Filed Pursuant to Rule 424(b)(3)

Registration No. 333-265953

 

PROSPECTUS SUPPLEMENT NO. 6

(to Prospectus dated August 5, 2022)

 

img152459402_0.jpg 

MSP RECOVERY, INC.

 

Up to 159,246,370 Shares of Class A Common Stock

Up to 755,200,000 Warrants to Purchase Shares of Class A Common Stock

Up to 41,303,150 Shares of Class A Common Stock Underlying Warrants

 

This prospectus supplement amends and supplements the prospectus dated August 5, 2022 (as supplemented or amended from time to time, the “Prospectus”), which forms a part of our Registration Statement on Form S-1 (No. 333-265953). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our Quarterly Report on Form 10-Q for the period ending September 30, 2023, filed with the Securities and Exchange Commission (the “SEC”) on November 14, 2023 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.

 

The Prospectus and this prospectus supplement relate to the offer and sale, from time to time, by the selling securityholders named in the Prospectus (the “Selling Securityholders”), or any of their permitted transferees, of (i) up to an aggregate of 30,221,000 shares of Common Stock (as defined in the Prospectus) otherwise held by the Selling Securityholders; (ii) up to an aggregate of 13,000 shares of Common Stock that may be issued upon exercise of Private Warrants (as defined in the Prospectus); (iii) up to an aggregate of 30,208,000 shares of Common Stock that may be issued upon exercise of New Warrants (as defined in the Prospectus); (iv) up to an aggregate of 230,000 shares of Common Stock that were issued to certain investors, including the Sponsor (as defined in the Prospectus) in a private placement in connection with the closing of the Business Combination (as defined in the Prospectus); (v) up to an aggregate of 26,000 shares of Common Stock that were issued to certain investors in a private placement of Private Units (as defined in the Prospectus) in connection with the Business Combination; (vi) up to an aggregate of 126,718,716 shares of Common Stock exchangeable for Up-C Units (as defined in the Prospectus) originally issued to certain Selling Securityholders, including the Members (as defined in the Prospectus), as consideration in the Business Combination for their membership interests in the MSP Purchased Companies (as defined in the Prospectus) or issuable pursuant to the terms of existing contracts; (vii) up to an aggregate of 2,000,880 shares of Common Stock issued to certain Selling Securityholders upon exchange of Up-C Units designated by the Members and issued in a private placement by the Company in lieu of a corresponding number of Up-C Units to which such Members were otherwise entitled but designated back to the Company and Opco (as defined in the Prospectus) pursuant to the terms of the Business Combination; (viii) up to an aggregate of 47,774 shares of Common Stock issued to certain Selling Securityholders in a private placement by the Company pursuant to the terms of existing contracts; (ix) up to an aggregate of 181,297 shares of Common Stock issuable upon the exercise of up to 4,532,405 Public Warrants (as defined in the Prospectus); and (x) up to an aggregate of 41,121,854 shares of Common Stock issuable upon the exercise of up to 1,028,046,326 New Warrants. The Prospectus and this prospectus supplement also cover any additional securities that may become issuable by reason of share splits, share dividends or other similar transactions.

 

 


Effective at 11:59 PM EDT on October 12, 2023, the Company amended its Second Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware to effect a 1-for-25 reverse stock split of the Company’s common stock (the “Reverse Split”). Unless otherwise noted, the share and per share information in this Prospectus Supplement No. 6 have been adjusted to give effect to the Reverse Split.

 

Our Common Stock, Public Warrants and New Warrants are listed on Nasdaq under the symbols “LIFW,” “LIFWZ,” and “LIFWW”. On November 14, 2023, the closing price of Common Stock was $6.86 per share, the closing price of our Public Warrants was $0.31 per warrant and the closing price of our New Warrants was $0.065 per warrant.

 

Investing in our securities involves risks. Before you invest in our securities, please carefully read the information provided in the “Risk Factors” section beginning on page 9 of the Prospectus and any in any applicable prospectus supplement, and Item IA of our Annual Report on Form 10-K for the fiscal year ending December 31, 2022, filed with the SEC on July 27, 2023, incorporated herein by reference.

 

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under the Prospectus or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The date of this prospectus supplement is November 15, 2023.

 

 

 

 


 

 

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

For the quarterly period ended September 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

 

MSP Recovery, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

84-4117825

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

2710 Le Jeune Road

Floor 10

Coral Gables, Florida

33134

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (305) 614-2222

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

 

LIFW

 

The Nasdaq Global Market

Redeemable warrants, each lot of 25 warrants is exercisable for one share of Class A common stock at an exercise price of $287.50 per share

 

LIFWW

 

The Nasdaq Global Market

Redeemable warrants, each lot of 25 warrants is exercisable for one share of Class A common stock at an exercise price of $0.0025 per share

 

LIFWZ

 

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 13, 2023, the registrant had 14,323,764 shares of Class A common stock, $0.0001 par value per share, and 124,253,176 shares of Class V common stock, $0.0001 par value per share, outstanding.

 

 


 

 

Explanatory Note

As previously reported, MSP Recovery, Inc., d/b/a LifeWallet, identified errors in the accounting for the indemnification asset, various intangible assets and rights to cash flows, and consolidation of an entity in connection with our business combination. As a result of these errors, management and the audit committee of our board of directors concluded that our previously issued unaudited condensed consolidated financial statements for the periods ended June 30, 2022, and September 30, 2022, were materially misstated. Accordingly, our unaudited condensed consolidated financial statements for the foregoing periods require restatement and should no longer be relied upon. The financial information that was previously filed or otherwise reported as of and for the periods ended June 30, 2022 and September 30, 2022 was superseded by the information in our Annual Report on Form 10-K filed with the SEC on July 27, 2023 and this Quarterly Report on Form 10-Q. See Note 2, Basis of Presentation And Summary of Significant Accounting Policies, to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the restatement and the related financial information impacts.

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

4

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (as restated)

5

Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2023 and 2022 (as restated)

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (as restated)

8

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

Item 4.

Controls and Procedures

46

PART II.

OTHER INFORMATION

49

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.

Defaults Upon Senior Securities

50

Item 4.

Mine Safety Disclosures

50

Item 5.

Other Information

50

Item 6.

Exhibits

51

Signatures

52


 

 


 

DEFINITIONS

 

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company,” and “LifeWallet” refer to MSP Recovery, Inc. d/b/a LifeWallet. As used in this Quarterly Report on Form 10-Q, unless otherwise noted or the context otherwise requires, the terms below are defined as follows:

 

“2022 Form 10-K” means the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed by the Company on July 27, 2023;

 

“Algorithm” refers to a set of instructions that perform a particular action. Our team of data scientists and medical professionals create proprietary instruction sets, or “Algorithms,” to identify recovery opportunities within the data sets of our Assignors’ Claims. Our proprietary algorithms incorporate various data points within the data sets of our Assignors’ Claims, which may include, but are not limited to, medical coding classification systems such as diagnosis codes (e.g., ICD-8/ICD-9/ICD-10 codes), procedure codes (e.g., CPT codes), and drug codes (e.g., NDC codes); non-medical data such as demographics and date ranges; and data from public sources such as crash reports, offense incident reports, and other reports that provide details as to an occurrence. These Algorithms are then applied to our Assignors’ aggregated Claims data, filtering through the billions of lines of data from our Assignors to identify recoverable opportunities consistent with a given Algorithm’s criteria. Identified potential recoveries are then further quality reviewed by our medical team;

“Billed Amount” (a/k/a the charged amount or retail price) is the full commercial value of services billed by the provider, or the full charge that the provider would ordinarily bill for the service provided. The Billed Amount for a specific procedure code is based on the provider and may vary from location to location. Where a Billed Amount is not provided in the data received from the Assignor, the Company may use paid amount or paid adjusted values, where available, to extrapolate a Billed Amount value. Where we have to extrapolate a Billed Amount to establish damages, the calculated amount may be contested by opposing parties;

“Board of Directors” or “Board” means the board of directors of the Company;

“Business Combination” means the business combination pursuant to the MIPA, as defined herein;

 

“CCRA” mean Claims Cost Recovery Agreement;

“CF” means Cantor Fitzgerald, L.P., a New York based investment bank;

 

“Claim” means the right, title to, and/or interest in, any and all claims or potential claims, including all related reimbursement and recovery rights, which the Company has, may have had, or may have in the future assigned to it (whether or not asserted), including all rights to causes of action and remedies against any third-party, whether a primary payer or responsible party, at law or in equity. The term “Claim” includes but is not limited to: (i) claims arising under consumer protection statutes and laws; (ii) claims arising under the Medicare and Medicare Advantage secondary payer statutes, whether based in contract, tort, statutory right, or otherwise, in connection with the payment to provide healthcare services or supplies; (iii) claims arising under any state statutes and common laws irrespective of the rights that are conferred to MSP through assignment or otherwise; and (iv) all right, title, and interest to any recovery rights that may exist for any potential cause of action where a responsible party or primary payer is liable, even where it has not been established because liability is not yet proven as of the date that the Claim is identified or discovered, together with all receivables, general intangibles, payment intangibles, and other rights to payment now existing or hereafter arising and all products and proceeds of the foregoing;

“Class A Common Stock” means the Company’s Class A common stock, par value $0.0001 per share;

“Class V Common Stock” means the Company’s Class V common stock, par value $0.0001 per share;

“Class B Unit” means the non-voting economic Class B Units of Opco, as described in more detail in Note 3, Business Combination, of this Form 10-Q;

“Closing” means the closing of the Business Combination, as described in more detail in Note 3, Business Combination, of this Form 10-Q;

“Company” means the registrant, MSP Recovery, Inc. d/b/a LifeWallet, a Delaware corporation;

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended;

i


 

“Existing Warrant Agreement” means the Warrant Agreement dated as of August 13, 2020, by and between the Company and Continental Stock Transfer & Trust Company;

“GAAP” means generally accepted accounting principles in the United States of America, as applied on a consistent basis;

 

“Hazel” means Hazel Holdings I LLC, a Delaware limited liability company, together with its affiliates;

 

“HPH” means Hazel Partners Holdings LLC, a Delaware limited liability company;

 

“HMO” means health maintenance organization;

“IPO” means the August 14, 2020 initial public offering of Lionheart Acquisition Corporation II.

 

“Law Firm” means La Ley con John H. Ruiz P.A. d/b/a MSP Recovery Law Firm;

 

“Legacy MSP” means MSP Recovery as it was organized in 2014 as a Medicaid and Medicare Secondary Pay Act recovery specialist;

 

“LLC Agreement” means the first amended and restated limited liability company agreement of Opco;

“MAO” means Medicare Advantage organization;

 

“Members’ Representative” means John H. Ruiz, solely in his capacity as the representative of the Members;

“MIPA” means the Membership Interest Purchase Agreement, dated as of July 11, 2021, as amended, and as described in more detail in Note 3, Business Combination, of this Form 10-Q;

“MSO” means management service organization;

 

“MSP Recovery” means MSP Recovery, LLC, a Florida limited liability company;

“MSP RH Series 01” means MSP Recovery Holdings Series 01, LLC, a Delaware limited liability company;

“MSP RH Series 01 Recovery Services Agreement” means the Recovery Services Agreement dated as of October 23, 2020 by and between MSP RH Series 01 and MSP Recovery;

“New Warrants” means 1,029,000,000 warrants, each exercisable to purchase 1/25 of one share, post Reverse Stock Split, of Class A Common Stock (but only exercisable in lots of 25 to purchase whole shares), which were issued as a dividend to the holders of record of Class A Common Stock as of the close of business on the date of Closing;

“Nomura” means Nomura Securities International, Inc.;

“Opco” means Lionheart II Holdings, LLC, a wholly owned subsidiary of the Company;

 

“OTC Equity Prepaid Forward Transaction” means an agreement between the Company and CF in which CF agreed to (a) transfer to the Company for cancellation any warrants to purchase shares received as a result of being the stockholder of record of a share as of the close of business on the closing date of the Business Combination, pursuant to the previously announced and declared LCAP dividend and (b) waive any redemption right that would require the redemption of the Subject Shares (as defined below) in exchange for a pro rata amount of the funds held in LCAP’s trust account;

“Paid Amount” (a/k/a Medicare Paid Rate or wholesale price) means the amount paid to a provider by a health plan or insurer. This amount varies based on the party making payment. For example, Medicare typically pays a lower fee for service rate than commercial insurers. The Paid Amount is derived from the Claims data we receive from our Assignors. In the limited instances where the data received lacks a paid amount value, our team calculates the Paid Amount with a formula. The formula used provides rates for outpatient services and is derived from the customary rate at the 95th percentile as it appears from standard industry commercial rates or, where that data is unavailable, the billed amount if present in the data. These amounts are then adjusted to account for the customary Medicare adjustment to arrive at the calculated Paid Amount. Management believes that this formula provides a conservative estimate for the

ii


 

Medicare paid amount rate, based on industry studies which show the range of differences between private insurers and Medicare rates for outpatient services;

 

We periodically update this formula to enhance the calculated paid amount where that information is not provided in the Assignor data. Management believes this measure provides a useful baseline for potential recoveries, but it is not a measure of the total amount that may be recovered in respect of potentially recoverable Claims, which in turn may be influenced by any applicable potential statutory recoveries such as double damages or fines, as described below. This calculation accounts for an approximate 7% increase in the total Paid Amount. Where we have to extrapolate a Paid Amount to establish damages, the calculated amount may be contested by opposing parties;

“Public Units” means units comprised of one share of Class A Common Stock and one-half of one Public Warrant issued at the IPO;

“Public Warrants” means warrants included in the Public Units issued in the IPO, each exercisable to purchase 1/25 of one share, post Reverse Stock Split, of Class A Common Stock (but only exercisable in lots of 25 to purchase whole shares), in accordance with its terms, as described in more detail in Note 3, Business Combination, of this Form 10-Q;

“PVPRC” means the cumulative Paid Amount value of potentially recoverable Claims. We use Algorithms to comb through historical paid Claims data and search for potential recoveries. The PVPRC is a measure of the Paid Amount in respect of those potentially recoverable Claims. In the limited instances where the data received from our Assignors lacks a paid value, the adjustment formula described in the definition of Paid Amount is applied and increases PVPRC by approximately 7%. As non-compliance with Section 111 reporting requirements is commonplace, responsible reporting entities (RRE) routinely fail to report their responsibility to make primary payments; for this reason, data matching is often required to determine which reporting entity is responsible to reimburse a given potentially recoverable Claim;

 

“Recovery Proceeds” means, with respect to any Claim, any and all gross proceeds recovered, including compensation, interest, penalties, and fees which may be paid or payable with respect to such Claim (including any and all cash, securities, instruments or other property which may be paid or issued by defendants or third parties in litigation proceedings in satisfaction of such Claim);

 

“SEC” means the U.S. Securities and Exchange Commission;

 

“Series” means Delaware series limited liability companies, formed pursuant to the Delaware law, that are used by the Company to own and segregate assets, including CCRAs;

“Securities Act” means the Securities Act of 1933, as amended;

“Series MRCS” means Series MRCS, a series of MDA, Series LLC, a Delaware series limited liability company;

“Trust Account” means the trust account established by the Company for the benefit of its stockholders with Continental Stock Transfer & Trust Company;

“Up-C Unit” means each pair consisting of one share of Class V Common Stock and one Class B Unit, as described in more detail in Note 3, Business Combination, of this Form 10-Q;

“Virage” means Virage Capital Management LP, a Delaware limited partnership;

“VRM” means Virage Recovery Master LP, a Delaware limited partnership and affiliate of Virage; and

“VRM MSP” means VRM MSP Recovery Partners LLC, a Delaware limited liability company and joint investment vehicle of VRM and Series MRCS;

 

“Working Capital Credit Facility” means the credit agreement as described in more detail in Note 10, Claims Financing Obligations and Notes Payable, of this Form 10-Q.
 

iii


Table of Contents

Part I – Financial Information

Item 1. Financial Statements

MSP RECOVERY, INC. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

September 30,

 

 

December 31,

 

(In thousands except per share amounts)

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,659

 

 

$

3,661

 

Restricted cash

 

 

 

 

 

11,420

 

Accounts receivable

 

 

706

 

 

 

6,195

 

Affiliate receivable (1)

 

 

831

 

 

 

2,425

 

Prepaid expenses and other current assets (1)

 

 

14,874

 

 

 

27,656

 

Total current assets

 

 

23,070

 

 

 

51,357

 

Property, plant and equipment, net

 

 

4,890

 

 

 

3,432

 

Intangible assets, net (2)

 

 

3,253,707

 

 

 

3,363,156

 

Right-of-use assets

 

 

368

 

 

 

 

Total assets

 

$

3,282,035

 

 

$

3,417,945

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,643

 

 

$

8,422

 

Affiliate payable (1)

 

 

19,822

 

 

 

19,822

 

Commission payable

 

 

829

 

 

 

545

 

Derivative liability

 

 

 

 

 

9,613

 

Warrant liability

 

 

662

 

 

 

5,311

 

Other current liabilities

 

 

14,588

 

 

 

72,002

 

Total current liabilities

 

 

42,544

 

 

 

115,715

 

Guaranty obligation (1)

 

 

900,455

 

 

 

787,945

 

Claims financing obligation and notes payable (1)

 

 

513,450

 

 

 

198,489

 

Lease liabilities

 

 

264

 

 

 

 

Loan from related parties (1)

 

 

130,709

 

 

 

125,759

 

Interest payable (1)

 

 

50,951

 

 

 

2,765

 

Total liabilities

 

$

1,638,373

 

 

$

1,230,673

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A common stock subject to possible redemption, 45,183 shares at redemption value as of December 31, 2022 (None as of September 30, 2023)

 

$

 

 

$

1,807

 

 

 

 

 

 

 

 

Stockholders’ Equity (Deficit):

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 5,500,000,000 shares authorized; 13,799,230 and 2,984,212 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

$

1

 

 

$

 

Class V common stock, $0.0001 par value; 130,000,000 shares authorized; 124,264,645 and 125,919,180 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

 

12

 

 

 

13

 

Additional paid-in capital

 

 

347,376

 

 

 

137,069

 

Accumulated deficit

 

 

(62,094

)

 

 

(29,203

)

Total Stockholders’ Equity (Deficit)

 

 

285,295

 

 

 

107,879

 

Non-controlling interest

 

 

1,358,367

 

 

 

2,077,586

 

Total equity

 

$

1,643,662

 

 

$

2,185,465

 

Total liabilities and equity

 

$

3,282,035

 

 

$

3,417,945

 

 

(1)
As of September 30, 2023 and December 31, 2022, the total affiliate receivable, affiliate payable, guaranty obligation and loan from related parties balances are with related parties. In addition, the prepaid expenses and other current assets, claims financing obligation and notes payable, and interest payable includes balances with related parties. See Note 13, Related Party Transactions, for further details.
(2)
As of September 30, 2023 and December 31, 2022, intangible assets, net included $2.3 billion and $2.3 billion, respectively, related to a consolidated VIE. See Note 9, Variable Interest Entities, for further details.

 

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

4


Table of Contents

MSP RECOVERY, INC. and Subsidiaries

Condensed Consolidated Statements of Operations (As Restated)

(Unaudited)

 

 

Three months ended
September 30,

 

 

Nine months ended September 30,

 

(In thousands except per share amounts)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

As Restated

 

 

 

 

 

As Restated

 

Claims recovery income

 

$

440

 

 

$

2,759

 

 

$

6,479

 

 

$

4,225

 

Claims recovery service income (1)

 

 

 

 

 

5,748

 

 

 

498

 

 

 

17,795

 

Total Claims Recovery

 

$

440

 

 

$

8,507

 

 

$

6,977

 

 

$

22,020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cost of claim recoveries (2)

 

 

574

 

 

 

1,198

 

 

 

1,972

 

 

 

1,906

 

Claims amortization expense

 

 

121,008

 

 

 

111,851

 

 

 

355,481

 

 

 

153,560

 

General and administrative (3)

 

 

6,130

 

 

 

6,621

 

 

 

20,691

 

 

 

17,049

 

Professional fees

 

 

2,466

 

 

 

5,904

 

 

 

15,611

 

 

 

10,973

 

Professional fees – legal (4)

 

 

6,871

 

 

 

8,014

 

 

 

25,889

 

 

 

34,251

 

Allowance for credit losses

 

 

 

 

 

 

 

 

5,000

 

 

 

 

Depreciation and amortization

 

 

85

 

 

 

103

 

 

 

182

 

 

 

254

 

Total operating expenses

 

 

137,134

 

 

 

133,691

 

 

 

424,826

 

 

 

217,993

 

Operating Loss

 

$

(136,694

)

 

$

(125,184

)

 

$

(417,849

)

 

$

(195,973

)

Interest expense (5)

 

 

(88,279

)

 

 

(46,180

)

 

 

(204,287

)

 

 

(80,947

)

Other income, net

 

 

408

 

 

 

63,138

 

 

 

8,697

 

 

 

63,175

 

Change in fair value of warrant and derivative liabilities

 

 

348

 

 

 

2,670

 

 

 

4,247

 

 

 

(11,683

)

Net loss before provision for income taxes

 

$

(224,217

)

 

$

(105,556

)

 

$

(609,192

)

 

$

(225,428

)

Provision for income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(224,217

)

 

$

(105,556

)

 

$

(609,192

)

 

$

(225,428

)

Less: Net loss attributable to non-controlling members

 

 

204,462

 

 

 

103,484

 

 

 

576,301

 

 

 

221,476

 

Net loss attributable to controlling members

 

$

(19,755

)

 

$

(2,072

)

 

$

(32,891

)

 

$

(3,952

)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

12,703,472

 

 

 

2,761,476

 

 

 

7,097,032

 

 

 

2,125,539

 

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

 

$

(1.56

)

 

$

(0.75

)

 

$

(4.63

)

 

$

(1.86

)

 

(1)
For the three and nine months ended September 30, 2022, claims recovery service income included $0.0 million and $10.6 million, respectively, of claims recovery service income from VRM MSP. There was no claims recovery service income from VRM MSP for the three and nine months ended September 30, 2023. See Note 13, Related Party Transactions, for further details.
(2)
For both the three and nine months ended September 30, 2023, cost of claim recoveries included $0.3 million of related party expenses. For both the three and nine months ended September 30, 2022, cost of claim recoveries included $0.3 million of related party expenses. This relates to contingent legal expenses earned from claims recovery income pursuant to legal service agreements with the Law Firm. See Note 13, Related Party Transactions, for further details.
(3)
For the three and nine months ended September 30, 2022, general and administrative expenses included $0.2 million and $0.4 million of related party expenses. See Note 13, Related Party Transactions, for further details. No such related party expenses were present for the three and nine months ended September 30, 2023.
(4)
For the three and nine months ended September 30, 2023 and 2022, Professional Fees—legal included $4.6 million and $13.5 million, and $4.6 million and $5.0 million, respectively, of related party expenses related to the Law Firm. See Note 13, Related Party Transactions, for further details.
(5)
For three and nine months ended September 30, 2023, interest expense included $67.8 million and $159.2 million, respectively, related to interest expense due to VRM. For the three and nine months ended September 30, 2022, interest expense included $33.1 million and $46.5 million, respectively, related to interest expense due to VRM. See Note 13, Related Party Transactions, for further details.

 

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

5


Table of Contents

MSP RECOVERY, INC. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity (As Restated)

(Unaudited)

 

Three Months Ended September 30, 2023

 

 

 

Class A Common Stock

 

 

Class V Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands except shares)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional Paid-in Capital

 

 

Accumulated Deficit

 

 

Non- Controlling Interests

 

 

Total Equity

 

Balance at June 30, 2023

 

 

5,289,434

 

 

$

 

 

 

124,264,645

 

 

$

12

 

 

$

176,643

 

 

$

(42,339

)

 

$

1,669,169

 

 

$

1,803,485

 

Conversion of Warrants

 

 

125

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

1

 

 

 

3

 

Class A Issuances

 

 

8,509,671

 

 

 

1

 

 

 

 

 

 

 

 

 

170,731

 

 

 

 

 

 

(106,341

)

 

 

64,391

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,755

)

 

 

(204,462

)

 

 

(224,217

)

Balance at September 30, 2023

 

 

13,799,230

 

 

$

1

 

 

 

124,264,645

 

 

$

12

 

 

$

347,376

 

 

$

(62,094

)

 

$

1,358,367

 

 

$

1,643,662

 

 

Three Months Ended September 30, 2022 (As Restated)

 

(In thousands)

 

Class A Common Stock

 

 

Class V Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional Paid-in Capital

 

 

Member’s Deficit

 

 

Accumulated Deficit

 

 

Non- Controlling Interests

 

 

Total Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(As Restated)

 

 

 

 

 

(As Restated)

 

 

(As Restated)

 

 

(As Restated)

 

Balance at June 30, 2022

 

 

2,642,042

 

 

$

 

 

 

126,178,932

 

 

$

13

 

 

$

127,099

 

 

$

 

 

$

(23,666

)

 

$

2,360,520

 

 

$

2,463,966

 

Contributions prior to recapitalization transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions prior to recapitalization transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss prior to recapitalization transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effect of recapitalization transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening net assets of Lionheart II Holdings, LLC acquired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustment for value of derivative on temporary equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,062

 

 

 

 

 

 

 

 

 

 

 

 

1,062

 

Conversion of Warrants

 

 

28,247

 

 

 

 

 

 

 

 

 

 

 

 

1,805

 

 

 

 

 

 

 

 

 

(1,157

)

 

 

648

 

Class A Issuances

 

 

246,096

 

 

 

 

 

 

(230,123

)

 

 

 

 

 

5,310

 

 

 

 

 

 

 

 

 

(10,272

)

 

 

(4,962

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,072

)

 

 

(97,273

)

 

 

(99,345

)

Balance at September 30, 2022

 

 

2,916,385

 

 

$

 

 

 

125,948,809

 

 

$

13

 

 

$

135,276

 

 

$

 

 

$

(25,738

)

 

$

2,251,818

 

 

$

2,361,369

 

 

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

 

6


Table of Contents

MSP RECOVERY, INC. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity (As Restated)

(Unaudited)

 

Nine Months Ended September 30, 2023

 

 

 

Class A Common Stock

 

 

Class V Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands except shares)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional Paid-in Capital

 

 

Accumulated Deficit

 

 

Non- Controlling Interests

 

 

Total Equity

 

Balance at December 31, 2022

 

 

2,984,212

 

 

$

 

 

 

125,919,180

 

 

$

13

 

 

$

137,069

 

 

$

(29,203

)

 

$

2,077,586

 

 

$

2,185,465

 

Conversion of Warrants

 

 

9,523

 

 

 

 

 

 

 

 

 

 

 

 

388

 

 

 

 

 

 

(169

)

 

 

219

 

Class A Issuances

 

 

10,805,495

 

 

 

1

 

 

 

(1,654,535

)

 

 

(1

)

 

 

209,919

 

 

 

 

 

 

(142,749

)

 

 

67,170

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32,891

)

 

 

(576,301

)

 

 

(609,192

)

Balance at September 30, 2023

 

 

13,799,230

 

 

$

1

 

 

 

124,264,645

 

 

$

12

 

 

$

347,376

 

 

$

(62,094

)

 

$

1,358,367

 

 

$

1,643,662

 

 

Nine Months Ended September 30, 2022 (As Restated)

 

(In thousands)

 

Class A Common Stock

 

 

Class V Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional Paid-in Capital

 

 

Member’s Deficit

 

 

Accumulated Deficit

 

 

Non- Controlling Interests

 

 

Total Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(As Restated)

 

 

 

 

 

(As Restated)

 

 

(As Restated)

 

 

(As Restated)

 

Balance at December 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

(155,756

)

 

$

 

 

$

4,348

 

 

$

(151,408

)

Contributions prior to recapitalization transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

 

 

 

 

 

 

15

 

Distributions prior to recapitalization transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(147

)

 

 

 

 

 

 

 

 

(147

)

Net loss prior to recapitalization transaction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,640

)

 

 

 

 

 

 

 

 

(28,640

)

Cumulative effect of recapitalization transaction

 

 

303,307

 

 

 

 

 

 

126,178,932

 

 

 

13

 

 

 

41,579

 

 

 

184,528

 

 

 

 

 

 

2,490,751

 

 

 

2,716,871

 

Opening net assets of Lionheart II Holdings, LLC acquired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,786

)

 

 

 

 

 

(21,786

)

Adjustment for value of derivative on temporary equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,065

 

 

 

 

 

 

 

 

 

 

 

 

10,065

 

Conversion of Warrants

 

 

316,328

 

 

 

 

 

 

 

 

 

 

 

 

15,641

 

 

 

 

 

 

 

 

 

(13,444

)

 

 

2,197

 

Class A Issuances

 

 

2,296,750

 

 

 

 

 

 

(230,123

)

 

 

 

 

 

67,991

 

 

 

 

 

 

 

 

 

(96,144

)

 

 

(28,153

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,952

)

 

 

(133,693

)

 

 

(137,645

)

Balance at September 30, 2022

 

 

2,916,385

 

 

$

 

 

 

125,948,809

 

 

$

13

 

 

$

135,276

 

 

$

 

 

$

(25,738

)

 

$

2,251,818

 

 

$

2,361,369

 

 

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

7


Table of Contents

MSP RECOVERY, INC. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (As Restated)

(Unaudited)

 

 

Nine months ended September 30,

 

(In thousands)

 

2023

 

 

2022

 

 

 

 

 

 

(As Restated)

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss (1)

 

$

(609,192

)

 

$

(225,428

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

182

 

 

 

254

 

Claims amortization expense

 

 

355,481

 

 

 

153,560

 

Paid in kind interest (1)

 

 

204,263

 

 

 

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