SeaStar Medical(ICU) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited financial information, including statements and detailed notes, for LMF Acquisition Opportunities, Inc Item 1. Financial Statements This section presents LMF Acquisition Opportunities, Inc.'s unaudited financial statements and detailed notes Balance Sheets The Balance Sheets present the Company's assets, liabilities, and stockholders' deficit Balance Sheet Summary | ASSETS / LIABILITIES | June 30, 2022 (Unaudited) | December 31, 2021 | | :------------------- | :-------------------------- | :------------------ | | Cash | $79,023 | $51,567 | | Prepaid insurance and other fees | $34,906 | $286,237 | | Prepaid expenses | $188,947 | $14,817 | | Cash and marketable securities held in trust | $105,652,034 | $105,581,820 | | Total assets | $105,954,910 | $105,934,441 | | Accrued expenses | $1,037,428 | $376,702 | | Notes and advances payable - related parties | $911,940 | — | | Deferred underwriting commissions | $3,622,500 | $3,622,500 | | Warrant liability | $1,809,900 | $6,930,740 | | Total current liabilities | $7,381,768 | $10,929,942 | | Total liabilities | $7,381,768 | $10,929,942 | | Class A common stock subject to possible redemption | $105,570,000 | $105,570,000 | | Total stockholders' deficit | $(6,996,858) | $(10,565,501) | Statements of Operations The Statements of Operations detail the Company's revenues, expenses, and net income or loss Statements of Operations Summary | Expense/Income | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Formation and Administrative costs | $341,786 | $209,718 | $560,442 | $335,675 | | Merger costs | $1,061,968 | — | $1,061,968 | — | | Loss from operations | $(1,403,754) | $(209,718) | $(1,622,410) | $(335,675) | | Gain on warrant liability revaluation | $1,518,707 | $(1,772,980) | $5,120,840 | $57,680 | | Investment income earned on marketable securities held in Trust Account | $67,609 | — | $70,213 | $1,754 | | Net income (loss) | $182,562 | $(1,982,698) | $3,568,643 | $(276,241) | | Basic and diluted net income per share (Class A & B) | $0.01 | $(0.15) | $0.27 | $(0.02) | Statements of Cash Flows The Statements of Cash Flows present cash inflows and outflows from operating, investing, and financing Statements of Cash Flows Summary | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :----------------- | :----------------------------- | :----------------------------- | | Net income | $3,568,643 | $(276,241) | | Net cash used in operating activities | $(884,484) | $(319,372) | | Net cash used in investing activities | — | $(105,573,716) | | Net cash provided by financing activities | $911,940 | $106,194,424 | | NET INCREASE IN CASH | $27,456 | $301,336 | | CASH - END OF PERIOD | $79,023 | $339,724 | Statements of Stockholder's Deficit The Statements of Stockholder's Deficit track changes in equity, reflecting net income or loss - The total stockholders' deficit improved from $(10.566 million) as of December 31, 2021, to $(6.997 million) as of June 30, 2022, primarily due to net income of $3.386 million for the six months ended March 31, 2022, and $183 thousand for the three months ended June 30, 2022[19] Notes to Unaudited Financial Statements These notes provide essential details and explanations supporting the unaudited financial statements NOTE 1. ORGANIZATION AND BUSINESS OPERATIONS This note details the Company's SPAC formation, IPO, Trust Account, and proposed merger - The Company consummated its IPO on January 28, 2021, selling 10,350,000 units at $10.00 per unit, generating gross proceeds of $103.5 million[23] - Simultaneously, 5,738,000 Private Placement Warrants were sold to the Sponsor for $5.738 million[23] - A total of $105.57 million ($10.20 per unit) from the IPO and private placement proceeds was placed in a Trust Account[24] - On April 21, 2022, the Company entered into a Merger Agreement with SeaStar Medical, Inc. for a proposed business combination[25] - The aggregate consideration for SeaStar Medical stockholders is $85 million, payable in the Company's common stock valued at $10.00 per share[26] - The Company incurred $1.1 million in expenses related to the Proposed Business Combination during the three and six months ended June 30, 2022[30] - The Company elected to extend the time to complete a Business Combination by depositing $1.035 million into the Trust Account on July 29, 2022[30][96] NOTE 2. SIGNIFICANT ACCOUNTING POLICIES This note outlines significant accounting policies, including those for interim statements and derivative liabilities - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for new or revised financial accounting standards[34][35] - Class A Ordinary Shares subject to possible redemption are classified as temporary equity at redemption value, outside of stockholders' equity[39] - Public Warrants and Private Placement Warrants are recognized as derivative liabilities at fair value and re-measured each reporting period, with changes recognized in the statement of operations[43] - Offering costs totaling $6.212 million were charged to stockholders' equity upon IPO completion[44] - The Company applies a three-tier fair value hierarchy (Level 1, 2, 3) for financial instruments[45][47] - A valuation allowance is established for deferred tax assets as recovery is not likely due to the Company being in a loss position[48] NOTE 3. GOVERNMENT MONEY MARKET FUND HELD IN TRUST ACCOUNT This note details that $105.65 million of Trust Account assets were held in a treasury money market fund - As of June 30, 2022, approximately $105.652 million of assets in the Trust Account were held in a treasury money market fund[54] NOTE 4. PREPAID EXPENSES This note reports $189 thousand in prepaid expenses, mainly for D&O insurance and professional services - Prepaid expenses totaled approximately $189 thousand as of June 30, 2022, mainly for D&O insurance and professional services[55] NOTE 5. INITIAL PUBLIC OFFERING This note details the IPO, including 10.35 million units, warrant terms, and Trust Account proceeds - The IPO on January 28, 2021, sold 10,350,000 units at $10.00 per unit, each including one Class A common stock and one warrant[56] - Warrants are exercisable at $11.50 per share, becoming exercisable 30 days after business combination or 12 months from IPO, and expiring five years post-combination[56] - $10.20 per unit from IPO proceeds was placed in the Trust Account, invested in U.S. government securities or money market funds[57] NOTE 6. PRIVATE PLACEMENT This note describes the Sponsor's purchase of 5.738 million Private Placement Warrants and their non-redeemable nature - The Sponsor purchased 5,738,000 Private Placement Warrants at $1.00 each, totaling $5.738 million, concurrently with the IPO[58] - Private Placement Warrants are non-redeemable and exercisable on a cashless basis when held by the Sponsor or permitted transferees[59] - The Sponsor waived redemption rights for founder shares and public shares and liquidation rights from the Trust Account if a business combination is not completed[60] NOTE 7. RELATED PARTY TRANSACTIONS This note details related party transactions, including Sponsor loans and founder share holdings - The Company issued an unsecured promissory note to the Sponsor on February 1, 2022, for working capital, amended on July 28, 2022, to increase the aggregate principal amount to $1.75 million[63][95] - As of June 30, 2022, the Company had drawn down $910 thousand under the working capital promissory note[63] - On July 29, 2022, the Sponsor funded a $1.035 million Extension Loan into the Trust Account to extend the business combination period[64][96] - The Sponsor holds 2,587,500 founder shares (Class B common stock), issued for $25 thousand[65] - Founder shares are subject to transfer restrictions until the earlier of one year after business combination or liquidation events, with an early release if Class A common stock price exceeds $12.00 for 20 trading days within a 30-day period commencing 150 days after the Business Combination[66] NOTE 8. COMMITMENTS REGISTRATION RIGHTS This note outlines registration rights for founder shares and warrants, and Maxim Group LLC's compensation - Holders of founder shares, Private Placement Warrants, and underlying securities have registration rights, including up to three demand registrations and 'piggy-back' rights[67] - Maxim Group LLC was granted a right of first refusal for future public and private equity, convertible, and debt offerings for 18 months post-business combination, limited to three years from IPO effective date[69][70] - Maxim Group LLC received 103,500 shares of Class A common stock as underwriters' compensation, valued at $1 thousand[71] - These shares are subject to a 180-day lock-up period post-IPO effective date and Maxim waived redemption and liquidation rights[72][73] NOTE 9. DERIVATIVE LIABILITY This note explains the classification of 16.088 million warrants as derivative liabilities, resulting in revaluation gains - There are 16,088,000 warrants outstanding, each exercisable for one Class A common stock share at $11.50[75] - Warrants become exercisable 30 days after business combination or 12 months from IPO, expiring five years post-combination[76] - Warrants are classified as derivative liabilities due to provisions allowing potential changes to settlement amounts and a tender offer provision, failing the 'indexed to issuer's common stock' and 'classified in stockholders' equity' criteria under ASC 815-40[80][81][82] Warrant Liability Breakdown | Warrant Type | As of June 30, 2022 | As of December 31, 2021 | | :--------------------- | :------------------ | :---------------------- | | Public Warrants | $1,164,375 | $4,450,500 | | Private Placement Warrants | $645,525 | $2,480,240 | | Total Warrant Liability | $1,809,900 | $6,930,740 | - The Company recognized a $1.519 million gain for the three months ended June 30, 2022, and a $5.121 million gain for the six months ended June 30, 2022, from warrant revaluation[84] NOTE 10. FAIR VALUE MEASUREMENTS This note details fair value measurements, classifying Trust Account securities as Level 1 and warrants as Level 3 - Fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), Level 3 (unobservable inputs based on Company's assumptions)[91] Fair Value Measurements Hierarchy | Asset/Liability | Level | June 30, 2022 | December 31, 2021 | | :-------------------------- | :---- | :-------------- | :---------------- | | Government securities held in Trust Account | 1 | $105,652,034 | $105,581,820 | | Private Placement Warrants | 3 | $645,525 | $2,480,240 | | Public Warrants | 3 | $1,164,375 | $4,450,500 | - The fair value of warrant liabilities is classified within Level 3, utilizing management judgment and pricing inputs from observable and unobservable markets[83] NOTE 11. STOCKHOLDERS' EQUITY This note outlines the Company's authorized and outstanding shares of Preferred, Class A, and Class B common stock - Authorized shares: 1,000,000 Preferred Stock (none issued), 100,000,000 Class A Common Stock (103,500 issued and outstanding, excluding 10,350,000 subject to redemption), 20,000,000 Class B Common Stock (2,587,500 issued and outstanding)[88][89][90] - Class B common stock automatically converts into Class A common stock on a one-for-one basis at the time of the Business Combination, subject to certain adjustments[93] - Holders of Class A and Class B common stock vote together as a single class, with each share entitling one vote[94] NOTE 12. SUBSEQUENT EVENTS This note details subsequent events, including Working Capital Loan amendment and Extension Loan - On July 28, 2022, the Working Capital Loan with the Sponsor was amended, increasing loan availability from $500 thousand to $1.75 million[95] - On July 29, 2022, the Sponsor funded a $1.035 million Extension Loan into the Trust Account to extend the Business Combination timeline[96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, SPAC status, merger, performance, liquidity, and COVID-19 Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements regarding future expectations, beliefs, and strategies, which are subject to known and unknown risks and uncertainties[98][99] Overview This overview introduces LMF Acquisition Opportunities, Inc. as a SPAC, detailing its IPO, Trust Account, and proposed merger - LMF Acquisition Opportunities, Inc. is a SPAC formed for a business combination, with no operating revenues generated to date[101][103] - The Company completed its IPO on January 28, 2021, raising $103.5 million, and simultaneously sold $5.738 million in Private Placement Warrants[104][105] - A total of $105.57 million from IPO and private placement proceeds was placed in a Trust Account[107] - On April 21, 2022, the Company entered into a Merger Agreement with SeaStar Medical, Inc. for a proposed business combination, with consideration of $85 million in common stock[108][109] Recent Developments This section outlines recent developments, including Working Capital Loan amendment and Sponsor's Extension Loan - The Working Capital Loan with the Sponsor was amended on July 28, 2022, increasing the loan availability to $1.75 million to fund business combination expenses[114] - On July 29, 2022, the Sponsor funded a $1.035 million Extension Loan into the Trust Account to extend the period for completing the Proposed Business Combination[115] COVID-19 Update This update discusses the potential adverse impact of COVID-19 on completing a business combination - The COVID-19 outbreak could materially and adversely affect the Company's ability to complete a business combination due to restrictions on travel, meetings with investors, and the availability of personnel and service providers[116] Results of Operations for the Three Months Ended June 30, 2022 This section analyzes operational results for the three months ended June 30, 2022, focusing on expenses and net income/loss - No revenues were generated during the three months ended June 30, 2022[118] Three Months Ended June 30, 2022: Key Financial Metrics | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Total Expenses | $1,404 thousand | $210 thousand | | - Merger costs | $1,062 thousand | — | | - Formation and administrative costs | $342 thousand | $210 thousand | | Gain (Loss) on Revaluation of Warrants | $1.5 million (gain) | $(1.8) million (loss) | | Net Income (Loss) | $183 thousand (income) | $(1,983) thousand (loss) | - The Company did not incur any income tax expense due to being in a loss situation and recognizing a full taxation valuation allowance[121] Results of Operations for the Six Months Ended June 30, 2022 This section analyzes operational results for the six months ended June 30, 2022, detailing expenses and net income/loss - No revenues were generated during the six months ended June 30, 2022[124] Six Months Ended June 30, 2022: Key Financial Metrics | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Expenses | $1,622 thousand | $336 thousand | | - Merger expenses | $1,062 thousand | — | | - Formation and administrative expenses | $560 thousand | $336 thousand | | Gain on Revaluation of Warrants | $5.1 million (gain) | $58 thousand (gain) | | Net Income (Loss) | $3,569 thousand (income) | $(276) thousand (loss) | - The Company did not incur any income tax expense due to being in a loss situation and recognizing a full taxation valuation allowance[127] Liquidity and Capital Resources This section discusses the Company's liquidity and capital resources, including cash flows from operating, investing, and financing Liquidity and Capital Resources Summary | Metric | June 30, 2022 | June 30, 2021 | | :-------------------------- | :------------ | :------------ | | Cash | $79 thousand | $340 thousand | | Net cash used in operations | $(884) thousand | $(319) thousand | | Net cash used in investing activities | $0 | $(105.6) million | | Net cash provided by financing activities | $912 thousand | $106.2 million | - Net cash provided by financing activities for the six months ended June 30, 2022, was primarily from a $910 thousand net receipt under a related party loan[132] Shareholders' Equity This section provides an overview of changes in shareholders' equity, including share and warrant issuances - During the six months ended June 30, 2021, the Company issued 10.3 million units, 0.1 million Class A shares to underwriters, 0.4 million Class B shares, and 5.7 million Private Placement Warrants[133] - There were no issuances of shares or warrants during the six months ended June 30, 2022[133] Off-Balance Sheet Arrangements This section confirms that the Company does not have any off-balance sheet arrangements - The Company does not have any off-balance sheet arrangements[134] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, LMF Acquisition Opportunities, Inc. is exempt from market risk disclosures - The Company is not required to make disclosures about market risk as it is a smaller reporting company[135] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective due to material weaknesses in warrant accounting and segregation of duties Redeemable Equity Instruments This section explains the classification of redeemable Class A common stock outside of permanent equity - Class A common stock subject to redemption is classified outside of permanent equity due to redemption provisions not solely within the Company's control, as per ASC 480-10-S99[136][137] Warrants as Derivative Liability This section details the reclassification of Public and Private Placement Warrants as derivative liabilities - The Company reclassified its Public and Private Placement Warrants as derivative liabilities due to provisions that prevent them from being indexed to the issuer's common stock or classified in stockholders' equity under ASC 815-40[138][139] - This reclassification was prompted by the SEC Staff Statement on Accounting and Reporting Considerations for Warrants Issued by SPACs (April 12, 2021) and resulted in a material weakness in internal control over financial reporting[140] - The improper accounting classification of warrants necessitated a restatement of previously issued financial statements[141] Evaluation of disclosure controls and procedures This section reports management's conclusion that disclosure controls were not effective as of June 30, 2022 - As of June 30, 2022, the Company's disclosure controls and procedures were deemed not effective by Certifying Officers[143] - Material weaknesses identified include ineffective segregation of accounting duties due to small staff size and insufficient controls over accounting for complex financial instruments, specifically warrants[144] - Despite the material weaknesses, management believes the financial statements in this report fairly present the Company's financial position, results of operations, and cash flows[147] Changes in internal control over financial reporting This section states no material changes occurred in internal control over financial reporting during the quarter - There were no changes in internal control over financial reporting during the quarter ended June 30, 2022, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[149] PART II. OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings The Company is not involved in material litigation, nor are any legal proceedings threatened against it - The Company is not a party to material litigation proceedings, nor are any threatened against it or its officers/directors[152] Item 1A. Risk Factors New risk factors include proposed SEC rules on SPAC business combinations and material weaknesses in internal control - Proposed SEC rules regarding SPACs, if adopted, may increase costs and time for business combinations, potentially affecting the Company's ability to complete one[153] - Material weaknesses in internal control over financial reporting, specifically related to warrant accounting and segregation of duties, could lead to inaccurate financial reporting and loss of investor confidence[154][155] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details unregistered sales of Class B common stock and private placement warrants, and the use of IPO proceeds - 2,156,250 shares of Class B common stock were issued to the Sponsor for $25 thousand on November 6, 2020, under Section 4(a)(2) exemption[158] - 5,738,000 private placement warrants were sold to the Sponsor for $5.738 million, also under Section 4(a)(2) exemption[160] - Following the IPO, $105.57 million was placed in a trust account, primarily for the initial business combination[161][163] - Funds outside the trust account are used for identifying and evaluating target businesses, due diligence, and structuring a business combination[164] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[167] Item 4. Mine Safety Disclosures The Company has no mine safety disclosures to report - No mine safety disclosures were reported[167] Item 5. Other Information The Company has no other information to disclose under this item - No other information was reported[167] Item 6. Exhibits This section lists all exhibits filed with the report, including the Merger Agreement and corporate governance documents - Key exhibits include the Agreement and Plan of Merger with SeaStar Medical, Amended and Restated Promissory Note with Sponsor, and various corporate governance documents and certifications[170] SIGNATURES This section contains the official signatures of the Company's certifying officers - The report was signed on August 16, 2022, by Bruce M. Rodgers, Chief Executive Officer and Chairman of the Board, and Richard Russell, Chief Financial Officer[173]