MSP Recovery, Inc. 10-K

Item 8 . Financial Statements and Supplementary Data. 77 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 ) 79 Consolidated Balance Sheets as of December 31, 2024 and 2023 80 Consolidated Statements of Operations for the Years ended December 31, 2024 and 2023 81 Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2024 and 2023 82 Consolidated Statements of Cash Flows for the Years ended December 31, 2024 and 2023 83 Notes to Consolidated Financial Statements 85 78 Rep ort of Independent Registered Public Accounting Firm To the shareholders and the Board of Directors of MSP Recovery, Inc. and Subsidiaries: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of MSP Recovery, Inc. and Subsidiaries (the "Company") as of December 31, 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 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 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Miami, Florida April 15, 2025 We have served as the Company’s auditor since 2021. 79 MSP RECOVERY, INC. and Subsidiaries Consolidated Bala nce Sheets December 31, (In thousands, except share and per share data) 2024 2023 ASSETS Current assets: Cash $ 12,328 $ 11,633 Accounts receivable 295 217 Affiliate receivable (1) 1,204 1,188 Prepaid expenses and other current assets (1) 1,647 8,908 Total current assets 15,474 21,946 Property and equipment, net 5,159 4,911 Intangible assets, net (2) 1,898,223 3,132,796 Right-of-use assets 227 342 Total assets $ 1,919,083 $ 3,159,995 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 13,971 $ 6,244 Affiliate payable (1) 21,664 19,822 Commission payable 1,342 821 Derivative liability 211 37 Warrant liability (1) 22,373 268 Guaranty obligation (1) 1,126,490 — Claims financing obligation and notes payable (1) 31,200 — Interest payable (1) 33,298 — Other current liabilities (1) 14,765 19,314 Total current liabilities 1,265,314 46,506 Guaranty obligation (1) — 941,301 Claims financing obligation and notes payable (1) 633,026 548,276 Lease liabilities 102 235 Loan from related parties (1) 130,328 130,709 Interest payable (1) 14,828 73,839 Other long-term liabilities 3,894 — Total liabilities $ 2,047,492 $ 1,740,866 Commitments and contingencies (Note 12) Stockholders’ Equity: Class A common stock, $ 0.0001 par value; 5,500,000,000 shares authorized; 2,184,958 and 586,393 issued and outstanding as of December 31, 2024 and 2023, respectively $ — $ — Class V common stock, $ 0.0001 par value; 3,250,000,000 shares authorized; 4,962,704 and 4,965,296 issued and outstanding as of December 31, 2024 and 2023, respectively — — Additional paid-in capital 546,635 357,941 Accumulated deficit ( 446,050 ) ( 85,551 ) Total stockholders’ equity $ 100,585 $ 272,390 Non-controlling interest ( 228,994 ) 1,146,739 Total equity $ ( 128,409 ) $ 1,419,129 Total liabilities and equity $ 1,919,083 $ 3,159,995 1. 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. 2. 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. The accompanying notes are an integral part of these consolidated financial statements. 80 MSP RECOVERY, INC. and Subsidiaries Consolidated State ments of Operations Year Ended December 31, (In thousands, except share and per share data) 2024 2023 Claims recovery income $ 18,122 $ 7,207 Claims recovery service income — 498 Other 127 — Total Revenues $ 18,249 $ 7,705 Operating expenses Cost of revenues (1) 9,607 2,145 Claims amortization expense 484,076 476,492 General and administrative (2) 22,231 26,508 Professional fees 14,131 22,766 Professional fees – legal (3) 9,519 34,401 Impairment of intangible assets 752,697 — Allowance for credit losses — 5,000 Depreciation and amortization 277 263 Total operating expenses 1,292,538 567,575 Operating Loss $ ( 1,274,289 ) $ ( 559,870 ) Interest expense (4) ( 420,032 ) ( 289,169 ) Other income (expense), net 542 9,290 Change in fair value of warrant and derivative liabilities 136,934 4,604 Net loss before provision for income taxes $ ( 1,556,845 ) $ ( 835,145 ) Provision for income tax expense — — Net loss $ ( 1,556,845 ) $ ( 835,145 ) Less: Net loss attributable to non-controlling interests 1,196,346 778,797 Net loss attributable to MSP Recovery, Inc. $ ( 360,499 ) $ ( 56,348 ) Basic and diluted weighted average shares outstanding, Class A Common Stock 1,001,525 356,591 Basic and diluted net loss per share, Class A Common Stock $ ( 359.95 ) $ ( 158.02 ) 1. 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. Ruiz P.A., d/b/a MSP Recovery Law Firm (the “Law Firm”). See Note 14, Related Party Transactions , for further details. 2. 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 . 3. 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. See Note 14, Related Party Transactions , for further details. 4. 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. The accompanying notes are an integral part of these consolidated financial statements. 81 MSP RECOVERY, INC. and Subsidiaries Consolidated Statements of Cha nges in Equity Years Ended December 31, 2024, and 2023 Class A Common Stock Class V Stock (In thousands except shares) Shares Amount Shares Amount Additional Paid-in Capital Accumulated Deficit Non-Controlling Interests Total Equity Balance at December 31, 2022 119,369 $ — 5,036,768 $ — $ 137,082 $ ( 29,203 ) $ 2,077,586 $ 2,185,465 Conversion of Warrants 591 — — — 458 — ( 200 ) 258 Class A Issuances 466,433 — ( 71,472 ) — 220,401 — ( 151,850 ) 68,551 Net loss — — — — — ( 56,348 ) ( 778,797 ) ( 835,145 ) Balance at December 31, 2023 586,393 $ — 4,965,296 $ — $ 357,941 $ ( 85,551 ) $ 1,146,739 $ 1,419,129 Class A Issuances 1,598,565 — ( 2,592 ) — 188,694 — ( 179,387 ) 9,307 Net loss — — — — — ( 360,499 ) ( 1,196,346 ) ( 1,556,845 ) Balance at December 31, 2024 2,184,958 $ — 4,962,704 $ — $ 546,635 $ ( 446,050 ) $ ( 228,994 ) $ ( 128,409 ) The accompanying notes are an integral part of these consolidated financial statements. 82 MSP RECOVERY, INC. and Subsidiaries Consolidated Statements of C ash Flows Year Ended December 31, (In thousands) 2024 2023 Cash flows from operating activities: Net loss (1) $ ( 1,556,845 ) $ ( 835,145 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 277 263 Claims amortization expense 484,076 476,492 Paid-in-kind interest (1) 278,800 214,380 Impairment of intangible assets 752,697 — Allowance for credit losses — 5,000 Change in fair value of warrant liability ( 137,095 ) ( 4,785 ) Change in fair value of derivatives 161 181 Gain on sale of intangibles — ( 4,599 ) Share based compensation — 830 Mark-to-market gain on liability payable in stock ( 545 ) ( 4,431 ) Professional fees settled in shares 2,072 2,745 Non-cash lease expense 6 2 Change in operating assets and liabilities: Accounts receivable ( 78 ) 542 Prepaid expenses and other assets 7,261 18,999 Affiliate receivable (1) ( 17 ) 1,238 Affiliate payable (1) 1,842 — Accounts payable, commission payable and accrued liabilities 10,100 13,513 Interest Payable 141,167 74,752 Net cash used in operating activities ( 16,121 ) ( 40,023 ) Cash flows from investing activities: Purchases of property and equipment ( 525 ) ( 1,742 ) Purchases of intangible assets ( 2,200 ) ( 700 ) Proceeds from sale of intangible assets — 10,000 Net cash (used in) provided by investing activities ( 2,725 ) 7,558 Cash flows from financing activities: Proceeds from debt financing 23,500 39,000 Deferred financing costs — ( 250 ) Debt issuance costs — ( 708 ) Payments on related party loan (1) ( 382 ) — Proceeds on related party loan (1) — 4,950 Release of temporary equity — ( 11,420 ) Repayment of the Claims financing obligation ( 6,640 ) ( 2,555 ) Proceeds from the issuance of common stock 3,063 — Net cash provided by financing activities 19,541 29,017 Net increase (decrease) in cash 695 ( 3,448 ) Cash at beginning of year 11,633 15,081 Cash at end of period $ 12,328 $ 11,633 1. Balances include related party transactions. See Note 14, Related Party Transactions , f or further details. The accompanying notes are an integral part of these consolidated financial statements. 83 MSP RECOVERY, INC. and Subsidiaries Consolidated Statements of Cash Flows (continued) Year Ended December 31, (In thousands) 2024 2023 Supplemental disclosure of non-cash investing and financing activities: Sale of intangible assets $ — $ 30,987 Purchase of intangible asset financed by note payable $ — $ 250,000 Release of temporary equity $ — $ 1,807 Original issue discount $ 12,750 $ 20,167 Purchase of intangible asset through issuance of Class A common stock $ — $ 833 Issuance of shares in settlement of debt $ 3,063 $ — Payment of professional fees through issuance of Class A common stock $ 2,072 $ 4,745 Non-cash lease liabilities arising from obtaining right-of-use assets $ — $ 376 Payment of Cano Health payment in shares $ — $ 61,690 Warrant conversions on a cashless basis $ — $ 258 Cash paid during the period for: Interest $ 6,384 $ 37 The accompanying notes are an integral part of these consolidated financial statements. 84 Table of Contents Note 1. DESCRIPTION OF THE BUSINESS 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”). 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. The Company utilizes its proprietary internal data analytics platform to review health Claims assigned by secondary payers such as health plans, MSOs, providers of medical services, and independent physicians associations. This platform allows the Company to identify Claims cost recovery rights with potential recovery paths where Claims either should not have been paid by the secondary payers or should have been reimbursed by third-party entities. MSP Recovery is assigned recovery rights to Claims by secondary payers via CCRAs. Prior to executing a CCRA, MSP Recovery utilizes its proprietary internal data analytics platform to review the set of Claims of a prospective Assignor to identify Claims with probable recovery paths. MSP Recovery’s assets are these irrevocable broad assignments of health Claims recovery rights that are supported by federal and state laws and regulations. MSP Recovery’s offices are located in the U.S. and Puerto Rico. Warrants 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. New Warrants 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. 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. 85 Table of Contents 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. Fractional shares resulting from the 2024 Reverse Split were rounded up to the nearest whole number. The 2024 Reverse Split automatically and proportionately adjusted, based on the 1-for-25 split ratio, all issued and outstanding shares of the Company’s common stock, as well as the terms of warrants and other derivative securities outstanding at the time of the effectiveness of the 2024 Reverse Split. 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. 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 As an early-stage growth company, the Company has incurred substantial net losses since inception. As of December 31, 2024, the Company had unrestricted cash and cash equivalents totaling $ 12.3 million . 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, 86 Table of Contents 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 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: 1. 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 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. 2. 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 3, Material Agreements to the consolidated financial statements. On April 1, 2024, the Company entered into the MTA Amendment No. 3 and Amendment No. 2 to the Amended and Restated Security Agreement (“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; (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. John H. Ruiz and Frank C. Quesada, and the delivery of the resulting net cash proceeds thereof to VRM. 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. 3. 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. 4. 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 87 Table of Contents 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. Note 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation Basis of presentation These statements have been prepared pursuant to the rules and regulations of the SEC and in accordance with GAAP. In the opinion of management, the consolidated financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of operations, financial condition and cash flows for the periods presented herein. Prior to the Business Combination, the consolidated financial statements reflect Legacy MSP. All intercompany transactions and balances are eliminated from the consolidated financial statements. Principles of consolidation The Company consolidates all entities that it controls through a majority voting interest or otherwise and the accompanying financial statements include the accounts of the Company’s wholly owned subsidiaries and these entities for which the Company has a controlling interest in. The Company also consolidates all entities that it controls as the primary beneficiary of a variable interest entity (“VIE”). Under the VIE model, management first assesses whether the Company has a variable interest in an entity, which would include an equity interest. If the Company has a variable interest in an entity, management further assesses whether that entity is a VIE, and if so, whether the Company is the primary beneficiary under the VIE model. Generally, entities that are organized similar to a limited partnership, in which a general partner (or managing member) make the most relevant decisions that affect the entity’s economic performance, are considered to be VIEs which would require consolidation, unless the limited partners have substantive kickout or participating rights. Entities that do not qualify as VIEs are assessed for consolidation under the voting interest model. Under the VIE model, an entity is deemed to be the primary beneficiary of a VIE if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly affect the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. Management determines whether the Company is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. This analysis includes an evaluation of the Company’s control rights, as well as the economic interests that the Company holds in the VIE, including indirectly through related parties. As a result of the Business Combination, the Company consolidates MSP Recovery under the VIE model. Estimates and Assumptions The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from the Company’s estimates. Estimates are periodically reviewed considering changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Significant estimates and assumptions reflected in these consolidated financial statements include but are not limited to 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. Segments 88 Table of Contents 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. The Company’s CODM is its Chief Executive Officer . The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. In addition, all of the Company’s revenues and long-lived assets are attributable primarily to operations in the United States and Puerto Rico for all periods presented. Concentration of credit risk and Off-Balance Sheet Risk Cash and affiliate receivable are financial instruments that are potentially subject to concentrations of credit risk. See Note 14, Related Party Transactions , fo r disclosure of affiliate receivables. The Company’s cash and restricted cash are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. The Company has no other financial instruments with off-balance-sheet risk of loss. Cash and Cash Equivalents 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 . Fair Value Measurements The Company applies the provisions of ASC 820, Fair Value Measurements , for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company also applied the provisions of the subtopic to fair value measurements of non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis. The subtopic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The subtopic also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value framework requires the Company to categorize certain assets and liabilities into three levels, based upon the assumptions used to price those assets or liabilities. The three levels are defined as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Quoted prices for similar assets and liabilities in active markets or inputs that are observable. Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability. The Company has determined the estimated fair value of its financial instruments based on appropriate valuation methodologies; however, for Level 2 and Level 3 inputs considerable judgment is required to develop these estimates. Accordingly, these estimated fair values are not necessarily indicative of the amounts the Company could realize in a current market exchange. The estimated fair values can be materially affected by using different assumptions or methodologies. The methods and assumptions used in estimating the fair values of financial instruments are based on carrying values and future cash flows. As of December 31, 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. Equity Method Investments Equity investments that are not consolidated, but over which the Company exercises significant influence, are accounted for in accordance with ASC 323, “Investments—Equity Method and Joint Ventures” (“ASC 323”). Wh ether or not the Company exercises significant influence with respect to an investee company depends on an evaluation of several factors including, among others, representation on the investee company’s board of directors and ownership level. An entity is presumptively assumed to have significant influence in a corporation when it holds 20 % or more of the voting stock of the investee company, or at a lower level (e.g., 3 % to 5 %) for entities that track separate members capital accounts. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s consolidated balance sheets and statements of operations; however, the Company’s share of the earnings or losses of the investee company is reflected in the caption “Other income” in the consolidated statements of operations. The Company’s carrying value in equity method investee companies is not reflected in the Company’s consolidated balance sheets as of December 31, 2024 or 2023 as the carryin g value is de 89 Table of Contents minimis. When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company has guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. Property and Equipment Property and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Major expenditures for property and equipment and those that substantially increase useful lives are capitalized. When assets are sold or otherwise disposed of, costs and related accumulated depreciation are removed from the financial statements and any resulting gains or losses are included in general and administrative expenses within our consolidated statements of operations. The Company provides for depreciation and amortization on property and equipment using the straight-line method to allocate the cost of depreciable assets over their estimated lives as follows: Office and Computer Equipment 3 years Furniture and Fixtures 3 years Leasehold Improvements Lesser of lease term or estimated life Internal Use Software Internal-use software development costs incurred in the preliminary project stage are expensed as incurred; costs incurred in the application and development stage, which meet the capitalization criteria, are capitalized and amortized on a straight-line basis over the estimated useful life of the asset and costs incurred in the post-implementation/operations stage are expensed as incurred. The estimated useful life for development costs capitalized as of December 31, 2024 and 2023 is five years . Further, internal and external costs incurred in connection with upgrades or enhancements are also evaluated for capitalization. If the software upgrade results in an additional functionality, costs are capitalized; if the upgrade only extends the useful life, it is expensed as occurred. Intangible assets In certain of its CCRAs, the Company makes 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 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. As such these assets are held at cost, net of amortization. The Company evaluates these assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset group are less than the carrying value, a write-down would be recorded to reduce the related asset group to its estimated fair value. Derivative Instruments The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging . 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 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. 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 classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. 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 90 Table of Contents 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 As part of the Business Combination and described in Note 1, Description of the Business , the Company became the managing member of MSP Recovery, which is consolidated as the Company controls the operating decisions of MSP Recovery. The non-controlling interest relates to the Up-C Units that are convertible into Class A Common Stock of the Company at the discretion of the holder of the Up-C Unit. The Up-C Unit holders retained approximately 99.76 % of the economic ownership percentage of the Company as of the Closing Date. The non-controlling interest is classified as permanent equity within the consolidated balance sheet of the Company. As of December 31, 2024, based on the Class A common stock issuances during the period, the non-controlling interest of Class V shareholders was 69.43 % . Changes in the Company’s ownership interest in MSP Recovery, due to Class V shareholders converting their shares to Class A, are accounted for as equity transactions. Each issuance of the Company’s Class A Common Stock requires a corresponding issuance of MSP Recovery units to the Company. The issuance would result in a change in ownership and would reduce the balance of non-controlling interest and increase the balance of additional paid-in capital. Impairment of Long-Lived Assets The Company evaluates long-lived assets, such as property and equipment, including capitalized software costs, and finite-lived intangibles such as Claims recovery rights, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. 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 val ue. Claims Recovery The Company’s primary income-producing activities are associated with the pursuit and recovery of proceeds related to Claims recovery rights that the Company obtains through CCRAs, in which it becomes the owner of those rights. As a result, such income is not generated from the transfer of control of goods or services to customers, but from the proceeds realized from perfection of Claims recoveries from rights the Company holds outright. The Company may also generate future revenue by providing Claims recovery services to other entities outside of the Company. Claims recovery income The Company recognizes Claims recovery income based on a gain contingency model—that is, when the amounts are reasonably certain of collection. This typically occurs upon reaching a binding settlement or arbitration with the counterparty or when the legal proceedings, including any appellate process, are resolved. In some cases, the Company owes an additional payment to the original Assignor in connection with the realized value of the recovery right. Claims recovery income is recognized on a gross basis, as the Company is entitled to the full value of recovery proceeds, and makes a payment to the original Assignor similar to a royalty arrangement. Such payments to prior owners are recognized as cost of Claims recovery in the same period the Claims recovery income is recognized. When the Company becomes entitled to recovery proceeds from the settlement of a Claim recovery pursuit or proceeding 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 The guidance under ASC 606, Revenue from Contracts with Customers, provides that an entity should apply the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. The Company derives revenues from contracts with customers primarily from Claims recovery services arrangements (“Claims recovery services”). Claims recovery services include services to related parties or third parties to assist those entities with pursuit of Claims recovery rights. The Company has determined it has a single performance obligation for the series of daily activities that comprise Claims recovery services, which are recognized over time using a time-based progress measure and are typically based on (1) budgeted expenses for the current month with an adjustment for the variance between budget and actual expenses from the prior month or (2) on a contingent basis dependent on actual settlements or resolved litigation. Amounts estimated and recognized, but not yet fully settled or resolved as part of litigation are recognized as contract assets. There were no contract assets as of December 31, 2024 or 2023, as amounts associated with unresolved litigation were fully constrained. 91 Table of Contents Claims recovery services are generally paid in advance on a monthly basis. 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 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. The Company does not have material unfulfilled performance obligation balances for contracts with an original length greater than one year in any years presented. Additionally, the Company does not have material costs related to obtaining a Claims recovery service contract with amortization periods greater than one year for any period presented. The Company applies ASC 606 utilizing the following allowable exemptions or practical expedients: • Exemption to not disclose the unfulfilled performance obligation balance for contracts with an original length of one year or less. • Practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. • Election to present revenue net of sales taxes and other similar taxes, if any. • Practical expedient not requiring the entity to adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Transfers of Claims Cost Recovery Rights to Others In some cases, the Company has entered into arrangements to transfer CCRAs or rights to proceeds from CCRAs to other parties. The Company evaluates whether such transfers are sales of nonfinancial assets, sales of future revenues treated as debt, in-kind contributions to equity method investees, or other types of arrangements. When they are treated as sales of nonfinancial assets, the Company recognizes a gain on the sale when control transfers to the counterparty based on the difference between the fair value of consideration (including cash) received and the recognized carrying value of the CCRAs. In some cases, such sales include variable consideration in the form of payments that will be made only upon achievement of certain recoveries or based on a percentage of actual recoveries. The Company estimates and constrains the amounts that will ultimately be realized based on these variable payment terms and includes those amounts in the determination of gain or loss; the gain or loss is subsequently updated based on changes in those estimates. In other cases, such transfers are considered to be sales of future revenue that are debt-like in nature. These arrangements are recognized as debt based on the proceeds received, and are imputed an interest rate based on the expected timing and amount of payments to achieve contractual hurdles. These are subject to revisions of estimates of that timing and amount based on the contractual provisions and the Company’s assumptions from changes in facts and circumstances. Such changes are reflected through revision of the imputed interest rate on a cumulative catch-up basis. Cost of Claims Recoveries Costs of Claims recoveries consist of all directly attributable costs specifically associated with Claims processing activities, including contingent payments to Assignors (i.e., settlement expenses). Claims amortization expense Claims amortization expense includes amortization of CCRAs acquired as part of the business combination, shown as Intangibles, net in the consolidated balance sheets, and CCRA intangible assets for which the Company made up-front payments for Claims recovery rights. For further details on CCRAs see Note 6, Intangible Assets, Net . Income Taxes Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. As a result of the Business Combination, the Company became the sole managing member of MSP Recovery, which is treated as a partnership for U.S. federal, state and local income tax purposes. As a partnership, MSP Recovery is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by MSP Recovery is passed through to and included in the taxable income or loss of its partners, including MSP Recovery, Inc. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to the Company’s allocable share of income of MSP Recovery, LLC. 92 Table of Contents The Company’s deferred tax balances reflect the impact of temporary differences between the carrying amount of assets and liabilities and the Company’s tax basis. The balances are stated at the tax rates in effect when the temporary differences are expected to be recovered or settled. The Company reviewed the anticipated future realization of the tax benefit of the Company’s existing deferred tax assets and concluded that it is more likely than not that all of the deferred tax assets will not be realized in the future and recorded a full valuation allowance at December 31, 2024 and 2023. Comprehensive Income (Loss) The Company has no components of other comprehensive income (loss). As such, net loss equates to comprehensive income (loss) for all periods presented in this report. Recent Accounting Pronouncements New Accounting Pronouncements Recently Adopted In 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 ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . Among other requirements, this update adds specific disclosure requirements for income taxes, including: (1) disclosing specific categories in the rate reconciliation and (2) providing additional information for reconciling items that meet quantitative thresholds. The guidance is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. 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. Note 3. MATERIAL AGREEMENTS Virage 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 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 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”). Pursuant to the terms of the agreement with Virage, such amount is payable exclusively by any of the following means (or any combination thereof): (a) the Proceeds, net of expenses related to claim settlement, (b) a sale of certain reserved shares of Messrs. John H. 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. 93 Table of Contents 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. John H. 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. 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. John H. Ruiz and Frank C. Quesada would commence the sale of certain of their reserved shares, and deliver the resulting net cash proceeds thereof to VRM. 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; 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. This is referred to as the “Claims Purchase.” The purchase price for the Claims Purchase was funded by (i) a purchase money loan between Hazel, as a lender, and the Company, as a borrower, in the amount of $ 250 million (the “Purchase Money Loan”) and (ii) proceeds from the sale of certain, separate CCRAs in the Claims Sale (as defined below). Also, on March 29, 2023 , the Company sold a controlling interest in three legal entities whose sole assets are CCRAs to Hazel. The agreement provided that the Company and Hazel would share in the recovery proceeds therefrom, in accordance with an agreed waterfall after Hazel had realized the first $ 150 million in claims recoveries. This transaction is referred to as the “Claims Sale,” and together with the Claims Purchase, the “Claims Transactions.” As the Claims Transactions were negotiated together in contemplation of one another, they have been combined for accounting purposes. The Company analyzed the Claims Sale and determined that this transaction would be treated as the sale of in-substance nonfinancial assets, in exchange for noncash consideration in the form of the CCRAs from the Claims Purchase measured at fair value. The variable consideration related to future recoveries is fully constrained, because, at this time, it is not probable that any amounts will be owed above the $ 150 million recovery threshold that would trigger additional payments. The Company analyzed the Claims Purchase and determined it results in the initial consolidation of variable interest entities that are not businesses. The acquired CCRAs held by those entities are recognized at fair value. 94 Table of Contents The fair value of the assets sold in the Claims Sale was determined to be $ 45.5 million. The Company’s carrying value of those CCRAs surrendered was $ 40.9 million. Because there are no other observable prices for such transactions, the Company determined the fair value by reference to the purchase price for those CCRAs in a recent transaction. The fair value of the acquired CCRAs was determined to be $ 285.5 million, and the Company recognized the Purchase Money Loan recognized at $ 250 million, as any implicit discount or premium to current market rates at the time of issuance were insignificant. 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. 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”). 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. 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. Note 4. INVESTMENT IN EQUITY METHOD INVESTEES The Company holds four investments which are accounted for using the equity method : MAO-MSO Recovery II LLC Series PMPI (“Series PMPI”), MAO-MSO Recovery LLC, MAO-MSO Recovery II LLC (both collectively the “MAO-MSO entities”) and VRM MSP. Series PMPI is a series of MAO-MSO Recovery II LLC. The Company exercises significant influence over the operating and financial activities of Series PMPI, but does not exercise control of the entity. In accordance with Series PMPI’s operating agreement, the controlling member is entitled to a preferred return of 20 % per annum (the “Preferred Return”). Once the Preferred Return has been met, the controlling member is entitled to 50 % of Claim s recoveries by PMPI. The noncontrolling member is allocated 100 % of the costs of PMPI. Since the Preferred Return exceeds the total members’ equity of PMPI as of both December 31, 2024 and 2023, the value of the equity method investment in the consolidated balance sheet is $ 0 . The MAO-MSO entities are Delaware limited liability companies formed as master series entities whose central operations are to form other series legal entities that will hold and pursue Claims recovery rights. The MAO-MSO entities are not designed to hold or pursue Claims recoveries themselves. The Company holds a 50 % economic interest in both entities, and has significant influence through 95 Table of Contents its equity investment, but does not control either entity. As equity method investments, the Company recognizes its proportionate share of net earnings or losses as equity earnings in Other income. The activity of these entities has been insignificant for the years ended December 31, 2024 and 2023. Since the Company did not make a contribution to the MAO-MSO entities and the entities have recorded losses, the value of the equity method investment in the consolidated balance sheets is $ 0 as of both December 31, 2024 and 2023. Summary financial information for equity accounted investees, not adjusted for the percentage ownership of the Company is as follows: For the Year Ended December 31, (in thousands) 2024 2023 Revenue $ 354 $ ( 8 ) Amortization $ 1,167 $ 2,000 Other expenses $ 27 $ 30 Loss $ ( 840 ) $ ( 2,038 ) As of December 31, (in thousands) 2024 2023 Total Assets $ 928 $ 1,403 Total Liabilities $ 762 $ 399 In 2023, in connection with an amendment to the VRM MSP structure, the Company became a direct investor in VRM MSP, which controls MSP Recovery Claims, Series LLC, and recognizes this investment as an equity method investment. However, the Company previously consolidated and continues to consolidate the underlying Series of MSP Recovery Claims, Series LLC, which hold investments in CCRAs that the Company controls as primary beneficiary under the VIE model. As such, other than the Series, which were already consolidated, the investment in VRM MSP includes only administrative activities that are not otherwise consolidated, and any costs are allocable to the other investors. As a result, the Company has no significant equity earnings or exposure to losses or obligations to fund this investment. Note 5. PROPERTY AND EQUIPMENT, NET Property and equipment, net consist of the following: December 31, (in thousands) 2024 2023 Office and computer equipment $ 459 $ 434 Leasehold improvements 701 113 Internally developed software 5,588 5,789 Other software 67 67 Property and equipment, gross $ 6,815 $ 6,403 Less: accumulated depreciation and amortization of software ( 1,656 ) ( 1,492 ) Property and equipment, net $ 5,159 $ 4,911 For the years ended December 31, 2024 and 2023, depreciation expense and amortization expense was $ 0.3 million and $ 0.3 million , respectively. Note 6. 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 acquisitions of additional CCRAs from the Closing Date through 2024. Intangible assets, net consists of the following: December 31, (in thousands) 2024 2023 Intangible assets, gross $ 3,121,859 $ 3,872,356 Accumulated amortization ( 1,223,636 ) ( 739,560 ) Net $ 1,898,223 $ 3,132,796 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. 96 Table of Contents 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: (in thousands) CCRAs Amortization 2025 $ 474,556 2026 474,556 2027 474,556 2028 474,555 Total $ 1,898,223 The Company monitors intangible assets for potential impairment indicators, including, but not limited to, assumptions regarding the amount and timing of future collections derived from its CCRAs. The Company continues to pursue recoveries from various parties under rights held through its CCRAs; however, extended delays may result in future impairment of the Company’s 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. 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: (in thousands) Intangible Assets Balance as of December 31, 2022 $ 3,363,156 Acquisitions of CCRAs 287,029 Amortization expense ( 476,492 ) Sale of CCRAs ( 40,897 ) Balance as of December 31, 2023 $ 3,132,796 Acquisitions of CCRAs 2,200 Amortization expense ( 484,076 ) Impairment ( 752,697 ) Balance as of December 31, 2024 $ 1,898,223 Note 7. INCOME TAX The Company holds an economic interest in MSP Recovery, LLC and consolidates its financial position and results. The remaining ownership of MSP Recovery, LLC not held by the Company is considered a noncontrolling interest. MSP Recovery, LLC is treated as a partnership for income tax reporting and its members, including the Company, are liable for federal, state, and local income taxes based on their share of the LLC’s taxable income. 97 Table of Contents There was no provision for income tax for the years ended December 31, 2024 and 2023. A reconciliation of the United States statutory income tax rate to the Company’s effective tax rate for the year ended December 31, 2024 and 2023 is as follows for the years indicated: For the Year Ended December 31, 2024 2023 Federal Statutory rate 21.00 % 21.00 % Noncontrolling interests/effect of pass-through entities - 16.14 % - 19.59 % Valuation allowance - 8.47 % - 1.73 % Warrant liability 1.85 % 0.00 % State Taxes 1.76 % 0.37 % Other 0.00 % - 0.05 % Effective Income tax rate 0.00 % 0.00 % Details of the Company’s deferred tax assets and liabilities at December 31, 2024 and 2023 are as follows for the years indicated: As of December 31, in thousands 2024 2023 Deferred tax assets Net operating loss carryforward $ 4,613 $ 1,126 Investment in MSP Recovery, LLC 21,668 30,385 Start-up Costs 791 854 Transaction Costs 2,699 2,962 Interest Expense — 163j 16,863 5,065 Total deferred tax assets 46,634 40,392 Valuation Allowance ( 46,634 ) ( 40,392 ) Total deferred tax assets (liability) $ — $ — The Company has a deferred tax asset for the difference between the financial reporting and the tax basis of its investment in MSP Recovery, LLC. The deferred tax asset above does not consider the iterative impact of the TRA liability as the entire liability has not been recorded as of December 31, 2024 and 2023. As of December 31, 2024 the Company had $ 17.4 million and $ 17.4 million of U.S. gross federal and state net operating loss carryovers available to offset future taxable income, respectively. As of December 31, 2023, the Company had $ 4.3 million and $ 4.2 million of U.S. gross federal and state net operating loss carryovers available to offset future taxable income, respectively. In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. As of December 31, 2024 and 2023 , the Company has no t recorded any unrecognized tax benefits. The Company files income tax returns in the U.S. federal jurisdiction and Florida which remain open and subject to examination by the various taxing authorities. As of December 31, 2024 , the Company’s federal and state and local income tax years 2021 through 2023 remain open and are subject to examination. Note 8. VARIABLE INTEREST ENTITIES Investments in consolidated Variable Interest Entities The Company evaluates its ownership, contractual, and other interests in entities to determine if they are VIEs, if the Company has a variable interest in those entities, and the nature and extent of those interests. These evaluations are highly complex and involve management judgment and the use of estimates and assumptions based on available historical information, among other factors. Based on its evaluations, if the Company determines it is the primary beneficiary of such VIEs, it consolidates such entities into its financial statements. VIEs information below is presented on aggregate basis based on similar risk and reward characteristics and the Company’s involvement with the VIEs. The Company includes a number of entities that are determined to be VIEs and for which the common control group can direct the use of the entities’ assets and resources for other purposes. The Company only consolidates those VIEs for which the Company is the primary beneficiary. 98 Table of Contents The assets of the consolidated VIEs may only be used to settle obligations of these VIEs and to settle any investors’ ownership liquidation requests. There is no recourse to the Company for the consolidated VIEs’ liabilities. The assets of the consolidated VIEs are not available to the Company’s creditors. Total assets and liabilities included in its consolidated balance sheets for these VIEs were $ 1.4 billion and $ 0.4 million , respectively, at December 31, 2024 and $ 2.2 billion and $ 0.4 million , respectively, at December 31, 2023. The assets at December 31, 2024 and 2023 include the Intangible Assets, net included in the Series of $ 1.2 billion and $ 2.0 billion , respectively. Investments in unconsolidated Variable Interest Entities The Company is involved with VIEs in which it has investments in equity but does not consolidate because it does not have the power to direct the activities that most significantly impact their economic performance and thus is not considered the primary beneficiary of the entities. Those VIEs are reflected as equity method investments 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. Generally, MSP’s exposure is limited to its investment in those VIEs (see Note 4, Investment in Equity Method Investees ). For MAO-MSO Recovery II, LLC and Series PMPI, MSP may be exposed to providing additional recovery services at its own cost if recovery proceeds allocated to it are insufficient to recover the costs of those services. MSP does not have any other exposures or any obligation to provide additional funding. VRM MSP As discussed in Note 4, Investment in Equity Method Investees , the Company became a member of VRM MSP through the contribution of certain Series (holding certain CCRAs) by MSP Recovery into VRM MSP. The Company determined, based on analysis of the rights to cash flows from the Series and the related guaranty obligation, that the Company is the primary beneficiary of the Series entities, and therefore should consolidate as of the transaction date. The contribution is considered a common control transaction, as the Company controls and consolidated the Series before and after such contribution. The Company consolidates the Series held within VRM MSP, however does not consolidate VRM MSP itself. Refer to Note 4, Investment in Equity Method Investees , for additional information on this VRM MSP transaction. Note 9. CLAIMS FINANCING OBLIGATIONS AND NOTES PAYABLE 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 % . The Company is expected to repay these obligations from cash flows from claim recovery income or potentially for the renegotiated debt through class A common stock issuances. As of December 31, 2024, the minimum required payments on these agreements are $ 818.7 million . Certain of these agreements have priority of payment regarding any proceeds until full payment of the balance due is satisfied. The maturity of the commitments range from the date sufficient claims recoveries are received to cover the required return or in some cases by 2031. 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. (Eastern Time), on September 30, 2027 and may be exercised in whole or in part by Holder at any time prior to such date. The Holder can only sell a maximum of 15 % per month of the Class A Shares obtained through the Warrant. In exchange for the Company issuing the Warrant, the amounts owed to the Holder pursuant to CPIA are amended to equal $ 80 million. 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 99 Table of Contents 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. Ruiz and Frank C. Quesada (the “Founders”). 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 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”). 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. 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. Purchase Money Loan On March 29, 2023, the Company acquired a controlling interest in nine legal entities, whose sole assets are CCRAs, from Hazel. This is referred to as the “Claims Purchase.” The purchase price for the Claims Purchase was funded by (i) a purchase money loan between Hazel, as a lender, and the Company, as a borrower, in the amount of $ 250.0 million (the “Purchase Money Loan”) as discussed in Note 3, Material Agreements , and (ii) proceeds from the sale of certain, separate CCRAs in the Claims Sale (as defined below). Also, on March 29, 2023 , the Company sold a controlling interest in three legal entities whose sole assets are CCRAs to Hazel. The agreement provided that the Company and Hazel would share in the recovery proceeds therefrom, in accordance with an agreed waterfall after Hazel had realized the first $ 150 million in claims recoveries. This transaction is referred to as the “Claims Sale,” and together with the Claims Purchase, the “Claims Transactions.” Amounts borrowed and obligations under the Purchase Money Loan and the Working Capital Credit Facility 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 Second Amended and Restated First Lien Credit Agreement, and in order to secure those additional advances of Term Loan B beginning in January 2024, the following was provided as additional collateral: (i) a pledge of proceeds from certain Claims in the Company’s Claims portfolio, up to $ 14 million; (ii) 100 Table of Contents a pledge of the equity interests in an Affiliate of Messrs. John H. Ruiz and Frank C. Quesada; and (iii) a personal guaranty by Messrs. John H. Ruiz and Frank C. Quesada, as primary obligors, guaranteeing those additional advances of Term Loan B beginning in January 2024. On December 22, 2023, our Board approved the Company's payment of certain costs and fees (including legal fees) on behalf of John H. Ruiz and Frank C. Quesada, associated with a mortgage granted in connection with said guaranty, totaling $ 0.1 million . On April 1, 2025, in connection with the increased funding under the Operational Collection Floor, the pledge and personal guaranty in (ii) and (iii) above was increased by $ 3.25 million to $ 17.25 million. Loans under the Working Capital Credit Facility accrue interest at a Term Secured Overnight Financing Rate for 12-month interest period, plus an applicable margin of 10 % per annum. Accrued interest on the Working Capital Credit Facility is payable in kind and are capitalized. The Working Capital Credit Facility has a stated maturity date of March 31, 2026 , and HPH may extend for up to one year in its sole discretion. The Purchase Money Loan accrues interest at a rate of 20 % per annum, payable in kind or in cash at the Company’s discretion. The Purchase Money Loan has a maturity date of March 31, 2026 , extendable up to one year in Hazel’s sole discretion. The Company is permitted to prepay the loans under the Working Capital Credit Facility from time to time without prepayment premium. Prepayment of the Purchase Money Loan will be permitted after the prepayment or repayment of loans under the Working Capital Credit Facility, and such prepayment of the Purchase Money Loan may be subject to prepayment penalty, as applicable. Pursuant to the Purchase Money Loan and the Working Capital Credit Facility, the Company entered into a collateral administrative agreement between the Company and HPH, which sets forth certain arrangements between the Company and HPH in relation to the management of the litigation of certain Claims owned by the Company, the proceeds of which are due to the Company, and were pledged to Hazel and HPH to secure the Purchase Money Loan and the Working Capital Credit Facility, respectively. The Purchase Money Loan and the Working Capital Credit Facility contain certain representations, warranties, and covenants of the Company and its subsidiaries, including restrictions on debt incurrence, liens, investments, affiliate transactions, distributions and dividends, fundamental changes, certain debt prepayments, and Claim settlement. Nomura Promissory Note On May 27, 2022, the Company issued an unsecured promissory note to Nomura (as amended on April 12, 2023, November 13, 2023, and March 26, 2024, the “Nomura Note”). The Nomura Note carries a principal amount of approximately $ 30.0 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. The Nomura Note is payable in kind or in cash, at the Company’s discretion, accrues interest at 16 % per annum, and matures on September 30, 2025. Upon two days prior written notice to Nomura, the Company may prepay all or any portion of the then outstanding principal amount under the Nomura Note together with all accrued and unpaid interest thereon. The balance of the unsecured Nomura Note and related interest are included within Claims financing obligations and notes payable in the consolidated balance sheet. The Nomura Note became current on September 30, 2024, and the Company does not currently have available liquidity to satisfy said obligation. Under the Nomura 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 a letter agreement dated November 15, 2024, Nomura agreed to forego payments of up to $ 4.0 million due under the Nomura Note from proceeds from the sale of Class A Common Stock to Yorkville pursuant to the Yorkville SEPA until March 31, 2025. Yorkville Standby Equity Purchase Agreement On November 14, 2023, the Company entered into a standby equity purchase agreement (the “Yorkville SEPA”) with YA II PN, Ltd., a Cayman Island exempted company (“Yorkville”), pursuant to which Yorkville committed to purchase up to $ 250.0 million in shares of Class A Common Stock, subject to certain limitations and conditions set forth therein, during the term thereof. Sales of Class A Common Stock 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 Class A 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. Pursuant to the terms and conditions set forth in the Yorkville SEPA, the Company has 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 Class A 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 Class A Common Stock purchased pursuant to an Advance Notice will be purchased at a price equal to: (i) 98 % of the VWAP of the shares of Class A 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 Class A Common Stock during the three consecutive trading 101 Table of Contents 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. In connection with the Yorkville SEPA, and subject to the conditions set forth therein, Yorkville agreed to advance to the Company in the form of convertible promissory notes (the “Yorkville Convertible Notes”) an aggregate principal amount of $ 15.0 million. In 2023, the Company issued two Convertible Notes to Yorkville for a combined principal amount of $ 10 million, resulting in net proceeds of $ 9.48 million, and in 2024 the Company 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. Pursuant to the Yorkville Convertible Notes, Yorkville has the option, subject to certain limitations, of exchanging on one or more occasions all or part of the then outstanding balance under a given note for shares of our Class A Common Stock at a conversion price equal to the lower of: (i) a fixed price equaling 120 % of VWAP the day prior to the date of the closing of each tranche (the “Fixed Price”), or (ii) a variable price equaling 95 % of the lowest daily VWAP during the seven consecutive trading days immediately preceding the exchange (the “Variable Price”), but in no event may the variable price be lower than $ 3.75 per share (the “Floor Price”). With respect to the initial Convertible Note issued on November 15, 2023, the Fixed Price equals $ 200.5625 per share, with respect to the second Convertible Note issued on December 11, 2023, the Fixed Price equals $ 92.84 per share, and with respect to the third Convertible Note issued on April 8, 2024, the Fixed Price equals $ 37.625 per share. As required pursuant to the Second Amended and Restated Nomura Promissory Note, 50 % of the aggregate proceeds under the Yorkville SEPA will be used to repay amounts outstanding under the Nomura Note (first towards accrued and unpaid interest, if any, then towards principal) and the remaining 50 % of such proceeds will be used to repay amounts due under the Yorkville Convertible Notes, if any, or be paid to the Company after the Yorkville Convertible Notes are fully repaid. Pursuant to a letter agreement dated November 15, 2024, Nomura agreed to forego payments of up to $ 4.0 million due under the Nomura Note from proceeds from the sale of Class A Common Stock to Yorkville pursuant to the Yorkville SEPA until March 31, 2025. 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 Yorkville Convertible Notes are fully satisfied. Upon the occurrence and during the continuation of an event of default, the Yorkville 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) termination of quotation or listing of the Class A Common Stock on any primary market for a period of 10 consecutive trading days (the Company is currently quoted and listed for trading on Nasdaq) and (ii) failure to timely file any periodic report with the SEC 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 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, 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 $ 1.5 million plus a 5.0 % premium and accrued and unpaid interest. On December 6, 2024, stockholders holding at least a majority of our outstanding voting capital stock approved by written consent as required by Nasdaq Rule 5635(d), the issuance of shares of common stock of the Company in excess of the Exchange Cap set forth in the Yorkville SEPA. Effective January 8, 2025, the Exchange Cap was effectively lifted, allowing the Company to issue shares to Yorkville pursuant to the Yorkville SEPA and the Yorkville Convertible Notes in excess of the Exchange Cap. In addition, on April 10, 2025, Yorkville agreed to waive Volume Threshold and Maximum Advance Amount limitations set forth in the Yorkville SEPA. Yorkville, at its discretion and providing that there is a balance remaining outstanding under the Yorkville Convertible Notes, may deliver a notice under the Yorkville SEPA requiring the issuance and sale of shares of Class A Common Stock to Yorkville at the Conversion Price in consideration of an offset of the Yorkville Convertible Notes (“Investor Notice”). Yorkville, in its sole discretion, may select the amount of any Investor Notice, provided that the number of shares issued does not cause Yorkville to exceed the 9.99 % ownership limitation or the amount of shares of Class A Common Stock that are registered. As a result of an Investor Notice, the amounts payable under the Yorkville Convertible Notes will be offset by such amount subject to each Investor Notice. The Company will control the timing and amount of any sales of shares of Class A Common Stock to Yorkville, except with respect to the conversion of the Yorkville Convertible Notes. Actual sales of shares of Class A 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 Class A Common Stock, and determinations by the Company as to the appropriate sources of funding for our business and operations. 102 Table of Contents 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 Class A Common Stock equal to $ 250.0 million. The Company has the right to terminate the Yorkville SEPA at no cost or penalty upon five trading days’ prior written notice to Yorkville, provided that there are no outstanding Advance Notices for which shares of Class A Common Stock need to be issued, and the Company has paid all amounts owed to Yorkville pursuant to the Yorkville 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 Class A 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. 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 Yorkville SEPA solely due to the Ownership Limitation, Yorkville committed to fund an additional advance in the principal amount of $ 13.0 million on the same terms and conditions as the Yorkville Convertible Notes pursuant to the Yorkville SEPA. During 2024, the Company sold 1,108,071 shares of Class A Common Stock to Yorkville, respectively, pursuant to investor and/or advance notices delivered under the Yorkville SEPA at prices between $ 1.78 and $ 21.09 per share. The proceeds therefrom were used to: (i) reduce amounts owed under Yorkville Note #1 by $ 2.8 million and $ 0.2 million of principal and interest, respectively for fiscal year 2024, (ii) $ 0.5 million to fund operations of the Company, and (iii) $ 2.6 million of payment to reduce amounts owed under the Nomura Note for fiscal year 2024. 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. Note 10. WARRANT LIABILITY When the Company issues warrants, it evaluates the proper balance sheet classification of the warrant to determine whether it should be classified as equity or as a derivative liability on the consolidated balance sheets. In accordance with ASC 815-40, “ Derivatives and Hedging-Contracts in the Entity’s Own Equity ” (“ASC 815-40”), the Company classifies a warrant as equity so long as it is “indexed to the Company’s equity” and several specific conditions for equity classification are met. A warrant is not considered indexed to the Company’s equity, in general, when it contains certain types of exercise contingencies or adjustments to the exercise price. If a warrant is not indexed to the Company’s own common stock or it has net cash settlement that results in the warrants to be accounted for under ASC 480, “ Distinguishing Liabilities from Equity ”, or ASC 815-40, it is classified as a derivative liability which is carried on the consolidated balance sheet at fair value with any changes in its fair value recognized currently in the consolidated statement of operations. On May 17, 2022, the Company and CF Principal Investments LLC (“CF”) entered into an agreement for an OTC Equity Prepaid Forward Transaction (the “Prepaid Forward”). Pursuant to the terms of the Prepaid Forward, CF agreed to, among other things, transfer to MSP for cancellation any New Warrants received as a result of being the stockholder of record of any shares of Class A Common Stock as of the close of business on the closing date of the Business Combination, in connection with the New Warrant Dividend, On January 12, 2024, CF transferred 133,291,502 New Warrants to the Company, which were canceled upon receipt. As of December 31, 2024 , the Company had recognized a warrant liability for the following securities which are convertible into, or allow the purchase of, our Class A Common Stock, including: (i) 2,950,157 Public Warrants outstanding, each exercisable to purchase 1/625 th of one share of our Class A Common Stock (but only exercisable in lots of 625 to purchase whole shares); (ii) the CPIA Warrant, exercisable to purchase 106,667 shares of Class A Common Stock at a purchase price of $ 0.0625 per share; (iii) the VRM Warrants, of which 10 are exercisable to purchase a total of 9,751,339 shares of Class A Common Stock at a purchase price of $ 0.0025 per share; and (iv) warrants to Virage Recovery Participation, LP, exercisable to purchase 100,000 shares of Class A Common Stock at a purchase price of $ 0.0025 per share. The warrant liability includes the mark-to-market fair value of the warrants discussed above. The fair value of the warrant liability is derived considering the potential shares issuable for each warrant and using the price of the Company’s Class A Common Stock as of the most recent balance sheet date, which is a quoted price in active markets. 103 Table of Contents The table below presents a roll-forward of the warrant liability from December 31, 2023 to December 31, 2024: (in thousands) Warrant Liability Balance at December 31, 2023 $ ( 268 ) Issuance of warrants ( 159,200 ) Change in fair value of outstanding warrants 137,095 Balance at December 31, 2024 $ ( 22,373 ) A summary of activity of the shares underlying the warrants from December 31, 2022 through December 31, 2024: Weighted Average # of Shares Exercise Price Balance at December 31, 2022 111,978 $ 0.0625 Converted ( 590 ) $ 0.0625 Balance at December 31, 2023 111,388 $ 0.0625 Issued 9,851,339 $ 0.0025 Balance at December 31, 2024 9,962,727 $ 0.0032 Refer to Note 1, Description of the Business , for discussion of the terms of the Public Warrants and New Warrants, to Note 3, Material Agreements , for discussion of the terms of the VRM Warrants, and to Note 9, Claims Financing Obligations and Notes Payable for discussion of the terms of the CPIA Warrant. Note 11. NONCONTROLLING INTEREST The non-controlling interest balance primarily represents the Up-C Units of the Company held by the Members. The following table summarizes the ownership of Units in the Company as of December 31, 2024: Common Stock Ownership Percentage Ownership of Class A Common Stock 2,184,958 30.6 % Ownership of Class V Common Stock 4,962,704 69.4 % Balance at end of period 7,147,662 100.0 % The non-controlling interest holders have the right to exchange Up-C Units, at the Company’s option, for (i) cash or (ii) one share of Class A Common Stock, subject to the provisions set forth in the LLC Agreement. As such, future exchanges of Up-C Units by non-controlling interest holders will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in-capital or retained earnings when the Company has positive or negative net assets, respectively. As of December 31, 2024 , 0.1 million Up-C Units had been exchanged into Class A shares. In addition to the non-controlling interest related to Up-C Units, the Company also has non-controlling interests related to the Series as noted in Note 8, Variable Interest Entities , and MAO-MSO Recovery LLC Series FHCP (“FHCP”), which is a non-wholly owned subsidiary of MSP Recovery, LLC. In accordance with FHCP’s operating agreement, the noncontrolling member is entitled to a preferred return of 20 % per annum (the “Preferred Return”). Once the Preferred Return has b een met, the noncontrolling member is entitled to 80 % of Claims recoveries by FHCP. The controlling member is allocated 100 % of the costs of FHCP. Since the Preferred Return exceeds the total members’ equity of FHCP as of both December 31, 2024 and 2023 , the non-controlling interest also includes $ 4.4 million representing the entire members’ equity of FHCP. Note 12. COMMITMENTS AND CONTINGENCIES The Company is subject to certain legal proceedings, claims, investigations, and administrative proceedings in the ordinary course of its business. The Company records a provision for a liability when it is both probable that the liability has been incurred and the amount of the liability can be reasonably estimated. These provisions, if any, are reviewed and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Depending on the nature and timing of any such proceedings that may arise, an unfavorable resolution of a matter could materially affect the Company’s future results of operations, cash flows or financial position in a particular period. The Company pursues claims recoveries through settlement, arbitration and legal proceedings. The accounting policy for these activities is discussed under Claims recovery income in Note 2, Basis of Presentation and Summary of Significant Accounting Policies . A significant majority of the Company’s expected recoveries arise from Claims brought pursuant to the private cause of action under the Medicare Secondary Payer Act (“MSP Act”). This law allows the Company to pursue recoveries against primary payers for reimbursement of medical expenses that the Company’s Assignors paid for when primary payers (i.e., liability insurers) were responsible for payment. Investigations 104 Table of Contents On August 11, 2022, the Securities and Exchange Commission (the “SEC”) initiated an investigation of the Company, and requested documents relating to, among other matters, the Business Combination transaction with Lionheart Acquisition Corporation II consummated on May 23, 2022, certain historical and projected financial results, investor agreements, and data analytic platforms and Algorithms. The Company received a subpoena dated March 1, 2023 from the SEC regarding the aforementioned subject matter, and subsequently received a subpoena on May 10, 2023, in connection with the investigation relating to, among other matters, the Company’s projections and the accounting and valuation of certain assets that were the basis for the Company’s determination that its quarterly financial statements for the periods ended June 30, 2022 and September 30, 2022 require restatements and should no longer be relied upon, as disclosed in the Company’s Form 8-K on April 14, 2023. On August 16, 2023, the Company received an additional subpoena from the SEC regarding certain funding sources of the Company prior to the Business Combination, various statements and disclosures by the Company in connection with, and following, the Business Combination, certain historical and projected financial results, and data analytic platforms and Algorithms used to identify potential recoveries. In addition, on March 10, 2023, the Company received a subpoena from the U.S. Attorney’s Office (“USAO”) in connection with a grand jury investigation in the U.S. District Court for the Southern District of Florida requesting certain information concerning the Company, which subpoena requests documents relating to, among other matters, the Company’s proprietary Algorithms and other software used to identify potentially recoverable claims, the drop in the price of the Company’s common stock following the Business Combination, and certain marketing materials and investment agreements presented to potential investors. On July 18, 2024, the Company received an additional subpoena from the USAO, requesting documents related to a Company press release. To the best of the Company’s knowledge, the Department of Justice has not issued any target letters to anyone associated with the Company as a result of this investigation. (The United States Attorney’s Manual states that a “target” is a person as to whom the prosecutor or the grand jury has substantial evidence linking him or her to the commission of a crime and who, in the judgment of the prosecutor, is a putative defendant.) The Company has cooperated, and will continue to cooperate, fully with these inquiries. On April 16, 2023, a special committee of the Board of Directors was formed, which along with external advisors retained thereby, reviewed matters related to the preparation and filing of the 2022 Annual Report on Form 10-K and the subject matter of information requests related to the foregoing subpoenas received prior to June 2023. Based on that review, and the nature of the documents requested in the subsequent subpoena, the Company believes that the investigations will be resolved without any material developments; however, there can be no assurance as to the outcome or future direction thereof. Cano Health, LLC On July 7, 2023, the Company issued 318,401 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 elected to pay in stock, of which (i) 129,033 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) 189,368 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. On August 10, 2023, the Company sued Cano in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida for declaratory relief and anticipatory breach of the Cano CCRA, Cano Purchase Agreement, and a Service Agreement (collectively, the “Cano Agreements”) between the parties. On the same day, Cano sued the Company in the same court, alleging fraud in the inducement, breach of contract, tortious interference, and unjust enrichment relating to the Cano Agreements. The Company has a $ 5.0 million receivable outstanding from Cano; however, due to Cano’s Quarterly Report on Form 10-Q filings for the periods ending June 30, 2023 and September 30, 2023, which include a substantial doubt about Cano’s ability to continue as a going concern, and Cano’s subsequent filing of voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code on February 4, 2024, the Company established a reserve for the balance due under such receivable during 2023. These matters were automatically stayed as a result of Cano’s bankruptcy filing. As of June 28, 2024, the Debtors’ Plan has been confirmed and declared effective. The automatic stay of litigation has been lifted and the parties anticipate the ongoing litigation to re-commence under a new scheduling order. On January 4, 2024, Cano sued Simply Healthcare Plans, Inc. (“Simply”) and the Company and affiliated entities seeking a declaratory judgment to determine whether the Cano Purchase Agreement should be rescinded, and whether Cano or the Company have standing to recover on claims assigned to the Company against Simply under the Cano Purchase Agreement. Cano also seeks damages from Simply relating to the claims assigned to the Company under the Cano Purchase Agreement. Effective March 4, 2025, Cano voluntarily dismissed their case against Simply without prejudice. The Company intends to vigorously assert its position in all Cano related litigation. 105 Table of Contents Note 13. FAIR VALUE MEASUREMENTS The Company has no assets that are measured at fair value on a recurring basis as of December 31, 2024 and 2023 . Liabilities measured at fair value on a recurring basis as of December 31, 2024 and 2023, are summarized as follows: (in thousands) Level December 31, 2024 December 31, 2023 Derivative liability 3 $ 211 $ 37 Warrant liability 2 22,373 268 Total $ 22,584 $ 305 The following table details the roll-forward of the Level 3 liabilities during the year ended December 31, 2024: (in thousands) Derivative liability Balance at December 31, 2023 $ 37 Change in fair value of derivative liability 161 Issuance of note 13 Balance at December 31, 2024 $ 211 As of December 31, 2024 , the beneficial conversion feature within the Yorkville SEPA is treated as an embedded derivative liability and changes in the fair value were recognized in the change in fair value of warrant and derivative liabilities in the consolidated statements of operations. The embedded derivative liability was valued at each of the respective issuance dates and at year-end using the following market-based inputs: December 31, 2024 December 31, 2023 Price of Common Stock $ 2.27 $ 56.75 Volatility 60 % 40 % Market Risk Spread 9.56 % 12.37 % Expected Term (in years) 0.75 1.25 Note 14. RELATED PARTY TRANSACTIONS Loans from Related Parties During the year ended December 31, 2022, the Company issued an unsecured promissory note in an aggregate principal amount of $ 112.8 million (the “Promissory Note”) to John H. Ruiz and Frank C. Quesada, the Company’s Chief Executive Officer and director and Chief Legal Officer and director, respectively (collectively, the “MSP Principals”), in exchange for the MSP Principals agreeing to provide cash to pay transaction costs related to the Merger, pay down affiliate payable balances, and provide operating cash to the Company. In addition to the amounts in the Promissory Note, at the merger date with LCAP, the MSP Principals contributed $ 13.0 million through funds that had been loaned to VRM MSP to cover related service fees. The Promissory Note as well as the amount contributed at the merger date bears interest at an annual rate of 4 %, payable in kind, and will mature on the four-year anniversary of the issuance. The Promissory Note is payable by the Company at any time, without prepayment penalties, fees, or other expenses. The Company recorded $ 5.0 million of interest expense related to the Promissory Note for each of the years ended December 31, 2024 and 2023. A portion of the proceeds under the Promissory Note in an amount equal to $ 36.5 million was advanced to the Law Firm, an affiliate of certain Members, for certain operating expenses pursuant to a legal services agreement. During the three months ended September 30, 2024, the Company amortized all remaining advances to the Law Firm. This amount is reflected in prepaid expenses and other current assets within the consolidated balance sheets and had a balance of $ 0 and $ 7.7 million as of December 31, 2024 and 2023, respectively. The advances of Law Firm expenses are reflected in Professional fees - legal within the consolidated statement of operations. The advances are expensed as incurred, as the Company does not have recourse to any amounts incurred should Law Firm fail to secure recoveries, although it does have recourse to any amounts advanced that have not been incurred as an expense. Under the legal services agreement, Company shall advance certain of Law Firm’s monthly expenses, including payroll and overhead; however, should Law Firm earn fees under the legal service agreements (the “Existing LSAs”) noted below, net of pre-existing obligations including payments to co-counsel sufficient to cover its monthly expenses, Company is entitled to reimbursement of the advance of said monthly expenses. Further, to the extent that Law Firm earns a surplus of fees in excess of its monthly expenses, said surplus shall be used to reimburse past amounts of Law Firm’s monthly expenses that Company advanced. For the years ended December 31, 2024 and 2023, approximately $ 7.7 million and $ 19.2 million , respectively, of the $ 36.5 million advanced by the Company to the Law Firm has been incurred for expenses pursuant to the legal services agreement. Founders’ Pledge - Claims Proceeds Investment Agreement 106 Table of Contents As disclosed in Note 9, Claims Financing Obligations and Notes Payable to the consolidated financial statements, the Founders pledged 80 thousand shares to secure payment of the original principal amount of the CPIA. Legal Services – Law Firm Certain Company entities have previously entered into the Existing LSAs with the Law Firm, an affiliate of certain Members, for the recovery of Claims. Pursuant to the terms of the Existing LSAs, the Law Firm provides the Company with investigation, case management, research and legal services in the pursuit of recovery of Claims in exchange for a portion of the recovered proceeds relating to such Claims. The Existing LSAs also provide that the Law Firm serves as lead counsel or co-lead counsel for any litigation relating to such Claims. As of December 31, 2024, the Company has a payable to the Law Firm amounting to $ 1.8 million . For the years ended December 31, 2024 and 2023, $ 7.7 million and $ 19.2 million , respectively, was included in Professional fees - legal for expenses related to the Law Firm in the consolidated statements of operations. In addition, during fiscal year 2023 , the Company issued an unsecured promissory note in an aggregate principal amount of $ 4.95 million to the Law Firm, to provide general operational funding (the “Law Firm Loan”). The aggregate unpaid principal amount of this promissory note is due 24 months from the date of the last advance from the Second Amended and Restated First Lien Credit Agreement is made. This promissory note does not carry interest and is payable by the Company at any time, without prepayment penalties, fees, or other expenses. On March 4, 2024, the Board authorized the partial repayment of the Law Firm Loan in the amount of $ 0.4 million, which funds were to be used for the express purpose of paying property taxes on real property owned and pledged by the MSP Principals to HPH as collateral in connection with the Working Capital Credit Facility. For the years ended December 31, 2024 and 2023, $ 3.4 million and $ 0.3 million , respectively, were included in cost of Claims recoveries for expenses related to the Law Firm in the consolidated statements of operations. The Law Firm may also collect and/or hold cash on behalf of the Company in the ordinary course of business. As of December 31, 2024 and 2023, $ 0.8 million and $ 0.8 million , respectively, was due from the Law Firm and included in the consolidated balance sheets in Affiliate Receivable. In addition, the Company rents office space from the Law Firm. MSP Recovery Aviation, LLC The Company may make payments related to operational expenses on behalf of its affiliate, MSP Recovery Aviation, LLC (“MSP Aviation”). The Company has made payments in the periods of the financial statements only related to specifically billed flights. As of both December 31, 2024 and 2023, $ 0.2 million was due from MSP Aviation and included in the consolidated balance sheets in Affiliate Receivable. For the years ended December 31, 2024 and 2023, $ 0.2 million and $ 0.2 million , respectively, was included in General and Administrative expenses related to MSP Aviation in the consolidated statements of operations. Funds Held for Other Entities The Company may collect and/or hold cash on behalf of its affiliates in the ordinary course of business. As of both December 31, 2024 and 2023, $ 19.8 million was due to affiliates of the Company and included in the consolidated balance sheets in Affiliate Payable. These amounts were primarily due to Series MRCS, and will be repaid either through excess cash flows from operations or other financing. During the year ended December 31, 2021, the Company also entered into a note payable with Series MRCS as outlined in Note 6 , Intangible Assets, Net . As of both December 31, 2024 and 2023, the balance of the note payable was $ 0.5 million and included in the consolidated balance sheets in Claims financing obligation and notes payable. As of December 31, 2024 and 2023, there were additional receivables from other affiliates of $ 0.2 million and $ 0.2 million , respectively. These were included in the consolidated balance sheets in Affiliate Receivable. VRM MSP The Company concluded that VRM MSP is a related party due to ownership interests in the entity held by the MSP Recovery and Series MRCS. For the year ended December 31, 2024, the Company recorded $ 188.0 million and $ 124.7 million for interest expense related to the VRM Full Return and Virage MTA Amendment, and for the year ended December 31, 2023, the Company recorded $ 156.2 million and $ 65.3 million for interest expense related to the VRM Full Return and Virage MTA Amendment, respectively. Virage As discussed in Note 3, Material Agreements to the consolidated financial statements, the Initial Virage Warrant, as amended, was issued effective January 1, 2024. 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: (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) the issuance of subsequent Monthly Virage Warrants. 107 Table of Contents Refer to Note 3, Material Agreements to the consolidated financial statements, for the listing of warrants issued during the year ended December 31, 2024. Pursuant to purchase agreements dated March 4, 2024 and August 22, 2024, and as disclosed on Form 4 filings by Mr. John H. Ruiz, the Company’s Chief Executive Officer, the Company issued 17,544 and 14,425 , respectively, of unregistered shares of Class A Common Stock to Virage in satisfaction of certain obligations of the Company, which shares were subsequently purchased from Virage by Mr. Ruiz. Founder’s Up-C Units – VRM Full Return As disclosed in Note 3, Material Agreements to the consolidated financial statements, in connection with the MTA Amendment, the Company agreed to pay Virage an amount equal to the contributions by Virage to VRM MSP plus an annual rate of return of 20 % (the “VRM Full Return”). Pursuant to the terms of the agreement with Virage, such amount may be payable by a sale of certain reserved shares of Messrs. John H. Ruiz and Frank C. Quesada, and the delivery of the resulting net cash proceeds thereof to VRM. Working Capital Credit Facility Collateral Pursuant to the Second Amended and Restated First Lien Credit Agreement, and in order to secure those additional advances of Term Loan B beginning in January 2024, the Company approved for Messrs. John H. Ruiz and Frank C. Quesada to provide, as additional collateral, the following: (i) a pledge of the equity interests in an Affiliate of Messrs. John H. Ruiz and Frank C. Quesada; (ii) a mortgage on real property owned by an Affiliate of Messrs. John H. Ruiz and Frank C. Quesada, and (iii) a personal guaranty by Messrs. John H. Ruiz and Frank C. Quesada, as primary obligors, guaranteeing those additional advances of Term Loan B beginning in January 2024. On December 22, 2023, our Board approved the Company's payment of certain costs and fees (including legal fees) on behalf of John H. Ruiz and Frank C. Quesada, associated with the mortgage granted in connection with said guaranty, totaling $ 0.1 million. On March 4, 2024, the Board authorized the partial repayment of the Law Firm Loan in the amount of $ 0.4 million, which funds were to be used for the express purpose of paying property taxes on real property owned and pledged by the MSP Principals to HPH as collateral in connection with the Working Capital Credit Facility. Note 15. SEGMENT INFORMATION Operating segments are defined as components of an entity for which separate financial information is available and regularly reviewed by the chief operating decision maker (“CODM”). The Company manages its operations, as described in Note 1, Description of the Business , as a single reportable segment for the purposes of assessing performance and making decisions. The accounting policies of the reportable segment are those included in this Note 2, Basis of Presentation and Summary of Significant Accounting Policies . The Company’s CODM is its Chief Executive Officer . The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis, using the operating expenses and interest expense, as presented on the face of the income statement, for purposes of making operating decisions, allocating resources, and evaluating financial performance. The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets. In addition, all of the Company’s revenues and long-lived assets are attributable primarily to operations in the United States and Puerto Rico for all periods presented. Significant expenses regularly provided to the CODM are Claims Amortization Expense, Interest Expense, General & Administrative, and Professional Fees as reported on the face of the income statement. The table below presents the Company’s significant segment expenses and a reconciliation of Significant Segment expenses and other segment items to Net Loss, the CODM’s primary measure of performance: Year Ended December 31, (In thousands) 2024 2023 Total Revenues $ 18,249 $ 7,705 Less: Significant Expenses: Claims amortization expense ( 484,076 ) ( 476,492 ) General and administrative ( 22,231 ) ( 26,508 ) Professional fees ( 14,131 ) ( 22,766 ) Professional fees – legal ( 9,519 ) ( 34,401 ) Impairment of intangible assets ( 752,697 ) — Interest expense ( 420,032 ) ( 289,169 ) Significant Expenses ( 1,702,686 ) ( 849,336 ) Other Segment Items (1) ( 127,592 ) ( 6,486 ) Net Loss $ ( 1,556,845 ) $ ( 835,145 ) (1) Includes Cost of revenues, Allowance for credit losses, Depreciation and amortization, Change in fair value of warrant and derivative liabilities, and Other income (expense), net, as reported in our consolidated statements of operations. 108 Table of Contents Note 16. N ET LOSS PER COMMON SHARE Basic earnings per share of Class A common stock is computed by dividing net income attributable to common shareholders by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to common shareholders adjusted for the assumed exchange of all potentially dilutive securities, by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements. Diluted loss per share for all period presented is the same as basic loss per share as the inclusion of the potentially issuable shares would be anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share of Class A common stock: Year Ended December 31, (In thousands, except share and per share data) 2024 2023 Numerator - basic and diluted: Net loss $ ( 1,556,845 ) $ ( 835,145 ) Less: Net loss attributable to the non-controlling interests 1,196,346 778,797 Net loss attributable to MSP Recovery, Inc. $ ( 360,499 ) $ ( 56,348 ) Denominator – basic and diluted: Weighted-average shares of Class A common stock outstanding – basic 1,001,525 356,591 Weighted-average shares of Class A common stock outstanding – dilutive 1,001,525 356,591 Earnings per share of Class A common stock – basic $ ( 359.95 ) $ ( 158.02 ) Earnings per share of Class A common stock – diluted $ ( 359.95 ) $ ( 158.02 ) Shares of the Company’s Class V common stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class V common stock under the two-class method has not been presented. In the calculation for earnings per share for the year ended December 31, 2024 , the Company excluded from the calculation of diluted earnings per share 4,962,704 shares of Class V common stock, 2,950,157 Public Warrants outstanding, the CPIA Warrant exercisable for 106,667 shares of Class A Common Stock, 894,754,824 New Warrants outstanding and 9,851,339 warrants issued to Virage, as their effect would have been anti-dilutive. In the calculation for earnings per share for the year ended December 31, 2023 , the Company excluded from the calculation of diluted earnings per share 4,965,296 shares of Class V common stock, 2,950,157 Public Warrants outstanding, the CPIA Warrant exercisable for 106,667 shares of Class A Common Stock, 894,754,824 New Warrants outstanding because their effect would have been anti-dilutive. Note 17. DERIVATIVE LIABILITY For purposes of determining whether certain instruments are derivatives for accounting treatment, the Company follows the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. Yorkville SEPA As disclosed previously, the beneficial conversion feature within the Yorkville SEPA is treated as an embedded derivative liability and changes in the fair value are recognized in the change in fair value of warrant and derivative liabilities in the consolidated statements of operations. As of December 31, 2024 and 2023, the derivative liability associated with the beneficial conversion feature within the Yorkville SEPA amounted to $ 0.2 million and $ 37 .0 thousand , respectively. Refer to Note 9, Claims Financing Obligations and Notes Payable for additional information on the Yorkville SEPA and Note 13, Fair Value Measurements for fair value measurements disclosures related to the embedded derivative in the Yorkville SEPA. 109 Table of Contents OTC Equity Prepaid Forward Transaction The Company and CF entered into an agreement for an OTC Equity Prepaid Forward Transaction (the “Transaction”). Pursuant to the terms of the Transaction, CF agreed to (a) transfer to the Company for cancellation any warrants to purchase shares received as a result of being the stockholder of record of a share as of the close of business on the closing date of the Business Combination, pursuant to the previously announced and declared LCAP dividend and (b) waive any redemption right that would require the redemption of the Subject Shares (as defined below) in exchange for a pro rata amount of the funds held in LCAP’s trust account. At closing of the Business Combination, the Company transferred from the trust account to an escrow account an amount equal to (a) the aggregate number of such Subject Shares (approximately 1.8 thousand shares), multiplied by (b) the per share redemption price for shares out of the trust account, as a prepayment to CF of the amount to be paid to CF in settlement of the Transaction for the number of shares owned by CF at the closing of the Business Combination (the “FEF Shares”). CF may sell the Subject Shares at its sole discretion in one or more transactions, publicly or privately. Any such sale shall constitute an optional early termination of the Transaction upon which (a) CF will receive from the escrow account an amount equal to the positive excess, if any, of (x) the product of the redemption price and the aggregate number of shares over (y) an amount equal to the proceeds received by CF in connection with sales of the shares, and (b) the Company will receive from the escrow account the amount set forth in (y) above. The Company concluded that the instrument includes an embedded derivative for the change in value of the Company’s Class A common stock and as such, at the end of each period the Company will mark to market the shares through booking a derivative liability/asset. The calculation of the derivative liability/asset would be the difference between the restricted cash and current fair value of the outstanding FEF shares (number of FEF shares multiplied by market price of the Company’s Class A common stock as of period end). On January 6, 2023, the Company and CF entered into an Omnibus Fee Amendment Agreement (“Fee Amendment Agreement”). Pursuant to the terms of the Fee Amendment Agreement, in satisfaction of the deferred underwriting commissions under a previous agreement, the Company and CF agreed to release from escrow the $ 11.4 million of restricted cash and release the FEF shares previously held as Class A Common Stock subject to possible redemption within temporary equity. Prior to the Fee Amendment Agreement, CF had not sold any FEF shares. As a result of the Fee Amendment Agreement and termination of the OTC Forward Transaction, as of December 31, 2024 , the Company no longer has any restricted cash, Class A Common Stock subject to possible redemption, or derivative liability in the consolidated balance sheets related to the OTC Forward Transaction. Note 18. SUBSEQUENT EVENTS Restructuring Plan As described in our Current Report on Form 8-K filed with the SEC on April 10, 2025, on April 4, 2025, Virage Recovery Master, LP (“Virage”); Virage Capital Management, LP; Hazel Partners Holdings, LLC (“HPH”); Hazel Holdings I, LLC (and together with HPH, “Hazel”); La Ley con John H. Ruiz P.A. d/b/a MSP Recovery Law Firm; MSP Recovery, LLC; MSP Law Firm PLLC; MSP Recovery, Inc. (the “Company”), John H. Ruiz, and Frank C. Quesada (collectively, the “Parties”) entered into a term sheet (the “Term Sheet”) agreeing to certain terms and transactions that are designed to reduce costs of the Company through a servicer, deleverage the Company by converting certain debt of certain creditors into equity, provide access to $ 9.75 million of bridge funding to the Company (of which $ 6.5 million remains available through July 2025 pursuant to the Term Sheet, $ 2.75 million of which remains available under the Operational Collection Floor at the sole discretion of HPH) and up to $ 25 million of working capital for New Servicer (as defined below), and focus the Company’s operations, through the New Servicer, on the core business model of pursuing recoveries under the MSP Laws so that it can achieve its long-term recovery goals. Beyond July 2025, the Company’s anticipated sources of funding include the MSP Principals’ commitment to pledge $ 25 million of collateral to backstop additional working capital funding for the Company, potential distributions under our Standby Equity Purchase Agreement with YA II PN, Ltd. (the “Yorkville SEPA”), and claims recovery proceeds, subject to debt obligations on certain of the claims. These proposed transactions are subject to, among other things, further negotiation and the execution of definitive agreements, regulatory approvals, certain third-party consents and approvals, and shareholder approvals if required by the Nasdaq Stock Market. The obligation of Hazel and its affiliates to enter into definitive documents is subject to the satisfaction of various conditions precedent, at their sole discretion, including, but not limited to, satisfactory finalization of due diligence and all required internal approvals, receipt of certain third-party consents required, and finalization of documentation. Consummation of the transactions contemplated by the Term Sheet are also subject to additional fundings by other parties and certain debt concessions by other stakeholders. As a result, there can be no guarantee that the transactions contemplated by the Term Sheet will be consummated. The proposed transactions include, but are not limited to, the following transactions: 1. Establishment of New Servicer The Company shall establish a new subsidiary (“New Servicer”) to provide and control recovery efforts, by way of litigation, 110 Table of Contents demand letters, settlements, or other means, in connection with existing claim recovery rights (to the extent assignable), and those acquired in the future, held in special purpose vehicles (“SPV”), wholly owned by New Servicer, to hold any new claims acquired. The Company will license its intellectual property to the New Servicer in exchange for a license fee of 17.5 % of New Servicer’s excess cash flow, with a minimum fee of $ 1.55 million paid on May 30, 2025, and June 30, 2025. New Servicer will be funded by an affiliate of Hazel (hereinafter, “Funder”), up to $ 25 million in funding, as set forth below, with a right of first refusal for additional funding needs. New Servicer will be independently managed and be separately governed by an independent board of directors, including a chief executive officer chosen by Funder and consented to by the Company, one director chosen by the Company, and one independent director chosen by Funder and approved by the Company. Funder’s governance rights shall terminate once all Hazel loans have been repaid in full, and Funder’s Recovery Rights Interest (as defined below) in the New Servicer is less than 10 %. Virage shall have observer rights to the New Servicer board of directors until the amounts owed to Virage pursuant to the Master Transaction Agreement dated March 9, 2022, as amended (the “MTA”), which was approximately $ 1.1 billion as of December 31, 2024 (the “VRM Full Return”) has been repaid and Virage’s equity interest in the Company is less than 10 %. 2. Working Capital Funding for the New Servicer Funder has agreed to extend a line of credit to New Servicer of up to $ 25 million, funded in tranches of up to $ 1.75 million per month, subject to the New Servicer meeting certain milestones (which are currently being negotiated and to be agreed in definitive documentation), beginning September 2025, with a maturity date of June 30, 2027 . New Servicer funding will accrue interest at the Secured Overnight Financing Rate (“ SOFR ”) plus 5 % per annum for one year, and SOFR plus 10 % thereafter. Funder will establish a first lien on the New Servicer; the Company will not guaranty the loan to fund New Servicer. In addition, Funder or Hazel is entitled to receive to up to 35 % of New Servicer’s excess cash flow (the “Recovery Rights Interest”). At its option, Funder may convert, in whole or part, its Recovery Rights Interest for up to 30 % of the then outstanding shares of Company’s equity, measured as of the Closing and subject to dilution for stock issuance thereafter. 3. Additional Bridge Financing for the Company Moreover, Hazel agreed to provide 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 (vii) $ 1.55 million for July 2025. Funding is conditional, in part, on an increase in the pledge of collateral and personal guaranty by $ 9.75 million by Messrs. Ruiz and Quesada (the “MSP Principals”). Such minimum license fee payment will be paid from the Bridge Loan. Beyond July 2025, the MSP Principals have committed to pledge $ 25 million of collateral to backstop additional working capital requirements of the Company, in addition to other previous sources of funding, including cash proceeds from the sale of Class A Common Stock to Yorkville pursuant to the Yorkville SEPA, and the proceeds from claims recoveries, subject to lien repayment on certain claims. In addition, the Company expects annual costs reductions due to New Servicer operations and shall be funded by the Funder (through New Servicer). In addition, the Term Sheet requires (and is conditioned upon) La Ley con John H. Ruiz, P.A. d/b/a MSP Recovery Law Firm and MSP Law Firm, PLLC, collectively, raising $ 25 million for operational funding over two years, subject to similar milestones (to be agreed upon) as per the New Servicer funding, and to be entered into at completion of the proposed transaction. 4. Debt Restructuring In exchange for a 43 % equity interest in the Company (inclusive of shares currently held and those shares acquired through warrant exercises pursuant to the Virage Term Sheet discussed below) Virage has agreed to waive all claims and release all liens against the Company relating to the VRM Full Return (approximately $ 1.1 billion as of December 31, 2024 ), and the Parties agree that the VRM Full Return will be paid only from: (i) a junior lien against Subrogation Holdings proceeds, (ii) claims currently owned by Virage, (iii) liens over two tranches of claims currently owned by Hazel (which Hazel shall release as part of the reorganization transaction) and (iv) a non-recourse second lien up to $ 100 million over 50 % of the proceeds from the New Servicer and associated SPVs, to the extent that the VRM Full Return has not been repaid. In addition, the MSP Principals have agreed to convert 100 % of the Company’s debt obligation to them, totaling approximately $ 144 million, into shares of the Company’s Class A Common Stock, the full and final amount of the debt-to-equity conversion is subject to tax analysis and approval of the MSP Principals and the Company’s Board of Directors. Hazel’s existing loans to Subrogation Holdings and the amount of Company’s guaranty (currently approximately $ 100 million) remain unchanged except that such lien shall now exclude the Company’s intellectual property. Hazel agreed, subject to obtaining third-party consents, to extend the maturity date on all outstanding obligations to November 30, 2026 . To secure the repayment of the existing 111 Table of Contents Hazel loans to the extent such loans have not been repaid in full, the Company shall, for a principal amount of up to $ 235 million with an interest rate of SOFR plus 10 % per annum: (i) pledge to Hazel 50.1 % of the New Servicer and associated SPV equity interests; and (ii) grant a lien over 50 % of the proceeds from New Servicer and associated SPVs, once the New Servicer funding has been repaid. In addition, to the extent the VRM Full Return has not been repaid, Virage has second lien of up to $ 100 million over 50 % of the proceeds from New Servicer and associated SPVs. On January 13, 2025, the Board delegated to an independent committee of the Board of Directors (the “Independent Committee”) the power and authority to, among other things, determine on behalf of the Board and the Company whether, to the extent any conflicts or potential conflicts exist or arise in the future among the Company and Messrs. Ruiz and Quesada, certain Restructuring and Proposals are advisable and fair to, and in the best interests of, the Company and its stockholders. The Independent Committee reviewed the Term Sheet and engaged legal counsel and financial advisors that are familiar with the Company and restructuring transactions to determine if the Term Sheet is advisable and fair, and in the best interests of the Company and its stockholders. Although the Independent Committee identified material conflicts, those conflicts involve conditions precedent to the Term Sheet, and are resolvable to the satisfaction of the Independent Committee in furtherance of the Term Sheet and in the best interest of the Company; as such, the Independent Committee determined that it is advisable and in the best interests of the Company to approve the signing of the Term Sheet and subsequent entry into agreements consistent with the terms set forth therein. Pursuant to the Term Sheet, the parties are working to complete the definitive agreements by April 30, 2025. VRM Warrant Issuance and Restructuring Pursuant to the first Amendment to the Master Transaction Agreement, dated April 11, 2023 (the “First Amendment”), for each calendar month beginning with January 31, 2024 and ending when the VRM Full Return (as defined in the Master Transaction Agreement dated March 9, 2022 (as amended, the “MTA”)) is paid in full, the Company is required to either: (i) pay in cash or (ii) issue a warrant to purchase a number of shares of Class A Common Stock of the Company, or some combination thereof, to Virage Recovery Master LP (“VRM”) equal to the quotient of 1 % of the calendar month-end balance of the Unpaid Base Amount (as defined in the MTA) (the “Required Monthly Issuance”). On Apri l 14, 2025, the Company issued VRM Monthly Warrants for November 2024 and December 2024, for 3,277,808 and 6,332,792 shares respectively, exercisable at a purchase price of $ 0.0001 per share for a period of two years from the original issuance date, exercisable on a cashless basis only. To date, the Company has issued 12 warrants to VRM pursuant to the First Amendment, entitling Virage to purchase 19,361,939 shares of Class A Common Stock. In connection with negotiations to restructure the Company’s obligations under the MTA, on February 18, 2025, the Company entered into a term sheet agreement with Virage (the “Virage Term Sheet”) to amend the MTA, whereby Virage and the Company agreed, subject to certain conditions, which have not been met as of the date of this Annual Report on Form 10-K, to enter into definitive documentation at a later date to: (i) exercise the VRM Warrants to purchase that number of shares that would result in Virage owning 33 1/3 % of the then issued and outstanding Common Stock (the “Warrant Exercise”), (ii) surrender to the Company any remaining unexercised VRM Warrants, or portions thereof, for termination, (iii) contemporaneous with the Warrant Exercise, terminate its agreement to hold no more than 9.99 % of the outstanding Common Stock of the Company, (iv) subject to certain conditions, grant proxy voting rights to the MRCS Principals over an amount of shares of Common Stock issuable to Virage from the Warrant Exercise such that the MRCS Principals will have voting control over 51 % of the total outstanding Parent Class A Common Stock, and (v) terminate any obligation of the Company to satisfy the Required Monthly Issuance. These proposed transactions under the Virage Term Sheet are subject to, among other things, further negotiation and the execution of definitive agreements, regulatory approvals, and shareholder approvals if required by the Nasdaq Stock Market; as a result, there can be no guarantee that the transactions thereby will be consummated. Yorkville Amendments At the close of Primary Market trading on October 18, 2024, the daily VWAP for MSP Recovery, Inc.’s (the “Company”) Class A Common Stock was below the Floor Price (which is $ 3.75 ), as defined in the Exchangeable Promissory Notes (“Notes”) issued to YA II PN, Ltd. (“Yorkville”) pursuant to the Standby Equity Purchase Agreement dated November 14, 2023, as amended (the “SEPA”), by and between Yorkville and the Company, for ten consecutive Trading Days, resulting in a Floor Price Trigger pursuant to the Notes. Upon the occurrence of a Trigger Event, the Company shall make monthly payments (“Monthly Payments”) beginning on the 7th Trading Day after the date of the Trigger Event and continuing on the same day of each successive month. On April 10, 2025, Yorkville agreed: (i) that the first Monthly Payment, as set forth in Section (1)(c) of the Notes, would be due from the Company no sooner than November 30, 2026, (ii) the maturity date of the Convertible Notes is extended to November 30, 2026, and (iii) to waive Volume Threshold and Maximum Advance Amount limitations set forth in the Yorkville SEPA. Capitalized but undefined terms have the same meaning as set forth in the Yorkville SEPA and the Notes. 112 Table of Contents LSA Amendment On April 14, 2025, Lionheart II Holdings, LLC (“Lionheart”), a wholly owned subsidiary of the Company, entered into Amendment No. 1 to its Legal Services Agreement with La Ley con John H. Ruiz, P.A. d/b/a MSP Recovery Law Firm (“La Ley”), and MSP Law Firm, PLLC (collectively with La Ley, “Law Firm”), which: (i) terminates any obligation by the Company or its subsidiaries to provide further advances to fund the Law Firm, and provides that any Compensation earned by the Law Firm will be first used to repay the Advance Balance to Lionheart. 113 Table of Contents Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable.