Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act ). Yes ☐ No ☒

As of ~~August 4,~~November 10, 2023, the registrant had ~~18,570,971~~36,979,724 shares of common stock, $0.0001 par value per share, outstanding.


		June 30,			December 31,				September 30,			December 31,
		2023			2022				2023			2022
ASSETS	ASSETS							ASSETS
Current assets
Cash		$	13		$	47			$	73		$	47
Other receivables			—			12				—			12
Prepaid expenses			2,319			2,977				2,172			2,977
Total current assets			2,332			3,036				2,245			3,036
Forward option-prepaid forward contracts, net			-			1,729				—			1,729
Other assets			2			2				2			2
Total assets		$	2,334		$	4,767			$	2,247		$	4,767
LIABILITIES AND STOCKHOLDERS' DEFICIT	LIABILITIES AND STOCKHOLDERS' DEFICIT							LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable		$	4,355		$	1,927			$	5,042		$	1,927
Accrued expenses			1,095			2,245				1,481			2,245
Contingent upfront payment for license agreement			100			—				100			—
Notes payable, net of deferred financing costs			5,907			1,178				—			1,178
Convertible notes			2,230			—				4,405			—
Warrants liability			95			—				1,400			—
Total current liabilities			13,782			5,350				12,428			5,350
Notes payable, net of deferred financing costs			-			7,652				5,722			7,652
Total liabilities			13,782			13,002				18,150			13,002
Commitments and contingencies (see Note 10)
Stockholders' deficit (1)
Common stock - $0.0001 par value per share; 100,000,000 shares authorized; 18,121,238 and 12,699,668 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively			2			1
Common stock - $0.0001 par value per share; 500,000,000 and 100,000,000 shares authorized at September 30, 2023 and December 31, 2022, respectively; 27,201,087 and 12,699,668 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively										3			1
Additional paid-in capital			96,806			91,089				99,776			91,089
Accumulated deficit			(108,256	)		(99,325	)			(115,682	)		(99,325	)
Total stockholders' deficit			(11,448	)		(8,235	)			(15,903	)		(8,235	)
Total liabilities and stockholders' deficit		$	2,334		$	4,767			$	2,247		$	4,767

(1) Retroactively restated to ~~give~~present effect toof the reverse recapitalization

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
	2023			2022			2023			2022			2023			2022			2023			2022
Operating expenses
Research and development	$	2,007		$	596		$	3,791		$	951		$	1,107		$	727		$	4,898		$	1,678
General and administrative		1,743			716			4,540			1,173			1,829			1,042			6,369			2,215
Total operating expenses		3,750			1,312			8,331			2,124			2,936			1,769			11,267			3,893

Loss from operations		(3,750	)		(1,312	)		(8,331	)		(2,124	)		(2,936	)		(1,769	)		(11,267	)		(3,893	)

Other income (expense), net
Interest expense		(225	)		(191	)		(658	)		(360	)		(224	)		(123	)		(882	)		(483	)
Change in fair value of convertible notes		(100	)		—			—			—			(291	)		—			(291	)		—
Change in fair value of warrants liability		480			—			480			—			825			—			1,305			—
Change in fair value of notes payable derivative liability		—			601			—			578			—			—			—			578
Change in fair value of forward option-prepaid forward contracts		(69	)		—			(1,723	)		—			—			—			(1,723	)		—
Loss on extinguishment of convertible notes														(4,949	)		—			(4,949	)		—
Gain on sale of recycled shares		—			—			1,306			—			—			—			1,306			—
Other income														149			1			149			1
Total other income (expense), net		86			410			(595	)		218			(4,490	)		(122	)		(5,085	)		96

Loss before provision for income taxes		(3,664	)		(902	)		(8,926	)		(1,906	)		(7,426	)		(1,891	)		(16,352	)		(3,797	)

Provision for income taxes		5			—			5			—			—			1			5			1

Net loss	$	(3,669	)	$	(902	)	$	(8,931	)	$	(1,906	)	$	(7,426	)	$	(1,892	)	$	(16,357	)	$	(3,798	)
Net loss per share of common stock, basic and diluted	$	(0.25	)	$	(0.12	)	$	(0.64	)	$	(0.26	)	$	(0.37	)	$	(0.26	)	$	(1.02	)	$	(0.52	)
Weighted-average shares outstanding, basic and diluted (1)		14,932,866			7,238,767			13,984,625			7,238,767
Weighted-average shares outstanding, basic and diluted, retrospectively restated to present effect of the reverse recapitalization														20,048,473			7,238,767			16,028,118			7,238,767

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Stockholders' Deficit												Stockholders' Deficit
										Total												Total
	Common Shares				Additional		Accumulated			Stockholders'			Common Shares				Additional		Accumulated			Stockholders'
	Shares (1)		Amount		Paid-In Capital		Deficit			Deficit			Shares (1)		Amount		Paid-In Capital		Deficit			Deficit
Balance, January 1, 2022		7,238,767	$	1	$	73,495	$	(76,312	)	$	(2,816	)		7,238,767	$	1	$	73,495	$	(76,312	)	$	(2,816	)
Stock-based compensation		—		—		4		—			4			—		—		4		—			4
Net loss		—		—		—		(1,004	)		(1,004	)		—		—		—		(1,004	)		(1,004	)
Balance, March 31, 2022		7,238,767		1		73,499		(77,316	)		(3,816	)		7,238,767		1		73,499		(77,316	)		(3,816	)
Stock-based compensation						345					345							345					345
Net loss								(902	)		(902	)								(902	)		(902	)
Balance, June 30, 2022		7,238,767	$	1	$	73,844	$	(78,218	)	$	(4,373	)		7,238,767		1		73,844		(78,218	)		(4,373	)
Stock-based compensation																		357					357
Net loss																				(1,892	)		(1,892	)
Balance, September 30, 2022														7,238,767	$	1	$	74,201	$	(80,110	)	$	(5,908	)


Balance, January 1, 2023	12,699,668	$	1	$	91,089	$	(99,325	)	$	(8,235	)	12,699,668	$	1	$	91,089	$	(99,325	)	$	(8,235	)
Issuance of shares - equity line of credit	378,006		—		1,108		—			1,108		378,006		—		1,108		—			1,108
Issuance of shares - commitment fee for equity line of credit	218,842		—		1,000		—			1,000		218,842		—		1,000		—			1,000
Stock-based compensation	—		—		505		—			505		—		—		505		—			505
Net loss	—		—		—		(5,262	)		(5,262	)	—		—		—		(5,262	)		(5,262	)
Balance, March 31, 2023	13,296,516		1		93,702		(104,587	)		(10,884	)	13,296,516		1		93,702		(104,587	)		(10,884	)
Issuance of shares - equity line of credit	26,993		—		55		—			55		26,993		—		55		—			55
Issuance of shares - conversion of convertible notes	3,088,167		1		1,936		—			1,937		3,088,167		1		1,936		—			1,937
Issuance of shares - vesting of RSUs	153,405		—		—		—			—		153,405		—		—		—			—
Issuance of shares - prepaid forward contracts	1,096,972		—		558		—			558		1,096,972		—		558		—			558
Stock-based compensation	459,185		—		555		—			555		459,185		—		555		—			555
Net loss	—		—		—		(3,669	)		(3,669	)	—		—		—		(3,669	)		(3,669	)
Balance, June 30, 2023	18,121,238	$	2	$	96,806	$	(108,256	)	$	(11,448	)	18,121,238		2		96,806		(108,256	)		(11,448	)
Issuance of shares - equity line of credit												234,579		—		120		—			120
Issuance of shares - conversion of convertible notes												8,432,517		1		2,410		—			2,411
Issuance of shares - vesting of RSUs												32,839		—		—		—			—
Stock-based compensation												379,914		—		440		—			440
Net loss												—		—		—		(7,426	)		(7,426	)
Balance, September 30, 2023												27,201,087	$	3	$	99,776	$	(115,682	)	$	(15,903	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements


	Six Months Ended						Nine Months Ended
	June 30,						September 30,
	2023			2022			2023			2022
Cash flows from operating activities
Net loss	$	(8,931	)	$	(1,906	)	$	(16,357	)	$	(3,798	)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization of discount on notes payable		—			208			—			234
Amortization of deferred financing costs		23			—			37			—
Non-cash accrued interest related to notes payable		—			151
Non-cash conversion of accrued expenses into notes payable		—			96
Non-cash fair value of discount on issuance of notes payable		—			(52	)
Non-cash fair value of derivative liability on issuance of notes payable		—			52
Non-cash accrued interest related to convertible notes								—			249
Change in fair value of notes payable derivative liability		—			(578	)		—			(578	)
Change in fair value of convertible notes								291			—
Change in fair value of warrants liability		(480	)		—			(1,305	)		—
Change in fair value of forward option - prepaid forward contracts		1,723			—
Change in fair value of forward option-prepaid forward contracts								1,723			—
Gain on sale of recycled shares		(1,306	)		—			(1,306	)		—
Loss on extinguishment of convertible notes								4,949			—
Stock-based compensation		1,060			349			1,544			706
Changes in operating assets and liabilities
Other receivables		12			—			12			—
Prepaid expenses		658			(777	)		805			(3	)
Capitalized merger costs								—			(1,005	)
Accounts payable		2,428			584			3,115			1,206
Accrued expenses		350			295			692			497
Net cash used in operating activities		(4,463	)		(1,578	)		(5,800	)		(2,492	)

Cash flows from financing activities
Proceeds from issuance of convertible notes		5,000			—			6,500			—
Payment of convertible notes		(258	)		—			(282	)		—
Proceeds from issuance of shares		1,163			—			1,283			—
Payment of commitment fee - equity line of credit		(500	)		—			(500	)		—
Proceeds from sale of recycled shares		1,870			—			1,870			—
Proceeds from notes payable		100			1,681			100			2,031
Payment of notes payable		(2,946	)		—			(3,145	)		—
Net cash provided by financing activities		4,429			1,681			5,826			2,031

Net increase (decrease) in cash		(34	)		103			26			(461	)

Cash, beginning of period		47			510			47			510

Cash, end of period	$	13		$	613		$	73		$	49


Supplemental disclosure of cash flow information

Cash paid for interest	$	675		$	—		$	707		$	—

Supplemental disclosure of noncash financing activities

Value of derivative liability on issuance of convertible notes							$	—		$	52
Non-cash conversion of accrued expenses into convertible notes							$	—		$	96
Shares issued as payment of convertible notes	$	1,937		$	—		$	4,348		$	—
Shares issued to settle forward option-prepaid forward contracts	$	558		$	—		$	558		$	—
Issuance of convertible note warrants	$	575		$	—		$	2,705		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Note 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the period. Significant estimates include the valuation of the forward option on prepaid forward contracts, derivative liability, warrants, provision for income taxes, convertible debt measured at fair value, and the amount of stock-based compensation expense. Although actual results could differ from those estimates, such estimates are developed based on the best information available to management and management's best judgments at the time.

Concentrations of credit risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. The Company has not experienced any losses on deposits since inception.

Fair value option of accounting

Generally, when financial instruments are first acquired and are not required to be recorded at fair value, ASC 825, Financial Instruments (“ASC 825”), allows an entity to elect the fair value option (“FVO”). The FVO may be elected on an instrument-by-instrument basis only at the time of acquisition and once elected is irrevocable. The FVO allows an entity to account for the entire financial instrument at fair value with subsequent changes in fair value recognized in earnings through the condensed consolidated statements of operations at each reporting date. A financial instrument is generally eligible for the FVO if, amongst other factors, no part of the financial instrument is classified in stockholders’ equity.

Based on the eligibility assessment discussed above, the Company concluded that its convertible notes (see Note 7) were eligible for the FVO and accordingly elected the FVO for those debt instruments. This election was made because of operational efficiencies in valuing and reporting for these debt instruments at fair value in their entirety at each reporting date. The convertible notes contain certain embedded derivatives that otherwise would require bifurcation and separate accounting at fair value.

The convertible notes, inclusive of their respective accrued interest at the stated interest rates (collectively referred to as the “FVO debt instruments”) were initially recorded at fair value as liabilities on the condensed consolidated balance sheets and subsequently re-measured at fair value at the end of each reporting period presented within the condensed consolidated financial statements. The changes in fair value of the FVO debt instruments are recorded in changes in fair value of convertible notes, included as a component of other income (expense), net, in the condensed consolidated statements of operations.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except for shares and per-share amounts)

Fair value measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Inputs used to measure fair value are classified into the following hierarchy:

Level 1 – quoted prices in active markets for identical assets and liabilities.

Level 2 – other significant observable inputs (including quoted prices for similar assets and liabilities, interest rate, credit risk, etc.).

Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of assets and liabilities).

The fair value of the forward option on prepaid forward contracts, convertible notes, and the warrants liability, are classified as Level 3 in the fair value hierarchy.

The following table presents the changes in the forward option-prepaid forward contracts, convertible notes measured at fair value, warrants liability, and the notes derivative liability for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 (in thousands):


	Forward Option-												Forward Option-
	Prepaid									Notes Payable			Prepaid									Notes Payable
Level 3 Rollforward	Forward Contracts			Convertible Notes			Warrants Liability			Derivative Liability			Forward Contracts			Convertible Notes			Warrants Liability			Derivative Liability
Balance January 1, 2022	$	—		$	—		$	—		$	(526	)	$	—		$	—		$	—		$	(526	)
Additions		—			—			—			(52	)		—			—			—			(52	)
Changes in fair value		—			—			—			578			—			—			—			578
Balance June 30, 2022	$	—		$	—		$	—		$	—
Balance September 30, 2022													$	—		$	—		$	—		$	—

Balance January 1, 2023	$	1,729		$	—		$	—		$	—		$	1,729		$	—		$	—		$	—
Additions		—			4,425			575			—			—			3,795			2,705			—
Sale of recycled shares		(564	)		—			—			—			(564	)		—			—			—
Payments		—			(258	)		—			—			—			(282	)		—			—
Shares issued as payments		—			(1,937	)		—			—			—			(4,348	)		—			—
Changes in fair value		(1,723	)		—			(480	)		—			(1,723	)		291			(1,305	)		—
Loss on extinguishment (see Note 7)														—			4,949			—			—
Shares issued as maturity consideration		558			—			—			—			558			—			—			—
Balance June 30, 2023	$	—		$	2,230		$	95		$	—
Balance September 30, 2023													$	—		$	4,405		$	1,400		$	—

The convertible notes are recorded as liabilities and are recorded at fair value based on Level 3 measurements. The estimated fair values of the convertible notes are each determined based on the aggregated, probability-weighted average of the outcomes of certain possible scenarios. The combined value of the probability-weighted average of those outcomes is then discounted back to each reporting period in which the convertible notes are outstanding, in each case, based on a risk-adjusted discount rate estimated based on the implied interest rate using the changes in observed interest rates of corporate rate debt that the Company believes is appropriate for those probability-adjusted cash flows.

The estimated fair value of prepaid expenses, accounts payable and accrued expenses approximate their fair value because of the short-term nature of these instruments.

Note 4. Accrued Expenses

Accrued expenses consisted of the following:


($ in thousands)	June 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Accrued commitment fee, equity line of credit	$	—	$	1,500	$	—	$	1,500
Accrued bonus		502		450		663		450
Accrued director remuneration		244		61
Accrued director compensation						335		61
Accrued interest						224		112
Accrued settlement		150		—		100		—
Accrued interest		72		112
Accrued legal		51		80
Accrued research and development		19		18
Other		57		24		159		122
Total accrued expenses	$	1,095	$	2,245	$	1,481	$	2,245

Note 6. Notes Payable

Notes payable consisted of the following:


($ in thousands)	June 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
LMFA notes payable	$	438		$	968		$	438		$	968
LMFAO note payable		1,757			2,785			1,757			2,785
Maxim note payable		3,590			4,167			3,590			4,167
Insurance financing		199			910			—			910
Unamortized deferred financing costs		(77	)		—			(63	)		—
		5,907			8,830			5,722			8,830
Less current portion		(5,907	)		(1,178	)		—			(1,178	)
	$	—		$	7,652		$	5,722		$	7,652

Future maturities of principal repayment of the notes payable as of ~~June~~September 30, 2023 are as follows:


($ in thousands)
Years ended December 31:
2023 (remaining)	$	—	$	—
2024		5,907		—
2025				5,722
	$	5,907	$	5,722

On March 15, 2023, the Company amended its LMFA notes payable, LMFAO note payable, and Maxim note payable, extending their maturity dates to June 15, 2024. In consideration for such extension, the Company agreed to pay the noteholders an aggregate amount of $100 in cash upon receipt of proceeds from the issuance of the note at the second closing under the ~~securities purchase agreement~~Securities Purchase Agreement (the "SPA") (see Note 7). The $100 consideration for the modification was capitalized as a deferred financing cost. The Company amortized $2014 and $2337 of the deferred financing cost during the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively.

On August 7, 2023, the Company entered into certain amendments and waivers for the LMFA notes payable, LMFAO note payable, and Maxim note payable. The lenders waved their rights to receive any mandatory prepayments for proceeds received by the Company from the convertible note financings and agreed to extend the maturity dates to March 26, 2025. (see Note 7).

LMFA Notes Payable

~~During the six months ended June 30, 2023, the maturity date was extended to~~ ~~June 15, 2024~~. The balance due was $438 and $968 as of ~~June~~September 30, 2023 and December 31, 2022, respectively. The balance at December 31, 2022 consisted of a $700 interest bearing note and a $268 noninterest bearing note. The Company recorded interest expense of $78 and $1927 for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, on the interest-bearing note. The noninterest bearing note was paid in full in January 2023.

~~The mandatory repayment provisions of the LMFA note were waived for the second senior unsecured convertible note drawn on May 12, 2023 (see Note 7).~~

LMFAO Note Payable

~~During the six months ended June 30, 2023, the maturity date was extended to~~ ~~June 15, 2024. The mandatory repayment provisions of the LMFA note were waived for the second senior unsecured convertible note drawn on May 12, 2023 (see Note 7).~~

The balance due was $1,757 and $2,785 on ~~June~~September 30, 2023 and December 31, 2022, respectively. The Company recorded interest expense of $3132 and $74105 for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively.

Maxim Note Payable

~~During the six months ended June 30, 2023, the maturity date was extended to~~ ~~June 15, 2024~~. The ~~mandatory repayment provisions~~balance of the Maxim note ~~were waived~~was $3,590 and $4,167 as of September 30, 2023 and December 31, 2022, respectively. The Company recorded interest expense of $63 and $194 for the ~~first senior unsecured convertible note drawn on March 15,~~three and nine months ended September 30, 2023, ~~(see Note 7).~~respectively.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except for shares and per-share amounts)

Insurance Financing

The balance ~~of the Maxim note~~due was $~~3,590~~0 and $~~4,167~~910 ~~as of June~~on September 30, 2023 and December 31, 2022, respectively. The Company recorded interest expense of $632 and $~~130~~ ~~for the six months ended June 30, 2023.~~

~~Insurance Financing~~

~~The balance due was $199~~ ~~and $910~~ ~~on June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023,~~ ~~two~~ ~~monthly~~ ~~installments of $101, consisting of principal and interest remain. The Company recorded interest expense of $~~6 ~~and $~~1719 for the three and ~~six~~nine months ended ~~June~~September 30, ~~2023.~~2023, respectively.

Notes Payable

Amortization of the debt discounts related to the Dow Employees' Pension Plan Trust, Union Carbide ~~IBT~~Employees' Pension Trust, Innovative BioTherapies, Inc., and investor notes for the three and ~~six~~nine months ended ~~June~~September 30, 2022 was $9926 and $~~208~~234, respectively.

Note 7. Convertible Notes

3i Notes

On March 15, 2023, the Company entered into ~~a securities purchase agreement~~the SPA with 3i LP ("3i") an institutional investor, whereby the Company has the ability to issue a series of four senior unsecured convertible notes (collectively the "Convertible Notes"), with aggregate principal amounts totaling up to $9,000, and warrants to purchase shares of the Company’s common stock. On March 15, 2023, the Company issued a note (the "First Convertible Note"), convertible into 1,207,729 shares of common stock at an initial conversion price of $2.70, in a principal amount of $3,261, and a warrant to purchase up to 328,352 shares of common stock. The First Convertible Note was issued at an 8.0% discount, bears interest at 7.0% per annum, matures on June 15, 2024, and requires monthly installments of principal and interest.

On May 12, 2023, the Company issued a note (the "Second Convertible Note"), convertible into 805,153 shares of common stock at an initial conversion price of $2.70, in a principal amount of $2,174, and a warrant to purchase up to 218,901 shares of common stock. The Second Convertible Note was issued at an 8.0% discount, bears interest at 7.0% per annum, matures on August 12, 2024, and requires monthly installments of principal and interest.

During the period from January 1, 2023 through August 7, 2023, the Company made cash payments of principal and interest of $237 and $21, respectively, on the First Convertible Note. The Company also made additional principal and interest payments, which included accelerated payments through equity conversions. 3i elected to convert the conversion amount (as defined in the First Convertible Note) into shares of common stock of the Company. The Company converted principal and interest into 1,879,688 shares of common stock with a fair value of $1,291 during the period from January 1, 2023 through August 7, 2023.

During the period from January 1, 2023 through August 7, 2023, the Company made cash payments of principal and interest of $21 and $3, respectively, on the Second Convertible Note. The Company also made additional principal and interest payments, which included accelerated payments through equity conversions. 3i elected to convert the conversion amount (as defined in the Second Convertible Note) into shares of common stock of the Company. The Company converted principal and interest into 1,423,633 shares of common stock with a fair value of $763 during the period from January 1, 2023 through August 7, 2023.

On August 7, 2023, the Company entered into an amendment to the SPA dated March 15, 2023, whereby 3i may purchase additional Convertible Notes in aggregate principal amounts up to $2,000 (the "Additional Convertible Notes") in lieu of the third and fourth series as provided in the original SPA dated March 15, 2023.

Also on August 7, 2023, the Company entered into a side letter with 3i (the “Letter Agreement”), pursuant to which the Company agreed to adjust the conversion price of the First and Second Convertible Notes to the lowest of (i) $0.20, (ii) the closing sale price of common stock on the trading day immediately preceding the date of the conversion, and (iii) the average closing sale price of common stock for the five consecutive trading days immediately preceding the date of the conversion. The Company also agreed to issue a convertible note warrant to purchase up to 4,765,620 shares of common stock with an exercise price of $0.20 per share, as part of the August 7, 2023 amendment to the SPA.

The Company concluded that the August 7, 2023 amendment should be accounted for as an extinguishment of the First and Second Convertible Notes. The Company derecognized the First and Second Convertible Notes with principal amounts of $1,937 and $1,568, respectively, and recorded fair value amounts of $1,643 and $1,257, respectively. The amended First and Second Convertible Notes were recorded at fair value based on the amended

Notes to the Condensed Consolidated Financial Statements

(in thousands, except for shares and per-share amounts)

terms at $3,472 and $2,747, respectively, along with a loss on extinguishment for the difference between the fair value of the amended terms and the fair value of the original terms on August 7, 2023 of $3,319. The Company recorded the convertible note warrants issued with the Letter Agreement as a liability measured at fair value at inception with subsequent changes in fair value recorded in earnings. The initial fair value of the convertible note warrants issued with the Letter Agreement of $1,630 was also recorded as loss on extinguishment.

The Company closed three of four tranches of the Additional Convertible Notes on August 7, 2023, August 30, 2023, and September 26, 2023, respectively. Each tranche of the Additional Convertible Notes is convertible into 2,717,144 shares of common stock at an initial conversion price of $0.20, in a principal amount of $543, and includes a warrant to purchase up to 738,791 shares of common stock. The Additional Convertible Notes mature on November 6, 2024, November 29, 2024, and December 25, 2024, respectively. All Additional Convertible Notes are issued at an 8.0% discount, bear interest at 7.0% per annum, and require monthly installments of principal and interest.

During the period from August 8, 2023 through September 30, 2023, the Company made additional principal and interest payments, which included accelerated payments through equity conversions. In accordance and pursuant to the Second Convertible Note, 3i elected to convert the conversion amount (as defined in the Second Convertible Note) into shares of common stock of the Company. The Company converted principal and interest into 8,217,363 shares of common stock with a fair value of $2,294.

The Company did not make any payments on the Additional Convertible Notes during the nine months ended September 30, 2023.

The Company concluded that the transactions include ~~two~~ legally detachable and separately exercisable freestanding financial instruments: the Convertible Notes and the warrants. The Company concluded that the warrants should be recorded as a liability (see Note 8). The Company determined the Convertible Notes are liability instruments under ASC 480, Distinguishing Liabilities from Equity. The Convertible Notes were then evaluated in accordance with the requirements of ASC 825, and it was concluded that the Company was not precluded from electing the FVO for the Convertible Notes. As such, the Convertible Notes are carried at fair value in the condensed consolidated balance sheets. The Convertible Notes are measured at fair value each reporting date with changes in fair value recognized in the condensed consolidated statements of operations, unless the change is concluded to be related to the changes in the Company’s credit rating, in which case the change will be recognized as a component of accumulated other comprehensive income in the condensed consolidated balance sheets.

~~During the six months ended June 30, 2023, the Company made cash payments of principal and interest of $238~~ ~~and $~~20~~, respectively, on the First Convertible Note.~~ The Company also made additional principal and interest payments, which included accelerated payments through equity conversions. In accordance and pursuant to the First Convertible Note, 3i elected to convert the conversion amount (as defined in the First Convertible Note) into shares of common stock of the Company. The Company converted principal and interest into~~1,879,688~~ ~~shares of common stock with a fair value of $1,291~~.

~~During the six months ended June 30, 2023, the Company made principal and interest payments on the~~ Second Convertible Note ~~which included accelerated payments, though equity conversions. In accordance and pursuant to the Second Convertible~~was paid in full in October 2023 (see Note 3i elected to convert the conversion amount (as defined in the Second Convertible Note) of principal and interest into shares of common stock of the Company. The Company converted principal and interest into ~~1,208,479~~ ~~shares of common stock with a fair value of $646~~13).

Future maturities of principal repayment of the Convertible Notes as of ~~June~~September 30, 2023 are as follows:

~~Notes to the Condensed Consolidated Financial Statements~~

~~(in thousands, except for shares and per-share amounts)~~


($ in thousands)
Years ended December 31:
2023 (remaining)	$	2,609	$	2,065
2024		1,009		1,645
	$	3,618	$	3,710

Note 8. Warrants

On March 15, 2023, as part of the issuance of the First Convertible Note, ~~(see Note 7)~~ a convertible note warrant exercisable for the purchase of 3~~328,352~~28,352 ~~warrants (“Convertible Note Warrants”) were~~shares of common stock was issued with an exercise price of $2.97 per share. On May 12, 2023, as part of the issuance of the Second Convertible Note, ~~(see~~a convertible note warrant exercisable for the purchase of 218,901 shares of common stock was issued with an exercise price of $2.97 per share. On August 7, 2023, as part of the Letter Agreement, an additional convertible note warrant exercisable for the purchase of 4,765,620 shares of common stock was issued with an exercise price of $0.20 per share. Also on August 7, 2023, as part of the issuance of the First Additional Convertible Note, 7) ~~218,901~~738,791 Convertible Note Warrants were issued with an exercise price of $~~2.97~~0.20 per share. On August 30, 2023, as part of the issuance of the Second Additional Convertible Note, a convertible note warrant exercisable for the purchase of 738,791 shares of common stock was issued with an exercise price of $0.20 per share. On September 26, 2023, as part of the issuance of the Third Additional Convertible Note, a convertible note warrant exercisable for the purchase of 738,791 shares of common stock was issued with an exercise price of $0.20 per share. The ~~Convertible Note Warrants~~convertible note warrants expire five years from their issuance date and contain cashless exercise

Notes to the Condensed Consolidated Financial Statements

(in thousands, except for shares and per-share amounts)

provisions. The Company does not have the ability to redeem the ~~Convertible Note Warrants.~~convertible note warrants. The ~~Convertible Note Warrants for the First Convertible Note~~convertible note warrants were collectively valued at $~~500~~ ~~at issuance. The Convertible Note Warrants for the Second Convertible Note were valued at $~~752,705 at issuance.

In accordance with ASC 815-40, Derivatives and Hedging-Contracts in and Entity’s own Equity, the Company has determined that the ~~Convertible Note Warrants~~convertible note warrants do not meet the conditions for equity classification, due to potential cash settlement under the ~~exchange cap provision of~~Exchange Cap provisions located in the ~~securities purchase agreement,~~SPA, and should be carried on the condensed consolidated balance sheets as a liability measured at fair value, with subsequent changes in fair value recorded in the condensed consolidated statements of operations as change in fair value of warrants liability. The fair value of the ~~Convertible Note Warrants~~convertible note warrants was determined using a Black-Scholes option pricing model, which considers variables such as estimated volatility, time to maturity, and the risk-free interest rate. The risk-free interest rate is the U.S. Treasury rate at the date of issuance, and the time to maturity is based on the contractual life at the date of issuance, which is five years.

The Company has the following warrants outstanding:


	June 30,		December 31,		September 30,		December 31,
	2023		2022		2023		2022
Public Stockholders' Warrants		10,350,000		10,350,000		10,350,000		10,350,000
Private Placement Warrants		5,738,000		5,738,000		5,738,000		5,738,000
PIPE Investor Warrants		700,000		700,000		700,000		700,000
Convertible Note Warrants		547,253		—		7,529,246		—
SeaStar Warrants		69,714		69,714
SeaStar Medical, Inc. Warrants						69,714		69,714
		17,404,967		16,857,714		24,386,960		16,857,714

Note 9. Common Stock and Stock-Based Compensation

During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company issued ~~459,185~~474,255 shares of common stock for management bonuses, ~~and~~ ~~153,405~~186,244 shares of common stock for vested restricted stock ~~units.~~units, and 364,844 stock awards. In addition, the Company granted 168,002 stock awards for which shares had not been issued as of September 30, 2023. The Company has recorded $44 in accrued expenses as of September 30, 2023, for the unissued stock awards. The Company also granted 351,029 options and 234,019 restricted stock units during the ~~six~~nine months ended ~~June~~September 30, 2023. For options granted during the ~~six~~nine months ended ~~June~~September 30, 2023, the weighted-average grant date fair value was $1.20 per share and the options vest one year from the grant date. For RSUs granted during the ~~six~~nine months ended ~~June~~September 30, 2023, the weighted-average grant date fair value was $1.47 per share and the RSUs vest one year from the grant date.

The following represents stock-based compensation expense in the company’s unaudited condensed consolidated statements of operations:

~~Notes to the Condensed Consolidated Financial Statements~~

~~(in thousands, except for shares and per-share amounts)~~


($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022		2023		2022
Research and development	$	96	$	90	$	135	$	90	$	198	$	27	$	355	$	53
General and administrative		459		255		925		259		286		330		1,189		653
Total	$	555	$	345	$	1,060	$	349	$	484	$	357	$	1,544	$	706

Note 12. Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, including vested restricted stock units for which common shares have not yet been issued, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, the warrants, common stock options, and unvested restricted stock units are considered to be potentially dilutive securities. As the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for all periods.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except for shares and per-share amounts)

The following weighted-average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022		2023		2022
Public Stockholders' warrants		10,350,000		—		10,350,000		—		10,350,000		—		10,350,000		—
Private Placement warrants		5,738,000		—		5,738,000		—		5,738,000		—		5,738,000		—
PIPE Investor warrants		700,000		—		700,000		—		700,000		—		700,000		—
Convertible Note warrants		448,627		—		256,393		—		4,135,056		—		1,563,488		—
SeaStar warrants		69,714		69,714		69,714		69,714
SeaStar Medical, Inc. warrants										69,714		69,714		69,714		69,714
Options to purchase common stock		576,534		332,544		411,579		335,102		595,821		326,399		473,668		330,121
Unvested restricted stock units		129,640		296,696		213,548		149,168		353,446		306,811		339,169		202,293
Total		18,012,515		698,954		17,739,234		553,984		21,942,037		702,924		19,234,039		602,128

Net loss per share is calculated using the shares in connection with the Business Combination and related transactions, assuming the shares were outstanding since January 1, 2022. As the Business Combination and related transactions are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issued in connection with the Business Combination have been outstanding for the entire period presented. The calculation of weighted average shares outstanding for basic and diluted net loss per share for the three and ~~six~~nine months ended ~~June~~September 30, 2022 has been retroactively restated to give effect to the Business Combination.


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022			2023			2022			2023			2022
Net loss	$	(3,669	)	$	(902	)	$	(8,931	)	$	(1,906	)	$	(7,426	)	$	(1,892	)	$	(16,357	)	$	(3,798	)
Weighted average shares outstanding - basic
and diluted		14,932,866			7,238,767			13,984,625			7,238,767			20,048,473			7,238,767			16,028,118			7,238,767
Basic and diluted net loss per share	$	(0.25	)	$	(0.12	)	$	(0.64	)	$	(0.26	)	$	(0.37	)	$	(0.26	)	$	(1.02	)	$	(0.52	)

~~On August 7, 2023, the Company entered into an amendment to the securities purchase agreement with 3i, whereby the VWAP price will be $0.20~~ for all future conversions and the provisions of the third closing have been amended. 3i will have the discretion to purchase additional shares of the Company common stock in an aggregate principal amount of $~~2,000, provided that 3i will purchase additional shares of the Company common stock in an aggregate principal amount of $1,000~~ ~~in two tranches no later than September 5, 2023. On August 7, 2023, the Company issued a note (the "Third Convertible Note") in a principal amount of $543, convertible into shares of common stock at an initial conversion price of $0.20, and a warrant to purchase up to~~ ~~738,791~~ ~~shares of common stock. The Third Convertible Note was issued at an~~ ~~8.0% discount, bears interest at~~ ~~7.0% per annum, matures on~~ ~~November 6, 2024, and requires monthly installments of principal and interest.~~

In connection with the amendment to the securities purchase agreement with 3i, the Company entered into a letter agreement with 3i, providing for (i) certain adjustment mechanisms for the conversion price of the First and Second Convertible Notes and additional notes issued or to be issued under the securities purchase agreement, as amended, (ii) a six month waiver period of any cash payment obligations of the Company under each existing note, and (iii) the issuance of an additional warrant to purchase an aggregate of ~~4,765,620~~ ~~shares of common stock.~~

Also on August 7, 2023, the Company entered into certain amendments and waivers for the Maxim Note, LMFA Note, and LMFAO Note. The lenders waved their rights to receive any mandatory prepayments for proceeds received by the Company from the convertible note financings and agreed to extend the maturity dates to 91 days after the last maturity date applicable to any of the notes issued pursuant to the amended securities purchase agreement with 3i.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis are intended to help you understand our business, financial ~~condensed~~ condition, results of operations, liquidity, and capital resources. You should read this discussion in conjunction with the Company’s condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2022.

In addition to historical financial analysis, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions, as described under the heading “Cautionary Note Regarding Forward Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, risks and uncertainties, including those set forth under “Risk Factors” included elsewhere (or incorporated by reference) in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2022. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “SeaStar Medical,“ “we,“ “us,” “our,” and “the Company” are intended to mean the business and operations of SeaStar Medical Holding Corporation and its consolidated subsidiaries following the Business Combination.

On October 28, 2022, LMAO consummated a series of transactions that resulted in the combination of LMF Merger Sub, Inc. and SeaStar Medical, Inc. pursuant to an Agreement and Plan of Merger (the "Business Combination").

The Company is a medical technology company developing a platform therapy to reduce the consequences of hyperinflammation on vital organs. In a normal inflammatory response, neutrophils are the first immune cells to arrive at the site and are key to the entire immune response that kills pathogens and promotes tissue repair. If the inflammatory response becomes excessive and dysregulated, normal neutrophil die off may be delayed, altering feedback mechanisms that regulate the immune system. This results in damaging hyperinflammation spreading uncontrollably to other parts of the body, often leading to acute chronic solid organ dysfunction or failure, including heart, lung, kidney and liver diseases. This hyperinflammatory response is also known as the cytokine storm, referring to the body’s reaction to the category of small-secreted proteins released by hyperinflammatory cells that affect communication between cells. The cytokine storm, when left uncontrolled, can lead to organ damage and even death.

We are initially using our proprietary Selective Cytopheretic Device (“SCD”) technology platform to clinically validate several acute organ injury indications, including kidneys and lungs. Our investigational SCD is an extracorporeal synthetic membrane device designed to be easily integrated into existing Continuous Renal Replacement Therapy ("CRRT") systems that are commonly installed in hospitals, including in Intensive Care Units throughout the United States. Once approved and commercialized, the SCD would initially target acute kidney injury in both the pediatric CRRT population as well as adults on CRRT. In addition, we are developing our SCD to address inflammation associated with chronic dialysis and chronic heart failure. The regulatory approval process for our SCD product candidates is costly and involves significant risks and uncertainties. For a detailed description of these and other risks, please see “Risk Factors” under Part II, Item I of this Form 10-Q.

We have incurred net losses in each year since our inception in 2007. As of ~~June~~September 30, 2023 and December 31, 2022, we had an accumulated deficit of ~~$108.3~~$115.7 million and $99.3 million, respectively. Our net losses were ~~$3.7~~$7.4 million and ~~$0.9~~$1.9 million for the three months ended ~~June~~September 30, 2023 and 2022, respectively. Our net losses were ~~$8.9~~$16.4 million and ~~$1.9~~$3.8 million for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively. Substantially all our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. For the three and ~~six~~nine months ended ~~June~~September 30, 2023 additional losses were related to change in fair value of convertible notes, change in fair value of forward option-prepaid forward contracts and loss on extinguishment of convertible notes, which were partially offset by gains from the change in fair value of warrants liability and gain on sale of recycled shares. For the three and nine months ended September 30, 2022, additional ~~losses~~gains were related to the change in fair value of ~~the forward option derivatives and the change in fair value of convertible notes.~~notes payable derivative liability.

As of ~~June~~September 30, 2023 and December 31, 2022, we had cash of $0.1 million and $0.0 million.

Our accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. Our condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The recurring losses, working capital deficiency, the need for capital to fund our operations, including clinical trial and regulatory approval expenses, and the amount of cash reserve are factors that raise substantial doubt about our ability to continue as a going concern for the twelve-month period from the date the unaudited condensed consolidated financial statements are made available.

Our need for additional capital will depend in part on the scope and costs of our development activities. To date, we have not generated any significant revenue from the sale of commercialized products. Our ability to generate product revenue will depend on the successful development and eventual commercialization of our products. Until such time, if ever, we expect to finance our operations through the

sale of equity or debt, borrowings under credit facilities, potential collaborations, other strategic transactions or government and other grants. Adequate capital may not be available to us when needed or on acceptable terms. If we are unable to raise capital, we could be

forced to delay, reduce, suspend or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results and financial condition. See Part I, Item 1A “Risk Factors” for additional information.

To date, we have not generated any revenue from the sale of commercialized products. Revenue has been primarily derived from government and other grants. We may generate revenue in the future based on payments from future license or collaboration agreements and government and other grants, and, if our products receive regulatory approval for commercialization, from product sales. We expect that any revenue we generate will fluctuate from quarter to quarter. If we fail to complete the development of or obtain regulatory approval for commercialization of our products in a timely manner, our ability to generate future revenue and our results of operations and financial position, would be materially adversely affected.

Since our inception, we have focused our resources on our research and development activities, including conducting preclinical studies and clinical trials, and developing our process and activities related to regulatory filings for our products. Subject to the availability of additional funding, we plan to further increase our research and development expenses for the foreseeable future as we continue the development of our products.

General and administrative expenses consist primarily of salaries and related costs for employees in executive and finance roles, which also include stock-based compensation expenses and benefits for such employees.

Other significant general and administrative expenses include facilities costs, professional fees for accounting and legal services, expenses associated with obtaining and maintaining patents and obtaining financing, and expenses related to SEC reporting. As we continue to expand and grow our operations, we expect that our general and administrative expenses will increase, including additional expenses relating to new hires, travel, a new enterprise resource planning platform, and branding.

Total other income (expense), net primarily consists of interest expense relating to interest incurred on our notes, financing fees related to our convertible notes, gain on issuance of convertible notes, change in fair value of convertible notes, change in fair value of warrants liability, change in fair value of forward-option forward contracts, and gain on sale of recycled shares.

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges. Please see the factors discussed elsewhere in this Form 10-Q, including those discussed in Part I, Item 1A, “Risk Factors,” for additional information.

Comparison of the Three Months Ended ~~June~~September 30, 2023 to the Three Months Ended ~~June~~September 30, 2022

The following table sets forth a summary of our results of operations. This information should be read together with our unaudited condensed consolidated financial statements and related Notes included elsewhere in this Form 10-Q.


	Three Months Ended												Three Months Ended
	June 30,						Change						September 30,						Change
($ in thousands)	2023			2022			$			%			2023			2022			$			%
Revenue	$	—		$	—		$	—			—		$	—		$	—		$	—			—
Operating expenses
Research and development		2,007			596			1,411			237	%		1,107			727			380			52	%
General and administrative		1,743			716			1,027			143	%		1,829			1,042			787			76	%
Total operating expenses		3,750			1,312			2,438			186	%		2,936			1,769			1,167			66	%
Loss from operations		(3,750	)		(1,312	)		(2,438	)		186	%		(2,936	)		(1,769	)		(1,167	)		66	%
Total other income (expense)		86			410			(324	)		(79	)%		(4,490	)		(122	)		(4,368	)		3580	%
Loss before income tax provision		(3,664	)		(902	)		(2,762	)		306	%		(7,426	)		(1,891	)		(5,535	)		293	%
Income tax provision (benefit)		5			—			5						—			1			(1	)
Net loss	$	(3,669	)	$	(902	)	$	(2,767	)		307	%	$	(7,426	)	$	(1,892	)	$	(5,534	)		292	%

The following table discloses the breakdown of research and development expenses:


	Three Months Ended									Three Months Ended
	June 30,				Change					September 30,				Change
($ in thousands)	2023		2022		$		%			2023		2022		$			%
Clinical trials	$	803	$	—	$	803		100	%	$	447	$	—	$	447			100	%
External services		486		419		67		16	%		96		574		(478	)		(83	)%
Payroll and personnel expenses		656		115		541		470	%		551		119		432			363	%
Other research and development expenses		62		62		-		0	%		13		34		(21	)		(62	)%
	$	2,007	$	596	$	1,411		237	%	$	1,107	$	727	$	380			52	%

Research and development expenses for the three months ended ~~June~~September 30, 2023 and 2022 were ~~$2.0~~$1.1 million and ~~$0.6~~$0.7 million, respectively. The increase in research and development expenses of ~~$1.4~~$0.4 million, or ~~237%~~52%, was primarily driven by increases in clinical trial expenses of ~~$0.8~~$0.5 million, ~~an increase in the use of external services of $0.1 million, and~~ an increase in payroll and personnel expenses of $0.4 million, partially offset by a decrease of external services of $0.5 million.

General and administrative expenses for the three months ended ~~June~~September 30, 2023 and 2022 were ~~$1.7~~$1.8 million and ~~$0.7~~$1.0 million, respectively. The increase in general and administrative expenses of ~~$1.0~~$0.8 million, or ~~143%~~76%, is due primarily to an increase in insurance expense of $0.4 million, ~~increase in professional~~increased fees related to ~~SEC reporting of $0.2 million, cost of~~ SEC reporting of $0.2 million, an increase in payroll related expenses of $0.1 million, and an increase in ~~marketing~~accounting and ~~travel~~tax expenses of $0.1 million.

Other income (expense) for the three months ended ~~June~~September 30, 2023 and 2022 was ~~income~~expense of $4.5 million and expense of $0.1 million, ~~and income of $0.4 million,~~ respectively. The ~~decrease~~increase of ~~$0.3~~$4.4 million primarily resulted from ~~increases~~a change in interest ~~the change in fair value~~expense of ~~forward option-prepaid forward contracts, and~~$0.1 million, change in fair value of convertible notes ~~partially offset by the gain~~of $0.3 million, and loss on ~~issuance~~extinguishment of convertible notes ~~and~~of $4.9 million, partially offset by the change in fair value of warrants ~~liability.~~liability of $0.8, and other income of $0.1.

SeaStar Medical recorded a provision for income taxes of $0.0 million for the three months ended ~~June~~September 30, 2023, and an income tax benefit of $0.0 million for the three months ended ~~June~~September 30, 2022.

Under Accounting Standards Codification (“ASC”) 740-10-30-5, Income Taxes, deferred tax assets should be reduced by a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not (i.e., a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. SeaStar Medical considers all positive and negative evidence available in determining the potential realization of deferred tax assets including, primarily, the recent history of taxable earnings or losses. Based on operating losses reported during 2022 and 2021, the Company concluded there was not sufficient positive evidence to overcome this recent operating history. As a result, we believe that a valuation allowance continues to be necessary based on the more-likely-than-not threshold noted above.

~~During the three months ended June 30, 2023, SeaStar Medical had a~~The net loss ~~of $3.7 million compared to a net loss of $0.9 million~~ for the three months ended ~~June~~September 30, ~~2022.~~2023 and 2022 were $7.4 million and $1.9 million, respectively. The increased net loss of ~~$2.8~~$5.5 million primarily resulted from increases in general and administrative expenses of ~~$1.0~~$0.8 million, increases in research and development expenses of ~~$1.4~~$0.4 million, ~~change in fair value of forward option-prepaid forward contracts of $0.1 million, and the~~ change in fair value of convertible notes of ~~$0.8 million, partially offset by the change in fair value of notes payable of $0.6 million during the three months ended June 30, 2022,~~$0.3, and ~~the gain~~loss on ~~issuance~~extinguishment of convertible notes of ~~$0.7 million, and the change in~~$4.9, partially offset by fair value of warrants liability of ~~$0.5~~$0.8 million, and $0.1 other income during the three months ended ~~June~~September 30, ~~2023.~~2022.

Comparison of the ~~Six~~Nine Months Ended ~~June~~September 30, 2023 to the ~~Six~~Nine Months Ended ~~June~~September 30, 2022


	Six Months Ended												Nine Months Ended
	June 30,						Change						September 30,						Change
($ in thousands)	2023			2022			$			%			2023			2022			$			%
Revenue	$	—		$	—		$	—			—		$	—		$	—		$	—			—
Operating expenses
Research and development		3,791			951			2,840			299	%		4,898			1,678			3,220			192	%
General and administrative		4,540			1,173			3,367			287	%		6,369			2,215			4,154			188	%
Total operating expenses		8,331			2,124			6,207			292	%		11,267			3,893			7,374			189	%
Loss from operations		(8,331	)		(2,124	)		(6,207	)		292	%		(11,267	)		(3,893	)		(7,374	)		189	%
Total other income (expense)		(595	)		218			(813	)		(373	)%		(5,085	)		96			(5,181	)		(5397	)%
Loss before income tax provision		(8,926	)		(1,906	)		(7,020	)		368	%		(16,352	)		(3,797	)		(12,555	)		331	%
Income tax provision (benefit)		5			—			5						5			1			4
Net loss	$	(8,931	)	$	(1,906	)	$	(7,025	)		369	%	$	(16,357	)	$	(3,798	)	$	(12,559	)		331	%

The following table discloses the breakdown of research and development expenses:


	Six Months Ended										Nine Months Ended
	June 30,				Change						September 30,				Change
($ in thousands)	2023		2022		$			%			2023		2022		$			%
Clinical trials	$	1,314	$	—	$	1,314			100	%	$	1,735	$	—	$	1,735			100	%
External services		1,167		689		478			69	%		1,289		1,263		26			2	%
Payroll and personnel expenses		1,224		158		1,066			675	%		1,775		277		1,498			541	%
Other research and development expenses		86		104		(18	)		(17	)%		99		138		(39	)		(28	)%
	$	3,791	$	951	$	2,840			299	%	$	4,898	$	1,678	$	3,220			192	%

Research and development expenses for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were ~~$3.8~~$4.9 million and ~~$1.0~~$1.7 million, respectively. The increase in research and development expenses of ~~$2.8~~$3.2 million, or ~~299%~~192%, was primarily driven by increases in clinical trial expenses of ~~$1.3 million, an increase in the use of external services of $0.5~~$1.7 million, and an increase in payroll and personnel expenses of ~~$1.0~~$1.5 million.

General and administrative expenses for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were ~~$4.5~~$6.4 million and ~~$1.2~~$2.2 million, respectively. The increase in general and administrative expenses of ~~$3.4~~$4.2 million, or ~~287%~~188%, was driven by an increase in marketing related expenses of $0.2 million, an increase in SEC reporting related expenses of $0.5 million, payroll related expenses of $0.8 million, an increase in ~~insurance expense of $0.8 million, an increase in~~ professional fees ~~related to SEC reporting~~ of ~~$0.8 million, cost of SEC reporting of $0.4 million, an increase in marketing and travel expenses of $0.3~~$1.0 million, a legal settlement of $0.2 million, an increase in insurance expense of $1.3 million, and an increase in ~~director's compensation~~general business expenses of ~~$0.1~~$0.2 million.

Other income (expense) for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 was expense of ~~$0.6~~$5.1 million and income of ~~$0.2~~$0.1 million, respectively. The decrease of ~~$0.8~~$5.2 million, or 5,397%, primarily resulted from ~~increases~~an increase in interest expense of $0.4 million, the change in fair value of convertible notes of $0.3 million, the change in fair value of forward option-prepaid forward contracts of $1.7 million, and the loss on extinguishment of convertible notes of $4.9 million, partially offset by ~~the gain on issuance of convertible notes,~~ the change in fair value of warrants liability ~~and~~of $1.3 million, a gain on sales of recycled ~~shares.~~shares of $1.3 million, the change in fair value of notes payable derivative liability of $0.6 million, and other income of $0.1 million.

SeaStar Medical recorded a provision for income taxes of $0.0 million for the ~~six~~nine months ended ~~June~~September 30, 2023, and an income tax benefit of $0.0 million for the ~~six~~nine months ended ~~June~~September 30, 2022.

~~During~~The net loss for the ~~six~~nine months ended ~~June~~September 30, 2023 ~~SeaStar Medical had a net loss of $8.9~~and 2022 were $16.4 million ~~compared to a net loss of $1.9~~and $3.8 million, ~~for the six months ended June 30, 2022.~~respectively. The increased net loss of ~~$7.0~~$12.6 million primarily resulted from increases in general and administrative expenses of ~~$3.4~~$4.2 million, increases in research and development expenses of ~~$2.8~~$3.2 million, increases in interest expense of $0.3 million, a change in fair value of convertible notes of ~~$0.7~~$0.3 million, ~~and~~ a change in fair value of forward option-prepaid forward contracts of $1.7 million, ~~partially offset by the~~a change in fair value of notes payable of $0.6 million, ~~during the six months ended June 30, 2022,~~ and ~~the gain~~a loss on ~~issuance~~extinguishment of convertible notes of ~~$0.7~~$4.9 million, partially offset by a change in fair value of warrants liability of ~~$0.5~~$1.3 million, and a gain on sale of recycled shares of $1.3 million during the ~~six~~nine months ended ~~June~~September 30, 2023.

To date, we have financed our operations primarily through the sale of equity securities and convertible debt and, to a lesser extent, through grants from governmental and other agencies. Since our inception, we have incurred significant operating losses and negative cash flows. As of ~~June~~September 30, 2023 and December 31, 2022, we had an accumulated deficit of ~~$108.3~~$115.7 million and $99.3 million, respectively.

As of ~~June~~September 30, 2023 and December 31, 2022, we had cash of $0.1 million and $0.0 ~~million.~~million, respectively. We expect that our existing cash will be insufficient to fund our operations, including clinical trial expenses and capital expenditure requirements. We believe that this raises doubt about our ability to continue as a going concern. To finance our operations beyond that point, we would need to raise additional capital, and there is no guarantee that we will be able to secure additional funding on favorable terms, or at all. We have concluded that these circumstances raise doubt about our ability to continue as a going concern within one year after the issuance date of this Form 10-Q.

On March 15, 2023, the Company entered into a ~~securities purchase agreement~~Securities Purchase Agreement ("SPA") with ~~an institutional investor,~~3i LP ("3i"), whereby the Company agreed to issue a series of four senior unsecured convertible notes, with principal amounts totaling up to $9.8 million, and warrants to purchase shares of the Company’s common stock. On March 15, 2023, the Company issued the first senior unsecured convertible note in the amount of $3.3 million and warrants to purchase 328,352 shares of common stock. On May 12, 2023, the Company issued the second senior unsecured convertible note in the amount of $2.2 million and warrants to purchase 218,901 shares of common stock. The senior unsecured convertible notes were issued at an 8.0% discount and bear interest at 7.0% per annum and mature on June 15, 2024, and August 12, 2024. The senior unsecured convertible notes are redeemable, in whole or in part, at any time at the discretion of the Company. The warrants have an initial exercise price of $2.97 per share of common stock, expire 5 years from their issuance date, and contain cashless exercise provisions.

~~At each of the third and fourth closings,~~On May 12, 2023, the Company ~~may,~~issued a note (the "Second Convertible Note"), convertible into 805,153 shares of common stock at ~~its option, issue and sell to the Purchaser (i) additional Notes, each~~an initial conversion price of $2.70, in a principal amount of ~~$2.2 million~~$2,174, and ~~(ii) additional Warrants~~a warrant to purchase up to 218,901 shares of common ~~stock equal to 25%~~stock. The Second Convertible Note was issued at an 8.0% discount, bears interest at 7.0% per annum, matures on August 12, 2024, and requires monthly installments of ~~the shares issuable upon conversion of the Notes on the applicable closing date. Pursuant to the Securities Purchase Agreement, the Company must satisfy certain additional conditions~~principal and interest. The Second Convertible Note was paid in order to sell and issue the additional Notes and additional Warrants at the second, third and fourth closings. Such additional conditions include, but are not limited to, the effectiveness of a registration statement to be filed by the Company with the SEC to register shares of common stock issuable upon conversion of the Notes and exercise of the Warrants, and for the third and fourth closings, the approval by stockholders of the Company to issue more than 19.99% of issued and outstanding shares pursuant to applicable Nasdaq Rules.full in October 2023.

On August 7, 2023, the Company entered into an amendment to the ~~securities purchase agreement,~~SPA, whereby ~~the provisions of the third closing are amended. The institutional investor shall~~3i will have the discretion to purchase additional ~~shares of the Company common stock~~convertible notes in an aggregate principal amount of $2.0 million ~~provided that institutional investor will purchase additional shares~~(the "Additional Convertible Notes") in lieu of the third and forth series of convertible notes as provided in the original SPA dated March 15, 2023.

Also on August 7, 2023, the Company entered into a side letter with 3i (the “Letter Agreement”), pursuant to which the Company agreed to adjust the conversion price of the First and Second Convertible Notes to the lowest of (i) $0.20, (ii) the closing sale price of common stock ~~in an aggregate principal amount~~on the trading day immediately preceding the date of ~~$1.0 million in two tranches no later than September 5, 2023. On August 7, 2023,~~the conversion, and (iii) the average closing sale price of common stock for

the five consecutive trading days immediately preceding the date of the conversion. The Company ~~issued~~also agreed issue a ~~note,~~warrant to purchase up to 4,765,620 shares of common stock, as part of the August 7, 2023 amendment to the SPA.

In connection with the amendment to the securities purchase agreement, the Company entered into a letter agreement with the institutional investor, providing for (i) certain adjustment mechanisms for the conversion price of the First and Second The Additional Convertible Notes mature on November 6, 2024, November 29, 2024, and additional notes issued or to be issued under the securities purchase agreement, as amended, (ii) a six month waiver period of any cash payment obligations of the Company under each existing note, and (iii) the issuance of an additional warrant to purchase an aggregate of 4,765,620 shares of common stock.December 25, 2024, respectively.

On March 15, 2023, the Company amended its LMFA notes, LMFAO note and Maxim note, extending their maturity dates to June 15, 2024. In consideration for such extension, the Company agreed to pay the ~~note holders~~noteholders an aggregate amount of $0.1 million in cash upon receipt of proceeds from the issuance of the notes at the second closing under the ~~securities purchase agreement.~~SPA. The mandatory repayment provisions of the notes were waived for the first senior unsecured convertible note drawn on March 15, 2023.

On May 12, 2023, the Company amended its LMFA notes, LMFAO note and Maxim note. The mandatory repayment provisions of the notes were waived for the LMFA notes, and LMFAO note for the second senior unsecured convertible note drawn on May 12, 2023. The mandatory repayment for the Maxim note was reduced to $0.1 in full satisfaction of the obligation under the promissory note with respect to the second closing.

On August 7, 2023, the Company entered into certain amendments and waivers for the Maxim Note, LMFA Note, and LMFAO Note. The lenders waved their rights to receive any mandatory prepayments for proceeds received by the Company from the convertible note financings and agreed to extend the maturity dates to ~~91 days after the last maturity date applicable to any of the notes issued pursuant to the amended securities purchase agreement with 3i.~~March 26, 2023.

We expect to incur significant expenses in connection with our ongoing activities as we seek to (i) continue clinical development of our SCD product for approval by the Food and Drug Administration ("FDA"), and (ii) if regulatory approval is obtained, to launch and commercialize our product in the U.S. market, including subsequent launches in key international markets. We will need additional funding in connection with these activities. Our future funding requirements, both short-term and long-term, will depend on many factors, including:

Until such time, if ever, as we are able to successfully develop and commercialize our products, we expect to continue financing our operations through the sale of equity, debt, borrowings under credit facilities or through potential collaborations with other companies, other strategic transactions or government or other grants. Adequate capital may not be available to us when needed or on acceptable terms.

Based on our results of operations and liquidity as of ~~June~~September 30, 2023, we believe our cash and cash equivalents, including the cash we obtained from the Business Combination and the PIPE Investment, as well as potential proceeds available under the Purchase Agreement with Tumim Stone Capital ("Tumim") and from the Forward Purchase Agreements ("FPA"), are not sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of our unaudited condensed consolidated financial statements as of ~~June~~September 30, 2023, are made available. In addition, we do not expect to receive any cash proceeds from the exercise of warrants in the near term, because the trading price of our common stock is currently below the exercise price of such warrants. We are seeking additional cash to fund our growth through future debt or equity financing transactions; however, there can be no assurance that we will be able to obtain additional capital on terms acceptable to us, if at all, or that we will generate sufficient future revenues and cash flows to fund our operations. Our estimates of our results of operations, working capital and capital expenditure requirements may be different than our actual needs, and those estimates may need to be revised if, for example, our actual revenue is lower, and our net operating losses are higher, than we project, and our cash and cash equivalents position is reduced faster than anticipated. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include

liquidation or other preferences that adversely affect the rights of stockholders. Debt financing and preferred equity

financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures. Debt financing would also result in fixed payment obligations. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce, suspend or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results, and financial condition. See the section titled “Risk Factors” for additional risks associated with our substantial capital requirements.

The following table shows a summary of our cash flows for each of the periods shown below:


	Six Months Ending						Nine Months Ending
	June 30,						September 30,
($ in thousands)	2023			2022			2023			2022
Statement of cash flow data:
Total cash (used in)/provided by:
Operating activities	$	(4,463	)	$	(1,578	)	$	(5,800	)	$	(2,492	)
Investing activities		—			—			—			—
Financing activities		4,429			1,681			5,826			2,031
	$	(34	)	$	103		$	26		$	(461	)

Net cash used in operating activities for the ~~six~~nine months ended ~~June~~September 30, 2023 was ~~$4.5~~$5.8 million compared to ~~$1.6~~$2.5 million for the ~~six~~nine months ended ~~June~~September 30, 2022. The increase in cash used for operating activities of ~~$2.9~~$3.3 million is primarily due to the increase of resources to launch the clinical ~~trial.~~trial, an increase in expenses related to SEC reporting, and an increase in insurance expense.

Net cash provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2023 was ~~$4.4~~$5.8 million, primarily related to the issuance of new shares of common stock, proceeds from convertible notes, and the sale of recycled shares, partially offset by payments of notes payable, payment of convertible notes, and payment of commitment fees for the equity line of credit. ~~Cash provided by financing activities for the six months ended June 30, 2022 was $1.7 million, primarily from the issuance of notes payable.~~

The preparation of the unaudited condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and income and expenses during the periods reported. Although actual results could materially differ from those estimates, such estimates are developed based on the best information available to management and management's best judgments at the time.

Significant estimates include the valuation of the forward option on forward purchase agreement, derivative liability, warrants, convertible notes at fair value, and the amount of share-based compensation expense.

We are an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups (“JOBS”) Act. The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.

In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Since we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation

disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding

mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the condensed consolidated financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.

We will remain an EGC under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the closing of ~~this offering,~~the Business Combination, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the date on which we are deemed to be a “large-accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three-years.

The following table summarizes our contractual obligations as of ~~June~~September 30, 2023:


($ in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Contractual Obligations:
LMFA note payable		438		438		—		—		—		438		—		438		—		—
LMFAO note payable		1,757		1,757		—		—		—		1,757		—		1,757		—		—
Maxim note payable		3,590		3,590		—		—		—		3,590		—		3,590		—		—
First Convertible Note		2,107		2,107		—						2,436		2,436		—
Second Convertible Note		1,719		1,719		—		—		—		202		202		—		—		—
Additional Convertible Notes												1,767		—		1,767		—		—
Insurance Financing		199		199		—		—		—		—		—		—		—		—
Total contractual obligations	$	9,810	$	9,810	$	—	$	—	$	—	$	10,190	$	2,638	$	7,552	$	—	$	—

In March 2023, a Volume Weighted Average Price (“VWAP”) trigger event occurred, and the FPAs could mature on the date specified by the FPA Sellers’ discretion. During the three months ended June 30, 2023, the FPAs matured and were settled by transferring 1,096,972 shares to the FPA Sellers, with a fair value of $0.6 million.

The Company paid previously accrued commitment fees of $1.5 million during the ~~six~~nine months ended ~~June~~September 30, 2023, of which $1.0 million was paid in 218,842 shares of common stock and $0.5 million was paid in cash.

During the ~~six~~nine months ended ~~June~~September 30, 2023, the Company sold ~~404,999~~639,578 shares of common stock to Tumim for ~~$1.2~~$1.3 million as part of the equity line financing arrangement.

On March 15, 2023, the Company entered into a ~~securities purchase agreement~~SPA with ~~a related party institutional investor,~~3i, whereby the Company ~~will~~agreed to issue a series of four ~~senior unsecured convertible notes,~~Convertible Notes ("Convertible Notes"), with principal amounts totaling up to ~~$9.0~~$9.8 million, and warrants to purchase shares of the Company’s common stock. On March 15, 2023, the Company issued ~~a note,~~the First Convertible Note (the "First Convertible Note"), convertible into 1,207,729 shares of common stock at an initial conversion price of $2.70, in a principal amount of $3.0 million, and a warrant to purchase up to 328,352 shares of common stock. The ~~senior unsecured convertible note~~First Convertible Note was issued at an 8.0% discount, bears interest at 7.0% per annum, and matures on June 15, 2024. The ~~senior unsecured convertible notes are~~First Convertible Note is redeemable, in whole or in part, at any time at the discretion of the Company. The ~~warrants have~~warrant has an initial exercise price of $2.97 per share of common stock, expire five years from their issuance date, and contain cashless exercise provisions. The ~~convertible note~~First Convertible Note contains an original issue discount of $0.3 million and was measured at fair value.

On May 12, 2023, the Company issued the ~~second convertible note,~~Second Convertible Note (the "Second Convertible Note"), convertible into 805,153 shares of common stock at an initial conversion price of $2.70, in a principal amount of $2.2 million, and a warrant to purchase up to 218,901 shares of common stock. The ~~senior unsecured convertible note~~Second Convertible Note was issued at an 8.0% discount, bears interest at 7.0% per annum, and matures on August 12, 2024.

The ~~senior unsecured convertible note~~Second Convertible Note is redeemable, in whole or in part, at any time at the discretion of the Company. The ~~warrants have~~warrant has an initial exercise price of $2.97 per share of common stock, ~~expire~~expires five years from their issuance date, and ~~contain~~ contains

cashless exercise provisions. The ~~convertible note~~Second Convertible Note contains an original issue discount of $0.2 million and was measured at fair value.

On May 12, 2023, the ~~second convertible note~~Second Convertible Note and the ~~warrants~~warrant attached to the ~~second convertible note~~Second Convertible Note were recorded at their fair values of $1.2 million and $0.1 million, respectively, which was less than the proceeds received from the ~~second convertible note of $2.0 million and the Company recorded a gain on the issuance of the~~ Second Convertible Note of ~~$0.7~~$2.0 million.

On August 7, 2023, the Company entered into an amendment to the SPA, whereby 3i will have the discretion to purchase the Additional Convertible Notes (the "Additional Convertible Notes") in an aggregate principal amount of $2.0 million in lieu of the ~~unaudited condensed consolidated statements~~third and fourth series of ~~operations~~convertible notes as provided in the original SPA.

Also on August 7, 2023, the Company entered into a side letter with 3i (the “Letter Agreement”), pursuant to which the Company agreed to adjust the conversion price of the First and Second Convertible Notes to the lowest of (i) $0.20, (ii) the closing sale price of common stock on the trading day immediately preceding the date of the conversion, and (iii) the average closing sale price of common stock for the five consecutive trading days immediately preceding the date of the conversion. The Company also agreed issue a warrant to purchase up to 4,765,620 shares of common stock, as part of the August 7, 2023 amendment to the SPA.

The Company issued three ~~months ended June~~of four tranches of the Additional Convertible Notes on August 7, 2023, August 30, ~~2023.~~2023, and September 26, 2023, respectively. Each tranche of the Additional Convertible Notes is convertible into 2,717,144 shares of common stock at an initial conversion price of $0.20, in a principal amount of $543, and includes a warrant to purchase up to 738,791 shares of common stock. The Additional Convertible Notes mature on November 6, 2024, November 29, 2024, and December 25, 2024, respectively.

The warrants attached to the notes at the time of issuance are classified as a liability.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Interim Chief Financial Officer required by Rule 13a-14 of the Exchange Act included in this Form 10-Q as Exhibits 31.1 and 31.2.

Our management, including our Chief Executive Officer and Interim Chief Financial Officer, have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of ~~June~~September 30, 2023 and based on this evaluation, have concluded that, as a result of the material weaknesses in internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of ~~June~~September 30, 2023.

Pursuant to Rule 13a-15(e), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management is responsible for designing, implementing, and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The management of the Company has designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

As discussed elsewhere in this report, we completed the Business Combination on October 28, 2022. Prior to the Business Combination, SeaStar Medical, Inc. was a private company and therefore its controls were not required to be designed or maintained in accordance with Rules 13a-15 and 15d-15 under the Exchange Act. The design and implementation of internal control over financial reporting for the Company post-Business Combination has required and will continue to require significant time and resources from management and other personnel. Because of this, the design and ongoing development of our framework for implementation and evaluation of internal control over financial reporting is in its preliminary stages. As a result, management was unable, without incurring unreasonable effort or expense, to conduct an assessment of our internal control over financial reporting as of December 31, 2022. Accordingly, we are excluding management’s report on internal control over financial reporting pursuant to Section 215.02 of the SEC Division of Corporation Finance’s Regulation S-K Compliance & Disclosure Interpretations.

In the course of preparing the unaudited condensed consolidated financial statements that are included in this Form 10-Q, the Company has identified material weaknesses in its internal controls over financial reporting as of ~~June~~September 30, 2023, which relates to a deficiency in the design and operation of its financial accounting and reporting controls. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The Company has identified that additional headcount will be addressed in the near term to allow for further research and internal dialogue on complex accounting transactions prior to conclusion. The Company will also continue to review the overall internal control environment as we develop the requisite internal control framework.

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the period ended ~~June~~September 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we may become involved in various claims and legal proceedings. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 and our other public filings, which could materially affect our business, financial condition or future results. Except as set forth below, there has been no material changes from risk factors previously disclosed in “Risk Factors” in our Form 10-K for the year ended December 31, 2022:

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

Developing medical device products, including conducting preclinical studies and clinical trials, is expensive. The Company expects its research and development expenses to substantially increase in connection with its ongoing activities, particularly as it advances its clinical programs. As of ~~June~~September 30, 2023 and December 31, 2022, the Company had negative working capital of ~~$(11.4)~~$10.2 million and $2.3 million, respectively. The Company currently does not have sufficient capital to support its operations and complete its planned regulatory approval process. The Company will need to secure additional capital to continue its operation, and such funding may not be available on acceptable terms, or at all. In addition, the Company incurred a significant amount of debt, including the issuance of unsecured and secured promissory notes to LM Funding America, Inc. (“LMFA”), LMFAO Sponsor (the "Sponsor"), Maxim ("Maxim”), and convertible notes to 3i LP, an affiliate of Tumim Stone Capital ("Tumim"), and the Company may not have sufficient funds to repay these loans. Even if the Company obtains additional funding, the Company will be required to make certain mandatory payments under such promissory notes, which will reduce the amount of proceeds available for the Company to operate its business.

On August 23, 2022, LMAO and SeaStar Medical, Inc. entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Tumim for the purchase of up to $100.0 million in shares of the common stock after the consummation of the Business Combination. There are certain conditions and limitations on the Company’s ability to utilize the $100.0 million equity line with Tumim. The Company will be required to satisfy various conditions, which include, among others: (1) delivery of a compliance certificate; (2) filing of an initial registration statement; and (3) customary bring-down opinions and negative assurances, in order to commence the selling of common stock to Tumim under the Purchase Agreement. Once such conditions are satisfied, Tumim’s purchases are subject to various restrictions and other limitations, including a cap on the number of shares of common stock that we can sell based on the trading volume of our common stock, as well as certain beneficial ownership restrictions of Tumim. If any of these conditions are not satisfied or limitations are in effect, the Company may not be able to utilize all or part of the Tumim equity line, which would have an adverse impact on the Company’s ability to satisfy its capital needs and could have a material adverse impact on its business. The Company has received a total of ~~$1.9~~$1.3 million from the Purchase Agreement through ~~June~~September 30, 2023. However, this source of capital may be limited since it depends substantially on the trading volume and price of our common stock.

In March 2023, the Company completed a convertible note financing in which the Company may issue up to a principal amount of approximately $9.8 million of convertible notes to 3i LP (the “Lender”) in four separate tranches subject to certain conditions (the “Convertible Note Financing”)~~, and on~~. On March 15, 2023, the Company closed the first tranche of the financing by issuing a convertible note in a principal amount of $3.3 million, and a warrant to purchase up to 328,352 shares of common stock. On May 12, 2023, the Company closed the second tranche of the financing by issuing a convertible note in a principal amount of $2.2 million and a warrant to purchase up to 218,901 shares of common stock. On August 7, 2023, the Company and the Lender amended the terms of the financing, whereby the Lender may purchase additional convertible notes in aggregate principal amounts up to $2 million in lieu of the third and fourth series as originally provided. However, there is no guarantee that the Company will be able to satisfy the conditions required to issue additional notes under the remaining ~~three tranches, including the requirement to obtain stockholder approval of such financing at the next annual meeting of stockholders.~~tranches. In addition, because some of the outstanding notes of the Company with Maxim, LMFA, and Sponsor include mandatory prepayment provisions, the Company may be required to use a portion of the proceeds from the Convertible Note Financing to repay such notes, unless the Company can obtain a waiver from holders of such notes, and there is no guarantee that such waivers will be obtained. Even if the Company receives sufficient capital in the future, the Company will be required to raise additional funds to support its own operations and complete its planned regulatory approval process, and such funding may not be available in sufficient amounts or on acceptable terms to the Company, or at all. If it is unable to raise additional capital when required or on acceptable terms, the Company may be required to:

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

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

The Company may encounter various challenges and difficulties in its application to seek approval from the FDA to sell and market its SCD product candidates, including the application for HDE for pediatric AKI indication and the pivotal trial for adult AKI indication.

The Company is required to submit a substantial amount of supporting documentation for its HDE application to demonstrate the eligibility of the SCD to treat pediatric patients. The Company ~~recently~~submitted an application for a HDE for SCD in June 2022 for the treatment of pediatric patients with AKI on CRRT. On September 29, 2023, the Company received a correspondence from the FDA indicating that this HDE is approvable for use in children weighing 10 kilograms or more with AKI and sepsis or a septic condition requiring CRRT in the hospital ICU. On October 30, 2023 the Company announced that it ~~has~~ received athe approvable letter from the ~~Center~~FDA. Following the receipt of this approvable letter, we intend to work diligently and expeditiously to respond to these requests for ~~Biologics Evaluation~~additional information and ~~Research (“CBER”)~~address these conditions for approval of our HDE application. We anticipate receiving the HDE approval letter between December 2023 and January 2024. The Company believes the approval of its HDE will confirm SCD and its technology as an effective tool to treat hyperinflammation related diseases, which will enable us to successfully execute our business and growth strategies.

The Company believes that its novel therapeutic device is readily applicable for use in other indications, which will require additional clinical studies and FDA ~~regarding~~approval. For example, on September 28, 2023, the ~~Company’s HDE application~~Company received Breakthrough Device Designation for ~~its pediatric~~our patented and cell-directed SCD ~~program. In~~for use with patients in the ~~letter,~~hospital ICU with acute or chronic systolic heart failure and worsening renal function due to cardiorenal syndrome or right ventricular dysfunction awaiting implantation of a left ventricular assist device, and on October 18, 2023, the ~~FDA indicated that~~Company received Breakthrough Device Designation for our patented and cell-directed SCD for use with patients in the ~~application is not approvable in its current form but outlined specific guidance as to how the application may be amended~~hospital ICU with AKI and ~~resubmitted successfully.~~acute on chronic liver failure. While the Company ~~believes that each~~expects the Breakthrough Device Designation to expedite the clinical development and regulatory review of the ~~current deficiencies cited by CBER~~SCD program for use in ~~their letter are readily addressable,~~this patient population, there is no guarantee that the Company will be able to ~~fully address these deficiencies to~~expedite the clinical development or obtain approval in a timely or at all. In addition, even if the Company is able to comply with the guidance provided by the FDA and address the deficiencies, the Company may be required to make significant or material changes to the device structure and process of implement of SCD, and such changes may render the device less effective or require additional testing or trial to confirm effectiveness, which will increase the cost of our operations significantly. Our failure to address the FDA’s concerns will adversely affect the Company’s business operations and financial conditions.regulatory approval.

While the Company recently obtained approval from the FDA to conduct the AKI adult pivotal trial for SCE, there is no guarantee that the Company will be able to complete such trial in a timely manner, or at all, nor will there be any assurance that positive data will be generated from such trials. Even if the Company is able to generate positive results from this trial, the FDA and other regulatory agencies may require the Company to conduct additional trials to support the study or disagree with the design of the trial and request changes or improvements to such design. The Company is also subject to numerous other risks relating to the regulatory approval process, which include but are not limited to:

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

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

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

We recently received letters of deficiency from NASDAQ for failure to comply with certain continued listing requirements, and there is no guarantee that we will be able to regain compliance to avoid a delisting of our common stock.

On June 14, 2023, the Company received a letter from the NASDAQ Stock Market (“NASDAQ”), indicating that the Company did not comply with the $35 million minimum market value requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2). In accordance with NASDAQ rules, the Company has been provided an initial period of 180 calendar days, or until December 11, 2023, to regain compliance with such market value requirement. In addition, on June 26, 2023, the Company received a letter from NASDAQ indicating that the Company did not comply with the $1.00 per share minimum bid price requirement for continued inclusion on the NASDAQ Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). In accordance with NASDAQ rules, the Company has been provided an initial period of 180 calendar days, or until December 26, 2023 to regain compliance with such minimum bid price requirement. If the Company does not regain compliance by each such date, the Company may apply for an extension of grace periods or file an appeal with NASDAQ requesting continued listing of our common stock.

There is no guarantee that we will be able to regain compliance of the market value or the minimum bid price requirement under NASDAQ rules prior to these deadlines for the grace periods, and while we have the option to extend the grace periods, there is no guarantee that NASDAQ will grant such extension. Our failure to meet NASDAQ’s continued listing requirements may result in the delisting of our common stock, which will make our stock significantly less liquid and negatively affect its value. Delisting may also result in an event of default under our Notes and a breach of certain covenants with our warrant holders, which will have a material adverse effect on us. Delisting could also impair the liquidity of our common stock and could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in potential loss of confidence by investors, employees, and fewer business development opportunities.

On August 8, 2023, the compensation committee of the board of directors of the Company approved a modification of the terms of the base salary of each of Eric Schlorff, Chief Executive Officer, Kevin Chung, Chief Operating Officer and Caryl Baron, Interim Chief Financial Officer, as follows:

Except for the above, no other changes have been made to the compensation arrangements with the three executive officers.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


Delaware	85-3681132
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3513 Brighton Blvd., Suite 410 Denver, CO	80216
(Address of principal executive offices)	(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	ICU	The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of Common Stock for $11.50 per share	ICUCW	The Nasdaq Stock Market LLC


		Page

PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations (Unaudited)	2
	Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23

PART II.	OTHER INFORMATION	25

Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
Signatures		29



Exhibit No.		Description

10.1**3.1		~~Share Issuance~~Third Amended and ~~Settlement~~Restated Certificate of Incorporation of SeaStar Medical Holding Corporation, filed with the Secretary of State of the State of Delaware on October 28, 2022 (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed on November 4, 2022).
3.2		Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of SeaStar Medical Holding Corporation, filed with the Secretary of State of the State of Delaware on September 19, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed on September 20, 2023).
10.1		First Amendment to Securities Purchase Agreement, dated ~~as of June 6,~~August 7, 2023, by and between ~~SeaStar Medical Holding Corporation~~the Company and ~~Vellar Opportunity Fund SPV~~3i, LP (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on August 7, 2023).
10.2		First Amendment to Registration Rights Agreement, dated August 7, 2023, by and between the Company and 3i, LP (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed on August 7, 2023).
10.3		Letter Agreement, dated August 7, 2023, by and between the Company and 3i, LP (incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K filed on August 7, 2023).
10.4		Third Amendment, Consent and Waiver Agreement, dated August 7, 2023, by and between the Company and Maxim Group LLC ~~- Series 4.~~(incorporated by reference to Exhibit 10.4 to the Company’s current report on Form 8-K filed on August 7, 2023).
10.5		Third Amendment, Consent and Waiver Agreement, dated August 7, 2023, by and between the Company and LM Funding America, Inc. (incorporated by reference to Exhibit 10.5 to the Company’s current report on Form 8-K filed on August 7, 2023).
10.6		Third Amendment, Consent and Waiver Agreement, dated August 7, 2023, by and between the Company and LMFAO Sponsor, LLC (incorporated by reference to Exhibit 10.6 to the Company’s current report on Form 8-K filed on August 7, 2023).
10.7		Letter Agreement, dated August 30, 2023, by and between the Company and 3i, LP (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on August 30, 2023).
31.1**		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)


	SeaStar Medical Holding Corporation

Date: ~~August~~November 14, 2023	By:	/s/ Eric Schlorff
		Eric Schlorff
		Chief Executive Officer (Principal Executive Officer)

Date: ~~August~~November 14, 2023	By:	/s/ Caryl Baron
		Caryl Baron
		Interim Chief Financial Officer (Principal Financial and Accounting Officer)


☒	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 FOR THE TRANSITION PERIOD FROM TO


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒