The case, brought by MSP Recovery Law Firm on behalf of MSP Recovery Claims, Series LLC and MSPA Claims 1, LLC, centers on allegations that USAA's inaction contravenes both state and federal laws. This systemic and class-wide failure to identify benefits, Plaintiffs assert, has caused and will continue to cause Plaintiffs, and all similarly situated MAOs, MCOs, at-risk first-tier and downstream entities, and their assignees, throughout the state of Florida (the "Class"), to pay for accident-related medical ...

LifeWallet developed a sophisticated data analytics system, that in collaboration with Palantir Technologies Inc., captures and manages data, demonstrating property and casualty insurer ("P&C Insurer") USAA's failure to adequately coordinate benefits. This system is an integral part of the evidence presented to the Court, exemplifying the breadth and depth of the systemic issues plaguing the healthcare system. "USAA's failure to comply with its duties under Section 627.736(4), Florida Statutes and the resul ...

Financial Data and Key Metrics Changes - The company generated claims recovery income of $6 million in Q1 2024, an increase from $3.5 million in Q1 2023 [9] - The total assets decreased by $124 million since December 31, 2023, primarily due to the amortization of intangible assets [19] - The company reported an operating loss of $130 million, with 93% of the loss driven by non-cash items [9][20] Business Line Data and Key Metrics Changes - The company achieved two comprehensive settlements with multiple property and casualty insurers, enhancing its claims recovery strategies [3][4] - A tripartite data collaboration agreement was established to reconcile potential Medicare liabilities, which is part of the company's initiative to maximize its claims recovery platform [5] Market Data and Key Metrics Changes - The company currently has $1.8 billion in liabilities, with $83 million classified as current liabilities [8] - The majority of noncurrent liabilities are expected to be payable through claims recovery income [8] Company Strategy and Development Direction - The settlements with insurers include a ten-year agreement to resolve future claims and a commitment to provide historical data for claimants [4][17] - The company aims to build a diversified and predictable revenue stream by identifying and collecting unreimbursed liens from responsible parties [18] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future outlook, supported by expected funding from credit facilities and ongoing recovery efforts [10] - The company is currently in settlement negotiations with other property and casualty insurers to resolve pending litigation [18] Other Important Information - The company has extended obligations to Virage, Nomura, and Yorkville to 2025, enhancing its liquidity position [10] - The adjusted operating loss for the quarter, excluding non-cash items, was $8.7 million [20] Q&A Session Summary - There were no questions in the queue during the Q&A session [11]

CORAL GABLES, Fla., May 15, 2024 (GLOBE NEWSWIRE) -- MSP Recovery, Inc. d/b/a LifeWallet (NASDAQ: LIFW) ("LifeWallet," or the "Company"), a Medicare, Medicaid, commercial, and secondary payer reimbursement recovery and technology leader, today announced financial results for the quarter ended March 31, 2024. LifeWallet will host a conference call and live webcast to review the Company's first quarter 2024 results for investors and analysts at 8:30 a.m. Eastern Time on Thursday, May 16, 2024. To access this ...

CORAL GABLES, Fla., May 15, 2024 (GLOBE NEWSWIRE) -- MSP Recovery, Inc. d/b/a LifeWallet (NASDAQ: LIFW) ("LifeWallet," or the "Company"), a Medicare, Medicaid, commercial, and secondary payer reimbursement recovery and technology leader, today announced financial results for the quarter ended March 31, 2024. LifeWallet will host a conference call and live webcast to review the Company's first quarter 2024 results for investors and analysts at 8:30 a.m. Eastern Time on Thursday, May 16, 2024. To access this ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for MSP Recovery, Inc. and its subsidiaries, including balance sheets, statements of operations, changes in equity, and cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031,%202024%20and%20December%2031,%202023) The condensed consolidated balance sheets show the financial position of MSP Recovery, Inc. and its subsidiaries as of March 31, 2024, and December 31, 2023 | (In thousands) | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | **ASSETS** | | | | Cash | $11,973 | $11,633 | | Total current assets | $19,233 | $21,946 | | Intangible assets, net | $3,011,882 | $3,132,796 | | Total assets | $3,036,316 | $3,159,995 | | **LIABILITIES AND EQUITY** | | | | Warrant liability | $33,316 | $268 | | Total current liabilities | $82,767 | $46,506 | | Guaranty obligation | $984,450 | $941,301 | | Claims financing obligation and notes payable | $575,021 | $548,276 | | Total liabilities | $1,792,817 | $1,740,866 | | Total equity | $1,243,499 | $1,419,129 | - Intangible assets, net, decreased from **$3.13 billion** at December 31, 2023, to **$3.01 billion** at March 31, 2024, with **$2.1 billion** and **$2.2 billion**, respectively, related to a consolidated VIE[20](index=20&type=chunk) - Warrant liability significantly increased from **$268 thousand** at December 31, 2023, to **$33.3 million** at March 31, 2024[20](index=20&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20months%20ended%20March%2031,%202024%20and%202023) The condensed consolidated statements of operations show a net loss of $176.6 million for the three months ended March 31, 2024, similar to the $174.1 million loss in the prior year | (In thousands except per share amounts) | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Claims recovery income | $6,001 | $3,497 | | Total Claims Recovery | $6,001 | $3,995 | | Claims amortization expense | $121,014 | $113,469 | | Total operating expenses | $136,207 | $144,633 | | Operating Loss | $(130,206) | $(140,638) | | Interest expense | $(97,953) | $(42,390) | | Change in fair value of warrant and derivative liabilities | $51,307 | $2,255 | | Net loss | $(176,600) | $(174,146) | | Net loss attributable to MSP Recovery, Inc. | $(18,882) | $(4,916) | | Basic and diluted net income per share, Class A Common Stock | $(1.26) | $(1.39) | - Claims recovery income increased by **71.5%** from **$3.5 million** in Q1 2023 to **$6.0 million** in Q1 2024[23](index=23&type=chunk) - Interest expense more than doubled, increasing by **131%** from **$42.4 million** in Q1 2023 to **$98.0 million** in Q1 2024, primarily due to VRM-related interest[23](index=23&type=chunk)[24](index=24&type=chunk) - Change in fair value of warrant and derivative liabilities showed a significant gain of **$51.3 million** in Q1 2024, compared to **$2.3 million** in Q1 2023[23](index=23&type=chunk) [Condensed Consolidated Statements of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity%20for%20the%20three%20months%20ended%20March%2031,%202024%20and%202023) The condensed consolidated statements of changes in equity reflect a decrease in total equity from $1.42 billion at December 31, 2023, to $1.24 billion at March 31, 2024, primarily due to the net loss and a reduction in non-controlling interest | (In thousands) | Balance at Dec 31, 2023 | Class A Issuances | Net loss | Balance at Mar 31, 2024 | | :------------- | :---------------------- | :---------------- | :------- | :---------------------- | | Total Equity | $1,419,129 | $970 | $(176,600) | $1,243,499 | - Non-controlling interest decreased from **$1.147 billion** at December 31, 2023, to **$980.8 million** at March 31, 2024, reflecting the allocation of net loss and other equity changes[27](index=27&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031,%202024%20and%202023) The condensed consolidated statements of cash flows show a significant reduction in cash used in operating activities, from $10.0 million in Q1 2023 to $2.1 million in Q1 2024 | (In thousands) | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(2,145) | $(9,976) | | Net cash (used in) provided by investing activities | $(143) | $8,073 | | Net cash provided by financing activities | $2,628 | $8,405 | | Increase in cash | $340 | $6,502 | | Cash at end of period | $11,973 | $21,583 | - Net cash used in operating activities decreased by **$7.8 million**, from **$10.0 million** in Q1 2023 to **$2.1 million** in Q1 2024[32](index=32&type=chunk) - Investing activities shifted from providing **$8.1 million** in Q1 2023 to using **$143 thousand** in Q1 2024, primarily due to proceeds from the sale of intangible assets in the prior year not recurring[32](index=32&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering the company's business description, accounting policies, significant transactions, and financial instruments [Note 1. DESCRIPTION OF THE BUSINESS](index=9&type=section&id=Note%201.%20DESCRIPTION%20OF%20THE%20BUSINESS) MSP Recovery, Inc. (d/b/a LifeWallet) operates as a Medicaid and Medicare Secondary Payer Act recovery specialist, utilizing proprietary data analytics to identify and recover improper healthcare payments - MSP Recovery, Inc. (LifeWallet) was formed on May 23, 2022, through a business combination, consolidating Legacy MSP, a Medicaid and Medicare Secondary Payer Act recovery specialist[34](index=34&type=chunk) - The company uses a proprietary internal data analytics platform to review assigned health claims and identify recovery opportunities where secondary payers should not have paid or should have been reimbursed by third parties[35](index=35&type=chunk)[36](index=36&type=chunk) - On March 1, 2024, the company settled with **28 affiliated P&C Insurers**, securing historical and future data sharing, implementation of LifeWallet's coordination of benefits solution, a 5-year cooperative resolution agreement for Medicare claims, and a cash payment for existing historical claims[37](index=37&type=chunk)[39](index=39&type=chunk) - The Yorkville SEPA allows the company to sell up to **$250 million** in Class A Common Stock to Yorkville, with **$15 million** in convertible notes issued, and proceeds partially used to repay Nomura and VRM obligations[39](index=39&type=chunk)[44](index=44&type=chunk)[46](index=46&type=chunk) [Note 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=Note%202.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis of presentation for the unaudited condensed consolidated financial statements, emphasizing compliance with SEC rules and GAAP, and the consolidation of entities controlled by the company - The financial statements are prepared in accordance with SEC rules and GAAP, reflecting all necessary recurring adjustments for fair presentation[58](index=58&type=chunk) - The company consolidates entities it controls through majority voting interest or as the primary beneficiary of a Variable Interest Entity (VIE), such as MSP Recovery[62](index=62&type=chunk)[63](index=63&type=chunk) - Significant estimates and assumptions are made for Claims recovery income, Claims recovery service income recognition, recoverability of long-lived assets, and cost of Claims recoveries[64](index=64&type=chunk) - As of March 31, 2024, the non-controlling interest of Class V shareholders was **88.8%**, reflecting their economic ownership percentage[66](index=66&type=chunk) [Note 3. BUSINESS COMBINATION](index=14&type=section&id=Note%203.%20BUSINESS%20COMBINATION) The business combination, completed on May 23, 2022, involved MSP Recovery, Inc. acquiring Legacy MSP through an 'Up-C' structure, accounted for as a reverse recapitalization - The business combination of MSP Recovery, Inc. (formerly LCAP) and Legacy MSP was consummated on May 23, 2022, structured as an 'Up-C' model[71](index=71&type=chunk)[72](index=72&type=chunk) - The transaction was accounted for as a reverse recapitalization, with Legacy MSP treated as the acquired entity for financial reporting, and LCAP's net assets recorded at historical cost without goodwill[73](index=73&type=chunk) - The company assumed Public Warrants and issued approximately **1.03 billion** New Warrants as a dividend, with exercise prices adjusted[77](index=77&type=chunk)[78](index=78&type=chunk) - A Tax Receivable Agreement (TRA) was entered into, requiring payment of **85%** of realized tax benefits to sellers, but no TRA liability has been recognized as of March 31, 2024, due to the improbability of realizing future tax benefits[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) [Note 4. ASSET ACQUISITIONS](index=16&type=section&id=Note%204.%20ASSET%20ACQUISITIONS) This note details the acquisition of Claims and rights to proceeds from VRM MSP and Hazel, incurring a significant guaranty obligation and involving amendments to the Virage MTA - The company acquired Claims from Series MRCS by issuing approximately **7.9 million** Up-C Units, recorded as intangible assets with an eight-year useful life[86](index=86&type=chunk)[87](index=87&type=chunk) - Rights to proceeds from VRM MSP Claims were acquired for approximately **14.3 million** Up-C Units, leading to a guaranty obligation of **$984.4 million** as of March 31, 2024, for the VRM Full Return (contributions plus **20%** annual rate)[88](index=88&type=chunk)[89](index=89&type=chunk)[92](index=92&type=chunk) - The Third Virage MTA Amendment (April 1, 2024) extended the VRM Full Return payment due date to September 30, 2025, and introduced the issuance of VRM Warrants as a payment method for interest[97](index=97&type=chunk) - On March 29, 2023, the company acquired controlling interests in nine legal entities holding CCRAs from Hazel (Claims Purchase) and sold controlling interests in three entities to Hazel (Claims Sale), resulting in a **$4.6 million** gain on the combined Claims Transactions[102](index=102&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) [Note 5. INVESTMENT IN EQUITY METHOD INVESTEES](index=18&type=section&id=Note%205.%20INVESTMENT%20IN%20EQUITY%20METHOD%20INVESTEES) The company holds equity method investments in Series PMPI, MAO-MSO entities, and VRM MSP, recorded at $0 on the balance sheet due to preferred returns or insignificant earnings/losses - The company accounts for investments in Series PMPI, MAO-MSO Recovery LLC, MAO-MSO Recovery II LLC, and VRM MSP using the equity method[107](index=107&type=chunk) - The equity method investment in Series PMPI is valued at **$0** as of March 31, 2024, and December 31, 2023, because the preferred return exceeds total members' equity[110](index=110&type=chunk) - The MAO-MSO entities' investments are also valued at **$0** due to no initial contribution and recorded losses, with insignificant activity for the periods presented[111](index=111&type=chunk) | (in thousands) | For the Three Months Ended March 31, 2024 | For the Three Months Ended March 31, 2023 | | :------------- | :---------------------------------------- | :---------------------------------------- | | Revenue | $7 | $0 | | Amortization | $500 | $500 | | Other expenses | $10 | $0 | | Profit (Loss) | $(503) | $(500) | | (in thousands) | As of March 31, 2024 | As of December 31, 2023 | | :------------- | :------------------- | :---------------------- | | Total Assets | $911 | $1,403 | | Total Liabilities | $410 | $399 | [Note 6. PROPERTY AND EQUIPMENT, NET](index=19&type=section&id=Note%206.%20PROPERTY%20AND%20EQUIPMENT,%20NET) Property and equipment, net, primarily consists of internally developed software, office and computer equipment, and leasehold improvements, with a slight decrease in net value due to depreciation and amortization | (In thousands) | March 31, 2024 | December 31, 2023 | | :------------- | :------------- | :---------------- | | Office and computer equipment | $455 | $434 | | Leasehold improvements | $113 | $113 | | Internally developed software | $5,810 | $5,789 | | Other software | $67 | $67 | | Property and equipment, gross | $6,445 | $6,403 | | Less: accumulated depreciation and amortization of software | $(1,559) | $(1,492) | | Property and equipment, net | $4,886 | $4,911 | - Depreciation and amortization expense for property and equipment was **$67 thousand** for the three months ended March 31, 2024, a significant increase from **$9 thousand** in the same period of 2023[113](index=113&type=chunk) [Note 7. INTANGIBLE ASSETS, NET](index=20&type=section&id=Note%207.%20INTANGIBLE%20ASSETS,%20NET) Intangible assets, net, primarily comprise Claims Cost Recovery Agreements (CCRAs), amortized over an eight-year useful life, decreasing to $3.01 billion at March 31, 2024, due to amortization expense - Intangible assets, net, primarily consist of CCRAs, which are amortized over an eight-year useful life[114](index=114&type=chunk) | (in thousands) | March 31, 2024 | December 31, 2023 | | :------------- | :------------- | :---------------- | | Intangible assets, gross | $3,872,456 | $3,872,356 | | Accumulated amortization | $(860,574) | $(739,560) | | Net | $3,011,882 | $3,132,796 | - Claims amortization expense was **$121.0 million** for the three months ended March 31, 2024, up from **$113.5 million** in the prior year[114](index=114&type=chunk) - The company did not identify any new impairment indicators for its definite-lived CCRA intangible assets as of March 31, 2024[116](index=116&type=chunk) [Note 8. LEASES](index=20&type=section&id=Note%208.%20LEASES) The company leases office space in Puerto Rico under a non-cancellable operating lease, resulting in a right-of-use (ROU) asset and lease liability, and also rents office space from a related party on a month-to-month basis - The company leases office space in Puerto Rico under a non-cancellable operating lease expiring in August 2026[118](index=118&type=chunk) - Lease expense for the three months ended March 31, 2024, was **$39.5 thousand**[118](index=118&type=chunk) - Short-term rent expense from the Law Firm (a related party) was **$0.5 million** for Q1 2024, compared to **$0.3 million** for Q1 2023[119](index=119&type=chunk) | (In thousands) | March 31, 2024 | December 31, 2023 | | :------------- | :------------- | :---------------- | | Right-of-use asset | $315 | $342 | | Total Lease Liability | $(319) | $(344) | [Note 9. VARIABLE INTEREST ENTITIES](index=21&type=section&id=Note%209.%20VARIABLE%20INTEREST%20ENTITIES) The company consolidates several Variable Interest Entities (VIEs) where it is the primary beneficiary, with total assets of $2.1 billion and liabilities of $0.4 million as of March 31, 2024 - The company consolidates VIEs where it is the primary beneficiary, meaning it directs activities and absorbs losses or receives significant benefits[122](index=122&type=chunk)[123](index=123&type=chunk) - Total assets of consolidated VIEs were **$2.1 billion** and liabilities were **$0.4 million** as of March 31, 2024, with intangible assets (CCRAs) accounting for **$1.9 billion**[124](index=124&type=chunk) - The company also has investments in unconsolidated VIEs, with total assets of **$0.9 million** and liabilities of **$0.4 million** at March 31, 2024, where its exposure is limited to its investment[125](index=125&type=chunk)[126](index=126&type=chunk) [Note 10. CLAIMS FINANCING OBLIGATIONS AND NOTES PAYABLE](index=22&type=section&id=Note%2010.%20CLAIMS%20FINANCING%20OBLIGATIONS%20AND%20NOTES%20PAYABLE) The company's claims financing obligations and notes payable totaled $584.3 million as of March 31, 2024, with a weighted average interest rate of 14.8%, including amounts owed to Brickell Key Investments, Hazel, and Nomura - Claims financing obligations and notes payable amounted to **$584.3 million** as of March 31, 2024, with a weighted average interest rate of **14.8%**[130](index=130&type=chunk) - The company has an **$80 million** obligation to Brickell Key Investments, which can be paid through claims proceeds, cash, or monetization of warrants[132](index=132&type=chunk) - The Hazel Working Capital Credit Facility provides up to **$80 million** (with a **40%** OID), with **$4.5 million** funded under Term Loan B in Q1 2024, and **$14.0 million** additional availability; the Purchase Money Loan from Hazel is **$250.0 million**[134](index=134&type=chunk)[135](index=135&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk) - The Nomura Promissory Note was amended to increase the principal to **$30.0 million** and extend the maturity date to September 30, 2025, with a **16%** annual interest rate[85](index=85&type=chunk)[145](index=145&type=chunk) [Note 11. WARRANT LIABILITY](index=24&type=section&id=Note%2011.%20WARRANT%20LIABILITY) The company recognized a warrant liability of $33.3 million as of March 31, 2024, for Public Warrants, New Warrants, and VRM Warrants, significantly increasing from December 31, 2023, due to new issuances and fair value changes - As of March 31, 2024, the company recognized a warrant liability of **$33.3 million**, up from **$268 thousand** at December 31, 2023[149](index=149&type=chunk) - The warrant liability includes Public Warrants (**2.95 million** outstanding), New Warrants (**894.75 million** outstanding), and VRM Warrants (**48.52 million** shares purchasable)[148](index=148&type=chunk) | in thousands | Warrant Liability | | :----------- | :---------------- | | Balance at December 31, 2023 | $(268) | | Issuance of new warrants | $(84,508) | | Change in fair value of outstanding warrants | $51,460 | | Balance at March 31, 2024 | $(33,316) | | | of Shares | Weighted Average Exercise Price | | :------------------------ | :---------- | :------------------------------ | | Balance at December 31, 2023 | 35,908,200 | $286.56 | | Issued | 48,517,817 | $0.0001 | | Balance at March 31, 2024 | 84,426,017 | $121.88 | [Note 12. NONCONTROLLING INTEREST](index=25&type=section&id=Note%2012.%20NONCONTROLLING%20INTEREST) Non-controlling interest primarily represents the Up-C Units held by Members, which constituted 88.8% of the company's ownership as of March 31, 2024, and are convertible into Class A Common Stock - Non-controlling interest primarily represents the Up-C Units held by Members, which accounted for **88.8%** of the company's ownership as of March 31, 2024[150](index=150&type=chunk) | | Ownership | Percentage | | :------------------------ | :-------- | :--------- | | Ownership of Class A Common Stock | 15,636,062 | 11.2 % | | Ownership of Class V Common Stock | 124,067,498 | 88.8 % | | Balance at end of period | 139,703,560 | 100.0 % | - As of March 31, 2024, **2.7 million** Up-C Units have been exchanged into Class A Common Stock[150](index=150&type=chunk) [Note 13. COMMITMENTS AND CONTINGENCIES](index=25&type=section&id=Note%2013.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in various legal proceedings and investigations, including ongoing SEC and U.S. Attorney's Office inquiries, and litigation with Cano Health, LLC, which filed for bankruptcy - The company is subject to ongoing investigations by the SEC and the U.S. Attorney's Office regarding its business combination, financial results, investor agreements, and data analytic platforms[155](index=155&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk) - The RAMP Act, if passed, could impact the company's ability to pursue recoveries on prospective claims under the Medicare Secondary Payer Act by striking 'primary plan' and inserting 'group health plan'[154](index=154&type=chunk) - The company is involved in litigation with Cano Health, LLC, which filed for Chapter 11 bankruptcy, resulting in a **$5.0 million** receivable from Cano being reserved[159](index=159&type=chunk)[322](index=322&type=chunk) [Note 14. FAIR VALUE MEASUREMENTS](index=26&type=section&id=Note%2014.%20FAIR%20VALUE%20MEASUREMENTS) The company measures certain liabilities at fair value on a recurring basis, including derivative liability and warrant liability, totaling $33.5 million as of March 31, 2024 | in thousands | Level | March 31, 2024 | December 31, 2023 | | :----------- | :---- | :------------- | :---------------- | | Derivative liability – fair value of beneficial conversion feature | 3 | $190 | $37 | | Warrant liability | 2 | $33,316 | $268 | | Total | | $33,506 | $305 | - The embedded derivative liability within the Yorkville SEPA is valued at **$190 thousand** as of March 31, 2024, with a **$153 thousand** impact on the Statement of Operations for the three months ended March 31, 2024[55](index=55&type=chunk)[161](index=161&type=chunk) | in thousands | March 31, 2024 | December 31, 2023 | | :----------- | :------------- | :---------------- | | Price of Common Stock | $0.685 | $2.27 | | Volatility | 35 % | 40 % | | Market Risk Spread | 11.69 % | 12.37 % | | Expected Term (in years) | 1.50 | 1.25 | [Note 15. RELATED PARTY TRANSACTIONS](index=27&type=section&id=Note%2015.%20RELATED%20PARTY%20TRANSACTIONS) The company has significant related party transactions, including loans from MSP Principals ($112.8 million promissory note) and the Law Firm ($4.95 million loan), and interest expense related to VRM ($73.4 million in Q1 2024) - The company has an unsecured promissory note of **$112.8 million** from MSP Principals (John H. Ruiz and Frank C. Quesada), bearing **4%** annual interest, maturing June 16, 2026[163](index=163&type=chunk) - Interest expense related to the MSP Principals Promissory Note was **$1.3 million** for both Q1 2024 and Q1 2023[163](index=163&type=chunk) - Professional fees – legal included **$3.0 million** and **$4.2 million** of related party expenses to the Law Firm for Q1 2024 and Q1 2023, respectively[166](index=166&type=chunk) - Interest expense related to VRM was **$73.4 million** for Q1 2024, significantly up from **$37.1 million** in Q1 2023[174](index=174&type=chunk) - The company issued VRM Warrants in Q1 2024, entitling Virage to purchase **48.5 million** Class A Common Stock shares, and further Monthly Virage Warrants were issued in April and May 2024[175](index=175&type=chunk) [Note 16. NET LOSS PER COMMON SHARE](index=29&type=section&id=Note%2016.%20NET%20LOSS%20PER%20COMMON%20SHARE) Basic and diluted net loss per share for Class A Common Stock was $(1.26) for the three months ended March 31, 2024, compared to $(1.39) in the prior year, with potentially dilutive securities excluded as anti-dilutive | (In thousands except shares and per share amounts) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss attributable to MSP Recovery, Inc. | $(18,882) | $(4,916) | | Weighted-average shares of Class A common stock outstanding – basic | 15,013,881 | 3,544,381 | | Basic and diluted net income per share, Class A common stock | $(1.26) | $(1.39) | - The calculation excluded **124.1 million** Class V Common Stock shares, **2.95 million** Public Warrants, **2.67 million** CPIA Warrants, **894.75 million** New Warrants, and **48.52 million** VRM Warrants for Q1 2024, as their inclusion would be anti-dilutive[182](index=182&type=chunk) [Note 17. SUBSEQUENT EVENTS](index=30&type=section&id=Note%2017.%20SUBSEQUENT%20EVENTS) Subsequent to March 31, 2024, the company reached another comprehensive settlement with an additional group of affiliated property and casualty insurers, including historical data provision and a 10-year cooperative resolution agreement - On April 18, 2024, the company reached a comprehensive settlement with an additional group of affiliated property and casualty insurers[184](index=184&type=chunk) - The settlement terms include historical data provision, assistance in reconciling claims, assignment of collection rights against third parties, and a 10-year agreement for cooperative resolution or binding mediation of claims[185](index=185&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting its business model, key performance factors, and liquidity position [Our Business](index=31&type=section&id=Our%20Business) MSP Recovery, Inc. (LifeWallet) is a healthcare recovery and data analytics company focused on identifying and recovering improper payments in Medicare, Medicaid, and commercial insurance - LifeWallet is a leading healthcare recovery and data analytics company, disrupting the reimbursement system by identifying and recovering improper payments in Medicare, Medicaid, and commercial insurance[188](index=188&type=chunk)[189](index=189&type=chunk) - The company utilizes proprietary algorithms and a team of data scientists and medical professionals to analyze historical medical claims data and identify recoverable opportunities[190](index=190&type=chunk) - The business model relies on irrevocable assignments of claims, giving the company control over litigation and the ability to pursue additional recoveries under various legal theories, including double damages under the MSP Act[191](index=191&type=chunk)[192](index=192&type=chunk) - As of March 31, 2024, the company's claims portfolio includes approximately **$1,545 billion** in Billed Amount and **$370 billion** in Paid Amount, with **$86.6 billion** in Paid Value of Potentially Recoverable Claims[194](index=194&type=chunk) [Healthcare Industry](index=32&type=section&id=Healthcare%20Industry) The company's business is deeply intertwined with the healthcare industry, particularly Medicare and Medicaid, which represent a significant market for recovery services - The company's total potentially serviceable market is estimated to be over **$150 billion** annually, primarily in the Medicare and Medicaid segments[195](index=195&type=chunk) - CMS projects health spending to grow at an average rate of **5.4%** annually between 2022 and 2031, which could increase the complexity and number of claims, impacting demand for the company's solutions[196](index=196&type=chunk) - Approximately **95.6%** of expected recoveries are based on the Medicare Secondary Payer Act, making the business highly dependent on the stability of this law[197](index=197&type=chunk) [Our Business Model](index=32&type=section&id=Our%20Business%20Model) The company operates primarily under a Recovery Model, acquiring irrevocable assignments of health claim recovery rights and using proprietary algorithms to identify and pursue recoveries - Under the Recovery Model, the company receives irrevocable assignments of health claim recovery rights (CCRAs) and uses proprietary algorithms to identify and pursue potential recoveries, typically retaining **50%** of Net Proceeds[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - The 'Chase to Pay' model aims to use near real-time analytics to identify the proper primary insurer at the point of care, preventing wrongful payments and potentially decreasing legal costs[201](index=201&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) - The company also provides Claims Recovery Services to assist other entities in identifying and pursuing claims recovery rights for a fee, not tied to recovery amounts[206](index=206&type=chunk) [Recent Updates](index=33&type=section&id=Recent%20Updates) The company recently achieved comprehensive settlements with two groups of affiliated property and casualty insurers, generating revenue and securing data sharing agreements, and amended key claims financing obligations - On March 1, 2024, the company reached a comprehensive settlement with **28 affiliated P&C Insurers**, generating revenue and securing data sharing, coordination of benefits, and cooperative resolution agreements[209](index=209&type=chunk) - On April 18, 2024, an additional settlement was reached with another group of P&C Insurers, including historical data provision, assignment of collection rights, and a 10-year cooperative resolution agreement[210](index=210&type=chunk)[211](index=211&type=chunk) - Amendments were made to the Nomura Note, Yorkville SEPA convertible notes, and Virage MTA, extending maturity dates and modifying payment terms[212](index=212&type=chunk) [Key Factors Affecting Our Results](index=34&type=section&id=Key%20Factors%20Affecting%20Our%20Results) The company's financial results are heavily influenced by its Claims portfolio, which includes $86.6 billion in Paid Value of Potentially Recoverable Claims, and the ability to attract new assignors and collect on identified claims - The company's Claims portfolio holds approximately **$86.6 billion** in Paid Value of Potentially Recoverable Claims as of March 31, 2024[213](index=213&type=chunk) - Future profitability depends on attracting new assignors (grown from **32** in 2015 to over **160** to date) and collecting on identified claims at estimated multiples, including double damages and statutory interest under the MSP Act[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - Revenue from claims recovery is typically recognized upon binding settlement, arbitration, or resolution of legal proceedings[218](index=218&type=chunk) - As of March 31, 2024, approximately **86.8%** of accident-related claims identified as potentially recoverable are already in the recovery process[218](index=218&type=chunk) [Key Performance Indicators](index=34&type=section&id=Key%20Performance%20Indicators) The company tracks several Key Performance Indicators (KPIs) to evaluate business performance, including Total Paid Amount, Paid Value of Potentially Recoverable Claims (PVPRC), Billed Value of Potentially Recoverable Claims (BVPRC), Recovery Multiple, and Penetration Status of Portfolio - Key Performance Indicators (KPIs) include Total Paid Amount, Paid Value of Potentially Recoverable Claims (PVPRC), Billed Value of Potentially Recoverable Claims (BVPRC), Recovery Multiple, and Penetration Status of Portfolio[219](index=219&type=chunk) - PVPRC is a measure of the Paid Amount for potentially recoverable claims, identified using algorithms, and is a useful metric for potential recoveries[221](index=221&type=chunk) - BVPRC represents the cumulative Billed Amount of potentially recoverable claims, with the company aiming to recover in excess of the Paid Amount, including double damages[222](index=222&type=chunk) | $ in billions | March 31, 2024 | December 31, 2023 | December 31, 2022 | | :------------ | :------------- | :---------------- | :---------------- | | Paid Amount | $370.0 | $369.8 | $374.8 | | Paid Value of Potentially Recoverable Claims | $86.6 | $88.9 | $89.6 | | Billed Value of Potentially Recoverable Claims | $363.8 | $373.5 | $377.8 | | Penetration Status of Portfolio | 86.8 % | 86.8 % | 85.8 % | - For Q1 2024, total recoveries were **$6.1 million** with a recovery multiple of **1.53x**, though this sample is not statistically significant[229](index=229&type=chunk) [Key Components of Our Results of Operations](index=36&type=section&id=Key%20Components%20of%20Our%20Results%20of%20Operations) This section details the components of the company's results of operations, including Claims Recovery Income, Claims Recovery Service Income, and various operating expenses such as Claims Amortization Expense, General and Administrative, Professional Fees, and Interest Expense - Claims Recovery Income is recognized on a gross basis when amounts are reasonably certain of collection, typically upon binding settlement or legal resolution[227](index=227&type=chunk)[228](index=228&type=chunk) - Claims Amortization Expense relates to the amortization of CCRA intangible assets acquired through upfront payments or commitments[232](index=232&type=chunk) - Interest expense includes interest on the Nomura Note, Hazel Working Capital Credit Facility and Purchase Money Loan, Virage transactions, Yorkville Advances, and related party loans[239](index=239&type=chunk) - Changes in Fair Value of Warrant and Derivative Liabilities reflect mark-to-market adjustments for Public Warrants and Virage Warrants[241](index=241&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) For the three months ended March 31, 2024, the company reported a net loss of $176.6 million, similar to the prior year, with increased claims recovery income offset by higher interest and claims amortization expenses | (in thousands except for percentages) | 2024 | 2023 | $ Change | % Change | | :------------------------------------ | :---------- | :---------- | :---------- | :------- | | Claims recovery income | $6,001 | $3,497 | $2,504 | 72 % | | Claims recovery service income | $0 | $498 | $(498) | (100) % | | Total Claims Recovery | $6,001 | $3,995 | $2,006 | 50 % | | Cost of claim recoveries | $1,673 | $1,021 | $652 | 64 % | | Claims amortization expense | $121,014 | $113,469 | $7,545 | 7 % | | General and administrative | $5,566 | $6,855 | $(1,289) | (19) % | | Professional fees | $4,420 | $9,728 | $(5,308) | (55) % | | Professional fees - legal | $3,467 | $8,551 | $(5,084) | (59) % | | Allowance for credit losses | $0 | $5,000 | $(5,000) | (100) % | | Total operating expenses | $136,207 | $144,633 | $(8,426) | (6) % | | Operating Loss | $(130,206) | $(140,638) | $10,432 | (7) % | | Interest expense | $(97,953) | $(42,390) | $(55,563) | 131 % | | Change in fair value of warrant and derivative liabilities | $51,307 | $2,255 | $49,052 | 2,175 % | | Net loss | $(176,600) | $(174,146) | $(2,454) | 1 % | | Net loss attributable to MSP Recovery, Inc. | $(18,882) | $(4,916) | $(13,966) | 284 % | - Claims recovery income increased by **$2.5 million (72%)** to **$6.0 million**, driven by increased settlements, including from P&C Insurers[244](index=244&type=chunk) - Interest expense surged by **$55.6 million (131%)** to **$98.0 million**, primarily due to the guaranty obligation, new Hazel financing, and accrued interest on related party loans[251](index=251&type=chunk) - A significant gain of **$51.3 million** was recorded from the change in fair value of warrant and derivative liabilities, compared to **$2.3 million** in the prior year[253](index=253&type=chunk) [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP financial measures, 'adjusted net loss' and 'adjusted operating loss,' to provide insights into its ongoing operating performance by excluding certain non-cash and non-recurring expenses - Adjusted net loss and adjusted operating loss are non-GAAP measures used to evaluate ongoing operating performance[254](index=254&type=chunk) | (In thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------- | :-------------------------------- | :-------------------------------- | | GAAP Operating Loss | $(130,206) | $(140,638) | | Professional fees paid in stock | $469 | $7,557 | | Claims amortization expense | $121,014 | $113,469 | | Allowance for credit losses | $0 | $5,000 | | Adjusted Operating Loss | $(8,723) | $(14,612) | | GAAP Net Loss | $(176,600) | $(174,146) | | Professional fees paid in stock | $469 | $7,557 | | Claims amortization expense | $121,014 | $113,469 | | Allowance for credit losses | $0 | $5,000 | | Interest expense | $97,953 | $42,390 | | Change in fair value of warrant and derivative liabilities | $(51,307) | $(2,255) | | Adjusted Net Loss | $(8,471) | $(7,985) | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company has incurred substantial net losses and negative cash flows, with an accumulated deficit of $104.4 million as of March 31, 2024, relying on the Working Capital Credit Facility, Yorkville SEPA, and debt agreement amendments to address liquidity concerns - As of March 31, 2024, the company had **$12.0 million** in unrestricted cash and an accumulated deficit of **$104.4 million**, having used **$2.1 million** in cash from operations during Q1 2024[255](index=255&type=chunk) - The company's liquidity strategy includes the Working Capital Credit Facility (up to **$80 million**, with **$14.0 million** additional availability under Term Loan B as of March 31, 2024) and the Yorkville SEPA (up to **$250 million** in equity sales)[256](index=256&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[275](index=275&type=chunk) - Key actions to address liquidity include extending the VRM Full Return payment to September 30, 2025, and the Nomura Note maturity to September 30, 2025[256](index=256&type=chunk)[263](index=263&type=chunk)[269](index=269&type=chunk)[272](index=272&type=chunk) - The Yorkville SEPA includes **$15.0 million** in convertible promissory notes, with a third **$5.0 million** note issued on April 8, 2024, and an agreement for an additional **$13.0 million** advance[263](index=263&type=chunk)[278](index=278&type=chunk)[289](index=289&type=chunk) [Going Concern](index=39&type=section&id=Going%20Concern) The company has incurred substantial net losses and negative cash flows since inception, resulting in an accumulated deficit of $104.4 million as of March 31, 2024, but management believes actions taken alleviate substantial doubt about its ability to continue as a going concern - The company had an accumulated deficit of **$104.4 million** as of March 31, 2024, and used **$2.1 million** in cash from operations during the three months ended March 31, 2024[255](index=255&type=chunk) - Management concluded that actions such as the Working Capital Credit Facility, Yorkville SEPA, and extensions of payment obligations (VRM Full Return to Sept 30, 2025, Nomura Note to Sept 30, 2025) alleviate substantial doubt about the company's ability to continue as a going concern[256](index=256&type=chunk)[257](index=257&type=chunk)[263](index=263&type=chunk) [Sources of Liquidity](index=40&type=section&id=Sources%20of%20Liquidity) The company's primary liquidity sources include the Hazel Working Capital Credit Facility (up to $80 million), a $250 million Hazel Purchase Money Loan, a $112.8 million promissory note from MSP Principals, and the Yorkville SEPA, which allows for up to $250 million in equity sales - The Hazel Working Capital Credit Facility provides up to **$80 million** (with a **40%** original issue discount), with **$4.5 million** funded under Term Loan B in Q1 2024, and **$14.0 million** additional availability[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) - The MSP Principals provided a **$112.8 million** unsecured promissory note to finance operations, bearing **4%** annual interest and maturing on June 16, 2026[262](index=262&type=chunk) - The Third Virage MTA Amendment (April 1, 2024) extended the VRM Full Return payment due date to September 30, 2025, and allows for payment via cash, sale of reserved shares, or issuance of Monthly Virage Warrants[269](index=269&type=chunk) - The Yorkville SEPA allows the company to sell up to **$250 million** of Class A Common Stock to Yorkville and includes **$15 million** in convertible promissory notes, with maturity extended to September 30, 2025[275](index=275&type=chunk)[278](index=278&type=chunk)[289](index=289&type=chunk) [Cash Flows](index=44&type=section&id=Cash%20Flows) For the three months ended March 31, 2024, net cash used in operating activities significantly decreased to $2.1 million from $10.0 million in the prior year, while investing activities shifted to a net cash outflow and financing activities decreased | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(2,145) | $(9,976) | | Net cash (used in) provided by investing activities | $(143) | $8,073 | | Net cash provided by financing activities | $2,628 | $8,405 | | Increase in cash | $340 | $6,502 | | Cash at end of period | $11,973 | $21,583 | - Net cash used in operating activities decreased by **$7.8 million**, primarily due to net loss, claims amortization, paid-in-kind interest, and changes in warrant liability fair value[303](index=303&type=chunk) - Net cash provided by financing activities decreased by **$5.8 million**, mainly due to **$4.5 million** in new debt financing offset by **$1.5 million** in claims financing obligation repayments and **$0.4 million** in related party loan repayment[305](index=305&type=chunk) [Contractual Obligations, Commitments and Contingencies](index=44&type=section&id=Contractual%20Obligations,%20Commitments%20and%20Contingencies) As of March 31, 2024, the company's claims financing obligations and notes payable had a present value of $584.3 million, with minimum required payments totaling $727.5 million, and guaranty obligations amounted to $984.4 million - Claims financing obligations and notes payable had a present value of **$584.3 million** as of March 31, 2024, with minimum required payments of **$727.5 million**[306](index=306&type=chunk)[307](index=307&type=chunk) - Guaranty obligations totaled **$984.4 million** as of March 31, 2024, with the VRM Full Return payment date extended to September 30, 2025[308](index=308&type=chunk) - Repayment of the VRM Full Return will utilize **25%** of the company's portion of net proceeds from the Yorkville SEPA (after Convertible Notes are satisfied) and proceeds from the sale of certain reserved shares of Messrs. John H. Ruiz and Frank C. Quesada[308](index=308&type=chunk) [Critical Accounting Estimates](index=45&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting estimates, as disclosed in its 2023 Form 10-K, remain unchanged for the three months ended March 31, 2024, involving significant judgment and assumptions - There have been no material changes to the company's critical accounting policies and estimates during the three months ended March 31, 2024[310](index=310&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, MSP Recovery, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[311](index=311&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's internal controls over financial reporting were not effective as of March 31, 2024, due to unremediated material weaknesses, though these did not affect financial results - Management concluded that internal controls over financial reporting were not effective as of March 31, 2024[313](index=313&type=chunk) - Material weaknesses identified include issues with human resources processes (user access, IT change management, payroll approval) and accounting for contract terminations[313](index=313&type=chunk) - Remediation of these material weaknesses is in progress, and management believes they did not affect the financial results[313](index=313&type=chunk)[314](index=314&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ongoing legal proceedings and investigations, including subpoenas from the SEC and the U.S. Attorney's Office, and litigation with Cano Health, LLC - The company is cooperating with ongoing investigations by the SEC and the U.S. Attorney's Office, which involve subpoenas for documents related to the business combination, financial results, and data analytic platforms[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk) - The company is involved in litigation with Cano Health, LLC, which filed for Chapter 11 bankruptcy, leading to a **$5.0 million** receivable from Cano being reserved[322](index=322&type=chunk) - On January 4, 2024, Cano sued Simply Healthcare Plans, Inc. and the company, seeking a declaratory judgment on the rescission of the Cano Purchase Agreement and standing to recover claims[323](index=323&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the principal risk factors affecting the company's business, results of operations, and financial condition since the 2023 Form 10-K - No material changes to principal risk factors have occurred since the 2023 Form 10-K[325](index=325&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter ended March 31, 2024, the company issued unregistered equity securities, including warrants to Virage entitling them to purchase 48.5 million Class A Common Stock shares, and unregistered Class A Common Stock shares to Palantir and Virage - The company issued warrants to Virage entitling them to purchase **48,517,817** shares of Class A Common Stock during Q1 2024[326](index=326&type=chunk) - **472,772** unregistered shares of Class A Common Stock were issued to Palantir Technologies, Inc. for services provided[327](index=327&type=chunk) - **438,596** unregistered shares of Class A Common Stock were issued to Virage in satisfaction of obligations, which were subsequently purchased by Mr. John H. Ruiz[328](index=328&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - No defaults upon senior securities were reported[329](index=329&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[329](index=329&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported under this item[329](index=329&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q, including various agreements, certifications, and XBRL documents - The exhibits include the VRM Warrant Agreement, Amended and Restated Collateral Administration Agreement, Amended and Restated Promissory Note with Nomura, MTA Amendment No. 3, Yorkville SEPA Side Letters, and various certifications[331](index=331&type=chunk) [Signatures](index=50&type=section&id=Signatures) The report is duly signed on behalf of MSP Recovery, Inc. by Francisco Rivas-Vásquez, Chief Financial Officer, on May 15, 2024 - The report was signed by Francisco Rivas-Vásquez, Chief Financial Officer, on May 15, 2024[336](index=336&type=chunk)

CORAL GABLES, Fla., April 18, 2024 (GLOBE NEWSWIRE) -- MSP Recovery, Inc. d/b/a LifeWallet (NASDAQ:LIFW) ("LifeWallet" or "the Company") announces another comprehensive settlement with 10 affiliated property and casualty insurers ("P&C Insurers") that write personal lines of P&C insurance in 15 states. In addition to settling existing claims, the settlement establishes a going-forward process to collaboratively and timely resolve future claims, as well as share important historical data that is expected to ...

PART I [Business](index=13&type=section&id=Item%201.%20Business) MSP Recovery, Inc. is a healthcare data analytics and recovery company specializing in identifying and recovering improper payments made by Medicare, Medicaid, and commercial insurers - The company's primary focus is on the Medicare and Medicaid markets, with an estimated total potentially serviceable market of over **$150 billion annually**[29](index=29&type=chunk) - MSP Recovery differentiates itself by receiving **irrevocable assignments of claims**, allowing it to control litigation and pursue recoveries as the plaintiff, unlike competitors who typically act as third-party vendors[35](index=35&type=chunk) - The company is developing a 'Chase to Pay' model, a near real-time analytics platform intended to identify the correct primary insurer at the point of care, aiming to prevent wrongful payments and reduce legal recovery costs[46](index=46&type=chunk)[48](index=48&type=chunk) - Approximately **93.1%** of the company's expected recoveries are based on claims brought under the Medicare Secondary Payer (MSP) Act, which provides a private cause of action and the potential for **double damages**[32](index=32&type=chunk)[55](index=55&type=chunk) Claims Portfolio Overview (as of Dec 31, 2023) | Metric | Value (Approximate) | | :--- | :--- | | Total Billed Amount | $1,544 billion | | Total Paid Amount | $370 billion | | Paid Value of Potentially Recoverable Claims (PVPRC) | $88.9 billion | [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks, including a history of net losses, uncertain future revenue, litigation outcomes, potential legislative changes, cybersecurity threats, substantial indebtedness, and dependence on assigned claims - The company has a history of **net losses** and **no substantial revenue**, with a limited track record of generating meaningful recoveries from its assigned claims, making future profitability uncertain[129](index=129&type=chunk)[130](index=130&type=chunk) - Litigation outcomes are inherently risky; an adverse ruling by the Eleventh Circuit on the statute of limitations could reduce PVPRC by an estimated **$7.02 billion** if applied to all claims[135](index=135&type=chunk)[139](index=139&type=chunk) - Potential legislative changes, such as the proposed Repair Abuses of MSP Payments Act (RAMP Act), could limit the application of **double damages** to only group health plans, which would significantly reduce potential future recoveries if enacted[67](index=67&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - The company has **substantial indebtedness** and payment obligations, and failure to generate significant revenue could impact its ability to service this debt, potentially restricting business operations and growth[225](index=225&type=chunk)[226](index=226&type=chunk) - The company is controlled by its founding members, who hold approximately **89.44%** of the combined voting power, allowing them to determine all corporate actions requiring stockholder approval[273](index=273&type=chunk) - The company is subject to ongoing investigations by the SEC and the U.S. Attorney's Office regarding the business combination, financial projections, and its data analytics platforms[326](index=326&type=chunk)[327](index=327&type=chunk) [Unresolved Staff Comments](index=99&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - Not applicable[357](index=357&type=chunk) [Cybersecurity](index=101&type=section&id=Item%201C.%20Cybersecurity) The company maintains a comprehensive cybersecurity program managed by an internal IT Security Team to protect sensitive healthcare data, complying with HIPAA and other regulations - The company has an **IT Security Team** responsible for managing cybersecurity risks and a DevOPS/Security Manager with **27 years of experience** leading the program[360](index=360&type=chunk)[361](index=361&type=chunk) - The company has achieved key industry certifications, including a **SOC 2 Type II report** and **HITRUST CSF® v11.1.0 certification**, demonstrating compliance with high standards for protecting healthcare information[371](index=371&type=chunk) - A **Cybersecurity Subcommittee** of the Audit Committee was established on **February 7, 2024**, to provide board-level oversight of cybersecurity risks[374](index=374&type=chunk) - In 2023, the company did not identify any cybersecurity threats that **materially affected** or are reasonably likely to materially affect its business strategy, results of operations, or financial condition[359](index=359&type=chunk) [Properties](index=104&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters in Coral Gables, Florida, and also leases office space in Puerto Rico, which management believes are adequate for current and planned operations - The company's principal executive offices are located at 2701 S. Le Jeune Road, 10th Floor, Coral Gables, Florida 33134[376](index=376&type=chunk) [Legal Proceedings](index=104&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in significant legal matters, including ongoing investigations by the SEC and the U.S. Attorney's Office for the Southern District of Florida, and litigation with Cano Health, LLC, which is currently stayed - The **SEC initiated an investigation in August 2022** and has since issued multiple subpoenas concerning the business combination, financial projections, accounting, and data analytics platforms[378](index=378&type=chunk) - The **U.S. Attorney's Office for the Southern District of Florida issued a subpoena in March 2023** in connection with a grand jury investigation into the company's algorithms, stock price drop, and marketing materials[379](index=379&type=chunk) - The company is in a legal dispute with Cano Health, LLC, with both parties suing each other over claims recovery agreements; due to Cano's bankruptcy filing in February 2024, these matters are currently **stayed**[384](index=384&type=chunk)[385](index=385&type=chunk) [Mine Safety Disclosures](index=106&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[386](index=386&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=107&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A Common Stock and two classes of warrants trade on the Nasdaq Stock Market, while Class V Common Stock is not publicly traded, and the company has never paid cash dividends - Class A Common Stock trades under the symbol '**LIFW**', Public Warrants under '**LIFWZ**', and New Warrants under '**LIFWW**' on the Nasdaq Stock Market[389](index=389&type=chunk) - The company has never declared or paid **cash dividends** and does not plan to in the foreseeable future[391](index=391&type=chunk) - During fiscal 2023, the company issued **452,598 unregistered shares** to Palantir Technologies, Inc. in exchange for services[392](index=392&type=chunk) - On July 7, 2023, the company issued **7,960,001 unregistered shares** of Class A Common Stock to Cano Health, LLC[395](index=395&type=chunk) [Reserved](index=108&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=109&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal year 2023, the company's total claims recovery revenue decreased, operating loss widened due to increased amortization, and management addressed going concern doubts through new financing and debt extensions Consolidated Results of Operations (in thousands) | Metric | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Total Claims Recovery | $7,705 | $23,420 | | Total operating expenses | $567,575 | $354,898 | | Operating Loss | $(559,870) | $(331,478) | | Net loss | $(835,145) | $(401,905) | | Net loss attributable to MSP Recovery, Inc. | $(56,348) | $(7,417) | - Claims amortization expense increased by **$209.6 million** to **$476.5 million** in 2023, primarily due to amortization of newly acquired Claims Cost Recovery Agreements (CCRAs)[483](index=483&type=chunk) - Interest expense increased by **139%** to **$289.2 million** in 2023, driven by new debt facilities (Hazel Working Credit Facility) and increased interest on claims financing obligations[488](index=488&type=chunk) - The company has taken several actions to address liquidity concerns and alleviate going concern doubts, including securing a **Working Capital Credit Facility**, entering into the **Yorkville SEPA for up to $250 million** in equity financing, and **extending maturity dates** on major debt obligations with Virage and Nomura[494](index=494&type=chunk)[613](index=613&type=chunk) Key Performance Indicators ($ in billions) | KPI | 2023 ($ in billions) | 2022 ($ in billions) | | :--- | :--- | :--- | | Paid Amount | $369.8 | $374.8 | | Paid Value of Potentially Recoverable Claims (PVPRC) | $88.9 | $89.6 | | Billed Value of Potentially Recoverable Claims (BVPRC) | $373.5 | $377.8 | | Penetration Status of Portfolio | 86.8% | 85.8% | [Quantitative and Qualitative Disclosures About Market Risk](index=143&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, MSP Recovery, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[545](index=545&type=chunk) [Financial Statements and Supplementary Data](index=143&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's consolidated financial statements for the years ended December 31, 2023, 2022, and 2021, along with accompanying notes and the independent auditor's report Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash | $11,633 | $3,661 | | Intangible assets, net | $3,132,796 | $3,363,156 | | **Total Assets** | **$3,159,995** | **$3,417,945** | | **Liabilities & Equity** | | | | Guaranty obligation | $941,301 | $787,945 | | Claims financing obligation and notes payable | $548,276 | $198,489 | | **Total Liabilities** | **$1,740,866** | **$1,230,673** | | **Total Equity** | **$1,419,129** | **$2,185,465** | Consolidated Statement of Operations Highlights (in thousands) | Account | 2023 (in thousands) | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Total Claims Recovery | $7,705 | $23,420 | $14,626 | | Operating Loss | $(559,870) | $(331,478) | $(7,170) | | Net loss | $(835,145) | $(401,905) | $(33,077) | Consolidated Statement of Cash Flows Highlights (in thousands) | Account | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(40,023) | $(80,634) | | Net cash provided by (used in) investing activities | $7,558 | $(5,684) | | Net cash provided by financing activities | $29,017 | $99,735 | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=203&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company - Not applicable[788](index=788&type=chunk) [Controls and Procedures](index=203&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2023, due to identified material weaknesses in internal control over financial reporting, with a remediation plan initiated - Management concluded that disclosure controls and procedures were **not effective** as of **December 31, 2023**[790](index=790&type=chunk) - **Material weaknesses** were identified in two main areas: **insufficient controls over human resources and payroll processes**, and a **lack of controls for the accounting of contract terminations**[795](index=795&type=chunk) - A remediation plan is underway, which includes designing new controls, enhancing IT change management, providing additional training, and fully transitioning to a **third-party payroll processor with SOC audit processes**[797](index=797&type=chunk)[801](index=801&type=chunk) [Other Information](index=204&type=section&id=Item%209B.%20Other%20Information) On April 12, 2024, the company secured an agreement with Yorkville to fund an additional $13 million advance under the Standby Equity Purchase Agreement if ownership limitations prevent its utilization - Yorkville has committed to fund an additional **$13 million advance** under the SEPA if its share ownership prevents the company from otherwise accessing the facility[799](index=799&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=204&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[800](index=800&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=205&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's Board of Directors, including CEO John H. Ruiz and CLO Frank C. Quesada, comprises seven members with established Audit, Compensation, and Nominating committees, adhering to corporate governance guidelines - The Board of Directors is composed of seven members: John H. Ruiz, Frank C. Quesada, Ophir Sternberg, Beatriz Maria Assapimonwait, Michael Arrigo, Thomas Hawkins, and Roger Meltzer[804](index=804&type=chunk) - Key executive officers include John H. Ruiz (CEO), Frank C. Quesada (CLO), Ricardo Rivera (COO), and Francisco Rivas-Vásquez (CFO)[804](index=804&type=chunk) - The Board has three standing committees: Audit, Compensation, and Nominating and Corporate Governance[832](index=832&type=chunk) [Executive Compensation](index=214&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation for 2023 consisted primarily of base salaries and benefits, with CEO John H. Ruiz's salary voluntarily reduced, and non-employee directors receiving annual retainers in cash and equity 2023 Named Executive Officer Compensation | Name | Position | Salary ($) | Bonus ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | John H. Ruiz | CEO | 917,500 | - | 1,007,332 | | Frank C. Quesada | CLO | 600,000 | - | 605,750 | | Ricardo Rivera | COO | 600,000 | 75,000 | 675,000 | - CEO John H. Ruiz voluntarily reduced his salary to $35,000 effective June 26, 2023; his salary was reinstated retroactively from January 1, 2024 by the Board on April 12, 2024[834](index=834&type=chunk)[851](index=851&type=chunk) - Non-employee directors receive an annual retainer of $237,000, paid 30% in cash and 70% in equity, with additional cash retainers for committee chairs and members; several directors also received additional cash compensation for services on a Special Committee[845](index=845&type=chunk)[843](index=843&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=218&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of April 5, 2024, executive officers and directors, particularly CEO John H. Ruiz and CLO Frank C. Quesada, hold highly concentrated ownership and voting control of the company's common stock - CEO John H. Ruiz is the beneficial owner of **86.55% of Class A Common Stock** and **67.19% of Class V Common Stock**[858](index=858&type=chunk) - CLO Frank C. Quesada is the beneficial owner of **70.30% of Class A Common Stock** and **29.06% of Class V Common Stock**[858](index=858&type=chunk) - All directors and executive officers as a group beneficially own **92.05% of Class A Common Stock** and **96.26% of Class V Common Stock**, indicating **significant insider control**[858](index=858&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=221&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company engages in significant related-party transactions, including legal services and loans with entities controlled by its founders, while five of its seven directors are deemed independent - The company has a Legal Services Agreement with **MSP Recovery Law Firm**, an affiliate of the founders, to act as exclusive lead counsel for claims recovery, with the company advancing monthly expenses to the Law Firm[865](index=865&type=chunk)[866](index=866&type=chunk) - The company has received significant loans from its principals, John H. Ruiz and Frank C. Quesada, and the Law Firm to fund transaction costs and operating expenses; a **$112.8 million note** from the principals bears **4% interest**[863](index=863&type=chunk) - The company utilizes aviation services from **MSP Recovery Aviation, LLC**, an entity owned by CEO John H. Ruiz[867](index=867&type=chunk) - The Board has determined that **five of its seven directors are independent**: Michael F. Arrigo, Beatriz Assapimonwait, Thomas Hawkins, Ophir Sternberg, and Roger Meltzer[875](index=875&type=chunk) [Principal Accounting Fees and Services](index=225&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Deloitte & Touche LLP served as the company's principal accountant, with total fees of approximately $1.7 million in 2023 and $2.3 million in 2022, primarily for audit and audit-related services Fees Billed by Deloitte & Touche LLP | Fee Category | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Audit Fees | $1,475,236 | $1,444,002 | | Audit-Related Fees | $226,895 | $895,821 | | Tax Fees | — | — | | All Other Fees | — | — | | **Total Fees** | **$1,702,131** | **$2,339,823** | PART IV [Exhibits, Financial Statement Schedules](index=227&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements of MSP Recovery, Inc. filed with the Annual Report, noting that all financial statement schedules are omitted as information is inapplicable or presented in notes - The consolidated financial statements of MSP Recovery, Inc. are included in the report[883](index=883&type=chunk) - All financial statement schedules are omitted as they are inapplicable or the information is included in the notes to the financial statements[884](index=884&type=chunk) [Form 10-K Summary](index=234&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company - Not applicable[889](index=889&type=chunk)

PART I [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited financial statements show a **$609.2 million net loss**, **$1.64 billion in liabilities**, and restated 2022 figures - The company identified **material errors** in its previously issued financial statements for the periods ended June 30, 2022, and September 30, 2022, leading to their **restatement**[5](index=5&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased slightly to **$3.28 billion**, liabilities increased to **$1.64 billion**, decreasing total equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$3,282,035** | **$3,417,945** | | Intangible assets, net | $3,253,707 | $3,363,156 | | Cash and cash equivalents | $6,659 | $3,661 | | **Total Liabilities** | **$1,638,373** | **$1,230,673** | | Guaranty obligation | $900,455 | $787,945 | | Claims financing obligation and notes payable | $513,450 | $198,489 | | **Total Equity** | **$1,643,662** | **$2,185,465** | | Accumulated deficit | ($62,094) | ($29,203) | [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2023 net loss **$224.2 million**, nine-month net loss **$609.2 million**, due to revenue drop and higher expenses Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Q3 2023 | Q3 2022 (Restated) | 9 Months 2023 | 9 Months 2022 (Restated) | | :--- | :--- | :--- | :--- | :--- | | Total Claims Recovery | $440 | $8,507 | $6,977 | $22,020 | | Claims amortization expense | $121,008 | $111,851 | $355,481 | $153,560 | | Operating Loss | ($136,694) | ($125,184) | ($417,849) | ($195,973) | | Interest expense | ($88,279) | ($46,180) | ($204,287) | ($80,947) | | Net loss | ($224,217) | ($105,556) | ($609,192) | ($225,428) | | Basic and diluted net loss per share | ($1.56) | ($0.75) | ($4.63) | ($1.86) | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations improved to **$31.5 million**, financing decreased, resulting in **$8.4 million cash decrease** Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 (Restated) | | :--- | :--- | :--- | | Net cash used in operating activities | ($31,533) | ($70,764) | | Net cash provided by (used in) investing activities | $7,759 | ($4,563) | | Net cash provided by financing activities | $15,352 | $99,351 | | **(Decrease) increase in cash** | **($8,422)** | **$24,024** | | Cash at end of period | $6,659 | $25,688 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail **liquidity challenges**, **key transactions**, **2022 financial restatement**, and **ongoing SEC/U.S. Attorney investigations** - The company faces **significant liquidity challenges**, with an **accumulated deficit of $62.1 million** as of September 30, 2023, though management believes actions taken alleviate going concern doubt[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - The company is subject to an **ongoing investigation by the SEC** and a **grand jury investigation by the U.S. Attorney's Office**, with the company intending to cooperate fully[154](index=154&type=chunk)[155](index=155&type=chunk)[313](index=313&type=chunk) - On March 29, 2023, the company **acquired CCRAs from Hazel Holdings** funded by a **$250 million Purchase Money Loan**, resulting in a **net gain of $4.6 million**[107](index=107&type=chunk)[108](index=108&type=chunk)[110](index=110&type=chunk) - The company has a **significant guaranty obligation to Virage (VRM)**, amounting to **$900.5 million** as of September 30, 2023, with the payment date extended to December 31, 2024[97](index=97&type=chunk)[99](index=99&type=chunk)[104](index=104&type=chunk) - Subsequent to quarter end, the company replaced its Yorkville Purchase Agreement with a **new Standby Equity Purchase Agreement (SEPA) for up to $250 million**, including a **pre-paid advance of $15.0 million** in convertible promissory notes[44](index=44&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses healthcare payment recovery, noting decreased Q3 2023 revenue, increased net loss, **$91.5 billion PVPRC**, and liquidity challenges Key Performance Indicators (as of period end) | $ in billions | Sep 30, 2023 | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | :--- | | Paid Amount | $381.1 | $374.8 | $364.4 | | Paid Value of Potentially Recoverable Claims (PVPRC) | $91.5 | $89.6 | $86.6 | | Billed Value of Potentially Recoverable Claims (BVPRC) | $387.1 | $377.8 | $363.2 | | Penetration Status of Portfolio | 86.8% | 85.8% | 75.6% | - A U.S. Court of Appeals decision on a four-year statute of limitations could **reduce the Paid Value of Potentially Recoverable Claims (PVPRC) by approximately $8.9 billion** if applied broadly[229](index=229&type=chunk) - The company has **yet to generate substantial revenue from its primary recovery model** and remains **dependent on achieving future revenue from its claims portfolio**[192](index=192&type=chunk)[216](index=216&type=chunk)[238](index=238&type=chunk) Non-GAAP Reconciliation: Adjusted Net Loss (in thousands) | | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | **GAAP Net Loss** | **($609,192)** | **($225,428)** | | Share-based compensation | $1,875 | $20,055 | | Gain on debt extinguishment | $0 | ($63,367) | | Claims amortization expense | $355,481 | $153,560 | | Allowance for credit losses | $5,000 | $0 | | Paid-in-kind Interest | $204,287 | $80,947 | | Change in fair value of warrant and derivative liabilities | ($4,247) | $11,683 | | **Adjusted net loss** | **($46,796)** | **($22,550)** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is **not required to provide market risk disclosures** - As a smaller reporting company defined by Rule 12b-2 of the Exchange Act, the company is **not required to provide quantitative and qualitative disclosures about market risk**[304](index=304&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were **ineffective** due to **material weaknesses**, with a remediation plan underway - The CEO and CFO concluded that the company's disclosure controls and procedures were **not effective** as of September 30, 2023, due to existing **material weaknesses**[306](index=306&type=chunk) - Identified material weaknesses include **insufficient controls for: accounting for complex transactions, human resources and payroll processes, segregation of duties over cash disbursements, personnel training, and monitoring activities**[307](index=307&type=chunk)[308](index=308&type=chunk) - A **remediation plan is in process**, including **hiring a director of internal audit**, **implementing further controls** over complex financial instruments, **engaging third-party payroll providers**, and **enhancing internal communication and oversight**[308](index=308&type=chunk)[309](index=309&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company faces **significant legal matters**, including **ongoing SEC/U.S. Attorney investigations** and **litigation with Cano Health** - The **SEC initiated an investigation** in August 2022, issuing **multiple subpoenas** related to the business combination, financial restatements, and pre-merger funding[154](index=154&type=chunk)[313](index=313&type=chunk) - On March 10, 2023, the company received a **subpoena from the U.S. Attorney's Office** for the Southern District of Florida in connection with a **grand jury investigation**[155](index=155&type=chunk)[314](index=314&type=chunk) - The **company and Cano Health have filed lawsuits against each other** in August 2023, with the company seeking declaratory relief and Cano alleging fraud and breach of contract[156](index=156&type=chunk)[315](index=315&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) No **material changes** to principal risk factors from prior Annual Report on Form 10-K - There have been **no material changes** to the principal risks from those previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[316](index=316&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2023, the company issued **unregistered Class A Common Stock** to Palantir, Cano Health, and Virage, some purchased by executives - Issued **274,947 unregistered shares of Class A Common Stock to Palantir Technologies, Inc.** in exchange for services[317](index=317&type=chunk) - Issued **7,960,001 unregistered shares of Class A Common Stock to Cano Health, LLC** as payment for deferred compensation related to claims assignment agreements[54](index=54&type=chunk)[320](index=320&type=chunk) - Issued **742,016 unregistered shares of Class A Common Stock to Virage** in satisfaction of obligations, subsequently **purchased from Virage by CEO John H. Ruiz and CLO Frank C. Quesada**[318](index=318&type=chunk)[319](index=319&type=chunk) [Item 3. Defaults Upon Senior Securities](index=50&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[321](index=321&type=chunk) [Item 4. Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[321](index=321&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) The company did not report any other information for this item - None[321](index=321&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) Key exhibits filed include **amendments for the reverse stock split** and **significant financing agreements** with Nomura, Virage, and Yorkville - Key exhibits filed include the **Certificate of Amendment for the reverse stock split, the Amended and Restated Promissory Note with Nomura, MTA Amendment No. 2 with Virage, and the Standby Equity Purchase Agreement with Yorkville**[323](index=323&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware 84-4117825 (I.R.S. Employer Identification No.) Registrant's telephone number, including area code: (305) 614-2222 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39445 ...