SeaStar Medical(ICU) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter of 2024, along with disclosures on market risk and internal controls Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for SeaStar Medical Holding Corporation, including the balance sheets, statements of operations, changes in stockholders' deficit, and cash flows, along with detailed notes explaining significant accounting policies, financial instrument activities, and other relevant disclosures for the period ended March 31, 2024 Condensed Consolidated Balance Sheets (Unaudited) This statement provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' deficit at specific points in time Condensed Consolidated Balance Sheets (in thousands) | ASSETS / LIABILITIES AND STOCKHOLDERS' DEFICIT (in thousands) | March 31, 2024 | December 31, 2023 | | :------------------------------------------------ | :------------- | :---------------- | | Cash | $5,019 | $176 | | Total current assets | $6,537 | $2,308 | | Total assets | $7,740 | $3,513 | | Total current liabilities | $9,648 | $13,046 | | Total liabilities | $12,213 | $17,383 | | Accumulated deficit | $(127,431) | $(114,734) | | Total stockholders' deficit | $(4,473) | $(13,870) | - The Company's cash significantly increased from $0.2 million at December 31, 2023, to $5.0 million at March 31, 2024[10] - Total stockholders' deficit improved from ($13.9 million) at December 31, 2023, to ($4.5 million) at March 31, 2024[10] Condensed Consolidated Statements of Operations (Unaudited) This statement outlines the Company's financial performance over a period, focusing on revenues, expenses, and net loss Condensed Consolidated Statements of Operations (in thousands) | Operating Expenses / Other Income (Expense) (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $1,697 | $1,730 | | General and administrative | $2,253 | $2,851 | | Total operating expenses | $3,950 | $4,581 | | Loss from operations | $(3,950) | $(4,581) | | Total other income (expense), net | $(8,747) | $(2,515) | | Net loss | $(12,697) | $(7,096) | | Net loss per share, basic and diluted | $(0.19) | $(0.54) | | Weighted-average shares outstanding | 67,106,081 | 13,025,852 | - Net loss increased by 79% to ($12.7 million) for the three months ended March 31, 2024, compared to ($7.1 million) for the same period in 2023[12] - Total operating expenses decreased by 14% to $4.0 million, primarily due to a reduction in general and administrative expenses[12] Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited) This statement details the changes in the Company's equity accounts, including common shares, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Changes in Stockholders' Deficit (in thousands) | Stockholders' Deficit (in thousands) | Balance, December 31, 2023 | Issuance of shares - conversion of convertible notes | Issuance of shares - exercise of warrants | Issuance of shares - equity offering, net of issue costs | Stock-based compensation | Net loss | Balance, March 31, 2024 | | :----------------------------------- | :------------------------- | :--------------------------------------------------- | :---------------------------------------- | :------------------------------------------------------- | :----------------------- | :------- | :---------------------- | | Common Shares | 47,615,285 | 12,697,792 | 8,801,836 | 6,304,545 | — | — | 75,419,458 | | Additional Paid-In Capital | $100,859 | $9,389 | $3,959 | $8,309 | $434 | — | $122,950 | | Accumulated Deficit | $(114,734) | — | — | — | — | $(12,697) | $(127,431) | | Total Stockholders' Deficit | $(13,870) | $9,390 | $3,960 | $8,310 | $434 | $(12,697) | $(4,473) | - The total stockholders' deficit improved from ($13.9 million) at December 31, 2023, to ($4.5 million) at March 31, 2024, primarily due to significant equity issuances[15] - Common shares outstanding increased substantially from 47.6 million to 75.4 million during the quarter, driven by conversions of convertible notes, warrant exercises, and an equity offering[15] Condensed Consolidated Statements of Cash Flows (Unaudited) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over a period Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activities (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(3,488) | $(2,294) | | Net cash provided by financing activities | $8,331 | $2,972 | | Net increase in cash | $4,843 | $678 | | Cash, end of period | $5,019 | $725 | - Net cash provided by financing activities significantly increased to $8.3 million in Q1 2024 from $3.0 million in Q1 2023, primarily from equity issuances and warrant exercises[18] - The Company experienced a net increase in cash of $4.8 million in Q1 2024, resulting in an end-of-period cash balance of $5.0 million[18] Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Description of Business This note describes the Company's core business, product development focus, and addresses its going concern status - SeaStar Medical Holding Corporation is engaged in the research, development, and commercialization of a platform medical device technology designed to modulate inflammation, primarily targeting acute kidney injuries[20] - The Company is in the pre-revenue stage, focused on product development[21] - As of March 31, 2024, the Company has an accumulated deficit of $127.4 million and cash of $5.0 million, which is insufficient to fund operations for at least 12 months, raising substantial doubt about its ability to continue as a going concern[26][28] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles, estimates, and elections applied in preparing the financial statements - Significant estimates in financial statements include the valuation of liability classified warrants, prepaid forward purchase agreement derivative liability, provision for income taxes, convertible debt measured at fair value, and stock-based compensation expense[30] - The Company uses a Black-Scholes option pricing model to fair value Warrants, considering inputs like strike price, estimated volatility, time to maturity, and risk-free interest rate[33] - As an 'emerging growth company,' SeaStar Medical has elected to use the extended transition period for complying with new or revised accounting standards[35] Note 3. Accrued Expenses This note details the composition and changes in the Company's accrued liabilities Accrued Expenses Summary (in thousands) | Accrued Expenses (in thousands) | March 31, 2024 | December 31, 2023 | | :------------------------------ | :------------- | :---------------- | | Accrued bonus | $671 | $501 | | Accrued director compensation | $519 | $427 | | Accrued research and development| $308 | $507 | | Accrued legal | — | $43 | | Accrued interest | $29 | $19 | | Other | $17 | $26 | | Total accrued expenses | $1,544 | $1,523 | - Total accrued expenses slightly increased to $1.5 million at March 31, 2024, from $1.5 million at December 31, 2023, primarily due to increases in accrued bonus and director compensation, offset by a decrease in accrued R&D and legal expenses[37] Note 4. Notes Payable This note provides information on the Company's outstanding debt obligations, including payments and maturities Notes Payable Summary (in thousands) | Notes Payable (in thousands) | Balance as of December 31, 2023 | Payments | Amortization of costs | Balance as of March 31, 2024 | | :--------------------------- | :------------------------------ | :------- | :-------------------- | :--------------------------- | | LMFA | $296 | $(296) | — | — | | LMFAO | $1,128 | $(1,128) | — | — | | Maxim | $2,771 | $(181) | — | $2,590 | | Insurance Financing | $565 | $(208) | — | $357 | | Unamortized deferred financing costs | $(52) | — | $27 | $(25) | | Total | $4,708 | $(1,813) | $27 | $2,922 | - The Company fully paid off its Senior Secured LMFA and LMFAO Notes Payable during Q1 2024[40][41] - Future maturities of notes payable as of March 31, 2024, include $0.4 million remaining in 2024 and $2.6 million in 2025, primarily from the Unsecured Maxim Note Payable[39][42] Note 5. Convertible Notes This note describes the Company's convertible debt instruments, including issuances, conversions, and related financial impacts - During Q1 2024, the Company issued two additional Investor D notes totaling $1.1 million in principal, with an initial conversion price of $0.56 per share[44] - The institutional investor converted approximately $3.3 million (face value) of outstanding debt into approximately $9.5 million of the Company's common stock during Q1 2024[47] - The Company incurred a total loss of approximately $5.8 million related to convertible notes in Q1 2024, including losses on conversion into equity, issuance of new notes, and changes in fair value of outstanding notes[48] Note 6. Equity Transactions This note details significant equity-related activities, such as offerings, warrant exercises, and credit line changes - On January 26, 2024, the Company completed a registered direct offering and concurrent private placement, receiving aggregate gross proceeds of approximately $9.0 million[49] - The Q1 2024 SPA included the issuance of 6.3 million shares of common stock, pre-funded warrants to purchase 4.5 million shares, and Series A and B warrants to purchase 16.3 million shares[49][56] - All Pre-Funded Warrants were exercised in full during the first quarter ended March 31, 2024[51] - The Tumin Equity Line of Credit, with approximately $95.3 million available to draw as of December 31, 2023, was terminated in February 2024[53] Note 7. Warrants This note provides information on the Company's outstanding warrants, their classification, and fair value adjustments Warrants Outstanding Summary | Warrants Outstanding | March 31, 2024 | December 31, 2023 | | :------------------- | :------------- | :---------------- | | Liability Classified Warrants | | Investor D Warrants | 3,158,086 | 6,368,289 | | Private Placement Warrants | 5,738,000 | 5,738,000 | | PIPE Investor Warrants | 500,000 | 500,000 | | Subtotal | 9,396,086 | 12,606,289 | | Equity Classified Warrants | | Investor E Warrants | 16,261,142 | — | | Placement agent Warrants | 542,038 | — | | Public Stockholders' Warrants | 10,550,000 | 10,550,000 | | Legacy Warrants | 48,914 | 48,914 | | Subtotal | 27,402,094 | 10,598,914 | | Grand Total | 36,798,180 | 23,205,203 | - The Company incurred $1.6 million in losses from the exercise of certain Investor D Warrants and a $1.2 million loss from the mark-to-market adjustment for remaining liability classified warrants during Q1 2024[60] - Investor E and Placement Agent Warrants, issued in Q1 2024, are classified as equity, while Investor D, Private Placement, and PIPE Investor Warrants remain liability classified[55][58] Note 8. Stock-Based Compensation Awards This note outlines the Company's stock-based compensation plans and related expenses Stock-Based Compensation Expenses (in thousands) | Stock-Based Compensation (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $119 | $39 | | General and administrative | $315 | $466 | | Total stock-based compensation | $434 | $505 | - Total stock-based compensation decreased to $0.4 million in Q1 2024 from $0.5 million in Q1 2023[61] - The 2022 Omnibus Incentive Plan provides long-term incentives, with options generally vesting over one or four years and expiring 10 years after grant[62] Note 9. Commitments and Contingencies This note discloses the Company's contractual obligations, license agreements, and potential legal liabilities - The Company has an exclusive license and distribution agreement for its Selective Cytopheretic Device (SCD) in the United States, with milestone payments tied to regulatory approvals and sales[71] - A legal settlement of approximately $0.2 million was paid during the year ended December 31, 2023, related to a stockholder litigation demand concerning authorized common stock shares[75] Note 10. Fair Value Measurements This note explains the methodologies and inputs used to determine the fair value of financial instruments Fair Value of Liabilities (in thousands) | Liabilities (in thousands) | March 31, 2024 (Level 3) | December 31, 2023 (Level 3) | | :------------------------- | :----------------------- | :-------------------------- | | Convertible notes | $1,135 | $4,179 | | Liability classified warrants | $2,633 | $2,307 | | Total | $3,768 | $6,486 | - The fair value of convertible notes decreased significantly from $4.2 million to $1.1 million, while liability classified warrants increased from $2.3 million to $2.6 million[80] - All fair value measurements for convertible notes and liability classified warrants are classified as Level 3, indicating significant unobservable inputs are used[78][80] Note 11. Income Taxes This note details the Company's income tax position, including deferred tax assets and valuation allowances - SeaStar Medical recorded no provision for income taxes for the three months ended March 31, 2024, or 2023[115] - A full valuation allowance has been recorded against the Company's net deferred tax assets due to the uncertainty of future profitable operations and taxable income[86][116] Note 12. Net Loss Per Share This note presents the calculation of basic and diluted net loss per share and the impact of potentially dilutive securities Net Loss Per Share Calculation | Net Loss Per Share | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(12,697) | $(7,096) | | Weighted-average shares outstanding | 67,106,081 | 13,025,852 | | Basic and diluted net loss per share | $(0.19) | $(0.54) | - Basic and diluted net loss per share improved to ($0.19) in Q1 2024 from ($0.54) in Q1 2023, despite a higher net loss, due to a significant increase in weighted-average shares outstanding[87] - Approximately 37.3 million potentially dilutive securities were excluded from diluted net loss per share computation in Q1 2024 because their inclusion would have been anti-dilutive[89] Note 13. Subsequent Events This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On April 1, 2024, the Company and Investor D entered into a side letter agreement suspending certain Investor D rights for 60 days, after which Investor D has the right to redeem outstanding convertible notes at 200% of the conversion amount[90] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition, results of operations, liquidity, and capital resources for the three months ended March 31, 2024. It highlights the Company's pre-revenue stage, ongoing net losses, and significant doubt about its ability to continue as a going concern, while also detailing operational expenses, other income/expense, and recent developments Overview This section provides an overview of the Company's business, financial performance, and going concern status - SeaStar Medical is a medical technology company developing a platform therapy, the Selective Cytopheretic Device (SCD), to reduce hyperinflammation, initially targeting acute kidney injury in pediatric and adult CRRT populations[95][96] - The Company is in the pre-revenue stage and has incurred significant net losses since its inception, with an accumulated deficit of $127.4 million as of March 31, 2024[97][101] - The Company's recurring losses and insufficient cash ($5.0 million as of March 31, 2024) raise substantial doubt about its ability to continue as a going concern for the next twelve months[98][100] Key Components of Results of Operations This section outlines the primary drivers of the Company's financial performance, including revenue and expense trends - The Company has not generated revenue from commercialized products to date, but expects to commercialize its pediatric SCD following HDE approval in February 2024[103] - Research and development expenses are expected to increase as the Company continues product development and clinical trials[104] - General and administrative expenses are anticipated to rise with operational expansion, including new hires, travel, and a new enterprise resource planning platform[106] Results of Operations This section analyzes the Company's financial results for the reporting period, detailing changes in revenue, expenses, and net loss Consolidated Results of Operations (in thousands) | Financial Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change ($) | Change (%) | | :------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Revenue | $0 | $0 | $0 | — | | Research and development | $1,697 | $1,730 | $(33) | (2)% | | General and administrative | $2,253 | $2,851 | $(598) | (21)% | | Total operating expenses | $3,950 | $4,581 | $(631) | (14)% | | Loss from operations | $(3,950) | $(4,581) | $631 | (14)% | | Total other income (expense) | $(8,747) | $(2,515) | $(6,232) | 248% | | Net loss | $(12,697) | $(7,096) | $(5,601) | 79% | - Net loss increased by $5.6 million, or 79%, to $12.7 million in Q1 2024 compared to $7.1 million in Q1 2023, primarily driven by a significant increase in other expenses[111][117] - Other expenses increased by $6.2 million, or 248%, mainly due to losses on extinguishment of convertible notes ($4.6 million), change in fair value of liability classified warrants ($2.8 million), and loss on issuance of convertible notes ($0.7 million)[114] Liquidity and Capital Resources This section discusses the Company's ability to meet its financial obligations and its sources of funding - As of March 31, 2024, the Company had $5.0 million in cash, which is deemed insufficient to fund operations for at least the next twelve months, reinforcing the going concern doubt[119] - The Company does not expect to rely on the cash exercise of warrants to fund operations, as the current common stock trading price is below the exercise price, making such exercises unlikely[121] - Future funding requirements are significant, dependent on clinical trial progress, regulatory approvals, intellectual property costs, and public company operating expenses, necessitating additional equity or debt financing[123][124] Cash Flows This section analyzes the Company's cash inflows and outflows from operating, investing, and financing activities Consolidated Cash Flow Data (in thousands) | Cash Flow Data (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $(3,488) | $(2,294) | | Investing activities | $0 | $0 | | Financing activities | $8,331 | $2,972 | | Net increase in cash | $4,843 | $678 | - Net cash used in operating activities increased to $3.5 million in Q1 2024 from $2.3 million in Q1 2023, primarily due to the timing of vendor payments[129] - Net cash provided by financing activities rose to $8.3 million in Q1 2024 from $3.0 million in Q1 2023, driven by new share issuances, warrant exercise proceeds, and convertible note conversions[130] Critical Accounting Policies and Estimates This section discusses the accounting policies and estimates that require significant judgment and are crucial to the Company's financial reporting - There have been no material changes to the Company's critical accounting policies or methods from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023[132] Emerging Growth Company Status This section explains the Company's status as an emerging growth company and the implications for its financial reporting - The Company maintains its status as an 'emerging growth company' (EGC) and continues to utilize the extended transition period for new accounting standards and other exemptions provided by the JOBS Act[133][134] Contractual Obligations and Commitments This section details the Company's future payment obligations under various contracts and agreements Contractual Obligations Summary (in thousands) | Contractual Obligations (in thousands) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :----------------------------------- | :---- | :--------------- | :-------- | :-------- | :---------------- | | LMFA note payable | $0 | $0 | $0 | $0 | $0 | | LMFAO note payable | $0 | $0 | $0 | $0 | $0 | | Maxim note payable | $2,565| $0 | $2,565 | $0 | $0 | | Convertible Notes | $918 | $918 | $0 | $0 | $0 | | Insurance Financing | $357 | $357 | $0 | $0 | $0 | | Total contractual obligations | $3,840| $1,275 | $2,565 | $0 | $0 | - Total contractual obligations as of March 31, 2024, amount to $3.8 million, with $1.3 million due within one year and $2.6 million due in 1-3 years[136] Recent Developments This section provides updates on significant events and milestones that occurred recently - In April 2024, SeaStar Medical was included in a consortium awarded a $3.6 million NIH grant to evaluate its SCD-Adult device for cardiorenal syndrome in chronic heart failure patients[138] - The SCD-Adult device previously received a Breakthrough Device Designation from the FDA's CBER in September 2023 for cardiorenal syndrome[138] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, SeaStar Medical is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[139] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2024, due to identified material weaknesses in internal control over financial reporting. Remediation efforts are underway, including strengthening the accounting team - The Company's disclosure controls and procedures were not effective as of March 31, 2024, due to material weaknesses in internal control over financial reporting[141] - A material weakness was identified in the design and operation of financial accounting and reporting controls[144] - Remediation efforts include strengthening the accounting team with an experienced Controller and Chief Financial Officer, and identifying additional accounting resources[145] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The Company is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business, financial condition, or results of operations - The Company is not currently involved in any legal proceedings deemed likely to have a material adverse effect on its business, financial condition, or results of operations[148] Item 1A. Risk Factors No new risk factors have emerged that were not already disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 - No additional risk factors have arisen beyond those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[149] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company did not engage in any unregistered sales of equity securities during the three months ended March 31, 2024 - The Company did not have any sales of unregistered securities during the three months ended March 31, 2024[150] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - This item is marked as 'N/A' (Not Applicable)[150] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - This item is marked as 'N/A' (Not Applicable)[150] Item 5. Other Information No director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2024 - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended March 31, 2024[150] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, warrant forms, employment agreements, and certifications - The exhibit index includes the Second Amended and Restated Bylaws, various forms of warrants, an employment agreement, and certifications from the Principal Executive Officer and Principal Financial Officer[153] Signatures This section provides the official signatures for the quarterly report filing - The report is signed by Eric Schlorff, Chief Executive Officer, and David Green, Chief Financial Officer, on May 14, 2024[156]