SeaStar Medical Holding Corp 10-Q for FY2024 Q3
SeaStar Medical Holding Corp (ICU)
About this 10-Q
SeaStar Medical Holding Corp filed this 10-Q on November 13, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $68K
- compared with $0 a year earlier
- Net loss
- $4.48M
- compared with a net loss of $7.23M a year earlier
- Diluted EPS
- -$1.10
- compared with -$9.02 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
Commission File Number
(Exact name of Registrant as specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
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The |
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act ). Yes ☐ No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
As of November 6, 2024, the registrant had
SeaStar Medical Holding Corporation
September 30, 2024
Table of Contents
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Page |
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PART I. |
1 |
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Item 1. |
1 |
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Condensed Consolidated Balance Sheets (September 2024 Unaudited) |
1 |
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2 |
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Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited) |
3 |
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4 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
5 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 |
Item 3. |
33 |
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Item 4. |
33 |
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PART II. |
35 |
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Item 1. |
35 |
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Item 1A. |
35 |
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Item 2. |
37 |
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Item 3. |
38 |
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Item 4. |
38 |
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Item 5. |
38 |
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Item 6. |
39 |
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40 |
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i
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
SeaStar Medical Holding Corporation
Condensed Consolidated Balance Sheets
(in thousands, except for share and per-share amounts)
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As of |
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As of |
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(unaudited) |
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ASSETS |
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Current assets |
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Cash |
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$ |
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$ |
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Accounts receivable |
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$ |
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Prepaid expenses |
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Total current assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Contract liabilities |
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Notes payable, net of deferred financing costs |
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Convertible notes, current portion |
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Liability classified warrants |
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Total current liabilities |
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Notes payable, net of deferred financing costs |
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Convertible notes, net of current portion |
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Total liabilities |
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Stockholders' deficit |
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Preferred stock - $ |
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Common stock - $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders' deficit |
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( |
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( |
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Total liabilities and stockholders' deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
SeaStar Medical Holding Corporation
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for share and per-share amounts)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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— |
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— |
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Operating expenses |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expense) |
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Interest income |
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Interest expense |
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( |
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( |
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( |
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( |
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Change in fair value of convertible notes |
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( |
) |
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( |
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( |
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Change in fair value of liability classified warrants |
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( |
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Change in fair value of forward option-prepaid forward contracts |
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( |
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Loss on extinguishment of convertible notes |
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( |
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( |
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Other income |
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Total other income (expense), net |
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( |
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( |
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( |
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( |
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Loss before provision for income taxes |
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( |
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( |
) |
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( |
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( |
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Provision for income taxes |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Net loss per share of common stock, basic and diluted |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Weighted-average shares of common stock outstanding, basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
SeaStar Medical Holding Corporation
Condensed Consolidated Statements of Changes in Stockholders' Deficit
(unaudited)
(in thousands, except for share and per-share amounts)
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Stockholders' Deficit (unaudited) |
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Common Shares |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Accumulated Deficit |
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Total Stockholders' Deficit |
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Balance as of December 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Issuance of shares - conversion of convertible notes |
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— |
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— |
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Issuance of shares - exercise of warrants |
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— |
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— |
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Issuance of shares - equity offerings, net of issuance costs |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of March 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Issuance of shares - conversion of convertible notes |
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— |
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— |
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Issuance costs - registration of previously issued warrants |
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— |
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— |
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( |
) |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of June 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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Issuance of shares - equity offerings, net of issuance costs |
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— |
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— |
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Issuance of shares - stock issued for Board compensation in-lieu of cash |
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— |
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— |
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Issuance of shares - vesting of RSUs |
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— |
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— |
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— |
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— |
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Issuance of shares - stock issued for employee bonuses |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of September 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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Balance as of December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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Issuance of shares - equity line of credit |
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— |
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— |
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Issuance of shares - commitment fee for equity line of credit |
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— |
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— |
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Issuance of shares - prepaid forward contracts |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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Issuance of shares - equity line of credit |
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— |
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— |
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Issuance of shares - conversion of convertible notes |
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— |
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— |
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Issuance of shares - vesting of RSUs |
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— |
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— |
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— |
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— |
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Issuance of shares - prepaid forward contracts |
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— |
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— |
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— |
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— |
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Forward Purchase Agreement Derivative Liability |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of June 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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Issuance of shares - equity line of credit |
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— |
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Issuance of shares - conversion of convertible notes |
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— |
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— |
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Issuance of shares - prepaid forward contracts |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Net loss |
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- |
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— |
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— |
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( |
) |
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( |
) |
Balance as of September 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
3
SeaStar Medical Holding Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands, except for shares and per-share amounts)
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Nine Months Ended September 30, |
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2024 |
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2023 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities |
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Amortization of deferred financing costs |
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Change in fair value of convertible notes (issued, converted and outstanding) |
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Change in fair value of forward purchase agreement derivative liability |
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Change in fair value of liability classified warrants (exercised and outstanding) |
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( |
) |
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Stock-based compensation |
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Loss on extinguishment of convertible notes |
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Changes in operating assets and liabilities |
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— |
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Accounts receivable |
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( |
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Other receivables |
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Prepaid expenses |
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Other assets |
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Accounts payable |
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( |
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Accrued expenses |
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Other liabilities |
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Net cash used in operating activities |
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( |
) |
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( |
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Cash flows from financing activities |
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Proceeds from issuance of convertible notes |
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Payment of convertible notes |
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( |
) |
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( |
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Proceeds from issuance of shares |
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Proceeds from exercise of convertible note warrants |
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Proceeds of pre-funded warrants |
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Payment of commitment fee - equity line of credit |
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( |
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Proceeds from sale of recycled shares |
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Proceeds from notes payable |
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Payment of notes payable |
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( |
) |
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( |
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Net cash provided by financing activities |
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Net increase in cash |
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Cash, beginning of period |
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Cash, end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information |
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Cash paid for interest |
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$ |
|
|
$ |
|
||
Exercise of liability classified warrants |
|
$ |
|
|
$ |
|
||
Shares issued as payment of convertible notes |
|
$ |
|
|
$ |
|
||
Shares issued to settle forward option-prepaid forward contracts |
|
$ |
|
|
$ |
|
||
Board compensation settled in shares of common stock in-lieu-of-cash |
|
$ |
|
|
$ |
|
||
Issuance of convertible note warrants |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
Note 1. Description of Business
Organization and Description of Business
SeaStar Medical Holding Corporation, a Delaware corporation ("SeaStar") and its wholly owned subsidiary, SeaStar Medical, Inc., are collectively referred to as the "Company". SeaStar Medical, Inc. was incorporated as a Delaware corporation in June 2007, and it is headquartered in Denver, Colorado. The Company is a commercial stage medical technology company developing a proprietary platform therapy, its Selective Cytopheretic Device (“SCD”), to reduce the consequences of hyperinflammation on vital organs. The initial target of this technology is for the treatment of acute kidney injuries. The Company received FDA approval for our pediatric SCD on February 22, 2024, under a Humanitarian Device Exemption ("HDE"), and shipped its first commercial units in July 2024. A pivotal clinical trial for the SCD in adult patients with Acute Kidney Injury ("AKI") is underway with
On October 28, 2022, LMF Merger Sub, Inc., a wholly owned subsidiary of LMF Acquisition Opportunities, Inc., (“LMAO”) merged with and into SeaStar Medical, Inc. (the "Business Combination"), with SeaStar Medical, Inc. surviving the Business Combination as a wholly owned subsidiary of LMAO. Following the consummation of the Business Combination, LMAO was renamed "SeaStar Medical Holding Corporation."
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules and regulations, certain notes or other financial information normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments that are necessary to present fairly the Company’s results for the interim periods presented. The results from operations for the three and nine months ended September 30, 2024, are not necessarily indicative of the results to be expected for the year ended December 31, 2024, or for any future annual or interim period.
The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the related notes for the year ended December 31, 2023. There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2023 except for inclusion of the (i) Company’s policy for revenue recognition, and (ii) adoption of the expected credit loss model pursuant to Topic 326 - Credit Losses, which is discussed in Note 2 of this Form 10-Q.
The interim unaudited condensed consolidated financial statements include the consolidated accounts of the Company's wholly owned subsidiary, SeaStar Medical, Inc. All significant intercompany transactions have been eliminated in consolidation.
5
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
Segment Information
The Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein.
Liquidity and Going Concern
The Company incurred losses of $
The Company's need for additional capital will depend in part on the scope and costs of its development activities. Through September 30, 2024, the Company generated approximately $
Risks and Uncertainties
The Company is subject to risks common to early-stage companies in the medical technology industry including, but not limited to, the success of its clinical trials, new medical and technological innovations, dependence on key personnel, supply of key components, protection of proprietary technology, and product liability. There can be no assurance that the Company's products or services will be accepted in the marketplace, nor can there be any assurance that any future products or services can be developed or deployed at an acceptable cost and with appropriate performance characteristics, or that such products or services will be successfully marketed, if at all. These factors could have a materially adverse effect on the Company's future financial results, financial position and cash flows.
Note 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of the unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the period. Significant estimates include (i) revenue recognition, (ii) the valuation of the liability classified warrants, (iii) prepaid forward purchase agreement derivative liability, (iv) provision for income taxes, (v) convertible debt measured at fair value, and (vi) the amount of stock-based compensation expense. Although actual results could differ from those estimates, such estimates are developed based on the best information available to management and management's best judgments at the time.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash. Periodically, the Company may maintain deposits in financial institutions in excess of government
6
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
insured limits. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows.
Fair Value of Financial Instruments
The following provides a summary of those assets or liabilities for which the Company is required to measure at fair value either on a recurring basis, the valuation techniques and summary of inputs used to arrive at the measure of fair value. Changes in fair value of these assets or liabilities are recognized as a component of net income in the consolidated statements of operations. Changes in fair value of these assets or liabilities are considered unrealized gains or losses and therefore are classified as non-cash adjustments to reconcile net income to operating cash flows. Significant increases (decreases) in unobservable inputs used in fair value measurements could, in isolation, potentially result in a significantly lower or higher valuation for those assets or liabilities requiring recurring fair value measurements at each reporting date.
The Company uses a Black-Scholes option pricing model to the fair value of liability classified warrants, using standard option pricing inputs such as the strike price of each warrant tranche, estimated volatility, time to maturity, and the risk-free interest rate. The risk-free interest rate is the U.S. Treasury rate at the date of issuance, and the time to maturity is based on the contractual life at the date of issuance, which is an interpolated value based on the remaining term of each individual instrument. The change in fair value of the liability classified warrants in each reporting period is recorded to the change in fair value of warrants liability in the consolidated statements of operations.
Revenue Recognition
Overall
Under ASC Topic 606, the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of Topic 606, the Company evaluates the following criteria: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) performance obligations are satisfied.
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation. Goods and services that are determined not to be distinct are combined with other promised goods and services until a distinct combined performance obligation is identified. The Company then allocates the transaction price to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied. The estimate of the transaction price for each contract includes all variable consideration to which the Company expects to be entitled, subject to the constraint on variable consideration. The Company constrains revenue by giving consideration to factors that could otherwise lead to a probable reversal of revenue. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized at the contract level is not significant.
The Company records any payments received from customers prior to the Company fulfilling its performance obligation(s) as contract obligations. Amounts expected to be recognized as revenue within the one year following the balance sheet date are classified as current contract obligations. Amounts not expected to be recognized as revenue within the one year following the balance sheet date are classified as contract obligations, net of current portion. See Note 3 – Revenue and Contract Obligations for further details.
Product Sales Revenue
The Company has sold and intends to continue to sell its products either through a combination of distributor(s) and/or directly to end-user qualified customers through the Company's own internal commercial/sales resources. The acting distributor during the three- and nine-months ended September 30, 2024, subsequently resold and was to
7
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
continue to resell the products to present and future customers, until such time the Company terminated its agreement with the distributor (see Notes 3, 11, and 15).
The Company will continue to monitor all of the above as the Company continues to commercialize and increase its customer base, which could result with each distributor or end-user customer agreement resulting in its own unique terms and conditions, that will potentially impact the timing and amount of revenue recognition pursuant to US GAAP.
Cost of Goods Sold
Prior to July 2024, the Company only manufactured/assembled pediatric or adult SCDs for research oriented and/or clinical trial related activities. Accordingly, as of and during the three-and nine-months ended September 30, 2024, all inventory on-hand or utilized had $
Accounts Receivable, net
The need for a credit loss allowance is evaluated each reporting period based on the Company's assessment of the credit worthiness of its customers or any other potential circumstances that could result in a credit loss. The Company uses an aging schedule method for estimating expected credit losses. As the Company just commenced commercial operations during the three-months ended September 30, 2024, with a limited customer base, the Company's estimates are based on customer specific facts, until such time that the Company has developed sufficient collection history data in which to apply a portfolio-wide expected credit loss estimate based on an aging schedule.
The Company believes that the entire accounts receivable balance as of September 30, 2024, is collectible and there is
Emerging Growth Company Status
8
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
The Company is an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"). Under the JOBS Act, emerging growth companies can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (1) no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
Recently issued accounting standards
Accounting Standards Update 2023-09 — In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures. ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures. The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently assessing the impact of this guidance on our disclosures.
Accounting Standards Update 2023-07 — In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses, and is effective for fiscal years beginning after December 15, 2023 on a retrospective basis. The Company is currently assessing the impact of this guidance on our disclosures, but does not expect adoption to have an impact on our consolidated financial statements.
Note 3. Revenues and Contract Obligations
In December 2022, the Company entered into a License and Distribution Agreement (the "Distribution Agreement") with Nuwellis, Inc. ("Nuwellis") granting exclusive distribution rights of the Company's pediatric SCD within the United States of America. Under the terms of the Distribution Agreement, Nuwellis would pay the Company consideration comprising both (i) a per unit sales price for each unit shipped and (ii) a royalty for all units sold to customers.
In addition, Nuwellis also agreed to pay (i) a $
The Company had the following performance obligations within the Distribution Agreement: (i) a material right to Nuwellis consisting of an exclusive option for Nuwellis to purchase additional pediatric SCDs during the term of the Distribution Agreement for a discounted price, (ii) to provide training to Nuwellis personnel and medical professionals at end-user customers of Nuwellis and (iii) upon each receipt of a valid Nuwellis purchase order, delivery of pediatric SCDs. The transaction price for the Nuwellis material right and training is comprised of the Upfront Payment, the Regulatory Milestone Payment and the Sales Based Milestone Payment. The transaction price for each pediatric SCD device sold was the actual price for each device and the estimated royalties to be received.
As of September 30, 2024, the Company received full consideration for the Up-front Payment and the Regulatory Milestone Payment. No revenue had been recognized from this consideration as of September 30, 2024, which has been accounted for and disclosed as contract liabilities and was to be recognized over the remaining term of the Distribution Agreement beginning with the first commercial shipment to Nuwellis.
The following table summarizes the changes in the Company's contract liability balance for the nine months ended September 30, 2024 and 2023:
9
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
|
|
|
Nine Months Ended |
|
|
Year-Ended |
|
||
($ in thousands) |
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Contract liabilities, beginning of period |
|
|
$ |
|
|
$ |
— |
|
|
Consideration received |
|
|
|
|
|
|
|
||
Revenue |
|
|
|
— |
|
|
|
— |
|
Contract liabilities, end of period |
|
|
$ |
|
|
$ |
|
||
As of September 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was equal to the contract liability balance.
The Company and Nuwellis entered into a confidential settlement agreement on October 20, 2024 (the "Settlement Agreement"), in connection with the Company's termination of the Distribution Agreement on August 18, 2024. Under the Settlement Agreement the Company agreed to refund Nuwellis the entire $
As a result, the Company (i) was precluded from recognizing revenue of approximately $
Since the termination of the Distribution Agreement, the Company developed its own commercial operations and sold approximately $
The Company's sales during the three- and nine-months ended September 30, 2024, were all within the same reportable segment (the Company is a single reportable/operating segment due to its size and business operations). In addition, as the Company can only commercially sell pediatric SCDs within the United States of America. There are no sales to foreign jurisdictions.
Note 4. Trade Accounts Receivable
The table below presents the opening and closing balances of accounts receivable, on a gross and net basis, with the total change in expected credit losses.
($ in thousands) |
|
Accounts Receivable, Gross |
|
Expected Credit Losses |
|
Accounts Receivable, Net |
|
|||
December 31, 2023 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Increase in trade accounts receivable, gross |
|
|
|
|
— |
|
|
|
||
September 30, 2024 |
|
$ |
|
$ |
— |
|
$ |
|
||
Note 5. Accrued Expenses
Accrued expenses consisted of the following amounts as of September 30, 2024, and December 31, 2023:
10
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
($ in thousands) |
As of September 30, |
|
|
As of December 31, |
|
||
Accrued bonus |
$ |
|
|
$ |
|
||
Accrued director compensation |
|
|
|
|
|
||
Accrued research and development expenses |
|
|
|
|
|
||
Accrued legal |
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
||
Contract settlement contingent liability (*) |
|
|
|
|
|
||
Other |
|
|
|
|
|
||
Total accrued expenses |
$ |
|
|
$ |
|
||
(*) -
Note 6. Notes Payable
Notes payable activity was as follows for the nine-month period ended September 30, 2024:
($ in thousands) |
|
LMFA |
|
|
LMFAO |
|
|
Maxim |
|
|
Insurance Financing |
|
|
Investor D Note |
|
|
Unamortized deferred financing costs |
|
||||||
Balance as of December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||||
Note issued in exchange for warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
— |
|
|
Payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Balance as of September 30, 2024 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
There are no future maturities of any of the above formerly existing notes payable, as further explained below.
Investor D Note
On June 28, 2024, the Company and Investor D agreed to exchange all of the remaining outstanding warrants held by Investor D, which were issued in connection with Investor D's convertible debt issued between March 2023 and January 2024, into a short-term note of approximately $
Senior Secured LMFA Note Payable
The company entered into a senior secured note with LMFA in September 2022. The interest rate on the loan was
Senior Secured LMFAO Note Payable
11
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
The company entered into a senior secured note with LMFAO in October 2022. The interest rate on the loan was
Unsecured Maxim Note Payable
In October 2022, the Company entered into an unsecured promissory note with Maxim, for an aggregate principal amount of $
Insurance Financing
In October 2023, the Company entered into a financing arrangement with a lender to finance a portion of the annual premium of an insurance policy in the amount of $
Note 7. Convertible Notes
The activity for the convertible notes is disclosed in the table below for the nine month period ended September 30, 2024. See our Annual Report on Form 10-K for the year-ended for December 31, 2023, for other details relating to the Investor D convertible notes issued prior to December 31, 2023.
($ in thousands) |
|
3rd Investor D Note |
|
|
3rd Investor D Note |
|
|
3rd Investor D Note |
|
|
3rd Investor D Note |
|
|
4th Investor D Note |
|
|
5th Investor D Note |
|
|
6th Investor D Note |
|
|
Total |
|
||||||||
Balance as of December 31, 2023 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
||||||||
Issuance (Face Value) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fair value of detachable warrants at issuance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|||||
(Gain)/loss on conversion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Conversion to common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
(Gain)/loss on reporting period remeasurement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Redemption |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Balance as of September 30, 2024 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||||
The Company completed additional closings related to the Second Amendment to the Investor D Securities Purchase Agreement on January 12, 2024 and January 24, 2024, issuing notes in principal amounts of $
On January 30, 2024, the institutional investor agreed to waive its Optional Redemption Rights and any event of default that may arise thereunder with respect to this offering and suspend the Optional Redemption Rights for a period of sixty (
During the quarter-ended March 31, 2024, the institutional investor converted approximately $
12
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
(face value) in convertible debt, with a fair value of approximately $
The Company incurred a loss of approximately $
Investor D April 2024 Side Letter
On April 1, 2024, the Company and Investor D entered into a side letter agreement (the "April 2024 Side Letter") whereby each party agreed to suspend certain rights of Investor D for a
On June 5, 2024, Investor D completed the following two transactions, eliminating the remaining outstanding convertible debt:
Note 8. Equity Transactions
January 2024 Offering
On January 26, 2024, the Company entered into a Securities Purchase Agreement with a single institutional investor, pursuant to which the Company issued to the investor (the "Q1 2024 SPA"), (i) in a registered direct offering,
The Company received aggregate gross proceeds from the January 2024 Offering of approximately $
13
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
Pre-Funded Warrants are exercised in full. All Pre-Funded Warrants were exercised during the first quarter ended March 31, 2024.
The Company paid approximately $
July 2024 Offering
On July 10, 2024, the Company entered into a securities purchase agreement (the “Q3 2024 SPA”) with certain institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market consistent with the rules of the Nasdaq Stock Market: (i)
On May 17, 2024, the Company entered into an engagement letter with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which Wainwright agreed to serve as the exclusive placement agent for the Company, on a reasonable best-efforts basis, in connection with the offering. The Company paid Wainwright an aggregate cash fee equal to (i)
August 2024 At-The-Market Offering
On August 20, 2024, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with Wainwright as sales agent, to sell shares of its common stock, from time to time, through an “at the market offering” program under which Wainwright will act as sales agent. The sales, if any, of the Company's Common Stock made under the ATM Agreement will be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on or through the Nasdaq Capital Market or on any other existing trading market for the Company’s common stock (the "ATM").
Through September 30, 2024, the Company raised approximately $
Tumin Equity Line of Credit
During the year ended December 31, 2023, the Company sold
14
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
Note 9. Warrants
Warrants Issued in FY 2024
July 2024 Warrants
As discussed in Note 7, as part of the Q3 2024 SPA, the Company issued on July 11, 2024 the following warrants to purchase the Company's common stock to certain institutional investors and the placement agent:
Investor E (January 2024) Warrants
As discussed in Note 7, as part of the Q1 2024 SPA, the Company issued on January 26, 2024 the following warrants to purchase the Company's common stock to Investor E:
Investor E Warrants became exercisable on
Maxim Group LLC ("Maxim") acted as the placement agent in connection with the transactions pursuant to the Placement Agency Agreement, dated January 26, 2024, by and between the Company and Maxim. On January 30, 2024, Maxim received warrants to purchase
In accordance with ASC 815-40, Derivatives and Hedging-Contracts in Entity’s own Equity, the Company determined the Investor E and PA Warrants meet the conditions for equity classification and should be included on the consolidated balance sheet as a component of stockholders' equity (deficit).
Investor D Warrants
The Company, in conjunction with additional borrowing of convertible debt related to the Second Amendment to the Investor D SPA on January 12, 2024 and January 24, 2024, issued warrants to purchase up to
15
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
All remaining Investor D Warrants issued in connection with the Investor D SPA were exchanged for an approximately $
The Investor D Warrants issued in January 2024 in connection with the Investor D SPA were determined to be liability classified. The initial fair value of the convertible note warrants was determined using a Black-Scholes option pricing model, which considers variables such as estimated volatility, time to maturity, and the risk-free interest rate. The risk-free interest rate is the U.S. Treasury rate at the date of issuance, and the time to maturity is based on the contractual life at the date of issuance, which is five years. Subsequent changes in fair value were recognized through earnings at each reporting period end-date or settlement date.
The Company had the following warrants outstanding at September 30, 2024, and December 31, 2023:
|
|
As of |
|
|
As of |
|
||
Liability Classified Warrants |
|
|
|
|
|
|
||
Investor D Warrants |
|
|
|
|
|
|
||
Private Placement Warrants |
|
|
|
|
|
|
||
PIPE Investor Warrants |
|
|
|
|
|
|
||
Subtotal |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Equity Classified Warrants |
|
|
|
|
|
|
||
Investor E (January 2024) Warrants |
|
|
|
|
|
|
||
July 2024 Warrants |
|
|
|
|
|
|
||
Placement Agent Warrants |
|
|
|
|
|
|
||
Public Stockholder Warrants |
|
|
|
|
|
|
||
Legacy Warrants |
|
|
|
|
|
|
||
Subtotal |
|
|
|
|
|
|
||
Grand Total |
|
|
|
|
|
|
||
The following tables provides the weighted-average strike price and time to maturity for each warrant tranche as of September 30, 2024, and December 31, 2023:
16
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
As of September 30, 2024 |
|
Warrant Share Equivalents |
|
|
Weighted-Average Strike Price |
|
|
Weighted-Average Time to Maturity |
|
|||
Liability Classified Warrants |
|
|
|
|
|
|
|
|
|
|||
Private Placement Warrants |
|
|
|
|
$ |
|
|
|
|
|||
PIPE Investor Warrants |
|
|
|
|
$ |
|
|
|
|
|||
|
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|
|
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|
|
|
|
|||
Equity Classified Warrants |
|
|
|
|
|
|
|
|
|
|||
Investor E (January 2024) Warrants |
|
|
|
|
$ |
|
|
|
|
|||
July 2024 Warrants (*) |
|
|
|
|
$ |
|
|
|
|
|||
Placement Agent Warrants |
|
|
|
|
$ |
|
|
|
|
|||
Public Stockholder Warrants |
|
|
|
|
$ |
|
|
|
|
|||
Legacy SeaStar Inc. Warrants |
|
|
|
|
$ |
|
|
|
|
|||
|
|
|
|
|
|
|
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|
|||
|
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|
|||
As of December 31, 2023 |
|
Warrant Share Equivalents |
|
|
Weighted-Average Strike Price |
|
|
Weighted-Average Time to Expiration |
|
|||
Liability Classified Warrants |
|
|
|
|
|
|
|
|
|
|||
Investor D Warrants |
|
|
|
|
$ |
|
|
|
|
|||
Private Placement Warrants |
|
|
|
|
$ |
|
|
|
|
|||
PIPE Investor Warrants |
|
|
|
|
$ |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Equity Classified Warrants |
|
|
|
|
|
|
|
|
|
|||
Public Stockholder Warrants |
|
|
|
|
$ |
|
|
|
|
|||
Legacy SeaStar Inc. Warrants |
|
|
|
|
$ |
|
|
|
|
|||
(*) - The July 2024 Warrants comprise both the July 2024 Investor Warrants and the July 2024 PA Warrants. Accordingly, the reported exercise price is the weighted-average exercise price.
Below is the warrant activity for the nine-months ended September 30, 2024:
|
|
Investor D Warrants |
|
|
Investor E (January 2024) Warrants |
|
|
July 2024 Warrants |
|
|
Placement Agent Warrants |
|
|
Private Placement Warrants |
|
|
PIPE Investor Warrants |
|
|
Public Stockholders' Warrants |
|
|
Legacy Warrants |
|
||||||||
Outstanding as of December 31, 2023 |
|
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||||||||
Issuance |
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|
||||||||
Exercised |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
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|
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|
|
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|
|
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|
||||||
Forfeited / cancelled |
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Exchanged for Investor D Note |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Outstanding as of September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
During the three months ended September 30, 2024, the Company incurred a gain of approximately $
During the nine months ended September 30, 2024, the Company incurred (i) a $
Note 10. Stock-Based Compensation Awards
The following table sets forth the total stock-based compensation cost included in the Company's condensed
17
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
consolidated statements of operations for the period indicated:
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||
($ in thousands) |
|
|
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Equity Incentive Plan - Summary
2022 Omnibus Incentive Plan
The Company's Board of Directors adopted, and the shareholders approved the 2022 Omnibus Incentive Plan to provide long-term incentive for its employees and non-employee service providers. The vesting of stock options is stated in each individual grant agreement, which is generally either or
2019 Stock Incentive Plan
The Company’s Board of Directors adopted the 2019 Stock Incentive Plan on February 25, 2019, to provide long-term incentive for its employees and non-employee service providers. The Stock Incentive Plan was terminated on October 28, 2022, and no further awards were granted under such plan.
Stock Options
Option activity for the period ended September 30, 2024, is as follows:
2022 Omnibus Incentive Plan - Stock Options
|
|
|
|
Options |
|
|
Weighted-Average Exercise Price |
|
|
Total Intrinsic Value |
|
|
Weighted-Average Remaining Contractual Life (Years) |
|
||||
Outstanding as of December 31, 2023 |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited / cancelled |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2024 |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||
Vested and exercisable as of September 30, 2024 |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||
18
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
2019 Omnibus Incentive Plan - Options
|
|
|
|
Options |
|
|
Weighted-Average Exercise Price |
|
|
Total Intrinsic Value |
|
|
Weighted-Average Remaining Contractual Life (Years) |
|
||||
Outstanding as of December 31, 2023 |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited / cancelled |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding as of September 30, 2024 |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||
Vested and exercisable as of September 30, 2024 |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||
Restricted Stock Units
A summary of the Company’s restricted stock unit (‘RSU”) activity is as follows:
2022 Omnibus Incentive Plan - RSUs
|
|
|
|
Number of RSU |
|
|
Weighted-Average Grand Date Fair Value (per share) |
|
||
Outstanding as of December 31, 2023 |
|
|
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
|
|
||
Vested |
|
|
|
|
( |
) |
|
|
|
|
Forfeited / cancelled |
|
|
|
|
( |
) |
|
|
|
|
Outstanding as of September 30, 2024 |
|
|
|
|
|
|
$ |
|
||
2019 Stock Incentive Plan - RSUs
|
|
|
|
Number of RSU |
|
|
Weighted-Average Grand Date Fair Value (per share) |
|
||
Outstanding as of December 31, 2023 |
|
|
|
|
|
|
$ |
|
||
Exercised |
|
|
|
|
|
|
|
|
||
Vested |
|
|
|
|
( |
) |
|
|
|
|
Forfeited / cancelled |
|
|
|
|
( |
) |
|
|
|
|
Outstanding as of September 30, 2024 |
|
|
|
|
|
|
$ |
|
||
Note 11. Commitments and Contingencies
Lease Agreements
The Company is part of a membership agreement for shared office space and can cancel at any time. Rent expense was approximately $
19
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
Litigation
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business.
2022 Demand Letter
In connection with the Business Combination, LMAO proposed, for stockholder approval, various amendments to its Amended and Restated Certificate of Incorporation, which included among other things a proposal to increase the authorized shares of common stock. A purported stockholder sent a Stockholder Litigation Demand letter (the “Demand”) to the Board of Directors of LMAO alleging that the Delaware General Corporation Law required a separate class vote of the Class A common stockholders to increase the authorized shares of common stock. Following receipt of the Demand, the Company canceled and withdrew the proposal to increase the authorized shares of common stock.
The stockholder’s counsel thereafter demanded that the Company pay counsel fees for the purported benefit conferred upon the Company’s shareholders by causing the Company to withdraw the allegedly invalid proposal to increase the authorized shares of common stock. The Company paid approximately $
2024 Securities Class Action Lawsuit
On July 5, 2024, Forrest A K Wells (the “Plaintiff”), a purported stockholder of the Company, filed a putative class action complaint in the United States District Court for the State of Colorado, captioned Wells v. SeaStar Medical Holding Corporation et al, Case No. 1:24-cv-0187 (D. Colorado) (the “Class Action”). The Class Action alleges that the Company, its Chief Executive Officer and former Chief Financial Officer made or caused to be made material misstatements or omissions regarding the Company’s business and operations, allegedly culminating in the Company’s restatement of its consolidated financial statements, disclosed in a Form 8-K and filed on March 27, 2024. The Class Action asserts claims pursuant to the Securities Exchange Act of 1934, including Section 10(b), Rule 10b-5 promulgated thereunder and Section 20(a). The Class Action seeks to recover, among other remedies, compensatory damages. The Company intends to vigorously defend the action.
The Company has not recognized a contingent liability for this Class Action event as it does not qualify for the recognition criteria under ASC 450 - Contingencies.
Confidential Settlement Agreement
On October 20, 2024, the Company entered into the Settlement Agreement with Nuwellis whereby the Company has agreed to pay Nuwellis $
Note 12. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Inputs used to measure fair value are classified into the following hierarchy:
Level 1 – quoted prices in active markets for identical assets and liabilities.
Level 2 – other significant observable inputs (including quoted prices for similar assets and liabilities, interest rate, credit risk, etc.).
Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of assets and liabilities).
The fair value of the forward option on prepaid forward contracts, convertible notes, and the warrants liability is
20
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
classified as Level 3 in the fair value hierarchy.
Fair Value Measurement Hierarchy
The following table presents the Company's financial assets and/or liabilities that were accounted for at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, by level within the fair value hierarchy. There were no non-recurring fair value measurements, as the Company does not have any long-lived assets, including fixed assets, intangible assets or goodwill which can require non-recurring measurements for impairment.
|
|
Fair Value Measurements as of September 30, 2024 |
|
|||||||||||||
($ in thousands) |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liability classified warrants |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Fair Value Measurements as of December 31, 2023 |
|
|||||||||||||
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible notes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liability classified warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Summary of Level 3 Input Changes
The following table presents the changes in the forward option-prepaid forward contracts, convertible notes measured at fair value, warrants liability, and the notes derivative liability for the periods ended September 30, 2024 and December 31, 2023 (in thousands):
Level 3 Roll Forward ($ in thousands) |
|
|
Convertible Notes |
|
|
Liability Classified Warrants |
|
||
Balance as of December 31, 2023 |
|
|
$ |
|
|
$ |
|
||
Additions |
|
|
|
|
|
|
|
||
Cash paid to settle |
|
|
|
( |
) |
|
|
|
|
Exchange for short-term note payable |
|
|
|
|
|
|
( |
) |
|
Shares issued upon conversion or exercise |
|
|
|
( |
) |
|
|
( |
) |
Changes in fair value |
|
|
|
|
|
|
|
||
Balance as of September 30, 2024 |
|
|
$ |
|
|
$ |
|
||
Level 3 Inputs
For assets or liabilities for which the Company is required to remeasure the fair value on a recurring basis at each reporting date, generally the Company is required to disclose certain quantitative data related to the inputs used at the most recent reporting period date. However, for those assets or liabilities for which the Company has elected to take the FVO in accordance with ASC 825, Financial Instruments, then such quantitative disclosures are not required.
Liability Classified Warrants
The liability classified warrants as of September 30, 2024 and December 31, 2023, include three classes of warrants, and therefore, the range of assumptions used has been provided. Significant assumptions used in valuing warrants which require liability classification were as follows as of September 30, 2024 and December 31, 2023.
21
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
|
|
As of September 30, 2024 |
|
|
|
|
|
|
|
Expected volatility |
|
|
% |
|
Equivalent term |
|
|
|
|
Risk-free rate |
|
|
% |
|
Dividend yield |
|
|
% |
|
Stock price |
|
$ |
|
|
Strike price |
|
$ |
|
|
|
|
As of December 31, 2023 |
|
||||||
|
|
Minimum |
|
|
|
Maximum |
|
||
Expected volatility |
|
|
% |
|
|
|
% |
||
Equivalent term |
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
% |
|
|
|
% |
||
Dividend yield |
|
|
% |
|
|
|
% |
||
Stock price |
$ |
|
|
|
$ |
|
|
||
Strike price |
$ |
|
|
|
$ |
|
|
||
Note 13. Income Taxes
In accordance with U.S. GAAP, a valuation allowance should be provided if it is more likely than not that some or all of the Company’s deferred tax assets will not be realized. The Company’s ability to realize the benefit of its deferred tax assets will depend on the generation of future taxable income. Except as noted below, due to the uncertainty of future profitable operations and taxable income, the Company has recorded a full valuation allowance against its net deferred tax assets. The Company has recognized an insignificant provision for certain minimum state taxes of less than $
The Company believes its tax filing position and deductions related to tax periods subject to examination will be sustained under audit and, therefore, has no reserve for uncertain tax positions.
Note 14. Net Loss Per Share
The following table presents the calculation of basic and diluted net loss per share (in thousands except share and per share information):
|
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
|||||||||||
($ in thousands except share and per share amounts) |
|
|
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
2023 |
|
||||
Net loss |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted net loss per share |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
$ |
( |
) |
The following weighted-average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive:
22
SeaStar Medical Holding Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024
|
|
|
|
As of September 30, |
|
|||||||
|
|
|
|
|
|
2024 |
|
|
2023 |
|
||
Investor D warrants |
|
|
|
|
|
|
|
|
|
|
||
Investor E (January 2024) warrants |
|
|
|
|
|
|
|
|
|
|
||
July 2024 Warrants |
|
|
|
|
|
|
|
|
|
|
||
Placement Agent warrants |
|
|
|
|
|
|
|
|
|
|
||
Public Stockholders' warrants |
|
|
|
|
|
|
|
|
|
|
||
Private Placement warrants |
|
|
|
|
|
|
|
|
|
|
||
PIPE Investor warrants |
|
|
|
|
|
|
|
|
|
|
||
Legacy warrants |
|
|
|
|
|
|
|
|
|
|
||
Employee based options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
||
Unvested employee based restricted stock units |
|
|
|
|
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
|
|
|
|
||
Note 15. Subsequent Events
Confidential Settlement Agreement
In December 2022, the Company entered into the Distribution Agreement with Nuwellis, pursuant to which the Company appointed Nuwellis as its exclusive distributor for the sale and distribution of its pediatric SCD product throughout the United States. In May 2024, the Company provided notice to Nuwellis that Nuwellis had breached the Distribution Agreement and that the Distribution Agreement would terminate effective August 18, 2024.
Nuwellis disputed the validity of the termination and on October 20, 2024, the Company entered into a confidential settlement agreement and release with Nuwellis, pursuant to which the Company agreed to pay Nuwellis an aggregate of $
At-The-Market Offering
Subsequent to September 30, 2024 and as of November 11, 2024, the Company raised approximately $2.0 million by issuing approximately
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis are intended to help you understand our business, financial condition, results of operations, liquidity, and capital resources. You should read this discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2023.
In addition to historical financial analysis, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions, as described under the heading “Cautionary Note Regarding Forward Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, risks and uncertainties, including those set forth under “Risk Factors” included elsewhere (or incorporated by reference) in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2023. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “SeaStar Medical", “we", “us", “our,” and “the Company” are intended to mean the business and operations of SeaStar Medical Holding Corporation and its consolidated subsidiaries following the Business Combination.
Overview
On October 28, 2022, LMAO consummated a series of transactions that resulted in the combination of LMF Merger Sub, Inc. and SeaStar Medical, Inc. pursuant to an Agreement and Plan of Merger (the "Business Combination"), resulting in the formation of the Company.
We are a commercial stage medical technology company developing a proprietary platform therapy, our Selective Cytopheretic Device (“SCD”), to reduce the consequences of hyperinflammation on vital organs. We received Food and Drug Administration ("FDA") approval for our pediatric SCD on February 22, 2024, under a Humanitarian Device Exemption ("HDE"), and shipped our first commercial pediatric SCD in July 2024. A pivotal clinical trial for the SCD in adult patients with Acute Kidney Injury ("AKI") is underway with 59 patients enrolled as of November 12, 2024.
The inflammatory response is critical to fend off infections and repair damaged tissue in the body. Central to inflammation are the cells within blood and lymph circulatory systems, called white blood cells (primarily neutrophils and monocytes), also referred to commonly as “pus” cells. In a normal inflammatory response, neutrophils are the first immune cells to arrive at the site and are key to the entire immune response that kills pathogens and promotes tissue repair. These inflammatory cells release chemicals (cytokines) that trigger the immune system to eliminate foreign pathogens or damaged tissue, enhancing the immune response.
If the inflammatory response becomes excessive and dysregulated (referred as proinflammatory), normal neutrophil cells die off (“apoptosis”), allowing the inflammatory cells to continue to produce cytokines, further enhancing the dysregulated immune response, and altering feedback mechanisms that regulate the immune system. This results in damaging hyperinflammation spreading uncontrollably to other parts of the body, often leading to acute chronic solid organ dysfunction or failure, including heart, lung, kidney and liver diseases. This hyperinflammatory response is also known as the “cytokine storm,” referring to the body’s reaction to the category of small-secreted proteins released by hyperinflammatory cells that affect communication between cells. The cytokine storm, when left uncontrolled, can lead to organ damage and even death.
Based on clinical and preclinical studies conducted over the last 15 years, our technology has shown promise in modulating the degree of activity of proinflammatory cells to help reduce tissue damage and speed the repair and recovery of organ function. We believe this approach, if successful, will transform the ability of clinicians to treat acute organ failure in the intensive care unit (“ICU”) and to improve organ function in hospitalized patients.
Currently, few therapeutics are available to clinicians to address hyperinflammation and for those options that do exist, such options are either immunosuppressive or only target one cytokine. We believe our technology has the potential to overcome limitations in existing anti-inflammatory treatments and address the challenge of selectively targeting activated neutrophils and monocytes.
We are leveraging our patent protected and scalable SCD technology platform to develop proprietary therapies that are organ agnostic and target both acute and chronic indications. Preclinically, our SCD was tested in various animal models, which include acute myocardial infarction, intracranial hemorrhage, chronic heart failure, sepsis, and acute respiratory distress syndrome. The animal models demonstrated the inflammatory response and how it was modified by our SCD. We will continue
24
to explore the application of our SCD technology across a broad range of markets and indications where proinflammatory activated neutrophils and monocytes may contribute to disease progression or severity in both acute and chronic indications.
We are using our SCD to clinically validate several acute and chronic organ injury indications, which include kidneys, heart, liver, brain and lungs. Our investigational SCD for adults is an extracorporeal synthetic membrane device that is currently being evaluated in a pivotal clinical trial in the US for pre-market clearance by the FDA. The SCD for adults is designed to be easily integrated into existing continuous renal replacement therapy (“CRRT”) systems that are commonly installed in hospitals, including in ICUs throughout the United States. Similar to our pediatric SCD, once approved and commercialized, our adult SCD is expected to initially target acute kidney injury in adults on CRRT. In addition, we are developing our SCD to address inflammation associated with liver disease, acute respiratory distress syndrome, chronic dialysis and chronic heart failure in adult populations.
We have incurred net losses in each year since our inception in 2007. As of September 30, 2024 and December 31, 2023, we had an accumulated deficit of $135.2 million and $114.7 million, respectively. Our net losses were $20.4 million and $16.8 million for the nine months ended September 30, 2024, and 2023, respectively. Substantially all our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.
As of September 30, 2024, and December 31, 2023, we had cash of $2.1 million and $0.2 million, respectively.
Our accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern.
The recurring losses, working capital deficiency, the need for capital to fund our operations, including clinical trial and regulatory approval expenses, and the amount of cash reserve are factors that raise substantial doubt about our ability to continue as a going concern for the twelve-month period from the date the unaudited consolidated financial statements are made available. See Note 1 to our unaudited consolidated financial statements for the three- and nine- months ended September 30, 2024, included elsewhere in this Form 10-Q for additional information on our assessment.
Our need for additional capital will depend in part on the scope and costs of our development activities. To date, we have generated revenue of approximately $0.1 million from the sale of commercialized pediatric SCD products. Our ability to generate product revenue in the future will depend on the successful roll-out of our QUELIMMUNE pediatric SCD to hospitals and the development and eventual successful commercialization of our adult SCD. Until such time we are able to generate significant revenue from product sales, we expect to finance our operations through the sale of equity or debt, borrowings under credit facilities, potential collaborations, other strategic transactions or government and other grants. Adequate capital may not be available to us when needed or on acceptable terms. If we are unable to raise capital, we could be forced to delay, reduce, suspend or cease our research and development programs and any future commercialization efforts, which would have a negative impact on our business, prospects, operating results and financial condition. See Part I, Item 1A “Risk Factors” for additional information.
Key Components of Results of Operations
Recent Developments
Confidential Settlement Agreement
In December 2022, we entered into a license and distribution agreement (the “Distribution Agreement”) with Nuwellis, Inc. (“Nuwellis”), pursuant to which we appointed Nuwellis as our exclusive distributor for the sale and distribution of its pediatric SCD throughout the United States. In May 2024, we provided notice to Nuwellis that Nuwellis had breached the Distribution Agreement and that the Distribution Agreement would terminate effective August 18, 2024.
Nuwellis disputed the validity of the termination and on October 20, 2024, the Company entered into a confidential settlement agreement and release with Nuwellis (the "Settlement Agreement"), pursuant to which the Company agreed to pay Nuwellis an aggregate of $900,000 payable in three installments through December 31, 2024. The Company made the first payment of $0.5 million on October 22, 2024.
Revenue
25
Our pediatric SCD received HDE approval from the FDA in February 2024. Since that time, we have begun to build out our commercial operations, develop our customer base and initiate commercial sales of QUELIMMUNE. We shipped our first commercial QUELIMMUNE units in July 2024. Through September 30, 2024, we have recognized approximately $0.1 million of revenue from the sale of QUELIMMUNE. Historically, prior period revenue has been primarily derived from government and other grants. We will continue to focus our efforts on generating revenue in the future based on product sales of QUELIMMUNE, as well as potential future payments from license or collaboration agreements and government and other grants. We expect that any revenue we generate will fluctuate from quarter to quarter as we introduce QUELIMMUNE to pediatric hospital customers. We also continue to develop our adult SCD for which we are enrolling patients in a pivotal study to support a FDA approval. If we fail to complete the development of, or fail to obtain regulatory approval for commercialization of our adult SCD in a timely manner, our ability to generate future revenue, and our results of operations and financial position, could be materially adversely affected.
Research and Development Expenses
Since inception, we have focused our resources on research and development activities, including conducting preclinical studies and clinical trials, and developing our process and activities related to regulatory filings for our products. Subject to the availability of additional funding, we plan to further increase our research and development expenses for the foreseeable future as we continue the development of our SCD as well as a next generation SCD.
Research and Development expenses also include salaries and related costs for employees in clinical and medical affairs roles, which include stock-based compensation expenses and benefits for such employees .
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for employees in executive and finance roles, which also include stock-based compensation expenses and benefits for such employees.
Other significant general and administrative expenses include facilities costs, insurance, professional fees for accounting and legal services and expenses associated with obtaining and maintaining patents and obtaining financing. As we continue to expand and grow our operations, we expect that our general and administrative expenses will increase, including additional expenses relating to new hires, travel, an enterprise resource planning platform, and branding.
Other Income (Expense), Net
Total other income (expense), net primarily consists of interest expense relating to interest incurred on our notes, interest incurred on our convertible notes, change in the fair value of warrants liability, change in fair value of convertible notes, gain on issuance of convertible notes, change in fair value of forward-option forward contracts, and gain on sale of recycled shares.
Net Loss
Net loss consists of the loss from operations, less other expense.
Factors Affecting Operating Results
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges. Please see the factors discussed elsewhere in this Form 10-Q, including those discussed in Part II, Item 1A, “Risk Factors,” for additional information.
Results of Operations
Comparison of the Three Months Ended September 30, 2024 to the Three Months Ended September 30, 2023
The following table sets forth a summary of our results of operations. This information should be read together with our unaudited consolidated financial statements and related Notes included elsewhere in this Form 10-Q.
26
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
||||||||
|
|
|
September 30, |
|
|
|
Change |
|
|||||||||||
($ in thousands) |
|
|
2024 |
|
|
|
2023 |
|
|
|
$ |
|
|
% |
|
||||
Revenue |
|
|
$ |
68 |
|
|
|
$ |
— |
|
|
|
$ |
68 |
|
|
* |
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
2,336 |
|
|
|
|
1,087 |
|
|
|
|
1,249 |
|
|
|
115 |
% |
General and administrative |
|
|
|
2,188 |
|
|
|
|
1,855 |
|
|
|
|
333 |
|
|
|
18 |
% |
Total operating expenses |
|
|
|
4,524 |
|
|
|
|
2,942 |
|
|
|
|
1,582 |
|
|
|
54 |
% |
Loss from operations |
|
|
|
(4,456 |
) |
|
|
|
(2,942 |
) |
|
|
|
(1,582 |
) |
|
|
54 |
% |
Total other income (expense) |
|
|
|
(22 |
) |
|
|
|
(4,290 |
) |
|
|
|
4,268 |
|
|
|
(99 |
)% |
Loss before income tax provision |
|
|
|
(4,478 |
) |
|
|
|
(7,232 |
) |
|
|
|
2,686 |
|
|
|
(37 |
)% |
Income tax provision (benefit) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Net loss |
|
|
$ |
(4,478 |
) |
|
|
$ |
(7,232 |
) |
|
|
$ |
2,686 |
|
|
|
(37 |
)% |
Revenue
Revenue increased $0.1 million for the three-months ended September 30, 2024 compared to the three-months ended September 30, 2023, as the Company commenced commercial sales in July 2024. This was made possible because the Company obtained an HDE for the pediatric SCD in February 2024, and final regulatory clearance to sell commercially from the FDA under this HDE in July 2024.
Research and Development Expenses
The following table discloses the breakdown of research and development expenses:
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
||||||||
|
|
|
September 30, |
|
|
|
Change |
|
|||||||||||
($ in thousands) |
|
|
2024 |
|
|
|
2023 |
|
|
|
$ |
|
|
% |
|
||||
Clinical trials |
|
$ |
|
1,161 |
|
|
|
|
447 |
|
|
$ |
|
714 |
|
|
|
160 |
% |
External services |
|
|
|
179 |
|
|
|
|
76 |
|
|
|
|
103 |
|
|
|
136 |
% |
Payroll and personnel expenses |
|
|
|
935 |
|
|
|
|
551 |
|
|
|
|
384 |
|
|
|
70 |
% |
Other research and development expenses |
|
|
|
61 |
|
|
|
|
13 |
|
|
|
|
48 |
|
|
|
369 |
% |
|
|
$ |
|
2,336 |
|
|
$ |
|
1,087 |
|
|
$ |
|
1,249 |
|
|
|
115 |
% |
Research and development expenses for the three months ended September 30, 2024 and 2023 were $2.3 million and $1.1 million, respectively. The increase in research and development expenses of approximately $1.2 million, or 115%, was primarily driven by (i) a $0.7 million increase in clinical trial costs due to the Company's increased efforts related to patient treatments and obtaining regulatory approval to commercially market and sell its adult SCD devices, (ii) a $0.4 million increase in personnel costs related to increased headcount during the three-months ended September 30, 2024 compared to this same period ended September 30, 2023, and (iii) $0.2 million increase in external costs due to the use of certain 3rd party vendors in conjunction with the Company's regulatory compliance and maintenance efforts.
General and Administrative Expenses
General and administrative expenses for the three months ended September 30, 2024 and 2023 were $2.2 million and $1.9 million, respectively. The increase in general and administrative expenses of approximately $0.3 million was the result of (i) $0.3 million increases in fees, primarily related to the settlement for contract termination with Nuwellis, Inc., (ii) $0.1 million increase professional services, driven primarily by increased accounting, investor relations related expenses, and employee training, and (iii) and approximately $0.1 million in compensation expense. This was offset by (i) a decline in insurance expense of approximately $0.1 million, and (ii) a $0.1 million decline in marketing expenses.
Other Income (Expense)
Other expenses (net) decreased approximately $4.3 million, or close to an 100% decline for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The key drivers for this decrease were the following: (i) $1.3 million loss on change in fair value of a forward purchase option-prepaid forward contract that occurred during the three-months ended September 30, 2023, but for which there was no activity during the three-months ended September 30, 2024, as the forward purchase option-prepaid forward contract did not exist during the three-months ended
27
September 30, 2024, and (ii) $5.3 million loss on the change in fair value or extinguishments of convertible notes that occurred during the three-months ended September 30, 2023, but there was no such activity for the three months ended September 30, 2024, as all convertible notes were fully redeemed or converted by June 30, 2024.
The above charges were offset by (i) $1.3 million gain from the change in fair value of forward purchase agreement derivative liabilities during the three-months ended September 30, 2023, but for which there was no activity during the three-months ended September 30, 2024, as the forward purchase agreement did not exist during the three-and-nine months ended September 30, 2024, and (ii) a $0.8 million decline in gains from the change in fair value of liability classified warrants, with $1.0 million gain recognized for the three-months ended September 30, 2023, compared to only a $0.2 million gain recognized during the same period in 2024. The reason for the decline was the number of outstanding liability classified warrants declined as all of the Investor D warrants were either exercised or exchanged for a short term note by June 30, 2024, and (iii) $0.2 million decline in other income.
Income Tax Provision (Benefit)
SeaStar Medical recorded a provision for income taxes of $0.0 million for the three months ended September 30, 2024, and a provision for income taxes of $0.0 million for the nine months ended September 30, 2023.
Under Accounting Standards Codification (“ASC”) 740-10-30-5, Income Taxes, deferred tax assets should be reduced by a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not (i.e., a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. SeaStar Medical considers all positive and negative evidence available in determining the potential realization of deferred tax assets including, primarily, the recent history of taxable earnings or losses. Based on operating losses reported during 2022 and 2021, the Company concluded there was not sufficient positive evidence to overcome this recent operating history. As a result, we believe that a valuation allowance continues to be necessary based on the more-likely-than-not threshold noted above.
Net Loss
During the three months ended September 30, 2024, SeaStar Medical had a net loss of $4.5 million compared to a net loss of $7.2 million for the three months ended September 30, 2023. The decreased net loss of $2.7 million has been disclosed in the above discussion.
Comparison of the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023
|
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
||||||||
|
|
|
September 30, |
|
|
|
Change |
|
|||||||||||
($ in thousands) |
|
|
2024 |
|
|
|
2023 |
|
|
|
$ |
|
|
% |
|
||||
Revenue |
|
|
$ |
68 |
|
|
|
$ |
— |
|
|
|
$ |
— |
|
|
* |
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
6,367 |
|
|
|
|
4,798 |
|
|
|
|
1,569 |
|
|
|
33 |
% |
General and administrative |
|
|
|
6,776 |
|
|
|
|
6,475 |
|
|
|
|
301 |
|
|
|
5 |
% |
Total operating expenses |
|
|
|
13,143 |
|
|
|
|
11,273 |
|
|
|
|
1,870 |
|
|
|
17 |
% |
Loss from operations |
|
|
|
(13,075 |
) |
|
|
|
(11,273 |
) |
|
|
|
(1,870 |
) |
|
|
17 |
% |
Total other income (expense) |
|
|
|
(7,333 |
) |
|
|
|
(5,497 |
) |
|
|
|
(1,836 |
) |
|
|
33 |
% |
Loss before income tax provision |
|
|
|
(20,408 |
) |
|
|
|
(16,770 |
) |
|
|
|
(3,706 |
) |
|
|
22 |
% |
Income tax provision (benefit) |
|
|
|
3 |
|
|
|
|
5 |
|
|
|
|
(2 |
) |
|
|
(40 |
)% |
Net loss |
|
|
$ |
(20,411 |
) |
|
|
$ |
(16,775 |
) |
|
|
$ |
(3,704 |
) |
|
|
22 |
% |
Revenue
Revenue increased $0.1 million for the nine-months ended September 30, 2024 compared to the nine-months ended September 30, 2023, as the Company did not commence commercial sales until the three-months ended September 30, 2024. This was made possible because the Company obtained an HDE for the pediatric SCD devices in February 2024, and final regulatory clearance to sell commercially from the FDA under this HDE in July 2024.
28
Research and Development
The following table discloses the breakdown of research and development expenses:
|
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
||||||||
|
|
|
September 30, |
|
|
|
Change |
|
|||||||||||
($ in thousands) |
|
|
2024 |
|
|
|
2023 |
|
|
|
$ |
|
|
% |
|
||||
Clinical trials |
|
$ |
|
3,099 |
|
|
|
|
1,761 |
|
|
$ |
|
1,338 |
|
|
|
76 |
% |
External services |
|
|
|
833 |
|
|
|
|
1,163 |
|
|
|
|
(330 |
) |
|
|
(28 |
)% |
Payroll and personnel expenses |
|
|
|
2,258 |
|
|
|
|
1,775 |
|
|
|
|
483 |
|
|
|
27 |
% |
Other research and development expenses |
|
|
|
177 |
|
|
|
|
99 |
|
|
|
|
78 |
|
|
|
79 |
% |
|
|
$ |
|
6,367 |
|
|
$ |
|
4,798 |
|
|
$ |
|
1,569 |
|
|
|
33 |
% |
Research and development expenses for the nine months ended September 30, 2024 and 2023 were $6.4 million and $4.8 million, respectively, an increase of approximately $1.6 million, or 3%. The increase in research and development expenses was primarily driven by (i) $1.3 million increase in clinical trial expense due to the ongoing efforts related to the Company's adult SCD device clinical trial and continuing additional clinical trial efforts on the pediatric SCD device, (ii) $0.5 million increase in personnel costs related to increased headcount during the nine-months ended September 30, 2024 compared to this same period ended September 30, 2023, and (iii) a $0.1 million increase in other research and development expenses primarily driven by employee training programs. These increases were offset by a $0.3 million decrease in external services as the Company invested in medical training and educational materials necessary for both clinical sites and future commercialization.
General and Administrative
General and administrative expenses for the nine months ended September 30, 2024 and 2023 were $6.8 million and $6.5 million, respectively. The increase in general and administrative was driven by (i) a $0.4 million increase in accounting, finance, legal, and SEC related fees, primarily due to the restatement of 2022 and 2023 annual and interim financial statements during 2024, (ii) a $0.1 million increase in investor relations activities, (iii) a $0.4 million increase in fees primarily related to the settlement for contract termination with Nuwellis, Inc., (iv) a $0.1 million increase in recruiting costs (vi) a $0.2 million increase in employee related expenses due to head count increases, and (v) a $0.1 million increase in all other expenses. These increases were offset by (i) an approximately $0.3 million decrease in insurance expense; (ii) a $0.3 million decrease in sales and marketing expenses as the Company reduced trade show and advertising expenses, and (iii) a $0.4 million decrease in SEC reporting and filing fees by insourcing preparation of SEC filings.
Other Income (Expense)
Other expenses increased by approximately $1.8 million, or approximately 33% for the nine-months ended September 30, 2024, compared to the nine-months ended September 30, 2023. The key drivers for this increase were the following: (i) a $5.3 million loss on the change in fair value or extinguishments of convertible notes that occurred during the nine-months ended September 30, 2023 compared to a loss of $6.1 million for the same period ended September 30, 2024, an increase in losses of approximately $0.9 million, and (ii) a $2.6 million decline in gains from the change in fair value of liability classified warrants, with $1.8 million gain recognized for the nine-months ended September 30, 2024, compared to a loss of $0.8 million recognized during the same period in 2024. This was primarily due to the losses incurred as a result of liability classified warrants exercised during the nine-months ended September 30, 2024, and net losses incurred from mark-to-market adjustments at each quarterly reporting period end date.
These increases were offset by (i) a $1.3 million loss on change in fair value of a forward purchase option-prepaid forward contract that occurred during the nine-months ended September 30, 2023, but for which there was no activity during the nine-months ended September 30, 2024, as the forward purchase option-prepaid forward contract did not exist during the nine-months ended September 30, 2024, and (ii) $0.1 million in interest income for the nine-months ended September 30, 2024 compared to $0 for the same period in 2023 due to the Company utilizing an overnight sweep option with its main commercial financial institution and (iii) $0.4 million decline in interest expense for the nine-months ended September 30, 2024, as the Company incurred $0.5 million in interest expense for the nine-months ended September 30, 2024, compared to $0.9 million in interest expense for the same period ended September 30, 2023, due to the Company's reduction of its outstanding notes to $0 as of September 30, 2024.
29
Income Tax Provision (Benefit)
SeaStar Medical recorded a provision for income taxes of $0.0 million for the three- and nine-months ended September 30, 2024, and a provision for income taxes of $0.0 million for the three and nine months ended September 30, 2023.
Under Accounting Standards Codification (“ASC”) 740-10-30-5, Income Taxes, deferred tax assets should be reduced by a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not (i.e., a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. SeaStar Medical considers all positive and negative evidence available in determining the potential realization of deferred tax assets including, primarily, the recent history of taxable earnings or losses. Based on operating losses reported during 2022 and 2021, the Company concluded there was not sufficient positive evidence to overcome this recent operating history. As a result, we believe that a valuation allowance continues to be necessary based on the more-likely-than-not threshold noted above.
Net Loss
During the nine months ended September 30, 2024, SeaStar Medical had a net loss of $20.4 million compared to a net loss of $16.8 million for the nine months ended September 30, 2023. The increased net loss of $3.6 million has been disclosed in the above discussion.
Liquidity and Capital Resources
Sources of Liquidity
To date, we have financed our operations primarily through the sale of equity securities and convertible debt and, to a lesser extent, through grants from governmental and other agencies. Since our inception, we have incurred significant operating losses and negative cash flows. As of September 30, 2024 and December 31, 2023, we had an accumulated deficit of $135.1 million and $114.7 million, respectively.
As of September 30, 2024 and December 31, 2023, we had cash of $2.1 million and $0.2 million, respectively. Based on our results of operations and liquidity as of September 30, 2024, we believe our cash and cash equivalents, including the cash we obtained from the registered direct financing in the first quarter of 2024 and the registered direct offering in July 2024, are not sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of our unaudited consolidated financial statements for the nine months ended September 30, 2024, are made available. We believe that this raises substantial doubt about our ability to continue as a going concern.
To finance our operations, we will need to raise additional capital. As described below, we do not expect to receive any cash proceeds from the exercise of warrants in the near term, because the trading price of our common stock is currently below the exercise price of such warrants. We are seeking additional cash to fund our growth through future debt or equity financing transactions; however, there can be no assurance that we will be able to obtain additional capital on terms acceptable to us, if at all, or that we will generate sufficient future revenues and cash flows to fund our operations. We do not currently have any committed external source of funds. We have concluded that these circumstances raise doubt about our ability to continue as a going concern within one year after the issuance date of this Form 10-Q. See Note 1 to our unaudited condensed consolidated financial statements for the period ended September 30, 2024.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures. Debt financing would also result in fixed payment obligations. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce, suspend or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results, and financial condition. See the section titled “Risk Factors” for additional risks associated with our substantial capital requirements.
We would receive the proceeds from any exercise of warrants that are exercised for cash pursuant to their terms. To the extent any warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the warrants will decrease. We would expect to use any such proceeds received from warrants that are exercised for cash in the future for general corporate and working capital purposes, which would increase our liquidity. However, we will only receive such proceeds if and when the warrant holders exercise the warrants. The exercise of the warrants, and any proceeds we may receive
30
from their exercise, are highly dependent on the price of our common stock and the spread between the exercise price of the warrant and the price of our common stock at the time of exercise. There is no assurance that the warrant holders will elect to exercise for cash any or all of such warrants, and we believe that any such exercise currently is unlikely to occur. The likelihood that warrant holders will exercise the warrants, and therefore the amount of cash proceeds that we would receive from such exercise, is dependent upon the trading price of our common stock. If the trading price for our common stock remains less than the respective exercise price of our outstanding warrants, we believe our warrant holders will be unlikely to exercise their warrants. There is no guarantee that the warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the warrants may expire worthless, and we may not receive any proceeds from the exercise of the warrants. To the extent that any of the warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the warrants will decrease.
As of the date of this Quarterly Report, we have neither included nor intend to include any potential cash proceeds from the exercise of our warrants in our short-term or long-term liquidity projections. We will continue to evaluate the probability of warrant exercise over the life of our warrants and the merit of including potential cash proceeds from the exercise in our liquidity projections.
Future Funding Requirements
We expect to incur significant expenses in connection with our ongoing activities as we seek to (i) continue clinical development of our adult SCD for approval by the FDA, invest in our commercialization of our pediatric SCD, and (ii) if regulatory approval is obtained, to launch and commercialize our adult SCD in the U.S. market, including potential subsequent launches in key international markets. We will need additional funding in connection with these activities. Our future funding requirements, both short-term and long-term, will depend on many factors, including:
Our estimates of our results of operations, working capital and capital expenditure requirements may be different than our actual needs, and those estimates may need to be revised if, for example, our actual revenue is lower, and our net operating losses are higher, than we project, and our cash and cash equivalents position is reduced faster than anticipated. Until such time, if ever, as we are able to generate significant revenue from the commercialization of our products, we expect to continue financing our operations through the sale of equity, debt, borrowings under credit facilities or through potential collaborations with other companies, other strategic transactions or government or other grants. Adequate capital may not be available to us when needed or on acceptable terms.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of September 30, 2024:
|
|
Total |
|
|
Less than |
|
|
1-3 years |
|
|
3-5 years |
|
|
More than |
|
|||||
Contractual Obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
None |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total contractual obligations |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Investor D Note
On June 28, 2024, Investor D agreed to exchange all of the remaining outstanding warrants held by Investor D, which were issued in connection with Investor D’s convertible debt issued between March 2023 and January 2024, into a short-term note of approximately $0.5 million. The interest rate on the loan is 7.00% per annum and the note is due in full during the
31
three-months ending September 30, 2024. In August 2024, the Company paid the remaining $0.4 million and there are no further obligations.
Unsecured Maxim Note Payable
In October 2022, we entered into an unsecured promissory note with Maxim, for an aggregate principal amount of $4.2 million. The interest rate on the note is 7%. As a result of the Reverse Stock Split in June 2024, the Maxim Note became due within 90 days of the Reverse Stock Split event. In addition, the Maxim Note provides for a mandatory prepayment in connection with any subsequent financing we conduct, in an amount equal to 25% of the gross proceeds from such subsequent financing. As a result of the registered direct offering we conducted in July 2024, we were required to pay down $2.5 million of the outstanding Maxim Note in July 2024, leaving a remaining balance of approximately $0.1 million plus accrued interest that was paid down in full in August 2024. The Company has no further obligations to Maxim outstanding as of September 30, 2024.
Insurance Financing
In October 2023, we entered into a financing arrangement with a lender to finance a portion of the annual premium of an insurance policy in the amount of $0.7 million. We paid down the remaining principal and interest payments during the three months ended September 30, 2024.
Cash Flows
The following table shows a summary of our cash flows for each of the periods shown below:
Cash Flow from Operating Activities
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Statement of cash flow data: |
|
|
|
|
|
|
||
Total cash (used in)/provided by: |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(11,314 |
) |
|
$ |
(5,800 |
) |
Investing activities |
|
|
— |
|
|
|
— |
|
Financing activities |
|
|
13,220 |
|
|
|
5,826 |
|
|
|
$ |
1,906 |
|
|
$ |
26 |
|
Net cash used in operating activities for the nine months ended September 30, 2024 was $11.3 million compared to $5.8 million for the nine months ended September 30, 2023. The increase in cash used for operating activities of $5.5 million is primarily due to the (i) increase in operating expenditures of approximately $2.0 million, and (ii) coupled with the timing of certain payments to vendors to reduce our outstanding payables resulted in an increase in cash outflows for operating activities.
Net cash provided by financing activities for the nine months ended September 30, 2024 was $13.2 million, was primarily related to (i) $13.6 million received from the issuance of new shares of common stock, (ii) $3.8 million in proceeds from issuance of pre-funded warrants, (iii) $0.9 million from proceeds received from the exercise of warrants to purchase shares of the our common stock, and (iv) $1.0 million received from the issuance of convertible notes. This was offset by (i) $5.3 million paid to settle outstanding notes payable and (ii) $0.7 million paid to cover a redemption of certain outstanding convertible notes.
Critical Accounting Policies and Estimates
The preparation of the unaudited consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported. Although actual results could materially differ from those estimates, such estimates are developed based on the best information available to management and management's best judgments at the time.
There has been no material change from the policies or methods disclosed in our Annual Report to Form 10-K filed April 16, 2024, as amended by Form 10-K/A filed April 26, 2024, and Form 10-K/A filed July 3, 2024, for the year-ended December
32
31, 2023.
Emerging Growth Company Status
We are an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups (“JOBS”) Act. The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Since we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
We will remain an EGC under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the closing of the Business Combination, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a “large-accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three-years
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures.
This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Exchange Act included in this Form 10-Q as Exhibits 31.1 and 31.2.
Evaluation of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated as of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2024, and based on this evaluation, have concluded that, as a result of the material weaknesses in internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of September 30, 2024.
Pursuant to Rule 13a-15(e), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Material Weaknesses
33
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
In the course of preparing the audited consolidated financial statements as of and for the year-ended December 31, 2023, our management identified material weaknesses in its internal controls over financial reporting related to a deficiency in the design and operation of our financial accounting and reporting controls.
To help address the material weaknesses, we have strengthened our accounting team with the addition of an experienced Controller and Chief Financial Officer and have added additional accounting resources that are expected to help to remediate the material weaknesses. We will also continue to review the overall internal control environment as we develop the requisite internal control framework. While we believe these efforts will remediate the material weakness, the material weakness cannot be considered fully remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting
Except for the changes intended to remediate the material weakness described above, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the three-months ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, we are continually evaluating its processes and controls over financial reporting in order to implement substantive changes to remediate aforementioned material weaknesses.
34
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
On July 5, 2024, Forrest A K Wells (the “Plaintiff”), a purported stockholder of the Company, filed a putative class action complaint in the United States District Court for the State of Colorado, captioned Wells v. SeaStar Medical Holding Corporation et al, Case No. 1:24-cv-0187 (D. Colorado) (the “Class Action”). The Class Action alleges that the Company, its Chief Executive Officer and former Chief Financial Officer made or caused to be made material misstatements or omissions regarding the Company’s business and operations, allegedly culminating in the Company’s restatement of its consolidated financial statements, disclosed in a Form 8-K and filed on March 27, 2024. The Class Action asserts claims pursuant to the Securities Exchange Act of 1934, including Section 10(b), Rule 10b-5 promulgated thereunder and Section 20(a). The Class Action seeks to recover, among other remedies, compensatory damages. The Company intends to vigorously defend the action.
From time to time, we may become involved in various claims and legal proceedings. Other than as disclosed herein, we are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and our other public filings, which could materially affect our business, financial condition or future results. Except as set forth below, there has been no material changes from risk factors previously disclosed in “Risk Factors” in our Form 10-K for the year ended December 31, 2023 and our other public filings:
Risks Related to our Company
Our Common Stock may be delisted from Nasdaq if we do not maintain compliance with Nasdaq’s continued listing requirements. If our Common Stock is delisted, it could negatively impact the Company.
Continued listing of a security on Nasdaq is conditioned upon compliance with various continued listing standards. There can be no assurance that we will be able to comply with the applicable listing standards.
On June 14, 2023, we received a letter from the Nasdaq Staff notifying us that the MVLS of our Common Stock had been below the minimum $35,000,000 MVLS Requirement (the “MVLS Requirement”).
The letter also stated that we would be provided 180 calendar days, or until December 11, 2023, to regain compliance with the MVLS Requirement. On December 13, 2023, we received a notification from the Listing Qualification Department of Nasdaq that we had not regained compliance with the MVLS Requirement and that our Common Stock would be subject to delisting unless we timely requested a hearing before a panel (the “Panel”). On December 19, 2023, we submitted a hearing request to the Panel to appeal the delisting determination. On the same date, we received a notice from Nasdaq stating that its delisting action had been stayed pending a final written decision by the Panel and that a hearing would be held on March 12, 2024. On February 6, 2024, we received notification from Nasdaq that we had regained compliance with the MVLS Requirement.
On June 26, 2023, we received a letter from the Listing Qualifications Department of Nasdaq notifying us that the Company was not in compliance with the $1.00 per share minimum Bid Price Requirement for continued inclusion on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2).
This letter had no immediate effect on the listing of the Company’s Common Stock on Nasdaq and the Company had 180 calendar days from the date of the notice, or until December 26, 2023, to regain compliance with the Bid Price Requirement. On December 27, 2023, we received notification from Nasdaq that the Company had not regained compliance with the Bid Price Requirement and that the Panel would consider this matter in rendering a determination regarding the Company’s continued listing on Nasdaq. Pursuant to Listing Rule 5810(d), the Company should present its views with respect to this deficiency at its Panel hearing to be held on March 12, 2024. If we failed to address the aforementioned issue, the Panel would consider the record as presented at the hearing and would make its determination based upon that information.
35
On February 21, 2024, the Company made a pre-hearing submission to Nasdaq, outlining its plan to gain compliance with the minimum Bid Price Requirement. On March 6, 2024, we received a letter from the Nasdaq Staff granting the Company a temporary exception until June 24, 2024, subject to certain milestones, to regain compliance with the Bid Price Requirement by evidencing a closing bid price of $1.00 or more per share for a minimum of ten consecutive trading sessions. On June 7, 2024, the Company effected a reverse stock split to regain compliance with the Bid Price Requirement. On June 27, 2024, we received a letter from the Nasdaq Staff indicating the Company regained compliance with the minimum Bid Price Requirement for listing on Nasdaq.
On June 24, 2024, we received a letter from the Nasdaq Staff indicating the Company was no longer in compliance with the MVLS of $35 million required for listing on Nasdaq. The Company has 180 days, or until December 23, 2024, to regain compliance with the MVLS Requirement.
On July 3, 2024, the Company provided notice to the Listing Qualifications Department of Nasdaq regarding the Company’s possible violation of Nasdaq Listing Rule 5635(d)(2). The notification to Nasdaq related to the issuance of shares of the Company’s Common Stock upon conversion of certain convertible notes and upon exercise of certain warrants issued to an institutional investor in connection with a March 15, 2023 securities purchase agreement that may have required additional shareholder approval prior to the issuance of such securities.
The Company believed at the time of these issuances and adjustments that the entire transaction had been approved by shareholders. The Company requested that Nasdaq determine whether the issuance of and adjustment to the conversion price of certain of the convertible notes to a price that was lower than the floor price initially agreed to in the subject securities purchase agreement, and the issuance of certain warrants (the "Additional Transactions") did not violate Nasdaq Listing Rule 5635(d)(2).
The notification to Nasdaq was made in accordance with Nasdaq Listing Rule 5625. Pursuant to the notice, the Company committed to fully comply with all Nasdaq shareholder approval requirements, to involve certain advisers and to notify Nasdaq prior to the issuance of any securities for one year following the date of notice.
While the Additional Transactions may have violated Nasdaq Listing Rule 5635(d)(2), Nasdaq has agreed to not issue a delisting letter if the Company obtains shareholder ratification of the Additional Transactions by the end of 2024. In order to obtain such approval and ratification of the Additional Transactions, the Company will hold a special meeting of its shareholders on November 26, 2024. The Company has filed with the Securities and Exchange Commission (“SEC” ) a proxy statement on Schedule 14A that contains more information on the special meeting and the voting rights of the Company's shareholders. If shareholder approval and ratification is not obtained, the Company’s Common Stock may be delisted from Nasdaq.
If the Company’s Common Stock ultimately were to be delisted for any reason, it could negatively impact the Company by (i) reducing the liquidity and market price of the Company’s Common Stock; (ii) reducing the number of investors willing to hold or acquire the Company’s Common Stock, which could negatively impact the Company’s ability to raise equity financing; (iii) limiting the Company’s ability to use a registration statement to offer and sell freely tradable securities, thereby preventing the Company from accessing the public capital markets; and (iv) impairing the Company’s ability to provide equity incentives to its employees.
If the Company 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. The Company expects its research and development expenses to substantially increase in connection with its ongoing activities, particularly as it advances its clinical programs. As of September 30, 2024 and December 31, 2023, SeaStar Medical had negative working capital of $3.0 million and $10.7 million, respectively. The Company currently does not have sufficient capital to support its operations and complete its planned regulatory approval process. The Company will need to secure additional capital to continue its operation, and such funding may not be available on acceptable terms, or at all.
Even if the Company receives sufficient capital in the future, the Company 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 the Company, or at all. If it is unable to raise additional capital when required or on acceptable terms, the Company may be required to:
36
If we are unable to raise additional capital in sufficient amounts or on acceptable terms, the Company will be prevented from pursuing development and commercialization efforts, including completing the clinical trials and regulatory approval process for its SCD product candidates, which would have a material adverse impact on its business, results of operations and financial condition.
Risks Related to our Business Operations
Supply interruptions affecting the availability of components used in the Company’s SCD Clinical Kits could have an adverse effect upon its clinical trials and revenue prospects.
The Company currently outsources the manufacturing of all components used with its SCD which are then assembled (kitted) and shipped by the Company. Manufacturing of the Company’s SCD cartridge is an involved process and is currently limited to one approved supplier. Manufacturing of the Company’s SCD blood tubing set is straight-forward but is also currently limited to one approved supplier. Certain other SCD kit components are readily available from multiple sources.
To support its current clinical trial needs and its commercial sales, the Company complies with, and intends to continue to comply with, current Good Manufacturing Practice (“cGMP”) for the outsourced manufacturing and in-house kitting of its products where applicable. The Company’s ability to adequately procure the outsourced components and supply its SCD in a timely matter is dependent on the uninterrupted and efficient operation of its third-party suppliers and manufacturers, and those of the parties producing raw materials and supplies upon which it relies for the manufacturing of its products. Availability of the Company’s products may be impacted by:
If efficient manufacture and supply of its SCD is interrupted, the Company may experience delayed shipments or supply constraints. If it is unable to provide an uninterrupted supply of its products, the Company’s ongoing clinical trials may be delayed, and/or commercial sales can be impaired, which could materially and adversely affect its business, results of operations, and financial condition.
The Company recently terminated its exclusive distribution agreement with a third-party distribution partner.
In August 2024, the Company terminated its Distribution Agreement with Nuwellis, which was the Company’s exclusive distribution agreement with a third-party distribution partner. The Company has currently elected to commercialize its FDA approved SCD-PED (SCD-pediatric, tradename ‘QUELIMMUNE’), using its own commercial resources. The Company does not have experience with selling and distributing QUELIMMUNE and its results may fall short of investors’ expectations. If the Company is unable to develop effective sales and distribution capabilities internally, we may not be able to successfully generate sales of our products, including QUELIMMUNE, and our business and results of operations may be adversely affected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three- and nine- months ended September 30, 2024, we did not have sales of unregistered securities not previously included in a Current Report on Form 8-K.
37
Item 3. Defaults Upon Senior Securities.
N/A
Item 4. Mine Safety Disclosures.
N/A
Item 5. Other Information.
During the three- and nine- months ended September 30, 2024, no director or officer of the Company
38
Item 6. Exhibits
Exhibit Index
|
|
|
Exhibit |
|
Description |
|
|
|
4.1 |
|
|
4.2 |
|
|
10.1 |
|
|
10.2 |
|
|
31.1** |
|
|
31.2** |
|
|
32.1** |
|
|
32.2** |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
** Filed herewith
39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
SeaStar Medical Holding Corporation |
|
|
|
|
|
Date: November 13, 2024 |
|
By: |
/s/ Eric Schlorff |
|
|
|
Eric Schlorff |
|
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
Date: November 13, 2024 |
|
By: |
/s/ David Green |
|
|
|
David Green |
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
40
EXHIBIT 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Eric Schlorff, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of SeaStar Medical Holding Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 13, 2024
|
|
|
/s/ Eric Schlorff |
||
Eric Schlorff |
||
Chief Executive Officer |
||
EXHIBIT 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, David Green, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of SeaStar Medical Holding Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:November 13, 2024
|
|
|
/s/ David Green |
||
David |
||
Chief Financial Officer |
||
EXHIBIT 32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Eric Schlorff, Chief Executive Officer of SeaStar Medical Holding Corporation (the “Company”), certify that:
1. the Quarterly Report on Form 10-Q of the Company for the three and nine months ended September 30, 2024 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 13, 2024
|
|
|
/s/ Eric Schlorff |
||
Eric Schlorff |
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Chief Executive Officer |
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EXHIBIT 32.2
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, David Green, Chief Financial Officer of SeaStar Medical Holding Corporation (the “Company”), certify that:
1. the Quarterly Report on Form 10-Q of the Company for the three and nine months ended September 30, 2024 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 13, 2024
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/s/ David Green |
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David Green |
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Chief Financial Officer |
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