Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical facts included in this Quarterly
Report on Form 10-Q, including, without limitation, statements regarding our or
our management team's expectations, hopes, beliefs, intentions or strategies
regarding the future, are forward-looking statements. Forward-looking statements
generally can be identified by the use of forward-looking terminology such as
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "might," "plan," "possible," "potential," "predict," "project," "should,"
"would" or the negative thereof or any variation thereon or similar terminology
or expressions.
We have based these forward-looking statements on our current expectations and
beliefs concerning future developments and their potential effects on us. These
forward-looking statements are not guarantees and are subject to known and
unknown risks, uncertainties, and assumptions about us that may cause our actual
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking statements. Important
factors which could materially affect our results and our future performance
include, without limitation:
• our ability to complete our initial business combination;
• our expectations around the performance of the prospective target business
or businesses;
• our success in retaining or recruiting, or changes required in, our
officers, key employees or directors following our initial business
combination;
• our officers and directors allocating their time to other businesses and
potentially having conflicts of interest with our business or in approving
our initial business combination, as a result of which they would then
receive expense reimbursements;
• our potential ability to obtain additional financing to complete our initial
business combination;
• our pool of prospective target businesses;
• the ability of our officers and directors to generate a number of potential
acquisition opportunities;
• our public securities' potential liquidity and trading;
• the lack of a market for our securities;
• the use of proceeds not held in the trust account or available to us from
interest income on the trust account balance;
• the trust account not being subject to claims of third parties; or
• our financial performance, and
• other factors set forth under "Item 1A. Risk Factors" in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2021.
Except as required by law, we assume no duty to update or revise any
forward-looking statements.
Overview
LMF Acquisition Opportunities, Inc. (the "Company") was incorporated in Delaware
for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization, or similar business combination
with one or more businesses (a "Business Combination"). The Company has not
selected any specific business-combination target and it has not, nor has anyone
on the Company's behalf, initiated any substantive discussions, directly or
indirectly, with any business-combination target.
The Company has selected December 31 as its fiscal year end.
As of June 30, 2022, the Company had not yet commenced any operations. All
activity for the period from October 28, 2020 (inception) through June 30, 2022
relates to the Company's formation and the initial public offering ("IPO")
described below. The Company will not generate any operating revenues until
after the completion of its initial Business Combination, at the earliest. The
Company will generate non-operating income in the form of interest income on
cash and cash equivalents from the proceeds derived from the IPO.
The registration statement for the Company's IPO was declared effective on
January 25, 2021 (the "Effective Date"). On January 28, 2021, the Company
consummated the IPO of 10,350,000 units (the "Units" and, with respect to the
shares of Class A common stock
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included in the Units sold, the "Public Shares"), at $10.00 per Unit, generating
gross proceeds of $103,500,000, which offering is further described in Note 5.
Simultaneously with the closing of the IPO, the Company consummated the sale of
5,738,000 warrants (the "Private Placement Warrants") at a price of $1.00 per
Private Placement Warrant in a private placement to LMFAO Sponsor LLC, a Florida
limited liability company (the "Sponsor"), generating gross proceeds of
$5,738,000.
Transaction costs for the IPO amounted to $6,211,902 consisting of $2,070,000 of
underwriting discount, $3,622,500 of deferred underwriting fee, the fair value
of the shares issued to the underwriters of $1,000 deemed as underwriters'
compensation, and $518,402 of other offering costs. In addition, $974,009 of
cash was held outside of the Trust Account (as defined below) as of the date of
the IPO and became available for working capital purposes at such time.
Following the closing of the IPO on January 28, 2021, an amount of $105,570,000
($10.20 per Unit) from the net proceeds of the sale of the Units in the IPO and
the sale of the Private Placement Warrants was placed in a trust account ("Trust
Account") which will be invested in U.S. government securities, within the
meaning set forth in Section 2(a)(16) of the Investment Company Act, with a
maturity of 180 days or less or in any open-ended investment company that holds
itself out as a money market fund meeting the conditions of Rule 2a-7 of the
Investment Company Act, as determined by the Company. Except with respect to
interest earned on the funds held in the Trust Account that may be released to
the Company to pay its franchise and income tax obligations (less up to $100,000
of interest to pay dissolution expenses), the proceeds from the IPO and the sale
of the Private Placement Warrants will not be released from the Trust Account
until the earliest of (a) the completion of the Company's initial Business
Combination, (b) the redemption of any Public Shares properly submitted in
connection with a stockholder vote to amend the Company's amended and restated
certificate of incorporation, and (c) the redemption of the Company's Public
Shares if the Company is unable to complete the initial Business Combination
within 18 months from the closing of the IPO (or up to 21 months from the
closing of the IPO if the Company extends the period of time to consummate a
business combination, as described in more detail in the prospectus for the
IPO), subject to applicable law. The proceeds deposited in the Trust Account
could become subject to the claims of the Company's creditors, if any, which
could have priority over the claims of the Company's public stockholders.
Proposed Business Combination
On April 21, 2022, the Company, entered into an Agreement and Plan of Merger
(the "Merger Agreement") with LMF Merger Sub, Inc., a Delaware corporation and
direct, wholly owned subsidiary of the Company ("Merger Sub"), and SeaStar
Medical, Inc., a Delaware corporation ("SeaStar Medical") pursuant to which,
subject to the satisfaction or waiver of certain conditions set forth therein,
Merger Sub will merge with and into SeaStar Medical (the "Merger"), with SeaStar
Medical surviving the merger in accordance with the Delaware General Corporation
Law as a wholly owned subsidiary of the Company (the transactions contemplated
by the Merger Agreement and the related ancillary agreements, the "Proposed
Business Combination").
The aggregate consideration payable to the stockholders of SeaStar Medical at
the closing of the Proposed Business Combination (the "Closing") is $85,000,000,
payable solely in shares of the Company's common stock, par value $0.0001 per
share ("Common Stock"), valued at $10.00 per share, subject to possible
deductions for indebtedness of SeaStar Medical and SeaStar Medical transaction
expenses in excess of a capped amount of $800,000 as set forth in the Merger
Agreement, plus the aggregate exercise price of (1) SeaStar Medical warrants
issued and outstanding immediately prior to the closing of the Proposed Business
Combination and (2) SeaStar Medical options issued and outstanding immediately
prior to the Effective Time, less the value of the shares of Common Stock
underlying the Assumed Equity.
Immediately prior to the Preferred Conversion, each of SeaStar Medical's issued
and outstanding convertible notes will automatically convert into shares of
SeaStar Medical common stock. Immediately prior to the Effective Time, each
share of SeaStar Medical's issued and outstanding preferred stock will
automatically convert into shares of SeaStar Medical common stock and those
SeaStar Medical warrants that would be automatically exercised or exchanged in
connection with the Proposed Business Combination pursuant to the terms thereof
will be automatically exercised for shares of SeaStar Medical common stock. At
the time of the Proposed Business Combination, the (i) SeaStar Medical warrants
that would not automatically be exercised or exchanged in connection with the
Proposed Business Combination will be assumed by the Company and converted into
warrants to purchase Common Stock, (ii) outstanding options for shares of
SeaStar Medical common stock under SeaStar Medical's equity plan will be assumed
by the Company and converted into options to purchase Common Stock, and (iii)
outstanding restricted stock unit awards under SeaStar Medical's equity plan
will be assumed by the Company and converted into restricted stock units of the
Company.
The Merger Agreement contains customary representations, warranties and
covenants by the parties thereto, including, among other things, covenants with
respect to the conduct of the Company and SeaStar Medical during the period
between execution of the Merger Agreement and the Closing. The representations,
warranties and covenants made under the Merger Agreement will not survive the
closing; provided, any covenants that are to be performed at or after the
closing shall survive until such covenant has been performed or satisfied. No
party to the Merger Agreement will have any liabilities to such other parties,
other than claims for willful and material breach or fraud. Each of the Company
and SeaStar Medical have agreed to use their commercially reasonable efforts to
cause the Merger to be consummated as soon as practicable.
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The closing of the Proposed Businses Combination is subject to certain
conditions, including, among others, that (i) the stockholders of SeaStar
Medical and the stockholders of the Company approve the Proposed Business
Combination, (ii) the Nasdaq Stock Market approves for listing the common stock
to be issued in connection with the Proposed Business Combination, (iii) the
Company has, including any proceeds from the Company's private investment in
public equity financing and net of any redemptions and the payment of
transaction expenses (and in the case of SeaStar Medical's transaction expenses,
only expenses up to the Cap (as defined in the Merger Agreement), at least
$15,000,000 unrestricted cash on hand and (iv) the Company has $5,000,001 or
more in net tangible assets at the closing.
The Merger Agreement may be terminated prior to the closing under certain
circumstances, including, among others, (i) by written consent of SeaStar
Medical and the Company, (ii) by written notice from either the Company or
SeaStar Medical, if (A) the closing has not occurred on or before (I) July 29,
2022 or (II) October 29, 2022 if the Extension (as defined below) occurs (the
"Outside Date"), unless the terminating party's failure to comply in any
material respect with its obligations under the Merger Agreement shall have
proximately contributed to the failure of the closing to have occurred on or
prior to the Outside Date, (B) the consummation of the Proposed Business
Combination is permanently enjoined or (C) the Company does not obtain
stockholder approval of the Proposed Business Combination at its special
meeting, (iii) by written notice from either the Company or SeaStar Medical, in
the event that the other party breaches any of its representations, warranties,
covenants or other agreements under the Merger Agreement that would result in
the failure of the conditions to the Company's or SeaStar Medical's obligation
to consummate the Proposed Business Combination and such breach has not been
cured by the breaching party by the earlier of 30 days after receiving notice of
such breach and the Outside Date and (iv) by SeaStar Medical at any time prior
to the approval of the Proposed Business Combination by the Company's public
stockholders, if the board of directors of the Company has made a change in
recommendation to its stockholders regarding the Proposed Business Combination.
The Merger Agreement allows the Outside Date to be extended if the Sponsor
elects to extend the time period by which the Company must consummate a business
combination by depositing $1,035,000 in additional funds in the Company's trust
account on or prior to July 29, 2022 (the "Extension"). The Company elected to
extend the time line. See Footnote 12 - Subsequent Events
Recent Developments
The Company entered into Amended and Restated Restated Promissory Note, dated
July 28, 2022 (effective as of June 30, 2022), with Sponsor relating to the
Working Capital Loan, whereunder the amount of the loan availability under the
Working Capital Loan was increased from $500,000 to $1,750,000 to fund expenses
relating to the Proposed Business Combination.
On July 29, 2022, Sponsor funded an Extension Loan in the amount of $1,035,000
and caused such amount to be deposited into thte Trust Account in order provide
additional time to complete the Proposed Business Combination.
COVID-19 Update
A The significant outbreak of COVID-19 has resulted in a widespread health
crisis that could adversely affect the economies and financial markets
worldwide, and the business of any potential target business with which we
consummate a business combination could be materially and adversely affected. We
may be unable to complete a business combination if continued concerns relating
to COVID-19 restrict travel, limit the ability to have meetings with potential
investors, or the target company's personnel, vendors, and services providers
are unavailable to negotiate and consummate a transaction in a timely manner.
The extent to which COVID-19 impacts our search for a business combination will
depend on future developments, which are highly uncertain and cannot be
predicted, including new information that may emerge concerning the severity of
COVID-19 and the actions to contain COVID-19 or treat its impact, among others.
If the disruptions posed by COVID-19 or other matters of global concern continue
for an extensive period of time, our ability to consummate a business
combination, or the operations of a target business with which we ultimately
consummate a business combination, may be materially adversely affected.
Results of Operations for the Three Months Ended June 30, 2022
The Company's only activities since inception in October 28, 2020 through June
30, 2022 were organizational activities and those necessary to consummate the
IPO. The Company does not expect to generate any operating revenues until after
the completion of the initial Business Combination.
Revenues
The Company had no revenues during the Three Months ended June 30, 2022.
Expenses
During the Three Months ended June 30, 2022 and 2021, expenses were
approximately $1,404 thousand and $210 thousand, respectively. The Three Months
ended June 30, 2022 included $1,062 thousand of merger expenses and $342
thousand of formation and administrative expenses.
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Gain (Loss) on Revaluation of Warrants
The Company recognized a $1.5 million gain and ($1.8) million loss upon the
revaluation of the warrants as of June 30, 2022 and 2021, respectively.
Income Tax Expense
During the Three Months ended June 30, 2022 and 2021, the Company did not incur
any income tax expense due to the Company being in a loss situation since
inception. As such, any benefits from the Company's operating loss is deferred
as it recognizes a taxation valuation allowance for the full amount. The Company
did not recognize any income tax expense for the Three Months ended June 30,
2022 or 2021.
Net Income (Loss)
During the Three Months ended June 30, 2022 and 2021, net income (loss) was $183
thousand and ($1,983) thousand, respectively. Such net income resulted from a
revaluation of the Company's warrants.
Results of Operations for the Six Months Ended June 30, 2022
The Company's only activities since inception in October 28, 2020 through June
30, 2022 were organizational activities and those necessary to consummate the
IPO. The Company does not expect to generate any operating revenues until after
the completion of the initial Business Combination.
Revenues
The Company had no revenues during the Six Months ended June 30, 2022.
Expenses
During the Six Months ended June 30, 2022 and 2021, expenses were approximately
$1,622 thousand and $336 thousand, respectively. The Six Months ended June 30,
2022 included $1,062 thousand of merger expenses and $560 thousand of formation
and administrative expenses.
Gain on Revaluation of Warrants
The Company recognized a $5.1 million gain and $58 thousand gain upon the
revaluation of the warrants as of June 30, 2022 and 2021, respectively.
Income Tax Expense
During the Six Months ended June 30, 2022 and 2021, the Company did not incur
any income tax expense due to the Company being in a loss situation since
inception. As such, any benefits from the Company's operating loss is deferred
as it recognizes a taxation valuation allowance for the full amount. The Company
did not recognize any income tax expense for the Six Months ended June 30, 2022
or 2021.
Net Income (Loss)
During the Six Months ended June 30, 2022 and 2021, net income (loss) was $3,569
thousand and ($276) thousand, respectively. Such net income resulted from a
revaluation of the Company's warrants.
Liquidity and Capital Resources
General
As of June 30, 2022 and 2021, we had cash of $79 thousand and $340 thousand,
respectively.
Cash from Operations
Net cash used in operations was $884 thousand and $319 thousand during the Six
Months ended June 30, 2022 and 2021, respectively, due to cash used for
operating and formation costs.
Cash from Investing Activities
For the Six Months ended June 30, 2022 and 2021, net cash used in investing
activities was $0 and $105.6 million, respectively as the Company invested
$105.6 million into its Trust account.
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Cash from Financing Activities
Net cash provided by financing activities was $912 thousand and $106.2 million
for the Six Months ended June 30, 2022 and 2021. During the Six Months ended
June 30, 2022 the Company received $910 thousand, net of repayments, under a
related party loan. During the Six Months ended June 30, 2021, $106.8 million
was generated by the Company's IPO and the Company paid $611 thousand for
director and officer insurance premiums.
Shareholders' Equity
During the Six Months ended June 30, 2021, the Company issued 10.3 million
units, 0.1 million Class A shares to our underwriter, 0.4 million in Class B
shares and 5.7 million Private Placement Warrants. There were no issuance of
either shares or warrants during the Six Months ended June 30, 2022.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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