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Item 8. Financial Statements and Supplementary Data

2025-04-16 compared with 2024-04-15 · 554 added, 518 removed, 656 unchanged (62% of the section changed)

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Rep ort of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of MSP Recovery, Inc.

To the shareholders and the Board of Directors of

MSP Recovery, Inc.

and Subsidiaries:

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

and Subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

and Subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in equity, and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of matter

As discussed in Note 6 to the financial statements, the Company identified potential impairment indicators with respect to its claims cost recovery agreement (“CCRA”) definite-lived intangible assets during 2024.

The Company performed an undiscounted cash flow analysis and determined the carrying value was recoverable.

The Company performed an undiscounted cash flow analysis and determined the carrying value was not recoverable.

The Company performed a fair value assessment to measure the impairment and recorded an impairment loss of $752.7 million during 2024.

Going Concern

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

As discussed in Note 1 to the financial statements, the Company has incurred recurring net losses and negative cash flows that raise substantial doubt about its ability to continue as a going concern.

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

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

Basis for Opinion

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Consolidated Bala nce Sheets

(In thousands except per share amounts)

(In thousands, except share and per share data)

Current assets:

Restricted cash

Accounts receivable

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Warrant liability (1)

Guaranty obligation (1)

Claims financing obligation and notes payable (1)

Interest payable (1)

Other current liabilities (1)

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Interest payable (1)

Other long-term liabilities

Total liabilities

Commitments and contingencies (Note 12)

Class A common stock subject to possible redemption, 45,183 shares at redemption value as of December 31, 2022 ( No ne as of December 31, 2023).

Stockholders’ Equity (Deficit):

Stockholders’ Equity:

Class A common stock, $ 0.0001 par value;

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Total liabilities and equity

As of December 31, 2023 and 2022, the total affiliate receivable, affiliate payable, other current liabilities, guaranty obligation and loan from related parties balances are with related parties.

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

As of December 31, 2024 and 2023, total affiliate receivable, affiliate payable, warrant liability, guaranty obligation and loan from related parties balances are with related parties.

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

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

As of December 31, 2023 and 2022 , intangible assets, net included $ 2.2 billion and $ 2.3 billion related to a consolidated VIE.

As of December 31, 2024 and 2023, intangible assets, net included $ 1.4 billion and $ 2.2 billion , respectively, related to a consolidated VIE.

See Note 8, Variable Interest Entities , for further details.

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Year Ended December 31,

(In thousands except per share amounts)

(In thousands, except share and per share data)

Claims recovery income

Claims recovery service income

Total Claims Recovery

Total Revenues

Operating expenses

Cost of claim recoveries (2)

Cost of revenues (1)

Claims amortization expense

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Professional fees – legal (3)

Impairment of intangible assets

Allowance for credit losses

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Provision for income tax expense

Net (income) loss attributable to non-controlling interests

Net loss attributable to non-controlling interests

Net loss attributable to MSP Recovery, Inc.

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

Basic and diluted net income per share, Class A Common Stock (6)

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

There was no claims recovery service income from VRM MSP for the year ended December 31, 2023.

See Note 15, Related Party Transactions , for further details.

For the years ended December 31, 2023 and 2022, cost of Claim recoveries included $ 0.3 million and $ 0.4 million of related party expenses.

Basic and diluted net loss per share, Class A Common Stock

For the years ended December 31, 2024 and 2023, cost of Claim recoveries included $ 3.4 million and $ 0.3 million of related party expenses, respectively.

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

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See Note 14, Related Party Transactions , for further details.

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

For the years ended December 31, 2024 and 2023, general and administrative expenses included $ 0.2 million and $ 0.2 million of related party expenses, respectively .

For the year ended December 31, 2021, the amount was de minimis.

See Note 15, Related Party Transactions , fo r further details.

For the year ended December 31, 2024 and 2023, Professional Fees - Legal included $ 7.7 million and $ 19.2 million of related party expenses related to the Law Firm.

For the year ended December 31, 2021, the amount of related party expenses related to the Law Firm was de minimis.

See Note 14, Related Party Transactions , for further details.

For the year ended December 31, 2024 and 2023, Interest expense included $ 318.9 million and $ 226.5 million , respectively, of interest expense to related parties.

For the year ended December 31, 2021 the interest expense to related parties was de minimis.

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

See Note 17, Net Loss Per Common Share , for further information.

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

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Consolidated Statements of Cha nges in Equity

Years Ended December 31, 2023 and December 31, 2022

Years Ended December 31, 2024, and 2023

Class A Common Stock

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(In thousands except shares)

Paid-in Capital

Members' Deficit

Additional Paid-in Capital

Accumulated Deficit

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Balance at December 31, 2022

Contributions prior to recapitalization transaction

Distributions prior to recapitalization transaction

Net loss prior to recapitalization transaction

Cumulative effect of recapitalization transaction

Opening net assets of Lionheart II Holdings, LLC acquired

Adjustment for value of derivative on temporary equity

Conversion of Warrants

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Balance at December 31, 2023

Conversion of Warrants

Class A Issuances

Balance at December 31, 2024

Year Ended December 31, 2021

(In thousands)

Non- Controlling Interests

Balance at December 31, 2020

Contributions

Distributions

Balance at December 31, 2021

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

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Cash flows from operating activities:

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

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

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Paid-in-kind interest (1)

Impairment of intangible assets

Allowance for credit losses

Change in fair value of warrant liability

Change in fair value of derivatives

Gain on sale of intangibles

Gain on debt extinguishment

Share based compensation

Mark-to-market gain on liability payable in stock

Professional fees settled in shares

Change in fair value of derivatives

Non-cash lease expense

Share based compensation

Deferred income taxes

PPP loan forgiveness

Realized gain on equity securities

Change in operating assets and liabilities:

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Accounts payable, commission payable and accrued liabilities

Deferred service fee income

Net cash (used in) provided by operating activities

Interest Payable

Net cash used in operating activities

Cash flows from investing activities:

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Proceeds from sale of intangible assets

Proceeds from sale of equity securities

Purchases of equity securities

Purchase of securities to cover short position

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

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Debt issuance costs

Proceeds from related party loan (1)

Payments on related party loan (1)

Proceeds on related party loan (1)

Release of temporary equity

Repayment of the Claims financing obligation

Proceeds from Business Combination

Transaction costs incurred for the Business Combination

Issuance of common stock

Issuance of temporary equity

Contribution from members

Distributions to members

Net cash provided by (used in) financing activities

(Decrease) increase in cash and restricted cash

Cash and restricted cash at beginning of year

Cash and restricted cash at end of period

Proceeds from the issuance of common stock

Net cash provided by financing activities

Net increase (decrease) in cash

Cash at beginning of year

Cash at end of period

Balances include related party transactions.

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Consolidated Statements of Cash Flows (continued)

Year Ended December 31,

(In thousands)

Supplemental disclosure of non-cash investing and financing activities:

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Purchase of intangible asset through issuance of Class A common stock

Purchase of intangible asset in accrued expenses

Issuance of shares in settlement of debt

Payment of professional fees through issuance of Class A common stock

Transaction costs incurred included in accounts payable

Non-cash lease liabilities arising from obtaining right-of-use assets

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DESCRIPTION OF THE BUSINESS

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

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

On May 23, 2022 (the “Closing Date”), MSP Recovery, Inc., a Delaware corporation (formerly known as Lionheart Acquisition Corporation II (“LCAP”)) consummated the previously announced business combination pursuant to that certain Membership Interest Purchase Agreement, dated as of July 11, 2021, as amended (the “MIPA”), by and among the Company, Lionheart II Holdings, LLC, a wholly owned subsidiary of the Company, MSP Recovery, LLC and combined and consolidated subsidiaries (“Legacy MSP”), the members of Legacy MSP (the “Members”), and John H.

Ruiz, in his capacity as the representative of the Members (the “Members’ Representative”).

Pursuant to the MIPA, the Members sold and assigned all of their membership interests in Legacy MSP to the Company in exchange for non-economic voting shares of Class V common stock, par value $ 0.0001 , of the Company (“Class V Common Stock”) and non-voting economic Class B Units of Opco (“Class B Units,” and each pair consisting of one share of Class V Common Stock and one Class B Unit, an “Up-C Unit”) (such transaction, the “Business Combination”).

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

See Note 3, Business Combination , for details.

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

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

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

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

The aggregate consideration paid to the Members (or their designees) at the Closing consisted of:

(i) 5,200,000 Units and (ii) rights to receive payments under the Tax Receivable Agreement (“TRA”), discussed in more detail below.

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

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and Puerto Rico.

2023 Reverse Stock Split

Effective at 11:59 PM EDT on October 12, 2023, the Company amended its Second Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware to effect a 1-for-25 reverse stock split of the Company’s common stock (the “Reverse Split”).

The Company’s Class A Common Stock began trading post split on October 13, 2023 under the same symbol, LIFW.

Public Warrants

Pursuant to the terms of the Existing Warrant Agreement, and after giving effect to the issuance of the New Warrants, as defined below, the exercise price of the Public Warrants increased to $ 0.0625 per share of Class A Common Stock, on a cashless basis, in lots of 625.

During the period from the Closing Date to December 31, 2024, approximately 8.9 million war rants of the orig inal 11.8 million warrants had been exercised.

For the years ended December 31, 2024 and 2023, the fair value of the remaining unexercised warrants decreased resulting in other income of $ 0.3 million and $ 4.8 million, respectively, which is recorded within change in fair value of warrant and derivative liabilities in the consolidated statements of operations.

The New Warrants expire on the fifth anniversary of the Closing Date or upon earlier redemption.

The Company determined that the New Warrants instruments meet the equity scope exception in ASC 815 to be classified in stockholders’ equity, and as the repurchase right noted above has a mirrored value designed to offset the New Warrants, if exercised would be an equity only transaction.

The New Warrants are each exercisable in lots of 625 for one whole share of Class A Common Stock at a reverse split adjusted exercise price $ 7,187.50 per whole share.

The New Warrants are subject to certain anti-dilution adjustments.

Public Warrants and New Warrants are currently listed on Nasdaq under the symbols “MSPRZ” and “MSPRW,” respectively.

Tax Receivable Agreement

In connection with the Business Combination, the Company also entered into a Tax Receivable Agreement (the “TRA”).

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

During the years ended December 31, 2024 and 2023, the Company’s TRA liability associated with the allocable share of existing tax basis acquired in the Business Combination would give rise to a TRA liability of $ 12.8 million and $ 11.3 million, respectively.

The Company has not recognized such liabilities under the TRA after concluding it was not probable that the Company will be able to realize the remaining tax benefits based on estimates of future taxable income.

No payments were made to the Continuing Equity Owners and Blocker Shareholders (as defined in the TRA) pursuant to the TRA during the years ended December 31, 2024, or 2023.

The estimation of liability under the tax receivable agreement is by its nature imprecise and subject to significant assumptions regarding the amount, character, and timing of the taxable income of MSP Recovery, Inc.

in the future.

We may incur additional liabilities under the TRA when Lionheart II Holdings, LLC are exchanged in the future.

If the valuation allowance recorded against the deferred tax assets applicable to the tax attributes subject to the TRA is released in a future period, the relating TRA liability may be considered probable at that time and recorded within earnings.

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

The Company has recorded a full valuation allowance against the deferred tax assets as of December 31, 2024 and 2023, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.

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

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

Non-Controlling Interest

The Company reflects non-controlling interests due to the Up-C structure.

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

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

See Note 11, Noncontrolling Interest , for more information on ownership interests in the Company

Reverse Stock Splits

Effective at 11:59 PM EDT on November 15, 2024, the Company amended its Charter filed with the Secretary of State of the State of Delaware to effect a 1-for-25 reverse stock split of the Company’s common stock (the “2024 Reverse Split”).

The Company’s Class A Common Stock began trading post split on November 18, 2024.

As a result of the 2024 Reverse Split, every 25 shares of the Company’s old common stock were converted into one share of the Company’s new common stock.

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Proportionate adjustments were made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options and warrants to purchase shares of common stock.

Share and per share data (except par value) for the periods presented reflect the effects of the Reverse Split.

References to numbers of shares of common stock and per share data in the accompanying financial statements and notes thereto for periods ended prior to October 13, 2023 have been adjusted to reflect the Reverse Split on a retroactive basis.

Unless otherwise noted, the share and per share information in this Annual Report have been adjusted to give effect to the one-for-twenty-five ( 1-for-25 ) Reverse Split.

Compliance with Nasdaq Listing Requirements

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 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.

On August 17, 2023, the Company filed its Quarterly Report on Form 10-Q for the period ending March 31, 2023.

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.

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

As of December 31, 2023, the Company’s investment related to LifeWallet included in the consolidated statement of operations was limited to activity and expenses incurred during the years ended December 31, 2023 and 2022 which amounted to $ 4.4 million and $ 3.9 million, respectively.

Yorkville Purchase Agreement and Yorkville Standby Equity Purchase Agreement

On January 6, 2023 , the Company entered into a Company Common Stock Purchase Agreement (the “Yorkville Purchase Agreement”) with YA II PN, Ltd., a Cayman Island exempted company (“Yorkville”), which replaced the CF Agreement discussed below in “ Committed Equity Facility ” within Note 11, Claims Financing Obligations and Notes Payable .

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

On November 14, 2023, the Company entered into the Standby Equity Purchase Agreement (“Yorkville SEPA”) with Yorkville, which replaced the Yorkville Purchase Agreement described above.

Pursuant to the Yorkville SEPA, the Company has the right to sell to Yorkville up to $ 250 million of its shares of common stock, subject to certain limitations and conditions set forth in the Yorkville SEPA, from time to time during the term of the Yorkville SEPA.

Sales of the shares of common stock to Yorkville under the Yorkville SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of common stock to Yorkville under the Yorkville SEPA except in connection with notices that may be submitted by Yorkville, in certain circumstances as described below.

Upon the satisfaction of the conditions to Yorkville’s purchase obligation set forth in the Yorkville SEPA, including having a registration statement registering the resale of the shares of common stock issuable under the Yorkville SEPA declared effective by the SEC, the Company will have the right, but not the obligation, from time to time at its discretion until the Yorkville SEPA is terminated to direct Yorkville to purchase a specified number of shares of common stock (“Advance”) by delivering written notice to Yorkville (“Advance Notice”).

While there is no mandatory minimum amount for any Advance, it may not exceed an amount equal to 100 % of the average of the daily traded amount during the five consecutive trading days immediately preceding an Advance Notice.

The shares of common stock purchased pursuant to an Advance delivered by the Company will be purchased at a price equal to (i) 98 % of the VWAP of the shares of common stock on the applicable date of delivery of the Advance Notice during regular trading hours on such date or (ii) 97 % of the lowest daily VWAP of the shares of common stock during the three consecutive trading days commencing on the date of the delivery of the Advance Notice, other than the daily VWAP on a day in which the daily VWAP is less than a minimum acceptable price as stated by the Company in the Advance Notice or there is no VWAP on the subject trading day.

The Company may establish a minimum acceptable price in each Advance Notice below which the Company will not be obligated to make any sales to Yorkville.

“VWAP” is defined as the daily volume weighted average price of the shares of common stock for such trading day on the Nasdaq Stock Market during regular trading hours as reported by Bloomberg L.P.

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 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.

On April 8, 2024, the Company and Yorkville agreed to an amendment to the Yorkville SEPA and Convertible Notes in which:

(1) the Floor Price Trigger was reduced from $ 1.28 to $ 1.00 ;

(2) the Floor Price Trigger for the 10-day period ending February 5, 2024 has been cured and the monthly payment of $ 1.5 million that would have been due, was waived;

and (3) the maturity date of the Convertible Notes was extended to September 30, 2025 .

In addition, the third Convertible Note for $ 5.0 million was 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.

As required pursuant to the Amended and Restated Nomura Promissory Note, 50 % of the aggregate proceeds under the Yorkville SEPA will be used to pay 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 will be used to pay 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.

Interest shall accrue on the outstanding balance of any Convertible Notes 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, and is payable upon maturity or upon the occurrence of a Trigger Event.

The maturity date of each Convertible Note will be September 30, 2025, and may be extended at the option of Yorkville.

Yorkville may convert the Convertible Notes into shares of the Company’s common stock at a conversion price equal to the lower of 120 % of VWAP the day prior to the date of the closing of each tranche (the “Fixed Price”) or 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 20 % of the closing price the trading day immediately prior to the signing of the definitive documents.

In addition, upon the occurrence and during the continuation of an event of default, the Convertible Notes shall become immediately due and payable and the Company shall pay to Yorkville the principal and interest due thereunder.

Events of default include, among others:

(i) the Class A Common Stock shall cease to be quoted or listed for trading, as applicable, on any primary market for a period of ten (10) consecutive Trading Days (the Company is currently in compliance with NASDAQ listing requirements and has not been issued a reverse stock split warning since regaining compliance upon the Reverse Split) and (ii) failure to timely file with the SEC any periodic report on or before the due date of such filing as established by the SEC, including extensions under Rule 12b-25 under the Exchange Act.

In no event shall Yorkville be allowed to effect a conversion if such conversion, along with all other shares of common stock beneficially owned by Yorkville and its affiliates would exceed 9.99 % of the outstanding shares of the common stock of the Company.

If any time on or after November 14, 2023 (i) the daily VWAP is less than $ 1.00 (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) the Parent 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”), 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.

The Exchange Cap Trigger will not apply in the event the Company has obtained the approval from its stockholders in accordance with the rules of Nasdaq Stock Market for the issuance of shares of common stock pursuant to the transactions contemplated in the Convertible Note and the Yorkville SEPA in excess of 19.99 % of the aggregate number of shares of common stock issued and outstanding as of the effective date of the Yorkville SEPA (the “Exchange Cap”).

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 and sale of shares of common stock to Yorkville at the Conversion Price in consideration of an offset of the Convertible Notes (“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 9.99 % ownership limitation, does not exceed the Exchange Cap or the amount 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.

The Company will control the timing and amount of any sales of shares of common stock to Yorkville, except with respect to Yorkville Advances.

Actual sales of shares of common stock to Yorkville as an Advance under the Yorkville SEPA will depend on a variety of factors to be determined by the Company from time to time, which may include, among other things, market conditions, the trading price of the Company’s common stock and determinations by the Company as to the appropriate sources of funding for our business and operations.

The Yorkville SEPA will automatically terminate on the earliest to occur of (i) the first day of the month following the 36-month anniversary of the date of the Yorkville SEPA or (ii) the date on which Yorkville shall have made payment of Advances pursuant to the Yorkville SEPA for shares of common stock equal to $ 250 million.

The Company has the right to terminate the Yorkville SEPA at no cost or penalty upon five (5) trading days’ prior written notice to Yorkville, provided that there are no outstanding Advance Notices for which shares of common stock need to be issued and the Company has paid all amounts owed to Yorkville pursuant to the Convertible Notes.

The Company and Yorkville may also agree to terminate the Yorkville SEPA by mutual written consent.

Neither the Company nor Yorkville may assign or transfer the Company’s respective rights and obligations under the Yorkville SEPA, and no provision of the Yorkville SEPA may be modified or waived by the Company or Yorkville other than by an instrument in writing signed by both parties.

The Yorkville SEPA contains customary representations, warranties, conditions and indemnification obligations of the parties.

The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.

The net proceeds under the Yorkville SEPA to the Company will depend on the frequency and prices at which the Company sells its shares of common stock to Yorkville.

The Company expects that any proceeds received from such sales to Yorkville will be used for working capital and general corporate purposes.

Certain features of the Yorkville SEPA have been identified and classified as an embedded derivatives, which are classified as a liability in accordance with ASC 815 and valued in accordance with ASC 470, Debt .

These features classified as embedded derivatives include payment and redemption premiums, increase in interest rate in the event of default and accelerated payments as a result of Trigger events.

Per ASC 815, in circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, combined derivative instrument.

The fair value of the combined embedded derivative was $ 37.0 thousand as of December 31, 2023, and the impact in the Statement of Operations for the year-ended December 31, 2023 was $ 23.0 thousand.

On July 7, 2023, the Company issued 7,960,001 unregistered shares of Class A Common Stock (after giving effect to the Reverse Split) to Cano Health, LLC (“Cano”) as payment for $ 61.7 million in deferred compensation related to the following agreements, which the Company had the option to pay in cash or in stock and has elected to pay in stock, of which (i) 3,225,807 shares of Common Stock were issued as a deferred consideration for the assignment of certain claims pursuant to that certain Purchase Agreement, effective as of September 30, 2022, as amended to date, by and between MSP Recovery and Cano, and (ii) 4,734,194 shares of Common Stock were issued as deferred consideration for the assignment of certain claims pursuant to that certain Amended and Restated Claims Recovery and Assignment Agreement effective as of December 31, 2021, as amended to date, by and between MSP Recovery and Cano.

See summary in “ Cano Health ” in Note 13, Commitments and Contingencies .

Warrant Agreement with Brickell Key Investments, LP

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

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

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

The maximum amount of Class A shares that the holder may purchase from the Company is 2,666,667 (the “Amount”) for a purchase price equal to $ 6,666.67 ($ 0.0025 per Class A Share) (the “Exercise Price”) and is payable in cash.

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

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

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

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

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

If the Holder monetizes the Warrant, the amount owed will be reduced at a measure of $ 30.00 per Class A Share (five-day volume weighted average price as of September 30, 2022).

Investment Capacity Agreement

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

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

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

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

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

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

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

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

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

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

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

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

Prudent Assignment and Sale of Proceeds Agreement

On June 30, 2022, the Company entered into an Assignment and Sale of Proceeds Agreement (the “Assignment Agreement”) and a Recovery Services Agreement (the “Services Agreement” and collectively, the “Agreements”) with the Prudent Group (“Prudent”) in order to monetize up to $ 250 million of the value of the Company’s net recovery interest in Claim demand letters that the Company has commenced sending to insurers who admitted they had primary payer responsibility for the underlying accidents to the federal government (“Net Recovery Proceeds”).

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

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

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

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

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

On October 12, 2023, we amended our Charter with the Secretary of State of the State of Delaware to effect a 1-for-25 reverse stock split (the “2023 Reverse Split”) of the Company’s common stock, effective October 13, 2023.

Unless otherwise stated, all share and per shares numbers (except par value) in this Annual Report on Form 10-K have been adjusted to reflect the 2024 Reverse Split and 2023 Reverse Split.

Primary Market Change

On December 6, 2024, the Company received notification from the Staff that the Company’s application to transfer the listing of its common stock from the Nasdaq Global Market to the Nasdaq Capital Market was approved.

The Company’s securities transferred to the Nasdaq Capital Market at the opening of business on December 10, 2024, and continue to trade under the symbol “MSPR.” The Nasdaq Capital Market operates in substantially the same manner as the Nasdaq Global Market, and listed companies must meet certain financial requirements and comply with Nasdaq’s corporate governance requirements.

Symbol Change

Effective December 9, 2024, the Company rebranded all lines of business under the MSP Recovery brand, and the Company’s Class A Common Stock, New Warrants, and Public Warrants begin trading on Nasdaq under the ticker symbols “MSPR,” “MSPRW,” and “MSPRZ,” respectively.

Prior to this change, the Company was known as LifeWallet.

Going Concern

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The Company has incurred recurring losses and negative cash flows since inception and has an accumulated deficit of $ 446.1 million as of December 31, 2024.

For the year ended December 31, 2023, the Company used approximately $ 40.0 million of cash in operations.

For the year ended December 31,

2024, the Company used approximately $ 16.1 million of cash in operations.

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

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

The Company anticipates sources of liquidity to include the Working Capital Credit Facility and the Yorkville SEPA as disclosed in Note 11, Claims Financing Obligations and Notes Payable , and has taken several actions to address liquidity concerns, including:

On March 29, 2023, Subrogation Holdings and its parent MSP Recovery entered into the Working Capital Credit Facility consisting of commitments to fund up to $ 48 million in proceeds.

The Company anticipates sources of liquidity to include up to $ 9.75 million in bridge loan funding to the Company under the existing Operational Collection Floor facility (in addition to the $ 16.0 million previously funded under the facility) in the amounts of:

(i) $ 1.75 million for March 2025, which was funded on February 28, 2025;

(ii) $ 1.5 million for April 2025, which was funded on April 4, 2025;

(iii) $ 1.5 million for May 2025, to be funded on or about April 30, 2025;

(iv) up to $ 2.0 million to fund the legal, accounting, and administrative expenses associated with the reorganization, subject to certain terms and customary conditions acceptable to Hazel, and minimum license fees of (v) $ 1.55 million for June 2025;

and (vi) $ 1.55 million for July 2025, as well as the Yorkville SEPA as disclosed in more detail in Note 9, Claims Financing Obligations and Notes Payable , and beyond July 2025, the MSP Principals’ commitment to pledge $ 25 million of collateral to backstop additional working capital requirements of the Company.

The Company has taken several actions to address liquidity concerns, including actions enumerated below.

However, as discussed further below, the Company has concluded management’s plans were not sufficient to alleviate the substantial doubt about the Company’s ability to continue as a going concern:

On March 29, 2023, the Company’s subsidiary, Subrogation Holdings, LLC and its parent, MSP Recovery, entered into the Working Capital Credit Facility consisting of commitments to fund up to $ 48 million in proceeds.

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

See summary in “ Hazel Transactions ” in Note 11, Claims Financing Obligations and Notes Payable, within the notes to the consolidated financial statements as of and for the year ended December 31, 2023 appearing elsewhere in this Annual Report.

See summary in “ Hazel Working Capital Credit Facility and Hazel Purchase Money Loan ” in Note 9, Claims Financing Obligations and Notes Payable to the consolidated financial statements.

On August 2, 2024, HPH agreed to, among other things, (i) extend the period for the Company draw up to $ 14 million for working capital, accessible in eight tranches of $ 1.75 million, that can be drawn at least one month apart, until September 2025 and (ii) provide for a $ 2.0 million loan to be funded by August 31, 2024 for the purpose of acquiring the New Claims.

On January 30, 2025, the Company drew the final $ 1.75 million tranche for working capital.

Pursuant to the OCF Amendment, HPH may, at its sole discretion, increase the Operational Collection Floor by an amount of up to $ 6.0 million, to be funded over a period of three to six months .

On February 28, 2025 and April 4, 2025, HPH exercised that discretion and funded $ 1.75 million and $ 1.5 million, respectively, from the increase to the Operational Collection Floor;

said payments are considered part of the bridge loan, as set forth in the proposed reorganization term sheet.

An additional $ 2.75 million remains available under the Operational Collection Floor, to be funded at HPH’s sole discretion.

On November 13, 2023, the Company entered into the MTA Amendment No.

2 and Amendment to the Amended and Restated Security Agreement (“Second Virage MTA Amendment”), which extended the due date for the payment obligations to Virage to December 31, 2024.

See summary in Note 4, Asset Acquisitions, within the notes to the consolidated financial statements as of and for the year ended December 31, 2023 appearing elsewhere in this Annual Report.

See summary in Note 3, Material Agreements to the consolidated financial statements.

On April 1, 2024, the Company entered into the MTA Amendment No.

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(i) extended the VRM Full Return payment due date to September 30, 2025, subject to acceleration upon certain triggering events;

(ii) the Company agreed that, after the Convertible Notes are fully satisfied, 25 % of the Company’s portion of any net proceeds from the Yorkville SEPA would be used to pay down the VRM Full Return;

(ii) the Company agreed that, after the Yorkville Convertible Notes are fully satisfied, 25 % of the Company’s portion of any net proceeds from the Yorkville SEPA would be used to pay down the VRM Full Return;

and (iii) commence the sale of certain reserved shares of Messrs.

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Quesada, and the delivery of the resulting net cash proceeds thereof to VRM.

On November 13, 2023, the Company entered into the Amended and Restated Nomura Promissory Note, which extended the due date to December 31, 2024.

See summary in Note 11, Claims Financing Obligations and Notes Payable, within the notes to the consolidated financial statements as of and for the year ended December 31, 2023 appearing elsewhere in this Annual Report.

On March 26, 2024, the maturity date of the Amended and Restated Nomura Promissory Note was extended to September 30, 2025 .

On November 14, 2023, the Company entered into the Yorkville SEPA, which included the issuance of Convertible Notes to Yorkville having aggregate principal amounts of up to $ 15.0 million in connection with the purchase of Class A Common Stock.

See summary in “ Committed Equity Facility ” within Note 1, Description of the Business, and Note 11, Claims Financing Obligations and Notes Payable, within the notes to the consolidated financial statements as of and for the year ended December 31, 2023 appearing elsewhere in this Annual Report .

On April 8, 2024, the maturity date of the Convertible Notes was extended to September 30, 2025 .

Refer to Note 1, Description of the Business , for additional information.

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

The VRM Full Return guaranty obligation became current on September 30, 2024, and the Company does not currently have available liquidity to satisfy said obligation.

On November 13, 2023, the Company entered into the Second Amended and Restated Nomura Note (defined in Note 3, Business Combination to the consolidated financial statements), which extended the maturity date of the Nomura Note to December 31, 2024.

See summary in Note 9, Claims Financing Obligations and Notes Payable to the consolidated financial statements.

On March 26, 2024, the Company entered into the Third Amended and Restated Nomura Promissory Note, which extended the maturity date of the Nomura Note to September 30, 2025.

The note became current on September 30, 2024, and the Company does not currently have available liquidity to satisfy said obligation.

Pursuant to a letter agreement dated November 15, 2024, Nomura agreed to forego payments of up to $ 4.0 million due under the Third Amended and Restated Nomura Note from proceeds from the sale of Class A Common Stock to Yorkville pursuant to the Yorkville SEPA until March 31, 2025.

On November 14, 2023, the Company entered into the Yorkville SEPA, which included the issuance of Yorkville Convertible Notes to Yorkville having aggregate principal amounts of up to $ 15.0 million in connection with the purchase of Class A Common Stock.

See summary in “ Committed Equity Facility ” within Note 9 , Claims Financing Obligations and Notes Payable to the consolidated financial statements.

On April 8, 2024, the maturity date of the Yorkville Convertible Notes was extended to September 30, 2025 .

On April 12, 2024, Yorkville 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 $ 13.0 million on the same terms and conditions as the previous

advances pursuant to the Yorkville SEPA.

On April 10, 2025, Yorkville further agreed to:

(i) extend the due date for the first Monthly Payment to November 30, 2026, (ii) extend the maturity date of the Convertible Notes to November 30, 2026, and (iii) to waive Volume Threshold and Maximum Advance Amount limitations set forth in the Yorkville SEPA.

As we have sold substantially all of the 2.0 million shares currently registered for resale to Yorkville, we need to file with the SEC one or more additional registration statements to register under the Securities Act the resale by Yorkville of any 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.

There can be no assurances of such events occurring or the timing of such events occurring.

The Company has concluded that, despite the aforementioned financing arrangements, there is substantial doubt about its ability to continue as a going concern.

Unless we are successful in raising additional funds through the offering of debt or equity securities, we have concluded it is probable we will be unable to continue to operate as a going concern beyond the next twelve months.

The Company has received a report from its independent registered public accounting firm with an emphasis of matter paragraph as to going concern in connection with the Company’s audited annual financial statements for the year ended December 31, 2024, which resulted in an event of default in the aforementioned debt agreement, which would have resulted in the debt becoming immediately due;

however, the Company has received waivers from (i) Virage and VRM and (ii) HPH and Hazel as it pertains to the year ended December 31, 2024.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

Significant estimates and assumptions reflected in these consolidated financial statements include but are not limited to recoverability of long-lived assets.

Reclassifications

Certain reclassifications have been made to the prior year statement of cash flows to conform to classifications used in the current year.

These reclassifications had no impact on net loss, shareholders’ equity or total cash flows as previously reported.

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

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

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

Cash and Cash Equivalents and Restricted Cash

Cash and Cash Equivalents

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

There are no cash equivalents as of December 31, 2024 or 2023 .

Restricted Cash as of December 31, 2022 consists of cash held in escrow related to the Prepaid Forward Agreement with CF.

See Note 18, Derivative Liability , for more info rmation on the Prepaid Forward Agreement.

Fair Value Measurements

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

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

See Note 14, Fair Value Measurements , for additional information on Level 3 assets and liabilities as of December 31, 2023.

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

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

As of December 31, 2023 , the Company did no t hold any Level 2 or Level 3 assets.

See Note 13, Fair Value Measurements , for additional information on Level 2 and Level 3 liabilities as of December 31, 2024.

Cash is stated at cost, which approximates their fair value.

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

Outstanding borrowings that qualify as financial instruments are carried at cost, which approximates their fair value as of December 31, 2024 and 2023 , due to their short duration.

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

The Company’s carrying value in equity method investee companies is not reflected in the Company’s consolidated balance sheets as of December 31, 2023 or 2022 as the carryin g value is de minimis.

The Company’s carrying value in equity method investee companies is not reflected in the Company’s consolidated balance sheets as of December 31, 2024 or 2023 as the carryin g value is de

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

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Intangible assets

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

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

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

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

The CCRA assets are held at cost.

Historically, the Company amortized capitalized costs associated with CCRAs over eight years , based on the expected timing to pursue recovery through litigation, including through potential appeals.

As part of the annual reassessment of useful lives as of December 31, 2024, the Company updated the estimated useful life of the CCRAs to seven years beginning January 1, 2025.

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

As a result of this purchase and the guaranty obligation as noted in Note 8, Variable Interest Entities , the Company consolidated the entity which holds these Claim rights.

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

Upon consolidation, these Claims rights were accounted for under ASC 350.

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

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

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

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

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

The Company elected not to separate lease and non-lease components for arrangements where the Company is a lessee.

See Note 8, Leases , for more information.

Derivative Instruments

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The result of this accounting treatment is that the fair value of the embedded derivative, if required to be bifurcated, is marked-to-market at each balance sheet date and recorded as a liability.

The change in fair value is recorded in the Statement of Operations as a component of other income or expense.

The change in fair value is recorded in the statements of operations as a component of other income or expense.

Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

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Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date.

Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

Derivative instrument liabilities

will be classified in the consolidated balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

Non-Controlling Interests

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

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

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

As of December 31, 2024, based on the Class A common stock issuances during the period, the non-controlling interest of Class V shareholders was 69.43 % .

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

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

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

Claims recovery income

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

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

When the Company becomes entitled to recovery proceeds from the settlement of a Claim recovery pursuit or proceeding that meets the requirements under ASC 450, it recognizes the amount in accounts receivable.

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

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The Company did not recognize any material revenue for the years ended December 31, 2024 or 2023 for performance obligations that were fully satisfied in previous periods.

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

There was no claims recovery service income from VRM MSP for the year ended December 31, 2023.

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

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

For the year ended December 31, 2023 , the Company also recognized $ 0.5 million of servicing income related to a specific contract where the performance obligations were completed during the year.

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Claims amortization expense

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

For further details on CCRAs see Note 6, Intangible Assets, Net .

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

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

Comprehensive Income (Loss)

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New Accounting Pronouncements Recently Adopted

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses .

In 2016 and subsequently, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

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

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

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

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

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

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

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

The Company adopted this guidance on January 1, 2023 and it had no material impact on our consolidated financial statements.

In 2024, we adopted Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , on a retrospective basis.

The amendments are intended to increase reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

Refer to Note 15 , Segment Information for further information.

New Accounting Pronouncements Issued but Not Yet Adopted

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The guidance is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated financial statements and disclosures.

BUSINESS COMBINATION

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

Ruiz, in his capacity as the representative of the Members (the “Members’ Representative”).

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

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

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

As a result of the closing of the Business Combination (the “Closing”), the Company is organized in an “Up-C” structure in which all of the business of Legacy MSP and its subsidiaries is held directly or indirectly by the Company, the Company is the managing member, consolidates Legacy MSP and the Company owns all of the voting economic Class A Units and the Members and their designees own all of the non-voting economic Class B Units in accordance with the terms of the first amended and restated limited liability company agreement of the Company.

The aggregate consideration paid to the Members (or their designees) at the Closing consisted of (i) 1 30,000,000 Units and (ii) rights to receive payments under the Tax Receivable Agreement (“TRA”).

Of the 1 30,000,000 Units, 126,178,932 Units were issued in connection with the Closing and 3,821,068 Units were designated to the Company and Opco for cancellation (“Canceled Units”).

Since the Closing, the Company has issued 2,000,880 Up-C Units to certain designated persons and intends to further issue shares of Class A Common Stock in respect of transaction-related bonuses or certain other designated persons, which together with the 2,000,880 Up-C Units would be equivalent in number to the Canceled Units.

In connection with the Closing, the Company changed its name from “Lionheart Acquisition Corporation II” to “MSP Recovery, Inc.” The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP.

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

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

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

The Company received net proceeds in the business combination tr ansaction of approximately $ 23.4 million, which includes the restricted cash received as part of FEF shares as defined in Note 18, Derivative Liability .

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

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

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

Pursuant to the terms of the Existing Warrant Agreement, and after giving effect to the issuance of the New Warrants, as defined below, the exercise price of the Public Warrants decreased to $ 0.0025 per share of Class A Common Stock.

During the period from the Closing Date to December 31, 2023 , approximately 8.9 million war rants of the orig inal 11.8 million warrants had been exercised.

For the year ended December 31, 2023, the fair value of the remaining unexercised warrants decreased resulting in other income of $ 4.8 million, which is recorded within change in fair value of warrant and derivative liabilities in the consolidated statements of operations.

F ollowing anti-dilution adjustments made in connection with the Business Combination, the Public Warrants have an exercise price of $ 0.0025 per share, which have become exercisable as of 10 days after closing of the Business Combination, on a cashless basis in lots of 25.

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

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

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

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

The Company determined that the New Warrants instruments meet the equity scope excepti on in ASC 815 to be classified in stockholders’ equity, and as the repurchase right noted above has a mirrored value designed to offset the New Warrants, if exercised would be an equity only transaction.

The New Warrants are each exercisable in lots of 25 for one whole share of Class A Common Stock at a Reverse Split adjusted exercise price $ 287.50 per whole share.

The New Warrants must be exercised in lots of 25, as no fractional shares will be issued as a result of their exercise.

The New Warrants are subject to certain anti-dilution adjustments.

Public Warrants and New Warrants are currently listed on Nasdaq under the symbols “LIFWZ” and “LIFWW,” respectively.

Tax Receivable Agreement

In connection with the Business Combination, the Company also entered into a Tax Receivable Agreement (the “TRA”) .

During the years ended December 31, 2023 and 2022, the Company’s TRA liability associated with the allocable share of existing tax basis acquired in the Business Combination would give rise to a TRA liability of $ 11.3 million and $ 2.5 million, respectively.

No payments were made to the Continuing Equity Owners and Blocker Shareholders (as defined in the TRA) pursuant to the TRA during the years ended December 31, 2023, or 2022.

in the future.

We may incur additional liabilities under the TRA when Lionheart II Holdings, LLC are exchanged in the future.

The Company has recorded a full valuation allowance against the deferred tax assets as of December 31, 2023 and 2022, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.

As the tax benefits associated with the TRA have not be recognized, based on estimates of future taxable income, the Company has concluded it is not

probable to recognize any tax receivable agreement liability.

Non-Controlling interest

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

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

Amended and Restated Nomura Promissory Note

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

On April 12, 2023, the Company amended the promissory note, increasing the principal amount to approximately $ 26.3 million and extending the maturity date of the promissory note to September 30, 2024 .

On November 13, 2023, the Company entered into another Amended and Restated Nomura Promissory Note to (a) increase the principal amount to approximately $ 28.9 million, (b) extend the maturity date to December 31, 2024 , and (c) permit the Company to use the proceeds of an at-the-market offering to repay indebtedness incurred by the Company for which the proceeds are used for operating expenses, subject to certain enumerated restrictions.

On March 26, 2024, the Company further amended and restated the Amended and Restated Nomura Promissory Note (the “Amendment to the Amended and Restated Nomura Promissory Note”) to (a) increase the principal amount to approximately $ 30.0 million, and (b) extend the maturity date to September 30, 2025 .

The Amended and Restated Nomura Promissory Note carries an interest rate of 16 % per annum and is payable in kind or in cash, at the Company’s discretion, every 30 calendar days after March 26, 2024.

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

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

ASSET ACQUISITIONS

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

In exchange for approximately 7.9 million Up-C Units (after giving effect to the Reverse Split), the Company acquired Claims previously held by Series MRCS, an affiliate of the Company.

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

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

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

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

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

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

The Company is currently evaluating the provisions of this guidance and assessing the potential impact on the Company’s financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, “ Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses ”.

The guidance in ASU 2024-03 does not change the expense line items presented on the face of the financial statements, but instead, it requires additional disaggregation of specific expense captions in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory;

employee compensation;

and depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements.

The Company is currently evaluating the provisions of this guidance and assessing the potential impact on the Company’s financial statement disclosures.

MATERIAL AGREEMENTS

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

In exchange for approximately 14.3 million Up-C Units (after giving effect to the Reverse Split), the Company acquired the rights to receive the distributable net proceeds (the “Proceeds”) of a portfolio of Claims owned by VRM MSP, a Delaware limited liability company and joint investment vehicle of VRM and Series MRCS.

In exchange for approximately 0.6 million Up-C Units, the Company acquired the rights to receive the distributable net proceeds (the “Proceeds”) of a portfolio of Claims owned by VRM MSP, a Delaware limited liability company and joint investment vehicle of VRM and Series MRCS.

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

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

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

These are held at cost and treated as finite life intangible assets under ASC 350, and have a useful life of seven years .

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

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(a) the Proceeds, net of expenses related to claim settlement, (b) a sale of certain reserved shares of Messrs.

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

The amount of the VRM Full Return was $ 941.3 million as of December 31, 2023.

Ruiz and Frank C.

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

The amount of the VRM Full Return was $ 1,126.5 million and $ 941.3 million as of December 31, 2024 and 2023, respectively.

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

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

On April 12, 2023, the Company and Messrs.

Quesada and Ruiz entered into an amendment (the “Virage MTA Amendment”) to the agreement with Virage and the related Guaranty pursuant to which the payment date for the VRM Full Return was extended from May 23, 2023 until September 30, 2024, subject to acceleration upon certain triggering events.

On November 14, 2023, the maturity date was extended to December 31, 2024.

In addition, the Virage MTA Amendment changed the payment methods to Virage to exclusively be, in the following order of priority:

(a) the Proceeds and any other sources of revenue or liquidity of the Company (and its subsidiaries) that are not encumbered by a lien of a party other than Virage and to the extent such revenues and liquidity exceed the amount of net of revenues necessary to establish and maintain an operating reserve of $ 70.0 million (reduced to $ 47.5 million on July 24, 2023) for certain Company expenses, (b) a sale of certain reserved shares of Messrs.

John Ruiz and Frank Quesada, and the delivery of the resulting net cash proceeds thereof to VRM, (c) Parent’s sale of additional shares and delivery of proceeds to Virage, subject to certain anti-dilution provisions, (d) if not satisfied by the foregoing, a sale of other shares of the Company by Messrs.

John Ruiz and Frank Quesada, and the delivery of the resulting net cash proceeds thereof to VRM;

Pursuant to the Virage MTA dated March 9, 2022 (as amended on April 12, 2023, November 13, 2023, and April 1, 2024, the “Virage MTA”), the VRM Full Return payment due date is September 30, 2025.

The payment methods for the VRM Full Return are as follows, and in the following order of priority:

(a) a first priority lien on all sources of revenue of the Company not otherwise encumbered as of April 12, 2023 to the extent such revenues and liquidity exceed the amount of net of revenues necessary to establish and maintain an operating reserve (“Operating Reserve”) of to the budget of the Company (plus applicable taxes) plus 10 %, (b) a sale of certain reserved shares of Messrs.

Ruiz and Frank C.

Quesada, and the delivery of the resulting net cash proceeds thereof to VRM, (c) Parent’s sale of additional shares and delivery of proceeds to VRM, subject to certain anti-dilution provisions, and (d) if the VRM Full Return is not satisfied by the foregoing, a sale by Messrs.

Ruiz and Quesada of other shares of Common Stock that they hold, and the delivery of the resulting net cash proceeds thereof to VRM;

provided that if the VRM Full Return is not fully paid by September 30, 2025 the VRM Full Return shall be payable by any of such payment methods in any order of priority.

As a part of the Virage MTA Amendment, on January 1, 2024, the Company will be required to make a one-time, lump sum payment to Virage for the period starting May 24, 2023 and ending December 31, 2023, in one or a combination of:

(a) cash, in an amount equal to 1.0% of each calendar month-end balance (which month-end balance shall be increased daily up to 20% per annum based on a formula set forth in the Virage MTA Amendment) of the amount owing to Virage as of each preceding calendar month end and/or (b) warrants to purchase Class A common stock at $ 0.0001 per share, in an amount equal to the quotient of 1.0% of each calendar month-end balance (which month-end balance shall be increased daily up to 20% per annum based on a formula set forth in the Virage MTA Amendment) of the amount owing to Virage as of each preceding calendar month end and the volume weighted average price of a share of our Class A common stock for the five day period prior to the issuance.

If paid in warrants, such warrants will expire on January 1, 2026 .

On November 13, 2023, the Company entered into the Second Virage MTA Amendment that extended the final payment date of the VRM Full Return to December 31, 2024, subject to acceleration upon certain triggering events.

In addition, the Second Virage MTA Amendment (a) changed the minimum operating reserve from $ 47.5 million to the budget of the Company (plus applicable taxes) plus 10 % and (b) required Virage and the Company negotiate and agree on a form of initial warrant and monthly warrant by no later than December 31, 2023.

Accordingly, the Company issued the VRM Warrants.

The Initial Virage Warrant, as amended, was issued effective January 1, 2024 and entitles Virage to purchase 28,298,329 shares of Class A Common Stock, with an expiration date of January 1, 2026 .

Further, as of April 5, 2024, Monthly Virage Warrants were issued for February 2024 entitling Virage to purchase 8,263,494 shares, March 2024 entitling Virage to purchase 11,955,994 shares, and April 2024 entitling Virage to purchase 13,556,181 shares .

Until our obligations to Virage are paid in full, the Company has the option every month to continue to pay Virage in one or a combination of:

On April 1, 2024, the Company entered into the Third Virage MTA Amendment which:

(i) extended the VRM Full Return payment due date to September 30, 2025, subject to acceleration upon certain triggering events, including the receipt of a going concern opinion by the Company’s independent auditor;

and (iii) commence the sale of certain reserved shares of Messrs.

In addition, Messrs.

Quesada and Ruiz agreed to certain transfer restrictions applicable to their Common Stock.

In addition, the Company agreed to make a one-time, lump sum payment to Virage for the period starting May 24, 2023 and ending December 31, 2023, in one or a combination of:

(a) cash, in an amount equal to 1.0% of each calendar month-end balance (which month-end balance shall be increased daily up to 20.0% per annum based on a formula set forth in the Virage MTA) of the amount owing to Virage as of each preceding calendar month end and/or (b) issue to VRM a warrant to purchase a number of shares of Class A Common Stock of Parent equal to the quotient of 1.0% of each calendar month end balance of the Unpaid Base Amount (calculated on a cumulative basis) and the VWAP of a share of Class A Common Stock for the five-day period prior to the issuance, beginning with May 24, 2023 and ending December 31, 2023, which warrant will have an exercise price (payable in cash) of $ 0.0025 per share (the “Initial Virage Warrant”);

provided that the Initial Virage Warrant will expire on January 1, 2026 .

The Initial Virage Warrant, as amended, was issued effective January 1, 2024, entitling Virage to purchase 1,131,934 shares of Class A Common Stock at an exercise price of $ 0.0025 per share, with an expiration date of January 1, 2026 .

Furthermore, for each calendar month-end beginning with January 31, 2024, and continuing until the VRM Full Return is paid in full, the Company agreed to issue to VRM a warrant to purchase a number of shares of Class A Common Stock of Parent equal to the quotient of 1% of the calendar month-end balance of the Unpaid Base Amount and the VWAP (each, a “Monthly Virage Warrant”), which warrant will have an exercise price (payable in cash) of $ 0.0001 per share and expire on the second anniversary of its issuance.

As of December 31, 2024, the Company issued 9 Monthly Virage Warrants, entitling Virage to purchase 8,619,405 shares of Class A Common Stock, each warrant expiring two years from the date of issuance, which are exercisable for $ 0.0025 per share.

Furthermore, on April 14, 2025, the Company issued two additional warrants for November 2024 and December 2024, each warrant exercisable for 3,277,808 and 6,332,792 shares, respectively, both which are exercisable for $ 0.0001 per share and expiring two years from the date of issuance.

The Company also agreed that, after the Yorkville Convertible Notes are fully satisfied, 25 % of the Company’s portion of any net proceeds from the Yorkville SEPA would be used to pay down the VRM Full Return , and that Messrs.

Ruiz and Frank C.

Quesada, and the delivery of the resulting net cash proceeds thereof to VRM.

On July 28, 2023, VRM exercised its option to exchange Claims with service dates prior to January 1, 2014 for more recent Claims.

To do so, the VRM MSP agreement was amended to reflect that:

(a) rights to recovery proceeds arising from Claims held by VRM MSP, with dates of service before January 1, 2014, were transferred to MSP Recovery;

(b) MSP Recovery contributed to VRM MSP in the form of in-kind ownership interests to certain Series entities holding Claims;

and (c) as a result of such capital contributions, MSP Recovery was admitted as a member of VRM MSP.

The contribution of certain Series (holding certain CCRAs) by MSP Recovery into VRM MSP is considered a common control transaction, given that the Company consolidates Series before and after such transfers.

In addition, the Company analyzed being admitted as a member of VRM MSP and concluded to apply Investments in Equity Method guidance under ASC 323.

The Company initially measured and recorded its equity method investment in VRM MSP using a cost accumulation model;

however, in consolidation, the investment in VRM MSP is eliminated, with the CCRA intangible assets remaining on the balance sheet under the “Intangible assets”

The investment in VRM MSP will reflect a zero balance.

In addition, given VRM MSP’s primary assets are the CCRAs, VRM MSP’s ability to generate any earnings (not already reported via MSP Recovery consolidation of Series), is negligible;

therefore, MSP Recovery does not expect any significant earnings from VRM MSP.

Hazel Transactions

Claims Transactions and Purchase Money Loan

Quesada would commence the sale of certain of their reserved shares, and deliver the resulting net cash proceeds thereof to VRM.

however on September 6, 2024, Virage agreed to waive a provision of the Virage MTA Amendment that would otherwise accelerate the payment of amounts due to Virage in such event.

Hazel Purchase Money Loan

On March 29, 2023, the Company acquired a controlling interest in nine legal entities, whose sole assets are CCRAs, from Hazel.

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This resulted in a gain on the Claims Transactions of $ 4.6 million, which largely corresponds to the previously recognized amortization of the CCRAs that were sold in the Claims Sale.

Amounts borrowed and obligations under the Purchase Money Loan and the Working Capital Credit Facility (See Note 11, Claims Financing Obligation and Note Payable ) are secured by a pledge of proceeds from specific Claims in the Company’s Claims portfolio, with the lien securing the Purchase Money Loan being subordinated and junior to the lien securing the Working Capital Credit Facility.

In addition, under the Operational Collection Floor, HPH agreed to extend up to $ 3.3 million (with a 40 % original issue discount) to fund the acquisition of additional Claims, which further collateralize the Working Capital Credit Facility.

On October 2, 2024, the Company acquired the recovery rights to additional Medicare Secondary Payer Claims from an existing Assignor consisting of more than 450,000 Medicare members, as documented by the Assignor.

Amounts borrowed and obligations under the Purchase Money Loan and the Working Capital Credit Facility (See Note 9, Claims Financing Obligations and Notes Payable ) are secured by a pledge of proceeds from specific Claims in the Company’s Claims portfolio, with the lien securing the Purchase Money Loan being subordinated and junior to the lien securing the Working Capital Credit Facility.

Pursuant to the Purchase Money Loan and the Working Capital Credit Facility, the Company entered into a collateral administrative agreement between the Company and Hazel, which sets forth certain arrangements between the Company and Hazel in relation to Claims owned by the Company, the proceeds of which are due to the Company were pledged to Hazel to secure the Purchase Money Loan and the Working Capital Credit Facility.

Hazel Working Capital Credit Facility

On March 6, 2023 , Subrogation Holdings entered into a credit agreement (as amended on March 29, 2023;

November 10, 2023;

and October 1, 2024;

the “Working Capital Credit Facility”) with HPH 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.

During fiscal year 2023, HPH disbursed $ 20.5 million under Term Loan A and $ 9.0 million under Term Loan B.

During fiscal year 2024, HPH disbursed $ 4.5 million under Term Loan B on January 25, 2024.

On August 2, 2024, Subrogation Holdings entered into a letter agreement to amend the Working Capital Credit Facility (the “HPH Letter Agreement”) with HPH, which, among other things:

(i) extended the period to draw up to $ 23.3 million (with a 40 % original issue discount) remaining under Term Loan B for working capital, accessible in eight tranches of $ 1.75 million, that can be drawn at least one month apart, until September 2025 , and (ii) provided for a $ 3.3 million loan (subject to a 40 % original issue discount) funded by August 31, 2024 to acquire additional Claims (the “New Claims”) that collateralize the Working Capital Credit Facility (collectively, (i) and (ii) the “Operational Collection Floor”).

The parties formalized the terms of the HPH Letter Agreement in Amendment No.

3 to the Working Capital Credit Facility dated October 1, 2024 (the “OCF Amendment”).

Under the Operational Collection Floor, the Company received during 2024:

(i) $ 12.3 million for working capital, and (ii) $ 2.0 million for the purpose of acquiring the New Claims.

To date, the Company received $ 3.5 million of working capital for 2025.

Pursuant to the Working Capital Credit Facility, HPH may, at its sole discretion, increase the Operational Collection Floor by an amount of up to $ 6.0 million, to be funded over a period of three to six months .

On February 28, 2025 and April 4, 2025, HPH exercised that discretion and funded $ 1.75 million and $ 1.5 million, respectively, from the increase to the Operational Collection Floor.

An additional $ 2.75 million remains available under the Operational Collection Floor, to be funded at HPH’s sole discretion.

INVESTMENT IN EQUITY METHOD INVESTEES

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

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

The Company holds a 50 % economic interest in both entities, and has significant influence through

its equity investment, but does not control either entity.

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

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Other expenses

Profit (Loss)

As of December 31,

(in thousands)

Total Liabilities

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Property and equipment, net

For the years ended December 31, 2023, 2022 and 2021, depreciation expense and amortization expense was $ 0.3 million , $ 0.4 million , and $ 0.3 million , respectively.

For the years ended December 31, 2024 and 2023, depreciation expense and amortization expense was $ 0.3 million and $ 0.3 million , respectively.

INTANGIBLE ASSETS, NET

The Company holds CCRAs held by Series MRCS, which were acquired through the issuance of equity as part of the Business Combination in 2022 and additional acquisitions of additional CCRAs throughout 2022 and 2023 .

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

The Company holds CCRAs held by Series MRCS, which were acquired through the issuance of equity as part of the Business Combination in 2022 and acquisitions of additional CCRAs from the Closing Date through 2024.

Intangible assets, net consists of the following:

(in thousands)

December 31, 2023

December 31, 2022

Intangible assets, gross

Accumulated amortization

During the year ended December 31, 2023, the Company purchased $ 287.0 million of CCRAs included in Intangible assets, net, of which $ 285.5 million was through the Hazel transaction (See Note 4, Asset Acquisitions ), $ 0.8 million was through a Class A Common Stock issuance in July 2023 and $ 0.7 million was paid in cash.

For the years ended December 31, 2023, 2022 and 2021, Claims amortization expense was $ 476.5 million , $ 266.9 million and $ 0.2 million , respectively.

During the year ended December 31, 2024, the Company purchased $ 2.2 million of CCRAs included in Intangible assets, net, which were paid in cash.

During the year ended December 31, 2023, the Company purchased $ 287.0 million of CCRAs included in Intangible assets, net, of whic h $ 285.5 million was through the Hazel transaction (See Note 3, Material Agreements ), $ 0.8 million was through a Class A Common Stock and $ 0.7 million was paid in cash.

For the years ended December 31, 2024 and 2023, Claims amortization expense was $ 484.1 million and $ 476.5 million , respectively.

Future amortization for CCRAs is expected to be as follows:

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however, extended delays may result in future impairment of the Company’s intangible assets.

During the Company’s annual review of its CCRAs, the Company identified potential impairment indicators, such as recurring operating losses, which it considered in its evaluation of its definite-lived intangible assets.

As a result, the Company performed a recoverability analysis on the definite-lived CCRA intangible assets.

During the Company’s fourth quarter review of its CCRAs, the Company identified potential impairment indicators, such as recurring operating losses, and a lack of substantial revenue generated from our Claims portfolio to date, which it considered in its evaluation of its definite-lived intangible assets.

As a result, the Company performed a recoverability analysis on the definite-lived CCRA intangible assets in the fourth quarter of 2024.

The recoverability analysis primarily included unobservable inputs, including internally developed assumptions about the estimated market share of insurance carriers that may not have paid claims due to Assignors, undiscounted cash flows of potential estimated recoveries from those carriers, the corresponding direct costs associated with those estimated recoveries, and the Company’s ability to successfully litigate or negotiate settlements.

In addition, the Company also took into consideration transactions of the sale of CCRAs to unrelated third parties.

Based on these analyses, the Company concluded that the undiscounted net recoveries were in excess of the CCRAs’ carrying amounts as of December 31, 2023.

As such, no impairment was recognized.

There are inherent risks in our business which could impact the recoverability analysis.

For example, litigation outcomes are inherently risky, and unfavorable court rulings, delays, damages calculations, or other limitations can adversely affect our recovery efforts.

In addition, the market share of the carriers that we pursue may change, which could impact the overall potential recoveries that we could generate in the future.

As a result, factors may change in the future that could negatively impact our recoverability of the CCRAs, and may result in a material impairment charge.

An asset group is impaired if the estimated undiscounted cash flows are less than the asset group’s carrying value.

Impairment is measured by the amount by which the carrying value exceeds fair value.

The Company performed a probability-weighted undiscounted net cash flow analyses, taking into account various scenarios of expected cash flows, some of which rendered positive results, while others rendered negative results.

Given that the probability-weighted average cash flows of all scenarios were below the carrying value, the Company performed a fair value assessment to measure impairment loss.

The fair value assessment of the intangible assets was determined using the income approach.

The significant inputs and assumptions used in the estimate of fair value were primarily Level 3 inputs, and include internally developed assumptions used in the undiscounted analysis, as well as the determination of an appropriate discount rate.

The Company’s estimation of the fair value of its CCRA intangible assets resulted in a non-cash impairment charge amount of $ 752.7 million recorded during the fourth quarter of 2024 in Impairment of intangible assets in the consolidated statement of operations for the year ended December 31, 2024.

The estimation of the fair value requires significant management judgment with respect to the estimates discussed above.

The estimates of the fair value are based on the best information available as of the date of the assessment.

Small changes in the significant inputs and assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge by a material amount.

For example, if estimated recoveries were accelerated by one year, the non-cash impairment charge would decrease by $ 141.6 million, while if estimated recoveries were extended by a year, then the non-cash impairment charge would increase by $ 128.3 million.

In addition, a hypothetical 1 % change in the discount rate assumption would increase or decrease the impairment charge by approximately $ 39.0 million.

If actual results or future expectations are not consistent with the assumptions used in our estimate of fair value, it may result in the recording of additional impairment charges in the future which could be material.

The following table presents the changes in the Company’s intangibles assets for year ended December 31, 2024:

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Sale of CCRAs

The Company leases office space in Puerto Rico under a non-cancellable operating lease which commenced in September 2023 and expires August 2026 .

Prior to this lease, the Company held a short-term lease, therefore the Company recorded an initial ROU asset and lease liability upon signing the new lease agreement.

Lease expense under the new operating lease for year ended December 31, 2023 amounted to $ 52.6 thousand.

In addition, the Company rents an office space from the Law Firm, which is on a month-to-month basis and therefore is not included within the ROU Asset and Lease liability nor in the future minimum lease payments below.

Short-term rent expense each of the years ended December 31, 2023, 2022 and 2021 was $ 0.8 million .

As of December 31, 2023 , the weighted-average lease term and weighted-average discount rate were 2.6 years and 15.31 %, respectively.

The presentation of right-of-use assets and lease liabilities in the consolidated balance sheet is as follows:

(In thousands)

Classification

Right-of-use asset

Right-of-use assets

Total Leased Assets

Operating lease liability

Other current liabilities

Operating lease liability

Lease liabilities

Total Lease Liability

The future minimum lease payments under non-cancellable operating leases as of December 31, 2023 for the next five years and thereafter are as follows:

(in thousands)

Total minimum payments required

implied interest

Present value of lease liabilities

Balance as of December 31, 2023

Acquisitions of CCRAs

Amortization expense

Balance as of December 31, 2024

The Company holds an economic interest in MSP Recovery, LLC and consolidates its financial position and results.

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Valuation allowance

Warrant liability

Effective Income tax rate

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The Company is involved with VIEs in which it has investments in equity but does not consolidate because it does not have the power to direct the activities that most significantly impact their economic performance and thus is not considered the primary beneficiary of the entities.

Those VIEs are reflected as equity method investments.

Those VIEs are reflected as equity method investments and are reflected at $ 0 on the Company’s consolidated balance sheet.

Total assets and liabilities for these VIEs were $ 0.9 million and $ 0.8 million , respectively, at December 31, 2024 and $ 1.4 million and $ 0.4 million , respectively, at December 31, 2023.

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Based on claims financing obligations and notes payable agreements, as of December 31, 2024 and 2023, the present value of amounts owed under these obligations were $ 673.6 million and $ 556.3 million , respectively, including capitalized interest.

In addition, as of December 31, 2024 and 2023 , the Company has $ 12.2 million and $ 10.0 million of advances from Yorkville, respectively.

The weighted average interest rate is 15.0 % based on the current book value of $ 685.7 million with rates that range from 0.0 % to 20.0 % .

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The maturity of the commitments range from the date sufficient claims recoveries are received to cover the required return or in some cases by 2031.

Brickell Key Investments

In 2015, the Company entered into a Claims Proceeds Investment Agreement (“CPIA”), as amended, with Brickell Key Investments LP (the “Holder”).

Pursuant to the CPIA, as amended, the Company grants to the Holder the right to purchase Class A common shares in the Company (the “Class A Shares”) up to a maximum amount of 2,666,667 (the “Amount”) for a purchase price equal to $ 6,666.67 ($ 0.0025 per Class A Share), and is payable in cash.

Brickell Key Investments, LP

In 2015, the Company entered into a Claims Proceeds Investment Agreement (as amended, the “CPIA”) with Brickell Key Investments LP (the “Holder”).

On October 12, 2022, the Company entered into an Amendment to the CPIA (the “Amendment”) and a Warrant Agreement (the “Warrant Agreement”) with the Holder, pursuant to which the parties agreed to amend the original CPIA and required payment terms.

Pursuant to the CPIA, as amended, the Company granted to the Holder the right to purchase Class A common shares in the Company (the “Class A Shares”) up to a maximum amount of 106,667 (the “Amount”) for a purchase price equal to $ 6,666.67 ($ 0.0625 per Class A Share), and is payable in cash.

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

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In exchange for the Company issuing the Warrant, the amounts owed to the Holder pursuant to CPIA are amended to equal $ 80 million.

If the Holder monetizes the Warrant, the amount owed will be reduced at a measure of $ 30.00 per Class A Share.

If the Holder monetizes the Warrant, the

amount owed will be reduced at a measure of $ 750.00 per Class A Share (five-day volume weighted average price as of September 30, 2022).

In connection with the Amendment and Warrant Agreement, the Holder also executed a Stock Pledge Agreement (the “Pledge Agreement”) with Legacy MSP founders, John H.

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Quesada (the “Founders”).

As part of the Pledge Agreement, the Founders agreed to pledge 50 million shares to secure payment of the original principal amount of the CPIA.

In addition, the Pledge Agreement provides the right to repurchase the Warrant from the Holder on or before June 30, 2023.

The Founders entered into an agreement with the Company where this repurchase right has been assigned to the Company (the “Side Agreement”).

As the Company has, at its option, the ability to pay its obligation through cash proceeds or through monetization of the Warrants, the $ 80.0 million of amounts owed as of December 31, 2023 was included as Claims financing obligation and notes payable on the consolidated balance sheet.

The Founders did not exercise the option to repurchase the Warrants on or before June 30, 2023.

The Company recognized the Warrants at fair value which, considering the price of the Company’s common stock was below $ 30.00 as of December 31, 2023 , it was determined to be zero .

Hazel Working Capital Credit Facility and Hazel Purchase Money Loan

On March 29, 2023 , the Company’s subsidiary, Subrogation Holdings, LLC, entered into an Amended and Restated Credit Agreement (the “Working Capital Credit Facility”) with Hazel Partners Holdings LLC (“HPH”), an affiliate of Hazel, as the lender and administrative agent, which provides for up to $ 80 million (with a 40 % original issue discount), consisting of a Term Loan A commitment to fund up to $ 30 million in proceeds (in multiple installments), and a Term Loan B Commitment to fund up to $ 18 million in proceeds (in multiple installments), the funding of each conditioned on certain milestones.

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.

At different points during the year ended December 31, 2023, the Company received funding with an aggregate amount of $ 20.5 million under Term Loan A, which was then terminated.

The parties agreed to increase the Term Loan B commitment from $ 18 million to $ 27.5 million, after giving effect to the original issue discount on the Working Capital Credit Facility, which would be funded in multiple installments and in accordance with the terms of the Working Capital Credit Facility.

At different points during the year ended December 31, 2023, the Company received funding with an aggregate amount of $ 9.0 million under Term Loan B, and received an additional $ 4.5 million on January 25, 2024.

After considering the subsequent payment received, the Company has additional availability amounting to $ 14.0 million under Term Loan B.

Amounts borrowed and obligations under the Working Capital Credit Facility are secured by a pledge of proceeds from certain Claims in the Company’s Claims portfolio, with the lien securing the Purchase Money Loan being subordinated and junior to the lien securing the Working Capital Credit Facility.

As part of the Pledge Agreement, the Founders agreed to pledge 80 thousand shares to secure payment of the original principal amount of the CPIA;

provided, that if any any time prior to September 30, 2024, if the pledge agreement had not terminated, and the per share price of the pledged shares dropped below $ 0.60 (before 2023 and 2024 Reverse stock splits), then additional shares were required to be pledged by the Founders to bring the number of pledged shares to a value based on the value on that date to $ 36.0 million (minus amounts received in satisfaction of the obligation) .

Holder has raised a dispute relating to the total number of shares that the Founders were required to pledge under the Pledge Agreement;

however, before any pledged shares may be transacted upon, Holder must have monetized the CPIA Warrant.

As of the date of this report, Holder has not monetized the CPIA Warrant.

As the Company has an obligation to pay this indebtedness through cash proceeds from certain purchased claims recovery rights, the $ 80.0 million of amounts owed as of December 31, 2024 was included as Claims financing obligation and notes payable on the consolidated balance sheet.

The Founders did not exercise the option to repurchase the CPIA Warrant on or before June 30, 2023.

The Company recognizes the CPIA Warrant at fair value which, considering the price of the Company’s common stock was below $ 750.00 as of December 31, 2024 , was determined to be zero .

Hazel Working Capital Credit Facility and Purchase Money Loan

Working Capital Credit Facility