Financial Position - As of September 30, 2025, the company has an accumulated deficit of $878.6 million and used approximately $19.1 million of cash in operations for the nine months ended September 30, 2025[244]. - The company has unrestricted cash totaling $1.8 million as of September 30, 2025, with $1.1 million due to assignors and $0.8 million owed to a law firm for legal fees[239]. - The current principal amount outstanding under the Nomura Note is approximately $35.4 million, with a limited waiver of obligations increased from $3.0 million to $6.0 million[288]. - Cash at the end of the period was $1.8 million as of September 30, 2025, down from $4.7 million at the end of the same period in 2024[388]. - The minimum required payments on agreements as of September 30, 2025, totaled $897.1 million, with maturities ranging from the date of claims recoveries to 2031[393]. - The Company has $1,290.4 million of guaranty obligations, with a maturity date of November 30, 2026, subject to acceleration upon certain events[394]. Revenue and Income - The Company has not yet generated substantial revenue from the recovery model, with no Claims recovery service income recognized during the nine months ended September 30, 2025 or 2024[258]. - Total revenue for the three months ended September 30, 2025, was $198 thousand, a 95% decrease compared to $3.7 million in the same period of 2024[328]. - Claims recovery income decreased by $3.4 million to $0.2 million for the three months ended September 30, 2025, driven by decreased settlements during the period[328]. - Claims recovery income decreased by $8.3 million to $1.6 million for the nine months ended September 30, 2025, representing an 84% decline compared to the prior year[339]. - Total revenue fell by $8.4 million to $1.6 million, also an 84% decrease year-over-year[339]. Operating Expenses - Operating loss for the three months ended September 30, 2025, was $123.8 million, a slight improvement of $6.1 million compared to a loss of $129.9 million in the prior year[328]. - Interest expense increased by $23.8 million to $130.5 million for the three months ended September 30, 2025, primarily due to increased obligations related to financing[334]. - Claims amortization expense decreased by $2.4 million to $118.6 million for the three months ended September 30, 2025, due to a lower amortizable asset base[330]. - General and administrative expenses decreased by $1.4 million to $4.0 million for the three months ended September 30, 2025, primarily driven by payroll and marketing expense reductions[331]. - Professional fees decreased by $2.3 million to $1.0 million for the three months ended September 30, 2025, mainly due to lower corporate legal and consulting fees[332]. - Operating expenses decreased by $27.9 million to $377.1 million, a 7% reduction compared to the same period in the prior year[339]. - Interest expense increased by $67.4 million to $374.0 million, a 22% increase year-over-year, primarily due to increased financing obligations[346]. - Claims amortization expense decreased by $7.1 million to $355.9 million, a 2% decline year-over-year, due to a lower amortizable asset base[341]. - General and administrative expenses decreased by $3.5 million to $13.7 million, primarily driven by reductions in salaries and marketing expenses[342]. - Professional fees decreased by $6.4 million to $5.6 million, reflecting a reduction in corporate legal and consulting fees[343]. Funding and Liquidity - The company has entered into agreements with Yorkville for funding, including a supplemental agreement for up to $3.0 million in convertible promissory notes[241]. - The Yorkville SEPA is currently the Company's sole source of liquidity, and if liquidity is not provided, the Company may face insolvency proceedings[285]. - The company anticipates potential insolvency proceedings if liquidity from Yorkville is not available, highlighting the critical nature of this funding source[352]. - The Company entered into a standby equity purchase agreement with Yorkville to purchase up to $250 million in shares of Class A Common Stock[353]. - The Company sold 2,353,238 shares of Class A Common Stock to Yorkville at prices between $1.60 and $17.55 per share, using proceeds to reduce amounts owed by $6.2 million and fund operations by $0.7 million[367]. - The Company has the right to terminate the Yorkville SEPA at no cost upon five trading days' notice, provided all amounts owed are paid[363]. - Yorkville agreed to fund an additional advance of $13.0 million under the Yorkville SEPA to prevent ownership limitation issues[366]. - The Company expects proceeds from sales to Yorkville to be used for working capital and general corporate purposes[365]. - 50% of the aggregate proceeds under the Yorkville SEPA will be allocated to pay amounts outstanding under the Nomura Note and Convertible Promissory Notes[381]. Market and Business Model - The total potentially serviceable market for the company is estimated to be over $161.5 billion annually, with Medicare expenditures in 2023 at approximately $1,029.8 billion and Medicaid at approximately $871.7 billion[252]. - Approximately 95.9% of expected recoveries arise from claims under the Medicare Secondary Payer Act, indicating a significant dependency on this legislation[254]. - The company utilizes proprietary data analytics platforms to identify recoverable healthcare claims, differentiating itself from competitors[249]. - The Centers for Medicare & Medicaid Services projects health spending to grow at an average rate of 5.6% annually between 2023 and 2032, which may impact the demand for the company's solutions[253]. - The Company has grown its Assignor base from 32 in 2015 to over 160 to date, indicating a strategy to expand its claims portfolio[294]. - The Company’s business model relies on achieving revenue from its Claims portfolio, which has not yet generated substantial revenue[292]. - The ability to collect on identified claims at estimated multiples is crucial for future profitability, with the Company pursuing double damages and statutory interest under the MSP Laws[295]. Recovery and Claims - The company is entitled to a portion of recovery rights associated with approximately $1,592 billion in billed amounts and approximately $381 billion in paid amounts, including approximately $87.8 billion in paid value of potentially recoverable claims[251]. - Approximately 86.5% of identified potentially recoverable claims are already in the recovery process as of September 30, 2025[297]. - The Paid Value of Potentially Recoverable Claims is a critical measure for assessing potential recoveries, with management viewing increases as positive indicators[300]. - The Penetration Status of Portfolio reflects the Company's recovery efforts and estimated market share, with ongoing recovery processes expected to increase this percentage[306]. - The Recovery Multiple is a key metric, with the potential for future recoveries to exceed the Paid Amount, which is expected to become more meaningful in the next 12 months[304][305]. - The estimated impact of the Eleventh Circuit ruling could reduce potentially recoverable claims by approximately $10.8 billion[308]. Technology and Platforms - The Chase to Pay platform aims to improve payment accuracy and is expected to enhance the net recovery margin as recovery multiples grow and legal costs decline[261][262]. - The clearinghouse platform, developed in collaboration with Palantir, is designed to identify and resolve outstanding liens, addressing systemic issues in healthcare reimbursement[264][266]. - Primary payers have a reporting rate as low as 2%, indicating a significant compliance issue that the clearinghouse platform aims to rectify[265]. - The EHR platform went live in Q2 2024, but revenue generated from it has not been significant[269]. - The Company is working to increase the number of Assignors providing daily data outputs for the Chase to Pay platform[263].
MSP Recovery(LIFW) - 2025 Q3 - Quarterly Report