| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
LMF ACQUISITION OPPORTUNITIES INC.
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Delaware | 85-3681132 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) | |
3513 Brighton Blvd, Suite
Denver, CO |
| 80216 |
(Address of principal executive offices) | (Zip code) |
Title of each class: | Trading symbol | Name of each exchange on which registered | ||
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| The Nasdaq Stock Market LLC | |
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| The Nasdaq Stock Market LLC |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||
Non-accelerated filer |
| Smaller reporting company |
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Emerging growth company |
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SEASTAR MEDICAL HOLDING CORPORATION
(f/k/a LMF ACQUISITION OPPORTUNITIES, INC.Acquisition Opportunities, Inc.)
TABLE OF CONTENTS
2
ITEM 1. Financial Statements
ITEM 1. | Financial Statements |
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| June 30, 2022 |
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| December 31, 2021 |
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| (Unaudited) |
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ASSETS |
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Cash |
| $ | 79,023 |
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| $ | 51,567 |
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Prepaid insurance and other fees |
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| 34,906 |
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| 286,237 |
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Prepaid expenses |
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| 188,947 |
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| 14,817 |
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Cash and marketable securities held in trust |
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| 105,652,034 |
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| 105,581,820 |
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Current Assets |
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| 105,954,910 |
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| 105,934,441 |
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Total assets |
| $ | 105,954,910 |
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| $ | 105,934,441 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Accrued expenses |
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| 1,037,428 |
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| 376,702 |
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Notes and advances payable - related parties |
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| 911,940 |
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| — |
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Deferred underwriting commissions in connection with the initial public offering |
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| 3,622,500 |
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| 3,622,500 |
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Warrant liability (Note 9) |
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| 1,809,900 |
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| 6,930,740 |
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Total current liabilities |
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| 7,381,768 |
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| 10,929,942 |
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Total liabilities |
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| 7,381,768 |
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| 10,929,942 |
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Commitments |
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Class A common stock subject to possible redemption 10,350,000 shares at redemption value of $10.20 per share |
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| 105,570,000 |
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| 105,570,000 |
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Stockholders’ deficit: |
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 0ne issued and outstanding |
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| — |
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| — |
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Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 103,500 issued and outstanding at June 30, 2022 and December 31, 2021 excluding 10,350,000 shares subject to possible redemption |
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| 10 |
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| 10 |
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Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 2,587,500 shares issued and outstanding at June 30, 2022 and December 31, 2021 (See Note 7) |
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| 259 |
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| 259 |
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Additional paid-in capital |
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| — |
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| — |
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Accumulated deficit |
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| (6,997,127 | ) |
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| (10,565,770 | ) |
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Total stockholders’ deficit |
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| (6,996,858 | ) |
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| (10,565,501 | ) |
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Total liabilities and stockholders’ deficit |
| $ | 105,954,910 |
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| $ | 105,934,441 |
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September 30, 2022 | December 31, 2021 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash | $ | 116,840 | $ | 51,567 | ||||
Prepaid insurance and other fees | 41,361 | 286,237 | ||||||
Prepaid expenses | 132,875 | 14,817 | ||||||
Cash and marketable securities held in trust | 107,048,750 | 105,581,820 | ||||||
Current Assets | 107,339,826 | 105,934,441 | ||||||
Total assets | $ | 107,339,826 | $ | 105,934,441 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Accrued expenses | 1,866,028 | 376,702 | ||||||
Notes and advances payable - related parties | 2,768,405 | — | ||||||
Deferred underwriting commissions in connection with the initial public offering | 3,622,500 | 3,622,500 | ||||||
Warrant liability (Note 9) | 1,129,378 | 6,930,740 | ||||||
Total current liabilities | 9,386,311 | 10,929,942 | ||||||
Total liabilities | 9,386,311 | 10,929,942 | ||||||
Commitments | ||||||||
Class A common stock subject to possible redemption 10,350,000 shares at redemption value of $10.32 and $10.20per share at September 30, 2022 and December 31, 2021, respectively | 106,848,750 | 105,570,000 | ||||||
Stockholders’ deficit: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | — | — | ||||||
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 103,500 issued and outstanding at September 30, 2022 and December 31, 2021 excluding 10,350,000 shares subject to possible redemption | 10 | 10 | ||||||
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 2,587,500 shares issued and outstanding at September 30, 2022 and December 31, 2021 (See Note 11 ) | 259 | 259 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (8,895,504 | ) | (10,565,770 | ) | ||||
Total stockholders’ deficit | (8,895,235 | ) | (10,565,501 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 107,339,826 | $ | 105,934,441 | ||||
)
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| For the Three Months Ended June 30, |
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| For the Six Months Ended June 30, |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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Expenses: |
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Formation and Administrative costs |
| $ | 341,786 |
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| $ | 209,718 |
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| $ | 560,442 |
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| $ | 335,675 |
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Merger costs |
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| 1,061,968 |
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| - |
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| 1,061,968 |
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| - |
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Loss from operations |
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| (1,403,754 | ) |
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| (209,718 | ) |
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| (1,622,410 | ) |
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| (335,675 | ) |
Gain on warrant liability revaluation |
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| 1,518,707 |
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| (1,772,980 | ) |
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| 5,120,840 |
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| 57,680 |
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Other income |
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Investment income earned on marketable securities held in Trust Account |
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| 67,609 |
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| - |
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| 70,213 |
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| 1,754 |
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Net income |
| $ | 182,562 |
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| $ | (1,982,698 | ) |
| $ | 3,568,643 |
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| $ | (276,241 | ) |
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Net income per share: |
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Weighted average shares outstanding, basic and dilutive |
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Class A - Common stock |
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| 10,453,500 |
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| 10,453,500 |
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| 10,453,500 |
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| 8,836,384 |
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Class B - Common stock |
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| 2,587,500 |
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| 2,587,500 |
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| 2,587,500 |
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| 2,520,787 |
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Basic and diluted net income per share |
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Class A - Common stock |
| $ | 0.01 |
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| $ | (0.15 | ) |
| $ | 0.27 |
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| $ | (0.02 | ) |
Class B - Common stock |
| $ | 0.01 |
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| $ | (0.15 | ) |
| $ | 0.27 |
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| $ | (0.02 | ) |
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For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Expenses: | ||||||||||||||||
Formation and Administrative costs | $ | 270,265 | $ | 411,398 | $ | 830,707 | $ | 747,073 | ||||||||
Merger costs | 1,391,601 | — | 2,453,569 | — | ||||||||||||
Loss from operations | (1,661,866 | ) | (411,398 | ) | (3,284,276 | ) | (747,073 | ) | ||||||||
Gain on warrant liability revaluation | 680,522 | 644,720 | 5,801,362 | 702,400 | ||||||||||||
Other income | ||||||||||||||||
Investment income earned on marketable securities held in Trust Account | 361,717 | 2,661 | 431,930 | 4,415 | ||||||||||||
Net income (loss) | $ | (619,627 | ) | $ | 235,983 | $ | 2,949,016 | $ | (40,258 | ) | ||||||
Net income (loss) per share: | ||||||||||||||||
Weighted average shares outstanding, basic and dilutive | ||||||||||||||||
Class A - Common stock | 10,453,500 | 10,453,500 | 10,453,500 | 9,381,347 | ||||||||||||
Class B - Common stock | 2,587,500 | 2,587,500 | 2,587,500 | 2,543,269 | ||||||||||||
Basic and diluted net income (loss) per share | ||||||||||||||||
Class A - Common stock | $ | (0.05 | ) | $ | 0.02 | $ | 0.23 | $ | (0.00 | ) | ||||||
Class B - Common stock | $ | (0.05 | ) | $ | 0.02 | $ | 0.23 | $ | (0.00 | ) |
)
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| For the Six Months Ended June 30, |
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| 2022 |
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| 2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
| $ | 3,568,643 |
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| $ | (276,241 | ) |
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Adjustments to reconcile net loss to cash used in operating activities |
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Formation costs paid by related parties |
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| — |
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| (126,413 | ) |
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Gain on warrant liability revaluation |
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| (5,120,840 | ) |
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| (57,680 | ) |
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Interest earned on marketable securities in trust |
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| (70,213 | ) |
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| (1,754 | ) |
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Change in assets and liabilities |
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Prepaid costs |
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| 77,201 |
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| 216,426 |
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Accrued expenses |
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| 660,725 |
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| (73,710 | ) |
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Net cash used in operating activities |
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| (884,484 | ) |
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| (319,372 | ) |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Investment in Trust account |
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| — |
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| (105,573,716 | ) |
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Net cash used in investing activities |
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| — |
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| (105,573,716 | ) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Insurance financing payments |
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| — |
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| (611,027 | ) |
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Proceeds from issuance of private placement warrants |
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| — |
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| 5,738,000 |
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Proceeds from issuance of units |
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| — |
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| 103,500,000 |
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Issue costs from issuance of units |
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| — |
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| (2,432,549 | ) |
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Proceeds from notes and advances payable - related party |
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| 941,940 |
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| — |
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Repayment from notes and advances payable - related party |
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| (30,000 | ) |
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| — |
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Net cash provided by financing activities |
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| 911,940 |
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| 106,194,424 |
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NET INCREASE IN CASH |
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| 27,456 |
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| 301,336 |
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CASH - BEGINNING OF YEAR |
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| 51,567 |
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| 38,388 |
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CASH - END OF PERIOD |
| $ | 79,023 |
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| $ | 339,724 |
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SUPPLEMENTAL DISCLOSURES OF NON-CASHFLOW INFORMATION |
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Reclassification of warrants to liability |
| $ | - |
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| $ | 8,116,680 |
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Deferred underwriting commissions in connection with the initial public offering |
| $ | - |
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| $ | 3,779,353 |
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For the Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | 2,949,016 | $ | (40,258 | ) | |||
Adjustments to reconcile net income (loss) to cash used in operating activities | ||||||||
Formation costs paid by related parties | — | (126,413 | ) | |||||
Gain on warrant liability revaluation | (5,801,362 | ) | (702,400 | ) | ||||
Interest earned on marketable securities in trust | (431,930 | ) | — | |||||
Change in assets and liabilities | ||||||||
Prepaid costs | 126,818 | 342,091 | ||||||
Accrued expenses | 1,489,326 | 154,275 | ||||||
Net cash used in operating activities | (1,668,132 | ) | (372,705 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Investment in Trust account | (1,035,000 | ) | (105,578,132 | ) | ||||
Net cash used in investing activities | (1,035,000 | ) | (105,578,132 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Insurance financing payments | — | (753,994 | ) | |||||
Proceeds from issuance of private placement warrants | — | 5,738,000 | ||||||
Proceeds from issuance of units | — | 103,500,000 | ||||||
Issue costs from issuance of units | — | (2,405,717 | ) | |||||
Proceeds from notes and advances payable - related party | 2,818,205 | — | ||||||
Repayment from notes and advances payable - related party | (49,800 | ) | — | |||||
Net cash provided by financing activities | 2,768,405 | 106,078,289 | ||||||
NET INCREASE IN CASH | 65,273 | 127,452 | ||||||
CASH - BEGINNING OF YEAR | 51,567 | 38,388 | ||||||
CASH - END OF PERIOD | $ | 116,840 | $ | 165,840 | ||||
SUPPLEMENTAL DISCLOSURES OF NON-CASHFLOW INFORMATION | ||||||||
Reclassification of warrants to liability | $ | — | $ | 8,116,680 | ||||
Deferred underwriting commissions in connection with the initial public offering | $ | — | $ | 3,806,185 | ||||
Remeasurement of Class A common stock subject to redemption | $ | 1,278,750 | $ | — |
) Additional Class A Common Stock Class B Common Stock paid Accumulated Total Shares (1) Amount Shares (1) Amount in capital Deficit Deficit Balance as of December 31, 2020 — $ — 2,156,250 $ 215 $ 24,785 $ (5,236 ) $ 19,764 Class A Units issued for cash 10,350,000 1,035 — — 103,498,965 — 103,500,000 Representative shares issued for no cash 103,500 10 — — (10 ) — - Class A Units reclassified to Commitments subject to possible redemption (10,350,000 ) (1,035 ) — — (105,568,965 ) (105,570,000 ) Underwriter fee & offering costs — — — — (6,211,902 ) — (6,211,902 ) Private placement warrants issued for cash — — — — 5,738,000 — 5,738,000 Class B shares issued to Sponsor — — 431,250 44 (44 ) — - Warrants classified as liabilities — — — — (8,116,680 ) — (8,116,680 ) Reclass APIC to retained earnings — — — — 10,635,851 (10,635,851 ) - Net income — — — — — 1,706,457 1,706,457 Balance - March 31, 2021 103,500 $ 10 2,587,500 $ 259 $ - $ (8,934,630 ) $ (8,934,361 ) Net loss — — — — — (1,982,698 ) (1,982,698 ) Balance - June 30, 2021 103,500 $ 10 2,587,500 $ 259 $ - $ (10,917,328 ) $ (10,917,059 ) Balance as of December 31, 2021 103,500 $ 10 2,587,500 $ 259 $ — $ (10,565,770 ) $ (10,565,501 ) Net income — — — — — 3,386,081 3,386,081 Balance - March 31, 2022 103,500 $ 10 2,587,500 $ 259 $ - $ (7,179,689 ) $ (7,179,420 ) Net income — — — — — 182,562 182,562 Balance - June 30, 2022 103,500 $ 10 2,587,500 $ 259 $ - $ (6,997,127 ) $ (6,996,858 ) Acquisition Opportunities, Inc.) Upon the closing of the Merger, the registrant changed its name from LMF Acquisition Opportunities, Inc. to SeaStar Medical Holding Corporation. financial advisor and/or placement agent, an amount equal to $4,182,353 in cash as professional fees. Upon the closing of the Business Combination, the parties agreed that $4,182,353 of such amount would be paid in the form of a promissory note. Accordingly, on October 28, 2022, the Company entered into a Promissory Note with Maxim as the lender, for an aggregate principal amount of $4,182,353 (the “Maxim Note”). The Maxim Note has a maturity date of October 30, 2023 and outstanding amount may be prepaid without premium or penalty. If the Company receives any cash proceeds from a debt or equity financing transaction prior to the maturity date, then the Company is required to prepay the indebtedness equal to 25.0% of the gross amount of the cash proceeds, provided that such repayment obligation shall not apply to the first $500,000 of the cash proceeds received by the Company. Interest on the Maxim Note is due at 7.0% per annum. The Maxim Note contains customary representations and warranties, and affirmative and negative covenants. The Maxim Note is also subject to customary events of default, the occurrence of which may result in the Maxim Promissory Note then outstanding becoming immediately due and payable, with interest being increased to 15.0% per annum. 5. 6. conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern. 2022 and December 31, 2021. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the condensed consolidated balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in interest earned on investments held in Trust Account in the accompanying condensed consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. The Company had $107,048,750 and $105,581,820 in investments held in the Trust Account as of September 30, 2022 and December 31, 2021, respectively. closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of the redeemable Class A INITIAL PUBLIC OFFERING PRIVATE PLACEMENT RELATED PARTY TRANSACTIONS On July 29, 2022, Sponsor funded an Extension Loan in the amount of $1,035,000 and caused such amount to be deposited into the Trust Account in order provide additional time to complete the Business Combination. shares. COMMITMENTS REGISTRATION RIGHTS IPO Effective Date. As of June 30, 2022 As of December 31, 2021 Public Warrants $ 1,164,375 $ 4,450,500 Private Placement Warrants 645,525 2,480,240 $ 1,809,900 $6,930,740 Level June 30, 2022 December 31, 2021 Assets: Government securities held in Trust Account 1 $ 105,652,034 $ 105,581,820 Liabilities: Private Placement Warrants 3 645,525 2,480,240 Public Warrants 3 1,164,375 4,450,500 exchange, or other similar transaction that results in all of its stockholders having the right to exchange their shares of Class A common stock for cash, securities, or other property. Any permitted transferees will be subject to the same restrictions and other agreements of the Sponsor with respect to any founder shares. Notwithstanding the foregoing, if the closing price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within any Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to LMF Acquisition Opportunities, Inc. prior to the Business Combination (as defined below), except where the context requires otherwise. References to our “management” or our “management team” refer to officers and directors of LMF Acquisition Opportunities, Inc. prior to the Business Combination (as defined below), and references to the “Sponsor” refer to LMFAO Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Forward-Looking Statements This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” or the negative thereof or any variation thereon or similar terminology or expressions. We have based these forward-looking statements on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties, and assumptions about us that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Important factors which could materially affect our results and our future performance include, without limitation: the Company’s future capital requirements and sources and uses of cash; the Company’s ability to obtain funding or raise capital for its operations and future growth; any delays or challenges in obtaining FDA approval of the Company’s SCD product candidates; economic downturns and the possibility of rapid change in the highly competitive industry in which the Company operates; the ability to develop and commercialize its products or services following regulatory approval of the Company’s product candidates; the failure of third-party suppliers and manufacturers to fully and timely meet their obligations; product liability or regulatory lawsuits or proceedings relating to the Company’s products and services; inability to secure or protect its intellectual property; dispute or deterioration of relationship with the Company’s major partners and collaborators; the outcome of any legal proceedings that may be instituted against the Company following completion of the Business Combination and transactions contemplated thereby; the ability to maintain the listing of its Common Stock on Nasdaq; the risk that the Business Combination disrupts current plans and operations; the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, and the ability of the Company to grow and manage growth profitably; costs related to the Business Combination; and Should one or more of these risks or uncertainties materialize or should any of the assumptions made by the management of the Company prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Except as required by law, we assume no duty to update or revise any forward-looking statements. OverviewSixNine Months Ended JuneSeptember 30, 2022 and 2021 — $ — 2,156,250 $ 215 $ 24,785 $ (5,236 ) $ 19,764 10,350,000 1,035 — — 103,498,965 — 103,500,000 103,500 10 — — (10 ) — —
Commitments subject to possible redemption (10,350,000 ) (1,035 ) — — (105,568,965 ) (105,570,000 ) — — — — (6,211,902 ) — (6,211,902 )
cash — — — — 5,738,000 — 5,738,000 — — 431,250 44 (44 ) — — — — — — (8,116,680 ) — (8,116,680 ) — — — — 10,635,851 (10,635,851 ) — — — — — — 1,706,457 1,706,457 103,500 $ 10 2,587,500 $ 259 $ — $ (8,934,630 ) $ (8,934,361 ) — — — — — (1,982,698 ) (1,982,698 ) 103,500 $ 10 2,587,500 $ 259 $ — $ (10,917,328 ) $ (10,917,059 ) — — — — — 235,983 235,983 103,500 $ 10 2,587,500 $ 259 $ — $ (10,681,345 ) $ (10,681,076 ) 103,500 $ 10 2,587,500 $ 259 $ — $ (10,565,770 ) $ (10,565,501 ) — — — — — 3,386,081 3,386,081 103,500 $ 10 2,587,500 $ 259 $ — $ (7,179,689 ) $ (7,179,420 ) — — — — — 182,562 182,562 103,500 $ 10 2,587,500 $ 259 $ — $ (6,997,127 ) $ (6,996,858 ) — — — — — (619,627 ) (619,627 )
stock — — — — — (1,278,750 ) (1,278,750 ) 103,500 $ 10 2,587,500 $ 259 $ — $ (8,895,504 ) $ (8,895,235 ) ACQUISITION OPPORTUNITIES INC.businesses (abusinesses.has selected December 31from and after the Closing Date, was required to pay to Tumim $1,000,000 of the Commitment Fee in cash on the Closing Date; (b) the Company is required to pay to Tumim $500,000 of the Commitment Fee in cash no later than the earliest of (i) the 30th calendar day immediately following the Effective Date of the Initial Registration Statement (each as defined in the Purchase Agreement), (ii) the 30th calendar day immediately following the Effectiveness Deadline (as defined in the Purchase Agreement) of the Initial Registration Statement, and (iii) not later than the second trading date immediately after the date on which written notice of termination is delivered by the Company or Tumim pursuant to the terms of the Purchase Agreement; and (c) the Company shall pay to Tumim the balance of the Commitment Fee, or $1,000,000, as Commitment Shares as set forth under the terms in the Purchase Agreement.fiscal year end.JuneSeptember 30, 2022, the Company had not yet commenced any operations. All activity for the period from October 28, 2020 (inception) through JuneSeptember 30, 2022 relates to the Company'sCompany’s formation, and the initial public offering ("IPO"(“IPO”), which is described below.below, and the search for and due diligence on a potential target for a business combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate“Effective“IPO Effective Date”). On January 28, 2021, the Company consummated the IPO3.4.IPO)IPO,), subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.Proposed Business CombinationOn April 21, 2022, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with LMF Merger Sub, Inc., a Delaware corporation and direct, wholly owned subsidiary of the Company (“Merger Sub”), and SeaStar Medical, Inc., a Delaware corporation (“SeaStar Medical”) pursuant to which, subject satisfaction or waiver of certain conditions set forth therein, Merger Sub will merge with and into SeaStar Medical (the “Merger”), with SeaStar Medical surviving the merger in accordance with the Delaware General Corporation Law as a wholly owned subsidiary of the Company (the transactions contemplated by the Merger Agreement and the related ancillary agreements, the “Proposed Business Combination”).The aggregate consideration payable to the stockholders of SeaStar Medical at the closing of the Proposed Business Combination (the “Closing”) is $85,000,000, payable solely in shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), valued at $10.00 per share, subject to possible deductions for indebtedness of SeaStar Medical and SeaStar Medical transaction expenses in excess of a capped amount of $800,000 as set forth in the Merger Agreement, plus the aggregate exercise price of (1) SeaStar Medical warrants issued and outstanding immediately prior to the closing of the Proposed Business Combination and (2) SeaStar Medical options issued and outstanding immediately prior to the Effective Time, less the value of the shares of Common Stock underlying the Assumed Equity.7Immediately prior to the Preferred Conversion, each of SeaStar Medical’s issued and outstanding convertible notes will automatically convert into shares of SeaStar Medical common stock. Immediately prior to the Effective Time, each share of SeaStar Medical’s issued and outstanding preferred stock will automatically convert into shares of SeaStar Medical common stock and those SeaStar Medical warrants that would be automatically exercised or exchanged in connection with the Proposed Business Combination pursuant to the terms thereof will be automatically exercised for shares of SeaStar Medical common stock. At the time of the Proposed Business Combination, the (i) SeaStar Medical warrants that would not automatically be exercised or exchanged in connection with the Proposed Business Combination will be assumed by the Company and converted into warrants to purchase Common Stock, (ii) outstanding options for shares of SeaStar Medical common stock under SeaStar Medical’s equity plan will be assumed by the Company and converted into options to purchase Common Stock, and (iii) outstanding restricted stock unit awards under SeaStar Medical’s equity plan will be assumed by the Company and converted into restricted stock units of the Company. The Merger Agreement contains customary representations, warranties and covenants by the parties thereto, including, among other things, covenants with respect to the conduct of the Company and SeaStar Medical during the period between execution of the Merger Agreement and the Closing. The representations, warranties and covenants made under the Merger Agreement will not survive the closing; provided, any covenants that are to be performed at or after the closing shall survive until such covenant has been performed or satisfied. No party to the Merger Agreement will have any liabilities to such other parties, other than claims for willful and material breach or fraud. Each of the Company and SeaStar Medical have agreed to use their commercially reasonable efforts to cause the Merger to be consummated as soon as practicable.The closing of the Proposed Businses Combination is subject to certain conditions, including, among others, that (i) the stockholders of SeaStar Medical and the stockholders of the Company approve the Proposed Business Combination, (ii) the Nasdaq Stock Market approves for listing the common stock to be issued in connection with the Proposed Business Combination, (iii) the Company has, including any proceeds from the Company’s private investment in public equity financing and net of any redemptions and the payment of transaction expenses (and in the case of SeaStar Medical’s transaction expenses, only expenses up to the Cap (as defined in the Merger Agreement), at least $15,000,000 unrestricted cash on hand and (iv) the Company has $5,000,001 or more in net tangible assets at the closing.The Merger Agreement may be terminated prior to the closing under certain circumstances, including, among others, (i) by written consent of SeaStar Medical and the Company, (ii) by written notice from either the Company or SeaStar Medical, if (A) the closing has not occurred on or before (I) July 29, 2022 or (II) October 29, 2022 if the Extension (as defined below) occurs (the “Outside Date”), unless the terminating party’s failure to comply in any material respect with its obligations under the Merger Agreement shall have proximately contributed to the failure of the closing to have occurred on or prior to the Outside Date, (B) the consummation of the Proposed Business Combination is permanently enjoined or (C) the Company does not obtain stockholder approval of the Proposed Business Combination at its special meeting, (iii) by written notice from either the Company or SeaStar Medical, in the event that the other party breaches any of its representations, warranties, covenants or other agreements under the Merger Agreement that would result in the failure of the conditions to the Company’s or SeaStar Medical’s obligation to consummate the Proposed Business Combination and such breach has not been cured by the breaching party by the earlier of 30 days after receiving notice of such breach and the Outside Date and (iv) by SeaStar Medical at any time prior to the approval of the Proposed Business Combination by the Company’s public stockholders, if the board of directors of the Company has made a change in recommendation to its stockholders regarding the Proposed Business Combination. The Merger Agreement allows the Outside Date to be extended if the Sponsor elects to extend the time period by which the Company must consummate a business combination by depositing $1,035,000 in additional funds in the Company’s trust account on or prior to July 29, 2022 (the “Extension”).The Company elected to extend the time line. See Footnote 12 – Subsequent EventsDuring the Three and Six Months ended June 30, 2022 the Company incurred $1.1 million of expenses associated with the Proposed Business Combination. If the Proposed Business Combination is not completed, the costs incurred to date for the proposed transaction will not be recoverable.Going Concern ConsiderationThe Company expects to incur significant costs in pursuit of its financing and acquisition plans. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management haspreviously determined that if the Company iswas unsuccessful in consummating an initial business combination within the prescribed period of time from the closing of the IPO, the requirement that the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve raises substantial doubt about the ability to continue as a going concern. The balance sheet does not include any adjustments that might result fromWhile the outcome of this uncertainty. Managementcompany has determined thatagreements under the Company has funds that areabove-described PIPE Investment, Prepaid Forward Agreements, and equity line under the Common Stock Purchase Agreement in place to generate sufficient capital to fund operations over the working capital needs ofnext 12 months, the Company untiluncertainty related to market conditions may hinder the consummation of an initial business combination or the winding up of the Company as stipulated in the Company’s amended and restated memorandum of association.companies ability to raise capital. The accompanying financial statement has been prepared in8 condensed financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The interim financial statements as of JuneSeptember 30, 2022 and for the Six Monthsthree and nine months ended JuneSeptember 30, 2022 and JuneSeptember 30, 2021, respectively, are unaudited. In the opinion of management, the interim financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of the results for the interim periods. Operating results for the Three and Nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any future period. The accompanying balance sheet as of December 31, 2021, is derived from the audited financial statements presented in the Company’s Annual Report on Formsixthree months or less when purchased to be cash equivalents. The Company did 0tnot have any cash equivalents as of JuneSeptember 30, 2022.JuneSeptember 30, 2022, substantially all of the assets held in the Trust Account were held in U.S. Treasury Securities Money Market Funds.Ordinary SharesCommon Stock Subject to Possible RedemptionOrdinary Sharescommon stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Class A Ordinary Sharescommon stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable Class A Ordinary Sharescommon stock (including Class A Ordinary Sharescommon stock that featurefeatures redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) areis classified as temporary equity. At all other times, Class A Ordinary Shares arecommon stock is classified as shareholders’ equity. The Class A Ordinary Shares featurecommon stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of JuneSeptember 30, 2022 and December 31, 2021Ordinary Sharescommon stock subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s condensed balance sheets. The Company recognizes changes in redemption value immediately as they occur and adjusts carrying value of redeemable Ordinary Sharesshares of common stock to equal the redemption value at the end of the reporting period. Immediately upon the9Ordinary Sharescommon stock resulted in charges against additional$250,000.$250,000JuneSeptember 30, 2022 and December 31, 2021, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.("SAB"(“SAB”) Topic 5A - "Expenses“Expenses of Offering"Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO and that were charged to stockholders'stockholders’ equity upon the completion of the IPO. Accordingly, as of JuneSeptember 30, 2022, offering costs totaling $6,211,902 have been charged to stockholders'stockholders’ equity (consisting of $2,070,000 in underwriters'underwriters’ discount, $3,622,500 in deferred underwriters'underwriters’ fee, the fair value of the shares issued to the underwriters of $1,000 deemed as underwriters’ compensation, and approximately $518,402 of other cash expenses).•Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;•Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and•Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.Taxes,”Taxes”, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.10JuneSeptember 30, 2022, the Company determined that a valuation allowance should be established.JuneSeptember 30, 2022 and December 31, 2021, the Company did not recognize any assets or liabilities relative to uncertain tax positions. Interest or penalties, if any, will be recognized in income tax expense. Since there are 0no significant unrecognized tax benefits as a result of tax positions taken, there are 0no accrued penalties or interest. Tax positions are positions taken in a previously filed tax return or positions expected to be taken in a future tax return that are reflected in measuring current or deferred income tax assets and liabilities reported in the financial statements.0tnot believe that there are any uncertain tax positions at JuneSeptember 30, 2022 and December 31, 2021.JuneSeptember 30, 2022 and 2021 have been excluded from the calculation of the basic net income per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. When calculating its diluted net income per share, the Company has not considered the effect of the incremental number of shares of common stock to settle Warrants sold in the Initial Public Offering and Private Placement, as calculated using the treasury stock method. The calculationSix Monththree and nine month periods ended JuneSeptember 30, 2022 and 2021 as the exercise prices were greater than the average market price during the period (out-of-the-money JuneSeptember 30, 2022, substantially all of the assets totaling approximately $105,652,000$107,048,750 were held in a treasury money market fund. Management elects to measure the treasury money market fund at fair value in accordance with the guidance in ASC Topic 825 “Financial Instruments”. Any changes in fair value of the government securities are recognized in net income. Impairment of government securities is recognized in earnings when a decline in value has occurred that is deemed to be other than temporary, and the current fair value becomes the new cost basis for the securities.JuneSeptember 30, 2022, the Company had prepaid expenses of approximately $189,000$174,000 primarily in connection with the prepayment for D&O insurance and professional services.NoteInitial Public Offering11Aggregate$50,000$100,000 of interest to pay dissolution expenses), the proceeds from the IPO and the sale of the Private Placement Warrants will not be released from the Trust Account until the earliest of (a) the completion of the Company’s initial Business Combination, (b) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation, and (c) the redemption of the Company’s Public Shares if the Company is unable to complete the initial Business Combination within 18 months from the closing of the IPO (or up to 21NotePrivate Placement has agreed to (i) waive its redemption rights with respect to its founder shares and Public Shares in connection with the completion of the Company’s initial Business Combination, (ii) waive its redemption rights with respect to its founder shares and Public Shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete its initial Business Combination within 18 months from the closing of the IPO (or up to 21 months from the closing of the IPO if the Company extends the period of time to consummate a business combination, which the Company elected to do (See Note 1), as described in more detail in the prospectus for the IPO) or (B) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity and (iii) waive its rights to liquidating distributions from the Trust Account with respect to its founder shares if the Company fails to complete its initial Business Combination within 18 months from the closing of the IPO (or up to 21 months from the closing of the IPO if the Company extends the period of time to consummate a business combination.combination, which the Company elected to do (See Note 1)). In addition, the Company’s Sponsor has agreed to vote any founder shares held by themit holds and any Public Shares purchased during or after the IPO (including in open market and privately negotiated transactions) in favor of the Company’s initial Business Combination.NoteRelated Party TransactionsJuneSeptember 30, 2021 or the closing of the IPO. The loan was to be repaid upon the closing of the IPO out of the offering proceeds not held in the Trust Account. On January 27, 2020, the Company had drawn down approximately $151,000 under the promissory note with the Sponsor to pay for offering expenses. On January 28, 2021, the Company repaid the balance of approximately $151,000 to the Sponsor and cancelled the note.12JuneSeptember 30, 2022, the Company had drawn down $910,000$1,750,000 under the promissory note with the Sponsor. On July 28, 2022, the promissory note was amended to increase the principal amount to $1,750,000, effective as of June 30, 2022.sixthree months (for a total of 21 months to complete a Business Combination) if such extension is requested by the Sponsor. Pursuant to the terms of the Company’s certificate of incorporation and the trust agreement entered into between the Company and Continental Stock Transfer & Trust Company on January 25, 2021, in order to extend the time available for the Company to consummate a Business Combination, the Sponsor or its affiliates or designees must deposit into the Trust Account $1,035,000$ has agreed to waive its right to be repaid for such loan out of the funds held in the Trust Account in the event that the Company does not complete a Business Combination. The Sponsor and its affiliates or designees are obligated to fund the Trust Account in order to extend the time for the Company to complete a Business Combination, but the Sponsor is not obligated to extend such time.See Footnote 12 – Subsequent Events.shares. has agreed not to transfer, assign or sell its founder shares until the earlier of: (i) one year after the date of the consummation of the Business Combination; or (ii) the date on which the Company consummates a liquidation, merger, stock exchange, or other similar transaction that results in all of its stockholders having the right to exchange their shares of Class A common stock for cash, securities, or other property. Notwithstanding the foregoing, if the closing price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within any 30-trading day period commencing 150 days after the Business Combination, the founder shares will no longer be subject to such transfer restrictions.NoteCommitments Registration Rightseffective date of the registration statement for the IPO Effective Date and may not exercise their demand rights on more than one occasion. Group LLC (“Maxim”), for a period beginning on the closing of the IPO and ending 18 months after the date of the consummation of the Business Combination, a right of first refusal to act as lead left book-13runningbook-running managing underwriter with at least 75% of the economics; or, in the case of a three-handed deal 50% of the economics, for any and all future public and private equity, convertible and debt offerings for the Company or any of its successors or subsidiaries. In accordance with FINRA Rule 5110(g)(6), such right of first refusal shall not have a duration of more than three years from the effective date of the registration statement for the IPO. has agreed not to transfer, assign, or sell any such shares until the completion of the Business Combination. In addition, Maxim has agreed: (i) to waive its redemption rights with respect to such shares in connection with the completion of the Business Combination; and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete its Business Combination within 18 months from the closing of the IPO (or 21 months from the closing, if the Company extends the period of time to consummate a Business Combination)Combination, which the Company elected to do (See Note 1)).effective date of the registration statement for the IPO Effective Date, nor may they be sold, transferred, assigned, pledged, or hypothecated for a period of 180 days immediately following the effective date of the registration statement for the IPO Effective Date, except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners.On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continuesevolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments andevaluate the impact of the COVID-19 outbreak onpandemic and have concluded that the specific impact is not readily determinable as of the date of the balance sheet. The consolidated financial markets andstatements do not include any adjustments that might result from the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial business combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdownoutcome of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial business combination in a timely manner. The Company’s ability to consummate an initial business combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.this uncertainty.At June14•in whole and not inpart;•at a price of $0.01 perwarrant;•upon not less than 30 days’ prior written notice of redemption to each warrant holder;and•if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted forstock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company send the notice of redemption to the warrantholders.3)2) and Private Placement Warrants issued in connection with its IPO as components of equity instead of as derivative liabilities. The warrant agreement governing the warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant. In addition, the warrant agreement includes a provision that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of common shares, all holders of the warrants would be entitled to receive cash for their warrants (the “tender offer provision”).JuneSeptember 30, 2022 and December 31, 2021 of the Company’s warrants. The Company used a Monte Carlo simulation model tofair value of the Public Warrants issued are estimated using the quoted market price and a modified Black-Scholes model is used to value the Private Placement Warrants. The Company’s warrant liability is based on a valuation model utilizingutilizes management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. These pricing inputs include the publicly traded value of the Public Warrants as of JuneSeptember 30, 2022 ($0.11250.07 per warrant) and December 31, 2021 ($0.43 per warrant). Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the warrant liability is for Public Warrants15 $ 726,570 $ 4,450,500 402,808 2,480,240 $ 1,129,378 $ 6,930,740 $1,518,707$680,522 and $5,120,840 $5,801,362Threethree and Six Monthsnine months ended JuneSeptember 30, 2022, respectively, upon the revaluation of the warrants and a gain (loss) of ($1,772,980)$57,680 $702,400Threethree and Six Monthsnine months ended JuneSeptember 30, 2021, respectively, upon the revaluation. The Company will remeasure these warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for the current period.Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3: Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability. JuneSeptember 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value: 1 $ 107,048,750 $ 105,581,820 3 402,808 2,480,240 3 726,570 4,450,500 On June0no shares of preferred stock issued or outstanding. On June, excluding 10,350,000 shares of Class A common shares subject to possible redemption. At June has agreed not to transfer, assign, or sell any of its founder shares until the earlier of: (i) one year after the date of the consummation of the Business Combination; or (ii) the date on which the Company consummates a liquidation, merger, stock16Company'sCompany’s stockholders, with each share of common stock entitling the holder to one vote.entered into Amendedevaluated subsequent events and Restated Promissory Note, dated Julytransactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon this review, other than as described below, the Company did not identify any events that require disclosure in the condensed consolidated financial statements.(effective as of June 30, 2022), with Sponsor relating to the Working Capital Loan, whereunderCompany and Old SeaStar Medical consummated the amount oftransactions contemplated by the loan availability under the Working Capital Loan was increased from $500,000 to $1,750,000 to fund expenses relating to the Business Combination.Merger Agreement. (see Note 1).On July 29, 2022, Sponsor funded an Extension Loan in the amount of $1,035,000 and caused such amount to be deposited into the Trust Account in order provide additional time to complete the Business Combination.17• •our ability to complete our initial business combination;•our expectations around the performance of the prospective target business or businesses;•our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;•our officersother risks and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;• our potential ability to obtain additional financing to complete our initial business combination;• our pool of prospective target businesses;• the ability of our officers and directors to generate a number of potential acquisition opportunities;• our public securities’ potential liquidity and trading;• the lack of a market for our securities;• the use of proceeds not helduncertainties indicated in the trust account or available to us from interest incomeProxy Statement/Prospectus contained in the Registration Statement on the trust account balance;• the trust account not being subject to claims of third parties; or• our financial performance, and•other factorsForm S-4 that became effective on September 26, 2022, including those set forth under “Item 1A. the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021Factors..”LMF Acquisition Opportunities, Inc. (the “Company”) wasAs of September 30, 2022, we were a former blank check company incorporated in Delaware for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses (a “Business Combination”). The Company has not selected any specific business-combination target and it has not, nor has anyone on the Company’s behalf, initiated any substantive discussions, directly or indirectly, with any business-combination target.The Company has selected December 31 as its fiscal year end.As of June 30, 2022, the Company had not yet commenced any operations. All activity for the period from October 28, 2020 (inception) through June 30, 2022 relates to the Company's formation and theWe completed our initial public offering ("IPO"(the “IPO”) described below. The Company will not generate any operating revenues until afteron January 28, 2021. For additional detail regarding the completionIPO and related transactions, see “Note 1 - Organization and Business Operations - Prior to the Business Combination.” We are an emerging growth company and, as such, are subject to all of its initialthe risks associated with emerging growth companies. On October 28, 2022, we consummated our Business Combination at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.The registration statement for the Company’s IPO was declared effective on January 25, 2021 (the “Effective Date”). On January 28, 2021, the Company consummated the IPO of 10,350,000 units (the “Units” and, with respect to the shares of Class A common stock18included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $103,500,000, which offering isOld SeaStar Medical (as defined below) as further described in Note 5.1 – Organization and Business Operations.Simultaneously with the closing of the IPO, the Company consummated the sale of 5,738,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to LMFAO Sponsor LLC, a Florida limited liability company (the “Sponsor”), generating gross proceeds of $5,738,000.Transaction costs for the IPO amounted to $6,211,902 consisting of $2,070,000 of underwriting discount, $3,622,500 of deferred underwriting fee, the fair value of the shares issued to the underwriters of $1,000 deemed as underwriters’ compensation, and $518,402 of other offering costs. In addition, $974,009 of cash was held outside of the Trust Account (as defined below) as of the date of the IPO and became available for working capital purposes at such time.19
Following the closing of the IPO on January 28, 2021, an amount of $105,570,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (“Trust Account”) which will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its franchise and income tax obligations (less up to $100,000 of interest to pay dissolution expenses), the proceeds from the IPO and the sale of the Private Placement Warrants will not be released from the Trust Account until the earliest of (a) the completion of the Company’s initial Business Combination, (b) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation, and (c) the redemption of the Company’s Public Shares if the Company is unable to complete the initial Business Combination within 18 months from the closing of the IPO (or up to 21 months from the closing of the IPO if the Company extends the period of time to consummate a business combination, as described in more detail in the prospectus for the IPO), subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Proposed Business Combination
On April 21, 2022, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with LMF Merger Sub, Inc., a Delaware corporation and direct, wholly owned subsidiary of the Company (“Merger Sub”), and SeaStar Medical, Inc., a Delaware corporation (“Old SeaStar Medical”) pursuant to which, subject to.
On October 28, 2022 (the “Closing Date”), LMAO consummated the satisfaction or waiver of certain conditions set forth therein,merger transaction contemplated by the Merger Agreement, whereby Merger Sub will mergemerged with and into Old SeaStar Medical, (the “Merger”), with Old SeaStar Medical surviving the merger in accordance with the Delaware General Corporation Law as a wholly owned subsidiary of the Company (the “Merger” and, collectively with the transactions contemplated by the Merger Agreement and the related ancillary agreements, the “Proposed Business Combination”).
The aggregate consideration payable to the stockholders of SeaStar Medical at the closing of the Proposed Business Combination (the “Closing”) iswas $85,408,328, which consisted of an aggregate equity value of Old SeaStar Medical of $85,000,000, payable solely in shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), valued at $10.00 per share, subject to possibleminus deductions for indebtedness of Old SeaStar Medical and Old SeaStar Medical transaction expenses in excess of a capped amount of $800,000, as set forth in the Merger Agreement, plus the aggregate exercise price of (1) Old SeaStar Medical warrants issued and outstanding immediately prior to the closing of the Proposed Business CombinationClosing and (2) Old SeaStar Medical options issued and outstanding immediately prior to the Effective Time, Closing, less the value of the shares of Common Stock (as defined below) underlying the Assumed Equity.
Immediatelyassumed equity (the “Closing Merger Consideration”). The Closing Merger Consideration was payable solely in shares of LMAO common stock, par value $0.0001 per share (“Common Stock”), valued at $10.00 per share, resulting in the issuance of 7,837,628 shares of common stock, par value $0.0001 per share, of Common Stock to holders of stock of Old SeaStar Medical immediately prior to the Preferred Conversion,Closing. At the Closing, shares of class B common stock, par value $0.0001 per share, of LMAO (“Class B Common Stock”) automatically converted into shares of class A common stock, par value $0.0001 per share, of LMAO (“Class A Common Stock”) on a one-to-one basis, and pursuant to the charter of LMAO after the Business Combination, Class A Common Stock and Class B Common Stock was reclassified as Common Stock.
At the Closing, each of SeaStar Medical’s issued and outstanding convertible notes will automatically convertconverted into shares of Old SeaStar Medical common stock.stock (the “Note Conversion”). Immediately prior to the Effective Time,effectiveness of the Business Combination, each share of Old SeaStar Medical’s issued and outstanding preferred stock will automatically convertconverted into shares of Old SeaStar Medical common stock (the “Preferred Conversion”) and those Old SeaStar Medical warrants that would be automatically exercised or exchanged in connection with the Proposed Business Combination pursuant to the terms thereof will be automaticallywere exercised for shares of Old SeaStar Medical common stock. At the time of the Proposed Business Combination,Closing, the (i) Old SeaStar Medical warrants that would not automatically be exercised or exchanged in connection with the Proposed Business Combination will bewere assumed by the Company and converted into warrants to purchase Common Stock, (ii) outstanding options for shares of Old SeaStar Medical common stock under Old SeaStar Medical’s equity plan will bewere assumed by the Company and converted into options to purchase Common Stock, and (iii) outstanding restricted stock unit awards under Old SeaStar Medical’s equity plan will be assumed by the Company and converted into restricted stock units of the Company.
In connection with the Business Combination, holders of 8,878,960 shares of Common Stock, par value $0.0001 per share, exercised their right to redeem their shares after giving effect to any redemption reversals requested by stockholders to reverse their election to have their shares redeemed.
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Prepaid Forward Agreements
On October 17 and October 26, 2022, LMAO and Old SeaStar Medical entered into certain prepaid forward agreements with two institutional investors, and the material terms of such agreements are described in more detail in the Forms 8-K filed on October 17, 2022 and October 27, 2022.
PIPE Financing
In connection with the Business Combination, LMAO has entered into subscription agreements, each dated August 23, 2022 (collectively, the “Subscription Agreements”) with certain third-party investors (the “PIPE Investors”) pursuant to which LMAO agreed to issue and sell to the PIPE Investors in private placements to close immediately prior to Closing, an aggregate of 700,000 shares of Common Stock at $10.00 per share, and warrants to purchase up to 700,000 shares of Common Stock (the “PIPE Warrants”) for an aggregate purchase price of $7,000,000 (the “PIPE Investment”). The MergerPIPE Warrants are exercisable starting on the Closing at an exercise price of $11.50 per share of Common Stock, subject to adjustment in certain circumstances, and expire five years after the Closing. At the Closing, the PIPE Investors and LMAO consummated the PIPE Investment pursuant to and in accordance with the terms of the Subscription Agreements.
Common Stock Purchase Agreement contains customary representations, warranties and covenants byLetter Agreement
On August 23, 2022, LMAO entered into an equity line financing arrangement through a Common Stock Purchase Agreement (the “Common Stock Purchase Agreement”) with Tumim Stone Capital LLC (“Tumim”), pursuant to which, after the parties thereto, including,Closing, subject to the conditions set forth in the Common Stock Purchase Agreement, LMAO has the right to sell to Tumim up to $100,000,000 worth of shares of Common Stock, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement (the “Common Stock Investment”). The Common Stock Purchase Agreement provides for a commitment fee (the “Commitment Fee”) in the amount of $2.5 million payable to Tumim, and such Commitment Fee shall be paid in shares of the Common Stock based on the weighted average trading price of the Common Stock prior to the filing of a registration statement pursuant to the registration rights agreement (the “Commitment Shares”).
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On October 28, 2022, LMAO, Old SeaStar Medical, and Tumim entered into a letter agreement (the “Tumim Letter Agreement”) to amend certain terms of the Common Stock Purchase Agreement, following the consummation of the Business Combination. Pursuant to the Tumim Letter Agreement, among other things, covenantsthe parties agreed to the following amendments with respect to the conductCommitment Fee and Commitment Shares: (a) LMAO, or the Company from and after the Closing Date, was required to pay to Tumim $1,000,000 of the Commitment Fee in cash on the Closing Date; (b) the Company is required to pay to Tumim $500,000 of the Commitment Fee in cash no later than the earliest of (i) the 30th calendar day immediately following the Effective Date of the Initial Registration Statement (each as defined in the Purchase Agreement), (ii) the 30th calendar day immediately following the Effectiveness Deadline (as defined in the Purchase Agreement) of the Initial Registration Statement, and (iii) not later than the second trading date immediately after the date on which written notice of termination is delivered by the Company or Tumim pursuant to the terms of the Purchase Agreement; and (c) the Company shall pay to Tumim the balance of the Commitment Fee, or $1,000,000, as Commitment Shares as set forth under the terms in the Purchase Agreement.
Amendment to Credit Agreement with LM Funding America, Inc. (“LMFA”) and Amended Promissory Note
On October 28, 2022, Old SeaStar Medical and LMFA entered into the First Amendment to Credit Agreement, dated September 9, 2022 between LMFA and Old SeaStar Medical (the “First Amendment to Credit Agreement”), pursuant to which the parties amended the Credit Agreement and entered into an Amended and Restated Promissory Note (the “LMFA Note”) to (i) extend the maturity date of the loan under the Credit Agreement to October 30, 2022; (ii) permit the LMFA Note be prepaid without premium or penalty; (iii) require the Company to use 5.0% of the gross cash proceeds received by the Company from any future debt and equity financing to pay outstanding balance of LMFA Note, provided that such repayment is not required for the first $500,000 of cash proceeds; (iv) reduce the interest rate of the LMFA Note from 15% to 7% per annum; and (iv) reduce the default interest rate from 18% to 15%. The LMFA Note contains customary representations and warranties, affirmative and negative covenants and events of default. In addition, on October 28, 2022, the parties entered into a Security Agreement (the “LMFA Security Agreement”), pursuant to which the Company and Old SeaStar Medical granted LMFA a security interest in substantially all of the assets and property of the Company and Old SeaStar Medical, during the period between execution of the Merger Agreement and the Closing. The representations, warranties and covenants made under the Merger Agreement will not survive the closing; provided, any covenants that are to be performed at or after the closing shall survive until such covenant has been performed or satisfied. No party to the Merger Agreement will have any liabilities to such other parties, other than claims for willful and material breach or fraud. Each of the Company and SeaStar Medical have agreed to use their commercially reasonable efforts to cause the Merger to be consummated as soon as practicable.
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The closing of the Proposed Businses Combination is subject to certain conditions, including, among others, thatexceptions, as collateral to secure the Company’s obligations under the amended Credit Agreement. In addition, the Company entered into a Guaranty, dated October 28, 2022 (the “LMFA Guaranty”), pursuant to which the Company unconditionally guarantees and promises to pay to LMFA the outstanding principal amount under the LMFA Note.
LMFAO Sponsor LLC (“Sponsor”) Promissory Note
On October 28, 2022, the Company entered into a Consolidated Amended and Restated Promissory Note with Sponsor as the lender, for an aggregate principal amount of $2,785,000 (the “Sponsor Note”) to amend and restate in its entirety (i) the stockholders of SeaStar Medical and the stockholders of the Company approve the Proposed Business Combination, (ii) the Nasdaq Stock Market approves for listing the common stock to be issued in connection with the Proposed Business Combination, (iii) the Company has, including any proceeds from the Company’s private investment in public equity financing and net of any redemptions and the payment of transaction expenses (and in the case of SeaStar Medical’s transaction expenses, only expenses up to the Cap (as defined in the Merger Agreement), at least $15,000,000 unrestricted cash on hand and (iv) the Company has $5,000,001 or more in net tangible assets at the closing.
The Merger Agreement may be terminated prior to the closing under certain circumstances, including, among others, (i) by written consent of SeaStar Medical and the Company, (ii) by written notice from either the Company or SeaStar Medical, if (A) the closing has not occurred on or before (I)Promissory Note, dated July 29, 2022, or (II) October 29, 2022 if the Extension (as defined below) occurs (the “Outside Date”), unless the terminating party’s failure to complyfor $1,035,000 in any material respect with its obligations under the Merger Agreement shall have proximately contributedaggregate principal amount issued by LMAO to the failure ofSponsor and (ii) the closing to have occurred on or prior to the Outside Date, (B) the consummation of the Proposed Business Combination is permanently enjoined or (C) the Company does not obtain stockholder approval of the Proposed Business Combination at its special meeting, (iii) by written notice from either the Company or SeaStar Medical, in the event that the other party breaches any of its representations, warranties, covenants or other agreements under the Merger Agreement that would result in the failure of the conditions to the Company’s or SeaStar Medical’s obligation to consummate the Proposed Business Combination and such breach has not been cured by the breaching party by the earlier of 30 days after receiving notice of such breach and the Outside Date and (iv) by SeaStar Medical at any time prior to the approval of the Proposed Business Combination by the Company’s public stockholders, if the board of directors of the Company has made a change in recommendation to its stockholders regarding the Proposed Business Combination. The Merger Agreement allows the Outside Date to be extended if the Sponsor elects to extend the time period by which the Company must consummate a business combination by depositing $1,035,000 in additional funds in the Company’s trust account on or prior to July 29, 2022 (the “Extension”). The Company elected to extend the time line. See Footnote 12 – Subsequent Events
Recent Developments
The Company entered into Amended and Restated Restated Promissory Note, dated July 28, 2022, (effective as of June 30, 2022), with Sponsor relatingfor $1,750,000 in aggregate principal amount, issued by LMAO to the Working Capital Loan, whereunderSponsor (collectively, the “Original Notes”). The Sponsor Note amended and consolidated the Original Notes to: (i) extend maturity dates of the Original Notes to October 30, 2023; (ii) permit outstanding amounts due under the Sponsor Notes to be prepaid without premium or penalty; and (iii) require the Company to use 5.0% of the gross cash proceeds received from any future debt and equity financing to pay outstanding balance of Sponsor Note, provided that such repayment is not required for the first $500,000 of cash proceeds. The Sponsor Note carries an interest rate of 7% per annum and contains customary representations and warranties and affirmative and negative covenants. The Sponsor Note is also subject to customary events of default, the occurrence of which may result in the Sponsor Promissory Note then outstanding becoming immediately due and payable, with interest being increased to 15.0% per annum. In addition, on October 28, 2022, the parties entered into a Security Agreement (the “Sponsor Security Agreement”), pursuant to which the Company and Old SeaStar Medical granted Sponsor a security interest in substantially all of the assets and property of the Company and Old SeaStar Medical, subject to certain exceptions, as collateral to secure the Company’s obligations under the Sponsor Note. In addition, Old SeaStar Medical entered into a Guaranty, dated October 28, 2022 (the “Sponsor Guaranty”), pursuant to which Old SeaStar Medical unconditionally guarantees and promises to pay to Sponsor the outstanding principal amount under the LMFA Note.
Maxim Group LLC (“Maxim”) Promissory Note
Pursuant to an engagement letter between Old SeaStar Medical and Maxim dated October 28, 2022, Old SeaStar Medical or the Company following the consummation of the Business Combination, was required to pay Maxim, as its financial advisor and/or placement agent, an amount equal to $4,182,353 in cash as professional fees. Upon the closing of the Business Combination, the parties agreed that $4,182,353 of such amount would be paid in the form of a promissory note. Accordingly, on October 28, 2022, the Company entered into a Promissory Note with Maxim as the lender, for an aggregate principal amount of $4,182,353 (the “Maxim Note”). The Maxim Note has a maturity date of October 30, 2023 and outstanding amount may be prepaid without premium or penalty. If the Company receives any cash proceeds from a debt or equity financing transaction prior to the maturity date, then the Company is required to prepay the indebtedness equal to 25.0% of the gross amount of the loan availabilitycash proceeds, provided that such repayment obligation shall not apply to the first $500,000 of the cash proceeds received by the Company. Interest on the Maxim Note is due at 7.0% per annum. The Maxim Note contains customary representations and warranties, and affirmative and negative covenants. The Maxim Note is also subject to customary events of default, the occurrence of which may result in the Maxim Promissory Note then outstanding becoming immediately due and payable, with interest being increased to 15.0% per annum.
Intercreditor Agreement
On October 28, 2022, Maxim, LMFA, Sponsor (collectively, the “Creditors”), SeaStar Medical and the Company entered into an Intercreditor Agreement (the “Intercreditor Agreement”) in order to set forth their relative rights under the Working Capital Loan was increased from $500,000 to $1,750,000 to fund expenses relatingLMFA Note, Sponsor Note and Maxim Note, including the payments of amounts by the Company upon an event of default under such notes. Pursuant to the Proposed Business Combination.
On July 29, 2022,Intercreditor Agreement, each Creditor agrees and acknowledges that LMFA and Sponsor funded an Extension Loanhave been granted liens on the collateral as set forth in the amountapplicable LMFA Security Agreement and Sponsor Security Agreement. Each Creditor also agrees and acknowledges that Maxim’s indebtedness under the Maxim Promissory Note is unsecured.
Except as otherwise expressly provided herein, the information in this Report does not reflect the consummation of $1,035,000 and caused such amountthe Business Combination, which, as discussed above, occurred subsequent to be deposited into thte Trust Account in order provide additional time to complete the Proposed Business Combination.period covered hereunder
COVID-19 UpdateResults of Operations
A The significant outbreak of COVID-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business combination could be materially and adversely affected. We may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors, or the target company’s personnel, vendors, and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
Results of Operations for the Three Months Ended JuneSeptember 30, 2022
The Company’s only activities since inception in October 28, 2020 through JuneSeptember 30, 2022 were organizational activities and those necessary to consummate the IPO. The Company does not expect to generate any operating revenues until after the completion of the initial Business Combination.
Revenues
The Company had no revenues during the Three Monthsthree months ended JuneSeptember 30, 2022.
Expenses
During the Three Monthsthree months ended JuneSeptember 30, 2022 and 2021, expenses were approximately $1,404$1,662 thousand and $210$411 thousand, respectively. The Three Monthsthree months ended JuneSeptember 30, 2022 and 2021 included $1,062$1,392 thousand ofand nill merger expenses and $342$270 thousand and $411 thousand of formation and administrative expenses.expenses, respectively.
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Gain (Loss) on Revaluation of Warrants
The Company recognized a $1.5 million gain of $681 thousand and ($1.8) million loss$645 thousand upon the revaluation of the warrants as of JuneSeptember 30, 2022 and 2021, respectively.
Income Tax Expense
DuringFor the Three Monthsthree months ended JuneSeptember 30, 2022 and 2021, the Company did not incur any income tax expense due to the Company being in a loss situation since inception. As such, any benefits from the Company’s operating loss is deferred as it recognizes a taxation valuation allowance for the full amount. The Company did not recognize any income tax expense for the Three Monthsthree months ended JuneSeptember 30, 2022 or 2021.
Net Income (Loss)
During the Three Monthsthree months ended JuneSeptember 30, 2022 and 2021, net income (loss) was $183($620) thousand and ($1,983)$236 thousand, respectively. SuchThe net income resulted fromloss for the three months ended September 30, 2022, was primarily driven by an increase in merger expenses of $1,392 offset by a revaluationreduction in formation and administrative expense of as $141 thousand as compared to the Company’s warrants.three months ended September 30, 2021.
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Results of Operations for the SixNine Months Ended JuneSeptember 30, 2022
The Company’s only activities since inception in October 28, 2020 through JuneSeptember 30, 2022 were organizational activities and those necessary to consummate the IPO. The Company does not expect to generate any operating revenues until after the completion of the initial Business Combination.
Revenues
The Company had no revenues during the Six Monthsnine months ended JuneSeptember 30, 2022.
Expenses
During the Six Monthsnine months ended JuneSeptember 30, 2022 and 2021, expenses were approximately $1,622$3,284 thousand and $336$747 thousand, respectively. The Six Monthsnine months ended JuneSeptember 30, 2022 and 2021 included $1,062$2,454 thousand ofand nill merger expenses and $560$831 thousand and $747 thousand of formation and administrative expenses.expenses, respectively.
Gain on Revaluation of Warrants
The Company recognized a $5.1$5.8 million gain and $58$702 thousand gain upon the revaluation of the warrants as of JuneSeptember 30, 2022 and 2021, respectively.
Income Tax Expense
During the Six Monthsnine months ended JuneSeptember 30, 2022 and 2021, the Company did not incur any income tax expense due to the Company being in a loss situation since inception. As such, any benefits from the Company’s operating loss is deferred as it recognizes a taxation valuation allowance for the full amount. The Company did not recognize any income tax expense for the Six Monthsnine months ended JuneSeptember 30, 2022 or 2021.
Net Income (Loss)
During the Six Monthsnine months ended JuneSeptember 30, 2022 and 2021, net income (loss) was $3,569$2,949 thousand and ($276)40) thousand, respectively. Such net income resulted from a revaluation of the Company’s warrants.
Liquidity and Capital Resources
General
As of JuneSeptember 30, 2022 and 2021, we had cash of $79$117 thousand and $340$166 thousand, respectively. Our liquidity needs through September 30, 2022 have been satisfied through a payment of $25,000 from our sale of our founder shares to our Sponsor, a loan from our Sponsor for $151,413, which we repaid in full on January 28, 2021, a working capital loan from our Sponsor of approximately $1,750,000, an extension loan from our Sponsor of $1,035,000, the net proceeds from the consummation of the IPO of $103,500,000, and net proceeds of a sale of private placement warrants to our Sponsor of $5,738,000.
We continue to evaluate the impact of the COVID-19 pandemic and have concluded that the specific impact is not readily determinable as of the date of the balance sheet. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Cash from Operations
Net cash used in operations was $884$1,668 thousand and $319$373 thousand during the Six Monthsnine months ended JuneSeptember 30, 2022 and 2021, respectively, due to cash used for merger expenses, operating and formation costs.
Cash from Investing Activities
For the Six Monthsnine months ended JuneSeptember 30, 2022 and 2021, net cash used in investing activities was $0$1.0 million and $105.6 million, respectively as the Company invested $105.6 million into its Trust account.account during the period ended September 30, 2021 and invested an additional $1.0 million during the nine months ended September 30, 2022.
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Cash from Financing Activities
Net cash provided by financing activities was $912 thousand$2.8 million and $106.2$106.1 million for the Six Monthsnine months ended JuneSeptember 30, 2022 and 2021. During the Six Monthsnine months ended JuneSeptember 30, 2022 the Company received $910 thousand,$2.8 million, net of repayments, under a related party loan. During the Six Monthsnine months ended JuneSeptember 30, 2021, $106.8 million was generated by the Company’s IPO and the Company paid $611$754 thousand for director and officer insurance premiums.
Shareholders’ Equity
During the Six Monthsnine months ended JuneSeptember 30, 2021, the Company issued 10.3 million units, 0.1 million Class A shares to our underwriter, 0.4 million in Class B shares and 5.7 million Private Placement Warrants. There were no issuance of either shares or warrants during the Six Monthsnine months ended JuneSeptember 30, 2022.
Contractual Obligations
We did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities as of September 30, 2022,
The underwriter of our IPO is entitled to underwriting discounts and commissions of 5.5%, of which 2.0% ($2,070,000) was paid at the closing of our IPO, and 3.5% ($3,622,500) was deferred. The deferred underwriting discount will become payable to the underwriter from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement. The underwriter is not entitled to any interest accrued on the deferred underwriting discount.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 2 to our unaudited condensed financial statements in Part I, Item 1 of this Quarterly Report. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our financial statements and require significant, difficult or complex judgments, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our 2021 Annual Report on Form 10-K filed with the SEC on April 6, 2022. There have been no significant changes in the application of our critical accounting policies during the nine months ended September 30, 2022.
Recent Accounting Pronouncements
See Note 2 to the unaudited financial statements included in Part I, Item 1 of this Quarterly Report for a discussion of recent accounting pronouncements.
Off-Balance Sheet Arrangements
We doAs of September 30, 2022, we did not have any off-balance sheet arrangements.arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
22JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be 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, (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 PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the 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 CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.
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Redeemable Equity Instruments
In accordance with the SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001.
Management reviewed the Company’s initial application of ASC 480-10-S99-3A to its accounting classification of public shares and determined that the public shares include certain redemption provisions outside of the Company’s control that require the public shares to be presented as temporary equity regardless of the minimum net tangible asset required by the Company to complete its initial business combination.
Warrants as Derivative Liability
The Company previously accounted for its outstanding Public Warrants and Private Placement Warrants issued in connection with its IPO as components of equity instead of as derivative liabilities. The warrant agreement governing the Warrant Agreement includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the Warrant. In addition, the Warrant Agreement includes a provision that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of common shares, all holders of the Warrants would be entitled to receive cash for their Warrants (the “tender offer provision”).
In connection with the reevaluation of the accounting treatment of the Warrants, the Company’s management evaluated the warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s Audit Committee, in consultation with management and after discussion with the Company’s independent registered public accounting firm, concluded that the Company’s Private Placement Warrants are not indexed to the Company’s common shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, based on management’s evaluation, the Company’s Audit Committee, in consultation with management and after discussion with the Company’s independent registered public accounting firm, concluded the tender offer provision included in the Warrant Agreement fails the “classified in stockholders’ equity” criteria as contemplated by ASC Section 815-40-15.
As a result of the above, the Company should have classified the Warrants as derivative liabilities in its previously issued balance sheet as of January 28, 2021 that was filed on Form 8-K on February 3, 2021. Under this accounting treatment, the Company is required to measure the fair value of the Warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for the current period improper accounting classification of warrants we issued in January 2021 which, due to its impact on our financial statements which we determined to be a material weakness. This mistake in classification was brought to our attention only when the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) dated April 12, 2021 (the “SEC Statement”). The SEC Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those we issued at the time of our initial public offering in January 2021.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the changes and has determined that the related impact was material to any previously presented financial statements. Therefore, the Company, in consultation with its Audit Committee, concluded that its previously issued financial statements should be restated to report all public shares as temporary equity and warrants should be classified and measured as derivative liabilities.
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
AsWe are a smaller reporting company weas defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to make disclosures under this item.
Item 4. | Controls and Procedures |
Redeemable Equity Instruments
In accordance with the SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001.
Management reviewed the Company’s initial application of ASC 480-10-S99-3A to its accounting classification of public shares and determined that the public shares include certain redemption provisions outside of the Company’s control that require the public shares to be presented as temporary equity regardless of the minimum net tangible asset required by the Company to complete its initial business combination.
Warrants as Derivative Liability
The Company previously accounted for its outstanding Public Warrants and Private Placement Warrants issued in connection with its IPO as components of equity instead of as derivative liabilities. The warrant agreement governing the Warrant Agreement includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the Warrant. In addition, the Warrant Agreement includes a provision that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of common shares, all holders of the Warrants would be entitled to receive cash for their Warrants (the “tender offer provision”).
In connection with the reevaluation of the accounting treatment of the Warrants, the Company’s management evaluated the warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s Audit Committee, in consultation with management and after discussion with the Company’s independent registered public accounting firm, concluded that the Company’s Private Placement Warrants are not indexed to the Company’s common shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, based on management’s evaluation, the Company’s Audit Committee, in consultation with management and after discussion with the Company’s independent registered public accounting firm, concluded the tender offer provision included in the Warrant Agreement fails the “classified in stockholders’ equity” criteria as contemplated by ASC Section 815-40-15.
As a result of the above, the Company should have classified the Warrants as derivative liabilities in its previously issued balance sheet as of January 28, 2021 that was filed on Form 8-K on February 3, 2021. Under this accounting treatment, the Company is required to measure the fair value of the Warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for the current period improper accounting classification of warrants we issued in January 2021 which, due to its impact on our financial statements which we determined to be a material weakness. This mistake in classification was brought to our attention only when the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) dated April 12, 2021 (the “SEC Statement”). The SEC Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those we issued at the time of our initial public offering in January 2021.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the changes and has determined that the related impact was material to any previously presented financial statements. Therefore, the Company, in consultation with its Audit Committee, concluded that its previously issued financial statements should be restated to report all public shares as temporary equity and warrants should be classified and measured as derivative liabilities.
(a) Evaluation of disclosure controls and procedures.
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Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of JuneSeptember 30, 2022, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of JuneSeptember 30, 2022, our disclosure controls and procedures were not effective.
Specifically, management’s determination was based solely on the following material weaknesses which existed as of JuneSeptember 30, 2022. Since inception in 2020 to the present, the Company did not effectively segregate certain accounting duties due to the small size of its accounting staff. In addition, we did not have sufficient controls in place surrounding the accounting of complex financial instruments. This lack of control led to improper accounting classification of warrants we issued in January 2021 which, due to its impact on our financial statements. This lack of control led to improper accounting classification of warrants we issued in January 2021 which we determined to be a material weakness. This mistake in classification was brought to our attention only when the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) dated April 12, 2021 (the “SEC Statement”). The SEC Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those we issued at the time of our initial public offering in January 2021.
A material weakness is a deficiency, or a combination of control 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. 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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
In connection with the evaluation of the SEC Statement and management’s subsequent re-evaluation of its Prior Financials, the Company determined that there were errors in its accounting for its warrants and shares as temporary equity. Management concluded that a deficiency in internal control over financial reporting existed relating to the accounting treatment for complex financial instruments and that the failure to properly account for such instruments constituted a material weakness. This material weakness resulted in the need to restate the Prior Financials.
Notwithstanding the determination that our internal control over financial reporting was not effective, as of JuneSeptember 30, 2022, and that there was a material weakness as identified in this Quarterly Report, we believe that our financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for the periods covered hereby in all material respects.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the quarter ended JuneSeptember 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
We are not currently a party to material litigation proceedings,, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers or directors in their corporate capacity.
Item 1A. | Risk Factors |
Except as set forth below, there have been no material changes fromAs a result of the closing of the Business Combination on October 28, 2022, the risk factors previously disclosed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021:
If2021 no longer apply. For risk factors relating to our business following the Business Combination, please refer to the section entitled “Risk Factors” in our final prospectus and definitive proxy statement filed with the SEC adoptson September 28, 2022. Except as set forth below, there has not been any material changes to such risk factors set forth in the proposed rulesfinal prospectus and regulations relatingdefinitive proxy statement:
We may suffer from lack of availability of additional funds.
We expect to among other things, enhancing disclosureshave ongoing needs for working capital in order to fund operations, continue to expand our operations and recruit experienced personnel. To that end, we will be required to raise additional funds through equity or debt financing. However, there can be no assurance that we will be successful in securing additional capital on favorable terms, if at all. If we are successful, whether the terms are favorable or unfavorable, there is a potential that we will fail to comply with the terms of such financing, which could result in severe liability for us. If we are unsuccessful, we may need to (a) initiate cost reductions; (b) forego business combination transactions involving SPACs,development opportunities; (c) seek extensions of time to fund liabilities, or (d) seek protection from creditors. In addition, any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. Our inability to raise capital could require us to significantly curtail or terminate our operations altogether. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to complete an initial business combination could be adversely and materially affected.
On March 30, 2022, the SEC issued certain proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving SPACs and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; increasing the liability of projections in SEC filings in connection with proposed business combination transactions; increasing the potential liability of certain participants in proposed business combination transactions; and modifying the extent to which SPACs could becomeobtain additional capital on acceptable terms is subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment companyvariety of uncertainties.
In addition, if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. These rules, if adopted, whether in the form proposed or in revised form, may increase the costs and time needed to negotiate and complete an initial business combination or impair our ability to complete an initial business combination, which may materially and adversely affect us.
We have identified material weaknesses in our internal control over financial reporting. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner.
As described elsewhere in this report, we identified material weaknesses in our internal control over financial reporting related to the accounting for the warrants we issued in connection with our initial public offering in January 2021 and in connection with the small size of our accounting staff and segregation of accounting duties. As a result of these material weaknesses, our management concluded that our internal control over financial reporting was not effective as of June 30, 2022. These material weaknesses led to a material misstatement of our warrant liabilities, Class A common stock subject to possible redemption, change in the fair value of warrant liabilities, additional paid-in capital, accumulated deficit and related financial disclosures for the Six Months ended June 30, 2022.
A material weakness is a deficiency, or a 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. Any failure to maintain such internal control could adversely impact our ability to report our financial position and resultsgenerate adequate cash from operations, on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successfulunable to find sources of funding, it may be necessary for us to sell all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in strengtheningsignificant dilution to our controlsshareholders or that result in our shareholders losing all of their investment in our Company.
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors and procedures, incomplying with the future those controls and proceduresincreasingly complex laws pertaining to public companies. Our management team may not be adequatesuccessfully or efficiently manage our transition to prevent or identify irregularities or errors orbeing a public company subject to facilitatesignificant regulatory oversight and reporting obligations under the fair presentationfederal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, results of operations, cash flows and financial statements.condition.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
In connection with Business Combination, LMAO entered into subscription agreements, each dated August 23, 2022 (collectively, the “Subscription Agreements”) with certain third-party investors (the “PIPE Investors”) pursuant to which LMAO agreed to issue and sell to the PIPE Investors in private placements to close immediately prior to the Closing, an aggregate of 700,000 shares of Common Stock at $10.00 per share, and warrants to purchase up to 700,000 shares of Common Stock (the “PIPE Warrants”) for an aggregate purchase price of $7,000,000 (the “PIPE Investment”). The PIPE Warrants are exercisable starting on the Closing at an exercise price of $11.50 per share of Common Stock, subject to adjustment in certain circumstances, and expire five years after the Closing. At the Closing, the PIPE Investors and LMAO consummated the PIPE Investment pursuant to and in accordance with the terms of the Subscription Agreements. The sale of shares of Common Stock and PIPE Warrants were made in reliance of an exemption under Section 4(2) of the Securities Act of 1933, as amended.
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(a) Sales of Unregistered Securities.
None.
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(b) Use of Proceeds.
On November 6, 2020, we issued 2,156,250 shares of our Class B common stock, to our sponsor for $25,000 in cash, at a purchase price of approximately $0.012 per share, in connection with our formation. Such shares were issued in connection with our organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
On January 28, 2021, we consummated our initial public offering of 10,350,000 units. Each unit consists of one share of our Class A common stock and one redeemable warrant, with each warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds of $103,500,000. Maxim Group LLC acted as sole book-running manager. The securities sold in the initial public offering were registered under the Securities Act on a Registration Statement on Form S-1 (No. 333-251962), which was declared effective by the SEC on January 25, 2021.
Simultaneously with the closing of our initial public offering, we consummated a private placement of 5,738,000 private placement warrants, at a price of $1.00 per private placement warrant, to our sponsor, generating gross proceeds of $5,738,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Following the closing of our initial public offering and the sale of the private placement warrants, an aggregate amount of $105,570,00 (which amount includes the deferred underwriting discount) was placed in a trust account established in connection with the initial public offering.
Transaction costs amounted to $6,211,902, consisting of $2,070,00$2,070,000 in underwriting discount, $3,622,500 in deferred underwriting discount, the fair value of the shares issued to the underwriters of $1,000 deemed as underwriters’ compensation, and $518,402 of other offering costs.
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account not previously released to us (less taxes payable) to complete our initial business combination. We may withdraw interest to pay our franchise and income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial business combination, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate, complete a business combination, and implement our plan of dissolution.
For a description of the use of the proceeds generated in our initial public offering, see Part I, Item 2 of this Quarterly Report.
(c) Repurchase of Securities.
None.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
None.
Item 5. | Other Information |
None
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Item 6. | Exhibits |
The following documents are filed as a part of this report or are incorporated herein by reference.
* | Filed herewith |
* Filed herewith28
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
| ||||||||
Date: | By: | /s/ | ||||||
| Eric Schlorff | |||||||
Chief Executive Officer and Chairman of the Board | ||||||||
(Principal Executive Officer) | ||||||||
Date: | By: | /s/ | ||||||
| Caryl Baron | |||||||
Chief Financial Officer | ||||||||
(Principal Accounting Officer) |
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