Warrants | Note 8. Warrants Warrants Issued in FY 2024 Investor D Warrants The Company, in conjunction with additional borrowing of convertible debt related to the Second Amendment to the Investor D SPA on January 12, 2024 and January 24, 2024, issued warrants to purchase up to 131,927 and 395,781 shares of common stock, respectively, with an exercise price of $ 0.56 per share, and an additional warrants to purchase up to 131,927 and 395,781 shares of common stock, respectively, with an exercise price of $ 0.56 per share. All remaining Investor D Warrants issued in connection with the Investor D SPA were exchanged for approximately $ 0.5 million short-term note payable on June 28, 2024, eliminating all remaining Investor D Warrants issued in connection with the Investor D SPA as of June 30, 2024. Investor E Warrants As discussed in Note 7, as part of the Q1 2024 SPA, the Company issued on January 26, 2024 the following warrants to purchase the Company's common stock to Investor E: • Pre-Funded Warrants - warrants to purchase 181,449 shares of common stock with an exercise price of $ 0.0001 . The Pre-Funded Warrants had no expiration date and were exercisable commencing on the date of issuance and at any time until all of the Pre-Funded Warrants are exercised in full. The Pre-Funded Warrants were exercised in full during the quarter ended March 31, 2024 • Series A and Series B Warrants - in a concurrent private placement, Series A Common Warrants to purchase 433,631 shares of Common Stock and Series B Common Warrants to purchase 216,816 shares of common stock each with an exercise price of $ 20.76 . • PA Warrants – in a concurrent private placement, PA Warrants to purchase 21,682 shares of common stock with an exercise price of $ 22.83 per share. Investor E Warrants became exercisable on the effective date of stockholder approval for the issuance of the shares of common stock issuable upon exercise of the Investor E Warrants. The Series A Common Warrants will expire on the fifth anniversary of the Stockholder Approval Date and the Series B Common Warrants will expire on the 12-month anniversary of the Stockholder Approval Date. Maxim Group LLC acted as the placement agent in connection with the Transactions pursuant to the Placement Agency Agreement, dated January 26, 2024, by and between the Company and the Placement Agent. On January 30, 2024, the Placement Agent received warrants to purchase 21,682 shares of common stock covering a number of shares equal to 5 % of the total number of shares of common stock sold in the Transactions. The Placement Agent Warrants become exercisable commencing six months after the closing and will expire on January 30, 2029 . The PA Warrants are exercisable at a price equal to 110.0 % of the offering price in connection with the placement. In accordance with ASC 815-40, Derivatives and Hedging-Contracts in Entity’s own Equity , the Company determined the Investor E and PA Warrants meet the conditions for equity classification, and should be carried on the consolidated balance sheets as a component of stockholders' equity (deficit). The Investor D Warrants issued in January 2024 in connection with the Investor D SPA were determined to be liability classified. The initial fair value of the convertible note warrants was determined using a Black-Scholes option pricing model, which considers variables such as estimated volatility, time to maturity, and the risk-free interest rate. The risk-free interest rate is the U.S. Treasury rate at the date of issuance, and the time to maturity is based on the contractual life at the date of issuance, which is five years. Subsequent changes in fair value were recognized through earnings at each reporting period end-date or settlement date. The Company had the following warrants outstanding at June 30, 2024 and December 31, 2023: As of As of Liability Classified Warrants Investor D Warrants — 254,732 Private Placement Warrants 229,520 229,520 PIPE Investor Warrants 20,000 20,000 Subtotal 249,520 504,252 Equity Classified Warrants Investor E Warrants 650,446 — Placement Agent Warrants 21,682 — Public Stockholder Warrants 422,000 422,000 Legacy Warrants 1,957 1,957 Subtotal 1,096,085 423,957 Grand Total 1,345,605 928,209 The following tables provides the weighted-average strike price and time to maturity for each warrant tranche as of June 30, 2024 and December 31, 2023: As of June 30, 2024 Warrant Share Equivalents Weighted-Average Strike Price Weighted-Average Time to Expiration Liability Classified Warrants Private Placement Warrants 229,520 $ 287.50 3.32 PIPE Investor Warrants 20,000 $ 287.50 3.32 Equity Classified Warrants Investor E Warrants 650,446 $ 20.76 4.93 Placement Agent Warrants 21,682 $ 22.75 4.58 Public Stockholder Warrants 422,000 $ 287.50 3.33 Legacy SeaStar Inc. Warrants 1,957 $ 250.00 1.88 As of December 31, 2023 Warrant Share Equivalents Weighted-Average Strike Price Weighted-Average Time to Expiration Liability Classified Warrants Investor D Warrants 254,732 $ 12.50 4.65 Private Placement Warrants 229,520 $ 287.50 3.82 PIPE Investor Warrants 20,000 $ 287.50 3.82 Equity Classified Warrants Public Stockholder Warrants 422,000 $ 287.50 3.82 Legacy SeaStar Inc. Warrants 1,957 $ 250.00 2.38 Below is the warrant activity for the six-months ended June 30, 2024: Investor D Warrants Investor E Warrants Placement Agent Warrants Private Placement Warrants PIPE Investor Warrants Public Stockholders' Warrants Legacy Warrants Outstanding as of December 31, 2023 254,732 — - 229,520 20,000 422,000 1,957 Issuance 42,217 831,895 21,682 — — — — Exercised ( 170,625 ) ( 181,449 ) - — — — — Forfeited / cancelled — — - — — — — Exchanged for Investor D Note ( 126,324 ) — — — — — — Outstanding as of June 30, 2024 - 650,446 21,682 229,520 20,000 422,000 1,957 During the three months ended June 30, 2024, the Company exchanged all outstanding warrants with Investor D; that were issued in connection with the convertible notes issued by the Company from March 2023 through January 2024 (see Note 6); for an approximately $ 0.5 million short-term Investor D Note. The Company recognized a gain of approximately $ 1.3 million upon the exchange. The Company recognized an unrealized gain of approximately $ 0.6 million due to the change in the fair value of the remaining liability classified warrants. During the six months ended June 30, 2024, the Company incurred $ 1.6 million from losses on exercises of certain Investor D Warrants, a gain of $ 1.3 million from the aforementioned exchange with Investor D, and a loss of approximately $ 0.6 million from the mark-to-market adjustment for all remaining liability classified warrants. |