proposal, approval of the Business Combination Proposal is a condition to the consummation of the Business Combination. If the Business Combination Proposal is not approved, the Business Combination will not take place. The Charter Approval Proposal, the Stock Plan Proposal, the ESPP Proposal, the Nasdaq Proposal and the Director Nomination Proposal are dependent upon approval of the Business Combination Proposal. If the Charter Approval Proposal and the Nasdaq Proposal are not approved, the Business Combination Proposal will have no effect (even if approved by the requisite vote of our stockholders at the Meeting of any adjournment or postponement thereof) and the Business Combination will not occur. The Governance Proposals and the Adjournment Proposal are not conditioned on, and therefore do not require the approval of, the Business Combination Proposal and Business Combination to be effective.

Approval of the Business Combination Proposal will require the affirmative vote of the holders of a majority of the votes cast by LMAO stockholders present in person or represented by proxy at the Meeting and entitled to vote thereon.

 

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As of [●], 2022, a total of [2,587,500] shares of Common Stock, or approximately 20% of the outstanding shares, were subject to the Letter Agreement or the Sponsor Support Agreement. As a result, only [3,933,001] shares of common stock held by the public stockholders will need to be present and entitled to vote to satisfy the quorum requirement for the Meeting. In addition, as the vote to approve the Business Combination Proposal is a majority of the votes cast by the stockholders represented in person or by proxy and entitled to vote thereon at a meeting at which a quorum is present, assuming only the minimum number of shares of common stock to constitute a quorum is present, only [672,751] shares of common stock, or approximately [6.4]% of the [10,453,500] shares of Common Stock held by the public stockholders, must vote in favor of the Business Combination Proposal for it to be approved

Board Recommendation

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE BUSINESS COMBINATION UNDER PROPOSAL 1.

 

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PROPOSAL 2 - THE CHARTER APPROVAL PROPOSAL

Overview

LMAO’s stockholders are being asked to adopt the Proposed Charter in the form attached to this proxy statement/prospectus as Annex B, which, in the judgment of the Board, is necessary to adequately address the needs of Combined Company.

The following is a summary of the key amendments effected by the Proposed Charter, but this summary is qualified in its entirety by reference to the full text of the Proposed Charter, a copy of which is attached to this proxy statement/prospectus as Annex B:

 

   

Changes to Authorized Capital Stock - the Existing Charter authorized the issuance of 121,000,000 total shares, consisting of (a) 100,000,000 shares of Class A Common Stock, (b) 20,000,000 shares of Class B Common Stock and (c) 1,000,000 shares of preferred stock. The Proposed Charter reclassifies our Class A Common Stock and Class B Common Stock as “Common Stock” and authorizes the issuance of 160,000,000 total shares, consisting of (a) 150,000,000 shares of Common Stock, and (b) 10,000,000 shares of preferred stock;

 

   

Classified Board - the Existing Charter divides the Board into two classes with staggered two-year terms. The Proposed Charter divides the Board into three classes with staggered three-year terms;

 

   

Director Removal - provide for the removal of directors for cause only by stockholders holding at least two-thirds (66 and 2/3%) of the outstanding shares of capital stock of the Combined Company, voting together as a single class, entitled to vote at an election of directors; and

 

   

Removal of Blank Check Company Provisions - eliminate various provisions applicable only to blank check companies, including business combination requirements.

Reasons for the Amendments

Each of these amendments was negotiated as part of the Business Combination. The Board’s reasons for proposing each of these amendments to the Existing Charter is set forth below.

Changes to Authorized Capital Stock

The Existing Charter authorizes 121,000,000 shares, consisting of (a) 100,000,000 shares of Class A Common Stock, (b) 20,000,000 shares of Class B Common Stock, and (c) 1,000,000 shares of preferred stock. The Proposed Charter reclassifies Class A Common Stock and Class B Common Stock as “Common Stock” and provides that LMAO will be authorized to issue 160,000,000 shares, consisting of (a) 150,000,000 shares of Common Stock and (b) 10,000,000 shares of preferred stock.

This amendment also increases the authorized number of shares because the Board believes that it is important for the Combined Company to have available for issuance a number of authorized shares of Common Stock and preferred stock sufficient to support its growth and to provide flexibility for future corporate needs (including, if needed, as part of financing for future growth acquisitions). The shares would be issuable as consideration for the Business Combination and the other transactions contemplated by in this proxy statement/prospectus, and for any proper corporate purpose, including future acquisitions, capital raising transactions consisting of equity or convertible debt, stock dividends or issuances under current and any future stock incentive plans.

The Board believes that these additional shares will provide the Combined Company with needed flexibility to issue shares in the future in a timely manner and under circumstances we consider favorable without incurring the risk, delay and potential expense incident to obtaining stockholder approval for a particular issuance.

 

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Classified Board

Under the Existing Charter, the Board is divided into two classes, as nearly equal in number as possible and designated as Class I and Class II. The term of the initial Class I directors expires at the first annual meeting of LMAO stockholders, whereas the term of the initial Class II directors expires at the second annual meeting of LMAO stockholders. At each succeeding annual meeting of LMAO stockholders, the successors elected to replace the class of directors whose term expires at that annual meeting is elected to a two-year term. This amendment divides the board of directors of the Combined Company into three classes, such classes being as nearly equal in number of directors as possible, having staggered three-year terms. The initial term of office of Class I directors will expire at the first annual meeting of Combined Company stockholders, the initial term of office of Class II directors will expire at the second annual meeting of Combined Company stockholders, and the initial term of office of Class III directors will expire at the third annual meeting of Combined Company stockholders, each following the Business Combination.

The Board believes that this amendment is appropriate because it (1) accounts for the increase in the size of the authorized board of directors of the Combined Company to seven members and (2) provides for continuity on the board of directors. A classified board makes it more difficult for Combined Company stockholders to replace the board of directors as well as for another party to obtain control of the Combined Company by replacing its board of directors. Because the board of directors of the Combined Company has the power to retain and discharge the Combined Company’s officers, these provisions could also make it more difficult for Combined Company stockholders or another party to effect a change in management.

Director Removal

At present, the Existing Charter provides that, directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class. This amendment provides for the removal of directors only for cause by the affirmative vote of the holders of at least two-thirds (66 and 2/3%) of the outstanding shares of capital stock of the Combined Company entitled to vote in the election of directors or class of directors, voting together as a single class, at a meeting of stockholders called for that purpose. The Board believes that supermajority voting requirements are appropriate at this time to protect all stockholders against potential self-interested actions by one or a few large stockholders. In reaching this conclusion, the Board was cognizant of the potential for certain stockholders to hold a substantial beneficial ownership of Common Stock following the Business Combination. We further believe that going forward, a supermajority voting requirement encourages the person seeking control of the Combined Company to negotiate with the board of directors to reach terms that are appropriate for all stockholders.

Removal of Blank Check Company Provisions

The Existing Charter contains various provisions applicable only to blank check companies. This amendment eliminates certain provisions related to LMAO’s status as a blank check company, which is desirable because these provisions will serve no purpose following the Business Combination. For example, these proposed amendments remove the requirement to dissolve the Combined Company and allow it to continue as a corporate entity with perpetual existence following the consummation of the Business Combination. Perpetual existence is the usual period of existence for corporations and we believe that it is the most appropriate period for the Combined Company following the Business Combination. In addition, certain other provisions in the Existing Charter require that proceeds from the IPO be held in the Trust Account until an initial business combination or the redemption of all public shares if an initial business combination is not consummated before the Deadline Date (as defined in the Existing Charter). These provisions cease to apply once the Business Combination is consummated.

 

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Vote Required for Approval

Assuming that a quorum is present at the Meeting, the affirmative vote of holders of a majority of the issued and outstanding shares of Common Stock on this Proposal 2 is required to approve the Charter Approval Proposal. Accordingly, a stockholder’s failure to vote during the Meeting or by proxy, a broker non-vote or an abstention will be considered a vote “AGAINST” Proposal 2.

This Proposal is conditioned on the approval of the Business Combination Proposal and the Nasdaq Proposal. If either of the Business Combination Proposal or the Nasdaq Proposal is not approved, Proposal 2 will have no effect even if approved by LMAO’s stockholders.

Board Recommendation

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” ADOPTION OF THE CHARTER APPROVAL PROPOSAL UNDER PROPOSAL 2.

 

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PROPOSALS 3A-3D - THE GOVERNANCE PROPOSALS

Overview

LMAO’s stockholders are also being asked to vote on four separate proposals with respect to certain governance provisions in the Proposed Charter, which are separately being presented in order to give LMAO stockholders the opportunity to present their separate views on important corporate governance procedures and which will be voted upon on a non-binding advisory basis. Accordingly, regardless of the outcome of the non-binding advisory vote on these proposals, LMAO and SeaStar Medical intend that the Proposed Charter in the form attached to this proxy statement/prospectus as Annex B will take effect at the Closing Date, assuming approval of the Charter Approval Proposal (Proposal 2). In the judgment of the Board, these provisions are necessary to adequately address the needs of the Combined Company.

Proposal 3A: Authorized Capital Stock

See “Proposal 2 - The Charter Approval Proposal - Reasons for the Amendments - Changes to Authorized Capital Stock” for a description and reasons for the amendment to increase the number of shares of (i) common stock LMAO is authorized to issue from 120,000,000 shares to 150,000,000 shares and (ii) preferred stock LMAO is authorized to issue from 1,000,000 shares to 10,000,000 shares.

Proposal 3B: Classified Board

See “Proposal 2 - The Charter Approval Proposal - Reasons for the Amendments - Classified Board” for a description and reasons for the amendment to change the classification of the Board from two classes of directors with staggered two-year terms to three classes of directors with staggered three-year terms.

Proposal 3C: Removal of Directors

See “Proposal 2 - The Charter Approval Proposal - Reasons for the Amendments - Director Removal” for a description and reasons for the amendment to require the vote of at least two-thirds (66 and 2/3%) of the outstanding shares of capital stock of the Combined Company, voting together as a single class, entitled to vote at an election of directors, rather than a simple majority, to remove a director from office.

Proposal 3D: Removal of Special Purpose Acquisition Company Provisions

See “Proposal 2 - The Charter Approval Proposal - Reasons for the Amendments - Removal of Blank Check Company Provisions” for a description and reasons for the amendment to remove certain provisions related to LMAO’s status as a special purpose acquisition company that will no longer be relevant following the Effective Time.

Vote Required for Approval

The Governance Proposals will be approved and adopted only by the affirmative vote of the holders of a majority of the votes cast by LMAO stockholders present in person or represented by proxy at the Meeting and entitled to vote thereon.

The Business Combination is not conditioned upon the approval of the Governance Proposals.

As discussed above, a vote to approve each of the Governance Proposals is an advisory vote, and therefore, is not binding on LMAO, SeaStar Medical or their respective boards of directors. Accordingly, regardless of the outcome of the non-binding advisory vote, LMAO and SeaStar Medical intend that the Proposed Charter, in the form attached to this proxy statement/prospectus as Annex B and containing the provisions noted above, will take effect at the Effective Time, assuming approval of the Charter Approval Proposal (Proposal 2).

Board Recommendation

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” ADOPTION OF EACH OF THE GOVERNANCE PROPOSALS UNDER PROPOSALS 3A-3D.

 

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PROPOSAL 4 - THE STOCK PLAN PROPOSAL

We are asking our stockholders to approve a proposal to adopt the LMF Acquisition Opportunities, Inc. 2022 Omnibus Incentive Plan, (the “Incentive Plan”). The Board adopted the Incentive Plan on [●], 2022, subject to stockholder approval at the Meeting. If approved by the stockholders, the Incentive Plan will become effective upon closing of the Business Combination (the “Plan Effective Date”). If the Incentive Plan is not approved by the LMAO stockholders, or if the Merger Agreement is terminated prior to the consummation of the Business Combination, the Incentive Plan will not become effective.

The Incentive Plan will allow us to grant equity-based awards to our officers and employees, non-employee directors, as well as consultants and other independent advisors in our employ or service (or the employ or service of any parent or subsidiary). We expect the Combined Company’s equity-based compensation program as implemented under the Incentive Plan to play a pivotal role in our effort to attract and retain key personnel essential to our long-term growth and financial success and remain competitive in the industry. If this proposal is not approved, we would not be able to grant equity-based awards. We would accordingly be at a disadvantage against our competitors for recruiting, retaining, and motivating individuals critical to our success and could be forced to increase cash compensation, thereby reducing resources available to meet our business needs.

If this proposal is approved, up to 1,270,000 shares of Common Stock will initially be available for issuance under the Incentive Plan (subject to adjustments described below and in the section titled “Securities Subject to Incentive Plan” below). On the first trading day in January each calendar year, beginning with 2023, the number of shares of Common Stock available for issuance under the Incentive Plan will automatically increase by three percent (3%) of the total number of shares of Common Stock outstanding on the last trading day of December of the immediately preceding the calendar year (or such lower number approved by the Board).

If the Incentive Plan is approved, on the Plan Effective Date, SeaStar Medical’s 2019 Stock Incentive Plan will terminate and no new awards will be granted under such plan. Any outstanding awards granted under SeaStar Medical’s 2019 Stock Incentive Plan will be assumed by the Combined Company in connection with the Business Combination.

Summary Description of Incentive Plan

The principal terms and provisions of the Incentive Plan are set forth below. The summary, however, is not intended to be a complete description of all the terms of the Incentive Plan and is qualified in its entirety by reference to the complete text of the Incentive Plan, filed with this proxy statement/prospectus as Annex D.

Types of Awards. The following types of awards may be granted under the Incentive Plan: options, stock appreciation rights, stock awards, restricted stock units, dividend equivalent rights and other awards. The principal features of each type of award are described below.

Administration. The Compensation Committee has the exclusive authority to administer the Incentive Plan with respect to awards made to our executive officers and non-employee directors and has the authority to make awards under the Incentive Plan to all other eligible individuals. However, our Board may at any time appoint a secondary committee of one (1) or more members of the Board to have separate but concurrent authority with the Compensation Committee to make awards under the Incentive Plan to individuals other than executive officers and non-employee directors. The Board or the Compensation Committee may also delegate authority to administer the Incentive Plan with respect to such individuals to one or more officers of the Combined Company.

The term “plan administrator,” as used in this summary, will mean our Compensation Committee, the Board, any secondary committee, and any delegates thereof, to the extent each such entity or person is acting within the scope of its administrative authority under the Incentive Plan.

 

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Eligibility. Employees, non-employee directors, as well as consultants and other independent advisors, in our employ or service or in the employ or service of any parent or subsidiary are eligible to participate in the Incentive Plan. As of [●], three employees (including two executive officers) and five non-employee directors would have been eligible to participate in the Incentive Plan had it been in effect on such date.

Securities Subject to Incentive Plan. Subject to the capitalization adjustments and the add back provisions related to outstanding awards, each as described below, an aggregate of up to 1,270,000 shares shall initially be reserved for issuance under the Incentive Plan. On the first trading day in January each calendar year, beginning with 2023, the number of shares of Common Stock available for issuance under the Incentive Plan will automatically increase by three percent (3%) of the total number of shares of Common Stock outstanding on the last trading day of December of the immediately preceding the calendar year (or such lower number approved by the Board).

Shares subject to outstanding awards under the Incentive Plan that expire, are forfeited, or cancelled or otherwise terminate prior to the issuance of the shares subject to those awards or are settled in cash will be available for subsequent issuance under the Incentive Plan.

In addition, the following share counting procedures will apply in determining the number of shares of common stock available from time to time for issuance under the Incentive Plan:

 

   

If shares of Common Stock otherwise issuable under the Incentive Plan are surrendered in payment of the exercise price of an option, then the number of shares of Common Stock available for issuance under the Incentive Plan shall be reduced only by the net number of shares issued by us upon such exercise and not by the gross number of shares as to which such option is exercised.

 

   

Upon the exercise of any stock appreciation right under the Incentive Plan, the number of shares of Common Stock available for issuance under the Incentive Plan shall be reduced by the net number of shares as to which such right is exercised, and not by the gross number of shares issued by us upon such exercise.

 

   

If shares of Common Stock otherwise issuable under the Incentive Plan are withheld by us in satisfaction of the withholding taxes incurred in connection with the issuance, vesting or exercise of any award or the issuance of Common Stock thereunder, then the number of shares of Common Stock available for issuance under the Incentive Plan shall be reduced by the net number of shares issued, vested or exercised under such award, calculated in each instance after payment of such share withholding.

 

   

Upon the exercise of an option through the net exercise procedure under the Incentive Plan or upon the exercise of a stock appreciation right, then for purposes of calculating the number of shares of Common Stock remaining available for exercise under such option or stock appreciation right, the number of such shares shall be reduced by the net number of shares for which the option or stock appreciation right is exercised, and without regard to any cash settlement of a stock appreciation right.

 

   

Unvested shares issued under the Incentive Plan and subsequently forfeited or repurchased by us, at a price per share not greater than the original issue price paid per share, pursuant to our repurchase rights under the Incentive Plan shall be available for subsequent issuance under the Incentive Plan.

 

   

Shares of Common Stock that have been repurchased by us on the open market using stock option exercise proceeds shall not be available for subsequent issuance under the Incentive Plan.

The maximum number of shares which may be issued pursuant to options intended to qualify as incentive stock options under the federal tax laws shall be limited to [●] shares increased, on the first trading day of January each year beginning with the calendar year 2023, by the number of shares by which the share reserve is to automatically increase on such date up to a maximum of six hundred thousand (600,000) shares.

The plan administrator may grant awards in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Combined Company or with which the Combined Company

 

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combines. Such substitute awards will not reduce the shares authorized for issuance under the Incentive Plan (but will count against the aggregate number of incentive stock options available for awards, as described above). Additionally, subject to applicable stock exchange requirements, if the acquired company’s equity plan has shares available, such shares may be available for grant under the Incentive Plan, which will not reduce (or be added back to) the shares authorized for issuance under the Incentive Plan.

The shares issuable under the Incentive Plan may be made available from our authorized but unissued shares or from shares that we acquire, including shares purchased on the open market.

Non-Employee Director Award Limits. The maximum aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial reporting rules) of all awards made to a non-employee director under the Incentive Plan in a single calendar year, taken together with any cash retainer paid to such non-employee director in respect of such calendar year, shall not exceed $500,000 in total value.

Awards

The plan administrator has complete discretion to determine (a) which eligible individuals are to receive awards, (b) the type, size, terms and conditions of the awards to be made, (c) the time or times when those awards are to be granted, (d) the number of shares or amount of payment subject to each such award, (e) the time when the award is to become exercisable, (f) the status of any granted option as either an incentive stock option or a non-statutory option under the federal tax laws, (g) the maximum term for which the award is to remain outstanding, (h) the vesting and issuance schedules applicable to the shares which are the subject of the award, (i) the cash consideration (if any) payable per share subject to the award and the form (cash or shares) in which the award is to be settled and (j) with respect to performance-based awards, the performance objectives, the amounts payable at one or more levels of attained performance, any applicable service vesting requirements, and the payout schedule.

Stock Options. Each granted option will have an exercise price per share determined by the plan administrator, but the exercise price will not be less than 100% of the fair market value of the option shares on the grant date. No granted option will have a term in excess of ten years. The shares subject to each option will generally vest in one or more installments over a specified period of service measured from the grant date or upon the achievement of pre-established performance objectives. However, one or more options may be structured so that they will be immediately exercisable for any or all of the option shares. The shares acquired under such immediately exercisable options will be subject to repurchase by us, at the lower of the exercise price paid per share or the fair market value per share, if the optionee ceases service prior to vesting in those shares. Payment of the exercise price may be paid in one or more of the following forms as determined by the plan administrator: cash, shares of Common Stock, through a cashless exercise procedure pursuant to which the optionee effects a same-day exercise of the option and sale of the purchased shares through a broker in order to cover the exercise price for the purchased shares and the applicable withholding taxes and/or through a net exercise procedure pursuant to which we withhold a number of shares of Common Stock otherwise issuable upon exercise of the option having a value equal to the exercise price and applicable withholding taxes.

Upon cessation of service, the optionee will have a limited period in which to exercise the optionee’s outstanding options to the extent exercisable for vested shares. The plan administrator will have complete discretion to extend the period following the optionee’s cessation of service during which the optionee’s outstanding options may be exercised, provide for continued vesting during the applicable post-service exercise period and/or accelerate the exercisability or vesting of options in whole or in part. Such discretion may be exercised at any time while the options remain outstanding.

Stock Appreciation Rights. The Incentive Plan allows the issuance of two types of stock appreciation rights:

 

   

Tandem stock appreciation rights granted in conjunction with options, which provide the holders with the right to surrender the related option grant for an appreciation distribution from us in an amount

 

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equal to the excess of (i) the fair market value of the vested shares of Common Stock subject to the surrendered option over (ii) the aggregate exercise price payable for those shares.

 

   

Stand-alone stock appreciation rights, which allow the holders to exercise those rights as to a specific number of shares of our Common Stock and receive in exchange an appreciation distribution from us in an amount equal to the excess of (i) the fair market value of the shares of Common Stock as to which those rights are exercised over (ii) the aggregate exercise price in effect for those shares. The exercise price per share may not be less than the fair market value per underlying share of Common Stock on the date the stand-alone stock appreciation right is granted, and the right may not have a term in excess of ten years.

The appreciation distribution on any exercised stock appreciation right will be paid in (i) cash, (ii) shares of our Common Stock or (iii) a combination of cash and shares of our Common Stock. Upon cessation of service with us, the holder of a stock appreciation right will have a limited period in which to exercise that right to the extent exercisable at that time. The plan administrator has complete discretion to extend the period following the holder’s cessation of service during which the holder’s outstanding stock appreciation rights may be exercised, provide for continued vesting during the applicable post-service exercise period and/or accelerate the exercisability or vesting of stock appreciation rights in whole or in part. Such discretion may be exercised at any time while the stock appreciation rights remain outstanding.

Repricing. The plan administrator may not implement any of the following repricing programs: (i) the cancellation of outstanding options or stock appreciation rights in return for new options or stock appreciation rights with a lower exercise price per share, (ii) the cancellation of outstanding options or stock appreciation rights with exercise prices per share in excess of the then current fair market value per share of Common Stock for consideration payable in cash or our equity securities (except in the event of a change in control or in the case of a corporate transaction as described in the section titled “Changes in Capitalization” below) or (iii) the direct reduction of the exercise price in effect for outstanding options or stock appreciation rights.

Stock Awards and Restricted Stock Units. Shares of our Common Stock may be issued under the Incentive Plan subject to performance or service vesting requirements established by the plan administrator or as a fully-vested bonus for past services without any cash outlay required of the recipient. Shares of our Common Stock may also be issued under the Incentive Plan pursuant to restricted stock units, which entitle the recipients to receive those shares upon the attainment of designated performance goals or the completion of a prescribed service period or upon the expiration of a designated period following the vesting of those units, including (without limitation), a deferred distribution date following the termination of the recipient’s service with us.

The plan administrator will have the discretionary authority to structure one or more such awards so that the shares of common stock subject to those awards (or cash, as applicable) will vest only upon the achievement of any subjective or objective goals established by the plan administrator. These goals may be based on, without limitation, one or more of the following criteria: (i) cash flow, any derivative of operating cash flow, cash flow sufficient to achieve financial ratios or a specified cash balance, free cash flow, cash flow return on capital, net cash provided by operating activities, and cash flow per share; (ii) earnings (including earnings before interest and taxes, earnings before taxes, earnings before interest, taxes, depreciation, amortization and charges for stock-based compensation, earnings before interest, taxes, depreciation and amortization, and net earnings); (iii) earnings per share; (iv) growth in earnings or earnings per share; (v) stock price, net asset value, dividend, dividend payout ratio; (vi) return on equity or average stockholder equity; (vii) total stockholder return or growth in total stockholder return either directly or in relation to a comparative group; (viii) return on capital or improvement in or attainment of working capital levels; (ix) return on assets or net assets or growth in assets; (x) invested capital, required rate of return on capital, return on invested capital, relative risk-adjusted investment performance and investment performance of capital; (xi) revenue, growth in revenue or return on sales; (xii) income or net income; (xiii) operating income, net operating income, or net operating income after tax; (xiv) operating profit or net operating profit; (xv) operating margin or gross margin; (xvi) return on operating

 

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revenue or return on operating profit; (xvii) collections and recoveries; (xviii) product research and development, implementation or completion of an identified special project, clinical trials, regulatory filings or approvals or other milestones, patent application or issuance, and manufacturing or process development; (xix) application approvals; (xx) litigation regulatory resolution, legal compliance, or safety and risk reduction goals; (xxi) any derivative of debt leverage (including debt to capital, net debt-to-capital, debt-to-EBITDA or other liquidity ratios); (xxii) balance of cash, cash equivalents and marketable securities; (xxiii) overhead, savings, G&A and other expense control goals; (xxiv) budget comparisons and management; (xxv) growth in stockholder value relative to the growth of the S&P 400 or S&P 400 Index, the S&P Global Industry Classification Standards (“GICS”) or GICS Index, or another peer group or peer group index; (xxvi) credit rating, debt, fixed charge coverage, interest coverage; (xxvii) development and implementation of strategic plans and/or organizational restructuring goals; (xxviii) development and implementation of risk and crisis management programs, including business continuity plans; (xxix) improvement in workforce diversity, equity and inclusion; (xxx) market share, market penetration, and economic value added; (xxxi) inventory control; (xxxii) compliance requirements and compliance relief; (xxxiii) health and safety goals; (xxxiv) productivity goals or backlog; (xxxv) workforce management, key hires, and succession planning goals; (xxxvi) economic value added (including typical adjustments consistently applied from generally accepted accounting principles required to determine economic value added performance measures); (xxxvii) measures of customer satisfaction, employee satisfaction or staff development; (xxxviii) stakeholder engagement; (xxxix ) environmental and climate-change-related goals; (xl) development or marketing collaborations, formations of joint ventures or partnerships or the completion of other similar transactions intended to enhance the Company’s revenue or profitability or enhance its customer base; (xli) business expansion, mergers, acquisitions, divestitures, joint ventures; (xlii) capital or fund raising to support operations, government grants, license arrangements; (xliv) acquisition of new customers, including institutional accounts or customer retention and/or repeat order rate; (xlv) progress of partnered programs; (lvi) partner satisfaction; (lvii) milestones related to samples received and/or tests run; (lviii) expansion of sales in additional geographies or markets; (liv) patient samples processed and billed; (lv) sample processing operating metrics (including, without limitation, failure rate maximums and reduction of repeat rates); or (xliii) such other performance criteria as the plan administrator may specify. In addition, such performance criteria may be based upon the attainment of specified levels of our performance under one or more of the measures described above relative to the performance of other entities and may also be based on the performance of any of our business units or divisions or any parent or subsidiary. Each applicable performance goal may include a minimum threshold level of performance below which no award will be earned, levels of performance at which specified portions of an award will be earned and a maximum level of performance at which an award will be fully earned. Each applicable performance goal may be structured at the time of the award to provide for appropriate adjustment for one or more of the following items: (A) asset impairments or write-downs; (B) litigation judgments or claim settlements; (C) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; (D) accruals for reorganization and restructuring programs; (E) any extraordinary nonrecurring items; (F) the operations of any business acquired by the Company; (G) the divestiture of one or more business operations or the assets thereof; (H) the effects of any corporate transaction, such as a merger, consolidation, separation (including spin-off or other distributions of stock or property by the Company) or reorganization (whether or not such reorganization is within the definition of that term in Code Section 368); and (I) any other adjustment consistent with the operation of the Incentive Plan.

Should the participant cease to remain in service while holding one or more unvested shares or should the performance objectives not be attained with respect to one or more such unvested shares, then those shares will be immediately subject to cancellation. Outstanding restricted stock units will automatically terminate, and no shares of Common Stock will be issued in satisfaction of those awards, if the performance goals or service requirements established for such awards are not attained. The plan administrator, however, will have the discretionary authority to issue shares of Common Stock in satisfaction of one or more outstanding awards, or waive the surrender and cancellation of one or more unvested shares of Common Stock, as to which the designated performance goals or service requirements are not attained.

 

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Dividend Equivalent Rights. The plan administrator may provide a participant as part of an award (other than options or stock appreciation rights) with dividends or dividend equivalents, payable in cash, shares of Common Stock, or a combination of cash and shares of Common Stock, on such terms as determined by the plan administrator. However, any dividend or dividend equivalent will only be paid if the underlying award vests and will be subject to a risk of forfeiture to the same extent as the underlying award.

Other Awards. Under the Incentive Plan, the plan administrator may grant other types of awards that are denominated in shares of Common Stock to anyone eligible to participate in the Incentive Plan. The plan administrator will determine the terms and conditions of such awards.

New Plan Benefits

No awards have been granted under the Incentive Plan. Any awards following approval of this proposal to other participants shall be at the discretion of the plan administrator. Accordingly, the benefits or amounts that may be received by or allocated to each of (i) the officers listed in the Summary Compensation Table, (ii) each of the nominees for election as a director, (iii) all non-employee directors as a group, (iv) all of our present executive officers as a group, and (v) all of our employees, including all other current officers, as a group under the Incentive Plan are not determinable at this time.

General Provisions

Change in Control. In the event we should experience a change in control, the following provisions are in effect for all outstanding awards under the Incentive Plan, unless provided otherwise in an award agreement entered into with the participant:

 

   

Each outstanding award may be assumed, substituted, replaced with a cash retention program that preserves the intrinsic value of the award and provides for subsequent payout in accordance with the same vesting schedule applicable to the award or otherwise continued in effect by the successor corporation.

 

   

To the extent an award is not so assumed, substituted, replaced, or continued, the award will automatically accelerate in full (with vesting of performance-based awards to be determined with reference to actual performance attained as of the change in control or based on target level), unless the acceleration of such award is precluded by other limitations imposed in the applicable award agreement.

 

   

The plan administrator has complete discretion to grant one or more awards which will vest in the event the individual’s service with us or the successor entity is terminated within a designated period following a change in control transaction in which those awards are assumed or otherwise continued in effect.

 

   

Unless the plan administrator establishes a different definition for one or more awards, a change in control will be deemed to occur for purposes of the Incentive Plan in the event (a) a merger or asset sale or (b) there occurs any transaction pursuant to which any person or group of related persons becomes directly or indirectly the beneficial owner of securities possessing 50% or more of the total combined voting power of our outstanding securities or (c) there is a change in the majority of the Board effected through one or more contested elections for board membership.

Changes in Capitalization. In the event any change is made to the outstanding Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction, or other change affecting the outstanding Common Stock without our receipt of consideration or should the value of our outstanding Common Stock be substantially reduced by reason of a spin-off transaction or extraordinary distribution (whether in cash, securities or other property) or an extraordinary distribution, or should there occur any merger, consolidation, reincorporation or other reorganization, equitable adjustments will be made to: (i) the

 

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maximum number and/or class of securities issuable under the Incentive Plan; (ii) the maximum number and/or class of securities for which incentive options may be granted under the Incentive Plan; (iii) the maximum number and/or class of securities for which any one person may be granted awards under the Incentive Plan per calendar year; (iv) the number and/or class of securities and the exercise price per share in effect for outstanding award and the cash consideration (if any) payable per share; (v) the number and/or class of securities subject to repurchase rights under the Incentive Plan and the repurchase price payable per share; and (vi) such other terms and conditions as the plan administrator deems appropriate. Such adjustments will be made in such manner as the plan administrator deems appropriate.

Valuation. The fair market value per share of Common Stock on any relevant date under the Incentive Plan is deemed to be equal to the closing selling price per share on that date as determined on Nasdaq. As of [●], the fair market value of a share of Common Stock determined on such basis was $[●] per share.

Stockholder Rights and Transferability. No optionee has any stockholder rights with respect to the option shares until such optionee has exercised the option and paid the exercise price for the purchased shares. The holder of a stock appreciation right will not have any stockholder rights with respect to the shares subject to that right unless and until such person exercises the right and becomes the holder of record of any shares of Common Stock distributed upon such exercise. Options are not assignable or transferable other than by will or the laws of inheritance following optionee’s death, and during the optionee’s lifetime, the option may only be exercised by the optionee. However, the plan administrator may structure one or more non-statutory options under the Incentive Plan so that those options will be transferable during optionee’s lifetime to one or more members of the optionee’s family or to a trust established for the optionee and/or one or more such family members or to the optionee’s former spouse, to the extent such transfer is in connection with the optionee’s estate plan or pursuant to a domestic relations order. Stand-alone stock appreciation rights will be subject to the same transferability restrictions applicable to non-statutory options.

A participant will have full stockholder rights with respect to any shares of Common Stock issued to the participant under the Incentive Plan, whether or not the participant’s interest in those shares is vested. A participant will not have any stockholder rights with respect to the shares of Common Stock subject to restricted stock units until that award vests and the shares of Common Stock are issued thereunder. However, dividend-equivalent units may be paid or credited, either in cash or in actual shares, on outstanding restricted stock units, subject to such terms and conditions as the plan administrator may deem appropriate.

Notwithstanding the foregoing, any dividends or dividend equivalents payable in connection with an award will be subject to the same restrictions as the underlying award and will not be paid until and unless such award vests.

Withholding Taxes. A participant shall be required to pay to the Company, and the Company shall have the right to withhold, from any cash, shares or other securities or property issuable under any award or from any other compensation, any required withholding or any other applicable taxes or other amounts due in respect of an award. The plan administrator may provide one or more holders of awards under the Incentive Plan with the right to have us withhold a portion of the shares otherwise issuable to such individuals in satisfaction of the withholding taxes to which they become subject in connection with the issuance, exercise, or settlement of those awards. Alternatively, the plan administrator may allow such individuals to deliver previously acquired shares of Common Stock in payment of such withholding tax liability.

Deferral Programs. The plan administrator may structure one or more awards (other than options and stock appreciation rights) so that the participants may be provided with an election to defer the compensation associated with those awards for federal income tax purposes.

The plan administrator may also implement a non-employee director retainer fee deferral program that allows the non-employee directors the opportunity to elect to convert the Board and Board committee retainer

 

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fees to be earned for a year into restricted stock units that defer the issuance of the shares of Common Stock that vest under those units until a permissible date or event under Internal Revenue Code Section 409A.

To the extent we maintain one or more separate non-qualified deferred compensation arrangements which allow the participants the opportunity to make notional investments of their deferred account balances in shares of Common Stock, the plan administrator may authorize the share reserve under the Incentive Plan to serve as the source of any shares of Common Stock that become payable under those deferred compensation arrangements.

Clawback / Forfeiture. All awards shall be subject to any clawback, recoupment or other similar policy adopted by the Board, and any cash, shares of Common Stock or other property or amounts due, paid, or issued to a participant shall be subject to the terms of such policy.

Amendment and Termination. Our Board may amend or modify the Incentive Plan at any time subject to stockholder approval to the extent required under applicable law or regulation or pursuant to the listing standards of the stock exchange on which our shares are at the time primarily traded. Unless sooner terminated by our Board, the Incentive Plan will terminate on the earliest of (i) the date immediately preceding the tenth anniversary of the Plan Effective Date, (ii) the date on which all shares available for issuance under the Incentive Plan have been issued as fully-vested shares or (iii) the termination of all outstanding awards in connection with certain changes in control or ownership.

Summary of U.S. Federal Income Tax Consequences

The following is a summary of the U.S. federal income taxation treatment applicable to us and the participants who receive awards under the Incentive Plan.

Option Grants. Options granted under the Incentive Plan may be either incentive options, which satisfy the requirements of Section 422 of the Code, or non-statutory options, which are not intended to meet such requirements. The federal income tax treatment for the two types of options differs as follows:

Incentive Options. No taxable income is recognized by the optionee at the time of the option grant, and no taxable income is recognized for regular tax purposes at the time the option is exercised, although taxable income may arise at that time for alternative minimum tax purposes. The optionee will recognize taxable income in the year in which the purchased shares are sold or otherwise made the subject of certain other dispositions. For Federal tax purposes, dispositions are divided into two categories: (i) qualifying, and (ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two (2) years after the date the option for the shares involved in such sale or disposition is granted and more than one (1) year after the date the option is exercised for those shares. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition will result.

Upon a qualifying disposition, the optionee will recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of the purchased shares over (ii) the exercise price paid for the shares. If there is a disqualifying disposition of the shares, then the excess of (i) the fair market value of those shares on the exercise date or (if less) the amount realized upon such sale or disposition over (ii) the exercise price paid for the shares will be taxable as ordinary income to the optionee. Any additional gain or loss recognized upon the disposition will be a capital gain or loss.

If the optionee makes a disqualifying disposition of the purchased shares, then we will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal to the amount of ordinary income recognized by the optionee as a result of the disposition (subject to the limitations described below). We will not be entitled to any income tax deduction if the optionee makes a qualifying disposition of the shares.

Non-Statutory Options. No taxable income is recognized by an optionee upon the grant of a non-statutory option. The optionee will in general recognize ordinary income, in the year in which the option is exercised,

 

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equal to the excess of the fair market value of the purchased shares on the exercise date over the exercise price paid for the shares, and the optionee will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the optionee with respect to the exercised non-statutory option (subject to the limitations described below). The deduction will in general be allowed for our taxable year in which such ordinary income is recognized by the optionee.

Stock Appreciation Rights. No taxable income is recognized upon receipt of a stock appreciation right. The holder will recognize ordinary income in the year in which the stock appreciation right is exercised, in an amount equal to the excess of the fair market value of the underlying shares on the exercise date over the exercise price in effect for the exercised right, and the holder will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the holder in connection with the exercise of the stock appreciation right (subject to the limitations described below). The deduction will be allowed for the taxable year in which such ordinary income is recognized.

Stock Awards. The recipient of unvested shares of Common Stock issued under the Incentive Plan will not recognize any taxable income at the time those shares are issued but will have to report as ordinary income, as and when those shares subsequently vest, an amount equal to the excess of (i) the fair market value of the shares on the vesting date over (ii) the cash consideration (if any) paid for the shares. The recipient may, however, elect under Section 83(b) of the Code to include as ordinary income in the year the unvested shares of Common Stock are issued an amount equal to the excess of (i) the fair market value of those shares on the issue date over (ii) the cash consideration (if any) paid for such shares. If the Section 83(b) election is made, the recipient will not recognize any additional income as and when the shares subsequently vest. We will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the recipient with respect to the unvested shares (subject to the limitations described below). The deduction will in general be allowed for our taxable year in which such ordinary income is recognized by the recipient.

Restricted Stock Units. No taxable income is recognized upon receipt of restricted stock units. The holder will recognize ordinary income in the year in which the shares subject to the units are issued to the holder. The amount of that income will be equal to the fair market value of the shares on the date of issuance, and the holder will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the holder at the time the shares are issued (subject to the limitations described below). The deduction will be allowed for the taxable year in which such ordinary income is recognized.

Dividend Equivalent Rights. No taxable income is recognized upon receipt of a dividend equivalent right award. The holder will recognize ordinary income in the year in which a dividend or distribution, whether in cash, securities, or other property, is paid to the holder. The amount of that income will be equal to the fair market value of the cash, securities or other property received, and the holder will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to an income tax deduction equal to the amount of the ordinary income recognized by the holder of the dividend equivalent right award at the time the dividend or distribution is paid to such holder (subject to the limitations described below). That deduction will be allowed for the taxable year in which such ordinary income is recognized.

Other Awards. In general, no taxable income is recognized upon receipt of other awards. The holder will recognize ordinary income in the year in which the awards are settled, and the participant will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the participant at the time of settlement (subject to the limitations described below). The deduction will be allowed for the taxable year in which such ordinary income is recognized.

 

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Section 162(m) of the Code. Subject to certain limitations and terms, Section 162(m) of the Code and its implementing regulations provide that we may not deduct compensation of more than $1,000,000 paid in any year to our CEO and certain other executive officers. While we intend to structure executive compensation to minimize any limitation imposed by Section 162(m) of the Code, we will continue to maintain flexibility and the ability to pay competitive compensation by not requiring all compensation to be deductible to the extent that doing so is consistent with the best interests of our company and stockholders.

Required Vote

Provided a quorum is present, the affirmative vote of holders of a majority of the votes cast in person or represented by proxy and entitled to vote at the Annual Meeting will be required to approve the adoption of the Incentive Plan. Should such approval not be obtained, then the Incentive Plan will not be implemented.

Recommendation of the Board

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” ADOPTION OF THE STOCK PLAN PROPOSAL UNDER PROPOSAL 4.

 

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PROPOSAL 5 - THE ESPP PROPOSAL

We are asking our stockholders to approve a proposal to adopt the LMF Acquisition Opportunities, Inc. 2022 Employee Stock Purchase Plan (the “ESPP”). The Board adopted the ESPP on [●], 2022, subject to stockholder approval at the Meeting. If approved by the stockholders, the ESPP will become effective upon closing of the Business Combination (the “ESPP Effective Date”). If the ESPP is not approved by the LMAO stockholders, or if the Merger Agreement is terminated prior to the consummation of the Business Combination, the ESPP will not become effective.

The ESPP is broad-based and allows us to provide an incentive to attract, retain and reward eligible employees of the Combined Company and any participating subsidiary companies (whether now existing or subsequently established) with the opportunity to periodically purchase shares of our Common Stock at a discount through their accumulated periodic payroll deductions. The Board believes that employees’ continuing economic interest, as stockholders, in our performance and success enhances the entrepreneurial spirit of the Combined Company, which will greatly contribute to our long-term growth and profitability.

The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (“Section 423”). Favorable tax treatment is available for United States tax residents participating in a Section 423 plan. The ESPP also authorizes the grant of rights to purchase shares that do not qualify under Section 423 pursuant to rules, procedures or sub-plans adopted by the plan administrator to achieve tax, securities law, or other compliance objectives in particular locations outside of the United States.

If this proposal is approved, up to 380,000 shares of Common Stock will be available for issuance under the ESPP (subject to adjustments described below and in the section titled “Stock Subject to the ESPP” below).

Summary Description of the ESPP

The following is a summary of the principal features of the ESPP, but such summary does not purport to be a complete description of all the provisions of the ESPP and is qualified in its entirety by reference to the provisions of the ESPP attached hereto as Annex E.

Stock Subject to the ESPP

The ESPP provides employees with the right to purchase shares of our Common Stock at a discount through periodic payroll deductions. A total of 380,000 shares of Common Stock have been reserved for issuance under the ESPP. The shares issuable under the ESPP may be made available from authorized but unissued shares of our Common Stock or from shares of Common Stock repurchased by us, including shares repurchased on the open market.

In the event that any change is made to our outstanding Common Stock (whether by reason of any recapitalization, stock dividend, stock split, recapitalization, reorganization, merger, consolidation, exchange or combination of shares, spin-off transaction or other change affecting the Common Stock without our receipt of consideration) or should the value of outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, appropriate adjustments will be made to (i) the maximum number and class of securities issuable under the ESPP, (ii) the maximum number and class of securities purchasable per participant on any purchase date, and (iii) the number and class of securities and the price per share in effect under each outstanding purchase right to prevent the dilution or enlargement of benefits thereunder.

Administration

Subject to the terms of the ESPP, a committee of two or more Board members appointed by the Board, in its role as plan administrator, has the authority to interpret and construe any provision of the ESPP, establish rules and regulations relating to administering the ESPP, and make all other determinations necessary or

 

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advisable for the administration of the ESPP. The decisions of the plan administrator are final and binding on all parties having an interest in the ESPP. To the extent applicable law permits, the plan administrator may, to the extent it deems appropriate, delegate, administrative duties.

Eligibility

All employees of the Combined Company and its participating subsidiaries (whether now existing or subsequently established or acquired) may become eligible to participate in the ESPP. Generally, an employee of the Combined Company or a participating subsidiary who is employed on a basis under which he or she is regularly expected to work for more than twenty hours per week for more than five months per calendar year is eligible to participate in an offering period under the ESPP. The plan administrator may waive one or all of the service requirements in advance and with respect to an offering period. Individuals employed outside the United States may be subject to similar or additional eligibility restrictions, unless prohibited by or required by the laws of the jurisdiction in which they are employed.

Immediately following the Business Combination, three employees (including two executive officers), would be eligible to participate in the ESPP.

Offering Periods and Purchase Rights

Shares of Common Stock will be available for issuance under the ESPP through a series of offering periods. The duration of each offering period will be set by the plan administrator prior to the start date and will not exceed 27 months. The first offering period will commence on the date as determined by the plan administrator and unless and until otherwise determined by the plan administrator, each offering period will have a six-month duration.

At the time the participant joins an offering period, he or she will be granted a purchase right to acquire shares of our Common Stock at a discount on the last day of the offering period. All payroll deductions collected from the participant during each offering period will be automatically applied to the purchase of Common Stock at the end of that offering period, subject to certain limitations.

Purchase Price

The plan administrator will establish the purchase price for each offering period prior to the start of the offering period, but such price may not be less than 85% of the lower of (i) the fair market value per share of our Common Stock on the start date of that offering period or (ii) the fair market value on the purchase date.

Valuation

For purposes of the ESPP, the fair market value per share of our Common Stock on any relevant date will be deemed to be equal to the closing sale price per share of our Common Stock on that date on Nasdaq, or, if there is no closing share price on the particular date, then the closing sale share price on the immediately preceding date where there is a closing sale share price. On [●], the fair market value was $[●] per share, based on the closing sale price of our Common Stock on that date on Nasdaq.

Payroll Deductions

To participate in the ESPP, an eligible employee must complete the enrollment procedure as prescribed by the plan administrator (or its designee). Each participant may authorize us to make payroll deductions of up to 15% from the participant’s salary on each regular payday for as long as he or she participates in the ESPP. We will credit these payroll deductions to the participant’s book account under the ESPP, and no interest will be

 

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applied to this amount. A participant may reduce his or her contribution percentage or discontinue participation in the ESPP at any time, but no other change can be made during an offering period. A participant may also increase his or her contribution percentage for the following offering period. To the extent necessary to comply with Section 423 or other ESPP limits, a participant’s contributions may be reduced without the participant’s consent, in which event such contributions will resume when permitted unless the participant elects to discontinue contributions. If a participant’s employment terminates for any reason, all amounts credited to his or her account will be returned.

All funds held or received by us under the ESPP may be used for any corporate purpose until applied to the purchase of Common Stock or refunded to employees and shall not be segregated from our general assets.

Special Limitations

The ESPP imposes certain limitations upon a participant’s right to acquire Common Stock, including the following:

 

   

Purchase rights may not be granted to any individual who owns stock (including stock purchasable under any outstanding purchase rights) possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or any of its affiliates.

 

   

A participant may not be granted rights to purchase more than $25,000 worth of Common Stock (valued at the time each purchase right is granted) for each calendar year in which such purchase rights are outstanding.

 

   

The plan administrator will establish the maximum number of shares purchasable by a participant on each purchase date during an offering period.

Stockholder Rights

No participant will have any stockholder rights with respect to the shares covered by his or her purchase rights until the shares are purchased on the participant’s behalf and the participant has become a holder of record of the purchased shares. No adjustment will be made for dividends, distributions, or other rights for which the record date is prior to the date of such purchase.

General Provisions

Assignability

No purchase rights will be assignable or transferable by the participant, and the purchase rights will be exercisable only by the participant.

Change in Control

In the event of a change in control (as defined in the ESPP), the plan administrator may take such action as deemed appropriate including (i) having the successor entity (or its parent or subsidiary corporation) assume our obligations under the ESPP and the outstanding purchase rights, (ii) accelerating the next purchase date in the then current offering period to a date immediately before the closing date of the change in control, and applying the accumulated payroll deductions to the purchase of shares of our Common Stock at the purchase price in effect for that offering period or (iii) terminating all outstanding purchase rights and refunding all accumulated payroll deductions.

Share Proration

Should the total number of shares of Common Stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the ESPP, then the

 

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plan administrator will make a pro-rata allocation of the available shares on a uniform and nondiscriminatory basis, and the payroll deductions of each participant, to the extent in excess of the aggregate purchase price payable for the Common Stock pro-rated to such individual, will be refunded.

Amendment and Termination

Our Board may terminate the ESPP at any time. Currently, the ESPP is set to terminate upon the earliest of (i) [●], 2032, (ii) the date on which all shares available for issuance under the ESPP have been sold pursuant to purchase rights exercised under the ESPP or (iii) the date on which all purchase rights are exercised in connection with a change in control. No further purchase rights shall be granted or exercised, and no further payroll deductions shall be collected, under the ESPP following its termination.

The Board may amend the ESPP at any time. To the extent necessary to comply with Section 423 (or any successor rule), certain material amendments must be approved by the stockholders.

New Plan Benefits

The benefits to be received by the Combined Company’s executive officers and employees as a result of the adoption of the ESPP are not determinable, since the amounts of future purchases by participants are based on elective participant contributions and the purchase price of our shares of Common Stock, which are not determinable until the end of an offering period. Our non-employee directors are not eligible to participate in the ESPP.

Summary of U.S. Federal Income Tax Consequences

The following is a summary of the U.S. Federal income taxation treatment, as of the date of this document, applicable to us and the participants with respect to the purchase of shares of Common Stock under the ESPP. The rules concerning U.S. federal income tax consequences with respect to purchasing shares under the ESPP are quite technical. Moreover, the applicable statutory provisions are subject to change, as are their interpretation and applicable, which may vary in individual circumstances. Therefore, the following is designed to provide a general understanding of U.S. federal income tax consequences with respect to such purchases. In addition, the following discussion does not describe any gift, estate, social security, or state or local tax consequences that may apply and is limited to the U.S. federal income tax consequences to individuals who are citizens of residents of the United States.

The ESPP is intended to be an “employee stock purchase plan” within the meaning of Section 423. Under a plan which so qualifies, no taxable income will be recognized by a participant subject to U.S. taxation, and no deductions will be allowable to us, upon either the grant or the exercise of the purchase rights. Taxable income will not be recognized until there is a sale or other disposition of the shares acquired under the ESPP or in the event the participant should die while still owning the purchased shares.

Generally, if the participant sells or otherwise disposes of the purchased shares within two years after the start date of the offering period in which such shares were acquired or within one year after the purchase date on which those shares were actually acquired, then the participant will recognize ordinary income in the year of sale or disposition equal to the amount by which the fair market value of the shares on the purchase date exceeded the purchase price paid for those shares, and we will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal in amount to such excess. Any additional gains will be treated as long-term capital gains.

If the participant sells or disposes of the purchased shares more than two years after the start date of the offering period in which the shares were acquired and more than one year after the purchase date of those shares, then the participant will recognize ordinary income in the year of sale or disposition equal to the lesser of (i) the

 

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amount by which the fair market value of the shares on the sale or disposition date exceeded the purchase price paid for those shares or (ii) fifteen percent of the fair market value of the shares on the start date of that offering period; and any additional gain upon the disposition will be taxed as a long-term capital gain. We will not be entitled to an income tax deduction with respect to such disposition.

If the participant still owns the purchased shares at the time of death, the lesser of (i) the amount by which the fair market value of the shares on the date of death exceeds the purchase price or (ii) fifteen percent of the fair market value of the shares on the start date of the offering period in which those shares were acquired will constitute ordinary income in the year of death.

Required Vote

Provided a quorum is present, the affirmative vote of holders of a majority of the votes cast in person or represented by proxy and entitled to vote at the Annual Meeting will be required to approve the adoption of the ESPP. Should such approval not be obtained, then the ESPP will not be implemented.

Recommendation of the Board

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” ADOPTION OF THE ESPP PROPOSAL UNDER PROPOSAL 5.

 

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PROPOSAL 6 - THE NASDAQ PROPOSAL

Overview

We are proposing the Nasdaq Proposal in order to comply with Nasdaq Listing Rules 5635(a) and (b). Under Nasdaq Listing Rule 5635(a), stockholder approval is required prior to the issuance of securities in connection with the acquisition of another company if such securities are not issued in a public offering and (A) have, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of common stock (or securities convertible into or exercisable for common stock); or (B) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of Common Stock outstanding before the issuance of the stock or securities. Under Nasdaq Listing Rule 5635(b), stockholder approval is required prior to the issuance of securities when the issuance or potential issuance will result in a change of control.

Pursuant to the Merger Agreement, we will issue to the SeaStar Medical stockholders as consideration in the Business Combination up to 7,907,774 shares of Common Stock. See the section entitled “Proposal 1 - The Business Combination Proposal - Treatment of SeaStar Medical Securities; Merger Consideration.” Because the number of shares of Common Stock we anticipate issuing as consideration in the Business Combination (1) will constitute more than 20% of our outstanding Common Stock and more than 20% of outstanding voting power prior to such issuance and (2) will result in a change of control of LMAO, we are required to obtain stockholder approval of such issuance pursuant to Nasdaq Listing Rules 5635(a) and (b).

Effect of Proposal on Current Stockholders

If the Nasdaq Proposal is adopted, LMAO would issue shares representing more than 20% of the outstanding shares of our Common Stock in connection with the Business Combination. The issuance of such shares would result in significant dilution to the LMAO stockholders and would afford such stockholders a smaller percentage interest in the voting power, liquidation value and aggregate book value of LMAO. If the Nasdaq Proposal is adopted, assuming that 7,907,774 shares of Common Stock are issued to the stockholders of SeaStar Medical as consideration in the Business Combination, we anticipate that the stockholders of SeaStar Medical will hold 39.2% of our outstanding shares of Common Stock, assuming the Dow Pension Funds will make only the minimum investment of $5,000,000, the Dow Pension Funds will hold 29.2% of our outstanding Common Stock, and the current LMAO stockholders will hold 48.7% of our outstanding Common Stock immediately following completion of the Business Combination. The ownership percentage with respect to the Combined Company (A) does not take into account (i) the redemption of any shares by the LMAO public stockholders, (ii) the issuance of any additional shares upon the closing of the Business Combination under the Incentive Plan or ESPP, and (iii) the withholding of shares of Common Stock to pay future exercises under the SeaStar Medical warrants and options assumed by LMAO or the settlement of SeaStar Medical restricted stock units assumed by LMAO, and (B) assumes (i) that the Dow Pension Funds only purchase the minimum amount under the commitment letter dated April 21, 2022 ($5,00,000) and (ii) that SeaStar Medical neither has any indebtedness to be repaid at Closing nor incurs transaction expenses in excess of the transaction expenses cap.

If the Nasdaq Proposal is not approved and we consummate the Business Combination on its current terms, LMAO would be in violation of Nasdaq Listing Rule 5635(a) and (b), which could result in the delisting of our securities from the Nasdaq Capital Market. If Nasdaq delists our securities from trading on its exchange, we could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for our securities;

 

   

reduced liquidity with respect to our securities;

 

   

a determination that our shares are a “penny stock,” which will require brokers trading in our securities to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our securities;

 

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a limited amount of news and analyst coverage for the post-transaction company; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

It is a condition to the obligations of LMAO and SeaStar Medical to close the Business Combination that our Common Stock remain listed on the Nasdaq Capital Market. As a result, if the Nasdaq Proposal is not adopted, the Business Combination may not be completed unless this condition is waived.

Vote Required for Approval

Assuming that a quorum is present at the Meeting, the affirmative vote of holders of at least a majority of the issued and outstanding shares of Common Stock present in person or represented by proxy and entitled to vote at the Meeting is required to approve the Nasdaq Proposal.

This Proposal is conditioned on the approval of the Business Combination Proposal and the Charter Approval Proposal. If either of the Business Combination Proposal or Charter Approval Proposal is not approved, Proposal 6 will have no effect even if approved by our stockholders. Because stockholder approval of this Proposal 6 is a condition to completion of the Business Combination under the Merger Agreement, if this Proposal 6 is not approved by our stockholders, the Business Combination will not occur unless we and SeaStar Medical waive the applicable closing condition.

Board Recommendation

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE NASDAQ PROPOSAL UNDER PROPOSAL 6.

 

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PROPOSAL 7 - THE DIRECTOR NOMINATION PROPOSAL

Overview

Our Board is currently divided into two classes, with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a two-year term. The term of office of our Class I directors, Bruce H. Bennett, Craig E. Burson, and Martin A. Traber, will expire at the Meeting.

If the Business Combination Proposal, the Charter Approval Proposal, the Stock Plan Proposal, the ESPP Proposal and the Nasdaq Proposal are approved, the Proposed Charter, which would be effective upon the Closing, will provide for the reclassification of our Board from two classes to three classes. Our Board has determined to increase the size of our Board from five to seven directors if the Business Combination is completed.

If any of the condition precedent proposals are not approved or the business combination is not completed, our Board will remain at six directors and classified in two classes, and the term of office of each of the Company’s three Class I directors, if elected, would begin upon the conclusion of the Meeting.

Director Nominees

Our Board has determined to increase the size of the Board from five to seven directors if the Business Combination is completed.

LMAO’s stockholders are being asked to consider and vote upon a proposal to elect seven directors to our Board, effective immediately upon the Closing of the Business Combination, with each Class I director having a term that expires at our first annual meeting of stockholders after the completion of the Business Combination, each Class II director having a term that expires at our second annual meeting of stockholders after the completion of the Business Combination and each Class III director having a term that expires at our third annual meeting of stockholders after the completion of the Business Combination, or, in each case, when his or her respective successor is duly elected and qualified, or upon his or her earlier death, resignation, retirement or removal.

We are proposing that Andres Lobo and Rick Barnett serve as the Class I directors, Bruce Rodgers, Richard Russell and Allan Collins serve as Class II directors and Eric Schlorff and Kenneth Van Heel serve as Class III directors.

For more information on the experience of Messrs. Lobo, Barnett, Rodgers, Russell, Collins, Schlorff and Van Heel, please see the section entitled “Directors and Executive Officers of the Combined Company After the Business Combination.”

Vote Required for Approval

Approval of the Director Election Proposal requires a plurality vote of the shares of Common Stock cast in respect of that Proposal and entitled to vote thereon at the Meeting. “Plurality” means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. Consequently, any shares not voted “FOR” a particular nominee (whether as a result of an abstention, a direction to withhold authority or a broker non-vote) will not be counted in the nominee’s favor. This Director Nomination Proposal is conditioned upon the approval and completion of the Business Combination Proposal, the Charter Approval Proposal and the Nasdaq Proposal. If any of the Business Combination Proposal, the Charter Approval Proposal or the Nasdaq Proposal are not approved, this Proposal will have no effect even if approved by our stockholders.

Board Recommendation

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE DIRECTOR NOMINATION PROPOSAL UNDER PROPOSAL 7.

 

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PROPOSAL 8 - THE ADJOURNMENT PROPOSAL

The Adjournment Proposal, if adopted, will approve the chairman’s adjournment of the Meeting to a later date to permit further solicitation of proxies. The Adjournment Proposal will only be presented to our stockholders in the event, based on the tabulated votes, there are not sufficient votes received at the time of the Meeting to approve the other Proposals.

Consequences if the Adjournment Proposal is Not Approved

If the Adjournment Proposal is not approved by our stockholders, the chairman will not adjourn the Meeting to a later date in the event, based on the tabulated votes, there are not sufficient votes received at the time of the Meeting to approve the Business Combination Proposal, the Charter Approval Proposal, the Stock Plan Proposal, the ESPP Proposal, the Nasdaq Proposal or the Director Nomination Proposal.

Required Vote

Approval of the Adjournment Proposal will require the affirmative vote of the holders of a majority of the votes cast by LMAO stockholders present in person or represented by proxy at the Meeting and entitled to vote thereon. The Adjournment Proposal is not conditioned on the approval of any other Proposal set forth in this proxy statement/prospectus.

Board Recommendation

OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ADJOURNMENT PROPOSAL UNDER PROPOSAL 8.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a general discussion of the material U.S. federal income tax consequences of the exercise of redemption rights by U.S. Holders and Non-U.S. Holders (defined below) of Common Stock.

This discussion is based on provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations promulgated thereunder (whether final, temporary, or proposed), administrative rulings of the IRS, and judicial decisions, all as in effect on the date hereof, and all of which are subject to differing interpretations or change, possibly with retroactive effect. This discussion does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences that may apply to a holder as a result of an exercise of redemption rights. In addition, this discussion does not address the U.S. federal 3.8% Medicare tax imposed on certain net investment income or federal estate, gift, or other non-income tax consequences, nor does it address any tax consequences arising under any U.S. state and local, or non-U.S. tax laws. Holders should consult their own tax advisors regarding such tax consequences in light of their particular circumstances.

No ruling has been requested or will be obtained from the IRS regarding the U.S. federal income tax consequences of an exercise of redemption rights, the Business Combination or any other related matter; thus, there can be no assurance that the IRS will not challenge the U.S. federal income tax treatment described below or that, if challenged, such treatment will be sustained by a court.

This summary is limited to considerations relevant to holders that hold Common Stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to holders, nor does it take into account the individual facts and circumstances of any particular holder that may affect the U.S. federal income tax consequences to such holder, and accordingly, is not intended to be and should not be construed as, tax advice. In particular, this summary does not address the federal income tax consequences to holders subject to special treatment under the U.S. tax laws, such as:

 

   

banks or other financial institutions, underwriters, or insurance companies;

 

   

traders in securities who elect to apply a mark-to-market method of accounting;

 

   

real estate investment trusts and regulated investment companies;

 

   

tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts;

 

   

expatriates or former long-term residents of the United States;

 

   

subchapter S corporations, partnerships or other pass-through entities or investors in such entities;

 

   

dealers or traders in securities, commodities or currencies;

 

   

grantor trusts;

 

   

persons subject to the alternative minimum tax;

 

   

U.S. persons whose “functional currency” is not the U.S. dollar;

 

   

persons who received shares of Common Stock through the issuance of restricted stock under an equity incentive plan or through a tax-qualified retirement plan or otherwise as compensation;

 

   

persons who own (directly or through attribution) 5% or more (by vote or value) of the outstanding shares of Common Stock (excluding treasury shares);

 

   

holders holding Common Stock as a position in a “straddle,” as part of a “synthetic security” or “hedge,” as part of a “conversion transaction,” or other integrated investment or risk reduction transaction;

 

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controlled foreign corporations, passive foreign investment companies, or foreign corporations with respect to which there are one or more United States shareholders within the meaning of Treasury Regulation Section 1.367(b)-3(b)(1)(ii); or

 

   

the Sponsor or its affiliates.

As used in this proxy statement/prospectus, the term “U.S. Holder” means a beneficial owner of Common Stock that is, for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (or other entity that is classified as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States or any State thereof or the District of Columbia;

 

   

an estate the income of which is subject to U.S. federal income tax regardless of its source; or

 

   

a trust (i) if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes.

A “Non-U.S. Holder” means a beneficial owner of Common Stock that is neither a U.S. Holder nor a partnership (or an entity or arrangement treated as a partnership) for U.S. federal income tax purposes.

If a partnership, including for this purpose any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes, holds Common Stock, the U.S. federal income tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. A holder that is a partnership and the partners in such partnership should consult their own tax advisors with regard to the U.S. federal income tax consequences of an exercise of redemption rights.

THIS SUMMARY DOES NOT PURPORT TO BE A COMPREHENSIVE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN EXERCISE OF REDEMPTION RIGHTS. IN ADDITION, THE U.S. FEDERAL INCOME TAX TREATMENT OF THE BENEFICIAL OWNERS OF COMMON STOCK MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN AND DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF U.S. FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. HOLDERS OF COMMON STOCK SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE BUSINESS COMBINATION, INCLUDING THE APPLICABILITY AND EFFECTS OF U.S. FEDERAL, STATE, LOCAL, AND OTHER TAX LAWS.

Certain Material U.S. Federal Income Tax Consequences of Exercising Redemption Rights

U.S. Federal Income Tax Consequences to U.S. Holders

In the event that a U.S. Holder elects to redeem its Common Stock for cash, the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale or exchange of the Common Stock under Section 302 of the Code or is treated as a corporate distribution under Section 301 of the Code with respect to the U.S. Holder.

Redemption Treated as Sale or Exchange

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U.S. Holder’s adjusted tax basis in the Common Stock surrendered in such redemption transaction. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder’s holding period for the Common Stock redeemed exceeds one year. It is unclear, however, whether the redemption rights with respect to the Common Stock may suspend the running of the applicable holding period for this purpose. If the running of the holding period for the Common Stock is suspended, then non-corporate U.S. Holders may not be able to satisfy the one-year holding period requirement for long-term capital gain treatment, in which case any gain recognized on the redemption of the Common Stock would be subject to short-term capital gain treatment and would be taxed at regular ordinary income tax rates. Long term capital gain realized by a non-corporate U.S. Holder is currently taxed at a reduced rate. The deductibility of capital losses is subject to limitations.

Redemption Treated as Corporate Distribution

If the redemption does not qualify as a sale or exchange of Common Stock, the U.S. Holder will be treated as receiving a corporate distribution. Such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from LMAO’s current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in the Common Stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the Common Stock. Dividends paid to a U.S. Holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations) and provided certain holding period requirements are met, dividends paid to a non-corporate U.S. Holder generally will constitute “qualified dividends” that will be subject to tax at the maximum tax rate accorded to long-term capital gains. However, it is unclear whether the redemption rights with respect to the Common Stock may prevent a U.S. Holder from satisfying the applicable holding period requirements with respect to the dividends received deduction or the preferential tax rate on qualified dividend income, as the case may be.

Characterization of Redemption

Whether a redemption qualifies for sale or exchange treatment will depend largely on the total number of shares of Common Stock treated as held by the U.S. Holder relative to all of the shares of Common Stock outstanding, determined as of before and after the redemption. The redemption of Common Stock generally will be treated as a sale or exchange of the Common Stock (rather than as a corporate distribution) if the redemption (i) is “substantially disproportionate” with respect to the U.S. Holder, (ii) results in a “complete termination” of the U.S. Holder’s interest in LMAO or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. Holder. These tests are explained more fully below.

In determining whether any of the f