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Item 1A. Risk Factors

2024-04-15 compared with 2023-07-27 · 553 added, 513 removed, 646 unchanged (62% of the section changed)

Risk Factors.

An investment in our securities involves a high degree of risk.

You should carefully consider the following risk factors, together with all of the other information included in this Form 10-K before making an investment decision.

The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances may have an adverse effect on our business, cash flows, financial condition, and results of operations.

You should also carefully consider the following risk factors in addition to the other information included in this Form 10-K, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

We may face additional risks and uncertainties that are not presently known to us or that we currently deem immaterial, which may also impair our business or financial condition.

The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

RISK FACTORS SUMMARY

The following is a summary of some of the Company’s most important risks and uncertainties that could materially adversely affect our business, financial condition, and results of operations.

You should read this summary together with the more detailed description of each risk factor.

Additional discussion of the risks summarized in this Risk Factors Summary, and other risks that we face, can be found below under the heading “Risk Factors”

and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment in our securities.

Risks Related to the Company’s Business and Industry:

We have a history of net losses and no substantial revenue to date, and we may not achieve recoveries, generate significant revenue or achieve profitability.

We have a limited history of actual recoveries to date, and there are risks associated with estimating the amount of revenue that we recognize from the recovery.

Litigation outcomes are inherently risky, and we depend upon the due care of lawyers and the court system.

Unfavorable court rulings, delays, damages limitations, and our ability to collect on judgments in our favor could adversely affect our business.

Counterparties in our lawsuits employ dilatory tactics that delay the resolution of litigation or settlement negotiations, which increases the costs associated with recoveries and substantially delays the outcome of our cases and any associated revenue recognition.

Our fee sharing arrangement with the Law Firm materially reduces our recoveries.

Assignors may pursue recovery on Claims directly or may use recovery agents other than us in connection with the Assignor’s efforts to recover on Claims.

Our business and future growth depend on our ability to successfully expand the volume of our healthcare Claims and obtain data from new Assignors and healthcare Claims from our existing Assignor base.

Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors” that represent challenges that we face in connection with the successful implementation of our strategy and growth of our business.

The occurrence of one or more of the events or circumstances described in the section entitled “Risk Factors,” alone or in combination with other events or circumstances, may adversely affect our ability realize the anticipated benefits of the Business Combination, and may have an adverse effect on our business, cash flows, financial condition, and results of operations.

Such risks include, but are not limited to:

Risks Related to the Company’s Business and Industry:

• We have a history of losses and no substantial revenue to date;

we may not generate significant revenue, or achieve profitability.

• We have a limited history of actual recoveries to date;

there are risks associated with estimating the revenue that we recognize.

• We assume the risk of failure to recover on the assigned Claims, and we may fail to make recoveries.

• Unfavorable court rulings, delays, and damages limitations may limit our ability to collect on judgments in our favor.

• Our litigation often involves complex, novel legal theories with little or no precedent on which courts can rely.

• Our lawsuits are brought in a diverse range of venues and jurisdictions, which may result in different outcomes on similar issues.

• Counterparties in our lawsuits employ dilatory tactics that delay the resolution of litigation or settlement negotiations.

• Our fee sharing arrangement with Law Firm materially reduces our recoveries.

• Assignors may pursue recoveries directly or use other recovery agents in connection with their efforts to recover on Claims.

• Lawyers who we rely on to litigate may not exercise due skill and care, or have interests conflicting with those of our Assignors.

• Our future growth depends on growth of the volume of our assigned healthcare Claims and obtaining associated data.

• The positions we will typically acquire in connection with our acquisition of Claims are unsecured and may be effectively subordinated to other obligations and are at risk to fraud on the part of the Assignor of the Claim.

If our existing Assignors prematurely terminate their agreement with us or if either party materially breaches an agreement, and we can no longer receive future assignments of healthcare Claims recoveries, it could have a material adverse effect on our business, financial condition, and results of operations.

We have long sales and implementation cycles for many of our data-driven solutions and may fail to close sales after expending time and resources, or experience delays in implementing the solutions.

If our Assignors’

risk agreements change, it can have a material adverse effect on our business, financial condition, and results of operations.

Our use and disclosure of individually identifiable information, including health information, is subject to federal and state privacy and security regulations, and our failure to comply with those regulations or adequately secure the information we hold could result in significant liability or reputational harm.

If we fail to innovate and develop new solutions, or if these new solutions are not adopted by existing and potential Assignors or other users, it could have a material adverse effect on our business, financial condition and results of operations.

Changes in the United States healthcare environment, or in laws relating to healthcare programs and policies, and steps we take in anticipation of such changes, particularly as they relate to the Affordable Care Act and Medicare and Medicaid programs, could have a material adverse effect on our business, financial condition and results of operations.

A significant portion of our Claims comes from a limited number of Assignors who have relationships with key existing payers, and the loss of one or more of these Assignors or disruptions in Assignor-payer relationships, could have a material adverse effect on our business, financial condition and results of operations.

The data healthcare analytics and healthcare payment market are relatively new and unpenetrated, and may not develop, develop more slowly than we expect, or sustain negative publicity which may adversely affect our business.

• Internal improvements to healthcare claims and billing processes could reduce the revenue generated by our solutions.

• Spending fluctuations, health care system simplification, and payment integrity initiatives may reduce the demand for our services.

• Our existing Assignors could prematurely terminate their agreement or materially breach their agreements.

• We may be unable to access Assignor data or be forced to destroy data in our possession, which may impair our ability to recover.

• We may be unable to develop new Assignor relationships.

• To the extent that we act as servicing agent, our clients may terminate or materially breaches their agreement with us.

• We have long sales cycles for our data-driven solutions and may fail to close sales or experience implementation delays.

• If our Assignors’ risk agreements change, it can have a material adverse effect on our financial condition and results of operations.

• We may fail to comply with those privacy regulations or adequately secure the information in our possession.

• Our systems and networks may be subject to cybersecurity breaches and other disruptions that could compromise our information.

• Increased cybersecurity vulnerabilities, threats, and targeted computer crime could pose a risk to our systems, solutions, and data.

• We may fail to innovate and develop new solutions, or new solutions may not be adopted by existing and potential Assignors.

• Certain of our activities present the potential for identity theft or illegal behavior by employees, contractors, or third parties.

• We may fail to comply with applicable privacy, security and data laws, regulations and standards.

• Adverse changes could occur in the U.S.

healthcare environment, or laws relating to healthcare programs and policies.

• We could lose of one or more significant Assignors or experience disruptions in Assignor-payer relationships.

• The inability of Assignors to maintain contracts with CMS could adversely affect our business.

• The healthcare data analytics and payment markets may not develop, develop slower than expected, or sustain negative publicity.

• Negative publicity concerning the healthcare data analytics and payment accuracy could limit the future growth of the market.

• We face significant competition, and we expect competition to increase.

Failure to adequately protect the confidentiality of our trade secrets, know-how, proprietary applications, business processes other proprietary information and trademarks could adversely affect the value of our technology and products.

• If we are unable to protect our proprietary technology, information, and processes, the value of our solutions may be diminished.

• Our success depends on our ability to protect our intellectual property rights.

• Our ability to obtain, protect, and enforce our intellectual property rights is uncertain.

• Our qui tam litigation may be subject to Government Intervention and Dismissal pursuant to 31 U.S.C.

§ 3730(2)(A).

We are subject to extensive government regulation.

Any violation of the laws and regulations applicable to us or a negative audit or investigation finding could have a material adverse effect on our business.

Our business depends on effective information processing systems that are compliant with current HIPAA transaction and code set standards and the integrity of the data in, and operations of, our information systems, as well as those of other entities that provide us with data or receive data from us.

In the event we fail to maintain our Security Organization Control 2, HITRUST, or other certifications, we could be in breach of our obligations under our contracts, fines and other penalties could result and we may suffer reputational harm and damage to our business.

We may make acquisitions of businesses or Claim recovery interests that prove unsuccessful, and any mergers, acquisitions, dispositions or joint venture activities may change our business and financial results and introduce new risks.

We have a substantial amount of indebtedness and payment obligations, and together with any future indebtedness or payment obligations, could adversely affect our ability to operate our business.

Failure to obtain or maintain ongoing financing to fund operations could negatively impact our business.

Adverse judgments or settlements in litigation, regulatory or other dispute resolution proceedings could have a material adverse effect on our business, financial condition and results of operations.

If we fail to accurately calculate the Paid Amount and Paid Value of Potential Recoverable Claims, it can have a material adverse effect on our business, results of operations, financial condition, and cash flows.

Failure of our software vendors, utility providers and network providers to perform as expected, changes in our relationships with them, or losing access to data sources may adversely affect our business.

§ 3730(c)(2)(A).

• Any violation of the laws and regulations or a negative audit or investigation finding could adversely affect our business.

• Our business depends on the integrity of our HIPAA compliant information processing systems.

• We may fail to maintain certifications that could result in a breach of our obligations under our contract.

• We have substantial indebtedness and payment obligations and may incur future indebtedness or payment obligations.

• Failure to obtain or maintain ongoing financing to fund operations would negatively impact our business.

• Costs associated with, and an inability to obtain and maintain insurance could adversely affect our profit and financial condition.

• Our services could become subject to new, revised, or enhanced regulatory requirements in the future.

• Failing to accurately estimate our contract pricing may have a material adverse effect on our business.

• We may fail to develop widespread brand awareness, maintain our reputation, or achieve and maintain market acceptance.

• Failure to properly manage growth may impact our ability to execute plans, maintain service levels, or address challenges.

• We may not be able to obtain additional capital to continue the development of our business.

• Failure to properly manage our growth or obtain additional financing to fund growth could negatively impact our business.

• Acquisitions may prove unsuccessful or change our business, financial results, and introduce new risks.

• We are subject to adverse judgments or settlements in litigation, regulatory, or other dispute resolution proceedings.

• If we are unable to successfully identify and recover on future Claims, our results of operations could be adversely affected.

• We may fail to accurately calculate the Paid Amount and Paid Value of Potential Recoverable Claims.

• Our software vendors, utility providers, and network providers may fail, and we may lose access to data sources.

• We may be sued by third parties for alleged infringement of their proprietary rights.

• Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.

We will be required to pay the Tax Receivable Agreement (“TRA”) Parties (as defined in the TRA) for most of the benefits relating to, among other things, an increase in tax attributes as a result of the Company’s direct and indirect allocable share of existing tax basis acquired in the Business Combination, and the Company’s increase in its allocable share of existing tax basis and anticipated tax basis adjustments we receive in connection with sales or exchanges of Up-C Units after the Business Combination.

Our success is dependent upon the efforts of our key personnel.

The loss of key personnel could negatively impact the operations and profitability of the Company and its financial condition could suffer as a result.

We might be unable to successfully recruit and retain qualified employees.

General economic, political and market forces and dislocations beyond our control could reduce demand for our solutions and our overall business may suffer from an economic downturn.

COVID-19 or another pandemic, epidemic, or outbreak of an infectious disease may have an adverse effect on our business, the nature and extent of which are highly uncertain and unpredictable.

We are concentrated in certain geographic regions, which makes us sensitive to regulatory, economic, environmental, and competitive conditions in those regions.

• We will be required to pay the Tax Receivable Agreement (“TRA”) Parties (as defined in the TRA).

• Payments under the TRA may impair our ability to consummate change of control transactions.

• Acceleration of payments under the TRA may impair our ability to consummate change of control transactions.

• The loss of key personnel could negatively impact the operations and profitability of the Company.

• Our business is dependent on our ability to attract and retain qualified employees.

• General economic, political, and market forces beyond our control could reduce demand for our solutions.

• Our geographic concentration makes us sensitive to regulatory, economic, environmental, and competitive conditions.

• Our overall business results may suffer from an economic downturn.

Risks Related to Our Securities:

We are controlled by the Members, including John H.

Ruiz and Frank C.

Quesada, whose interests may conflict with our interests and the interests of other stockholders.

Further, our status as a “controlled company”

on Nasdaq removes certain corporate governance protections.

Our stockholders will experience substantial dilution as a consequence of, among other transactions, any further issuance of common stock.

We may not be able to comply with Nasdaq's continued listing standards, which could cause de-listing and reduce liquidity.

Our common stock may be delisted from The Nasdaq Capital Market if we fail to comply with continued listing standards.

We may be required to take write-downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

• We are controlled by the Members, whose interests may conflict with our interests and the interests of other stockholders.

• Our stockholders will experience substantial dilution as a consequence of, among other transactions, further issuances of our stock.

• Our stockholders may lack corporate governance protections available to those of companies that are not controlled companies.

• There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.

• Failure to meet the Nasdaq listing requirements could result in the delisting of our stock and negatively impact capital raising.

• If our shares are delisted from Nasdaq , it will become more difficult to trade our shares.

• We may be required to take write-downs or write-offs, restructuring, and impairment or other charges.

• We may be subject to unanticipated changes in tax rates or adverse outcomes resulting from examination of our tax returns.

• We may be unable to obtain additional financing to fund the operations and growth of the Company.

Anti-takeover provisions contained in our Charter and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

• Our recoveries may be limited due to legal restrictions.

• Anti-takeover provisions contained in our Charter and bylaws, as well as Delaware law, could impair a takeover attempt.

• The Charter contains a provision renouncing our interest and expectancy in certain corporate opportunities.

Risks Related to Ownership of our Common Stock:

The market price of our common stock may be significantly volatile.

We may redeem unexpired Public Warrants and New Warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making such warrants worthless.

Our stockholders may experience significant dilution as a result of future equity offerings or issuances and exercise of outstanding options and warrants.

Warrants have become exercisable for our Class A Common Stock, which has increase the number of shares eligible for future resale in the public market and may result in dilution to our stockholders.

The Company’s management has limited experience in operating a public company.

Failure to establish and maintain effective internal controls could have a material adverse effect on the accuracy and timing of our financial reporting in future periods.

Risks Related to the Company’s Business and Industry

In this section “we,”

“us,”

“our,”

and other similar terms refer to MSP Recovery, Inc.

d/b/a LifeWallet and its subsidiaries prior to the Business Combination and to the Company following the Business Combination.

• The market price of our Class A Common Stock may be significantly volatile.

• A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

• If securities analysts publish negative reports or stop publishing reports about our business, the price of our stock could decline.

• We cannot predict the impact our dual class capital structure may have on the market price of the shares of our stock.

• We may amend the terms of the Public Warrants in a manner that may be adverse to holders.

• We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders.

• Our stockholders may experience significant dilution as a result of future equity offerings or the exercise of options and warrants.

• The Company’s management has limited experience in operating a public company.

• Our Charter identifying Delaware courts as an exclusive forum may discourage certain lawsuits against our directors and officers.

• The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from reporting requirements.

• Failure to establish and maintain effective internal controls could adversely affect the accuracy and timing of our reporting.

• Our controls over financial reporting may be ineffective and our accountants may not be able to certify as to their effectiveness.

• Governmental investigations, regulatory proceedings, and litigation will result in related expenses.

• The Company’s stockholders may be liable for third party claims against the Company to the extent of distributions they received.

Risks Related to the Yorkville SEPA:

• Substantial blocks of our common stock may be sold into the market, which may cause the price of our common stock to decline.

• It is impossible to predict the number of shares sold under the Yorkville SEPA;

we may not raise the value available thereunder.

• The sale and issuance of our shares of our Class A Common Stock to Yorkville will cause dilution to our existing shareholders.

• Once we issue a Convertible Note, we do not control the timing and amount of the issuance of our stock upon conversion of such Convertible Note.

• Upon a trigger event, we may be required to make payments that could cause us financial hardship.

An investment in our securities involves a high degree of risk.

You should carefully consider the following risk factors, together with all of the other information included in this Annual Report on Form 10-K (“Annual Report”) before making an investment decision.

You should also carefully consider the following risk factors in addition to the other information included in this Annual Report, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” We may face additional risks and uncertainties that are not presently known to us or that we currently deem immaterial, which may also impair our business or financial condition.

The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

Risks Related to the Company’s Business and Industry

In this section “we,” “us,” “our,” and other similar terms refer to Legacy MSP prior to the Business Combination and to the Company following the Business Combination.

We have a history of net losses and no substantial revenue to date, and we may not achieve recoveries, generate significant revenue, or achieve profitability.

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Our relatively limited operating history makes it difficult to evaluate our current business and plan for our future growth.

The Company started in 2014 with its very first assignment from a health plan in Miami, Florida.

To date, we have achieved no substantial revenue and limited actual recoveries from our assigned Claims, and there is no guarantee that we will achieve recoveries, revenue, or profitability as we have projected.

The Company started in 2014 with its first assignment from a health plan in Miami, Florida.

We have encountered, and will continue to encounter, significant risks and uncertainties frequently experienced by new and growing companies in rapidly changing industries, such as determining appropriate investments for our limited resources, competition from other data analytics companies, acquiring and retaining Assignors, hiring, integrating, training and retaining skilled personnel, unforeseen expenses, challenges in forecasting accuracy and successfully integrating new strategies.

If we are unable to achieve actual recoveries, increase our Assignor base, successfully manage our recovery efforts from third-party payers or successfully expand, our revenue and our ability to achieve and sustain profitability would be impaired.

If we are unable to achieve meaningful recoveries, increase our Assignor base, successfully manage our recovery efforts from third-party payers or successfully expand, our revenue and our ability to achieve and sustain profitability would be impaired.

If our assumptions regarding these and other similar risks and uncertainties, which we use to plan our business, are incorrect or change as we gain more experience operating our business or due to changes in our industry, or if we do not address these challenges successfully, our operating and financial results could differ materially from our expectations and our business could suffer.

We have a limited history of actual recoveries to date, and there are risks associated with estimating the amount of revenue that we recognize from the recovery.

We have a limited history of actual recoveries to date, and there are risks associated with estimating the amount of revenue that we recognize from recoveries.

If our estimates of revenue are materially inaccurate, it would impact the timing and the amount of our revenue recognition and have a material adverse effect on our business, results of operations, financial condition, and cash flows.

We have a limited track record of generating actual recoveries and related revenue from the Claims we have purchased or otherwise been assigned.

We have a limited track record of generating meaningful recoveries and related revenue from the Claims we have been assigned.

There are risks associated with estimating the value of future recoveries and revenues that we may achieve under our assigned Claims.

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If our estimates of revenues are materially inaccurate, it could impact the timing and the amount of our revenue recognition and have a material adverse impact on our business, results of operations, financial condition and cash flows.

Under most of our agreements with Assignors, we assume the risk of failure to recover on the assigned Claims, and if we fail to make recoveries with respect to the assigned Claims receivables and therefore, are unable to generate recovery proceeds greater than or equal to the amounts paid by us to purchase the assigned Claims, it can adversely affect our business.

In many instances, we pay our Assignors an upfront purchase price for assignment of their healthcare Claims recoveries.

Under most of our agreements with Assignors, we assume the risk of failure to recover on the assigned Claims, and if we fail to make recoveries with respect to the assigned Claim receivables and therefore, are unable to generate recovery proceeds greater than or equal to the amounts paid by us to purchase the assigned Claims, it can adversely affect our business.

In many instances, we pay our Assignors an upfront purchase price for assignment of their recovery rights to healthcare Claims.

Accordingly, there is a risk that we may not successfully recapture the upfront purchase price if we fail to make recoveries with respect to the assigned Claims.

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• litigation-related charges.

Finally, our potential ability to achieve recovery revenues are based largely on the Paid Value of Potentially Recoverable Claims of our portfolio and our ability to discover, quantify, and settle the gap between Billed Amount and Paid Amount on a large scale.

If we fail to accurately calculate the Paid Amount or the Paid Value of Potential Recoverable Claims, the Recovery Multiple or our recovery rights are not appropriately perfected, these factors may have a material adverse effect on our business, results of operations, financial condition, and cash flows.

Finally, our potential ability to achieve recovery revenues is based largely on the Paid Value of Potentially Recoverable Claims of our portfolio and our ability to discover, quantify, and settle the gap between Billed Amount and Paid Amount on a large scale.

Failure to accurately calculate the Paid Amount or the Paid Value of Potential Recoverable Claims, the Recovery Multiple, or our recovery rights are not appropriately perfected, may have a material adverse effect on our business, results of operations, financial condition, and cash flows.

Litigation outcomes are inherently risky;

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Unfavorable litigation outcomes could, individually or in the aggregate, have a material adverse effect on our business, revenue, results of operations, and financial condition.

Typically, we must file actions in court to recover monies related to those paid by our Assignors and a substantial amount of our recoveries are dependent on the courts.

Because we rely on the courts to adjudicate recoveries, we can be subject to adverse court rulings, significant delays, damages calculations or other limitations, each of which can negatively impact our recovery efforts, potential to generate revenue, and financial condition of our business.

Typically, we must file actions in court to recover monies related to those paid by our Assignors and a substantial portion of our recoveries are dependent on the courts.

As such, we may be subject to adverse court rulings, significant delays, damages calculations or other limitations, each of which can negatively impact our recovery efforts, potential to generate revenue, and the financial condition of our business.

For example, from time to time, the courts dismiss our cases, or Claims pursued in our cases, with or without prejudice.

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Accordingly, we retain the ability to bring those Claims in a recovery action.

When dismissal is with prejudice, we cannot refile the action.

Accordingly, we lose the ability to pursue such Claims.

When dismissal is with prejudice, we cannot refile the action to pursue recoveries using the dismissed cause of action.

We cannot guarantee that we will not receive adverse rulings in court.

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• Dismissal for pleading deficiencies.

Additionally, in certain of our cases, our recoveries may be limited as a function of courts’

damages calculations.

Additionally, in certain of our cases, our recoveries may be limited as a function of courts’ damages calculations.

Adverse court rulings could also occur from:

• Our assignment agreements with Assignors being deemed invalid by courts.

We receive assignments of healthcare Claims from our Assignors via irrevocable assignments, which allow use to pursue those Claims that our Assignors originally owned.

Enforceability of our assignment agreements is often challenged by defendants and if a court determines an assignment agreement is invalid (due to a technical deficiency or regulatory prohibition or otherwise) we will lose the ability to pursue those Claims.

We obtain assignments of healthcare Claims from our Assignors via irrevocable assignments, which allow us to pursue those Claims that our Assignors originally owned.

Enforceability of our assignment agreements is often challenged by defendants, and if a court determines an assignment agreement is invalid (due to a technical deficiency, regulatory prohibition, or otherwise), we may lose the ability to pursue recoveries related to those Claims.

• Our damages calculations include medical expenses paid by our Assignors that courts may deem unreasonable, unrelated, or unnecessary, and could lead to lower than anticipated recoveries.

This may include, but not be limited to, the difference between Medicare, Medicaid, and commercial rates.

• Our Claims may be subject to different interpretations of the applicable statutes of limitations.

For example, in certain antitrust matters, recoveries may be limited to the difference between the price that a drug manufacturer charged for the drug and the price of the drug absent the relevant anticompetitive action.

The list above is not exhaustive of unfavorable rulings, damages calculations or other limitations which we may or have encountered.

The list above is not exhaustive of potentially unfavorable rulings, damages calculations, or other limitations which we have encountered or may encounter.

We generate, and expect to generate, a significant portion of our revenue by collecting on settlements and/or judgments that are granted by courts in lawsuits filed against insurers, tortfeasors, and other liable parties.

A decrease in the willingness of courts to grant these judgments, a change in the requirements for filing these cases or obtaining these judgments, or a decrease in our ability to collect on these judgments could have an adverse effect on our revenue, operating results, and the financial condition of our business.

As we increase our use of the legal channels for collections, our short-term margins may decrease as a result of an increase in upfront court costs and costs related to counterclaims.

As we increase our use of the legal channels for collections, there could be an increase in upfront court costs and costs related to counterclaims.

We may not be able to collect on certain aged Claims because of applicable statutes of limitations, and we may be subject to adverse effects of regulatory changes.

Our recoveries may also be delayed due to inconsistent rulings on different cases which creates delays in our recovery efforts, or court and administrative closing resulting from the COVID-19 pandemic.

We can be subject to many other unfavorable rulings, damages calculations or limitations which are not listed above.

Such unfavorable rulings, damages calculations or other limitations can negatively affect our business and our recovery efforts.

Our recoveries may be delayed due to inconsistent rulings on different cases which delay our recovery efforts.

We can be subject to unfavorable rulings, damages calculations, or limitations which are not listed above.

Such unfavorable rulings, damages calculations, or other limitations can negatively affect our business, results of operations, financial condition, and cash flows.

Our recoveries may be limited if courts decline to compel our counterparties to data match with us, or we are otherwise unable to force responsible parties to produce data they store that would identify the proper party to make a given payment.

Among the ways we identify the proper payer for a given claim is by comparing our member data to that of property and casualty or no-fault insurers in a process called data matching.

Members found in both data sets are scrutinized to determine if a primary payer was responsible in the first instance to pay or reimburse the cost of care relating to an accident.

Should a court decline to compel data matching, our recoveries against a given insurer would be limited to those representative beneficiaries identified, and all matches that could be identified through a data matching exercise.

Our litigation often involves complex, novel legal theories with little or no precedent on which courts can rely, which may adversely affect our ability to generate revenue and negatively impact our business.

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For example, while the MSP Law was enacted in 1980, its use by an assignee to pursue recoveries on its own behalf is novel.

As such, courts deciding litigated issues in our cases often have limited binding precedent on which to base an opinion, and often review our cases as a first impression.

As such, courts deciding litigated issues in our cases often have limited binding precedent on which to base an opinion, and often review our cases as a matter of first impression.

As a result, our cases may be delayed as courts require more time to analyze the legal issues, and outcomes are difficult to accurately predict.

We may employ rarely used causes of action, such as Florida’s equitable pure bill of recovery.

LifeWallet has brought numerous pure bill of discovery cases against medical device and drug manufacturers and insurance companies, seeking to identify the proper party defendant or the appropriate theory on which to base relief.

As these cases do not seek money damages, success in these cases may lead to information that can used to further pursue recoveries, but not money damages that can be recognized as revenue.

These cases, in and of themselves, are an expense to LifeWallet, and may negatively impact our business if, for any reason, they fail to yield actionable results.

We may employ rarely used causes of action, such as Florida’s equitable pure bill of discovery.

The Company has brought numerous pure bill of discovery cases against medical device and drug manufacturers and insurance companies, seeking to identify the proper party defendant or the appropriate theory on which to base relief.

As these cases do not seek money damages, success in these cases may lead to information that can be used to further pursue recoveries, but not money damages that can be recognized as revenue.

These cases, in and of themselves, are an expense to the Company, and may negatively impact our business if, for any reason, they fail to yield actionable results.

Our counterparties likewise often assert defenses that require complex, jurisdiction specific analysis.

Litigation of these issues is often time consuming, delaying potential recoveries, and costly.

Litigation of these issues is often costly, time consuming, and may delay potential recoveries.

The success of these defenses is difficult to predict and could result in partial or the entire dismissal of a given case, reducing or eliminating potential recoveries, and any associated recognition of revenue.

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As such, we may expend substantial resources pursuing appeals to establish the validity of a legal basis for recovery, which may prove unsuccessful, thus limiting our ability to generate revenue and negatively impact our business.

Counterparties in our lawsuits employ dilatory tactics that delay the resolution of litigation or settlement negotiations, increasing costs associated with recoveries and substantially delaying the outcome of our cases and any associated revenue recognition.

Our counterparties employ strategies to delay proceedings and the ultimate resolution of our cases.

Dilatory tactics include, but are not limited to, frivolous court filings, extended and improper discovery objections and disputes, delayed negotiations for data matching protocols, and protracted settlement negotiations that may or may not yield a settlement.

While these delays do not adversely affect the value of the underlying assets, and in some case statutory interest continues to accrue, the costs associated with recoveries increase substantially, and our ability to successfully resolve our cases may be limited.

While these delays do not adversely affect the

value of the underlying assets, and in some case statutory interest continues to accrue, the costs associated with recoveries increase substantially, and our ability to successfully resolve our cases may be limited.

As a result, our ability to recognize revenue is delayed and our ultimate recovery may be diminished as a result.

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We enter into legal services agreements with the Law Firm and the various entities that hold Claims.

The Law Firm is engaged to act as counsel to represent MSP Recovery and each of its subsidiaries and affiliates (or other applicable entity) on a contingency basis as it pertains to the assigned Claims.

The Law Firm is engaged to act as counsel to represent the Company and each of its subsidiaries and affiliates (or other applicable entity) on a contingency basis as it pertains to the assigned Claims.

The Law Firm engages outside litigation counsel from around the U.S.

as co-counsel and

these arrangements are made directly between the Law Firm and other counsel.

as co-counsel and these arrangements are made directly between the Law Firm and other counsel.

For the services provided, the Law Firm typically collects a fee equal to 40% of our 50% portion of the Net Proceeds (i.e., 20% of the total Net Proceeds), which is paid from our portion of the Net Proceeds.

Co-counsel is paid from the Law Firm’s portion of the Net Proceeds.

The Law Firm is also entitled to attorney’s fees that are awarded to the Law Firm pursuant to any fee shifting statute, by agreement, or court award.

Any increase in attorneys’

fees and costs would reduce our potential net recoveries.

For more information about our fee sharing arrangement, see “Business —Scale of Current Portfolio”

—Fee Sharing Arrangements.”

Assignors may pursue recovery on Claims directly or may use recovery agents other than us in connection with the Assignor’s efforts to recover on Claims.

Co-counsel is paid from the Law Firm’s portion of the Net Proceeds.

The Law Firm is also entitled to attorney’s fees that are awarded to the Law Firm pursuant to any fee shifting statute, by agreement, or court award.

Any increase in attorneys’ fees and costs would reduce our potential net recoveries.

For more information about our fee sharing arrangement, see Item 1.

Business and “ —Fee Sharing Arrangements.”

Assignors may pursue recovery on Claims directly or may use recovery agents other than us in connection with the Assignor’s efforts to recover on Claims.

With respect to the Assignors of the assigned Claims, some of our agreements exclude from the assignment of Claims those Claims that are assigned to or being pursued by other recovery vendors of the Assignor at the time of the assignment.

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This resulted in some Claims being identified by us for purposes of our recovery estimates.

This also has resulted in other recovery agents of the Assignor making collections on Claims that we previously believed were assigned to us.

This also has resulted in other recovery agents of the Assignor making collections on Claims that were assigned to us.

Although we endeavor to seek appropriate clarification from Assignors to properly identify Claims that are being pursued by other recovery vendors, due to the nature and volume of data, it may not be possible to identify with precision all such Claims.

While we do not believe that there is any overlap with other recovery vendors with respect to assigned Claims to be material, there can be no assurance as to the ultimate impact on our recoveries or our business.

While we do not believe that there is material overlap with other recovery vendors with respect to assigned Claims to be material, there can be no assurance as to the ultimate impact on our recoveries or our business.

That notwithstanding, where other recovery vendors have made recoveries, the recoveries may not be the full amount of the potential recovery because it was not processed properly or against the correct responsible parties.

In addition, plaintiffs’ attorneys representing members in our Assignors data may have resolved liens as part of a third-party settlement, rendering our Claim moot and unrecoverable if paid properly.

If lawyers who we rely on to litigate Claims and defenses do not exercise due skill and care, or the interests of their clients do not align with the interests of our Assignors, there may be a material adverse effect on the value of our assets.

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If they are unable or unwilling to do this for any reason, it is likely to have a material adverse effect on the value of our assets.

We may have limited experience or no prior dealings with such lawyers and there can be no guarantee that the outcome of a case will be in line with our or the lawyers’

assessment of the case or that such lawyers will perform with the expected skill and care.

We may have limited experience or no prior dealings with such lawyers and there can be no guarantee that the outcome of a case will be in line with our or the lawyers’ assessment of the case or that such lawyers will perform with the expected skill and care.

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The holders of other obligations may have priority over us to collect amounts due to them and therefore would be entitled to be paid in full before assets would be available for distribution to us.

Further, the possibility of material misrepresentations or omissions on the part of an Assignor, underlying beneficiary or other counterparty (e.g., some Assignors may set out to defraud investors like us).

For example, an Assignor may misrepresent the quality, validity or existence of a Claim or other information provided to us.

There is no assurance we will detect such fraud and any inaccuracy or incompleteness, if undetected, may adversely affect the valuation of one or more Claims and adversely affect our business and performance.

Our Assignors typically provide subrogation or “carve out” lists to identify those claims that were not included in an assignment or were pursued by another recovery vendor;

however, the subrogation lists may be incomplete or inaccurate, thus resulting in our pursuit of a recovery that we are either not entitled to, or that has already been recovered.

Further, Assignors may misrepresent or omit material information, such as the underlying beneficiary or other counterparty.

For example, an Assignor may misrepresent the quality, validity, or existence of a Claim or other information provided to us, or provide duplicate Claim data, either due to unintentional negligence or intentional fraud.

There is no assurance we will detect such error.

Any inaccuracy, duplication, or incompleteness, if undetected, may adversely affect the valuation of one or more Claims and adversely affect

our business and performance.

Under certain circumstances, recoveries may be reclaimed if any such payment or distribution is later determined to have been a fraudulent conveyance.

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As the skills, experience, and resources of such technology, systems, and personnel improve, they may be able to identify payment inaccuracies before using our services, which would reduce the payment inaccuracies identified by our solutions and our ability to generate revenue, which could have a material adverse effect on our business, financial condition, and results of operations.

Healthcare spending fluctuations, simplification of the healthcare delivery and reimbursement system, programmatic changes to the scope of benefits and limitations to payment integrity initiatives could reduce the need for our data-driven solutions, which could have a material adverse effect on our business, financial condition and results of operations.

Our solutions improve our Assignors’

ability to accurately pay healthcare Claims and prevent or recover inaccurate payments, which often are a result of complexities in the healthcare Claims payment system.

Healthcare spending fluctuations, simplification of the healthcare delivery and reimbursement system, and programmatic changes to the scope of benefits and limitations to payment integrity initiatives could reduce the need for our data-driven solutions, which could have a material adverse effect on our business, financial condition, and results of operations.

Our solutions improve the Assignors’ ability to accurately pay healthcare Claims and prevent or recover inaccurate payments, which often are a result of complexities in the healthcare Claims payment system.

Although the healthcare benefit and payment systems continue to grow in complexity due to factors such as increased regulation and increased healthcare enrollment, the need for and user adoption of our solutions and/or the scope and profitability of the solutions that we provide to our Assignors could be negatively affected by, among other things:

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• the adoption of healthcare plans with significantly higher deductibles;

limits placed on payment integrity initiatives, including the Medicare RAC program;

• limits placed on payment integrity initiatives, including the Medicare Recovery Audit Contractor (“RAC”) program;

• lower than projected growth in private health insurance or the various Medicare and Medicaid programs, including Medicare Advantage.

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If our existing Assignors prematurely terminate their agreement with us, or if either party materially breaches an agreement, and we can no longer receive future assignments of healthcare Claims recoveries, it could have a material adverse effect on our business, financial condition, and results of operations.

We expect in the future to derive a significant portion of our revenue from our existing Assignors and, accordingly, we are reliant on ongoing transfer and usage of data, and associated assignments, of Claims from existing Assignors.

We expect in the future to derive a significant portion of our revenue from our existing Assignors and, accordingly, we are reliant on the ongoing transfer and usage of data, and associated assignments, of Claims from existing Assignors.

As a result, maintaining these relationships is critical to our future growth and our business, financial condition, and results of operations.

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• the availability, price, performance, and functionality of competing solutions;

our Assignors’

perceived ability to review Claims accurately using their internal resources;

• our Assignors’ perceived ability to review Claims accurately using internal resources;

• our ability to develop complementary solutions;

our continued ability to access the data necessary to enable us to effectively develop and deliver new solutions to Assignors;

• our continued ability to access data necessary to enable us to effectively develop and deliver new solutions to Assignors;

• the stability and security of our platform;

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• the business environment of our Assignors.

Pursuant to the Claims recovery and assignment agreements with our Assignors, the Assignors may choose to discontinue one or more services under an existing contract, may exercise flexibilities within their contracts to adjust service volumes, and may breach or terminate the contract prior to its agreed upon completion date.

A material breach by either party to the agreement may also result in the termination of receiving future Claims.

Pursuant to the CCRAs with our Assignors, the Assignors may choose to discontinue one or more services under an existing contract, may exercise flexibilities within their contracts to adjust service volumes, and may breach or terminate the contract prior to its

agreed upon completion date.

A material breach by either party to the agreement may also result in the termination of receiving future data transmissions or Claim assignments.

Any such occurrences could reduce our revenue from these Assignors.

Although a cancellation or termination of a contract does not revoke the original assignment from our Assignors in many instances because such assignment was irrevocable, termination still affects future transfers of data and future assignment of Claims.

Although a cancellation or termination of a contract does not revoke the original assignment from our Assignors, as such assignments are irrevocable, termination still affects future transfers of data and future assignment of Claims.

Accordingly, such cancellations or terminations can constrain our growth and result in a decrease in revenue, which could have a material adverse effect on our business, financial condition and results of operations.

If an Assignor prematurely terminates its agreement with us, we may be precluded from accessing that Assignor’s data and/or be forced to destroy data in our position from that Assignor, which may substantially impair our ability to recover on that Assignor’s Claims.

We enter into Claims Cost Recovery Agreements (“CCRA”) and Business Associate Agreements (“BAA”) with our Assignors.

Pursuant to the CCRAs with our Assignors, our Assignors typically agree to provide the Company with historical claims data as well

as the most updated claims data that the Assignor’s systems can provide and provide ongoing data transfers and agreed upon intervals.

If, for any reason, our CCRA with an Assignor is terminated, our BAA with that Assignor requires us to return and/or destroy all Protected Health Information, which may substantially impair our ability to recover on that Assignor’s Claims.

If an Assignor prematurely terminates its agreement with us, we may be precluded from accessing that Assignor’s data and/or be forced to destroy data in our possession from that Assignor, which may substantially impair our ability to recover on that Assignor’s Claims.

We enter into Claims Cost Recovery Agreements (“CCRA”) and Business Associate Agreements (“BAA”) with our Assignors.

Pursuant to the CCRAs with our Assignors, we receive historical claims data, and may receive updated claims data and ongoing data transfers at agreed upon intervals.

If, for any reason, a CCRA is terminated, the BAA requires us to return and/or destroy all PHI associated with that CCRA, which may substantially impair our ability to recover on that Assignor’s Claims.

If we are unable to develop new Assignor relationships, it could have a material adverse effect on our business, financial condition, and results of operations.

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If one of these parties terminates their agreement with us or if either party materially breaches an agreement, it could have a material adverse effect on our business, financial condition, and results of operations.

Sometimes, we may provide our services as a servicing agent to third parties.

We may provide our services as a servicing agent to third parties.

These services include, but are not limited to, identifying, processing, prosecuting, and recovering monies related to recoverable Claims.

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We may expend significant funds and management resources during the sales cycle and ultimately fail to close the sale.

Our sales cycle may be extended due to our potential customer’s budgetary constraints or for other reasons.

In addition, following a successful sale, the implementation of our systems frequently involves a lengthy process, as we onboard the new customer’s healthcare data into our proprietary systems.

Our sales cycle may be extended due to our potential customers’ budgetary constraints or for other reasons.

In addition, following a successful sale, the implementation of our systems frequently involves a lengthy process, as we onboard a new customer’s healthcare data into our proprietary systems.

If we are unsuccessful in closing sales after expending funds and management resources or if we experience delays in such sales or in implementing our solutions, it could have a material adverse effect on our business, financial condition, and results of operations.

If our Assignors’

risk agreements change, it can have a material adverse effect on our business, financial condition, and results of operations.

Many of our Assignors are First-Tier entities, as defined in 42 CFR § 422.2.

If our Assignors’ risk agreements change, it can have a material adverse effect on our business, financial condition, and results of operations.

Many of our Assignors are First-Tier entities, as defined in 42 C.F.R.

A First-Tier entity is a party that enters into a written arrangement, acceptable to CMS, with an MAO or applicant to provide administrative services or healthcare services for a Medicare eligible individual under the Medicare Advantage program.

These entities enter into risk agreements with Downstream Entities, as defined under 42 CFR § 422.2.

These entities enter into risk agreements with Downstream Entities, as defined under 42 C.F.R.

If these agreements change or include any restrictions on the assignability of Claims, it can have a material adverse effect on our recoveries, business, financial condition, and results of operations.

State and federal laws and regulations, including HIPAA, govern the collection, dissemination, use, disclosure, creation, receipt, maintenance, transmission, privacy, confidentiality, security, availability and integrity of individually identifiable information, including protected health information (“PHI”).

Our use and disclosure of personal identifiable information, including PHI, is subject to federal and state privacy and security regulations, and our failure to comply with those regulations or adequately secure the information we hold could result in significant liability or reputational harm.

State and federal laws and regulations, including HIPAA, govern the collection, dissemination, use, disclosure, creation, receipt, maintenance, transmission, privacy, confidentiality, security, availability, and integrity of personal identifiable information, including PHI.

HIPAA establishes basic national privacy and security standards for protection of PHI by covered entities such as our Assignors, and the business associates with whom such entities contract for services, including us.

As a business associate, we are also directly liable for compliance with HIPAA.

As a business associate, we are also directly

liable for HIPAA compliance.

In addition to HIPAA, we must adhere to state patient confidentiality and other laws that are not preempted by HIPAA, including those that are more stringent than HIPAA.

In the event of a breach of our obligations under HIPAA or other state laws, we could be subject to enforcement actions by the U.S.

Department for Health and Human Services Office for Civil Rights and state regulators and lawsuits, including class action lawsuits, by private plaintiffs.

In the event of a breach of our obligations under HIPAA or other state laws, we could be subject to enforcement actions and lawsuits brought by the U.S.

Department of Health and Human Services Office for Civil Rights (“OCR”) and state regulators, and class action lawsuits brought by private plaintiffs.

Mandatory penalties for HIPAA violations can be significant and OCR and state regulators may require businesses to enter into settlement or resolution agreements and corrective action plans that impose ongoing compliance requirements.

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In addition, state Attorneys General are authorized to bring civil actions under HIPAA or relevant state laws.

Courts can award damages, costs and attorneys’

fees related to violations of HIPAA or state laws in such cases.

While we maintain safeguards that we believe are reasonable and appropriate to protect the privacy and security of PHI and other personally identifiable information consistent with applicable law and our contractual obligations, we cannot provide assurance regarding how these laws, regulations,

and contracts will be interpreted, enforced or applied to our operations;

our systems may be vulnerable to physical break-ins, viruses, hackers, and other potential sources of security breaches or incidents.

In addition, we may not be able to prevent incidents of inappropriate use or disclosure or unauthorized access to or acquisition.

Courts can award damages, costs, and attorneys’ fees related to violations of HIPAA or state laws in such cases.

While we maintain safeguards that we believe are reasonable and appropriate to protect the privacy and security of PHI and other personal identifiable information consistent with applicable law and our contractual obligations, we cannot provide assurances regarding how these laws, regulations, and contracts will be interpreted, enforced, or applied to our operations.

We obtain and process a large amount of sensitive data.

Our systems and networks may be subject to cyber-security breaches and other disruptions that could compromise our information.

Our systems and networks may be subject to cybersecurity breaches and other disruptions that could compromise our information.

Any real or perceived improper use of, disclosure of, or access to such data could harm our reputation as a trusted brand, as well as have a material adverse effect on our business, financial condition, and results of operations.

We rely on information technology networks and systems to process and store electronic information.

We collect and store sensitive data, including personally identifiable information of our consumers, on our information technology networks.

We collect and store sensitive data, including personally identifiable information on our information technology networks.

Our systems may be vulnerable to physical break-ins, viruses, hackers, and other potential sources of security breaches or incidents.

We may not be able to prevent incidents of inappropriate use or disclosure or unauthorized access to or acquisition.

Despite the implementation of security measures, our information technology networks and systems have been, and in the future may be, vulnerable to disruptions and shutdowns due to attacks by hackers or breaches due to malfeasance by contractors, employees, and others who have access to our networks and systems.

The occurrence of any of these cyber security events could compromise our networks and the information stored on our networks could be accessed.

Any such access could disrupt our operations, adversely affect the willingness of sellers to sell to us or result in legal Claims, liability, reputational damage or regulatory penalties under laws protecting the privacy of personal information, any of which could adversely affect our business, financial condition and operating results.

In addition, our operations are spread across the United States and Puerto Rico and we rely heavily on technology to communicate internally and efficiently perform our services.

The occurrence of any of these cybersecurity events could compromise our networks and the information stored on our networks could be accessed.

Any such access could disrupt our operations, adversely affect the willingness of existing or potential Assignors to do business with us or result in legal claims, liability, reputational damage, or regulatory penalties under laws protecting the privacy of personal information, any of which could adversely affect our business, financial condition, and operating results.

We rely heavily on technology to communicate internally and efficiently perform our services.

We have implemented measures that are designed to mitigate the potential adverse effects of a disruption, relocation, or change in operating environment;

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• attacks by hackers or nefarious actors;

• human error;

• computer viruses and other malware or software defects;

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If we encounter a business interruption, if we fail to effectively maintain our information systems, if it takes longer than we anticipate to complete required upgrades, enhancements, or integrations or if our business continuity plans and business interruption insurance do not effectively compensate on a timely basis, we could suffer operational disruptions, disputes with Assignors, civil or criminal penalties, regulatory problems, increases in administrative expenses, loss of our ability to produce timely and accurate financial and other reports or other adverse consequences, any of which could have a material adverse effect on our business, financial condition, and results of operations.

Because of the large amount of data that we collect and manage, it is possible that hardware failures or errors in our systems could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our partners regard as significant.

If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may hinder our ability to provide services, establish appropriate pricing for services, retain and attract Assignors, establish reserves, report financial results timely and accurately and maintain regulatory compliance, among other things.

As we collect and manage large amounts of data, it is possible that hardware failures or errors in our systems could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our partners regard as significant.

If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may hinder our ability to provide services, establish appropriate pricing for services, retain and attract Assignors, establish reserves, timely report financial results, and accurately and maintain regulatory compliance, among other things.

Additionally, as Assignors maintain their own supporting documentation, data, and records, it is possible that they may provide us with erroneous or inaccurate data.

The occurrence of any of these events could cause our solutions to be perceived as vulnerable, cause our Assignors to lose confidence in our solutions, negatively affect our ability to attract new Assignors and cause existing Assignors to terminate or not renew our solutions.

our solutions.

If the information is lost, improperly disclosed, or threatened to be disclosed, we could incur significant liability and be subject to regulatory scrutiny and penalties.

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A core aspect of our business is the reliability and security of our technology platform.

Any perceived or actual breach of security could have a significant impact on our reputation as a trusted brand, cause us to lose existing Assignors, prevent us from

obtaining new Assignors, require us to expend significant funds to remedy problems caused by breaches and to implement measures to prevent further breaches and expose us to legal risk and potential liability.

Any perceived or actual breach of security could have a significant impact on our reputation as a trusted brand, cause us to lose existing Assignors, prevent us from obtaining new Assignors, require us to expend significant funds to remedy problems caused by breaches and to implement measures to prevent further breaches and expose us to legal risk and potential liability.

Any security breach at a third-party vendor providing services to us could have similar effects.

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Connectivity among technologies is becoming increasingly important.

We must also develop new systems to meet current market standards and keep pace with continuing changes in information processing technology, evolving industry and regulatory standards and patient needs.

We must continue to develop our systems to meet market standards and keep pace with continuing changes in information processing technology, evolving industry and regulatory standards and patient needs.

Failure to do so may present compliance challenges and impede our ability to deliver services in a competitive manner.

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Our failure to effectively invest in, implement improvements to, and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems could adversely affect our results of operations, financial position, and cash flow.

If any of our employees or contractors take, convert, or misuse such information, or we experience a data breach creating a risk of identity theft, we could be liable for damages and our business reputation could be damaged.

In addition, we could be perceived to have facilitated or participated in illegal misappropriation of documents or data and, therefore, be subject to civil or criminal liability.

In addition, federal and state regulators may take the position that a data breach or misdirection of data constitutes an unfair or deceptive act or trade practice.

We also may be required to notify individuals affected by any data breaches.

Further, a data breach or similar incident could impact the ability of our Assignors that are creditors to comply with the federal “red flags” rules, which require the implementation of identity theft prevention programs to detect, prevent, and mitigate identity theft in connection with Assignor accounts, which could be costly.

If data utilized in our solutions are misappropriated for the purposes of identity theft or similar illegal behavior, it could have a material adverse effect on our reputation, business, financial condition, and results of operations.

Increased cybersecurity requirements, vulnerabilities, threats, and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions, services, and data.

As the perpetrators of cyber attacks become more capable, as cybercrime becomes commoditized, and as critical infrastructure is increasingly becoming digitized, the risks in this area continue to grow.

While we attempt to mitigate these risks by employing certain physical, administrative, and technical measures, including, but not limited to, employee training, logical access controls, monitoring and testing, and maintenance of protective systems and contingency plans, we remain potentially vulnerable to additional known or unknown threats, and we cannot assure that the impact from such threats will not be material.

We regularly assess external and internal cybersecurity-related risks and identify potential improvements to our cybersecurity program, including its staffing, processes, and technology.

When potential improvements are identified, we weigh the costs and benefits of such improvements and, if selected, the improvements are added to an agenda for possible implementation.

Additionally, we have incurred and expect to continue to incur significant costs implementing additional security measures to protect against existing and emerging cybersecurity threats.

Our results of operations and continued growth will depend on our ability to successfully develop and market new solutions that our existing and potential Assignors or other users are willing to adopt.

For example, as part of our “Chase to Pay”

model, we launched LifeWallet in January 2022, a platform designed to organize and facilitate access to users’

medical records.

We cannot provide assurance that our new or modified solutions will be responsive to Assignor or users preferences or industry changes, or that the product and service development initiatives we prioritize will yield the gains that we anticipate, if any.

If we are unable to predict market preferences or if our industry changes, or if we are unable to modify our solutions on a timely basis, we may lose Assignors or fail to attract new ones.

For example, as part of our “Chase to Pay” model, we launched LifeWallet in January 2022, a platform designed to organize and facilitate access to users’ medical records.

We cannot provide assurance that our proposed solutions will be fully developed or released, or that new or modified solutions will be responsive to Assignor or

preferences or industry changes, or that the product and service development initiatives we prioritize will yield the return on investment that we anticipate, if any.

If we are unable to predict market preferences or if our industry changes, or if we are unable to implement or modify our solutions on a timely basis, we may lose Assignors or fail to attract new ones.

If existing Assignors are not willing to adopt new solutions, or if potential Assignors or other users do not value such new solutions, it could have a material adverse effect on our business, financial condition, and results of operations.

We expect to make substantial investments in and changes to our operational platforms, systems and applications to compete effectively and keep up with technological advances.

We may also face difficulties in integrating any upgraded platforms into our current technology infrastructure.

We may also face difficulties in integrating new or upgraded platforms into our current technology infrastructure.

In addition, significant technological changes could render our existing solutions obsolete.

Although we have invested, and will continue to invest, significant resources in developing and enhancing our solutions and platforms, any failure to keep up with technological advances or to integrate upgraded operational platforms and solutions into our existing technology infrastructure could have a material adverse effect on our business, financial condition and results of operations.

Certain of our activities present the potential for identity theft or similar illegal behavior by our employees or contractors with respect to third parties, which could have a material adverse effect on our business, financial condition and results of operations.

Although we have invested, and will continue to invest, significant resources in developing and enhancing our solutions and platforms, any failure to keep up with technological advances or to integrate upgraded operational platforms and solutions into our existing technology infrastructure could result in a negative return on investment, and have a material adverse effect on our business, financial condition, and results of operations.

Certain of our activities present the potential for identity theft or similar illegal behavior by employees, contractors, or third parties, which could have a material adverse effect on our business, financial condition, and results of operations.

Our solutions involve the use and disclosure of personal information that in some cases could be used to impersonate third parties or otherwise improperly gain access to their data or funds.

If an employee or contractor were to take, convert, or misuse such information, or we experience a data breach creating a risk of identity theft, we could be liable for damages and our business reputation could be damaged.

In addition, we could be perceived to have facilitated or participated in illegal misappropriation of documents or data and, therefore, be subject to civil or criminal liability.

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We also may be required to notify individuals affected by any data breaches.

Further, a data breach or similar incident could impact the ability of our Assignors that are creditors to comply with the federal “red flags”

rules, which require the implementation of identity theft prevention programs to detect, prevent and mitigate identity theft in connection with Assignor accounts, which could be costly.

Further, a data breach or similar incident could impact the ability of our Assignors, those of whom are creditors, to comply with the federal “red flags” rules, which require the implementation of identity theft prevention programs to detect, prevent and mitigate identity theft in connection with Assignor accounts, which could be costly.

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Therefore, we may be subject to the privacy laws of each such jurisdiction, which may vary and, in some cases, can impose more restrictive requirements than federal law.

Where state laws are more protective, we have to comply with the

stricter provisions.

Where state laws are more protective, we have to comply with the stricter provisions.

In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused.

California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages.

The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and our Assignors and potentially exposing us to additional expense, adverse publicity, and liability.

Further, as regulatory focus on privacy issues continues to increase, and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business could intensify.

Changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as PHI or PII, along with increased customer demands for enhanced data security infrastructure, could greatly increase our cost of providing our services, decrease demand for our services, reduce our revenue and/or subject us to additional liabilities.

Changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as PHI or PII, along with increased customer demands for enhanced data security infrastructure, could greatly increase the cost of providing our services, decrease demand for our services, reduce our revenue, and/or subject us to additional liabilities.

The following legal and regulatory developments also could have a material adverse effect on our business, financial condition, and results of operations:

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Changes in the United States healthcare environment, or in laws relating to healthcare programs and policies, and steps we take in anticipation of such changes or a failure to comply with such laws, particularly as they relate to the Affordable Care Act and Medicare and Medicaid programs, could have a material adverse effect on our business, financial condition, and results of operations.

Approximately 93% of our 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.

Approximately 93.1% of our expected recoveries arise from Claims being brought under the Medicare Secondary Payer Act private cause of action, codified at 42 U.S.C.

§ 1395y(b)(3)(A).

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While we believe we have been successful at both the federal and state level in establishing a legal basis for our recoveries, changes to the laws on which we base our recoveries, particularly the Medicare Secondary Payer Act, can adversely affect our business.

For example, 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.

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.

The healthcare industry in the United States is subject to a multitude of changing political, economic, and regulatory influences that affect every aspect of our healthcare system.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (the “Affordable Care Act”), made major changes in how healthcare is delivered and reimbursed, and generally increased access to health insurance benefits to the uninsured and underinsured population of the United States.

Among other things, the Affordable Care Act increased the number of individuals with Medicaid and private insurance coverage, implemented reimbursement policies that tie payment to quality, facilitated the creation of accountable care organizations that may use capitation and other alternative payment methodologies, strengthened enforcement of fraud and abuse laws, and encouraged the use of information technology.

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Future changes to the Affordable Care Act and to the Medicare and Medicaid programs and other federal or state healthcare reform measures may lower reimbursement rates, establish new payment models, increase or decrease government involvement in healthcare, decrease the Medicare RAC program and otherwise change the operating environment for us and our Assignors.

If efforts to waive, modify or otherwise change the Affordable Care Act, in whole or in part, are successful, if we are unable to adapt our solutions to meet changing requirements or expand service delivery into new areas, or the demand for our solutions is reduced as a

result of healthcare organizations’

reactions to changed circumstances and financial pressures, it could have a material adverse effect on our business, financial condition and results of operations.

If efforts to waive, modify, or otherwise change the Affordable Care Act, in whole or in part, are successful, if we are unable to adapt our solutions to meet changing requirements or expand service delivery into new areas, or the demand for our solutions is reduced as a result of healthcare organizations’ reactions to changed circumstances and financial pressures, it could have a material adverse effect on our business, financial condition, and results of operations.

Healthcare organizations may react to such changed circumstances and financial pressures, including those surrounding the implementation of the Affordable Care Act, by taking actions such as curtailing or deferring their retention of service providers, which could reduce the demand for our data driven solutions and, in turn, have a material adverse effect on our business, financial condition, and results of operations.

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We have acquired a significant portion of our Claims from and entered into agreements for new services with a limited number of large Assignors.

These Assignors assign these Claims with an irrevocable assignment from the Assignor to us each with different and/or staggered terms.

In addition, we also rely on our reputation and recommendations from key Assignors to promote our solutions to potential new Assignors.

These Assignors irrevocably assign Claims to us with different and/or staggered terms.

In addition, we rely on our reputation and recommendations from key Assignors to promote our solutions to potential new Assignors.

Further, our ability to pursue a significant portion of our Claims depends on our arrangements pursuant to which we are granted access to health care data, which may be terminated upon the occurrence of certain events.

See “- We use various data sources in our business and if we lose access to those data sources it could have a material adverse effect on our business, financial condition, and results of operations.”

Accordingly, if any of these Assignors fail to renew or terminate their existing agreements with us, it could have a material adverse effect on our business, financial condition and results of operations.

Our revenues and operations are dependent upon a limited number of key existing payers and our Assignors’

continued relationship with those payers, and disruptions in those relationships (including renegotiation, non-renewal or termination of capitation agreements) or the inability of such payers to maintain their contracts with the Centers for Medicare and Medicaid Services, or CMS, could adversely affect our business.

See “Risk Factor - Failure of our software vendors, utility providers, and network providers to perform as expected, changes in our relationships with them, or losing access to data sources may adversely affect our business.” Accordingly, if any of these Assignors fail to renew or terminate their existing agreements with us, it could have a material adverse effect on our business, financial condition, and results of operations.

Our revenues and operations are dependent upon a limited number of key existing payers and our Assignors’ continued relationship with those payers;

disruptions in those relationships (including renegotiation, non-renewal, or termination of capitation agreements) or the inability of such payers to maintain their contracts with the Centers for Medicare & Medicaid Services, or CMS, could adversely affect our business.

Our operations are dependent on a concentrated number of payers with whom our Assignors contract to provide services.

The loss of these contracts for our Assignors could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

The sudden loss of any of our Assignors’

payer partners or the renegotiation of any of our Assignors’

payer contracts could adversely affect our operating results.

The sudden loss of an Assignor or the renegotiation of the future rights of an Assignors’ contract could adversely affect our operating results.

Moreover, our inability to maintain agreements with our Assignors with respect to their health care Claims recovery rights and data, or to negotiate favorable terms for those agreements in the future, could result in the loss of revenue and could have a material adverse effect on our profitability and business.

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If our Assignors or other potential customers do not perceive the benefits of our data-driven solutions, then our market may not continue to develop, or it may develop more slowly than we expect.

If any of these events occurs, it could have a material adverse effect on our business, financial condition and results of operations.

If any of these events occur, it could have a material adverse effect on our business, financial condition, and results of operations.

Negative publicity concerning the data healthcare analytics and healthcare payment accuracy industry or patient confidentiality and privacy could limit the future growth of the healthcare payment accuracy market.

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As a result, they are lobbying for further restrictions on the dissemination or commercial use of personal information to the public and private sectors.

If healthcare providers, privacy advocates and others are successful in creating negative publicity for the healthcare payment accuracy industry, government and private healthcare payers could hesitate to contract with payment accuracy providers, such as us, which could have a material adverse effect on our reputation, business, financial condition and results of operations.

If healthcare providers, privacy advocates, or others are successful in creating negative publicity for the healthcare payment accuracy industry, government and private healthcare payers could hesitate to contract with payment accuracy providers, such as us, which could have a material adverse effect on our reputation, business, financial condition, and results of operations.

We face significant competition, and we expect competition to increase.

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In addition, we may be forced to increase the consideration we provide for assigned Claims or lower our pricing, or the demand for our data-driven solutions may decrease as a result of increased competition.

Further, a failure to be responsive to our existing and potential Assignors’

needs could hinder our ability to maintain or expand our Assignor base, hire and retain new employees, pursue new business opportunities, complete future acquisitions and operate our business effectively.

Further, a failure to be responsive to our existing and potential Assignors’ needs could hinder our ability to maintain or expand our Assignor base, hire and retain new employees, pursue new business opportunities, complete future acquisitions, and operate our business effectively.

Any inability to compete effectively could have a material adverse effect on our business, financial condition, and results of operations.

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If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties or our employees, the value of our solutions, brand, and other intangible assets may be diminished and competitors may be able to more effectively offer solutions that have the same or similar functionality as our solutions, which could have a material adverse effect on our business, financial condition, and results of operations.

Our success depends on our ability to protect our intellectual property rights.

Our success depends, in part, on our ability to protect our intellectual property rights.

Our success depends, in part, on our ability to protect our proprietary software, confidential information and know-how, technology and other intellectual property, and intellectual property rights.

To do so, we rely generally on copyright, trademark and trade secret laws, confidentiality and invention assignment agreements with employees and third parties, and license and other agreements with consultants, vendors and Assignors.

To do so, we generally rely on copyright, trademark and trade secret laws, confidentiality and invention assignment agreements with employees and third parties, and license and other agreements with consultants, vendors, and Assignors.

There can be no assurance that employees, consultants, vendors, and Assignors have executed such agreements or have not breached or will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors.

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To protect our trade secrets and other proprietary information, we require employees, consultants, advisors, and collaborators to enter into confidentiality agreements.

We cannot assure you that these

agreements will provide meaningful protection for our trade secrets, know-how, or other proprietary information in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information.

We cannot provide assurance that these agreements will provide meaningful protection for our trade secrets, know-how, or other proprietary information in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information.

Further, the theft or unauthorized use or publication of our trade secrets and other confidential business information could reduce the differentiation of our services and harm our business, and the value of our investment in development or business acquisitions could be reduced and third parties might make claims against us related to losses of their confidential or proprietary information.

We rely on our trademarks, service marks, trade names and brand names to distinguish our services from the services of our competitors and have registered or applied to register many of these trademarks.

We cannot assure you that our trademark applications will be approved.

We cannot provide assurance that our trademark applications will be approved.

Third parties may also oppose our trademark applications or otherwise challenge our use of the trademarks.

In the event that our trademarks are successfully challenged, we could be forced to rebrand our services, which could result in loss of brand recognition and could require us to devote resources advertising and marketing new brands.

Further, we cannot assure you that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks.

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Existing U.S.

federal and state intellectual property laws offer only limited protection.

Moreover, if we expand our business into markets outside of the United States, our intellectual property rights may not receive the same degree of protection as they would in the United States because of the differences in foreign trademark and other laws concerning proprietary rights.

federal and state intellectual property laws offer limited protection.

If we expand our business into foreign markets, our intellectual property rights may not receive the same degree of protection as they would in the United States because of the differences in foreign trademark and other laws concerning proprietary rights.

Governments may adopt regulations, and government agencies or courts may render decisions, requiring compulsory licensing of intellectual property rights.

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Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights.

Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our solutions, impair the functionality of our solutions, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our solutions, or have a material adverse effect on our business, financial condition and results of operations.

Our qui tam litigation may be subject to Government Intervention and Dismissal pursuant to 31 U.S.C.

§ 3730(c)(2)(A).

We file qui tam (“whistleblower”) actions on behalf of the United States government (“Federal Government”) under the False Claims Act, 31 U.S.C.

We file qui tam (whistleblower) actions on behalf of the federal government under the False Claims Act, 31 U.S.C.

§ 3729 et seq.

These actions give the federal government the opportunity to intervene and participate in the action.

The False Claims Act authorizes the Attorney General to dismiss a qui tam action over the relator’s objection.

The action can be dismissed if the federal government determines their best interests are not served with the litigation.

This can be the case if the litigation does not advance their interests, preserve their limited resources or avoid adverse precedent.

The Federal Government may dismiss an action notwithstanding the objections of the relator if the relator has received notice from the Federal Government and the person is afforded an opportunity to be heard on the Federal Government’s motion to dismiss.

Courts have stated that the Federal Government has an “unfettered”

right to dismiss a qui tam action.

The federal government may dismiss an action notwithstanding the objections of the relator if the relator has received notice from the federal government and the person is afforded an opportunity to be heard on the federal government’s motion to dismiss.

Courts have stated that the Federal Government has an “unfettered” right to dismiss a qui tam action.

United States , 318 F.3d 250, 252 (D.C.

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In addition, because we may receive payments from federal and state governmental agencies, we may become subject to various laws, including the Federal False Claims Act and similar state statutes, which permit government law enforcement agencies to institute suits against us for violations and, in some cases, to seek double or treble damages, penalties, and assessments.

In addition, private

citizens, acting as whistleblowers, can sue on behalf of the Federal Government under the “qui tam”

provisions of the Federal False Claims Act and similar statutory provisions in many states.

In addition, private citizens, acting as whistleblowers, can sue on behalf of the federal government under the “qui tam” provisions of the Federal False Claims Act and similar statutory provisions in many states.

The expansion of our operations into new products and services may further expose us to requirements and potential liabilities under additional statutes and legislative schemes that previously have not been relevant to our business, such as banking statutes, that may both increase demands on our resources for compliance activities and subject us to potential penalties for noncompliance with statutory and regulatory standards.

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Such risks, particularly under the Federal False Claims Act and similar state fraud statutes, have increased in recent years due to legislative changes that have (among other amendments) expanded the definition of a false claim to include, potentially, any unreimbursed overpayment received from, or other monetary debt owed to, a government agency.

If we are found to be in violation of any applicable law or regulation, or if we receive an adverse review, audit or investigation, any resulting negative publicity, penalties or sanctions could have an adverse effect on our reputation in the industry, impair our ability to compete for new contracts and have a material adverse effect on our business, financial condition and results of operations.

reputation in the industry, impair our ability to compete for new contracts and have a material adverse effect on our business, financial condition, and results of operations.

We are also subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq.

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In addition to government regulations and securities laws, we are subject to self-regulatory standards and industry certifications that may legally or contractually apply to us.

These include Security Organization Control 2 (“SOC 2”), with which we are currently compliant.

In the event we fail to maintain our SOC 2 compliance or fail to receive recertification from HITRUST, we could be in breach of our obligations under Assignor and other contracts, fines, and other penalties could result, and we may suffer reputational harm and damage to our business.

Further, our Assignors may expect us to comply with more stringent privacy and data security

requirements than those imposed by laws, regulations, or self-regulatory requirements, and we may be obligated contractually to comply with additional or different standards relating to our handling or protection of data.

Any failure or perceived failure by us to comply with federal or state laws or regulations, industry standards or other legal obligations, or any actual or suspected privacy or security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personally identifiable information ("PII") or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our Assignors to lose trust in us, which could have an adverse effect on our reputation and business.

Further, our Assignors may expect us to comply with more stringent privacy and data security requirements than those imposed by laws, regulations, or self-regulatory requirements, and we may be obligated contractually to comply with additional or different standards relating to our handling or protection of data.

Any failure or perceived failure by us to comply with federal or state laws or regulations, industry standards or other legal obligations, or any actual or suspected privacy or security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personal identifiable information or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties, or adverse publicity and could cause our Assignors to lose trust in us, which could have an adverse effect on our reputation and business.

We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to pursue recoveries could be limited.

Any of these developments could harm our business, financial condition, and results of operations.

Privacy and data security concerns, whether valid or invalid, may inhibit retention of our systems by existing Assignors or onboarding onto or, in the case of our Chase to Pay services, adoption of our systems by new Assignors.

For more information on Chase to Pay services, please see the section entitled “Business - Chase to Pay.”

Privacy and data security concerns may inhibit retention of our systems by existing Assignors or onboarding onto or, in the case of our Chase to Pay services, adoption of our systems by new Assignors.

For more information on Chase to Pay services, please see the section entitled “Business - Chase to Pay.”

We have a substantial amount of indebtedness and payment obligations which, together with any future indebtedness or payment obligations, could adversely affect our ability to operate our business.

We have substantial amounts of indebtedness and payment obligations, and we may incur substantial additional indebtedness or payment obligations in order to finance acquisitions of additional Claims assets or other costs in connection with financing our operations, and such increased leverage could adversely affect our business.

Our indebtedness carries high interest rates, which, if we are unable to generate revenues and reduce the amount of our indebtedness, will continue to increase over time by a significant amount.

In addition, the terms of any of our existing or future indebtedness or payment obligations may restrict or otherwise negatively impact our ability to grow and manage our business.

The maturity dates on our indebtedness are often short-term in nature, and require extensions and amendments in order to prevent such indebtedness from becoming immediately due and payable.

We may not have the ability to extend the terms of our indebtedness, refinance our indebtedness, or pay such amounts when due if we do not begin generating significant revenue.

Certain of our debt agreements are floating rate debt.

As a result, fluctuations in interest rates can increase borrowing costs, which may directly impact the amount of interest we are required to pay.

The amount of our indebtedness and payment obligations could limit our ability to obtain further financing and limit our ability to pursue our operational and strategic goals and opportunities, and adversely affect our liquidity position if the Claims we purchase do not generate proceeds at the rate we expect, if at all.

The increased leverage, potential lack of access to financing, and increased expenses could have a material adverse effect on our financial condition, results of operations, and cash flows.

Failure to obtain or maintain ongoing financing to fund operations would negatively impact our business.

The Working Capital Credit Facility, a continued source of funding for operations, is contingent on compliance with certain covenants, which we may not meet.

If we fail to comply with these covenants, continued funding may cease, substantially impairing our ability to continue our operations, including the pursuit of recoveries.

On March 6, 2023, Subrogation Holdings entered into a credit agreement (“Initial Credit Agreement”) with HPH, pursuant to which HPH funded an initial $10 million in proceeds to Subrogation Holdings.

On March 29, 2023, the Initial Credit Agreement was fully amended and restated (the “Working Capital Credit Facility”), providing for funding of 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.

On March 29, 2023, an additional $5 million was disbursed to Subrogation Holdings under the Term Loan A.

On May 11, 2023 and June 13, 2023, HPH notified us that it would not disburse additional funds under the Working Capital Credit Facility until the Company satisfied certain funding conditions, including the filing of our Annual Report on Form 10-K for the period ending December 31, 2022 (the “2022 Form 10-K”), which was filed on July 27, 2023.

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 our 2022 Form 10-K and receipt of funding notices, deeming funding conditions satisfied or waived.

Following such funding, the Term Loan A commitment was terminated, with total funding of $20.5 million.

The parties agreed to increase the Term Loan B commitment from $18 million to $27.5 million, which was funded in multiple installments and in accordance with the terms of the Working Capital Credit Facility.

On August 4, 2023, the Company received funding amounting to $5.5 million from Term Loan A and $2.25 million installment under Term Loan B.

Under Term Loan B, the Company received $2.25 million of funding on August 30, 2023, and Subrogation Holdings received $4.5 million on November 13, 2023 and $4.5 million on January 25, 2024.

Additional funding for fiscal year 2024 under the Working Capital Credit Facility is available at a rate of $1.75 million per month, up to $14.0 million, subject to potential further reductions in the case of certain agreed cost savings and funds availability;

however, no additional funding has been requested as of the date of the filing of this Annual Report.

The amended terms to the Working Capital Credit Facility were memorialized in the Second Amended and Restated First Lien Credit Agreement dated November 10, 2023.

A failure to obtain or maintain financing to fund operations would require us to significantly reduce operations and would have a material adverse effect on future operating prospects.

Moreover, in connection with the Yorkville SEPA, and subject to the condition set forth therein, Yorkville agreed to advance to the Company in the form of convertible promissory notes (the “Convertible Notes”) an aggregate principal amount of $15.0 million.

On November 14, 2023, we issued a Convertible Note to Yorkville in the principal amount of $5.0 million resulting in net proceeds of $4.73 million.

On December 11, 2023, we issued a Convertible Note to Yorkville in the principal amount of $5.0 million, resulting in net proceeds of $4.75 million.

On April 8, 2024, we issued a third Convertible Note to Yorkville in the principal amount of $5.0 million, resulting in net proceeds to us of $4.75 million.

For more information about the Convertible Notes, see Note 1, Description of the Business - Yorkville Purchase Agreement and Yorkville Standby Equity Purchase Agreement.

Costs associated with, and our ability to obtain and maintain adequate insurance, could adversely affect our profitability and financial condition.

We hold a number of insurance policies, including directors’

and officers’

liability insurance, business interruption insurance, property insurance and workers’

compensation insurance.

We hold a number of insurance policies to hedge against risks inherent in our business.

If the costs of maintaining adequate insurance coverage should increase significantly in the future, our operating results could be materially adversely affected.

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Similarly, if we exhaust our current insurance coverage for any given policy period, we would be required to operate our business without indemnity from commercial insurance providers for any Claims made that are attributable to that policy period.

Failure to maintain certain insurance policies could constitute a material breach of contract terms with certain Assignors and business partners.

Our services could become subject to new, revised, or enhanced regulatory requirements in the future, which could result in increased costs, could delay or prevent our introduction of new solutions, or could impair the function or value of our existing solutions, which could have a material adverse effect on our business, financial condition, and results of operations.

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As has been the trend in recent years, it is reasonable to assume that there will continue to be increased government oversight and regulation of the healthcare industry in the future.

Changes to existing laws and regulations, or the enactment of new federal and state laws and regulations affecting the healthcare industry, could create unexpected liabilities for us, could cause us or our Assignors to incur additional costs and could restrict our or our Assignors’

Changes to existing laws and regulations, or the enactment of new federal and state laws and regulations affecting the healthcare industry could create unexpected liabilities for us, could cause us or our Assignors to incur additional costs, and could restrict our or our Assignors’ operations.

Many healthcare laws are complex, subject to frequent change and dependent on interpretation and enforcement decisions from government agencies with broad discretion.

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healthcare system at both the federal and state level, such as the enactment of the Affordable Care Act.

It is possible that the changes to the Medicare, Medicaid or other governmental healthcare program reimbursements may serve as precedent to possible changes in other payers’

reimbursement policies in a manner adverse to us.

It is possible that the changes to the Medicare, Medicaid, or other governmental healthcare program reimbursements may serve as precedent to possible changes in other payers’ reimbursement policies in a manner adverse to us.

Similarly, changes in private payer reimbursements could lead to adverse changes in Medicare, Medicaid, and other governmental healthcare programs, which could have a material adverse effect on our business, financial condition, and results of operations.

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Our ability to earn a profit on a performance-based agreement requires that we accurately estimate the costs involved and outcomes likely to be achieved and assess the probability of completing multiple tasks and transactions within the contracted time period.

We derive a relatively small portion of our revenue on a “fee-for-service”

basis whereby billing is based upon a flat fee or a fee per hour.

We derive a relatively small portion of our revenue on a “fee-for-service” basis whereby billing is based upon a flat fee or a fee per hour.

To earn a profit on these contracts, we must accurately estimate costs involved and assess the probability of achieving certain milestones within the contracted time period.

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If we fail to cost-effectively develop widespread brand awareness and maintain our reputation, or if we fail to achieve and maintain market acceptance, our business could suffer.

We believe that maintaining and enhancing our reputation and brand recognition is critical to our relationships with our Assignors and ability to attract new Assignors.

We believe that maintaining and enhancing our reputation and brand recognition is critical to our relationships with existing Assignors and ability to attract new Assignors.

The promotion of our brand may require us to make substantial investments and we anticipate that, as our market becomes increasingly competitive, these marketing initiatives may become increasingly difficult and expensive.

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In addition, any factor that diminishes our reputation or that of our management, including failing to meet expectations, or any adverse publicity or litigation involving or surrounding us, could make it substantially more difficult for us to attract new Assignors.

In addition, negative publicity resulting from any adverse government audit could injure our reputation.

In addition, negative publicity resulting from an adverse government audit could injure our reputation.

If we do not successfully maintain and enhance our reputation and brand recognition, our business may not grow and we could lose our relationships with Assignors, which would harm our business, results of operations, and financial condition.

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To effectively manage our business plans, we must continue to improve our operations, while remaining competitive.

We must also be flexible and responsive to our Assignors’

needs and to changes in the political, economic and regulatory environment in which we operate.

We must also be flexible and responsive to our Assignors’ needs and to changes in the political, economic, and regulatory environment in which we operate.

The greater size and complexity of our expanding business puts additional strain on our administrative, operational, and financial resources and makes the determination of optimal resource allocation more difficult.

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We expect our operating expenses to increase significantly over the next several years as we continue to hire additional personnel, expand our operations and infrastructure, and continue to expand to reach more Assignors.

In addition to the expected costs to grow our business, we also expect to incur additional legal, accounting, investor relations and other expenses as a newly public company.

In addition to the expected costs to grow our business, we also expect to incur additional legal, accounting, investor relations, and other expenses as a public company.

These investments may be more costly than we expect, and if we do not achieve the benefits anticipated from these investments, or if the realization of these benefits is delayed, they may not result in increased revenue or growth in our business.

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The failure to secure additional financing on acceptable terms and conditions or at all could have a material adverse effect on our continued development or growth.

Our access to, and the availability of, financing will be impacted by many factors, including, but not limited to, our financial performance, our credit ratings, our then current level of indebtedness, the liquidity of the overall capital markets and the state of the U.S.

Our access to, and the availability of, financing will be impacted by many factors, including, but not limited to, our financial performance, our credit ratings,

our then current level of indebtedness, the liquidity of the overall capital markets and the state of the U.S.

and global economy.

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If we are unable to successfully recover on Claims and continue pursuing recoveries, holders of our Common Stock may lose their entire investment.

We face all of the risks inherent in a new business and a new public company, including the expenses, difficulties, complications and delays frequently encountered in connection with conducting operations, including the need for significant additional capital requirements and management’s potential underestimation of initial and ongoing costs.

We face all of the risks inherent in a new business and a new public company, including the expenses, difficulties, complications, and delays frequently encountered in connection with conducting operations, including the need for significant additional capital requirements and management’s potential underestimation of initial and ongoing costs.

In evaluating our business and future prospects, these difficulties should be considered.

If we are not effective in addressing these risks, we would not be able to implement our business strategy and our results of operations would be adversely affected.

To date, the Company’s sources of liquidity to fund working capital have been through funds from servicing agreements, member contributions and investments from other third parties.

To date, the Company’s sources of liquidity to fund working capital have been through funds from servicing agreements, member contributions, loans, and investments from other third parties.

Our ability to obtain necessary financing may be impaired by factors such as the health of, and access to, capital markets, our limited track record, or a future doubt about our ability to continue as a going concern.

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If we do not realize the anticipated benefits of any such acquisition, it would have a material effect on our business, financial condition, and results of operations.

We have a substantial amount of indebtedness and payment obligations, and together with any future indebtedness or payment obligations, could adversely affect our ability to operate our business.

We have substantial amounts of indebtedness and payment obligations and we may incur substantial additional indebtedness or payment obligations in order to finance acquisitions of additional Claims assets or otherwise in connection with financing our operations, and such increased leverage could adversely affect our business.

For example, on March 29, 2023, we entered into a membership interest purchase agreement with Hazel Holdings I LLC (together with its affiliates, "Hazel"), which was funded partially by a purchase money loan between Hazel, as lender, and the Company, as borrower, in the amount of $250 million, which has increased our indebtedness and obligation to pay interest, and an Amended and Restated Credit Agreement with affiliates of Hazel with respect to an aggregate $80 million loan credit facility, which has also increased our indebtedness and obligations to pay interest.

In addition, pursuant to the Master Transaction Agreement, dated March 9, 2022 (as amended, the "Virage MTA"), we have payment obligations to Virage in the amount of $825.0 million as of March 31, 2023.

The terms of any of our existing or future indebtedness or payment obligations may restrict or otherwise negatively impact our ability to grow and manage our business.

In addition, we may not have the ability to refinance or pay such amounts when due if we do not begin generating revenue.

The increased leverage, potential lack of access to financing and increased expenses could have a material adverse effect on our financial condition, results of operations and cash flows.

Failure to obtain or maintain ongoing financing to fund operations would negatively impact our business.

On March 29, 2023, the Company entered into an Amended and Restated Credit Agreement with affiliates of Hazel, as the lender and administrative agent with respect to an aggregate $80 million term loan credit facility 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, in each case, after taking into account an original issue discount (collectively, the "Working Capital Credit Facility").

This Working Capital Credit Facility, our continued source of funding for operations, is contingent on compliance with certain covenants, which we may not meet.

If we fail to meet comply with these covenants, continued funding may cease, substantially impairing our ability to continue our operations, including the pursuit of recoveries.

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.

A failure to obtain or maintain financing to fund operations would require us to significantly reduce operations and would have a material adverse effect on future operating prospects.

Adverse judgments or settlements in litigation, regulatory, or other dispute resolution proceedings could have a material adverse effect on our business, financial condition, and results of operations.

We are currently party to, and may in the future become party to, lawsuits and other claims against us that arise from time to time in the ordinary course of our business.

These may include lawsuits and claims related to, for example, contracts, subcontracts, protection of confidential information or trade secrets, wage and benefits, employment of our workforce or compliance with any of a wide array of state and federal statutes, rules and regulations that pertain to different aspects of our business.

These may include lawsuits and claims related to, for example, contracts (including CCRAs), subcontracts, protection of confidential information or trade secrets, wage and benefits, employment of our workforce, or compliance with any of a wide array of state and federal statutes, rules and regulations that pertain to different aspects of our business.

We also may be required to initiate expensive litigation or other proceedings to protect our business interests.

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Any investigations, settlements, or adverse judgments stemming from such legal disputes or other claims may result in significant monetary damages or injunctive relief against us, as well as reputational injury that could adversely affect us.

In addition, litigation and other legal claims are subject to inherent uncertainties and management’s view of currently pending legal matters may change in the future.

In addition, litigation and other legal claims are subject to inherent uncertainties, and management’s view of currently pending legal matters may change in the future.

Those uncertainties include, but are not limited to, costs of litigation, unpredictable judicial or jury decisions and the differing laws and judicial proclivities regarding damage awards among the states in which we operate.

Unexpected outcomes in such legal proceedings, or changes in management’s evaluation or predictions of the likely outcomes of such proceedings (possibly resulting in changes in established reserves) could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to successfully identify and recover on future Claims, our results of operations could be adversely affected.

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Typically, we identify recoverable Claims using our proprietary Algorithms which comb through historical paid Claims data and search for potential recoveries.

Typically, we identify recoverable Claims using our proprietary Algorithms which screen historical paid Claims data and search for potential recoveries.

Our potential ability to achieve recovery revenues are based largely on the Paid Value of Potentially Recoverable Claims of our portfolio and our ability to discover, quantify, and settle the gap between Billed Amount and Paid Amount on a large scale.

If we fail to accurately calculate the Paid Amount or the Paid Value of Potential Recoverable Claims, the Recovery Multiple or the recovery rights we are entitled to may not be appropriately captured, which may have a material adverse effect on our business, results of operations, financial condition, and cash flows.

Our ability to service our Assignors and deliver and implement solutions requires that we work with certain third-party providers, including software vendors, utility providers and network providers, and depends on such third parties meeting our expectations in both timeliness and quality.

Failure of our software vendors, utility providers, network providers, and third-party data providers to perform as expected, changes in our relationships with them, or losing access to data sources may adversely affect our business.

Our ability to deliver and implement solutions requires that we work with certain third-party providers, including software vendors, utility providers, data providers, and network providers, and depends on such third parties meeting our expectations in both timeliness and quality.

We might incur significant additional liabilities if the services provided by these third parties do not meet our expectations, if they terminate or refuse to renew their relationships with us, or if they were to offer their services to us on less advantageous terms, which could have a material adverse effect on our business, financial condition, and results of operations.

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We may be sued by third parties for alleged infringement of their proprietary rights.

Our success depends also in part on us not infringing the intellectual property rights of others.

Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry.

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Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.

We have operations throughout the United States and in Puerto Rico.

Accordingly, we are subject to taxation in many jurisdictions with increasingly complex tax laws, the application of which can be uncertain.

We have offices in the United States and in Puerto Rico.

Accordingly, we are subject to taxation in jurisdictions with increasingly complex tax laws, the application of which can be uncertain.

Unanticipated changes in our tax rates could affect our future financial condition and results of operations.

Our future effective tax rates could be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned and taxed, by changes in, or our interpretation of, tax rules and regulations in the jurisdictions in which we do business, by increases in expenses not

deductible for tax purposes including impairments of goodwill, by changes in GAAP or other applicable accounting standards or by changes in the valuation of our deferred tax assets and liabilities.

tax purposes including impairments of goodwill, by changes in GAAP or other applicable accounting standards or by changes in the valuation of our deferred tax assets and liabilities.

In addition, we are subject to the continual examination of our income tax returns by the U.S.

Internal Revenue Service (“IRS”) and other domestic and international tax authorities.

Tax authorities in various jurisdictions may disagree with and subsequently challenge the amount of profits taxed in their state or country, which may result in increased tax liability, including accrued interest and penalties, which would cause our tax expense to increase.

There can be no assurance that the final determination of any of these examinations will not have a material adverse effect on our financial condition and results of operations.

We will be required to pay the Tax Receivable Agreement ("TRA") Parties (as defined in the TRA) for most of the benefits relating to, among other things, an increase in tax attributes as a result of the Company’s direct and indirect allocable share of existing tax basis acquired in the Business Combination, and the Company’s increase in its allocable share of existing tax basis and anticipated tax basis adjustments we receive in connection with sales or exchanges of Up-C Units after the Business Combination.

In connection with the Business Combination, we entered into a TRA with the TRA Parties (as defined in the TRA) that provides for the payment by the Company to such TRA Parties of 85% of the benefits, if any, that the Company is deemed to realize (calculated using certain assumptions) 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 Opco as a result of the Business Combination and as a result of sales or exchanges of Up-C Units for cash or shares of the Company’s 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.

(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 Opco as a result of the Business Combination and as a result of sales or exchanges of Up-C Units for cash or shares of the Company’s 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.

These increases in existing tax basis and tax basis adjustments generated over time may reduce the amount of tax that the Company would otherwise be required to pay in the future, although the IRS may challenge all or part of the validity of that tax basis, and a court could sustain such a challenge.

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The payment obligation under the TRA is an obligation of the Company and not of Opco.

While the amount of existing tax basis, the anticipated tax basis adjustments and the actual amount and utilization of tax attributes, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of exchanges of Up-C Units for shares of the Company common stock, the applicable tax rate, the price of shares of the Company’s Class A common stock at the time of exchanges, the extent to which such exchanges are taxable and the amount and timing of our income, we expect that as a result of the size of the transfers and increases in the tax basis of the tangible and intangible assets of Opco and our possible utilization of tax attributes, including existing tax basis acquired at the time of the Business Combination, the payments that the Company may make under the TRA will be substantial.

While the amount of existing tax basis, the anticipated tax basis adjustments, and the actual amount and utilization of tax attributes, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of exchanges of Up-C Units for shares of the Company’s Class A Common Stock, the applicable tax rate, the price of shares of the Company’s Class A Common Stock at the time of exchanges, the extent to which such exchanges are taxable and the amount and timing of our income, we expect that as a result of the size of the transfers and increases in the tax basis of the tangible and intangible assets of Opco and our possible utilization of tax attributes, including existing tax basis acquired at the time of the Business Combination, the payments that the Company may make under the TRA will be substantial.

The payments under the TRA are not conditioned on the exchanging holders of Opco Units or other TRA Parties continuing to hold ownership interests in us.

To the extent payments are due to the TRA Parties under the TRA, the payments are generally required to be made within five business days after the tax benefit schedule (which sets forth the Company’s realized tax benefits covered by the TRA for the relevant taxable year) is finalized.

The Company is required to deliver such a tax benefit schedule to the TRA Parties’

Representative (as defined in the TRA), for its review, within ninety calendar days after the due date (including extensions) of the Company’s federal corporate income tax return for the relevant taxable year.

The Company is required to deliver such a tax benefit schedule to the TRA Parties’ Representative (as defined in the TRA), for its review, within 90 calendar days after the due date (including extensions) of the Company’s federal corporate income tax return for the relevant taxable year.

Payments under the TRA may be accelerated and/or significantly exceed the actual tax benefits the Company realizes under the TRA, and such accelerations may impair our ability to consummate change of control transactions.

The Company’s payment obligations under the TRA will be accelerated in the event of certain changes of control or its election to terminate the TRA early.

The accelerated payments will relate to all relevant tax attributes then allocable to the Company in the case of an acceleration upon a change of control, and to all relevant tax attributes allocable or that would be allocable to the Company (in the case of an election by the Company to terminate the TRA early, assuming all Up-C Units were then exchanged).

The accelerated payments required in such circumstances will be calculated by reference to the present value (at a specified discount rate determined by reference to LIBOR) of all future payments that holders of Up-C Units or other recipients would have been entitled to receive under the TRA, and such accelerated payments and any other future payments under the TRA will utilize certain valuation assumptions, including that the Company will have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the TRA.

In addition, recipients of payments under the TRA will not reimburse us for any payments previously made under the TRA if such tax basis and the Company’s utilization of certain tax attributes is successfully challenged by the IRS (although any such detriment would be taken into account in future payments under the TRA).

The Company’s ability to achieve benefits from any existing tax basis, tax basis adjustments or other tax attributes, and the payments to be made under the TRA, will depend upon a number of factors, including the timing and amount of our future income.

As a result, even in the absence of a change of control or an election to terminate the TRA, payments under the TRA could be in excess of 85% of the Company’s actual cash tax benefits.

Accordingly, it is possible that the actual cash tax benefits realized by the Company may be significantly less than the corresponding TRA payments or that payments under the TRA may be made years in advance of the actual realization, if any, of the anticipated future tax benefits.

There may be a material negative effect on our liquidity if the payments under the TRA exceed the actual cash tax benefits that the Company realizes in respect of the tax attributes subject to the TRA and/or distributions to the Company by Opco are not sufficient to permit the Company to make payments under the TRA after it has paid taxes and other

sufficient to permit the Company to make payments under the TRA after it has paid taxes and other expenses.

We may need to incur additional indebtedness to finance payments under the TRA to the extent our cash resources are insufficient to meet our obligations under the TRA as a result of timing discrepancies or otherwise, and these obligations could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control.

The acceleration of payments under the Tax Receivable Agreement in the case of certain changes of control may impair our ability to consummate change of control transactions or negatively impact the value of our Company common stock.

In the case of a “Change of Control”

under the TRA (which is defined to include, among other things, a 50% change in control of the Company, the approval of a complete plan of liquidation or dissolution of the Company, or the disposition of all or substantially all of the Company’s direct or indirect assets), payments under the TRA will be accelerated and may significantly exceed the actual benefits the Company realizes in respect of the tax attributes subject to the TRA.

In the case of a “Change of Control” under the TRA (which is defined to include, among other things, a 50% change in control of the Company, the approval of a complete plan of liquidation or dissolution of the Company, or the disposition of all or substantially all of the Company’s direct or indirect assets), payments under the TRA will be accelerated and may significantly exceed the actual benefits the Company realizes in respect of the tax attributes subject to the TRA.

We expect that the payments that we may make under the TRA (the calculation of which is described in the immediately preceding risk factor) in the event of a change of control will be substantial.

As a result, our accelerated payment obligations and/or the assumptions adopted under the TRA in the case of a change of control may impair our ability to consummate change of control transactions or negatively impact the value received by owners of our Company common stock in a change of control transaction.

Our success is dependent upon the efforts of our key personnel.

The loss of key personnel could negatively impact the operations and profitability of the Company, and its financial condition could suffer as a result.

It is possible that we will lose some key personnel, the loss of which could negatively impact the operations and profitability of the Company.

We anticipate that some or all of the management of the Company will remain in place.

The Company’s success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace.

Departure by certain of the Company’s officers could have a material adverse effect on the Company’s business, financial condition or operating results.

Our success depends largely upon the continued services of our senior management team and other key employees.

We rely on our leadership team in the areas of operations, information technology and security, marketing, compliance, and general and administrative functions.

From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business.

The loss of one or more of the members of our senior management team, or other key employees, could negatively impact the operations and profitability of the Company.

In particular, the loss of the services of our founder and Chief Executive Officer, John H.

Ruiz, could significantly delay or prevent the achievement of our strategic objectives.

Changes in our executive management team may also cause disruptions in, and harm to, our business.

The Company does not maintain key-man life insurance on any of its officers.

The services of such personnel may not continue to be available to the Company.

We anticipate that some or all of the management of the Company will remain in place.

Our business is dependent on our ability to attract and retain qualified employees.

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In addition, certain of our retrospective data-driven solutions rely on a team of trained registered nurses or medical coding professionals to review medical information and provide feedback with respect to the medical appropriateness of care provided.

Innovative, experienced and technologically proficient professionals, qualified nurses and experienced medical coding professionals are in great demand and are likely to remain a limited resource.

Innovative, experienced, and technologically proficient professionals, such as qualified nurses and experienced medical coding professionals, are in great demand and are likely to remain a limited resource.

Our ability to recruit and retain such individuals depends on a number of factors, including the competitive demands for employees having, or able to rapidly develop, the specialized skills we need and the level and structure of compensation required to hire and retain such employees.

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Any one or more of these factors may contribute to reduced activity and prices in the securities markets generally and could result in a reduction in demand for our solutions, which could have a material adverse effect on our business, results of operations and financial condition.

COVID-19 or another pandemic, epidemic, or outbreak of an infectious disease may have an adverse effect on our business, the nature and extent of which are highly uncertain and unpredictable.

The severity, magnitude and duration of the ongoing COVID-19 pandemic is uncertain and rapidly changing.

As of the date of this Form 10-K, the extent to which the COVID-19 pandemic may impact our business, results of operations and financial condition remains uncertain.

Furthermore, because of our business model, the full impact of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial condition until future periods.

We are concentrated in certain geographic regions, which makes us sensitive to regulatory, economic, environmental, and competitive conditions in those regions.

Due to the concentration of our operations in Florida, our business may be adversely affected by economic conditions that disproportionately affect Florida as compared to other states.

In addition, our exposure to many of the risks described herein are not mitigated by a diversification of geographic focus.

In addition, our exposure to many of the risks described herein are not mitigated by the diverse geographic locations of our Assignors.

Moreover, regions in and around the southeastern United States commonly experience hurricanes and other extreme weather conditions.

As a result, our offices, especially those in Florida and Puerto Rico, are susceptible to physical damage and business interruption from an active hurricane season or a single severe storm.

As a result, our offices, located in Florida and Puerto Rico, are susceptible to physical damage and business interruption from an active hurricane season or a single severe storm.

Moreover, global climate change could increase the intensity of individual hurricanes or the number of hurricanes that occur each year.

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If any of the circumstances described above occurred, there could be a harmful effect on our business and our results of operations could be adversely affected.

We depend on our senior management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm our business.

Our success depends largely upon the continued services of our senior management team and other key employees.

We rely on our leadership team in the areas of operations, information technology and security, marketing, compliance and general and administrative functions.

From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business.

The loss (including as a result of a COVID-19 infection) of one or more of the members of our senior management team, or other key employees, could harm our business.

In particular, the loss of the services of our founder and Chief Executive Officer, John H.

Ruiz, could significantly delay or prevent the achievement of our strategic objectives.

Changes in our executive management team may also cause disruptions in, and harm to, our business.

Our overall business results may suffer from an economic downturn.

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Risks Related to Our Securities

In this section, “we,”

“us,”

“our,”

and other similar terms refer to MSP Recovery, Inc.

d/b/a LifeWallet and its subsidiaries prior to the Business Combination and to the Company following the Business Combination.

In this section, “we,” “us,” “our,” and other similar terms refer to Legacy MSP prior to the Business Combination and to the Company following the Business Combination.

We are controlled by the Members, including John H.

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Quesada, whose interests may conflict with our interests and the interests of other stockholders.

Further, our status as a “controlled company”

on Nasdaq removes certain corporate governance protections.

Further, our status as a “controlled company” on Nasdaq removes certain corporate governance protections.

The Members (or their designees) hold all of our issued and outstanding Class V Common Stock, which control approximately 89.44% of the combined voting power of our Common Stock, and John H.

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This could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of the Company, which could cause the market price of our Class A Common Stock to decline or prevent stockholders from realizing a premium over the market price for Class A Common Stock.

The Members’

interests may conflict with our interests as a company or the interests of our other stockholders.

The Members’ interests may conflict with our interests as a company or the interests of our other stockholders.

Our stockholders will experience substantial dilution as a consequence of, among other transactions, any future issuances of Common Stock.

The Company currently has an aggregate of 3,084,305 Public Warrants outstanding and no Private Warrants outstanding, which have become exercisable as of 10 days after closing of the Business Combination, on a cashless basis with an exercise price of $0.0001.

In addition, there are outstanding or designated Up-C Units that may be exchanged for 3,106,616,119 shares of Common Stock.

In addition, the Company will have the ability to issue up to 98,736,750 shares of Class A Common Stock pursuant to awards under the Incentive Plan.

As of April 5, 2024, the following securities are convertible into, or allow the purchase of, our Class A Common Stock, including:

(i) 2,950,157 Public Warrants outstanding, each exercisable to purchase 1/25th of one share of our Class A Common Stock (but only exercisable in lots of 25 to purchase whole shares);

(ii) 894,754,824 New Warrants outstanding, each exercisable to purchase 1/25th of one share of our Class A Common Stock (but only exercisable in lots of 25 to purchase whole shares);

(iii) the CPIA Warrant exercisable to purchase up to 2,666,667 shares of our Class A Common Stock;

and (iv) the VRM Warrant, entitling VRM to purchase 62,073,998 shares of Class A Common Stock at a purchase price of $0.0001 per share for a period of two years from issuance, exercisable on a cashless basis.

In addition, there are outstanding or designated Up-C Units that may be exchanged for 124,067,498 shares of Class A Common Stock.

The Company has the ability to issue up to 3,843,002 shares of Class A Common Stock pursuant to awards under the Incentive Plan.

The shares of Class A Common Stock reserved for future issuance under the Incentive Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.

The aggregate number of shares that may be issued pursuant to awards under the Incentive Plan will be subject to an annual increase on

January 1 of each calendar year (commencing with January 1, 2023 and ending on and including January 1, 2031) equal to the lesser of (i) a number of shares equal to 3% of the total number of shares actually issued and outstanding on the last day of the preceding fiscal year or (ii) a number of shares as determined by the Board.

The aggregate number of shares that may be issued pursuant to awards under the Incentive Plan will be subject to an annual increase on January 1 of each calendar year (commencing with January 1, 2023 and ending on and including January 1, 2031) equal to the lesser of:

(i) a number of shares equal to 3% of the total number of shares actually issued and outstanding on the last day of the preceding fiscal year or (ii) a number of shares as determined by the Board.

The Company filed one or more registration statements on Form S-8 under the Securities Act to register shares of Class A Common Stock or securities convertible into or exchangeable for shares of Class A Common Stock issued pursuant to the Incentive Plan.

Any such Form S-8 registration statements will automatically become effective upon filing.

Any such Form S-8 registration statements automatically become effective upon filing.

Accordingly, shares registered under such registration statements will be available for sale in the open market.

Depending upon market liquidity at the time, sales of shares of our Class A Common Stock under the Yorkville Purchase Agreement may cause the trading price of our Class A Common Stock to decline.

After Yorkville has acquired shares under the Yorkville Purchase Agreement, it may sell all, some or none of those shares.

Sales to Yorkville by us pursuant to the Yorkville Purchase Agreement may result in substantial dilution to the interests of other holders of our Class A Common Stock.

Depending upon market liquidity at the time, sales of shares of our Class A Common Stock under the Yorkville SEPA and the Convertible Notes may cause the trading price of our Class A Common Stock to decline.

After Yorkville has acquired shares under the Yorkville SEPA, it may sell all, some or none of those shares.

Sales to Yorkville by us pursuant to the Yorkville SEPA may result in

substantial dilution to the interests of other holders of our Class A Common Stock.

The sale of a substantial number of shares of our Class A Common Stock to Yorkville, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

However, we have the right to control the timing and amount of any sales of our shares to Yorkville, and the Yorkville Purchase Agreement may be terminated by us at any time at our discretion without penalty.

The sale of substantial amounts of shares of our Common Stock or warrants, or the perception that such sales could occur, could cause the prevailing market price of shares of our Common Stock and warrants to decline significantly.

The sale of substantial amounts of shares of our Class A Common Stock or warrants, or the perception that such sales could occur, could cause the prevailing market price of shares of our Class A Common Stock and warrants to decline significantly.

These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

We believe the likelihood that warrant holders will exercise their warrants is dependent upon the market price of our Common Stock.

We qualify as a “controlled company”

within the meaning of the Nasdaq listing standards and, as a result, our stockholders may not have certain corporate governance protections that are available to stockholders of companies that are not controlled companies.

So long as more than 50% of the voting power for the election of directors is held by an individual, a group or another company, we will qualify as a “controlled company”

under the Nasdaq listing requirements.

We believe the likelihood that warrant holders will exercise their warrants is dependent upon the market price of our Class A Common Stock.

We qualify as a “controlled company” within the meaning of the Nasdaq listing standards and, as a result, our stockholders may not have certain corporate governance protections that are available to stockholders of companies that are not controlled companies.

So long as more than 50% of the voting power for the election of directors is held by an individual, group, or another company, we will qualify as a “controlled company” under the Nasdaq listing requirements.

Ruiz controls more than a majority of the voting power of our outstanding capital stock.

As a result, we qualify as a “controlled company”

under the Nasdaq listing standards and will not be subject to the requirements that would otherwise require us to have:

(i) a majority of “independent directors,”

as defined under the listing standards of Nasdaq;

As a result, we qualify as a “controlled company” under the Nasdaq listing standards, and will not be subject to the requirements that would otherwise require us to have:

(i) a majority of “independent directors,” as defined under the listing standards of Nasdaq;

(ii) a nominating and corporate governance committee comprised solely of independent directors;

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Quesada have the ability to control matters requiring stockholder approval, including the election and removal of directors, any amendment to our certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets.

See “We are controlled by the Members, including John H.

Ruiz and Frank C.

Quesada, whose interests may conflict with our interests and the interests of other stockholders.”

The Members, including John H.

Ruiz and Frank C.

Quesada (together, the "MSP Principals"), may have their interest in us diluted due to future equity issuances, repurchases under the LLC Agreement from the MSP Principals in connection with the exercise of New Warrants or Members or their designees selling shares of Class A Common Stock, in each case, which could result in a loss of the “controlled company”

exemption under the Nasdaq listing rules.

Quesada (together, the “MSP Principals”), may have their interest in us diluted due to future equity issuances, repurchases under the LLC Agreement from the MSP Principals in connection with the exercise of New Warrants or Members or their designees selling shares of Class A Common Stock, in each case, which could result in a loss of the “controlled company” exemption under the Nasdaq listing rules.

We would then be required to comply with those provisions of the Nasdaq listing requirements.

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• reduced liquidity for our securities;

a determination that the Class A Common Stock is a “penny stock”

which will require brokers trading in the Class A Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

• a determination that the Class A Common Stock is a “penny stock” which will require brokers trading in the Class A Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

• a limited amount of news and analyst coverage;

• a decreased ability to issue additional securities or obtain additional financing in future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.”

To the extent our Class A Common Stock, Public Warrants and New Warrants are listed on Nasdaq, they are covered securities.

The National Securities Markets Improvement Act of 1996, a federal statute, prevents or preempts states from regulating the sale of certain securities, which are referred to as “covered securities.” To the extent our Class A Common Stock, Public Warrants and New Warrants are listed on Nasdaq, they are covered securities.

Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case.

Failure to meet the continued listing requirements of Nasdaq could result in the delisting of our common stock, thus negatively impacting the price value of our common stock and negatively impacting our ability to raise additional capital.

On April 18, 2023, we received a notification letter from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) stating the Company was not in compliance with the requirements of Nasdaq Listing Rule 5250(c)(1) (the “Reporting Rule”) as a result of not having timely filed this Annual Report on Form 10-K (the “2022 Form 10-K”) with the SEC.

In addition, on May 18, 2023, we received a written notice from Nasdaq stating that the Company was not in compliance with Nasdaq’s continued listing requirements under the Reporting Rule as a result our failure to file our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 in a timely manner (the “First Quarter Form 10-Q”).

Under the Nasdaq rules, the Company had 60 calendar days, or until June 20, 2023, to file the 2022 Form 10-K and First Quarter Form 10-Q or to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rules.

On April 24, 2023, we received notice from Nasdaq that the closing bid price for our common stock had been below $1.00 per share for the previous 30 consecutive business days, and that we are therefore not in compliance with the minimum bid price requirement for continued inclusion on Nasdaq under Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Requirement”).

The notice indicates that we will have 180 calendar days, or until October 23, 2023, to regain compliance with this requirement.

We can regain compliance with the $1.00 minimum bid listing requirement if the closing bid price of our common stock is at least $1.00 per share for a minimum of 10 consecutive business days during the 180-day compliance period.

If we do not regain compliance during such 180-day compliance period, the Company may be eligible for an additional 180 calendar days, provided that the Company meets the continued listing requirement for market value of publicly held shares and all other applicable initial listing standards for Nasdaq, and provides a written notice of its intention to cure this deficiency during the second compliance period, including by effecting a reverse stock split, if necessary.

On June 20, 2023, the Company submitted a plan of compliance to achieve and sustain compliance with all Nasdaq Capital Market listing requirements, including the Reporting Rule and Minimum Bid Requirement.

On July 7, Nasdaq notified the Company that it was granting an extension to file the 2022 Form 10-K and the First Quarter Form 10-K on or before August 7, 2023.

The Company intends file its First Quarter Form 10-Q on or before such date, and to actively monitor its bid price.

If we fail to achieve our plan of compliance or in the future we fail to comply with Nasdaq’s continued listing requirements, including the Reporting Rule and Minimum Bid Requirement, our common stock will be subject to delisting.

In the event we receive notice that our common stock is being delisted, Nasdaq rules permit us to appeal any delisting determination by the Nasdaq staff to a Hearings Panel.

If our common stock were to be delisted by Nasdaq, our common stock would be subject to rules that impose additional sales practice requirements on broker-dealers who sell our securities.

The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our common stock.

This would adversely affect the ability of investors to trade our common stock and would adversely affect the value of our common stock.

These factors could contribute to lower prices and larger spreads in the bid and ask prices for our common stock.

The delisting of our common stock from Nasdaq would also adversely affect our ability to complete future financings.

If our shares are delisted from Nasdaq and become subject to the penny stock rules, it would become more difficult to trade our shares.

Failure to meet the continued listing requirements of Nasdaq could result in the delisting of our Class A Common Stock, thus negatively impacting the price value of our Class A Common Stock and negatively impacting our ability to raise additional capital.

On April 24, 2023, the Company was notified by Nasdaq Listing Qualifications staff (the “Staff”) that the Company was non-compliant with Nasdaq Listing Rule 5250(c)(1) as a result of not having timely filed its 2022 Form 10-K.

The Company was also deemed non-compliant with Nasdaq’s Bid Price Requirement as the closing bid price for the Company’s Class A Common Stock had fallen below $1.00 per share for 30 consecutive business days (March 13, 2023 through April 23, 2023).

Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A), the Company was provided with a compliance cure period of 180 calendar days, or until October 23, 2023, to regain compliance with the Bid Price Requirement.

On July 27, 2023, the Company filed its 2022 Form 10-K.

On May 24, 2023, the Company was notified by Nasdaq that it was not in compliance with the requirements of Nasdaq Listing Rule 5250(c) as a result of not having timely filed its Form 10-Q for the period ended March 31, 2023 with the SEC.

On August 7, 2023, Nasdaq granted the Company an extension until August 30, 2023 to file its Quarterly Reports on Form 10-Q for the quarters ending March 31, 2023 and June 30, 2023.

On August 17, 2023, the Company filed its Quarterly Report on Form 10-Q for the period ending March 31, 2023.

On August 16, 2023, the Company was notified by Nasdaq that it was not in compliance with the requirement of Nasdaq Listing Rule 5250(c)(1) as a result of not having timely filed its Form 10-Q for the period ended June 30, 2023 with the SEC.

The Company has regained compliance with such rule as a result of the filing of the Quarterly Report on Form 10-Q for the period ended June 30, 2023 on August 30, 2023.

On August 31, 2023, the Company was notified by Nasdaq that it regained compliance with Nasdaq Listing Rule 5250(c)(1) after having filed its 2022 Form 10-K, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023.

On September 5, 2023, the Company received a determination from the Staff that the Company’s Class A Common Stock had a closing bid price of $0.10 or less for 10 consecutive trading days during a compliance period and so, pursuant to Listing Rule 5810(3)(A)(iii), the staff determined to delist the Company’s securities from The Nasdaq Capital Market (the “Delisting Determination”).

Pursuant to the procedures set out in the Nasdaq Listing Rules, the Company appealed the Delisting Determination to a hearing panel (the “Hearing”), which suspended the Delisting Determination until the Hearing, which was scheduled for November 2, 2023.

The Company effected the Reverse Stock Split on October 13, 2023, which caused the price of its Class A Common Stock to trade at a level sufficient to regain compliance with Listing Rule 5810(3)(A)(iii), and Listing Rule 5450(a)(1).

On October 27, 2023, the Company was notified by the Staff that it had regained compliance with all applicable listing standards, the Hearing was canceled, and that the Company’s stock will continue to be listed and traded on the Nasdaq Stock Market.

If in the future we fail to comply with Nasdaq’s continued listing requirements, including the Reporting Rule and Minimum Bid Requirement, our Class A Common Stock will be subject to delisting.

In the event we receive notice that our Class A Common Stock is being delisted, Nasdaq rules permit us to appeal any delisting determination by the Nasdaq staff to a Hearings Panel.

If our Class A Common Stock were to be delisted by Nasdaq, our Class A Common Stock would be subject to rules that impose additional sales practice requirements on broker-dealers who sell our securities.

The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our Class A Common Stock.

This would adversely affect the ability of investors to trade our Class A Common Stock and would adversely affect the value of our Class A Common Stock.

These factors could contribute to lower prices and larger spreads in the bid and ask prices for our Class A Common Stock.

The delisting of our common stock from Nasdaq would also adversely affect our ability to complete future financing.

If our shares are delisted from Nasdaq and become subject to the penny stock rules, it will become more difficult to trade our shares.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.

Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system.

If we do retain a listing on Nasdaq and if the price of our common stock is less than $5.00, our Common Stock will be deemed a penny stock.

If we do not retain our listing on Nasdaq and if the price of our Class A Common Stock is less than $5.00, it will be deemed a penny stock.

The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information.

In addition, the penny stock rules require that, before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive:

(i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement;

(ii) a written agreement to transactions involving penny stocks;

and (iii) a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

Although due diligence was conducted on MSP prior to the Business Combination, we cannot assure you that this diligence surfaced all material issues that may be present in MSP’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of MSP’s business and outside of our and MSP’s control will not later arise.

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our Class A Common Stock, and therefore stockholders may have difficulty selling their shares.

We may be required to take write-downs or write-offs, or restructuring, impairment, or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could adversely affect the value of our securities.

Although due diligence was conducted on Legacy MSP prior to the Business Combination, we cannot assure you that this diligence surfaced all material issues that may have been present in Legacy MSP’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Legacy MSP’s business and outside of our and Legacy MSP’s control will not later arise.

As a result of these factors, we may be forced to write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses.

Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis.

Even though these charges may

be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about the Company or its securities.

Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about the Company or its securities.

Accordingly, any of our stockholders could suffer a reduction in the value of their shares.

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We may require additional financing to fund the operations or growth of the Company.

The failure to secure additional financing could have a material adverse effect on the continued development or growth of the Company.

The failure to secure additional financing could have a material adverse effect on the continued operations or growth of the Company.

None of our officers, directors or stockholders is required to provide any financing to us.

In some jurisdictions, our recoveries may be limited due to legal restrictions, which may have negative consequences for the value or enforcement of our contractual agreements with our counterparties, for our ability to do business in certain jurisdictions, or for our cost of doing business.

There exist in various jurisdictions prohibitions or restrictions in connection with purchasing Claims from plaintiffs (known as maintenance, and a form of maintenance, called champerty), assignment of certain kinds of Claims, and/or participating in a lawyer’s contingent fee interests.

Such prohibitions and restrictions, to the extent they exist, are governed by the rules and regulations of each state and jurisdiction in the United States and vary in degrees of strength and enforcement in different states and federal jurisdictions.

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Anti-takeover provisions contained in our Charter and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our Second Amended and Restated Certificate of Incorporation (our “Charter”) contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests.

Our Second Amended and Restated Certificate of Incorporation, as amended, (our “Charter”) contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests.

We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control.

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• the requirement that, at any time from and after the date on which the voting power of John H.

Ruiz and his affiliates represent less than 50% of the voting power of all of the then outstanding shares entitled to vote (“Voting Rights Threshold Date”), directors elected by the stockholders generally entitled to vote may be removed from the Board solely for cause and only by affirmative vote of the holders of at least 66 2/3% of the voting power of the then outstanding shares entitled to vote, voting together as a single class;

• the exclusive right of the Board to fill newly created directorships and vacancies with respect to directors elected by the stockholders generally entitled to vote, which prevents stockholders from being able to fill vacancies on the Board;

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the existence of authorized but unissued and unreserved shares of Common Stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise;

advance notice procedures set forth in the Amended and Restated Bylaws that stockholders must comply with in order to nominate candidates to the Board or to propose other matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company;

an exclusive forum provision which provides that, unless the Company consents in writing to the selection of an alternative forum, (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim;

• advance notice procedures set forth in the Amended and Restated Bylaws that stockholders must comply with in order to nominate candidates to the Board or to propose other matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company;

• an exclusive forum provision which provides that, unless the Company consents in writing to the selection of an alternative forum, (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim;

• arising pursuant to any provision of the DGCL, the Charter or the Amended and Restated Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine of the State of Delaware, in each case, will be required to be filed in the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over any such action or proceeding, then a state court located within the State of Delaware or the federal district court for the District of Delaware).

The Charter contains a provision renouncing our interest and expectancy in certain corporate opportunities.

The Charter provides that the Company will have no interests or expectancy in, or being offered an opportunity to participate in any corporate opportunity, to the fullest extent permitted by applicable law, with respect to any lines of business or business activity or business venture conducted by any holder of common stock, any affiliate of such holder or any director, officer or stockholder of such holder or any affiliate thereof (“Relevant Persons”) as of the date of the filing of the Charter with the Secretary of State of the State of Delaware or received by, presented to or originated by the Relevant Persons after the date of the filing of the Charter with the Secretary of State of the State of Delaware in such person’s capacity as a Relevant Person (and not in his, her or its capacity as a director, officer or employee of the Company).

The Charter provides that the Company will have no interests or expectancy in, or being offered an opportunity to participate in any corporate opportunity, to the fullest extent permitted by applicable law, with respect to any lines of business or business activity or business venture conducted by any holder of Common Stock, any affiliate of such holder or any director, officer or stockholder of such holder or any affiliate thereof (“Relevant Persons”) as of the date of the filing of the Charter with the Secretary of State of the State of Delaware or received by, presented to or originated by the Relevant Persons after the date of the filing of the Charter with the Secretary of State of the State of Delaware in such person’s capacity as a Relevant Person (and not in his, her or its capacity as a director, officer or employee of the Company).

These provisions of the Charter create the possibility that a corporate opportunity of ours may be used for the benefit of the Relevant Persons.

Risks Related to Ownership of Our Common Stock

In this section, unless otherwise noted or the context otherwise requires, “we,”

“us,”

and “our”

refer to the Company.

The market price of our common stock may be significantly volatile.

The market price for our common stock may be significantly volatile and subject to wide fluctuations in response to factors including the following:

In this section, unless otherwise noted or the context otherwise requires, “we,” “us,” and “our” refer to the Company.

The market price of our Class A Common Stock may be significantly volatile.

The market price for our Class A Common Stock may be significantly volatile and subject to wide fluctuations of price and volume in response to factors including the following:

• actual or anticipated fluctuations in our quarterly or annual operating results;

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• changes in the economic performance or market valuations of companies similar to ours;

• naked short selling of our common stock and stock price manipulation;

• general economic or political conditions in the United States or elsewhere.

In addition, if we fail to reach an important recovery milestone or result by a publicly expected deadline, even if by only a small margin, there could be significant impact on the market price of our common stock.

Additionally, as we approach the announcement of anticipated significant information and as we announce such information, we expect the price of our common stock to be particularly volatile, and negative results would have a substantial negative impact on the price of our common stock.

In some cases, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies.

Additionally, as we approach the announcement of anticipated significant information and as we announce such information, we expect the price of our Class A Common Stock to be particularly volatile, and negative results would have a substantial negative impact on the price of our Class A Common Stock.

In some cases, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies.

Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our business operations and reputation.

A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

The price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions.

The price of our securities may fluctuate significantly due to the market’s reaction to the perceived or actual condition of the Company’s business, and general market and economic conditions.

An active trading market for our securities may never develop or, if developed, it may not be sustained.

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You may be unable to sell your securities unless a market can be established or sustained.

If the Business Combination’s benefits do not meet the expectations of investors, stockholders, or financial analysts, the market price of our securities may decline.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of the Company’s securities may decline.

The trading price of our common stock is highly volatile and is subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume.

In addition to the factors discussed in this “Risk Factors”

section and elsewhere in this annual report, these factors include:

the valuation ascribed to MSP and the Company’s Class A Common Stock in the Business Combination may not be indicative of the price of the Company that will prevail in the current trading market,

If the Business Combination’s benefits do not meet the expectations of investors, stockholders, or financial analysts, the market price of our securities may decline.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of the Company’s securities may decline.

The trading price of our Class A Common Stock is highly volatile and is subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume.

In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report, these factors include:

• the valuation ascribed to Legacy MSP and the Company’s Class A Common Stock in the Business Combination may not be indicative of the price of the Company that will prevail in the current trading market,

• research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors,

• our dual class structure could make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices will not be investing in our stock,

our status as an “emerging growth company”

allows us exemptions from certain reporting requirements including:

(i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”);

• our status as an “emerging growth company” allows us exemptions from certain reporting requirements including:

(i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”);

(ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements;

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If securities analysts publish negative evaluations of our stock or stop publishing research or reports about our business, the price of our stock could decline.

The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business.

The trading market for our Class A Common Stock relies in part on the research and reports that industry or financial analysts publish about us or our business.

We currently have limited research coverage by financial analysts.

Securities analysts may discontinue coverage or downgrade their evaluation of our stock.

If any of the analysts who continue to cover or cover us in the future downgrade their evaluation of our common stock or publishes inaccurate or unfavorable research about our business, our common stock price may decline.

If any of the analysts who continue to cover or cover us in the future downgrade their evaluation of our Class A Common Stock or publishes inaccurate or unfavorable research about our business, our Class A Common Stock price may decline.

If additional analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

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For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices.

Under any such announced policies or future policies, our dual class capital structure could make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices will not be investing in our stock.

It is unclear what effect, if any, these policies will have on the

valuations of publicly traded companies excluded from such indices, but it is possible that they may depress valuations as compared to similar companies that are included.

will not be investing in our stock.

It is unclear what effect, if any, these policies will have on the valuations of publicly traded companies excluded from such indices, but it is possible that they may depress valuations as compared to similar companies that are included.

As a result, the market price of shares of Class A Common Stock could be adversely affected.

We may amend the terms of the Public Warrants in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then-outstanding Public Warrants.

As a result, the exercise price of a holder’s Public Warrants could be increased, the exercise period could be shortened and the number of shares of our Common Stock purchasable upon exercise of a Public Warrant could be decreased, all without the approval of that warrant holder.

As a result, the exercise price of a holder’s Public Warrants could be increased, the exercise period could be shortened and the number of shares of our Class A Common Stock purchasable upon exercise of a Public Warrant could be decreased, all without the approval of that warrant holder.

Our Public Warrants were issued in registered form under the Existing Warrant Agreement.

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or (iii) to accept the nominal redemption price which, at the time the outstanding New Warrants are called for redemption, is likely to be substantially less than the market value of their New Warrants.

None of the Private Warrants will be redeemable by us so long as they are held by their initial purchasers or such initial purchasers’

permitted transferees.

Pursuant to the terms of the Existing Warrant Agreement, the exercise price of the Public Warrants and Private Warrants has decreased to $0.0001 after giving effect to the issuance of the New Warrants.

None of the Private Warrants will be redeemable by us so long as they are held by the Sponsor or its permitted transferees.

Pursuant to the terms of the Existing Warrant Agreement, the exercise price of the Public Warrants has decreased to $0.0025 after giving effect to the issuance of the New Warrants.

The Company has no obligation to notify holders of the Public Warrants or the New Warrants that they have become eligible for redemption.

However, in the event the Company determined to redeem the Public Warrants or the New Warrants, holders of the Public Warrants and the New Warrants, as applicable, would be notified of such redemption as described in the Existing Warrant Agreement and the New Warrant Agreement, as applicable.

Specifically, in the event that the Company elects to redeem all of the redeemable warrants as described above, the Company shall fix a date for the redemption (the “Redemption Date”).

Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than 30 days prior to the Redemption Date to the registered holders of the redeemable warrants to be redeemed at their last addresses as they appear on the registration books.

Any notice mailed in the manner provided in the Existing Warrant Agreement and the New Warrant Agreement shall be conclusively presumed to have been duly given whether or not the registered holder received such notice.

In addition, beneficial owners of the redeemable warrants will be notified of such redemption via the Company’s posting of the redemption notice to DTC.

Our stockholders may experience significant dilution as a result of future equity offerings or issuances and exercise of outstanding options and warrants.

In order to raise additional capital or pursue strategic transactions, we may in the future offer, issue or sell additional shares of our common stock or other securities convertible into or exchangeable for our common stock, including the issuance of common stock in relation to our Incentive Plan.

In addition, beneficial owners of the redeemable warrants will be notified of such redemption via the Company’s posting of the redemption notice to DTC.

Our stockholders will experience significant dilution as a result of future equity offerings or issuances and exercise of outstanding options and warrants.

In order to raise additional capital or pursue strategic transactions, we may in the future offer, issue, or sell additional shares of our Class A Common Stock or other securities convertible into or exchangeable for our Class A Common Stock, including the issuance of stock in relation to our Incentive Plan.

Our stockholders may experience significant dilution as a result of future equity offerings, issuances, or the exercising of warrants.

Investors purchasing shares or other securities in the future could have rights superior to existing stockholders.

As of December 31, 2022, we have the following number of securities convertible into, or allowing the purchase of, our common stock, including 3,319,304 Public Warrants outstanding, outstanding Up-C units exchangeable for 3,147,979,494 shares of our Common Stock, and 98,736,750 shares of Class A Common Stock reserved for future issuance under our stock incentive plan.

Warrants have become exercisable for our Class A Common Stock, which has increased the number of shares eligible for future resale in the public market and may result in dilution to our stockholders.

We issued Public Warrants to purchase 11,500,000 shares of Class A Common Stock as part of our IPO and, on the IPO closing date, we issued Private Warrants to the Sponsor and Nomura to purchase in the aggregate 325,000 shares of our Class A Common Stock.

In addition, the Company issued an aggregate of 1,028,046,326 New Warrants to the holders of the Company’s Class A Common Stock as of the close of business on the Closing Date.

Pursuant to the terms of the Existing Warrant Agreement, the exercise price of the Public Warrants and Private Warrants decreased to $0.0001 per share after giving effect to the issuance of the New Warrants.

As of April 5, 2024, the following securities are convertible into, or allow the purchase of, our Class A Common Stock, including:

(i) 124,067,498 Up-C Units that may be exchanged for shares of Class A Common Stock;

2,950,157 Public Warrants outstanding, which are exercisable in lots of 25 with an exercise price of $0.0025 per whole share;

(ii) 894,754,824 New Warrants outstanding, which are exercisable in lots of 25 with an exercise price of $287.50 per whole share;

(iii) the CPIA Warrant exercisable to purchase up to 2,666,667 shares of our Class A Common Stock;

and (iv) the VRM Warrants, entitling Virage to purchase 62,073,998 shares of Class A Common

Stock at a purchase price of $0.0001 per share for a period of two years from issuance, exercisable on a cashless basis only.

In addition, 3,843,002 shares of Class A Common Stock are reserved for future issuance under our stock incentive plan.

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.

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Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Class A Common Stock.

The Private Warrants are identical to the Public Warrants sold as part of the Public Units issued in our IPO except that, so long as they are held by the Sponsor, Nomura or their permitted transferees:

(i) they will not be redeemable by us;

(ii) they (including the Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after the completion of an initial business combination;

(iii) they may be exercised by the holders on a net share (cashless) basis;

and (iv) are subject to registration rights.

The New Warrants will be issued in registered form under the New Warrant Agreement between the Company and Continental Stock Transfer & Trust Company.

The New Warrant Agreement is filed as an exhibit to the registration statement and incorporated by reference herein.

The Company’s management has limited experience in operating a public company.

The Company’s executive officers have limited experience in the management of a publicly traded company.

The Company’s management team may not successfully or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws.

Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the Company.

The Company’s management has limited experience in operating a public company.

The Company’s executive officers have limited experience in the management of a publicly traded company.

The Company is subject to significant regulatory oversight and reporting obligations under federal securities laws.

Management’s limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the Company.

The Company may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of publicly traded companies.

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The Charter requires that, unless the Company consents in writing to the selection of an alternative forum, (i) any derivative action brought on behalf of the Company;

(ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Company to the Company or the Company’s stockholders;

(iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Charter or Amended and Restated Bylaws;

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Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.

Although we believe that these exclusive forum provisions benefit us by providing greater consistency in the application of Delaware law, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable in disputes with us or any of our directors, officers or stockholders, which may discourage lawsuits with respect to such claims.

Further, in the event a court finds the exclusive forum provision contained in the Charter to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

The JOBS Act permits “emerging growth companies”

like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

We currently qualify as an “emerging growth company”

as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”).

As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including:

(i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”);

The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

We currently qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”).

growth company, including:

(i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”);

(ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements;

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As a result, our stockholders may not have access to certain information they deem important.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year:

We will remain an emerging growth company until the earliest of the last day of the fiscal year:

(a) following August 18, 2025, the fifth anniversary of our IPO;

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Failure to establish and maintain effective internal controls could have a material adverse effect on the accuracy and timing of our financial reporting in future periods.

As a publicly traded company, we are subject to the Exchange Act and the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”

or “SOX”).

As a publicly traded company, we are subject to the Exchange Act and the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act” or “SOX”).

The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting.

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Our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which the controls of the Company are documented, designed or operating.

As noted within “Part II, Item 9A Controls and Procedures”

of this Annual Report on Form 10-K, we reported material weaknesses in internal control related to the following items:

We did not have sufficient controls related to the accounting for complex transactions.

We did not have sufficient controls over the human resources and payroll processes.

Specifically:

o Insufficient design of controls as the outsourced system used for payroll did not have appropriate audit and we did not have appropriate compensating controls or documented segregation of duties over the system used for payroll;

o Insufficient implementation of controls resulting in a lack of an effective control environment over payroll entries;

o Insufficient design and implementation of controls within our human resources business process;

o Insufficient implementation of controls resulting in a lack of proper documentation over approval of bonus payments.

Insufficient design of controls as we did not have appropriate segregation of duties and review controls over disbursements.

On April 16, 2023, a special committee of the Board of Directors was formed to review matters related to the preparation and filing of this Annual Report on Form 10-K.

On June 13, 2023, the special committee finalized its review.

The findings and recommendations of the special committee are set forth in “Part II, Item 9A Controls and Procedures”

of this Annual Report on Form 10-K.

The special committee identified deficiencies in our internal controls which we consider material weaknesses.

The material weaknesses relate to failures to develop or maintain an effective system of internal disclosure controls for the timely disclosure of material communications from external sources to the Company’s management and Board of Directors for review and evaluation.

A special committee of the board of directors made unanimous recommendations to enhance and improve the public company reporting capabilities of the Company, including but not limited to:

The implementation of certain management training,

The hiring of a director of internal audit, and

Enhancements to the Company’s internal communication process, as well as increased reporting to the Audit Committee of Board of Directors.

We consider these recommendations to be indicative of material weaknesses related to a failure to develop or maintain an effective system of internal disclosure controls for the timely disclosure of material communications from external sources to the Company’s management and Board of Directors for review and evaluation.

Specifically, the material weaknesses we identified were as follows:

We did not have sufficient controls related to training personnel to understand their respective roles and responsibilities.

We did not have sufficient monitoring activities, including a director of internal audit.

We did not have sufficient lines of communication internally and to the Board of Directors, and therefore did not maintain a sufficient control environment with respect to oversight of the Board of Directors.

We have identified material weaknesses in internal control as noted within “Part II, Item 9A Controls and Procedures” of this Annual Report:

Any failure to maintain effective internal controls, including the recommendations of the Special Committee, could adversely impact our ability to report our financial results on a timely and accurate basis, or may result in a restatement of our financial statements for prior periods.

Any such failures could have a material adverse effect on our financial results and investor confidence and the market for our common stock.

For a discussion of our internal controls over financial reporting and a description of management's plan for remediation of the material weaknesses, see “Part II, Item 9A Controls and Procedures”

of this Annual Report on Form 10-K.

Completion of the remediation plan does not provide assurance that our remediation or other controls will continue to operate properly.

Any such failures could have a material adverse effect on our financial results and investor confidence and the market for our Class A Common Stock.

Our internal control over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of SOX, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting.

To comply with the requirements of being a public company, the Company may be required to provide the management report on internal controls commencing with the annual report for fiscal year ended December 31, 2023, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff.

To comply with the requirements of being a public company, the Company is required to provide the management report on internal controls commencing with this Annual Report on Form 10-K for year ended December 31, 2023, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff.

The standards required for a public company under Section 404 of SOX are significantly more stringent than those required as a privately held company.

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Testing and maintaining these controls can divert our management’s attention from other matters that are important to the operation of our business.

If we identify material weaknesses in the internal control over financial reporting of the Company or are unable to comply with the requirements of Section 404 of SOX or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.

The restatement of our prior quarterly financial statements may affect investor confidence and raise reputational issues and may subject us to additional risks and uncertainties, including increased professional costs and the increased possibility of legal proceedings and regulatory inquiries.

As discussed in the Explanatory Note preceding Part I, Item I above and in Note 18 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we determined to restate our unaudited condensed consolidated financial statements as of and for the periods ended June 30, 2022 and September 30, 2022 after we identified errors in the accounting for the indemnification asset, various intangible assets, and rights to cash flows and consolidation of an entity in connection with the our business combination.

As a result of this error and the resulting restatement of our unaudited condensed consolidated financial statements for the impacted periods, we have incurred, and may continue to incur, unanticipated costs for accounting and legal fees in connection with or related to the restatement and have become subject to a number of additional risks and uncertainties, including the increased possibility of litigation and regulatory inquiries.

Any of the foregoing may affect investor confidence in the accuracy of our financial disclosures and may raise reputational risks for our business, both of which could harm our business and financial results.

Matters relating to or arising from the special committee of the Board of Directors’

investigation, including governmental investigations, regulatory proceedings, litigation matters, and potential additional expenses, may adversely affect our business and results of operations.

On April 16, 2023, a special committee of the Board of Directors was formed to review matters related to the preparation and filing of this Annual Report on Form 10-K.

On June 13, 2023, the special committee finalized its review.

The findings and recommendations of the special committee are set forth in “Part II, Item 9A Controls and Procedures”

of this Annual Report on Form 10-K.

Testing and maintaining these controls can divert our management’s attention from other matters that are important to the operation of our business.

independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A Common Stock could be negatively affected and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.

Matters relating to or arising from the Special Committee investigation, including governmental investigations, regulatory proceedings, litigation matters, and potential additional expenses, may adversely affect our business and results of operations.

As previously disclosed, on August 11, 2022, the Securities and Exchange Commission (the “SEC”) initiated an investigation of the Company, and requested documents relating to, among other matters, the business combination transaction with Lionheart Acquisition Corporation II consummated on May 23, 2022, certain historical and projected financial results, investor agreements, and data analytic platforms and algorithms.

The Company received a subpoena dated March 1, 2023 from the SEC regarding the aforementioned subject matter, and subsequently received a subpoena on May 10, 2023, in connection with the investigation relating to, among other matters, the Company’s projections and the accounting and valuation of certain assets that were the basis for the Company’s determination that its quarterly financial statements for the periods ended June 30, 2022 and September 30, 2022 require restatements and should no longer be relied upon, as disclosed in the Company’s Form 8-K on April 14, 2023.

On August 16, 2023, the Company received an additional subpoena from the SEC regarding certain funding sources of the Company prior to the Business Combination, various statements and disclosures by the Company in connection with, and following, the Business Combination, certain historical and projected financial results, and data analytic platforms and algorithms used to identify potential recoveries.

The Company intends to fully cooperate with the SEC in responding to the subpoenas.

In addition, on March 10, 2023, the Company received a subpoena from the U.S.

Attorney’s Office in connection with a grand jury investigation in the U.S.

District Court for the Southern District of Florida requesting certain information concerning the Company, which subpoena requests documents relating to, among other matters, the Company’s proprietary algorithms and other software used to identify potentially recoverable claims, the drop in the price of the Company’s common stock following the Business Combination, and certain marketing materials and investment agreements presented to potential investors.

To the best of the Company’s knowledge, the Department of Justice has not issued any target letters to anyone associated with the Company as a result of this investigation (the United States Attorney’s Manual states that a “target” is a person as to whom the prosecutor or the grand jury has substantial evidence linking him or her to the commission of a crime and who, in the judgment of the prosecutor, is a putative defendant).

The Company has cooperated, and will continue to cooperate, fully with these inquiries.

In connection with its review of the matters related to the preparation and filing of the 2022 Form 10-K, the Special Committee, along with external advisors retained thereby, reviewed the subject matter of information requests related to the foregoing subpoenas received prior to June 2023.

Based on that review, and the nature of the documents requested in the subsequent subpoena, the Company believes that these investigations will be resolved without any material developments;

however, there can be no assurance as to the outcome or future direction thereof.

We have incurred significant expenses related to legal, accounting, and other professional services in connection with the Special Committee review and related matters.

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Any future investigations or additional lawsuits may adversely affect our business, financial condition, results of operations and cash flows.

The Company’s stockholders may be held liable for claims by third parties against the Company to the extent of distributions received by them.

If the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against the Company which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer”

or a “fraudulent conveyance.”

As a result, a bankruptcy court could seek to recover all amounts received by the Company’s stockholders.

Furthermore, because the Company distributed the proceeds held in the Public Shares to the Company’s Public Stockholders in connection with the Closing, this may be viewed or interpreted as giving preference to the Company’s Public Stockholders over any potential creditors with respect to access to or distributions from the Company’s assets.

Furthermore, the LCAP Board may be viewed as having breached their fiduciary duties to the Company’s creditors and/or may have acted in bad faith, and thereby exposing itself and the Company to claims of punitive damages, by paying Public Stockholders from the Trust Account prior to addressing the claims of creditors.

The Company’s stockholders may be held liable for claims by third parties against the Company to the extent of distributions received by them.

If the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against the Company that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by the Company’s stockholders.

The Company cannot assure you that claims will not be brought against it for these reasons.

Risks Related to the Yorkville Purchase Agreement

In this section “we,”

“us,”

“our,”

and other similar terms refer to MSP Recovery, Inc.

d/b/a LifeWallet and its subsidiaries prior to the Business Combination and to the Company following the Business Combination.

On January 6, 2023, we entered into the Yorkville Purchase Agreement with YA II PN, Ltd., a Cayman Island exempted company (“Yorkville”), pursuant to which Yorkville committed to purchase up to $1 billion in shares of Common Stock, subject to certain limitations and conditions set forth in the Yorkville Purchase Agreement.

Our shares of Common Stock that may be issued under the Yorkville Purchase Agreement may be sold by us to Yorkville at our discretion from time to time over the 36-month period commencing on the date the registration statement became effective.

No registration statement for the Yorkville Purchase Agreement is currently effective and no sales may be made under the Purchase Agreement until it becomes effective.

We generally have the right to control the timing and amount of any sales of our shares of Common Stock to Yorkville under the Yorkville Purchase Agreement.

Sales of our shares of Common Stock, if any, to Yorkville under the Yorkville Purchase Agreement will depend upon market conditions and other factors to be determined by us.

We may ultimately decide to sell to Yorkville all, some or none of the shares of Common Stock that may be available for us to sell to Yorkville pursuant to the Yorkville Purchase Agreement.

Because the purchase price per share to be paid by Yorkville for the shares of Common Stock that we may elect to sell to Yorkville under the Yorkville Purchase Agreement, if any, will fluctuate based on the market prices of our shares of Common Stock at the time we elect to sell shares to Yorkville pursuant to the Yorkville Purchase Agreement, if any, it is not possible for us to predict, as of the date of this Form 10-K and prior to any such sales, the number of shares of Common Stock that we will sell to Yorkville under the Yorkville Purchase Agreement, the purchase price per share that Yorkville will pay for shares purchased from us under the Yorkville Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by Yorkville under the Yorkville Purchase Agreement.

Although the Yorkville Purchase Agreement provides that, during the term of the agreement and subject to issuance and effective registration of the shares, we may, in our discretion, from time to time direct Yorkville to purchase our shares of Common Stock from us in one or more purchases under the agreement, for a maximum aggregate purchase price of up to $1,000,000,000, the Yorkville Purchase Agreement is subject to a cap of 650,000,000 shares of Common Stock.

Assuming all of the 120,000,000 shares remaining to be sold to Yorkville were sold, per the terms of the Yorkville Purchase Agreement, at a 2.0% discount to the last closing sale price of our shares of Common Stock as reported on NASDAQ on December 30, 2022, or $1.60 per share (inclusive of such discount), we would not receive aggregate gross proceeds from the sale of such shares to Yorkville equal to Yorkville’s $1,000,000,000 total aggregate purchase commitment under the Yorkville Purchase Agreement.

However, because the market prices of our shares of Common Stock may fluctuate from time to time and, as a result, the actual purchase prices to be paid by Yorkville for our shares of Common Stock that we direct it to purchase under the Yorkville Purchase Agreement, if any, also may fluctuate because they will be based on such fluctuating market prices of our shares of Common Stock, it is possible that we would need to issue and sell more than 650,000,000 shares of Common Stock to Yorkville under the Yorkville Purchase Agreement in order to receive aggregate gross proceeds equal to Yorkville’s $1,000,000,000 total aggregate purchase commitment under the Yorkville Purchase Agreement.

The number of our shares of Common Stock ultimately offered for sale by Yorkville is dependent upon the number of shares of Common Stock, if any, we ultimately elect to sell to Yorkville under the Yorkville Purchase Agreement.

Investors who buy shares at different times will likely pay different prices.

Pursuant to the Yorkville Purchase Agreement, we will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to Yorkville.

If and when we do elect to sell our shares of Common Stock to Yorkville pursuant to the Yorkville Purchase Agreement, after Yorkville has acquired such shares, Yorkville may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices.

As a result, investors who purchase shares from Yorkville at different times will likely pay different prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results.

Investors may experience a decline in the value of the shares they purchase from Yorkville as a result of future sales made by us to Yorkville at prices lower than the prices such investors paid for their shares.

In addition, if we sell a substantial number of shares to Yorkville under the Yorkville Purchase Agreement, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with Yorkville may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to affect such sales.

Unresolved Staff Comments.

Not applicable.

We lease our corporate headquarters and maintain our executive offices in an office building in Miami, Florida, which is located at 2701 S.

Le Jeune Road, 10th Floor, Coral Gables, FL 33134.

We also lease office space in Puerto Rico.

We believe that our existing facilities are adequate for our current and planned levels of operation.

Risks Related to the Yorkville SEPA

In this section “we,” “us,” “our,” and other similar terms refer to Legacy MSP Recovery prior to the Business Combination and to the Company following the Business Combination.

Substantial blocks of our common stock may be sold into the market as a result of the shares sold to Yorkville under the Yorkville SEPA, which may cause the price of our common stock to decline.

The price of our common stock could decline if there are substantial sales of shares of our common stock, if there is a large number of shares of our common stock available for sale, or if there is the perception that these sales could occur.

On January 6, 2023, we entered into a purchase agreement with YA II PN, Ltd., a Cayman Island exempted company (“Yorkville”), pursuant to which Yorkville committed to purchase up to $1 billion in shares of Class A Common Stock, subject to certain limitations and conditions set forth therein.

On November 14, 2023, we entered into the Yorkville SEPA, which fully amended and restated the January 6, 2023 agreement.

Under the Yorkville SEPA, the Company agreed to issue and sell to Yorkville, from time to time, and Yorkville agreed to purchase from the Company, up to $250 million of the Company’s Class A Common Stock.

The Company shall not affect any sales under the Yorkville SEPA, and Yorkville shall not have any obligation to purchase shares of our Class A Common Stock under the Yorkville SEPA, to the extent that after giving effect to such purchase and sale:

(i) Yorkville would beneficially own more than 9.99% of the Company’s outstanding voting Common Stock at the time of such issuance (the “Ownership Limitation”), or (ii) the aggregate number of shares of Class A Common Stock issued under the Yorkville SEPA together with any shares of Common Stock issued in connection with any other related transactions that may be considered part of the same series of transactions, would exceed 19.99% of the aggregate number of shares of outstanding voting Common Stock as of November 14, 2023 (the “Exchange Cap”).

Thus, the Company may not have access to the right to sell the full $250 million of shares of Class A Common Stock to Yorkville.

Our shares of Class A Common Stock that may be issued under the Yorkville SEPA may be sold by us to Yorkville at our discretion from time to time over the 36-month period commencing on November 14, 2023.

We generally have the right to control the timing and amount of any sales of our shares of Class A Common Stock to Yorkville under the Yorkville SEPA, except with respect to Class A Common Stock issued upon conversion of Convertible Notes.

Sales of our shares of Class A Common Stock, if any, to Yorkville under the Yorkville SEPA will depend upon market conditions and other factors to be determined by us.

We may ultimately decide to sell to Yorkville all, some, or none of the shares of Class A Common Stock that may be available for us to sell to Yorkville pursuant to the Yorkville SEPA.

However, to the extent that there is a balance outstanding pursuant to the Convertible Notes, Yorkville may, at its discretion, deliver a notice under the Yorkville SEPA requiring the issuance and sale of shares of Class A Common Stock to Yorkville at a price per share equivalent to the Conversion Price as determined in accordance with the Convertible Notes in consideration of an offset to the Convertible Notes;

Yorkville, in its sole discretion, may select the amount of any such conversion, provided that the number of shares issued does not cause Yorkville to exceed certain limitations.

It is not possible to predict the actual number of shares we will sell under the Yorkville SEPA to Yorkville, or the actual gross proceeds resulting from those sales.

Further, we may not have access to the full amount available under the Yorkville SEPA with Yorkville.

The number of shares of Class A Common Stock ultimately offered for sale by Yorkville is dependent upon the number of shares of Class A Common Stock, if any, we ultimately elect to sell to Yorkville under the Yorkville SEPA.

The Yorkville SEPA provides that, during the term of the agreement, and subject to issuance and effective registration of the shares, we may, at our discretion, from time to time direct Yorkville to purchase our shares of Class A Common Stock from us in one or more purchases under the agreement, for a maximum aggregate purchase price of up to $250 million.

However, because the market prices of our shares of Class A Common Stock may fluctuate from time to time and, as a result, the actual purchase prices to be paid by Yorkville for our shares of Class A Common Stock that we direct it to purchase under the Yorkville SEPA, if any, also may fluctuate because they will be based on such fluctuating market prices of our shares of Class A Common Stock, it is possible that we would need to issue, register, and sell additional shares of our Class A Common Stock to Yorkville under the Yorkville SEPA in order to receive aggregate gross proceeds equal to Yorkville’s $250 million total aggregate purchase commitment under the Yorkville SEPA.

We generally have the right to control the timing and amount of any sales of our shares of Class A Common Stock to Yorkville under the Yorkville SEPA, except with respect to a Yorkville Advance (as defined herein).

Sales of our shares of Class A Common Stock, if any, to Yorkville under the Yorkville SEPA will depend upon market conditions and other factors to be determined by us.

We may ultimately decide to sell to Yorkville all, some, or none of the shares of Class A Common Stock that may be available for us to sell to Yorkville pursuant to the Yorkville SEPA.

In addition, to the extent that there is a balance outstanding pursuant to the Convertible Notes, Yorkville may, at its discretion, deliver a notice under the SEPA requiring a Yorkville Advance.

Yorkville, in its sole discretion, may select the amount of any Yorkville Advance, provided that the number of shares issued does not cause Yorkville to exceed the Ownership Limitation, does not exceed the Exchange Cap, or the number of shares of common stock that are registered.

As a result of a Yorkville Advance, the amounts payable under the Convertible Notes will be offset by such amount subject to each Yorkville Advance.

In connection with the Yorkville SEPA, and subject to the condition set forth therein, Yorkville agreed to advance to the Company in the form of convertible promissory notes (the “Convertible Notes”) an aggregate principal amount of $15.0 million.

On November 14, 2023, we issued a Convertible Note to Yorkville in the principal amount of $5.0 million resulting in net proceeds to us of $4.73 million.

On December 11, 2023, we issued a second Convertible Note to Yorkville in the principal amount of $5.0 million, resulting in net proceeds to us of $4.75 million.

On April 8, 2024, we issued a third Convertible Note to Yorkville in the principal amount of $5.0 million, resulting in net proceeds to us of $4.75 million.

Interest shall accrue on the outstanding balance of any Convertible Note at an annual rate equal to 5.0%, subject to an increase to 18% upon an event of default as described in the Convertible Notes.

The maturity date of each Convertible Note will be September 30, 2025 (as extended pursuant to the Yorkville Letter Agreement) and may be extended at the option of the holder.

Yorkville may convert the Convertible Notes into shares of our Class A Common Stock at a conversion price equal to the lower of:

(A)(i) with respect to the initial Convertible Note issued on November 14, 2023, $8.0225, (ii) with respect to the second Convertible Note issued on December 11, 2023, $3.7136, and (iii) with respect to a third Convertible Note issued on April 8, 2024, $1.5050, or (B) 95% of the lowest daily VWAP during the seven consecutive trading days immediately preceding the conversion (the “Conversion Price”), which in no event may the Conversion Price be lower than $1.00 (the “Floor Price”) (as reduced by the Yorkville Letter Agreement).

Yorkville, at its discretion, and providing that there is a balance remaining outstanding under the Convertible Notes, may deliver a notice under the Yorkville SEPA requiring the issuance of shares of Class A Common Stock to Yorkville at a price per share equivalent to the Conversion Price as determined in accordance with the Convertible Notes;

Yorkville, in its sole discretion, may select the amount of any such conversion, provided that the number of shares issued is subject to certain limitations.

As the purchase price per share to be paid by Yorkville for the shares of Class A Common Stock that we may elect to sell to Yorkville under the Yorkville SEPA, if any, will fluctuate based on the market prices of our shares of Class A Common Stock at the time we elect to sell shares to Yorkville pursuant to the Yorkville SEPA, if any, it is not possible for us to predict the number of shares of Class A Common Stock that we will sell to Yorkville under the Yorkville SEPA, the purchase price per share that Yorkville will pay for shares purchased from us under the Yorkville SEPA, or the aggregate gross proceeds that we will receive from those purchases by Yorkville under the Yorkville SEPA.

In addition, unless we obtain stockholder approval, we will not be able to issue shares of common stock in excess of 19.99% of the aggregate number of shares of outstanding voting Common Stock as of November 14, 2023 (the “Exchange Cap”).

Depending on the market prices of our common stock in the future, this could be a significant limitation on the amount of funds we are able to raise pursuant to the Yorkville SEPA.

Other limitations in the Yorkville SEPA, including the Exchange Cap, and our ability to meet the conditions necessary to deliver a written notice to Yorkville of an Advance (“Advance Notice”), could also prevent us from being able to raise funds up to the $250 million.

Moreover, although the Yorkville SEPA provides that we may sell up to an aggregate of $250 million of our Class A Common Stock to Yorkville, only 50,000,000 shares of our common stock were registered for resale under the registration statement, which we may elect to sell to Yorkville, in our sole discretion, from time to time from and after the date of, and pursuant to, the Yorkville SEPA or that Yorkville may require that we sell pursuant to a Yorkville Advance.

Even if we elect to sell to Yorkville all of the shares of Common Stock, depending on the market prices of our Class A Common Stock at the time of such sales, the actual gross proceeds from the sale of all such shares may be substantially less than $250 million , which could materially and adversely affect our liquidity.

As required pursuant to the Amended and Restated Nomura Promissory Note, 50% of the aggregate proceeds under the Yorkville shall be used to repay amounts outstanding under the Amended and Restated Nomura Promissory Note (first towards accrued and unpaid interest, if any, then towards principal) and the remaining 50% of such proceeds shall be used to repay amounts due under the Convertible Notes, if any, or be paid to the Company after the Convertible Notes are fully repaid.

Pursuant to the Third Virage MTA Amendment, 25% of the Company’s portion of any net proceeds from the Yorkville SEPA would be used to pay down the VRM Full Return after the Convertible Notes are fully satisfied.

If we desire to issue and sell to Yorkville under the Yorkville SEPA more than the 50,000,000 shares registered for resale, and the Exchange Cap provisions and other limitations in the Yorkville SEPA would allow us to do so, we would need to file with the SEC one or more additional registration statements to register under the Securities Act the resale by Yorkville of any such additional shares of our common stock and the SEC would have to declare such registration statement or statements effective before we could sell additional shares.

The sale and issuance of our shares of our Class A Common Stock to Yorkville will cause dilution to our existing shareholders, and the sale of the shares acquired by Yorkville, or the perception that such sales may occur, could cause the price of our Class A Common Stock to fall.

The purchase price for the shares that we may sell to Yorkville under the Yorkville SEPA will fluctuate based on the price of our shares of Common Stock.

Depending on a number of factors, including market liquidity, sales of such shares may cause the trading price of our Common Stock to fall.

If and when we do sell shares to Yorkville or when Yorkville requires a Yorkville Advance, Yorkville may resell all, some, or none of those shares at its sole discretion, subject to the terms of the Yorkville SEPA.

Therefore, sales to Yorkville by us could result in substantial dilution to the interests of other holders of our shares of Common Stock.

Additionally, the

sale of a substantial number of shares of Common Stock to Yorkville, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a desirable time and price.

The resale of shares of Common Stock by Yorkville in the public market or otherwise, or the perception that such sales could occur, could also harm the prevailing market price of our shares of Common Stock.

Following these issuances described above and as restrictions on resale end and registration statements are available for use, the market price of our shares of Common Stock could decline if the holders of restricted shares sell them or are perceived by the market as intending to sell them.

As such, sales of a substantial number of shares of Common Stock in the public market could occur at any time.

These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our shares of Common Stock.

Once we issue a Convertible Note, we do not have the right to control the timing and amount of the issuance of our Class A Common Stock to Yorkville and, accordingly, it is not possible to predict the actual number of shares we will issue pursuant to the conversion of a Convertible Note at any one time or in total.

Once we issue a Convertible Note, we do not have the right to control the timing and amount of any issuances of our shares of Class A Common Stock to Yorkville upon conversion of a Convertible Notes.

Sales of our shares of Class A Common Stock, if any, to Yorkville under the Yorkville SEPA will depend upon market conditions and other factors, and the discretion of Yorkville.

We may ultimately decide to sell to Yorkville all, some, or none of the shares of Class A Common Stock that may be available for us to sell to Yorkville pursuant to the Yorkville SEPA.

As the purchase price per share to be paid by Yorkville for the shares of Class A Common Stock that we may elect to sell to Yorkville under the Yorkville SEPA, if any, will fluctuate based on the market prices of our shares of Class A Common Stock, if any, it is not possible for us to predict, prior to any such sales, the number of shares of Class A Common Stock that we will sell to Yorkville under the Yorkville SEPA, the purchase price per share that Yorkville will pay for shares purchased from us under the Yorkville SEPA, or the aggregate gross proceeds that we will receive from those purchases by Yorkville under the Yorkville SEPA, if any.

Upon a trigger event, we may be required to make payments that could cause us financial hardship.

In connection with the Yorkville SEPA, and subject to the conditions set forth therein, Yorkville has agreed to advance us an amount of up to $15.0 million, evidenced by Convertible Notes to be issued to Yorkville at a purchase price equal to 95.0% of the principal amount of each Convertible Note.

On November 14, 2023, we issued a Convertible Note to Yorkville in the principal amount of $5.0 million, resulting in net proceeds to us of $4.73 million.

On December 11, 2023, we issued a Convertible Note to Yorkville in the principal amount of $5.0 million, resulting in net proceeds to us of $4.75 million.

On April 8, 2024, we issued a third Convertible Note to Yorkville in the principal amount of $5.0 million, resulting in net proceeds to us of $4.75 million.

Interest accrues on the outstanding balance of any Convertible Note at an annual rate equal to 5.0%, subject to an increase to 18% upon an event of default as described in the Convertible Notes.

The maturity date of each Convertible Note will be September 30, 2025 (as extended pursuant to the Yorkville Letter Agreement, defined below), and may be extended at the option of Yorkville.

Yorkville may convert the Convertible Notes into shares of our Class A Common Stock at a conversion price equal to the lower of:

(A)(i) with respect to the initial Convertible Note issued on November 14, 2023, $8.0225, (ii) with respect to the second Convertible Note issued on December 11, 2023, $3.7136, and (iii) with respect to the third Convertible Note issued on April 8, 2024, $1.5050, or (B) 95% of the lowest daily VWAP during the seven consecutive trading days immediately preceding the conversion (the “Conversion Price”), which in no event may the Conversion Price be lower than $1.00 (the “Floor Price”) (as reduced by the Yorkville Letter Agreement).

If any time on or after November 14, 2023, (i) the daily VWAP is less than the Floor Price for ten consecutive trading days (“Floor Price Trigger”), (ii) the Company has issued substantially all of the shares available under the Exchange Cap (as defined below) (“Exchange Cap Trigger”) or (iii) Company is in material breach of the Registration Rights Agreement, dated as of the date hereof, by and between Yorkville and the Company (the “Registration Rights Agreement”) and such breach remains uncured for a period of twenty trading days, or the occurrence of an “Event” (as defined in the Registration Rights Agreement) (“Registration Event Trigger” and collectively with the Floor Price Trigger and the Exchange Cap Trigger, the “Trigger”), are triggered then the Company shall make monthly payments to Yorkville beginning on the seventh trading day after the Trigger and continuing monthly in the amount of $1,500,000 plus an 5.0% premium and accrued and unpaid interest.

On April 8, 2024, the Company and Yorkville reached an agreement (the “Yorkville Letter Agreement”) to:

(1) reduce the Floor Price from $1.28 to $1.00;

(2) waive the first monthly payment due to the Floor Price Trigger, thereby curing the Floor Price Trigger;

and (3) extend the maturity date of the Convertible Notes to September 30, 2025.

In addition, the parties agreed that the third Convertible Note for $5.0 million would be issued on April 8, 2024.

On April 12, 2024, Yorkville further agreed that, to the extent that it holds Class A Common Stock in such quantities that would prevent the Company from utilizing the SEPA solely due to the Ownership Limitation, Yorkville commits to fund an additional advance in the principal amount of $13,000,000 on the same terms and conditions as the previous advances pursuant to the Yorkville SEPA.

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 1A. Risk Factors