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Item 8. Financial Statements and Supplementary Data

2023-07-27 compared with 2022-03-08 · 1099 added, 701 removed, 41 unchanged (98% of the section changed)

Financial Statements and Supplementary Data.

LIONHEART ACQUISITION CORPORATION II

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 688 )

Consolidated Financial Statements:

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders’ Deficit

Consolidated Statements of Cash Flows

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the Years ended December 31, 2022 and 2021, and 2020

Consolidated Statements of Stockholders’

Equity for the Years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows for the Years ended December 31, 2022 and 2021, and 2020

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Lionheart Acquisition Corporation II

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balances sheets of Lionheart Acquisition Corporation II (the “Company”) as of December 31, 2021 and 2020, the related

consolidated statements of operations, changes in stockholders’ deficit and cash flows for the each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the each of the two years in the period

ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 1

to the consolidated financial statements, the Company’s business plan is dependent on the completion of a business combination and the Company’s cash and working capital as of December 31, 2021 and 2020 are not sufficient to complete its

planned activities.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not

include any adjustments that might result from the outcome of this uncertainty.

Rep ort of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of

MSP Recovery, Inc.

and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MSP Recovery, Inc.

and Subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements

based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance

about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we

express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and

performing procedures that respond to those risks.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum LLP

/s/ Deloitte & Touche LLP

Miami, Florida

July 26, 2023

We have served as the Company's auditor since 2021.

Houston, Texas

March 7, 2022

LIONHEART ACQUISITION CORPORATION II

CONSOLIDATED BALANCE SHEETS

December 31, 2021

December 31, 2020

MSP RECOVERY, INC.

and Subsidiaries

Consolidated Bala nce Sheets

(In thousands except per share amounts)

Current assets:

Prepaid expenses

Cash and cash equivalents

Restricted cash

Accounts receivable

Affiliate receivable (1)

Prepaid expenses and other current assets (1)

Total current assets

Marketable securities held in Trust Account

LIABILITIES AND STOCKHOLDERS' DEFICIT

Property, plant and equipment, net

Intangible assets, net (2)

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable and accrued expenses

Accrued offering costs

Total Current Liabilities

Accounts payable

Affiliate payable (1)

Commission payable

Deferred service fee income

Derivative liability

Warrant liability

Deferred underwriting fee payable

Other current liabilities

Total current liabilities

Guaranty obligation (1)

Claims financing obligation and notes payable (1)

Loan from related parties (1)

Interest payable (1)

Total liabilities

Commitments and contingencies (Note 13)

Class A common stock subject to possible redemption, 23,000,000 shares

at redemption value as of December 31, 2021 and 2020.

Stockholders' Deficit

Preferred stock, $ 0.0001 par value;

1,000,000 shares authorized;

none issued and outstanding

Class A common stock subject to possible redemption, 1,129,589 shares at redemption value as of December 31, 2022.

Stockholders' Equity (Deficit):

Class A common stock, $ 0.0001 par value;

5,500,000,000 shares authorized;

issued and outstanding (excluding 23,000,000 shares subject to possible redemption) as of December 31, 2021 and 2020.

Class B common stock, $ 0.0001 par value;

74,605,284 issued and outstanding as of December 31, 2022

Class V common stock, $ 0.0001 par value;

3,250,000,000 shares authorized;

shares issued and outstanding as of December 31, 2021 and 2020.

3,147,979,494 issued and outstanding as of December 31, 2022

Additional paid-in capital

Members' equity

Accumulated deficit

Total Stockholders' Deficit

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

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

LIONHEART ACQUISITION CORPORATION II

CONSOLIDATED STATEMENTS OF OPERATIONS

Operating and formation costs

Loss from operations

Other income (expense):

Interest earned on marketable securities held in Trust Account

Transactions costs associated with the Initial Public Offering

Change in fair value of warrant liabilities

Total Stockholders' Equity (Deficit)

Non-controlling interest

Total liabilities and equity

As of December 31, 2022 and 2021, the total affiliate receivable, affiliate payable, guaranty obligation and loan from related parties balances are with related parties.

In addition, the prepaid expenses and other current assets, Claims financing obligation and notes payable and interest payable includes balances with related parties.

See Note 14, Related Party, for furthe r details.

As of December 31, 2022 , intangible assets, net included $ 2.3 billion related to a consolidated VIE.

See Note 10 , Variable Interest Entities , for further details.

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

MSP RECOVERY, INC.

and Subsidiaries

Consolidated State ments of Operations

Year ended December 31,

(In thousands except per share amounts)

Claims recovery income

Claims recovery service income (1)

Total Claims Recovery

Operating expenses

Cost of claim recoveries (2)

Claims amortization expense

General and administrative (3)

Professional fees

Professional fees - legal (4)

Depreciation and amortization

Total operating expenses

Operating Loss

Interest expense

Other income (expense), net

Net income (loss)

Change in fair value of warrant and derivative liabilities

Net loss before provision for income taxes

Provision for income tax expense

Net (income) loss attributable to non-controlling members

Net loss attributable to controlling members

Basic and diluted weighted average shares outstanding, Class A Common Stock (5)

Basic and diluted net income (loss) per share, Class A Common stock

Basic and diluted weighted average shares outstanding, Class B Common Stock

Basic and diluted net income (loss) per share, Class B Common Stock

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

LIONHEART ACQUISITION CORPORATION II

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

Stockholders’

Balance – January 1, 2020

Issuance of Class B common stock to Sponsor

Sale of 650,000 Private Placement Units

Accretion to common stock subject to redemption amount

Balance – December 31, 2020

Balance – December 31, 2021

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

LIONHEART ACQUISITION CORPORATION II

CONSOLIDATED STATEMENT OF CASH FLOWS

Basic and diluted net income per share, Class A Common Stock (5)

For th e years ended December 31, 2022, 2021 and 2020, Claims recovery service income included $ 10.6 million , $ 11.5 million , and $ 13.1 million, respectively, of Claims recovery service income from VRM MSP.

See Note 14, Related Party, for further details.

For the year ended December 31, 2022, cost of Claim recoveries included $ 405 thousand of related party expenses.

This relates to contingent legal expenses earned from Claims recovery income pursuant to legal service agreements with the La Ley con John H.

Ruiz P.A., d/b/a MSP Recovery Law Firm (the "Law Firm").

See Note 14, Related Party, for further details.

For the years ended December 31, 2021 and 2020, the expenses related to contingent legal expenses were de minimis.

For the year ended December 31, 2022, general and administrative expenses included $ 400 thousand of related party expenses.

For the years ended December 31, 2021 and 2020 , the amounts were de minimis.

See Note 14, Related Party, fo r further details.

For the year ended December 31, 2022, professional fees - legal included $ 29.7 million of related party expenses related to the Law Firm.

For the year ended December 31, 2021 and 2020, the amounts were de minimis, respectively, of related party expenses related to the Law Firm.

See Note 14, Related Party, for further details.

Earnings pe r share information has not been presented for periods prior to the Business Combination (as defined in Note 1, Description of Business ), as it resulted in values that would not be meaningful to the users of these consolidated financial statements.

Refer to Note 16 , Net Loss Per Common Share for further information.

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

MSP RECOVERY, INC.

and Subsidiaries

Consolidated Statements of Cha nges in Equity

Year Ended December 31, 2022

Class A Common Stock

Class V Stock

(In thousands except shares)

Additional Paid-in Capital

Members' Deficit

Accumulated Deficit

Non- Controlling Interests

Balance at December 31, 2021

Contributions prior to recapitalization transaction

Distributions prior to recapitalization transaction

Net loss prior to recapitalization transaction

Cumulative effect of recapitalization transaction

3,154,473,292

Opening net assets of Lionheart II Holdings, LLC acquired

Adjustment for value of derivative on temporary equity

Conversion of Warrants

Class A Issuances

Balance at December 31, 2022

3,147,979,494

Year Ended December 31, 2021

(In thousands)

Members' Deficit

Non- Controlling Interests

Balance at December 31, 2020

Contributions

Distributions

Balance at December 31, 2021

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

MSP RECOVERY, INC.

and Subsidiaries

Consolidated Statements of Changes in Equity

Year Ended December 31, 2020

(In thousands)

Members' Deficit

Non- Controlling Interests

Balance at December 31, 2019

Contributions

Distributions

Balance at December 31, 2020

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

MSP RECOVERY, INC.

and Subsidiaries

Consolidated Statements of C ash Flows

Year ended December 31,

(In thousands)

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

Claims amortization expense

Paid in kind interest

Change in fair value of derivatives

Deferred income taxes

Share based compensation

Change in fair value of warrant liability

Transaction costs associated with the Initial Public Offering

Interest earned on marketable securities held in Trust Account

Changes in operating assets and liabilities:

Prepaid expenses

Accounts payable and accrued expenses

Net cash used in operating activities

PPP loan forgiveness

Realized gain on equity securities

Unrealized losses on investments - short position

Gain on debt extinguishment

Change in operating assets and liabilities:

Accounts receivable

Affiliate receivable (1)

Affiliate payable (1)

Prepaid expenses and other assets

Commission payable

Accounts payable and accrued liabilities

Deferred service fee income

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Investment of cash into Trust Account

( 230,000,000

Cash withdrawn from Trust Account to pay franchise and income taxes

Net cash provided by (used in) investing activities

( 230,000,000

Additions to property, plant, and equipment

Additions to intangible assets

Proceeds from short sale of short positions

Proceeds from sale of equity securities

Purchases of equity securities

Purchase of securities to cover short position

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from issuance of Class B common stock to Sponsor

Proceeds from sale of Units, net of underwriting discounts paid

Proceeds from sale of Private Placement Units

Proceeds from promissory notes – related party

Repayment of promissory notes – related party

Payment of offering costs

Net cash (used in) provided by financing activities

Net Change in Cash

Cash – Beginning

Cash – Ending

Non-cash investing and financing activities:

Initial classification of common stock subject to redemption

Deferred underwriting fee payable

Offering costs included in accrued offering costs

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

DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Lionheart Acquisition Corporation II (formerly known as Lionheart Acquisition Corp.) (the “Company”) was incorporated in Delaware on December

The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination.

The Company is an early stage

and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

The Company has one subsidiary, Lionheart II Holdings, LLC, a wholly owned subsidiary incorporated

in Delaware on July 9, 2021.

As of December 31, 2021, the Company had not commenced any operations.

All activity for the period from December 23, 2019 (inception) through

December 31, 2021 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination, in

particular activities in connection with the potential acquisition of MSP Recovery (see Proposed Business Combination within Note 1).

The Company will not generate any operating revenues until after the completion of its initial Business

Combination, at the earliest.

The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.

The registration statement for the Company’s Initial Public Offering was declared effective on August 12, 2020.

On August 18, 2020, the Company

consummated the Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the shares of Class A common stock

included in the Units sold, the “Public Shares”), at $ 10.00 per Unit, generating gross proceeds of $ 200,000,000 , which is described in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 650,000 units (the “Private Placement Units”) at a price of $ 10.00

per Private Placement Unit in a private placement to Lionheart Equities, LLC, a Delaware Limited Liability Company (the “Sponsor”), and Nomura Securities International, Inc.

(“Nomura”), an underwriter in the Initial Public Offering, generating

gross proceeds of $ 6,500,000 , which is described in Note 4.

Following the closing of the Initial Public Offering on August 18, 2020, an amount of $ 200,000,000 ($ 10.00 per Unit) from the net proceeds of the

sale of the Units in the Initial Public Offering and the sale of the Private Placement Units was placed in a trust account (the “Trust Account”) located in the United States and invested only in U.S.

government securities, within the meaning

set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (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 selected by

the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of:

(i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account, as

described below.

On August 20, 2020, the underwriters notified the Company of their intention to exercise their over-allotment option in full, resulting in an

additional 3,000,000 Units issued on August 24, 2020 for $ 30,000,000 .

A total of $ 30,000,000 was deposited into the

Trust Account, bringing the aggregate proceeds held in the Trust Account to $ 230,000,000 .

Transaction costs amounted to $ 13,128,937

consisting of $ 4,600,000 of underwriting fees, $ 8,050,000 of deferred underwriting fees and $ 478,937 of other offering costs.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and

the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward completing a Business Combination.

The Company must complete a Business Combination with one or more target businesses that together have an aggregate fair market value of at least 80 % of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the

agreement to enter into a Business Combination.

The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50 % or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the

Investment Company Act.

There is no assurance that the Company will be able to complete a Business Combination successfully.

The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a

Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer.

The decision as to whether the Company will seek stockholder approval of a Business

Combination or conduct a tender offer will be made by the Company, solely in its discretion.

The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially

anticipated to be $ 10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not

previously released to the Company to pay its tax obligations).

The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to

the underwriters (as discussed in Note 6).

There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

The Company will proceed with a Business Combination if the Company has net tangible assets of at least $ 5,000,001 immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the

shares voted are voted in favor of the Business Combination.

If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended

and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S.

Securities and Exchange Commission (“SEC”) and file tender offer

documents with the SEC prior to completing a Business Combination.

If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will

offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules.

If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor,

officers and directors and Nomura have agreed to vote their Founder Shares (as defined in Note 5), Private Placement Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of approving

a Business Combination.

Additionally, each public stockholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against the proposed Business Combination.

If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the

Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section

13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15 % or more of the Public Shares, without the prior consent of the Company.

The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder’s Shares, Private Placement Shares and Public Shares held

by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would affect the substance or timing of the ability of holders of the Public

Shares to seek redemption in connection with a Business Combination or the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders

with the opportunity to redeem their Public Shares in conjunction with any such amendment.

As described in more detail within the Note 11, the Company will have until August 18, 2022 to complete a Business Combination (the “Combination

If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter subject to lawfully available funds therefor, redeem 100 % of the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds

held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $ 100,000 of interest to

pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if

any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in

each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

There will be no redemption rights or liquidating distributions with respect to the Company’s warrants,

which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

The Sponsor and Nomura have agreed to waive their liquidation rights with respect to the Private Placement Shares if the Company fails to

complete a Business Combination within the Combination Period.

However, if the initial stockholders or any of their respective affiliates acquire Public Shares after the Initial Public Offering, such Public Shares will be entitled to

liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period.

The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6)

held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to

fund the redemption of the Public Shares.

In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($ 10.00 ).

In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by

a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the

lesser of (i) $ 10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the

liquidation of the Trust Account, if less than $ 10.00 per share due to reductions in the value of the trust assets, less taxes

payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable)

nor will it apply to any claims under the Company’s indemnity of the underwriters of Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.

The Company will seek to reduce the possibility that the

Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the

Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Liquidity and Going Concern

The Company has principally financed its operations from inception using proceeds from the sale of its equity securities to its stockholders

prior to the Initial Public Offering and such amount of proceeds from the Initial Public Offering that were placed in an account outside of the Trust Account for working capital purposes.

At December 31, 2021, the Company had cash outside the

trust of $ 177,386 and working capital deficit of $ 3,785,966 .

The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans.

On February 21, 2021, the Sponsor committed up to $ 750,000 in loans to the Company for continuing operations to consummate a business combination.

The loans would be non-interest bearing, unsecured,

and to be repaid upon the consummation of a business combination.

On July 29, 2021, the Sponsor committed up to an additional $ 250,000

in loans to the Company for continuing operations to consummate a business combination.

The loans would be non-interest bearing, unsecured, and to be repaid upon the consummation of a business combination.

In the event that a business

combination does not occur, then all loaned amounts under these commitments will be forgiven except to the extent that the Company has funds available to it outside the trust account.

The Sponsor has committed an aggregate of $ 1,000,000 between these two commitments.

The consolidated financial statements do not include any adjustments that might result from the outcome of

this uncertainty.

Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and

evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business

The Company will need to raise further additional capital through loans or additional investments from its Sponsor, stockholders, officers,

directors, or third parties.

In addition to the loan commitment described herein, the Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they

deem reasonable in their sole discretion, to meet the Company’s working capital needs.

Accordingly, the Company may not be able to obtain additional financing.

If the Company is unable to raise additional capital, it may be required to take

additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.

The Company cannot provide any

assurance that new financing will be available to it on commercially acceptable terms, if at all.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern through August 18, 2022, the Company’s

liquidation date, and/or through twelve months from the issuance of these consolidated financial statements.

These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the

classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Proposed Business Combination

On July 11, 2021, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) by and among the Company, Lionheart II

Holdings, LLC, a newly formed wholly owned subsidiary of the Company (“Purchaser”), each limited liability company set forth on Schedule 2.1(a) thereto (the “MSP Purchased Companies”), the members of the MSP Purchased Companies listed on

Schedule 2.1(b) thereto (the “Members”), and John H.

Ruiz, as the representative of the Members.

Subject to the terms and conditions set forth in the MIPA, including the approval of the Company’s stockholders, the parties thereto will enter

into a business combination transaction (the “Business Combination”), pursuant to which, among other things, the Members will sell and assign all of their membership interests in the MSP Purchased Companies to Purchaser in exchange for

non-economic voting shares of Class V common stock, par value $ 0.0001 , of the Company (“Class V Common Stock”) and non-voting

economic Class B Units of Purchaser (“Class B Units,” and each pair consisting of one share of Class V Common Stock and one Class B Unit, an “Up-C Unit”), with Up-C Units being exchangeable on a one-for-one basis for shares of the Company’s

Class A common stock.

Following the closing of the Business Combination (the “MIPA Closing”), the Company will own all of the voting Class A Units of Purchaser and the Members or their designees will own all of the non-voting economic Class B

Units of Purchaser.

Subject to the terms and conditions set forth in the MIPA, the aggregate consideration to be paid to the Members (or their designees) will consist of a number of (i) Up-C Units equal to (a) $ 32.5 billion divided by (b) $ 10.00

and (ii) rights to receive payments under the Tax Receivable Agreement (as defined below).

Of the Up-C Units to be issued to certain Members at the MIPA Closing, 6,000,000 (the “Escrow Units”) will be deposited into an escrow account with Continental Stock Transfer and Trust, to satisfy potential indemnification claims brought pursuant to the MIPA.

Additionally, in

connection with the Business Combination, the Company intends, subject to compliance with applicable law, to declare a dividend comprising approximately 1,029,000,000 newly issued warrants, each to purchase one share of Class A common stock for an exercise price of $ 11.50

per share, conditioned upon the consummation of any redemptions by the Company’s stockholders and the MIPA, to the holders of record of Class A common stock as of the close of business on the date of the MIPA Closing, after giving effect to the

waiver of the right to participate in such dividend by the Members.

The MIPA contains customary representations, warranties and covenants by the parties thereto and the closing is subject to certain conditions as

further described in the MIPA.

Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread

throughout the United States and the World.

As of the date the consolidated financial statements were issued, there was considerable uncertainty around the expected duration of this pandemic.

The Company has concluded that while it is

reasonably possible that COVID-19 could have a negative effect on identifying a target company for a Business Combination, the specific impact is not readily determinable as of the date of these consolidated financial statements.

consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Proceeds from Business Combination

Transaction costs incurred for the Business Combination

Proceeds from related party loan (1)

Issuance of common stock

Issuance of temporary equity

Contribution from members

Distributions to members

Proceeds from debt financing

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of year

Cash and cash equivalents and restricted cash at end of period

Supplemental cash flow information:

Supplemental disclosure of non-cash investing and financing activities:

Purchase of intangible asset financed by note payable

Purchase of intangible asset through issuance of Class A common stock

Purchase of intangible asset in accrued expenses

Payment of professional fees through issuance of Class A common stock

Transaction costs incurred included in accounts payable

Cash paid during the period for:

Balances include related party transactions.

See Note 14, Related Party , f or further details.

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

DESCRIPTION OF BUSINESS

On May 23, 2022 (the “Closing Date”), MSP Recovery, Inc.

d/b/a LifeWallet, a Delaware corporation (formerly known as Lionheart Acquisition Corporation II (“LCAP”) consummated the previously announced business combination pursuant to that certain Membership Interest Purchase Agreement, dated as of July 11, 2021 (as amended, the “MIPA”), by and among the Company, Lionheart II Holdings, LLC, a wholly owned subsidiary of the Company, MSP Recovery, LLC and combined and consolidated subsidiaries ("Legacy MSP"), the members of Legacy MSP (the “Members”), and John H.

Ruiz, in his capacity as the representative of the Members (the “Members’

Representative”).

Pursuant to the MIPA, the Members sold and assigned all of their membership interests in Legacy MSP to the Company in exchange for non-economic voting shares of Class V common stock, par value $ 0.0001 , of the Company (“Class V Common Stock”) and non-voting economic Class B Units of the Company (“Class B Units,”

and each pair consisting of one share of Class V Common Stock and one Class B Unit, an “Up-C Unit”) (such transaction, the “Business Combination”).

The Up-C Units are convertible into Class A Common Stock of the Company at the discretion of holder of the Up-C Unit.

See Note 3, Business Combination for details.

Subsequent to the Closing Date, the Company's sole asset is its equity interest in MSP Recovery, LLC.

The Company is the managing member and therefore consolidates Legacy MSP.

Legacy MSP was organized in 2014 as a Medicaid and Medicare Secondary Pay Act recovery specialist.

The Company utilizes its proprietary internal data analytics platform to review health Claims assigned by secondary payers such as Health Plans, Management Service Organizations (“MSO”), providers of medical services and Independent Physicians Associations.

This platform allows the Company to identify Claims cost recovery rights with potential recovery paths where Claims either should not have been paid by the secondary payers or should have been reimbursed by third-party entities.

MSP seeks the assignment of recovery rights from secondary payers by acquiring the recovery rights to Claims from secondary payers via Claims Cost Recovery Agreements (“CCRAs”).

Prior to executing a CCRA, the Company utilizes its proprietary internal data analytics platform to review the set of Claims and identify Claims with probable recovery paths.

MSP’s assets are these irrevocable assignments of health Claims recovery rights that are automatic, all-encompassing and superior to other interests supported by Federal and State laws and regulations.

MSP’s operations are primarily conducted in the U.S.

and Puerto Rico.

Investment Capacity Agreement

On September 27, 2021, the Company entered into an Investment Capacity Agreement (the “ICA”) providing for potential future transactions regarding select healthcare Claims recovery interests with its investment partner, Virage, which transactions may include the sale of Claims by MSP.

The ICA provides that the maximum value of such Claims will be $ 3 billion.

When the Company takes an assignment, the Company takes an assignment of the entire recovery but often has a contractual obligation to pay the assignor 50% of any recoveries.

This 50 % interest typically is retained by the assignor (the “Retained Interest”), although in some cases, the Company has acquired all of the recoveries, and the applicable assignor has not kept any Retained Interest.

The Retained Interest is not an asset of the Company, but an obligation to pay these assignors, with the Company keeping the other 50 % interest of any recoveries.

Virage’s funding in connection with future transactions generally will be used to purchase Retained Interests from existing assignors or new MSP assignors, although its funds can also be used to buy 50% of the recoveries from the Company, in the event the applicable assignor did not retain any Retained Interest.

In connection with transactions consummated under the ICA, the Company may receive certain fees, including a finder's fee for identifying the recoveries and a servicing fee for servicing the Claims.

Pursuant to the ICA, the Company will assist Virage in acquiring these Retained Interests for a cash price.

Virage will be paid the recovery generated from the purchased Retained Interests when received through litigation or settlements.

The ICA is separate and distinct from the equity investment in the Company by VRM MSP (an affiliate of Virage).

While the ICA is still in effect as of the date of this annual report, it is uncertain if or when the Company would transact on the ICA.

To date, there have been no transactions in connection with this ICA, and the Company does not anticipate any in the foreseeable future.

On January 10, 2022, the Company announced the launch of LifeWallet, LLC (“LifeWallet”).

As of December 31, 2022, the Company’s investment related to LifeWallet included in the consolidated balance sheets was limited to activity and expenses incurred during the year ended December 31, 2022.

Through the date the financial statements were issued, LifeWallet has executed agreements for advertising costs within the next 12 months of approximately $ 5.5 million.

A portion of these contracts are cancellable with a 30-day notice period.

For the aforementioned agreements that do not have a 30-day cancellation at will provision, the parties have mutually agreed to terminate said agreements prior to the filing of this Annual Report on Form 10-K.

Committed Equity Facility

On May 17, 2022, the Company entered into a Company Common Stock Purchase Agreement (the “Purchase Agreement”) with an affiliate of Cantor Fitzgerald (“CF”).

Pursuant to the Purchase Agreement, after the closing of the Business Combination, the Company will have the right to sell to CF from time to time at its option up to $ 1 billion in Class A common stock shares, subject to the terms, conditions and limitations set forth in the Purchase Agreement.

On January 6, 2023 , the Company entered into a Company Common Stock Purchase Agreement (the “Yorkville Purchase Agreement”) with YA II PN, Ltd., a Cayman Island exempted company (“Yorkville”), which replaced the Purchase Agreement with CF noted above.

Pursuant to the Yorkville Purchase Agreement, the Company has the right to sell to Yorkville from time to time at its option up to $ 1 billion in shares of the Company’s Common Stock, subject to the terms, conditions and limitations set forth in the Yorkville Purchase Agreement.

Sales of the shares of the Common Stock to Yorkville under the Yorkville Purchase Agreement, and the timing of any such sales, will be determined by the Company from time to time in its sole discretion and will depend on a variety of factors, including, among other things, market conditions, the trading price of the common stock, as well as determinations by the Company about the use of proceeds of such Common Stock sales.

The net proceeds from any such sales under the Yorkville Purchase Agreement will depend on the frequency with, and the price at, which the shares of Common Stock are sold to Yorkville.

Upon the initial satisfaction of the conditions to Yorkville’s obligation to purchase shares of Common Stock set forth under the Yorkville Purchase Agreement (the “Commencement”), including that a registration statement registering the resale by Yorkville of the shares of Common Stock under the Securities Act, purchased pursuant to the Yorkville Purchase Agreement (the “Resale Registration Statement”) is declared effective by the SEC and a final prospectus relating thereto is filed with the SEC, the Company will have the right, but not the obligation, from time to time, at its sole discretion and on the terms and subject to the limitations contained in the Yorkville Purchase Agreement, until no later than the first day of the month following the 36 month anniversary of the date that the Resale Registration Statement is declared effective, to direct Yorkville to purchase up to a specified maximum amount of Common Stock as set forth in the Yorkville Purchase Agreement by delivering written notice to Yorkville prior to the commencement of trading on any trading day.

The purchase price of the common stock that the Company elects to sell to Yorkville pursuant to the Yorkville Purchase Agreement will be 98 % of the volume-weighted average price ("VWAP") of the Common Stock during the applicable purchase date on which the Company has timely delivered a written notice to Yorkville, directing it to purchase common stock under the Yorkville Purchase Agreement.

The purchase agreement that the Company entered into on May 17, 2022 with CF has been terminated.

Assignment and Sale of Proceeds Agreement

On June 30, 2022, the Company entered into an Assignment and Sale of Proceeds Agreement (the “Assignment Agreement”) and a Recovery Services Agreement (the “Services Agreement”

and collectively, the “Agreements”) with the Prudent Group (“Prudent”) in order to monetize up to $ 250 million of the value of the Company’s net recovery interest in Claim demand letters that the Company has commenced sending to insurers who admitted they had primary payer responsibility for the underlying accidents to the federal government (“Net Recovery Proceeds”).

Pursuant to the Agreements, at the Company’s sole and absolute discretion, the Company has the right to direct Prudent to acquire, on a non-recourse basis, a percentage of the Company's Net Recovery Proceeds, up to an aggregate of $ 250 million, at a purchase price of 90 % of the Net Recovery Proceeds of such Claim.

Under the Services Agreement, the Company will service and recover on the demand letters and will retain any revenues generated in excess of the amount received from Prudent, plus up to an 18 % annual return on the amount Prudent paid for the Net Recovery Proceeds.

Prudent may terminate the Services Agreement upon sixty (60) days prior written notice to the Company.

The Company may utilize the Assignment Agreement as funding if needed.

While the Prudent Agreements are still in effect as of the date of these financial statements, it is uncertain if or when the Company would transact on the agreements.

Warrant Agreement with Brickell Key Investments, LP

On October 12, 2022, MSP Recovery, Inc., a Delaware corporation (the “Company”), finalized an Amendment to the Claim Proceeds Investment Agreement (the "Amendment") and a Warrant Agreement (the "Warrant Agreement") with Brickell Key Investments LP (the “Holder”), pursuant to which the parties have agreed to amend the original Claims Proceeds Investment Agreement ("CPIA") and required payment terms.

The Amendment and Warrant Agreement were agreed effective September 30, 2022.

Pursuant to the agreements, the Company grants to the Holder the right to purchase Class A common shares in the Company (the "Class A Shares") in accordance with the terms and conditions of the Agreement.

The maximum amount of Class A shares that the holder may purchase from the Company is 66,666,666 (the “Amount”) for a purchase price equal to $ 6,666.67 ($ 0.0001 per Class A Share) (the “Exercise Price”) and is payable in cash.

This Warrant (the “Warrant”) will expire at 5:00 p.m.

(Eastern Time), on September 30, 2027 and may be exercised in whole or in part by Holder at any time prior to such date.

The Holder can only sell a maximum of 15 % per month of the Class A Shares obtained through the Warrant.

In exchange for the Company issuing the Warrant, the amounts owed to the Holder pursuant to CPIA are reduced from approximately $ 143 million to equal $ 80 million (the "Reduced Obligation"), and no further interest will accrue.

The Holder has the right to receive the $ 80 million owed through (1) proceeds as outlined in the CPIA, (2) cash paid by the Company or (3) monetization of the Warrant (through the sale of the Warrant or sale of the underlying Class A Shares).

If the Holder monetizes the Warrant, the amount owed will be reduced at a measure of $ 1.20 per Class A Share (five-day volume weighted average price as of September 30, 2022).

As an early-stage growth company, the Company has incurred substantial net losses since inception.

As of December 31, 2022, the Company had unrestricted cash and cash equivalents totaling $ 3.7 million.

The Company has incurred recurring losses and negative cash flows since inception and has an accumulated deficit of $ 29.2 million as of December 31, 2022.

For the year ended December 31, 2022, the Company used approximately $ 80.6 million of cash in operations.

The Company's liquidity will depend on the ability to generate substantial Claims recovery income and Claims recovery services income in the near future, the timing of which is uncertain, as well as its ability to secure funding from capital sources.

The Company's principal liquidity needs have been capital expenditures, working capital, debt service and Claims financing obligations.

The Company anticipates sources of liquidity to include the Hazel Working Capital Facility as disclosed in Note 19, Subsequent Events .

The Company anticipates having funding through this source and has taken several actions to address liquidity concerns, including:

On April 12, 2023, the Company entered into the Virage MTA Amendment, which extended the due date for the payment obligations to Virage to September 30, 2024.

See summary in Note 19, Subsequent Events .

On April 12, 2023, the Company entered into an amended and restated promissory note with Nomura, which extended the due date to September 30, 2024.

See summary in Note 19, Subsequent Events .

On March 29, 2023, the Company entered into the Working Capital Credit Agreement consisting of commitments to fund up to $ 48 million in proceeds.

See summary in Note 19, Subsequent Events .

Given the uncertainty with regard to the timing and amount of claims recovery income, management implemented a reduction of operating costs in 2023 through the reduction or elimination of certain controllable expenses particularly within the budgeted costs to expand and develop new solutions through LifeWallet platform, advertising expenses and non-contingent legal fees.

The Company anticipates that the reductions would contribute approximately $ 21.5 M in savings to operating expenses over the next twelve months.

The Company has concluded that such actions alleviate the substantial doubt about the Company's ability to continue as a going concern beyond one year from the date these financial statements are issued.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

Basis of presentation

The accompanying consolidated financial statements are presented in conformity with accounting principles generally accepted in the United

States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.

These statements have been prepared pursuant to the rules and regulations of the SEC and in accordance with GAAP.

In the opinion of management, the consolidated financial statements (the “Financial Statements”) reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the periods presented herein.

Prior to the Business Combination, the consolidated interim financial statements reflect Legacy MSP.

All intercompany transactions and balances are eliminated from the consolidated financial statements.

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary.

All significant

intercompany balances and transactions have been eliminated in consolidation.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business

Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not

being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy

statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial

accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the

new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt

out is irrevocable.

The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an

emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s consolidated financial statements with another public company which is

neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions

that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Making estimates requires management to exercise significant judgment.

It is at least reasonably possible that the estimate of the effect of a

condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events.

One of the more significant accounting estimates included in these consolidated financial statements is the determination of the fair value of warrant liabilities.

Such estimates may be subject to change as more current information becomes

available and accordingly, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

Company did no t have any cash equivalents as of December 31, 2021 and December 31, 2020.

Marketable Securities Held in Trust Account

At December 31, 2021 and 2020, substantially all of the assets held in the Trust Account were held in money market funds which are invested

primarily in U.S.

Treasury Securities.

All of the Company’s investments held in the Trust Account are classified as trading securities.

Trading securities are presented on the consolidated balance sheets at fair value at the end of each

reporting period.

Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying statements of operations.

estimated fair values of investments held in Trust Account are determined using available market information.

Class A Common Stock Subject to Possible Redemption

The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480.

Class A common

stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value.

Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of

the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.

At all other times, common stock is classified as shareholders’ equity.

The Company’s Class

A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events.

Accordingly, at December 31, 2021 and 2020, Class A common stock subject to

possible redemption are presented as temporary equity, outside of the stockholders’ deficit section of the Company’s consolidated balance sheets.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal

the redemption value at the end of each reporting period.

Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value.

The change in the carrying value of

redeemable Class A common stock resulted in charges against additional paid-in capital and accumulated deficit.

At December 31, 2021 and 2020, the Class A common stock subject to redemption reflected in the consolidated balance sheets are reconciled in the

following table:

Gross proceeds

Proceeds allocated to Public Warrants

Class A common stock issuance costs

Accretion of carrying value to redemption value

Class A common stock subject to possible redemption

Warrant Liabilities

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s

specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity

classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at

the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component

of additional paid-in capital at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance,

and each balance sheet date thereafter.

Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.

Based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the Company’s Private Placement

Warrants are not indexed to the Company’s common stock in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares.

In addition, based on

management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the tender offer provision fails the “classified in stockholders’ equity” criteria as contemplated by ASC Section 815-40-25.

the Company accounts for the Public Warrants and Private Placement Warrants as liabilities in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and

liabilities are recognized for the estimated future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases.

assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a

change in tax rates is recognized in income in the period that included the enactment date.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions

taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

The Company recognizes accrued interest and penalties

related to unrecognized tax benefits as income tax expense.

There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2021 and 2020.

The Company is currently not aware of any issues under review

that could result in significant payments, accruals or material deviation from its position.

The Company is subject to income tax examinations by major taxing authorities since inception.

On March 27, 2020, the CARES Act was enacted in response to COVID-19 pandemic.

Under ASC 740, the effects of changes in tax rates and laws are

recognized in the period which the new legislation is enacted.

The CARES Act made various tax law changes including among other things (i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the

“IRC”) for 2019 and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net

operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhancing the

recoverability of alternative minimum tax credits.

Net Income (Loss) Per Common Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”.

Net income (loss) per common stock

is computed by dividing net income (loss) by the weighted average number of common stocks outstanding for the period.

The Company applies the two-class method in calculating earnings per share.

Accretion associated with the redeemable shares of

Class A common stocks is excluded from earnings per share as the redemption value approximates fair value.

The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial Public

Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events.

The warrants are exercisable to purchase 11,825,000 Class A common stocks in the aggregate.

As of December 31, 2021 and 2020, the Company did not have any dilutive securities or other contracts that could, potentially, be

exercised or converted into common stocks and then share in the earnings of the Company.

As a result, diluted net loss per common stock is the same as basic net loss per common stock for the periods presented.

The Company consolidates all entities that it controls through a majority voting interest or otherwise and the accompanying consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries and these entities for which the Company has a controlling interest in.

The Company also consolidates all entities that it controls as the primary beneficiary of a variable interest entity (“VIE”).

Under the VIE model, management first assesses whether the Company has a variable interest in an entity, which would include an equity interest.

If the Company has a variable interest in an entity, management further assesses whether that entity is a VIE, and if so, whether the Company is the primary beneficiary under the VIE model.

Generally, entities that are organized similar to a limited partnership, in which a general partner (or managing member) make the most relevant decisions that affect the entity’s economic performance, are considered to be VIEs which would require consolidation, unless the limited partners have substantive kickout or participating rights.

Entities that do not qualify as VIEs are assessed for consolidation under the voting interest model.

Under the VIE model, an entity is deemed to be the primary beneficiary of a VIE if it holds a controlling financial interest.

A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly affect the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.

Management determines whether the Company is the primary beneficiary of a VIE at the time it

becomes involved with a VIE and reconsiders that conclusion at each reporting date.

This analysis includes an evaluation of the Company’s control rights, as well as the economic interests that the Company holds in the VIE, including indirectly through related parties.

As a result of the Business Combination, the Company consolidates MSP Recovery, LLC under the VIE model.

Estimates and Assumptions

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from the Company’s estimates.

Estimates are periodically reviewed considering changes in circumstances, facts and experience.

Changes in estimates are recorded in the period in which they become known.

Significant estimates and assumptions reflected in these consolidated financial statements include but are not limited to Claims recovery income and Claims recovery service income recognition, recoverability of long-lived assets and cost of Claims recoveries.

Operating segments are defined as components of an entity for which separate financial information is available and regularly reviewed by the chief operating decision maker (“CODM”).

The Company manages its operations as a single segment for the purposes of assessing performance and making decisions.

The Company’s CODM is its Chief Executive Officer.

The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

In addition, all of the Company's revenues and long-lived assets are attributable primarily to operations in the United States and Puerto Rico for all periods presented.

Concentration of credit risk and Off-Balance Sheet Risk

Cash and cash equivalents and affiliate receivable are financial instruments that are potentially subject to concentrations of credit risk.

See Note 14, Related Party , fo r disclosure of affiliate receivables.

The Company’s cash and cash equivalents and restricted cash are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits.

The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held.

The Company has no other financial instruments with off-balance-sheet risk of loss.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Restricted Cash consists of cash held in escrow related to the Prepaid Forward Agreement with CF.

See Note 17, Derivative Liability , for more info rmation on the Prepaid Forward Agreement.

Fair Value Measurements

The Company applies the provisions of Accounting Standards Codification ("ASC") 820, Fair Value Measurements , for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the financial statements on a recurring basis.

The Company also applied the provisions of the subtopic to fair value measurements of non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis.

The subtopic defines fair value 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.

The subtopic also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

The fair value framework requires the Company to categorize certain assets and liabilities into three levels, based upon the assumptions used to price those assets or liabilities.

The three levels are defined as follows:

Quoted prices in active markets for identical assets or liabilities.

Quoted prices for similar assets and liabilities in active markets or inputs that are observable.

Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The Company has determined the estimated fair value of its financial instruments based on appropriate valuation methodologies;

however, for Level 2 and Level 3 inputs considerable judgment is required to develop these estimates.

Accordingly, these estimated fair values are not necessarily indicative of the amounts the Company could realize in a current market exchange.

The estimated fair values can be materially affected by using different assumptions or methodologies.

The methods and assumptions used in estimating the fair values of financial instruments are based on carrying values and future cash flows.

As of December 31, 2022 and December 31, 2021 , the Company did no t hold any Level 2 or Level 3 assets or liabilities.

Cash and cash equivalents and restricted cash are stated at cost, which approximates their fair value.

The carrying amounts reported in the balance sheets for affiliate receivable, accounts payable, affiliate payable and accrued liabilities approximate fair value, due to their short-term maturities.

Outstanding borrowings that qualify as financial instruments are carried at cost, which approximates their fair value as of December 31, 2022 and December 31, 2021 .

Equity Method Investments

Equity investments that are not consolidated, but over which the Company exercises significant influence, are accounted for in accordance with ASC 323, “Investments—Equity Method and Joint Ventures”

(“ASC 323”).

Wh ether or not the Company exercises significant influence with respect to an investee company depends on an evaluation of several factors including, among others, representation on the investee company’s board of directors and ownership level.

An entity is presumptively assumed to have significant influence in a corporation when it holds 20 % or more of the voting stock of the investee company, or at a lower level (e.g., 3 % to 5 %) for entities that track separate members capital accounts.

Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s consolidated balance sheets and statements of operations;

however, the Company’s share of the earnings or losses of the investee company is reflected in the caption “Other income”

in the consolidated statements of operations.

The Company’s carrying value in equity method investee companies is not reflected in the Company’s consolidated balance sheets as of December 31, 2022 or December 31, 2021 as the carryin g value is zero .

When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company has guaranteed obligations of the investee company or has committed additional funding.

When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

Property, Plant and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any.

Major expenditures for property and equipment and those that substantially increase useful lives are capitalized.

When assets are sold or otherwise disposed of, costs and related accumulated depreciation are removed from the financial statements and any resulting gains or losses are included in general and administrative expenses within our consolidated statements of operations.

The Company provides for depreciation and amortization on property and equipment using the straight-line method to allocate the cost of depreciable assets over their estimated lives as follows:

Office and Computer Equipment

Furniture and Fixtures

Leasehold Improvements

Lesser of lease term or estimated life

Internal Use Software

Internal-use software development costs incurred in the preliminary project stage are expensed as incurred;

costs incurred in the application and development stage, which meet the capitalization criteria, are capitalized and amortized on a straight-line basis over the estimated useful life of the asset and costs incurred in the post-implementation/operations stage are expensed as incurred.

The estimated useful life for development costs capitalized as of December 31, 2022 and 2021 is five years .

Further, internal and external costs incurred in connection with upgrades or enhancements are also evaluated for capitalization.

If the software upgrade results in an additional functionality, costs are capitalized;

if the upgrade only extends the useful life, it is expensed as occurred.

Intangible assets

In certain of its CCRAs, the Company makes upfront payments to acquire Claims recovery rights from secondary payers, such as health plans, managed service organizations, providers or medical services and independent physicians' associations.

The Company recognizes intangible assets for costs incurred up front to acquire Claims recovery rights from various assignors.

The Company amortizes capitalized costs associated with CCRAs over 8 years, based on the typical expected timing to pursue recovery through litigation, including through potential appeals.

As part of the Business Combination, the Company acquired rights to Claims recovery cash flows.

As a result of this purchase and the guarantee obligation as noted in Note 10, Variable Interest Entities , the Company consolidated the entity which holds these Claim rights.

Upon consolidation, these Claims rights were accounted for under ASC 350 similar to other CCRAs the Company holds.

As such these assets are held at cost, net of amortization.

The Company evaluates these assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset group are less than the carrying value, a write-down would be recorded to reduce the related asset group to its estimated fair value.

There were no impairment indicators in the years ended December 31, 2022, 2021 and 2020.

Leases entered into by the Company, in which substantially all the benefits and risk of ownership are transferred to the Company, are recorded as obligations under leases.

Leases that meet one of the finance lease criteria are classified as finance leases, while all others are classified as operating leases.

The Company determines if an arrangement is a lease at inception and has made an accounting policy election not to recognize right of use assets and lease liabilities that arise from short term lease as defined as leases with initial terms not in excess of 12 months.

As of December 31, 2022, the Company did not have any leases in excess of 12 months.

See Note 8, Short Term Leases , for more information.

Non-controlling Interests

As part of the Business Combination and described in Note 1, Description of Business , the Company became the managing member of MSP Recovery, LLC, which is consolidated as the Company controls the operating decisions of MSP Recovery, LLC.

The non-controlling interest relates to the Up-C Units that are convertible into Class A Common Stock of the Company at the discretion of the holder of the Up-C Unit.

The Up-C Unit holders retained approximately 99.76 % of the economic ownership percentage of the Company as of the Closing Date.

The non-controlling interest is classified as permanent equity within the consolidated balance sheet of the Company.

As of December 31, 2022, based on the Class A common stock issuances during the period, the non-controlling interest of Class V shareholders w as 97.70 %.

Changes in the Company’s ownership interest in MSP Recovery, LLC, due to Class V shareholders converting their shares to Class A, are accounted for as equity transactions.

Each issuance of the Company's Class A Common Stock requires a corresponding issuance of MSP Recovery, LLC units to the Company.

The issuance would result in a change in ownership and would reduce the balance of non-controlling interest and increase the balance of additional paid-in capital.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets, such as property and equipment, including capitalized software costs, and finite-lived intangibles such as Claims recovery rights, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.

There were no impairment indicators in the year ended December 31, 2022, 2021 and 2020.

Claims Recover y

The Company’s primary income-producing activities are associated with the pursuit and recovery of proceeds related to Claims recovery rights that the Company obtains through CCRAs, in which it becomes the owner of those rights.

As a result, such income is not generated from the transfer of control of goods or services to customers, but from the proceeds realized from perfection of Claims recoveries from rights the Company holds outright.

The Company also generates revenue by providing Claims recovery services to other entities outside of the Company.

Claims recovery income

The Company recognizes Claims recovery income based on a gain contingency model –

that is, when the amounts are reasonably certain of collection.

This typically occurs upon reaching a binding settlement or arbitration with the counterparty or when the legal proceedings, including any appellate process, are resolved.

In some cases, the Company owes an additional payment to the original assignor in connection with the realized value of the recovery right.

Claims recovery income is recognized on a gross basis, as the Company is entitled to the full value of recovery proceeds, and makes a payment to the original assignor similar to a royalty arrangement.

Such payments to prior owners are recognized as cost of Claims recovery in the same period the Claims recovery income is recognized.

When the Company becomes entitled to recovery proceeds from the settlement of a Claim recovery pursuit or proceeding, it recognizes the amount in accounts receivable.

Claims recovery service income, ASC 606, Revenue from Contracts with Customers

The guidance under ASC 606, Revenue from Contracts with Customers, provides that an entity should apply the following steps:

(1) identify the contract with a customer;

(2) identify the performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction price to the performance obligations in the contract;

and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

The Company derives revenues from contracts with customers primarily from Claims recovery services arrangements (“Claims recovery services”).

Claims recovery services include services to related parties or third parties to assist those entities with pursuit of Claims recovery rights.

The Company has determined it has a single performance obligation for the series of daily activities that comprise Claims recovery services, which are recognized over time using a time-based progress measure and are typically based on (1) budgeted expenses for the current month with an adjustment for the variance between budget and actual expenses from the prior month or (2) on

a contingent basis dependent on actual settlements or resolved litigation.

Amounts estimated and recognized, but not yet fully settled or resolved as part of litigation are recognized as contract assets.

There were no contract assets on December 31, 2022 or December 31, 2021, as amounts associated with unresolved litigation were fully constrained.

Claims recovery services are generally paid in advance on a monthly basis.

The Company did not recognize any material revenue for the year ended December 31, 2022 and 2021 for performance obligations that were fully satisfied in previous periods.

For the year ended December 31, 2022 and 2021, the majority of the Company’s Claims recovery service income was related to a servicing agreement with VRM MSP, which was entered into on March 27, 2018.

As part of the Business Combination, the Company acquired rights to cash flows in the assets, after certain required returns to VRM MSP, that had been part of the servicing agreement.

As part of this acquisition, the Company no longer receives service income from this agreement and consolidates the entity in which the Company acquired rights to cash flow in the assets as outlined in Note 4, Asset Acquisitions .

For the year ended December 31, 2022, the Company also recogni zed $ 5.0 million of servicing income related to a specific contract where the performance obligations were completed during the year.

The Company does not have material unfulfilled performance obligation balances for contracts with an original length greater than one year in any years presented.

Additionally, the Company does not have material costs related to obtaining a Claims recovery service contract with amortization periods greater than one year for any period presented.

The Company applies ASC 606 utilizing the following allowable exemptions or practical expedients:

Exemption to not disclose the unfulfilled performance obligation balance for contracts with an original length of one year or less.

Practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

Election to present revenue net of sales taxes and other similar taxes, if any.

Practical expedient not requiring the entity to adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Transfers of Claims Cost Recovery Rights to Others

In some cases, the Company has entered into arrangements to transfer CCRAs or rights to proceeds from CCRAs to other parties.

The Company evaluates whether such transfers are sales of nonfinancial assets, sales of future revenues treated as debt, in-kind contributions to equity method investees, or other types of arrangements.

When they are treated as sales of nonfinancial assets, the Company recognizes a gain on the sale when control transfers to the counterparty based on the difference between the fair value of consideration (including cash) received and the recognized carrying value of the CCRAs.

In some cases, such sales include variable consideration in the form of payments that will be made only upon achievement of certain recoveries or based on a percentage of actual recoveries.

The Company estimates and constrains the amounts that will ultimately be realized based on these variable payment terms and includes those amounts in the determination of gain or loss;

the gain or loss is subsequently updated based on changes in those estimates.

In other cases, such transfers are considered to be sales of future revenue that are debt-like in nature.

These arrangements are recognized as debt based on the proceeds received, and are imputed an interest rate based on the expected timing and amount of payments to achieve contractual hurdles.

These are subject to revisions of estimates of that timing and amount based on the contractual provisions and the Company’s assumptions from changes in facts and circumstances.

Such changes are reflected through revision of the imputed interest rate on a cumulative catch-up basis.

Cost of Claims Recoveries

Costs of Claims recoveries consist of all directly attributable costs specifically associated with Claims processing activities, including contingent payments to assignors (i.e., settlement expenses).

Claims amortization expense

Claims amortization expense includes amortization of CCRAs acquired as part of the business combination, shown as Intangibles, net in the consolidated balance sheets, and CCRA intangible assets for which the Company made upfront payments for Claims recovery rights.

For further details on CCRAs see Note 7, Intangible Assets, Net .

Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid.

As a result of the Business Combination, the Company became the sole

managing member of MSP Recovery, LLC, which is treated as a partnership for U.S.

federal, state and local income tax purposes.

As a partnership, MSP Recovery, LLC is not subject to U.S.

federal and certain state and local income taxes.

Any taxable income or loss generated by MSP Recovery, LLC is passed through to and included in the taxable income or loss of its partners, including MSP Recovery, Inc.

The Company is subject to U.S.

federal income taxes, in addition to state and local income taxes, with respect to the Company’s allocable share of income of MSP Recovery, LLC.

The Company's deferred tax balances reflect the impact of temporary differences between the carrying amount of assets and liabilities and the Company's tax basis.

The balances are stated at the tax rates in effect when the temporary differences are expected to be recovered or settled.

The Company reviewed the anticipated future realization of the tax benefit of the Company's existing deferred tax assets and concluded that it is more likely than not that all of the deferred tax assets will not be realized in the future.

Comprehensive Income (Loss)

The Company has no components of other comprehensive income (loss).

As such, net loss equates to comprehensive income (loss) for all periods presented in this report.

Recent Accounting Pronouncements

New Accounting Pronouncements Recently Adopted

In February 2016, the FASB issued ASU 2016-02, Leases , to increase transparency and comparability among organizations by recognizing right of use assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

In July 2018, ASU 2018-10 , Codification Improvements to ASC 2016-02 , Leases , was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02.

Furthermore, in July 2018, the FASB issued ASU 2018-11, Leases:

Targeted Improvements , which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.

Furthermore, in March 2020, ASU 2020-03, Codification Improvements to Financial Instruments, Leases , was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02.

Additionally, on June 3, 2020, the FASB deferred by one year the effective date of the new leases standard for private companies, private not-for-profits and public not-for-profits that have not yet issued (or made available for issuance) financial statements reflecting the new standard.

Furthermore, in June 2020, ASU 2020-05, Revenue from Contracts with Customers and Leases , was issued to defer effective dates of adoption of the new leasing standard for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

The Company adopted this guidance utilizing the cumulative catch-up method with an effective date of January 1, 2022 and it had no material impact on our consolidated financial statements.

The Company has made an accounting policy election to not to recognize right of use assets and lease liabilities that arise from short term lease as defined as leases with initial terms not in excess of 12 months.

As of December 31, 2022, the Company did not have any leases in excess of 12 months.

See Note 8, Short Term Leases , for more information.

ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) .

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) .

This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021.

The Company adopted this guidance on January 1, 2022 and it had no material impact on our consolidated financial statements.

ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

This standard is effective for all entities as of March 12, 2020 through December 31, 2022.

Early adoption is permitted.

The Company adopted this guidance on January 1, 2022 and it had no material impact on our consolidated financial statements.

ASU 2020-06, Debt —

Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —

Contracts in Entity's Own Equity (Subtopic 815- 40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity .

On August 5, 2020, the FASB issued ASU 2020-06, Debt —

Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —

Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity .

The amendments simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity.

The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021.

Early adoption is permitted.

The Company adopted this guidance on January 1, 2022 and it had no material impact on our consolidated financial statements.

ASU 2022-03, Fair Value Measurement (Topic 820) - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

On June 30, 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) - Fair Value Measurement of

Equity Securities Subject to Contractual Sale Restrictions .

The amendment clarifies that contractual sale restrictions should not be considered when measuring the equity security's fair value and prohibits an entity from recognizing a contractual sale restriction as a separate unit of account.

The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024 .

Early adoption is permitted.

The Company adopted this guidance in June 2022 , which resulted in the Company recognizing the assets acquired as part of the Business Combination at values that were not discounted for contractual sale restrictions, which had a material impact on the Company's consolidated financial statements in relation to the asset acquisitions as noted in Note 4, Asset Acquisitions .

New Accounting Pronouncements Issued but Not Yet Adopted

ASU 2016-13, Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses .

In 2016 and subsequently, the FASB issued ASU 2016-13, Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments including subsequent amendments to the initial guidance :

ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825.

Financial Instruments, ASU 2019-05, Financial Instruments - Credit Losses (Topic 326):

Targeted Transition Relief, ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses .

ASU 326, and ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures and related amendments require credit losses on financial instruments measured at amortized cost basis to be presented at the net amount expected to be collected, replacing the current incurred loss approach with an expected loss methodology that is referred to as CECL.

This ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

While the Company does not anticipate the implementation would have a material effect on the Company’s consolidated operating results, cash flows, financial condition and related disclosures, the Company is currently evaluating the effect that implementation of this standard will have.

BUSINESS COMBINATION

On May 23, 2022, MSP Recovery, Inc.

consummated the Business Combination pursuant to the MIPA as noted in Note 1.

As a result of the closing of the Business Combination (the “Closing”), the Company is organized in an “Up-C”

structure in which all of the business of Legacy MSP and its subsidiaries is held directly or indirectly by the Company, the Company is the managing member, consolidates Legacy MSP and the Company owns all of the voting economic Class A Units and the Members and their designees own all of the non-voting economic Class B Units in accordance with the terms of the first amended and restated limited liability company agreement of the Company.

Each Up-C Unit may be exchanged for either, at the Company’s option, (a) cash or (b) one share of Class A common stock, par value $ 0.0001 , of the Company (“Class A Common Stock”), subject to the provisions set forth in the LLC Agreement.

The aggregate consideration paid to the Members (or their designees) at the Closing consisted of (i) 3,250,000,000 Units and (ii) rights to receive payments under the Tax Receivable Agreement ("TRA").

Of the 3,250,000,000 Units, 3,154,473,292 Units were issued in connection with the Closing and 95,526,708 Units were designated to the Company and Opco for cancellation (“Canceled Units”).

Since the Closing, the Company has issued 50,022,000 Up-C Units to certain designated persons and intends to further issue shares of Class A Common Stock in respect of transaction-related bonuses or certain other designated persons, which together with the 50,022,000 Up-C Units would be equivalent in number to the Canceled Units.

In connection with the Closing, the Company changed its name from “Lionheart Acquisition Corporation II”

to “MSP Recovery, Inc.”

The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP.

Under this method of accounting, the Company is treated as the acquirer for financial statement reporting purposes.

The reverse recapitalization was treated as the equivalent of Legacy MSP issuing stock for the net assets of LCAP, accompanied by a recapitalization.

The net assets of LCAP are stated at historical cost, with no goodwill or other intangible assets recorded.

The Company received net proceeds in the business combination tr ansaction of approximately $ 23.4 million, which includes the restricted cash received as part of FEF shares as defined in Note 17, Derivative Liability .

The Company incurred direct and incremental costs of approximately $ 79.2 million relat ed to the Business Combination, which consisted primarily of investment banking, legal, accounting and other professional fees.

These transaction-related costs were recorded as a reduction of additional paid-in capital in the consolidated balance sheets.

As part of the business combination transaction, the Company assumed the liability related to the LCAP public warrants ("Public Warrants") of $ 12.5 million.

Pursuant to the terms of the Existing Warrant Agreement, and after giving effect to the issuance of the New Warrants, as defined below, the exercise price of the Public Warrants decreased to $ 0.0001 per share of Class A Common Stock.

During the period from the Closing Date to December 31, 2022, approximately 8.5 million warrants of the orig inal 11.8 million warrants had been exercised.

For the year ended December 31, 2022, the fair value of the warrants increased resulting in other expense of $ 2.9 million.

F ollowing anti-dilution adjustments made in connection with the Business Combination, the Public Warrants have an exercise price of $ 0.0001 per share, which have become exercisable as of 10 days after closing of the Business Combination, on a cashless basis.

Additionally, in connection with the Business Combination, the Company declared the New Warrant Dividend comprising approximately 1,028 million New Warrants payable to the holders of record of the Class A Common Stock as of the close of business on the Closing Date, after giving effect to the waiver of the right, title and intere st in, to or under, participation in any such dividend by the Members, on behalf of themselves and any of their designees.

The New Warrants will be exercisable 30 days following the Closing Date until their expiration date, which will be the fifth anniversary of the Closing Date or earlier redemption.

The record date for the determination of the holders of record of the outstanding shares of Class A Common Stock entitled to receive the New Warrant Dividend was the close of business on the Closing Date.

Pursuant to the terms of the LLC Agreement, at least twice a month, to the extent any New Warrants have been exercised in accordance with their terms, the Company is required to purchase from the MSP Principals, proportionately, the number of Up-C Units or shares of Class A Common Stock owned by such MSP Principal equal to the Aggregate Exercise Price divided by the Warrant Exercise Price in exchange for the Aggregate Exercise Price.

The Company determined that the New Warrants instruments meet the equity scope excepti on in ASC 815 to be classified in stockholders’

equity, and as the repurchase right noted above has a mirrored value designed to offset the New Warrants, if exercised would be an equity only transaction.

The New Warrants are each exercisable for one share of Class A Common Stock at an exercise price of $ 11.50 per share and will be subject to certain anti-dilution adjustments and become exercisable 30 days following the Closing, expiring five years from the date of Closing.

Public Warrants and New Warrants are currently listed on Nasdaq under the symbols “LIFWZ”

and “LIFWW”, respectively.

Tax Receivable Agreement

In connection with the Business Combination, the Company also entered into a TRA.

Pursuant to the TRA, the Company is required to pay the sellers 85 % of the amount of tax benefits that the Company actually realizes as a result of (i) the Company’s direct and indirect allocable share of existing tax basis acquired in the Business Combination, (ii) increases in the Company’s allocable share of existing tax basis and tax basis adjustments that will increase the tax basis of the tangible and intangible assets of the Company as a result of the Business Combination and as a result of sales or exchanges of Up-C Units for cash or shares of Class A Common Stock, and (iii) certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.

During the year ended December 31, 2022, the Company’s TRA liability associated with the allocable share of existing tax basis acquired in the Business Combination would give rise to a TRA liability of $ 2.5 million.

Furthermore, during the year ended December 31, 2022, 6,493,798 of Class V units were exchanged for Class A common stock of the Company, which will result in an increase in its share of the tax basis in the net assets of MSP Recovery, LLC;

these exchanges will not give rise to a TRA liability due to the Company not receiving a tax basis adjustment that increased the tax basis of the tangible and intangible assets as a result of a limitation on the partnership tax allocations of built-in gains and losses.

The Company has assessed the realizability of the net deferred tax assets and, in that analysis, has considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

The Company has recorded a full valuation allowance against the deferred tax assets as of December 31, 2022, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.

As the tax benefits associated with the TRA have not be recognized, based on estimates of future taxable income, the Company has concluded it is not probable to recognize any tax receivable agreement liability.

If the valuation allowance recorded against the deferred tax assets is released in a future period, the Tax Receivable Agreement liability may be considered probable at that time and recorded within earnings.

Non-Controlling interest

As a result of the Business Combination, the Company reflects non-controlling interests due to the Up-C structure.

The Company holds all of the voting Class A Units of Opco, whereas the Members (or their designees) hold all of the non-voting economic Class B Units of Opco (these Class B Units represent the non-controlling interest in the Company).

The ownership percentage of Class V Common Stock held in the Company by the Members (or their designees) will be equivalent to the number of Class B Units held in the Company, and as such, reflects non-controlling interest in the Company, which is equivalent to the Class V Common Stock ownership percentage.

See Note 12, Noncontrolling Interest , for more information on ownership interests in the Company.

Nomura Promissory Note

On May 27, 2022, the Company issued an unsecured promissory note to Nomura in a principal amount of approximately $ 24.5 million related to advisory fees and deferred underwriting fees and expenses that became due and payable by the Company to Nomura, in connection with the consummation of the Business Combination.

On April 12, 2023, the Company amended the promissory note, increasing the principal amount to approximately $ 26.2 million and extending the maturity date of the promissory note to September 30, 2024 .

The amended note carries an interest rate of 16 % per annum and is payable in kind or in cash, at the Company's discretion, every 30 calendar days after April 12, 2023.

Upon two days prior written notice to Nomura, the Company may prepay all or any portion of the then outstanding principal amount under the promissory note together with all accrued and unpaid interest thereon .

The balance of the unsecured promissory note and related interest are included within Claims financing obligations and notes payable in the consolidated balance sheet.

ASSET ACQUISITIONS

On May 23, 2022 as part of the closing of th e Business Combination, the Company acquired assets through the issuance of Up-C units.

In exchange for approximately 196.6 million Up-C units, the Company acquired CCRAs previously held by Series MRCS, an affiliate of MSP.

The CCRAs are included as I ntangible Assets, net in the consolidated balance sheet.

The CCRAs are held at cost, which was determined using the opening market price of the Company's Class A shares as of the day subsequent to the Closing Date discounted by 4.5 % for lack of marketability due to timing before shares are sellable.

The Company determined the appropriate measurement date was the opening of the first trading day of the Class A shares after the Closing Date as this reflects the equivalent value of the Up-C units provided to the sellers.

The Up-C units provided to the sellers did not include New Warrants and as such the Class A shares value excluding the New Warrants was reflected at the Close of the first trading day after the Closing Date.

The CCRAs are treated as finite life intangible a ssets similar to other CCRAs that the Company has acquired and have a useful life of 8 years.

For further details on this CCRA acquisition, see Note 7, Intangible Assets, Net .

On May 23, 2022 as part of the closing of the Business Combination, the Company acquired assets through the issuance of Up-C units.

In exchange for approximately 356.8 million Up-C units, the Company acquired the rights to receive the distributable net proceeds (the "Proceeds") of a portfolio of Claims owned by VRM MSP, a Delaware limited liability company and joint investment vehicle of VRM and Series MRCS.

Under this asset acquisition structure, the Company determined that the arrangements to acquire the rights to proceeds from certain Claims recovery rights along with the guarantee of the VRM Full Return (noted and defined below) result in the Company consolidating the Series.

Upon consolidation, the Company included the value of the Up-C units provided and the value of the guarantee as Intangible Assets, net in the consolidated balance sheet.

These are held at cost and treated as finite life intangible assets similar to other CCRAs that the Company has acquired and have a useful life of 8 years.

In connection with such transaction the Company agreed to pay Virage an amount equal to the contributions by Virage to VRM MSP plus an annual rate of return of 20 % (the "VRM Full Return").

Pursuant to the terms of the agreement with Virage, such amount is payable exclusively by any of the following means (or any combination thereof):

(a) the Proceeds, (b) a sale of certain reserved shares of Messrs.

John Ruiz and Frank Quesada, and the delivery of the resulting net cash proceeds thereof to VRM, or (c) a sale of shares by the Company and delivery of the net cash proceeds thereof to VRM.

The amount of the VRM Full Return was $ 787.9 million as of December 31, 2022.

Upon payment of the VRM Full Return, VRM and Series MRCS would assign and transfer to the Company their respective rights to receive all Proceeds.

As the Company incurred debt related to the VRM Full Return as included in the guarantee obligation within the consolidated balance sheet, this value was included in the purchase price and is included in Intangible Assets, net, in the consolidated balance sheet for the full value of the VRM Full Return at the acquisition date.

Any subsequent interest accrual is reflected within interest expense in the consolidated statement of operations.

Separately, the VRM Full Return was guaranteed by Messrs.

John Ruiz and Frank Quesada for any remaining required payment of the VRM Full Return as of May 23, 2023.

On April 12, 2023, the Company entered into an amendment (the "Virage MTA Amendment") to the agreement with Virage pursuant to which the payment date for the VRM Full Return was extended from May 23, 2023 until September 30, 2024, subject to acceleration upon certain triggering events.

See Note 19, Subsequent Events .

INVESTMENT IN EQUITY METHOD INVESTEES

The Company holds three investments which are accounted for using the equity method :

MAO-MSO Recovery II LLC Series PMPI (“Series PMPI”), MAO-MSO Recovery LLC and MAO-MSO Recovery II LLC (both collectively the “MAO-MSO entities”).

Series PMPI is a series of MAO-MSO Recovery II LLC.

The Company exercises significant influence over the operating and financial activities of Series PMPI, but does not exercise control of the entity.

In accordance with Series PMPI’s operating agreement, the controlling member is entitled to a preferred return of 20 % per annum (the “Preferred Return”).

Once the Preferred Return has been met, the controlling member is entitled to 50 % of Claim s recoveries by PMPI.

The noncontrolling member is allocated 100 % of the costs of PMPI.

Since the Preferred Return exceeds the total members’

equity of PMPI as of both December 31, 2022 and December 31, 2021, the value of the equity method investment in the consolidated balance sheet is $ 0 .

The MAO-MSO entities are Delaware limited liability companies formed as master series entities whose central operations are to form other series legal entities that will hold and pursue Claims recovery rights.

The MAO-MSO entities are not designed to hold or pursue Claims recoveries themselves.

The Company holds a 50 % economic interest in both entities, and has significant influence through its equity investment, but does not control either entity.

As equity method investments, the Company recognizes its proportionate share of net earnings or losses as equity earnings in Other income.

The activity of these entities has been insignificant for the years ended December 31, 2022, 2021 and 2020.

Since the Company did not make a contribution to the MAO-MSO entities and the entities have recorded losses, the value of the equity method investment in the consolidated balance sheets is $ 0 as of both December 31, 2022 and December 31, 2021.

Summary financial information for equity accounted investees, not adjusted for the percentage ownership of the Company is as follows:

For the year ended,

Series PMPI (in thousands)

December 31, 2022

December 31, 2021

Basic and diluted net income (loss) per common stock

Allocation of net income (loss), as adjusted

Basic and diluted weighted average shares outstanding

Basic and diluted net income (loss) per common stock

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial

institution, which, at times, may exceed the Federal Depository Insurance Coverage of $ 250,000 .

The Company has not experienced

losses on this account and management believes the Company is not exposed to significant risks on such account.

Fair value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,”

approximates the carrying amounts represented in the accompanying consolidated balance sheets, primarily due to their short-term nature, except for warrant liabilities (see Note 10.)

Recent Accounting Standards

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 — “Contracts in Entity’s

Own Equity (Subtopic 815-40) (“ASU 2020-06”)”, to simplify accounting for certain financial instruments ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible

instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.

The new standard also introduces additional disclosures for convertible debt and freestanding

instruments that are indexed to and settled in an entity’s own equity.

ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

ASU 2020-06 is

effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021.

The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its

financial position, results of operations or cash flows.

Management does not believe that any recently issued, but not yet effective, accounting standards update, if currently adopted, would have a

material effect on the Company’s consolidated financial statements.

INITIAL PUBLIC OFFERING

Pursuant to the Initial Public Offering, the Company sold 23,000,000 Units, inclusive of 3,000,000 Units sold to the underwriters on

August 24, 2020 upon the underwriters’ election to fully exercise their option to purchase additional Units, at a purchase price of $ 10.00

Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant (“Public Warrant”).

Each whole Public

Warrant entitles the holder to purchase one share of Class A common stock at a price of $ 11.50 per share, subject to adjustment (see

PRIVATE PLACEMENT

Simultaneously with the closing of the Initial Public Offering, the Sponsor and Nomura purchased an aggregate of 650,000 Private Placement Units at a price of $ 10.00

per Private Placement Unit, for an aggregate purchase price of $ 6,500,000 .

Each Private Placement Unit consists of one share of Class

A common stock (“Private Placement Share”) and one-half of one redeemable warrant (“Private Placement Warrant”).

Each whole Private Placement Warrant entitles the holder to purchase one share of Class A common stock at a price of $ 11.50 per share, subject to adjustment (see Note 8).

A portion of the proceeds from the Private Placement Units were added to the proceeds from the

Initial Public Offering held in the Trust Account.

The Private Placement Units are identical to the Public Units sold in the Initial Public Offering, except as described in Note 7.

If the Company does not complete a Business Combination within

the Combination Period, the proceeds of the sale of the Private Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and underlying securities will be worthless.

RELATED PARTY TRANSACTIONS

Founder Shares

On January 10, 2020, the Sponsor purchased 5,000,000

shares (the “Founder’s Shares”) of the Company’s Class B common stock for an aggregate price of $ 25,000 .

Subsequently, on February 6,

2020, the Company effected a stock dividend of 0.15 share for each Founder’s Share outstanding, resulting in the Sponsor holding an

aggregate of 5,750,000 Founder’s Shares.

All share and per-share amounts have been retroactively restated to reflect the stock

The Founder’s Shares included an aggregate of up to 750,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the initial stockholders (including Nomura)

would own, on an as-converted basis, 22.03 % of the Company’s issued and outstanding shares after the Initial Public Offering

(including the Private Placement Shares and assuming the initial stockholders do not purchase any Public Shares in the Initial Public Offering).

As a result of the underwriters’ election to exercise their over-allotment option in full on August

24, 2020, the 750,000 Founder’s Shares are no longer subject to forfeiture.

The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder’s Shares until the

earlier to occur of:

(A) six months after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $ 12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 -trading

day period commencing at least 30 days after a Business Combination, or (y) the date on which the Company completes a liquidation,

merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Promissory Note — Related Party

On January 10, 2020, the Company issued the Promissory Note to Lionheart Equities, LLC, the Sponsor, pursuant to which the Company could

borrow up to an aggregate amount of $ 300,000 to cover expenses related to the Initial Public Offering.

The Promissory Note was

non-interest bearing and payable on the completion of the Initial Public Offering.

The outstanding balance under the Promissory Note of $ 140,671

was repaid on August 24, 2020.

Borrowings under the Promissory Note are no longer available.

Administrative Services Agreement

The Company entered into an agreement whereby, commencing on the August 14, 2020, the Company will pay the Sponsor a total of $ 15,000 per month for office space, utilities and secretarial and administrative support.

Upon completion of the Business Combination or the

Company’s liquidation, the Company will cease paying these monthly fees.

For the years ended December 31, 2021 and 2020, the Company incurred $ 180,000

and $ 66,774 in fees for these services, of which $ 15,000 and $ 0 are included in the accounts payable and accrued expenses in the accompanying

consolidated balance sheets.

Related Party Loans

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or

certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).

If the Company completes a Business Combination, the Company would repay the Working Capital

Loans out of the proceeds of the Trust Account released to the Company.

Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account.

In the event that a Business Combination does not close, the Company

may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.

Except for the foregoing, the terms of such Working

Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.

The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s

discretion, up to $ 1 million of such Working Capital Loans may be convertible into units identical to the Private Placement Units at

a price of $ 10.00 per unit.

On February 21, 2021, the Sponsor committed up to $ 750,000

in loans to the Company for continuing operations to consummate a business combination.

The loans are non-interest bearing, unsecured, and to be repaid upon the consummation of a business combination.

In the event that a business combination

does not occur, then all loaned amounts under this commitment will be forgiven except to the extent that the Company has funds available to it outside the trust account.

The Company has not drawn on the aforementioned Sponsor commitment.

On July 29, 2021, the Sponsor committed up to an additional $ 250,000 in loans to the Company for continuing operations to consummate a business combination.

The loans are non-interest bearing, unsecured, and to be repaid upon the consummation of a business combination.

In the event that a business combination does not occur, then all loaned amounts under this commitment will be forgiven except to the extent that the Company has funds available to it outside the trust account.

The Company has not drawn on the

aforementioned Sponsor commitment.

The Sponsor has committed an aggregate of $ 1,000,000 .

COMMITMENTS AND CONTINGENCIES

Registration Rights

Pursuant to a registration rights agreement entered into on August 13, 2020, the holders of the Founder’s Shares, Private Placement Units,

Private Placement Shares, Private Placement Warrants, securities issuable pursuant to the forward purchase agreement (discussed below), the units that may be issued upon conversion of Working Capital Loans, the shares of Class A common stock

and the warrants issued as part of such units (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants included as part of the units that may be issued upon conversion of Working Capital

Loans and upon conversion of the Founder’s Shares) will be entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder’s Shares, only after conversion to the Company’s Class A common

The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that

the Company register such securities.

In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company

to register for resale such securities pursuant to Rule 415 under the Securities Act.

The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s

The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The underwriters are entitled to a deferred fee of $ 0.35

per Unit, or $ 8,050,000 in the aggregate.

The deferred fee will become payable to the underwriters from the amounts held in the Trust

Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Forward Purchase Agreement

Nomura entered into a forward purchase agreement with the Company, which provides for the purchase by Nomura of the Company’s Public Shares for

an aggregate purchase price of up to $ 100.0 million through, other than as described below, open market purchases or privately

negotiated transactions with one or more third parties.

In lieu of purchasing Public Shares in the open market or privately negotiated transactions, up to $ 85.0 million of such aggregate purchase price may instead be in the form of an investment in the Company’s equity securities on terms to be mutually agreed between Nomura and the Company, to occur concurrently

with the closing of a Business Combination.

In consideration of the forward purchase commitment, the Company will pay to Nomura (i) an amount equal to 2 %

of the aggregate purchase price of the purchases or investment requested by the Company pursuant to the forward purchase agreement (the “commitment fee”) plus (ii) an amount equal to the internal charges and carrying costs incurred by Nomura in

connection with the forward purchase commitment (the “commitment carrying costs”) on a monthly basis during the period from and including the date the Company executes a definitive agreement for a Business Combination through the earlier of (x)

the consummation of a Business Combination and (y) the date the Company notifies Nomura in writing that the Company does not require Nomura to provide the forward purchase commitment.

Up to $ 1.0 million of aggregate commitment carrying costs, to the extent timely paid pursuant to the forward purchase agreement, may be credited against the commitment fee.

Company requests that Nomura purchase or invest the full $ 100.0 million forward purchase commitment pursuant to the forward purchase

agreement, a maximum of $ 1.0 million of the commitment carrying costs will not be credited toward the commitment fee.

The decision to

make such an investment in other equity securities will not reduce the aggregate purchase price.

However, Nomura will be excused from its purchase obligation in connection with a specific business combination unless, within five business days following written notice delivered by the Company of its intention to enter into such Business Combination, Nomura notifies the

Company that it has decided to proceed with the purchase in whole or in part.

Nomura may decide not to proceed with the purchase for any reason, including, without limitation, if it has determined that such purchase would constitute a conflict

Nomura will also be restricted from making purchases if they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act.

Nomura has also indicated its intent, if so requested by the Company, to use its commercially reasonable efforts to underwrite, arrange and/or

syndicate up to $ 400 million of additional financing for the Company in the form of equity or debt (or a combination thereof) in

connection with a Business Combination, subject to market conditions and on terms and conditions satisfactory in all respects to Nomura in its sole judgment and determination.

Advisory Agreement

Nomura and the Company have entered into an advisory agreement for the proposed business combination with MSP Recovery.

This advisory agreement

is for Nomura’s role as a financial and capital markets advisor to the Company for the proposed business combination.

Nomura is entitled a transaction fee amounting to $ 20 million that is payable at the closing of the proposed business combination.

This fee is contingent upon the successful closing of the proposed business combination;

as such, no amounts have been recorded within the Company’s consolidated financial statements as of December 31, 2021.

Right of First Refusal

The Company has agreed that, if Nomura offers to purchase any securities under the forward purchase agreement, it will have a “right of first

refusal” to act as a bookrunner on any capital markets transaction issued in order to complete a Business Combination.

In addition, so long as the investor owns 5 % or more of the outstanding common stock of the post-business combination company on a fully-diluted basis, the Sponsor has agreed to use its best efforts and influence on the successor company to offer the

investor a bookrunner role on any capital markets transaction.

Any such bookrunner role will be pursuant to a separate agreement containing terms and conditions customary for the investor and mutually agreed upon by the Company or its successor

company, as applicable.

Notwithstanding the foregoing, the right of first refusal will not have a duration of more than three years

from the date of commencement of sales of the Initial Public Offering.

STOCKHOLDERS’ DEFICIT

Preferred Stock — On January 30, 2020, the Company amended Certificate of Incorporation such that the Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share

with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors.

At December 31, 2021 and 2020, there were no shares of preferred stock issued or outstanding.

Class A Common Stock — On January 30, 2020, the Company amended its Certificate of Incorporation such that the Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $ 0.0001 per share.

Class A common stock are entitled to one vote for each share.

At December 31, 2021 and 2020, there were 650,000 shares of Class A common stock issued and outstanding, excluding 23,000,000 shares of Class A common stock subject to possible redemption which are presented as temporary equity.

Class B Common Stock — On January 30, 2020, the Company amended its Certificate of Incorporation such that the Company is authorized to issue 10,000,000 shares of common stock with a par value of $ 0.0001 per share.

Holders of Class B

common stock are entitled to one vote for each share.

At December 31, 2021 and 2020, there were 5,750,000 shares of common stock issued and outstanding.

Holders of Class A common stock and Class B common stock are entitled to one vote for each share.

Holders of Class A common stock and Class B

common stock will vote separately as two separate classes on all matters submitted to a vote of stockholders, except as required by law.

The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one -for-one basis, subject to adjustment.

In the case that additional shares of Class A common stock, or equity-linked securities, are issued or

deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be

adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon

conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20 % of the sum of the total

number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination

(excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination).

Warrants — Public Warrants may only be exercised for a whole number of shares.

No fractional warrants will be issued upon separation of the Units and only whole warrants will trade.

The Public Warrants will become exercisable on

the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering.

The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no

obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current,

subject to the Company satisfying its obligations with respect to registration.

No warrant will be exercisable and the Company will not be obligated to issue any shares of Class A common stock upon exercise of a warrant unless Class A common

stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.

The Company has agreed that as soon as practicable, but in no event later than 30 days , after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement for the registration under the Securities

Act of the shares of Class A common stock issuable upon exercise of the warrants and thereafter will use its reasonable best efforts to cause the same to become effective within 60 business days following the Business Combination and to maintain a current prospectus relating to the Class A common stock issuable upon exercise of the warrants, until

the expiration of the warrants in accordance with the provisions of the warrant agreement.

If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60 th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement

and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.

If that exemption,

or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.

Once the warrants become exercisable, the Company may redeem the Public Warrants:

in whole and not in part;

at a price of $ 0.01 per warrant;

upon not less than 30 days ’ prior written notice of redemption to each warrant holder;

if, and only if, the reported last reported sale price of the Company’s Class A common stock equals or exceeds $ 18.00 per

share for any 20 trading days within a 30 -trading day period ending the third trading day prior to the date on which the Company sends the notice of redemption to each warrant holder.

If the Company calls the Public Warrants for redemption for cash, management will have the option to require all holders that wish to exercise

the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including

in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation.

However, except as described below, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price.

Additionally, in no event will the Company be required to net cash settle the warrants.

If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account,

holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants.

Accordingly, the

warrants may expire worthless.

In addition, if the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with

the closing of an initial Business Combination at an issue price or effective issue price of less than $ 9.20 per share of common

stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the initial stockholders or their affiliates, without taking into account any

Founder’s Shares or private placement securities held by them, as applicable, prior to such issuance) (the “Newly Issued Price”), the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115 % of the Newly Issued Price.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the

Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.

Additionally, the Private Placement Warrants will be exercisable on a

cashless basis and be non-redeemable so long as they are held by the initial purchasers of the Private Placement Units or their permitted transferees.

If the Private Placement Warrants are held by someone other than the initial purchasers of

the Private Placement Units or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company’s net deferred tax assets (liability) at December 31, 2021 and 2020 are as follows:

Deferred tax assets (liability)

December 31, 2020

Other expenses

Profit (Loss)

Series PMPI (in thousands)

December 31, 2022

December 31, 2021

Total Liabilities

PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consist of the following:

(In thousands)

Office and computer equipment

Leasehold improvements

Internally developed software

Other software

Property, plant and equipment, gross

accumulated depreciation and amortization of software

Property, plant and equipment, net

For the years ended December 31, 2022, 2021 and 2020, depreciation expense and amortization expense was $ 424 thousand , $ 343 thousand and $ 235 thousand, respectively.

INTANGIBLE ASSETS, NET

During the year ended December 31, 2022, the Company acquired CCRAs held by Series MRCS and consolidated CCRAs held by the Series.

The as sets were acquired through the issuance of equity as part of the Business Combination.

The assets are held at cost and treated as a finite intangible asset with a useful life of 8 years.

Intangible assets, net consists of the following:

(in thousands)

December 31, 2022

December 31, 2021

Intangible assets, gross

Accumulated amortization

During the year ended December 31, 2022, in addition to the CCRAs acquired as part of the Business Combination the Company purchased $ 64.8 million of CCRAs included in Intangible assets, net, of which $ 2.7 million was paid in cash, $ 11.0 million was paid through Class A Common Stock issuance and $ 51.2 million is recorded within Other Current Liabilities in the consolidated balance sheet as of December 31, 2022 and will be paid through the issuance of Class A Common Stock.

The payment is due in the second quarter of 2023.

For the CCRAs acquired through equity issuance, the Company is required to provide additional shares or cash if the value of the shares provided is not equal to $ 10.0 million or greater within 1 year of issuance.

As such, the Company recorded a liability of $ 8.7 million within Other current liabilities in the consolidate balance sheet for the difference between $ 10.0 million and the fa ir value of the shares as of December 31, 2022.

For the years ended December 31, 2022, 2021 and 2020, Claims amortization expense was $ 266.9 million , $ 164 thousand , and $ 125 thousand, respectively.

Future amortization for CCRAs is expected to be as follows:

(in thousands)

CCRAs Amortization

SHORT TERM LEASES

The Company leases office space under a non-cancellable operating lease expiring November 2023 .

In addition, the Company rents an office space from the Law Firm, which is on a month-to-month basis and therefore is not included in the future minimum lease payme nts below.

Rent expense for the years ended December 31, 2022, 2021 and 2020 was $ 0.8 million , $ 0.8 million and $ 1.5 million , respectively.

With the adoption of ASC 842 as noted in Note 2, Basis of Presentation and Summary of Significant Accounting Policies , the Company has made an accounting policy election to capitalize leases with initial terms in excess of 12 months.

As of December 31, 2022 , the Company did no t have any leases in excess of 12 months.

The future minimum lease payments under non-cancellable operating leases as of December 31, 2022 for the next five years and thereafter are as follows:

(In thousands)

Lease Payments

Year Ending December 31,

(1) Operating lease expires before or during the year ending December 31, 2023.

The Company holds an economic interest in MSP Recovery, LLC and consolidates its financial position and results.

The remaining ownership of MSP Recovery, LLC not held by the Company is considered a noncontrolling interest.

MSP Recovery, LLC is treated as a partnership for income tax reporting and its members, including the Company, are liable for federal, state, and local income taxes based on their share of the LLC’s taxable income.

There was no provision for income tax for the years ended December 31, 2022, 2021, and 2020.

A reconciliation of the United States statutory income tax rate to the Company’s effective tax rate for the year ended December 31, 2022, 2021, and 2020 is as follows for the years indicated:

December 31, 2022

December 31, 2021

December 31, 2020

Federal Statutory rate

Noncontrolling interests/effect of pass-through entities

Valuation allowance

Effective Income tax rate

Details of the Company’s deferred tax assets and liabilities at December 31, 2022 and 2021 are as follows for the years indicated:

December 31, 2022

December 31, 2021

Deferred tax assets

Net operating loss carryforward

Unrealized loss on securities

Investment in MSP Recovery, LLC

Start-up Costs

Transaction Costs

Total deferred tax assets

Valuation Allowance

Deferred tax assets (liability)

The income tax provision for the years ended December 31, 2021 and 2020 consists of the following:

Deferred (current and non-current deferred)

State and Local

Change in valuation allowance

Income tax provision

Total Deferred tax assets (liability)

The Company has a deferred tax asset for the difference between the financial reporting and the tax basis of its investment in MSP Recovery, LLC.

The deferred tax asset above does not consider the iterative impact of the TRA liability as the entire liability has not been recorded as of December 31, 2022.

As of December 31, 2022 and 2021, the Company had $ 3,854,829 and $ 446,481 of U.S.

federal and state net operating loss carryovers available to

offset future taxable income, respectively.

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the

deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts

become deductible.

gross federal and state net operating loss carryovers available to offset future taxable income, respectively.

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

After consideration of all

of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.

For the years ended December 31,

2021 and 2020, the change in the valuation allowance was $ 549,553 and $ 306,781 , respectively.

A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2021 and 2020 is as follows:

December 31, 2021

December 31, 2020

Statutory federal income tax rate

Transaction costs allocable to warrant liabilities

Business combination expenses

Change in fair value of warrant liability

Valuation allowance

Income tax provision

The Company’s effective tax rates for the periods presented differ from the expected (statutory) rates due to the change in FV

of warrants, business combination expenses, and the recording of full valuation allowances on deferred tax assets.

The Company's effective tax rates for the year ended December 31, 2020 was revised to correct the effect of transaction costs

attributable to warrant liabilities previously reported as Change in fair value of warrant liability.

The Change in fair value of warrant liability and the transaction costs attributable to warrants liabilities previously reported were

respectively ( 6.1 %) and 0 %.

After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.

As of December 31, 2022 and 2021, the Company has no t recorded any unrecognized tax benefits.

The Company files income tax returns in the U.S.

federal jurisdiction and Florida which remain open and subject to examination

by the various taxing authorities.

The Company’s tax returns since inception remain open to examination by the taxing authorities.

FAIR VALUE MEASUREMENTS

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each

reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received

in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date.

In connection with measuring the fair value of its assets and

liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and

liabilities).

The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Quoted prices in active markets for identical assets or liabilities.

An active market for an asset or liability is a market in which transactions for the asset or liability

occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Observable inputs other than Level 1 inputs.

Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical

assets or liabilities in markets that are not active.

Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

At December 31, 2021 and 2020, there were 11,500,000

Public Warrants and 325,000 Private Placement Warrants outstanding.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2021

and 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Marketable securities held in Trust Account

Warrant Liability – Public Warrants

Warrant Liability – Private Warrants

The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our consolidated

balance sheets.

The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statements of operations.

The Private Warrants were valued using Monte Carlo Model, which is considered to be a Level 3 fair value measurement.

The Monte Carlo model’s

primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of the common stock.

The expected volatility as of the IPO Closing date was derived from observable public warrant pricing on

comparable ‘blank-check’ companies without an identified target.

The expected volatility as of subsequent valuation dates was implied from the Company’s own public warrant pricing.

The Public warrants were valued using the close price of the

public warrant price was used as the fair value as of each relevant date.

The key inputs into the Monte Carlo simulation model for the Private Placement Warrants were as follows at December 31, 2021 and 2020:

December 31, 2021

December 31, 2020

Risk-free interest rate

Trading days per year

Expected volatility

Exercise price

The following table presents the changes in the fair value of warrant liabilities:

Warrant liabilities

Initial measurement on August 18, 2020 and over-allotment on August 20, 2020

Change in fair value

December 31, 2020

Change in fair value

Fair value as of December 31, 2021

federal jurisdiction and Florida which remain open and subject to examination by the various taxing authorities.

As of December 31, 2022, the Company’s federal and state and local income tax years 2019 through 2022 remain open and are subject to examination.

VARIABLE INTEREST ENTITIES

Investments in consolidated Variable Interest Entities

The Company evaluates its ownership, contractual, and other interests in entities to determine if they are VIEs, if the Company has a variable interest in those entities, and the nature and extent of those interests.

These evaluations are highly complex and involve management judgment and the use of estimates and assumptions based on available historical information, among other factors.

Based on its evaluations, if the Company determines it is the primary beneficiary of such VIEs, it consolidates such entities into its financial statements.

VIEs information below is presented on aggregate basis based on similar risk and reward characteristics and MSP’s involvement with the VIEs.

The Company includes a number of entities that are determined to be VIEs and for which the common control group can direct the use of the entities’

assets and resources for other purposes.

The Company consolidates VIEs in which one of the combined entities is the primary beneficiary.

The assets of the consolidated VIEs may only be used to settle obligations of these VIEs and to settle any investors’

ownership liquidation requests.

There is no recourse to MSP for the consolidated VIEs’

The assets of the consolidated VIEs are not available to MSP’s creditors.

Total assets and liabilities included in its consolidated balance sheets for these VIEs were $ 2.3 billion and $ 0.4 million, re spectively, at December 31, 2022 and $ 9.7 million and $ 122.7 million, respectively, at December 31, 2021 .

The assets at December 31, 2022 include the Intangible Assets, net included in the Series of $ 2.3 billion.

Investments in unconsolidated Variable Interest Entities

The Company is involved with VIEs in which it has investments in equity but does not consolidate because it does not have the power to direct the activities that most significantly impact their economic performance and thus is not considered the primary beneficiary of the entities.

Those VIEs are reflected as equity method investments.

Total assets and liabilities for these VIEs were $ 3.4 million and $ 0.3 million , respectively, at December 31, 2022 and $ 5.4 million and $ 0.3 million , respectively, at December 31, 2021.

Generally, MSP's exposure is limited to its investment in those VIEs (see Note 5, Investment in Equity Method Investees ).

For MAO-MSO Recovery II, LLC and Series PMPI, MSP may be exposed to providing additional recovery services at its own cost if recovery proceeds allocated to it are insufficient to recover the costs of those services.

MSP does n ot have any other exposures or any obligation to provide additional funding.

CLAIMS FINANCING OBLIGATIONS AND NOTES PAYABLE

During the year ended December 31, 2022, the Company finalized an Amendment to Claim Proceeds Investment Agreement and a Warrant Agreement with Brickell Key Investments LP (the "Holder"), pursuant to which the parties have agreed to amend the original Claims Proceeds Investment Agreement ("CPIA") and required payment terms.

The Amendment and Warrant Agreement were executed effective September 30, 2022.

The maximum amount of Class A Shares that the Holder may purchase from the Company is 66,666,666 (the “Amount”) for a purchase price equal to $ 6,666.67 ($ 0.0001 per Class A Share) and is payable in cash.

This Warrant (the “Warrant”) will expire at 5:00 p.m.

(Eastern Time), on September 30, 2027 and may be exercised in whole or in part by Holder at any time prior to such date.

The Holder can only sell a maximum of 15 % per month of the Class A Shares obtained through the Warrant.

In exchange for the Company issuing the Warrant, the amounts owed to the Holder pursuant to CPIA are amended to equal $ 80 million.

The Holder has the right to receive the $ 80 million owed through proceeds as outlined in the CPIA, cash paid by the Company or monetization of the Warrant (through the sale of the Warrant or sale of the underlying Class A Shares).

If the Holder monetizes the Warrant, the amount owed will be reduced at a measure of $ 1.20 per Class A Share.

In connection with the Amendment and Warrant Agreement, the Holder also executed a Stock Pledge Agreement (the "Pledge Agreement") with MSP Founders, John H.

Ruiz and Frank Quesada (the "Founders").

As part of the agreement, the Founders agreed to pledge 50 million shares to secure payment of the original principal amount of the CPIA.

If the Holder were to receive amounts in excess of $ 80 million, the Founders would receive interest of 10 % on the original principal amount of the CPIA.

In addition, the Pledge Agreement provides the right to repurchase the Warrant from the Holder on or before June 30, 2023.

The Founders entered into an agreement with the Company where this repurchase right has been assigned to the Company (the "Side Agreement").

The Pledge Agreement and Side Agreement were executed effective September 30, 2022.

As the Company has, at its option, the ability to pay its obligation through cash proceeds or through monetization of the Warrants, the amount owed as of December 31, 2022 was included as Claims financing obligation and notes payable on the consolidated balance sheet.

Also, the liability related to the remaining amounts due was recorded as $ 80 million as of December 31, 2022 as the Company, at its option, has the ability to repurchase the Warrants for $ 80 million on or before June 30, 2023.

The resulting gain on debt extinguishment from the amendment was $ 63.4 million and was recorded in Other income (expense), net within the consolidated statement of operations for the year ended December 31, 2022.

Based on Claims financing obligations and notes payable agreements, as of December 31, 2022 and December 31, 2021, the present value of amounts owed under these obligations were $ 201.3 million and $ 201.4 million , respectively, including unpaid interest to date of $ 2.8 million and $ 94.5 million , respectively.

The weighted average interest rate is 6.3 % based on the current book value of $ 201.3 million with rates that range from 2 % to 11.04 % .

The Company is expected to repay these obligations from cash flows from Claim recovery income or potentially through class A common stock issuances.

As of December 31, 2022, the minimum required payments on these agreements are $ 354.9 million .

Certain of these agreements have priority of payment regarding any proceeds until full payment of the balance due is satisfied.

The maturity of the commitments range from the date sufficient Claims recoveries are received to cover the required return or in some cases by 2031.

Also, during 2020, the Company obtained funds under the Paycheck Protection Program (the “PPP Loan”) in the amount of $ 1.1 million.

Since the amount must be repaid unless forgiven in accordance with the Paycheck Protection Program, the Company accounted for the funds as debt under ASC 470.

As of December 31, 2022 and December 31, 2021, t he total amount of the PPP Loans have been forgiven.

NONCONTROLLING INTEREST

The non-controlling interest balance primarily represents the Up-C Units of the Company held by the Members.

The following table summarizes the ownership of Units in the Company as of December 31, 2022:

Ownership Percentage

Ownership of Class A Common Units

Ownership of Class V Common Units

3,147,979,494

Balance at end of period

3,222,584,778

The non-controlling interest holders have the right to exchange Up-C Units, at the Company's option, for (i) cash or (ii) one share of Class A Common Stock, subject to the provisions set forth in the LLC Agreement.

As such, future exchanges of Up-C Units by non-controlling interest holders will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in-capital or retained earnings when the Company has positive or negative net assets, respectively.

As of December 31, 2022 , 6.5 million Up-C Units have exchanged into Class A shares.

In addition to the non-controlling interest related to Up-C Units, the Company also has non-controlling interests related to the Series as noted in Note 10, Variable Interest Entities, and MAO-MSO Recovery LLC Series FHCP (“FHCP”), which is a non-wholly owned subsidiary of MSP Recovery, LLC.

In accordance with FHCP’s operating agreement, the noncontrolling member is entitled to a preferred return of 20 % per annum (the “Preferred Return”).

Once the Preferred Return has b een met, the noncontrolling member is entitled to 80 % of Claims recoveries by FHCP.

The controlling member is allocated 100 % of the costs of FHCP.

Since the Preferred Return exceeds the total members’

equity of FHCP as of December 31, 2022 and December 31, 2021 , the non-controlling interest also includes $ 4.3 million representing the entire members’

equity of FHCP.

COMMITMENTS AND CONTINGENCIES

The Company is subject to certain legal proceedings, Claims, investigations, and administrative proceedings in the ordinary course of its business.

The Company records a provision for a liability when it is both probable that the liability has been incurred and the amount of the liability can be reasonably estimated.

These provisions, if any, are reviewed and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.

Depending on the nature and timing of any such proceedings that may arise, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period.

As of December 31, 2022, there was no material pending or threatened litigation against us.

The Company pursues Claims recoveries through settlement, arbitration and legal proceedings.

The accounting policy for these activities is discussed under Claims recovery income in Note 2, Basis of presentation and summary of significant accounting policies .

Approximately 93 % of the Company's expected recoveries arise from Claims being brought under the Medicare Secondary Payer Act private cause of action (Section 1862(b)(3)(A) of the Social Security Act (42 U.S.C.

§ 1395y(b)(3)(A)).

This law allows the Company to pursue recoveries against primary payers for reimbursement of medical expenses that the Company's assignors paid for when primary payers (i.e., liability insurers) were responsible for payment.

On May 16, 2023, Senators Tim Scott (R-SC) and Maggie Hassan (D-NH) and Representatives Brad Schneider (D-IL) and Gus Bilirakis (R-FL) introduced the Repair Abuses of MSP Payments Act (S.1607/H.R.3388) (the “RAMP Act”) in the U.S.

Senate and the U.S.

House of Representatives, respectively, seeking to amend the private cause of action under the Medicare Secondary Payer Act, by striking “primary plan”

and inserting “group health plan”

(as defined in paragraph 42 U.S.C.

§ 1395y(b)(1)(A)(v)).

The Medicare Secondary Payer Act’s private cause of action—a fundamental component of how the Company is able to calculate damages—incentivizes private parties, such as MSP Recovery, to pursue reimbursement of conditional payments by rewarding them with double damages.

If the Medicare Secondary Payer Act is changed, or if the RAMP Act were enacted to apply retroactively, it could

significantly reduce the Company's potential recoveries and have a material adverse effect on its business, financial condition, and results of operations.

RELATED PARTY

Loan from related parties

During the year ended December 31, 2022 , the Company issued an unsecured promissory note in an aggregate principal amount of $ 112.8 million ( the “Promissory Note”) to John H.

Ruiz and Frank C.

Quesada, the Company’s Chief Executive Officer and director and Chief Legal Officer and director, respectively (collectively, the “MSP Principals”), t o provide cash to pay transaction costs related to the Merger, pay down affiliate payable balances and provide operating cash to the Company.

In addition to the amounts in the Promissory Note, at the merger date with LCAP, the MSP Principals contributed $ 13.0 million through funds that had been loaned to VRM MSP to cover related service fees.

The Promissory Note as well as the amount contributed at the merger date bears interest at an annual rate of 4 %, payable in kind, and will mature on the four-year anniversary of the issuance.

The Promissory Note is payable by the Company at any time, without prepayment penalties, fees, or other expenses.

During the year ended December 31, 2022 , the Company recorded $ 2.7 million on interest expense related to the Promissory Note.

A portion of the proceeds under the Promissory Note in an amount equal to $ 36.5 million was advanced to the Law Firm, an affiliate of certain Members, for certain operating expenses as contemplated by the Legal Services Agreement.

This amount is reflected in prepaid expenses and other current assets within the consolidated balance sheets and had a balance o f $ 26.9 million as of December 31, 2022.

The payments of Law Firm expenses are reflected in Professional fees - legal within the consolidated statement of operations.

The payments are expense as incurred as the Company doesn't have recourse to these amounts, but if the Law Firm earns fees under the legal service agreements (the "Existing LSAs") noted below, the Company would not be obligated to pay these costs until the amount of fees earned were in excess of the payments of Law Firm expenses and payments the Company has made to co-counsels.

As of as December 31, 2022, the Company has paid Law Firm expenses and co-counsel fees equal to $ 21.9 million in excess of the fees earned under the Existing LSAs.

Therefore, the Company would not be required to pay or incur expenses through cost of Claims recoveries until the amount of fees earned were in excess of the amounts already paid.

As of December 31, 2022 , this represents prepayments that would cover recoveries of $ 109.5 million assuming the 40 % fees on the half owned by the Company as fees are not incurred on the half owned by the assignors.

Legal Services –

MSP Recovery Law Firm

Certain Company entities have previously entered into the Existing LSAs with the Law Firm, an affiliate of certain Members, for the recovery of Claims.

Pursuant to the terms of the Existing LSAs, the Law Firm provides the Company with investigation, case management, research and legal services in the pursuit of recovery of Claims in exchange for a portion of the recovered proceeds relating to such Claims.

The Existing LSAs also provide that the Law Firm serves as exclusive lead counsel for any litigation relating to such Claims.

As of December 31, 2022 there was no amount due as amounts paid through the prepaid noted above had covered amounts of existing LSAs due to the Law Firm for Claim recoveries.

As of December 31, 2021, $ 5.5 million was due to the Law Firm and included in the consolidated balance sheets in Affiliate Payable.

For the year ended December 31, 2022, $ 29.7 million was included in Professional fees - Legal for expenses related to the Law Firm in the consolidated statements of operations.

The amounts were largely due to share base compensation as noted below and the payment of Law Firm expenses per the related party loan as noted above.

For the years ended December 31, 2021 and 2020, the amounts were de minimis.

For the year ended December 31, 2022, $ 405 thousand were included in cost of Claims recoveries for expenses related to the Law Firm in the consolidated statements of operations.

For the years ended December 31, 2021 and 2020 , no amounts were included cost of Claims recoveries for expenses related to the Law Firm in the consolidated statements of ope rations.

The Law Firm may also collect and/or hold cash on behalf of the Company in the ordinary course of business.

As of December 31, 2022 and December 31, 2021, $ 2.1 million and $ 3.4 million , respectively, was due from the Law Firm and included in the consolidated balance sheets in Affiliate Receivable.

In addition, the Company rents office space from the Law Firm as discussed in Note 8, Short Term Leases .

For the year ended December 31, 2022, the Company issued 8,022,000 Class A common stock shares to the Law Firm employees, which was deemed to be share based compensation.

As such $ 20.1 million of expense was included within Professional fees - Legal for expenses related to the Law Firm in the consolidated statements of operations for the year ended December 31, 2022.

MSP Recovery Aviation, LLC

The Company may make payments related to operational expenses on behalf of its affiliate, MSP Recovery Aviation, LLC (“MSP Aviation”).

MSP Aviation was created to provide aircraft rental to third party customers and the Company.

The Company has made payments in the periods of the financial statements only related to specifically billed flights and these rates are at or below the market rate for such services.

As of both December 31, 2022 and December 31, 2021, $ 153 thousand was due from MSP Aviation and included in the consolidated balance sheets in Affiliate Receivable.

For the year ended December 31, 2022, $ 400 thousand was included in

General and Administrative expenses related to MSP Aviation in the consolidated statements of operations.

For the year ended December 31, 2021 and 2020, the amounts were de minimis.

Funds held for other entities

The Company may collect and/or hold cash on behalf of its affiliates in the ordinary course of business.

As of December 31, 2022 and December 31, 2021, $ 19.8 million and $ 39.7 million was due to affiliates of the Company and included in the consolidated balance sheets in Affiliate Payable.

These amounts were primarily due to Series MRCS, and will be repaid either through excess cash flows from operations or other financing.

During the year ended December 31, 2021, the Company also entered into a note payable with Series MRCS as outlined in Note 7, Intangible Assets, Net .

As of December 31, 2022 and December 31, 2021, the balance of the note payable was $ 0.5 million and included in the consolidated balance sheets in Claims financing obligation and notes payable.

As of December 31, 2022 and December 31, 2021, there were additional receivables from other affiliates of $ 148 thousand and $ 92 thousand , respectively.

As of December 31, 2021, $ 0.4 million was due to MSP National, LLC from Series MRCS.

These were included in the consolidated balance sheets in Affiliate Receivable.

Historically, MSP Recovery, LLC has received Claims recovery service income for services provided to VRM MSP.

The Company concluded that VRM MSP is a related party due to ownership interests in the entity held by Series MRCS LLC.

During the years ended December 31, 2022, 2021 and 2020, $ 10.6 million , $ 11.5 million and $ 13.1 million, respectively, of Claims recovery service income was received from VRM MSP as part of the servicing agreement and was included in the consolidated statements of operations.

As of the merger date, the VRM MSP servicing agreement was terminated.

INVESTMENTS IN EQUITY SECURITIES AND OBLIGATIONS TO DELIVER SECURITIES

The Company had an outstanding obligation to provide equity securities (a “short position”) as of December 31, 2020.

The short position was classified as a liability, marked-to-market and was evaluated at Level 1 for fair value.

During the year ended December 31, 2021 , the Company covered its short position by acquiring 100,000 equity shares of a publicly traded U.S.

company for $ 1.8 million, recognizing a realized loss of $ 193 thousand in Other income, net in the consolidated statements of operations.

As of December 31, 2022 and December 31, 2021 , the Company had no investments in equity securities.

N ET LOSS PER COMMON SHARE

Basic earnings per share of Class A common stock is computed by dividing net income attributable to common shareholders by the weighted-average number of shares of Class A common stock outstanding during the period.

Diluted earnings per share of Class A common stock is computed by dividing net income attributable to common shareholders adjusted for the assumed exchange of all potentially dilutive securities, by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements.

Diluted loss per share for all period presented is the same as basic loss per share as the inclusion of the potentially issuable shares would be anti-dilutive.

Prior to the Business Combination, the equity structure of MSP Recovery, LLC included units which shared in the profits and losses of MSP Recovery, LLC.

In reviewing the calculation of earnings per unit for periods prior to the Business Combination, the Company concluded that it resulted in values that would not be meaningful to the users of the consolidated financial statements.

As such, earnings per share information for the year ended December 31, 2021 and 2020 has not been presented.

The basic and diluted earnings per share for the year ended December 31, 2022 represent loss from only the period from the Closing Date to December 31, 2022 for the Company.

The following table sets forth the computation of basic and diluted earnings per share of Class A common stock:

(In thousands except shares and per share amounts)

Year ended December 31, 2022

Numerator - basic and diluted:

Net loss attributable to MSP Recovery, LLC pre Business Combination

Net loss attributable to the noncontrolling interest post Business Combination

Net loss attributable to common shareholders

Denominator - basic and diluted:

Weighted-average shares of Class A common stock outstanding - basic

Effect of dilutive securities:

Weighted-average shares of Class A common stock outstanding - dilutive

Earnings per share of Class A common stock - basic

Earnings per share of Class A common stock - diluted

Shares of the Company’s Class V common stock do not participate in the earnings or losses of the Company and are therefore not participating securities.

As such, separate presentation of basic and diluted earnings per share of Class V common stock under the two-class method has not been presented.

In the calculation for earnings per share for the year ended December 31, 2022, the Company excluded from the calculation of diluted earnings per share 3,147,979,494 shares of Class V common stock, 3,319,304 Public Warrants outstanding, 66,666,666 CPIA Warrants and 1,028,046,326 shares of New W arrants ou tstanding because their effect would have been anti-dilutive.

DERIVATIVE LIABILITY

The Company and CF entered into an agreement for an OTC Equity Prepaid Forward Transaction (the “Transaction”).

Pursuant to the terms of the Transaction, CF agreed to (a) transfer to the Company for cancellation any warrants to purchase shares received as a result of being the stockholder of record of a share as of the close of business on the closing date of the Business Combination, pursuant to the previously announced and declared LCAP dividend and (b) waive any redemption right that would require the redemption of the Subject Shares (as defined below) in exchange for a pro rata amount of the funds held in LCAP’s trust account.

At closing of the Business Combination, the Company transferred from the trust account to an escrow account an amount equal to (a) the aggregate number of such Subject Shares (approximately 1.1 million shares), multiplied by (b) the per share redemption price for shares out of the trust account, as a prepayment to CF of the amount to be paid to CF in settlement of the Transaction for the number of shares owned by CF at the closing of the Business Combination (the “FEF Shares”).

CF may sell the Subject Shares at its sole discretion in one or more transactions, publicly or privately.

Any such sale shall constitute an optional early termination of the Transaction upon which (a) CF will receive from the escrow account an amount equal to the positive excess, if any, of (x) the product of the redemption price and the aggregate number of shares over (y) an amount equal to the proceeds received by CF in connection with sales of the shares, and (b) the Company will receive from the escrow account the amount set forth in (y) above.

The Company concluded that the instrument includes an embedded derivative for the change in value of the Company's Class A common stock and as such, at the end of each period the Company will mark to market the shares through booking a derivative liability/asset.

The calculation of the derivative liability/asset would be the difference between the restricted cash and current fair value of the outstanding FEF shares (number of FEF shares multiplied by market price of the Company's Class A common stock as of period end).

As of December 31, 2022 , CF had not sold any FEF shares.

The aggregate purchase price of $ 11.4 million is reflected in restricted cash with the fair value of the shares of $ 1.8 million in cluded as Class A common stock subject to possible redemption within temporary equity and the derivative liability of $ 9.6 million reflecte d in current liabilities in the consolidated balance sheets.

QUARTERLY FINANCIAL DATA (UNAUDITED) RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Description of Restatement of Financial Information

Subsequent to the issuance of the interim financial information as of and for the periods ended June 30, 2022 and September 30, 2022, management identified material errors in such financial information.

As disclosed within Note 4, Asset Acquisitions, the Company acquired various intangible assets in connection with the Business Combination.

The Company identified an error in the accounting for these acquisitions, in that the Class A market price as of the Closing Date utilized in the valuation included the value of the New Warrants, whereas the Up-C Units provided in the acquisition did not have rights to New Warrants.

Therefore, the Class A market price didn't equate to the value of the Up-C Units until the opening of the day after the Closing Date when the New Warrants became detached from the Class A shares.

This error impacts the intangible assets value that was acquired as of the Closing Date and the resulting amortization of those assets.

In addition, the Company also determined, based on analysis of the rights to cash flows from the Series and the related guaranty obligation, that the Company is the primary beneficiary of the Series, and therefore should consolidate as of the transaction date.

This error impacts the intangible assets and indemnification asset value that was acquired as the balance is now reflected in Intangible Assets, net and is therefore amortized rather than recorded as a financial asset;

as a result of this change, the indemnification asset is no longer recorded and the Virage Guaranty is accreted through interest expense.

The Company's financial statements should also include the activity of the Series from the date of acquisition as it is now consolidated.

As a result of these errors, the Company determined that the valuation of the asset acquisitions and impacts of consolidating the Series were misstated in the Company's financial statements for the periods ending June 30 and September 30, 2022.

In the following tables, the Company has presented a reconciliation of its unaudited condensed consolidated financial information as originally reported, to the as restated amounts as of and for the three and six months ended June 30, 2022, and the three and nine months ended September 30, 2022.

The restatements will be reflected in the comparative financial statements included in our future filings of our 2023 unaudited condensed consolidated financial statements within our Quarterly Reports on Form 10-Q.

The table below sets forth the unaudited condensed consolidated balance sheet information, including the balances as reported, adjustments and the balances as restated:

For the reporting period

(In thousands except per share amounts)

June 30, 2022

As previously

Current assets:

Accounts receivable

Indemnification asset

Total current assets

Deferred tax asset

Intangible assets, net

Investment in rights to claim recovery cash flows

Stockholders' Equity (Deficit):

Additional paid-in capital

Accumulated deficit

Total Stockholders' Equity (Deficit)

Non-controlling interest

Total liabilities and equity

For the reporting period

September 30, 2022

As previously

(In thousands except per share amounts)

Current assets:

Accounts receivable

Indemnification asset

Total current assets

Deferred tax asset

Intangible assets, net

Investment in rights to claim recovery cash flows

Stockholders' Equity (Deficit):

Additional paid-in capital

Accumulated deficit

Total Stockholders' Equity (Deficit)

Non-controlling interest

Total liabilities and equity

The tables below set forth the unaudited condensed consolidated statements of operations, including the balances as reported, adjustments and the as restated balances:

For the three months

ended June 30, 2022

For the six months

ended June 30, 2022

(In thousands except per share amounts)

Restatement Adjustments

Claims recovery income

Claims recovery service income

Total Claims Recovery

Operating expenses

Cost of claim recoveries

Claims amortization expense

Professional fees

Total operating expenses

Operating Loss

Interest expense

Net loss before provision for income taxes

Provision for income tax benefit (expense)

Net (income) loss attributable to non-controlling members

Net loss attributable to controlling members

Basic and diluted weighted average shares outstanding, Class A Common Stock

Basic and diluted net income per share, Class A Common Stock

For the three months

ended September 30, 2022

For the nine months

ended September 30, 2022

(In thousands except per share amounts)

Restatement Adjustments

Claims recovery income

Total Claims Recovery

Operating expenses

Cost of claim recoveries

Claims amortization expense

Professional fees

Total operating expenses

Operating Loss

Interest expense

Net loss before provision for income taxes

Provision for income tax benefit (expense)

Net (income) loss attributable to non-controlling members

Net loss attributable to controlling members

Basic and diluted weighted average shares outstanding, Class A Common Stock

Basic and diluted net income per share, Class A Common Stock

The table below sets forth the unaudited condensed consolidated statements of cash flows, including balances as reported, adjustments and balances as restated amounts.

Note that only amounts that have changed have been disclosed:

For the six months

ended June 30,

(In thousands)

As Previously Reported

Restatement Adjustments

Cash flows from operating activities:

Claims amortization expense

Paid in kind interest

Deferred income taxes

Change in operating assets and liabilities:

Accounts receivable

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

For the nine months ended September 30, 2022

(In thousands)

As Previously Reported

Restatement Adjustments

Cash flows from operating activities:

Claims amortization expense

Paid in kind interest

Deferred income taxes

Accounts receivable

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

The table below sets forth the unaudited condensed consolidated statements of changes in equity, including balances as reported, adjustments and balances as restated amounts.

Note that only amounts that have changed have been disclosed:

For the reporting period June 30, 2022

As Previously Reported

Restatement Adjustments

(In thousands except shares)

Additional Paid-in Capital

Accumulated Deficit

Non- Controlling Interests

Additional Paid-in Capital

Accumulated Deficit

Non- Controlling Interests

Additional Paid-in Capital

Accumulated Deficit

Non- Controlling Interests

Balance at December 31, 2021

Contributions prior to recapitalization transaction

Distributions prior to recapitalization transaction

Net loss prior to recapitalization transaction

Cumulative effect of recapitalization transaction

Opening net assets of Lionheart II Holdings, LLC acquired

Adjustment for value of derivative on temporary equity

Conversion of Warrants

Class A Issuances

Balance at June 30, 2022

For the reporting period September 30, 2022

As Previously Reported

Restatement Adjustments

(In thousands except shares)

Additional Paid-in Capital

Accumulated Deficit

Non- Controlling Interests

Additional Paid-in Capital

Accumulated Deficit

Non- Controlling Interests

Additional Paid-in Capital

Accumulated Deficit

Non- Controlling Interests

Balance at December 31, 2021

Contributions prior to recapitalization transaction

Distributions prior to recapitalization transaction

Net loss prior to recapitalization transaction

Cumulative effect of recapitalization transaction

Opening net assets of Lionheart II Holdings, LLC acquired

Adjustment for value of derivative on temporary equity

Conversion of Warrants

Class A Issuances

Balance at September 30, 2022

SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated

financial statements were issued.

Based upon this review, except for below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

On January 27, 2022, the Company held a special meeting of the Company’s stockholders (the “Extension Meeting”).

At the Extension Meeting, the

Company’s stockholders approved to extend the date by which the Company must consummate its initial business combination from February 18, 2022 to August 18, 2022.

As part of the meeting, Stockholders holding 10,946,369 shares of the Company’s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the

Company’s trust account, amounting to approximately $ 109,469,789 removed from the Company’s trust account to pay such stockholders.

Hazel Transactions

On March 29, 2023 (and amended on July 17, 2023), the Company entered into a membership interest purchase agreement with Hazel, whereby in exchange for a stated purchase price of $ 390 million, the Company acquired from Hazel interests in certain Claims recovery and reimbursement rights (the "Claims Purchase").

The purchase price for the Claims Purchase was funded by (i) the proceeds from the Claims Sale (as defined below), and (ii) a purchase money loan between Hazel, as lender, and the Company, as borrower, in the amount of $ 250 million (the "Purchase Money Loan").

On March 29, 2023 , the Company entered into a membership interest purchase agreement with Hazel, whereby in exchange for a purchase price of $ 150 million, Hazel acquired from the Company the membership interests in entities that own certain other Claims recovery and reimbursement rights, provided that the Company and Hazel will share in the recovery proceeds therefrom in accordance with an agreed waterfall (the "Claims Sale," and together with the Claims Purchase, the "Claims Transactions").

In addition, on March 29, 2023 , the Company entered into an Amended and Restated Credit Agreement (the "Working Capital Credit Facility") with affiliates of Hazel, as the lender and administrative agent, which provides for up to $ 80 million (with a 40 % original issue discount), consisting of a Term Loan A commitment to fund up to $ 30 million (in multiple installments) in proceeds, and a Term Loan B Commitment to fund up to $ 18 million (in multiple installments) in proceeds, the funding of each conditioned on certain milestones.

An initial $ 10 million in proceeds was drawn under the Term Loan A on March 6, 2023.

On March 29, 2023, an additional $ 5 million was disbursed to the Company under the Term Loan A.

On May 11, 2023 and June 13, 2023, Hazel notified us that it would

not disburse additional funds under the Working Capital Credit Facility until the Company satisfies certain funding conditions, including the filing of this Annual Report on Form 10-K.

The parties subsequently agreed that $ 5.5 million will be funded under Term Loan A in accordance with the terms of the Working Capital Credit Facility subsequent to the filing of this 2022 Form 10-K and receipt of funding notices, deeming funding conditions satisfied or waived.

Following such funding, the Term Loan A commitment would be terminated , with total funding of $ 20.5 million .

In addition, the parties agreed to increase the Term Loan B commitment from $ 18 million to $ 27.5 million, which will be funded in multiple installments and in accordance with the terms of the Working Capital Credit Facility.

Loans under the Working Capital Credit Facility accrue interest at a Term Secured Overnight Financing Rate for 12-month interest period, plus an applicable margin of 10 % per annum.

Accrued interest on the Working Capital Credit Facility is payable in kind and will be capitalized.

The Working Capital Credit Facility has a stated maturity date of March 31, 2026 , and Hazel may extend for up to one year in its sole discretion.

The Purchase Money Loan accrues interest at a rate of 20 % per annum, payable in kind or in cash at the Company's discretion.

The Purchase Money Loan has a maturity date of March 31, 2026 , extendable up to one year in Hazel's sole discretion.

The Company is permitted to prepay the loans under the Working Capital Credit Facility from time to time without prepayment premium.

Prepayment of the Purchase Money Loans will be permitted after the prepayment or repayment of loans under the Working Capital Loans, and such prepayment of the Purchase Money Loans may be subject to prepayment penalty, as applicable.

The Purchase Money Loan and the Working Capital Credit Agreement contains certain representations, warranties and covenants of the Company and its subsidiaries, including restrictions on debt incurrence, liens, investments, affiliate transactions, distributions and dividends, fundamental changes, certain debt prepayments and Claim settlement.

Amounts borrowed and obligations under the Purchase Money Loan and the Working Capital Credit Facility are secured by a pledge of proceeds from certain Claims in the Company's Claims portfolio, with the lien securing the Purchase Money Loan being subordinated and junior to the lien securing the Working Capital Credit Facility.

Pursuant to the Purchase Money Loan and the Working Capital Credit Facility, the Company entered into a collateral administrative agreement between the Company and Hazel, which sets forth certain arrangements between the Company and Hazel in relation to the management of the litigation of certain Claims owned by the Company, the proceeds of which were pledged to Hazel to secure the Purchase Money Loan and the Working Capital Credit Facility.

Yorkville Facility

Refer to Note 1 - Description of the Business of this Form 10-K.

Virage Amendment

On April 12, 2023, we entered into an amendment (the "Virage MTA Amendment") to the Virage MTA and Virage Guaranty pursuant to which the payment date was extended from May 23, 2023 until September 30, 2024, subject to acceleration upon certain triggering events.

The guaranty obligation will become current at September 30, 2023, and the Company does not currently have available liquidity to satisfy such obligations.

Under the Virage MTA Amendment, Virage will receive a first priority lien on all sources of revenue of the company not otherwise encumbered as of the date of the Virage MTA Amendment, to the extent in excess of the amount of revenues necessary to establish and maintain an operating reserve of $ 70 million for overhead expenses and applicable taxes.

On January 1, 2024, if the Virage Guaranty is not paid, the Company will be required to make a one-time, lump sum payment to Virage for the period starting May 24, 2023 and ending December 31, 2023, in one or a combination of:

(a) cash, in an amount equal to 1.0% of each calendar month-end balance (which month-end balance shall be increased daily up to 20% per annum based on a formula set forth in the Virage MTA Amendment) of the amount owing to Virage as of each preceding calendar month end and/or (b) warrants to purchase Class A common stock at $ 0.0001 per share, in an amount equal to the quotient of 1.0% of each calendar month-end balance (which shall be increased daily up to 20% per annum based on a formula set forth in the Virage MTA Amendment) of the amount owing to Virage as of each preceding calendar month end and the volume weighted average price of a share of our Class A common stock for the five day period prior to the issuance.

If paid in warrants, such warrants will expire on January 1, 2026 .

Further, for each calendar month beginning with January 31, 2024 until the obligations to Virage are paid in full, the Company has agreed to pay to Virage an amount monthly, in one or a combination of:

(a) cash, in an amount equal to 1.0% of each calendar month-end balance (which month-end balance shall be increased daily up to 20% per annum based on a formula set forth in the Virage MTA Amendment) of the amount owing to Virage as of each preceding calendar month end and/or (b) warrants to purchase Class A common stock at $ 0.0001 per share, in an amount equal to the quotient of 1.0% of each calendar month-end balance (which month-end balance shall be increased daily up to 20% per annum based on a formula set forth in the Virage MTA Amendment) of the amount owing to Virage as of each preceding calendar month end and the volume weighted average price of a share of our Class A common stock.

If paid in warrants, such warrants will expire two years from the date of issuance.

The warrants will contain customary provisions for a transaction of this type, including that each warrant will be exercisable in whole or in part at any time prior to the expiration date, be freely transferable, subject only to applicable securities laws, and be subject to customary anti-dilution protection regarding the exercise price and number of shares of Class A Common Stock to be issued upon the exercise of each warrant.

Amended and Restated Nomura Promissory Note

On April 12, 2023, the Company amended the promissory note to Nomura originally issued on May 27, 2022, which amendment increased the principal amount to approximately $ 26.3 million and extended the maturity date of the promissory note to September 30, 2024 .

The note will become current at September 30, 2023, and the Company does not currently have available liquidity to satisfy said obligation.

The amended note carries an interest rate of 16 % per annum and is payable in kind or in cash, at the Company's discretion, every 30 calendar days after April 12, 2023.

Cano Health Share Issuance

On July 7, 2023, the Company issued 199,000,001 shares of Class A common stock to Cano Health, LLC (“Cano”) as payment for $ 61,677,419.35 million dollars in deferred compensation related to the following agreements, which the Company had the option to pay in cash or in stock and has elected to pay in stock, of which (i) 80,645,162 shares of Common Stock were issued as a deferred consideration for the assignment of certain claims pursuant to that certain Purchase Agreement, effective as of September 30, 2022, as amended to date, by and between the Company and Cano, and (ii) 118,354,839 shares of Common Stock were issued as deferred consideration for the assignment of certain claims pursuant to that certain Amended and Restated Claims Recovery and Assignment Agreement effective as of December 31, 2021, as amended to date, by and between the Company and Cano.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data