Financial Performance - Claims recovery income decreased by $2.3 million to $0.4 million for the three months ended September 30, 2023, a decline of 84% compared to the same period in the prior year, driven by decreased settlements[255]. - Claims recovery service income dropped by $5.7 million to $0.0 million for the three months ended September 30, 2023, a 100% decrease, primarily due to a reduction in third-party service fees[256]. - Total claims recovery income for the nine months ended September 30, 2023 was $6.977 million, down 68% from $22.020 million in the same period in 2022[267]. - Claims amortization expense increased by $201.9 million to $355.5 million for the nine months ended September 30, 2023, a 131% increase, primarily due to acquisitions of CCRAs[269]. - Interest expense rose by $123.3 million to $204.3 million for the nine months ended September 30, 2023, a 152% increase, driven by guarantee obligations and increased interest on claims financing[274]. - Net loss attributable to controlling members for the nine months ended September 30, 2023 was $32.9 million, compared to a loss of $3.9 million in the same period in 2022, reflecting a 732% increase[267]. - General and administrative expenses increased by $3.6 million to $20.7 million for the nine months ended September 30, 2023, a 21% increase, driven by higher salaries and benefits[270]. - Professional fees increased by $4.6 million to $15.6 million for the nine months ended September 30, 2023, a 42% increase, primarily due to costs associated with being a public company[271]. - Other income decreased by $54.5 million for the nine months ended September 30, 2023, primarily due to a significant gain from debt extinguishment in the prior year[275]. - The adjusted operating loss for the nine months ended September 30, 2023, was $55.5 million, significantly higher than the $22.4 million loss reported in the same period of 2022, reflecting an increase of approximately 148%[277]. Claims and Recovery - The current Claims portfolio includes approximately $1,603 billion in Billed Amount and $381 billion in Paid Amount, with about $92 billion in Paid Value of Potentially Recoverable Claims as of September 30, 2023[188]. - The company has yet to generate substantial revenue from its recovery model, primarily earning from performance-based or fee-for-service arrangements[192]. - The "Chase to Pay" model aims to identify the correct primary insurer at the point of care, potentially increasing recovery margins and reducing legal costs[193][194]. - The company has developed algorithms to identify waste, fraud, and abuse in healthcare claims, leveraging large volumes of data for recovery opportunities[186]. - The company receives recovery rights through irrevocable assignments of Claims, allowing it to control litigation direction and pursue recoveries that competitors cannot[187]. - The company is positioned to generate meaningful annual recovery revenue at high profit margins by addressing the billing gap in Medicare and Medicaid[185]. - Approximately 86.8% of claims identified as potentially recoverable are already in the recovery process as of September 30, 2023[221]. - The total addressable market for the company is estimated to exceed $150 billion annually, primarily focused on Medicare and Medicaid segments[231]. - Approximately 92.6% of expected recoveries arise from Claims under the Medicare Secondary Payer Act[234]. - Legal strategies are being deployed to mitigate the impact of a recent court ruling that could reduce PVPRC by approximately $8.9 billion[230]. Corporate Actions and Compliance - A reverse stock split of 1-for-25 was executed on October 12, 2023, adjusting all issued and outstanding shares and derivative securities accordingly[199]. - The company was notified of non-compliance with Nasdaq Listing Requirements due to late filings, but regained compliance by filing necessary reports by August 30, 2023[200][201]. - The Company received a delisting determination from Nasdaq due to its Class A Common Stock closing bid price being $0.10 or less for 10 consecutive trading days, but regained compliance after a reverse stock split on October 13, 2023[202]. - The Company amended the promissory note to Nomura, increasing the principal amount to approximately $28.9 million and extending the maturity date to December 31, 2024, with an interest rate of 16% per annum[211]. - The Company issued 4,760,001 unregistered shares of Class A Common Stock to Cano Health, LLC, as payment for $61.6 million in deferred compensation related to various agreements[212]. - The Company established a reserve for a $5.0 million receivable from Cano due to substantial doubt about Cano's ability to continue as a going concern[213]. - The Company plans to implement new strategies to secure new Assignors, aiming to expand its Assignor base from over 160 to further increase claims recovery opportunities[218]. Liquidity and Financial Position - As of September 30, 2023, the company had unrestricted cash and cash equivalents totaling $6.7 million, with an accumulated deficit of $62.1 million since inception[278]. - The company used approximately $31.5 million of cash in operations for the nine months ended September 30, 2023, highlighting ongoing liquidity challenges[278]. - The Working Capital Credit Facility provides for up to $80 million, with an initial $10 million drawn on March 6, 2023, and an additional $5 million disbursed on March 29, 2023[280]. - The company received $5.5 million from Term Loan A and $2.3 million from Term Loan B on August 4, 2023, as part of its liquidity management strategy[282]. - The company has entered into a Yorkville SEPA allowing it to sell up to $250 million of its common stock, providing a potential source of liquidity[291]. - The MSP Principals Promissory Note, totaling $112.8 million, has an annual interest rate of 4% and matures on June 16, 2026, impacting future cash flow[283]. - The company has not yet exercised its rights under the Assignment and Sale of Proceeds Agreement, which allows for monetization of up to $250 million in net recovery proceeds[293]. - The adjusted net loss for the nine months ended September 30, 2023, was $46.8 million, compared to $22.6 million in the same period in 2022, representing a year-over-year increase of approximately 107%[277]. - Net cash used in operating activities decreased by $39.2 million to $31.5 million for the nine months ended September 30, 2023, compared to $70.8 million for the same period in 2022[298]. - Net cash provided by investing activities increased by $12.3 million to $7.8 million for the nine months ended September 30, 2023, compared to a net cash used of $4.6 million in 2022[299]. - Net cash provided by financing activities decreased to $15.4 million for the nine months ended September 30, 2023, compared to $99.4 million for the same period in 2022[300]. - As of September 30, 2023, the present value of amounts owed under claims financing obligations was $529.2 million, with a weighted average interest rate of 14.5%[301]. - The company has $900.5 million of guaranty obligations as of September 30, 2023, with a maturity date extended to December 31, 2024[302]. - Minimum required payments on agreements as of September 30, 2023, total $678.1 million, with maturity ranging until 2031[303]. - Cash and cash equivalents at the end of the period were $6.7 million, down from $25.7 million at the end of the same period in 2022[297].
MSP RECOVERY(LIFWZ) - 2023 Q3 - Quarterly Report