NEW YORK, Dec. 16, 2024 (GLOBE NEWSWIRE) -- Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, is investigating potential claims against SeaStar Medical Holding Corp (NASDAQ: ICU) on behalf of long-term stockholders following a class action complaint that was filed against SeaStar on July 5, 2024 with a Class Period from October 31, 2022 to March 26, 2024. Our investigation concerns whether the board of directors of SeaStar have breached their fiduciary duties to the company.
SeaStar initially operated as a special purpose acquisition company ("SPAC") under the name LMF Acquisition Opportunities, Inc.
On April 22, 2022, the Company, then still operating as a SPAC, and SeaStar Medical, Inc. ("Legacy SeaStar"), a medical technology company developing extracorporeal therapies to reduce the consequences of excessive inflammation on vital organs, jointly announced that they had entered into a merger agreement (the "Merger Agreement"). As contemplated under the Merger Agreement, the combined company would be known as "SeaStar Medical Holding Corporation" and would operate under the same management team as Legacy SeaStar, with all Legacy SeaStar shares owned by Legacy SeaStar's existing equity holders to be converted into Class A Common Stock of the combined company (the "Merger").
The Company and Legacy SeaStar touted the overall prospects of the combined company following the Merger, asserting that Legacy SeaStar had an enterprise value of approximately $85 million, while highlighting Legacy SeaStar's Selective Cytopheretic Device ("SCD") for the treatment of hyperinflammation and the SCD's regulatory and commercial prospects. For example, the companies announced that Legacy SeaStar intended to submit an application for its SCD for approval with the U.S. Food and Drug Administration ("FDA") under the Humanitarian Device Exemption ("HDE") to commence commercialization for the treatment of pediatric acute kidney injury ("AKI"). Moreover, the companies announced that the Merger had already been unanimously approved by both Legacy SeaStar and the Company's Boards of Directors and that the holders of a majority of Legacy SeaStar's voting power had likewise already approved the Merger, with the Merger subject to final approval by stockholders of the Company and other customary closing conditions.
On July 20, 2022, the Company and Legacy SeaStar jointly announced that Legacy SeaStar had submitted an application under the HDE (the "HDE Application") to the FDA for use of Legacy SeaStar's SCD for critically ill children with AKI, which purportedly "follow[ed a] successful pilot study demonstrating the SCD was safe with probable clinical benefits for pediatric patients[.]"
On October 17, 2022, the Company, Legacy SeaStar, and Vellar Opportunity Fund SPV LLC - Series 4 ("Vellar") entered into an agreement (the "Prepaid Forward Agreement") for an equity prepaid forward transaction. The terms of the Prepaid Forward Agreement permitted Vellar to purchase through a broker in the open market shares of Class A common stock, par value $0.0001 per share, of the Company (together with the shares of common stock of the post-Merger Company) from holders of those shares, other than the Company or affiliates of the Company.
On October 18, 2022, following purported positive regulatory developments for the SCD, as announced by the Company and Legacy SeaStar following the unveiling of the Merger, the Company's stockholders voted to approve the Merger.
On October 28, 2022, the Company and Legacy SeaStar consummated the Merger pursuant to the Merger Agreement, whereby a wholly owned subsidiary of the Company, LMF Merger Sub, Inc. ("Merger Sub"), merged with and into Legacy SeaStar, with Legacy SeaStar surviving that merger as a wholly owned subsidiary of the Company. As a result of the Merger, Legacy SeaStar's business, operations, and management became the Company's business, operations, and management, and the Company renamed itself "SeaStar Medical Holding Corporation."
The following trading day, October 31, 2022, the Company's common stock and warrants began publicly trading on the Nasdaq Stock Market under the ticker symbols "ICU" and "ICUCW," respectively.
The Complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) SeaStar and/or Legacy SeaStar had deficient compliance controls and procedures related to the HDE Application; (ii) accordingly, there were deficiencies with the HDE Application, the FDA was unlikely to approve the HDE Application in its present form, and the SCD's regulatory prospects were overstated; (iii) the Company had downplayed the true scope and severity of deficiencies in its financial controls and procedures, while overstating Defendants' efforts to remediate the same; (iv) accordingly, SeaStar had failed to properly account for the classification of certain outstanding warrants and the Prepaid Forward Agreement; (v) as a result, SeaStar was likely to restate one or more of its previously issued financial statements; (vi) accordingly, SeaStar's post-Merger business and financial prospects were overstated; and (vii) as a result, the Company's public statements were materially false and misleading at all relevant times.
On May 9, 2023, SeaStar announced that it had received a letter from the Center for Biologics Evaluation and Research of the FDA, rejecting the Company's HDE application for its pediatric SCD because "the application [wa]s not approvable in its current form[.]" SeaStar's Chief Executive Officer, Defendant Eric Schlorff ("Schlorff"), also disclosed that the Company had engaged in "a series of [purported] collaborative meetings and correspondence over the past 10 months" with the FDA, had made repeated responses "to the Agency's recommendations," and that there were "current deficiencies cited by the Agency in their letter[.]"
On this news, SeaStar's stock price fell $0.77 per share, or 39.69%, to close at $1.17 per share on May 10, 2023.
Then, on March 27, 2024, SeaStar announced that it would restate its financial statements for the fiscal year ended December 31, 2022, as well as for the interim periods ended March 31, 2023, June 30, 2023, and September 30, 2023 (the "Affected Periods"). The Company disclosed that the restatement would impact the accounting treatment and classification of certain outstanding warrants and the Prepaid Forward Agreement. Defendant Schlorff further disclosed that "[t]he restatement . . . is related to the reporting of non-cash accounting items," noting that "[w]e pursued a [SPAC] as our route to become a public company in late 2022 due to the challenging market conditions at that time," but that, "[m]any SPACs, including ours, relied on a host of complex financial instruments" and, "[u]nfortunately, we determined that certain complex financial instruments required accounting treatment that differed from our previous judgment, which led to the need for a restatement."
On this news, SeaStar's stock price fell approximately $0.04 per share, or 4.84%, to close at approximately $0.71 per share on March 27, 2024.
If you are a long-term stockholder of SeaStar, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Marion Passmore by email at investigations@bespc.com, by telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.
About Bragar Eagel & Squire, P.C.:
Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York, California, and South Carolina. The firm represents individual and institutional investors in commercial, securities, derivative, and other complex litigation in state and federal courts across the country. For more information about the firm, please visit www.bespc.com. Attorney advertising. Prior results do not guarantee similar outcomes.
Contact Information:
Bragar Eagel & Squire, P.C.
Brandon Walker, Esq.
Marion Passmore, Esq.
(212) 355-4648
investigations@bespc.com
www.bespc.com
