x~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

¨~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

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 x☒ 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). Yesx☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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 x☐ No ¨☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No☒

As of ~~September 25, 2020 there were 23,650,000~~October 31, 2022, the registrant had 73,840,509 shares of Class A common stock, $0.0001 par value per share, and ~~5,750,000~~3,148,720,212 shares of Class BV common stock, $0.0001 par value ~~issued and~~per share, outstanding.

As of September 30, 2022 and December 31, 2021, the total affiliate receivable, indemnification asset, affiliate payable, guaranty obligation and loan from related parties balances are with related parties. In addition, the prepaid expenses and other current assets and claims financings obligation and notes payable includes balances with related parties. See Note 13, Related Party, for further details.

~~LIONHEART ACQUISITION CORPORATION II~~

~~CONDENSED BALANCE SHEETS~~

June 30,
2020

December 31,
2019

(unaudited) (audited)
ASSETS
Current asset - cash $ 18,378 $ —
Deferred offering costs 125,483 26,171
TOTAL ASSETS $ 143,861 26,171

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Accounts payable and accrued expenses $ 1,000 $ 1,000
Accrued offering costs 45,690 26,171
Promissory note — Related party 73,171 —
Total Current Liabilities 119,861 27,171

Commitments

Stockholder’s Equity
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; no issued and outstanding — —
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding as of June 30, 2020 and December 31, 2019⁽¹⁾ 575 —
Additional paid-in capital 24,425 —
Accumulated deficit (1,000 ) (1,000 )
Total Stockholder’s Equity 24,000 (1,000 )
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY $ 143,861 $ 26,171

~~(1)~~

~~Included an aggregate of up to 750,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters (see Note 5).~~

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

Table of Contents

MSP RECOVERY, INC. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


	Three months ended September 30,						Nine months ended September 30,
(In thousands except per share amounts)	2022			2021			2022			2021
Claims recovery income	$	2,571		$	48		$	3,999		$	63
Claims recovery service income (1)		5,748			2,439			17,795			9,213
Total Claims Recovery	$	8,319		$	2,487		$	21,794		$	9,276
Operating expenses
Cost of claim recoveries (2)		1,160			15			1,861			23
Claims amortization expense		66,331			47			92,866			114
General and administrative (3)		6,621			2,871			17,049			8,207
Professional fees		5,875			2,539			10,931			5,606
Professional fees - legal (4)		8,014			26			34,251			56
Depreciation and amortization		103			89			254			256
Total operating expenses		88,104			5,587			157,212			14,262
Operating Loss	$	(79,785	)	$	(3,100	)	$	(135,418	)	$	(4,986	)
Interest expense		(13,083	)		(6,990	)		(34,475	)		(19,579	)
Other (expense) income, net		63,138			(169	)		63,175			1,154
Change in fair value of warrant and derivative liabilities		2,670			-			(11,683	)		-
Net loss before provision for income taxes	$	(27,060	)	$	(10,259	)	$	(118,401	)	$	(23,411	)
Provision for income tax benefit (expense)		-			-			326			-
Net loss	$	(27,060	)	$	(10,259	)	$	(118,075	)	$	(23,411	)
Less: Net (income) loss attributable to non-controlling members		26,597			(16	)		116,324			(16	)
Net loss attributable to controlling members	$	(463	)	$	(10,275	)	$	(1,751	)	$	(23,427	)

Basic and diluted weighted average shares outstanding, Class A Common Stock (5)		69,036,899		N/A				53,138,474		N/A
Basic and diluted net income per share, Class A Common Stock (5)	$	(0.01	)	N/A			$	(0.03	)	N/A

For the three and nine months ended September 30, 2022 and 2021, claims recovery service income included $0 million and $10.6 million, respectively, and $1.7 million and $7.0 million, respectively, of claims recovery service income from VRM MSP Recovery Partners LLC (“VRM MSP”). See Note 13, Related Party, for further details.

For the three and nine months ended September 30, 2022, cost of claim recoveries included $0 and $271 thousand, respectively, of related party expenses. This relates to contingent legal expenses earned from claims recovery income pursuant to legal service agreements with the La Ley con John H. Ruiz P.A., d/b/a MSP Recovery Law Firm (the "Law Firm"). See Note 13, Related Party, for further details. For the three and nine months ended September 30, 2021, there were no expenses related to contingent legal expenses.

For the three and nine months ended September 30, 2022 and 2021, general and administrative expenses included $150 thousand and $400 thousand, respectively, and $20 thousand and $39 thousand, respectively, of related party expenses. See Note 13, Related Party, for further details.

For the three and nine months ended September 30, 2022 and 2021, professional fees - legal included $4.6 million and $5.0 million, respectively, $0 thousand and $8 thousand, respectively, of related party expenses related to the Law Firm. See Note 13, Related Party, for further details.

Earnings per share information has not been presented for periods prior to the Business Combination (as defined in Note 1, Description of Business), as it resulted in values that would not be meaningful to the users of these unaudited condensed consolidated financial statements. Refer to Note 15, Net Loss Per Common Share for further information.

~~LIONHEART ACQUISITION CORPORATION II~~

~~STATEMENT OF OPERATIONS~~

~~THREE AND SIX MONTHS ENDED JUNE 30, 2020~~

~~(Unaudited)~~

Three Months
Ended
June 30, 2020

Six Months
Ended
June 30, 2020

Formation costs $ — $ —
Net loss $ — $ —

Weighted average shares outstanding, basic and diluted ⁽¹⁾ 5,000,000 4,725,275

Basic and diluted net loss per common share $ (0.00 ) $ (0.00 )

~~(1)~~

~~Excluded an aggregate of up to 750,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters (see Note 5).~~

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

Table of Contents~~LIONHEART ACQUISITION CORPORATION II~~

~~CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY~~MSP RECOVERY, INC. and Subsidiaries

~~THREE AND SIX MONTHS ENDED JUNE~~Condensed Consolidated Statements of Changes in Equity

(Unaudited)

Three Months Ended September 30, ~~2020~~2022

~~(Unaudited)~~


	Class A Common Stock				Class V Stock
(In thousands except shares)	Shares		Amount		Shares			Amount		Additional Paid-in Capital		Members' Deficit		Accumulated Deficit			Non- Controlling Interests			Total Equity
Balance at June 30, 2022		66,051,029	$	7		3,154,473,292		$	315	$	187,269	$	—	$	(23,074	)	$	5,251,837		$	5,416,354
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		706,176		—		—			—		2,433		—		—			(1,156	)		1,277
Class A Issuances		6,152,404		—		(5,753,080	)		—		10,892		—		—			(10,272	)		620
Net loss		—		—		—			—		—		—		(463	)		(26,597	)		(27,060	)
Balance at September 30, 2022		72,909,609	$	7		3,148,720,212		$	315	$	201,656	$	—	$	(23,537	)	$	5,213,812		$	5,392,253

Class B
Common Stock Additional
Paid-in Accumulated Total
Stockholder’s
Shares Amount Capital Deficit Equity
Balance — January 1, 2020 — $ — $ — $ (1,000 ) $ (1,000 )

Issuance of Class B common stock to Sponsor ⁽¹⁾ 5,750,000 575 24,425 — 25,000

Net loss — — — — —

Balance — March 31, 2020 5,750,000 575 24,425 (1,000 ) 24,000

Net loss — — — — —

Balance — June 30, 2020 5,750,000 $ 575 $ 24,425 $ (1,000 ) $ 24,000

~~(1)~~

~~Included an aggregate of up to 750,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters (see Note 5).~~

Table of Contents

Nine Months Ended September 30, 2022


(In thousands except shares)	Shares		Amount		Shares			Amount		Additional Paid-in Capital		Members' Deficit			Accumulated Deficit			Non- Controlling Interests			Total Equity
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		7,582,668		—		3,154,473,292			315		48,773		184,528			—			5,406,736			5,640,352
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		7,908,198		1		—			—		22,895		—			—			(13,444	)		9,452
Class A Issuances		57,418,743		6		(5,753,080	)		—		119,923		—			—			(96,144	)		23,785
Net loss		—		—		—			—		—		—			(1,751	)		(87,684	)		(89,435	)
Balance at September 30, 2022		72,909,609	$	7		3,148,720,212		$	315	$	201,656	$	—		$	(23,537	)	$	5,213,812		$	5,392,253

Three Months Ended September 30, 2021


(In thousands)	Members' Deficit			Non- Controlling Interests		Total Equity
Balance at June 30, 2021	$	(133,634	)	$	4,332	$	(129,302	)
Contributions		—			—		—
Distributions		(2,109	)		—		(2,109	)
Net loss		(10,275	)		16		(10,259	)
Balance at September 30, 2021	$	(146,018	)	$	4,348	$	(141,670	)

Nine Months Ended September 30, 2021


(In thousands)	Members' Deficit			Non- Controlling Interests		Total Equity
Balance at December 31, 2020	$	(120,179	)	$	4,332	$	(115,847	)
Contributions		227			—		227
Distributions		(2,639	)		—		(2,639	)
Net loss		(23,427	)		16		(23,411	)
Balance at September 30, 2021	$	(146,018	)	$	4,348	$	(141,670	)

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

Table of Contents

MSP RECOVERY, INC. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine months ended September 30,
(In thousands)	2022			2021
Cash flows from operating activities:
Net loss (1)	$	(118,075	)	$	(23,411	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		254			256
Claims amortization expense		92,866			114
Paid in kind interest		34,475			19,557
Change in fair value of derivatives		10,065			—
Deferred income taxes		(857	)		—
Share based compensation		20,055			—
Change in fair value of warrant liability		1,619			—
PPP loan forgiveness		—			(1,043	)
Realized gain on equity securities		—			(201	)
Gain on debt extinguishment		(63,367	)		—
Change in operating assets and liabilities:
Accounts receivable		(7,525	)		—
Affiliate receivable (1)		2,296			755
Affiliate payable (1)		(25,430	)		1,868
Prepaid expenses and other assets		(32,609	)		(6,999	)
Commission payable		75			—
Accounts payable and accrued liabilities		15,394			2,848
Net cash used in operating activities		(70,764	)		(6,256	)
Cash flows from investing activities:
Additions to property, plant, and equipment		(1,863	)		(481	)
Additions to intangible assets		(2,700	)		—
Proceeds from sale of equity securities		—			4,450
Purchases of equity securities		—			(4,056	)
Purchase of securities to cover short position		—			(1,770	)
Net cash used in investing activities		(4,563	)		(1,857	)
Cash flows from financing activities:
Proceeds from Business Combination		12,009			—
Transaction costs incurred for the Business Combination		(49,638	)		—
Proceeds from related party loan (1)		125,759			—
Issuance of common stock		8,804			—
Issuance of temporary equity		2,417			—
Contribution from members		—			227
Distributions to members		—			(2,639	)
Net cash provided by (used in) financing activities		99,351			(2,412	)
Increase (decrease) in cash and cash equivalents and restricted cash		24,024			(10,525	)
Cash and cash equivalents and restricted cash at beginning of year		1,664			11,879
Cash and cash equivalents and restricted cash at end of period	$	25,688		$	1,354

Supplemental cash flow information:

Supplemental disclosure of non-cash investing and financing activities:
Purchase of intangible asset financed by note payable	$	—		$	500
Purchase of intangible asset through issuance of Class A common stock	$	10,000		$	—
Purchase of intangible asset in accrued expenses	$	48,167
Payment of professional fees through issuance of Class A common stock	$	1,326		$	—
Transaction costs incurred included in accounts payable and accrued liabilities	$	29,692		$	—
Cash paid during the period for:
Interest	$	—		$	22

Balances include related party transactions. See Note 13, Related Party, for further details.

~~LIONHEART ACQUISITION CORPORATION II~~

~~CONDENSED STATEMENT OF CASH FLOWS~~

~~SIX MONTHS ENDED JUNE 30, 2020~~

~~(Unaudited)~~

Cash Flows from Financing Activities:
Proceeds from issuance of Class B common stock to Sponsor 25,000
Proceeds from promissory note—related party 73,171
Payment of offering costs (79,793 )
Net cash provided by financing activities 18,378

Net Change in Cash 18,378
Cash — Beginning —
Cash — Ending $ 18,378

Non-cash investing and financing activities:
Deferred offering costs included in accrued offering costs $ 45,690

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

Table of Contents

MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~LIONHEART ACQUISITION CORPORATION II~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~NOTE~~Note 1. DESCRIPTION OF ~~ORGANIZATION AND~~ BUSINESS ~~OPERATIONS~~

~~Lionheart Acquisition Corporation II~~On May 23, 2022 (the “Closing Date”), MSP Recovery, Inc., a Delaware corporation (formerly known as Lionheart Acquisition ~~Corp.~~Corporation II (“LCAP,” the “Company,” or “MSP”) consummated the previously announced business combination pursuant to that certain Membership Interest Purchase Agreement, dated as of July 11, 2021 (as amended, the “MIPA”), by and among the Company, Lionheart II Holdings, LLC, a wholly owned subsidiary of the Company, MSP Recovery, LLC and combined and consolidated subsidiaries ("Legacy MSP"), the members of Legacy MSP (the ~~“Company”~~“Members”), and John H. Ruiz, in his capacity as the representative of the Members (the “Members’ Representative”). Pursuant to the MIPA, the Members sold and assigned all of their membership interests in Legacy MSP to the Company in exchange for non-economic voting shares of Class V common stock, par value $0.0001, of the Company (“Class V Common Stock”) ~~was incorporated~~and non-voting economic Class B Units of the Company (“Class B Units,” and each pair consisting of one share of Class V Common Stock and one Class B Unit, an “Up-C Unit”) (such transaction, the “Business Combination”). The Up-C Units are convertible into Class A Common Stock of the Company at the discretion of holder of the Up-C Unit. See Note 3, Business Combination for details. Subsequent to the Closing Date, the Company's sole asset is its equity interest in ~~Delaware on December 23, 2019.~~MSP Recovery, LLC. The Company is the managing member and therefore consolidates Legacy MSP.

Legacy MSP was ~~formed for the purpose~~organized in 2014 as a Medicaid and Medicare Secondary Pay Act recovery specialist. The Company utilizes its proprietary internal data analytics platform to review health claims assigned by secondary payers such as Health Plans, Management Service Organizations (“MSO”), providers of ~~effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).~~

~~Although~~medical services and Independent Physicians Associations. This platform allows the Company to identify claims cost recovery rights with potential recovery paths where claims either should not have been paid by the secondary payers or should have been reimbursed by third-party entities.

MSP seeks the assignment of recovery rights from secondary payers by acquiring the recovery rights to claims from secondary payers via Claims Cost Recovery Agreements (“CCRAs”). Prior to executing a CCRA, the Company utilizes its proprietary internal data analytics platform to review the set of claims and identify claims with probable recovery paths. MSP’s assets are these irrevocable assignments of health claims recovery rights that are automatic, all-encompassing and superior to other interests supported by Federal and State laws and regulations. MSP’s operations are primarily conducted in the U.S. and Puerto Rico.

Investment Capacity Agreement

On September 27, 2021, the Company entered into an Investment Capacity Agreement (the “ICA”) providing for potential future transactions regarding select healthcare claims recovery interests with its investment partner, Virage Capital Management LP (“Virage”), which transactions may include the sale of claims by MSP. The ICA provides that the maximum value of such claims will be $3 billion.

When the Company takes an assignment, the Company takes an assignment of the entire recovery but often has a contractual obligation to pay the assignor 50% of any recoveries. This 50% interest typically is retained by the assignor (the “Retained Interest”), although in some cases, the Company has acquired all of the recoveries, and the applicable assignor has not kept any Retained Interest. The Retained Interest is not an asset of the Company, but an obligation to pay these assignors, with the Company keeping the other 50% interest of any recoveries. Virage’s funding in connection with future transactions generally will be used to purchase Retained Interests from existing assignors or new MSP assignors, although its funds can also be used to buy 50% of the recoveries from the Company, in the event the applicable assignor did not retain any Retained Interest. In connection with transactions consummated under the ICA, the Company may receive certain fees, including a finder's fee for identifying the recoveries and a servicing fee for servicing the claims.

Pursuant to the ICA, the Company will assist Virage in acquiring these Retained Interests for a cash price. Virage will be paid the recovery generated from the purchased Retained Interests when received through litigation or settlements. The ICA is separate and distinct from the equity investment in the Company by VRM MSP (an affiliate of Virage).

LifeWallet

On January 10, 2022, the Company announced the launch of LifeWallet, LLC (“LifeWallet”). LifeWallet is being designed to help first responders and healthcare providers quickly and easily access patient medical histories. LifeWallet is part of MSP Recovery’s Chase to Pay platform, providing real-time analytics at the point of care, helping identify the primary insurer, assisting providers in receiving reasonable and customary rates for accident-related treatment, shortening the Company's collection time frame, and increasing revenue visibility and predictability. The Company absorbed part of the technology behind LifeWallet through an employment agreement with the developer of the technology. As such as of September 30, 2022, the Company's investment related to LifeWallet included in the condensed consolidated balance sheets was limited to activity and expenses incurred during the nine months ended September 30, 2022. Through the date the financial statements were issued, LifeWallet has committed to advertising costs within the next 12 months of approximately $1.7 million.

Table of Contents

MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Committed Equity Facility

On May 17, 2022, the Company entered into a ~~particular industry or sector for purposes~~Company Common Stock Purchase Agreement (the “Purchase Agreement”) with an affiliate of ~~consummating a~~Cantor Fitzgerald (“CF”). Pursuant to the Purchase Agreement, after the closing of the Business Combination, the Company ~~intends~~will have the right to ~~focus~~sell to CF from time to time at its ~~search on businesses that apply innovative digital technologies and technology-enhanced services and solutions~~option up to the identification, design, development, construction, operation, financing, management and disposition of real estate properties, commonly referred to as “PropTech.” The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of June 30, 2020, the Company had not commenced any operations. All activity for the period from December 23, 2019 (inception) through June 30, 2020 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income$1 billion in ~~the form of interest income from the proceeds derived from the Initial Public Offering.~~

The registration statement for the Company’s Initial Public Offering was declared effective on August 12, 2020. On August 18, 2020, the Company consummated the Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the shares of Class A common stock ~~included in~~shares, subject to the ~~Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $200,000,000, which is described in Note 3.~~

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 650,000 units (the “Private Placement Units”) at a price of $10.00 per Private Placement Unit in a private placement to Lionheart Equities, LLC, a Delaware Limited Liability Company (the “Sponsor”),terms, conditions and ~~Nomura Securities International, Inc. (“Nomura”), an underwriter in the Initial Public Offering, generating gross proceeds of $6,500,000, which is described in Note 4.~~

Following the closing of the Initial Public Offering on August 18, 2020, an amount of $200,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Units was placed in a trust account (the “Trust Account”) located in the United States and invested only in U.S. government securities, within the meaninglimitations set forth in ~~Section 2(a)(16)~~the Purchase Agreement.

Sales of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7shares of the ~~Investment Company Act~~Company’s common stock to CF under the Purchase Agreement, and the timing of ~~1940, as amended (the “Investment Company Act”), as~~any such sales, will be determined by the Company ~~until~~from time to time in its sole discretion and will depend on a variety of factors, including, among other things, market conditions, the ~~earlier of: (i)~~trading price of the common stock, as well as determinations by the Company about the use of proceeds of such common stock sales. The net proceeds from any such sales under the Purchase Agreement will depend on the frequency with, and the price at, which the shares of common stock are sold to CF.

Upon the initial satisfaction of the conditions to CF’s obligation to purchase shares of common stock set forth under the Purchase Agreement, including the completion of ~~a Business Combination~~due diligence activities and ~~(ii)~~registering shares through an S-1 filing, the ~~distribution~~Company will have the right, but not the obligation, from time to time, at its sole discretion and on the terms and subject to the limitations contained in the Purchase Agreement, until no later than the first day of the ~~funds~~month following the 36 month anniversary of the date that the registration statement of the shares is declared effective, to direct CF to purchase up to a specified maximum amount of common stock as set forth in the ~~Trust Account, as described below.~~

~~On August 20, 2020,~~Purchase Agreement by delivering written notice to CF prior to the ~~underwriters notified the Company~~commencement of ~~their intention to exercise their over-allotment option in full, resulting in an additional 3,000,000 Units issued~~trading on ~~August 24, 2020 for $30,000,000. A total of $30,000,000 was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $230,000,000.~~

Transaction costs amounted to $13,128,937 consisting of $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting fees and $478,937 of other offering costs. In addition, at August 18, 2020, cash of $2,039,384 was held outsideany trading day. The purchase price of the ~~Trust Account (as defined below) and is available for the payment of offering costs and for working capital purposes.~~

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurancecommon stock that the Company elects to sell to CF pursuant to the Purchase Agreement will be able to complete a Business Combination successfully. The Company must complete a Business Combination with one or more target businesses that together have an aggregate fair market value of at least 80%98% of the ~~assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time~~volume-weighted average price of the ~~agreement~~common stock during the applicable purchase date on which the Company has timely delivered a written notice to enter into a Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient forCF, directing it ~~not~~ to ~~be required to register as an investment company~~purchase common stock under the ~~Investment~~Purchase Agreement.

Assignment and Sale of Proceeds Agreement

On June 30, 2022, the Company ~~Act.~~

~~The Company will provide its holders~~entered into an Assignment and Sale of Proceeds Agreement (the “Assignment Agreement”) and a Recovery Services Agreement (the “Services Agreement” and collectively, the ~~outstanding Public Shares (the “public stockholders”~~“Agreements”) with the ~~opportunity~~Prudent Group (“Prudent”) in order to ~~redeem all or~~monetize up to $250 million of the value of the Company’s net recovery interest in claim demand letters that the Company has commenced sending to insurers who admitted they had primary payer responsibility for the underlying accidents to the federal government (“MSPR’s Net Recovery Proceeds”).

Pursuant to the Agreements, at the Company’s sole and absolute discretion, the Company has the right to direct Prudent to acquire, on a ~~portion~~non-recourse basis, a percentage of ~~their Public Shares upon~~MSPR’s Net Recovery Proceeds, up to an aggregate of $250 million, at a purchase price of 90% of MSPR's Net Recovery Proceeds of such claim.

Under the ~~completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether~~Services Agreement, the Company will ~~seek stockholder approval~~service and recover on the demand letters and will retain any revenues generated in excess of ~~a Business Combination or conduct a tender offer~~the amount received from Prudent, plus up to an 18% annual return on the amount Prudent paid for MSPR’s Net Recovery Proceeds. Prudent may terminate the Services Agreement upon sixty (60) days prior written notice to the Company.

The Company plans to utilize the Assignment Agreement as funding is needed.

Liquidity

As an early-stage growth company, the Company has incurred substantial net losses since inception. Our liquidity will depend on our ability to generate substantial claims recovery income and claims recovery services income in the near future. Our principal liquidity needs have been, and will continue to be, capital expenditures, working capital and claims financing obligation. Our capital expenditures support investments in our underlying infrastructure to enhance our solutions and technology for future growth. We expect our capital expenditures to increase primarily due to investments in our technology stack. Our strategy includes the expansion of our existing solutions and the development of new solutions, which will require cash expenditures over the next several years and the Company anticipates that it will be ~~made~~funded primarily by cash provided by operating activities and financing activities through resources noted below. We also expect our operating expenses to increase as we hire additional employees to support to the claim recovery team. We expect these investments to be a key driver of our long-term growth and competitiveness but to negatively impact our free cash flow.

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MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company anticipates funding to be available from the CF Purchase Agreement, Prudent Assignment Agreement and the ICA, as noted above. Additionally, on June 16, 2022, the Company ~~solely~~executed a promissory note with John H. Ruiz and Frank C. Quesada, the Company’s Chief Executive Officer and director and Chief Legal Officer and director, respectively, to provide operating cash to the Company. The aggregate principal amount was $112.8 million and bears interest at an annual rate of 4%, which is payable in ~~its discretion.~~kind. The ~~public stockholders will be entitled to redeem their Public Shares for a pro rata~~promissory note matures on the four year anniversary of issuance. A portion of the proceeds under the MSP Principal Promissory Note in an amount ~~then~~equal to $36.5 million was advanced to MSP Recovery Law Firm, an affiliate of certain Members (the “Law Firm”) for certain operating expenses as contemplated by the Legal Services Agreement. The MSP Principals Promissory Note contains customary events of default that would allow the MSP Principals to declare the MSP Principals Promissory Note immediately due and payable or the MSP Principals Promissory Note will immediately and automatically become due and payable without notice, presentment, demand, protest or other request of any kind. There were no events of default during the nine months ended September 30, 2022. This amount is reflected in prepaid expenses and other current assets within the condensed consolidated balance sheets and had a balance of $31.9 million as of September 30, 2022. Actual results, including sources and uses of cash, may differ from our current estimates due to the inherent uncertainty involved in making those estimates and any such differences may impact the Company’s ability to continue as a going concern in the ~~Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account~~future.

Note 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption rights upon the completionPrinciples of ~~a Business Combination with respect to the Company’s warrants.~~Consolidation

Basis of presentation

~~LIONHEART ACQUISITION CORPORATION II~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptionsThese statements have been prepared pursuant to the ~~tender offer~~ rules and regulations of the ~~U.S.~~ Securities and Exchange Commission ~~(“SEC”~~(the “SEC”) and, ~~file tender offer documents~~in accordance with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxythose rules and regulations do not ~~pursuant to the tender offer rules. If the Company seeks stockholder approval~~include all information and footnote disclosures normally included in connection with a Business Combination, the Company’s Sponsor, officers and directors and Nomura have agreed to vote their Founder Shares (as defined in Note 5), Private Placement Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.

If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.

The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder’s Shares, Private Placement Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would affect the substance or timing of the ability of holders of the Public Shares to seek redemption in connection with a Business Combination or the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.

The Company will have until February 18, 2022 to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter subject to lawfully available funds therefor, redeem 100% of the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

The Sponsor and Nomura have agreed to waive their liquidation rights with respect to the Private Placement Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders or any of their respective affiliates acquire Public Shares after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).

In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

~~LIONHEART ACQUISITION CORPORATION II~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Basis of Presentation~~

~~The accompanying unaudited condensed~~annual financial statements ~~have been~~ prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated under the Securities Act. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows.. In the opinion of management, the ~~accompanying~~ unaudited condensed consolidated interim financial statements ~~include~~(the “Financial Statements”) reflect all adjustments, ~~consisting~~which consist only of a normal recurring ~~nature, which are~~adjustments, necessary ~~for a fair presentation~~to state fairly the results of ~~the~~operations, financial ~~position, operating results~~condition and cash flows for the interim periods ~~presented.~~

~~The accompanying~~presented herein. Prior to the Business Combination, the unaudited condensed consolidated interim financial statements reflect Legacy MSP.

These Financial Statements should be read in conjunction with the ~~Company’s prospectus~~combined and consolidated financial statements and notes thereto included in Legacy MSP’s 2021 and 2020 combined and consolidated financial statements. The year-end consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by GAAP. The results of operations for ~~its Initial Public Offering as filed with the SEC on August 14, 2020, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on August 24, 2020. The~~any interim ~~results for the three and six months ended June 30, 2020~~period are not necessarily indicative of the results of operations to be expected for the ~~year ending December 31, 2020 or for any future periods.~~full year.

All intercompany transactions and balances are eliminated from the condensed consolidated financial statements.

Principles of consolidation

~~Emerging Growth Company~~

The Company ~~is an “emerging growth company,” as defined in Section 2(a)~~consolidates all entities that it controls through a majority voting interest or otherwise and the accompanying condensed consolidated financial statements include the accounts of the ~~Securities Act,~~Company’s wholly owned subsidiaries and these entities for which the Company has a controlling interest in. The Company also consolidates all entities that it controls as ~~modified by~~ the ~~Jumpstart Our Business Startups Act~~primary beneficiary of ~~2012 (the “JOBS Act”~~a variable interest entity (“VIE”),. Under the VIE model, management first assesses whether the Company has a variable interest in an entity, which would include an equity interest. If the Company has a variable interest in an entity, management further assesses whether that entity is a VIE, and ~~it may take advantage of certain exemptions from various reporting requirements~~if so, whether the Company is the primary beneficiary under the VIE model. Generally, entities that are ~~applicable~~organized similar to ~~other public companies~~a limited partnership, in which a general partner (or managing member) make the most relevant decisions that affect the entity’s economic performance, are considered to be VIEs which would require consolidation, unless the limited partners have substantive kickout or participating rights. Entities that do not ~~emerging growth companies including, but not limited~~qualify as VIEs are assessed for consolidation under the voting interest model.

Under the VIE model, an entity is deemed to ~~not being required~~be the primary beneficiary of a VIE if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to ~~comply with~~direct the ~~independent registered public accounting firm attestation requirements~~activities of ~~Section 404~~a VIE that most significantly affect the entity’s economic performance and (b) the obligation to absorb losses of the ~~Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions~~entity or the right to receive benefits from the ~~requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.~~

~~Further, Section 102(b)(1) of~~entity that could potentially be significant to the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies,VIE. Management determines whether the Company ~~as an emerging growth company, can adopt~~is the ~~new or revised standard~~primary beneficiary of a VIE at the time ~~private companies adopt the new or revised standard.~~it becomes involved with a VIE and reconsiders that conclusion at each reporting date. This ~~may make comparison~~analysis includes an evaluation of the Company’s ~~financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using~~control rights, as well as the ~~extended transition period difficult or impossible because~~economic interests that the Company holds in the VIE, including indirectly through related parties. As a result of the ~~potential differences in accounting standards used.~~Business Combination, the Company consolidates MSP Recovery, LLC under the VIE model.

Estimates and Assumptions

~~Use of Estimates~~

The preparation of condensed consolidated financial statements in conformity with GAAP requires ~~the Company’s~~ management to make estimates and assumptions that affect the reported amounts of assets, ~~and~~ liabilities, ~~and~~the disclosure of contingent assets and liabilities at the

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MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

date of the financial statements and ~~the~~ reported amounts of revenues and expenses during the reporting periods.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual Actual results could differ ~~significantly~~ from ~~those~~the Company’s estimates. Estimates are periodically reviewed considering changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Significant estimates and assumptions reflected in these condensed consolidated financial statements include but are not limited to claims recovery income and claims recovery service income recognition, recoverability of long-lived assets and cost of claims recoveries.

Segments

Operating segments are defined as components of an entity for which separate financial information is available and regularly reviewed by the chief operating decision maker (“CODM”). The Company manages its operations as a single segment for the purposes of assessing performance and making decisions. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. In addition, all of the Company's revenues and long-lived assets are attributable primarily to operations in the United States and Puerto Rico for all periods presented.

COVID-19 Impact

The COVID-19 pandemic has resulted, and could continue to result, in significant economic disruption. Federal, state and local governments mobilized to implement containment mechanisms to minimize impacts to their populations and economies. Various containment measures, which include the quarantining of cities, regions and countries, while aiding in the prevention of further outbreak, have resulted in a severe drop in general economic activity. In addition, the global economy has experienced a significant disruption to global supply chains. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak. As of September 30, 2022, COVID-19 has not had a significant impact on the Company.

Concentration of credit risk and Off-Balance Sheet Risk

Cash and cash equivalents and affiliate receivable are financial instruments that are potentially subject to concentrations of credit risk. See Note 13, Related Party, for disclosure of affiliate receivables. The Company’s cash and cash equivalents and restricted cash are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. The Company has no other financial instruments with off-balance-sheet risk of loss.

Cash and Cash Equivalents and Restricted Cash

The Company considers all ~~short-term~~highly liquid investments purchased with an original ~~maturity~~maturities of three months or less ~~when purchased~~ to be cash equivalents.

Restricted Cash consists of cash held in escrow related to the Prepaid Forward Agreement with CF. See Note 16, Derivative Liability, for more information on the Prepaid Forward Agreement.

Fair Value Measurements

The Company applies the provisions of Accounting Standards Codification ("ASC") 820, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company also applied the provisions of the subtopic to fair value measurements of non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis. The subtopic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The subtopic also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value framework requires the Company to categorize certain assets and liabilities into three levels, based upon the assumptions used to price those assets or liabilities. The three levels are defined as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Quoted prices for similar assets and liabilities in active markets or inputs that are observable.

Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The Company has determined the estimated fair value of its financial instruments based on appropriate valuation methodologies; however, for Level 2 and Level 3 inputs considerable judgment is required to develop these estimates. Accordingly, these estimated fair values are not necessarily indicative of the amounts the Company could realize in a current market exchange. The estimated fair values can be materially affected by using different assumptions or methodologies. The methods and assumptions used in estimating the fair

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MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

values of financial instruments are based on carrying values and future cash flows. As of September 30, 2022 and December 31, 2021, the Company did not hold any Level 2 or Level 3 assets or liabilities.

Cash and cash equivalents and restricted cash are stated at cost, which approximates their fair value. The carrying amounts reported in the balance sheets for affiliate receivable, accounts payable, affiliate payable and accrued liabilities approximate fair value, due to their short-term maturities.

The Company’s investments in rights to claim recovery cash flows are carried at cost as noted in Note 4, Asset Acquisitions. Outstanding borrowings that qualify as financial instruments are carried at cost, which approximates their fair value as of September 30, 2022 and December 31, 2021.

Equity Method Investments

Equity investments that are not consolidated, but over which the Company exercises significant influence, are accounted for in accordance with ASC 323, “Investments—Equity Method and Joint Ventures” (“ASC 323”). Whether or not the Company exercises significant influence with respect to an investee company depends on an evaluation of several factors including, among others, representation on the investee company’s board of directors and ownership level. An entity is presumptively assumed to have significant influence in a corporation when it holds 20% or more of the voting stock of the investee company, or at a lower level (e.g., 3% to 5%) for entities that track separate members capital accounts.

Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s condensed consolidated balance sheets and statements of operations; however, the Company’s share of the earnings or losses of the investee company is reflected in the caption “Other income” in the condensed consolidated statements of operations. The Company’s carrying value in equity method investee companies is not reflected in the Company’s condensed consolidated balance sheets as of September 30, 2022 or December 31, 2021 as the carrying value is zero. When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s condensed consolidated financial statements unless the Company has guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

Property, Plant and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Major expenditures for property and equipment and those that substantially increase useful lives are capitalized. When assets are sold or otherwise disposed of, costs and related accumulated depreciation are removed from the financial statements and any resulting gains or losses are included in general and administrative expenses within our condensed consolidated statements of operations.

The Company provides for depreciation and amortization on property and equipment using the straight-line method to allocate the cost of depreciable assets over their estimated lives as follows:


Office and Computer Equipment	3 years
Furniture and Fixtures	3 years
Leasehold Improvements	Lesser of lease term or estimated life

Internal Use Software

Internal-use software development costs incurred in the preliminary project stage are expensed as incurred; costs incurred in the application and development stage, which meet the capitalization criteria, are capitalized and amortized on a straight-line basis over the estimated useful life of the asset and costs incurred in the post-implementation/operations stage are expensed as incurred. Further, internal and external costs incurred in connection with upgrades or enhancements are also evaluated for capitalization. If the software upgrade results in an additional functionality, costs are capitalized; if the upgrade only extends the useful life, it is expensed as occurred.

Intangible assets

In certain of its CCRAs, the Company makes upfront payments to acquire claims recovery rights from secondary payers, such as health plans, managed service organizations, providers or medical services and independent physicians associations. The Company recognizes intangible assets for costs incurred up front to acquire claims recovery rights from various assignors.

The Company amortizes capitalized costs associated with CCRAs over 8 years, based on the typical expected timing to pursue recovery through litigation, including through potential appeals.

Investment in rights to claim recovery cash flows

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MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As part of the Business Combination, the Company acquired rights to claims recovery cash flows. These assets were determined to be financial instruments under ASC 825. These assets are held at cost. As cash flows are received the Company evaluates, based on the projected cash flows, whether there was an excess of proceeds received (or receivable) over the portion of the financial asset deemed to be recovered. In the case of excess, the Company would recognize the excess as income in the same period and the remainder would reduce the asset value. In addition, the Company evaluates these assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset group are less than the carrying value, a write-down would be recorded to reduce the related asset group to its estimated fair value. There were no impairment indicators in the nine months ended September 30, 2022 and 2021.

Leases

Leases entered into by the Company, in which substantially all the benefits and risk of ownership are transferred to the Company, are recorded as obligations under capital leases. Obligations under capital leases, if any, reflect the present value of future lease payments, discounted at an appropriate interest rate, and are reduced by rental payments, net of imputed interest. Assets under capital leases are amortized based on the useful lives of the assets. All other leases are classified as operating leases, and leasing costs, including any rent holidays, leasehold incentives and rent concessions, are recorded on a straight-line basis over the lease term under general and administrative expense in the condensed consolidated statements of operations. See Note 8, Operating Leases, for more information.

Non-controlling Interests

As part of the Business Combination and described in Note 1, Description of Business, the Company became the managing member of MSP Recovery, LLC, which is consolidated as the Company controls the operating decisions of MSP Recovery, LLC. The non-controlling interest relates to the Up-C Units that are convertible into Class A Common Stock of the Company at the discretion of the holder of the Up-C Unit. The Up-C Unit holders retained approximately 99.76% of the economic ownership percentage of the Company as of the Closing Date. The non-controlling interest is classified as permanent equity within the unaudited condensed consolidated balance sheet of the Company. As of September 30, 2022, based on the Class A common stock issuances during the period, the non-controlling interest of Class V shareholders was 97.70%.

Changes in the Company’s ownership interest in MSP Recovery, LLC, due to Class V shareholders converting their shares to Class A, are accounted for as equity transactions. Each issuance of the Company's Class A Common Stock requires a corresponding issuance of MSP Recovery, LLC units to the Company. The issuance would result in a change in ownership and would reduce the balance of non-controlling interest and increase the balance of additional paid-in capital.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets, such as property and equipment, including capitalized software costs, and finite-lived intangibles such as claims recovery rights, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset group are less than the carrying value, a write-down would be recorded to reduce the related asset group to its estimated fair value. There were no impairment indicators in the nine months ended September 30, 2022 and 2021.

Claims Recovery

The Company’s primary income-producing activities are associated with the pursuit and recovery of proceeds related to claims recovery rights that the Company obtains through CCRAs, in which it becomes the owner of those rights. As a result, such income is not generated from the transfer of control of goods or services to customers, but from the proceeds realized from perfection of claims recoveries from rights the Company holds outright. The Company also generates revenue by providing claims recovery services to other entities outside of the Company.

Claims recovery income

The Company recognizes claims recovery income based on a gain contingency model – that is, when the amounts are reasonably certain of collection. This typically occurs upon reaching a binding settlement or arbitration with the counterparty or when the legal proceedings, including any appellate process, are resolved.

In some cases, the Company owes an additional payment to the original assignor in connection with the realized value of the recovery right. Claims recovery income is recognized on a gross basis, as the Company is entitled to the full value of proceeds, and makes a payment to the original assignor similar to a royalty arrangement. Such payments to prior owners are recognized as cost of claims recovery in the same period the claims recovery income is recognized.

When the Company becomes entitled to proceeds from the settlement of a claim recovery pursuit or proceeding, it recognizes the amount in accounts receivable.

Claims recovery service income, ASC 606, Revenue from Contracts with Customers

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MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The guidance under ASC 606, Revenue from Contracts with Customers, provides that an entity should apply the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

The Company derives revenues from contracts with customers primarily from claims recovery services arrangements (“claims recovery services”). Claims recovery services include services to related parties or third parties to assist those entities with pursuit of claims recovery rights. The Company has determined it has a single performance obligation for the series of daily activities that comprise claims recovery services, which are recognized over time using a time-based progress measure and are typically based on (1) budgeted expenses for the current month with an adjustment for the variance between budget and actual expenses from the prior month or (2) on a contingent basis dependent on actual settlements or resolved litigation. Amounts estimated and recognized, but not yet fully settled or resolved as part of litigation are recognized as contract assets. There were no contract assets at September 30, 2022 or December 31, 2021, as amounts associated with unresolved litigation were fully constrained.

Claims recovery services are generally paid in advance on a monthly basis. The Company did not ~~have~~recognize any material revenue for the nine months ended September 30, 2022 and 2021 for performance obligations that were fully satisfied in previous periods.

For the nine months ended September 30, 2022 and 2021, the majority of the Company’s claims recovery service income was related to a servicing agreement with VRM MSP, which was entered into on March 27, 2018. As part of the Business Combination, the Company acquired rights to cash ~~equivalents~~flows in the assets, after certain required returns to VRM MSP, that had been part of the servicing agreement. As part of this acquisition, the Company no longer receives service income from this agreement and instead recognizes revenue and reductions in the asset when cash flows are received as outlined in Note 4, Asset Acquisitions. For the three months ended September 30, 2022, the Company also recognized $5.0 million of ~~June 30, 2020 and December 31, 2019.~~servicing income related to a specific contract where the performance obligations were completed during the quarter.

~~LIONHEART ACQUISITION CORPORATION II~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~Income Taxes~~

The Company ~~follows~~does not have material unfulfilled performance obligation balances for contracts with an original length greater than one year in any years presented. Additionally, the Company does not have material costs related to obtaining a claims recovery service contract with amortization periods greater than one year for any period presented.

The Company applies ASC 606 utilizing the following allowable exemptions or practical expedients:

•

Exemption to not disclose the unfulfilled performance obligation balance for contracts with an original length of one year or less.

•

Practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

•

Election to present revenue net of sales taxes and ~~liability~~other similar taxes, if any.

•

Practical expedient not requiring the entity to adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Transfers of Claims Cost Recovery Rights to Others

In some cases, the Company has entered into arrangements to transfer CCRAs or rights to proceeds from CCRAs to other parties. The Company evaluates whether such transfers are sales of nonfinancial assets, sales of future revenues treated as debt, in-kind contributions to equity method investees, or other types of ~~accounting~~arrangements.

When they are treated as sales of nonfinancial assets, the Company recognizes a gain on the sale when control transfers to the counterparty based on the difference between the fair value of consideration (including cash) received and the recognized carrying value of the CCRAs. In some cases, such sales include variable consideration in the form of payments that will be made only upon achievement of certain recoveries, or based on a percentage of actual recoveries. The Company estimates and constrains the amounts that will ultimately be realized based on these variable payment terms and includes those amounts in the determination of gain or loss; the gain or loss is subsequently updated based on changes in those estimates.

In other cases, such transfers are considered to be sales of future revenue that are debt-like in nature. These arrangements are recognized as debt based on the proceeds received, and are imputed an interest rate based on the expected timing and amount of payments to achieve contractual hurdles. These are subject to revisions of estimates of that timing and amount based on the contractual provisions and the Company’s assumptions from changes in facts and circumstances. Such changes are reflected through revision of the imputed interest rate on a cumulative catch up basis.

Cost of Claims Recoveries

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MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Costs of claims recoveries consist of all directly attributable costs specifically associated with claims processing activities, including contingent payments to assignors (i.e., settlement expenses).

Claims amortization expense

Claims amortization expense includes amortization of CCRAs acquired as part of the business combination, shown as Intangibles, net in the condensed consolidated balance sheets, and CCRA intangible assets for which the Company made upfront payments for claims recovery rights. For further details on CCRAs see Note 7, Intangible Assets, Net.

Income Taxes

Our income ~~taxes under ASC 740, “Income Taxes.” Deferred~~tax expense, deferred tax assets and liabilities, ~~are recognized~~and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. As a result of the ~~estimated future~~Business Combination, the Company became the sole managing member of MSP Recovery, LLC, which is treated as a partnership for U.S. federal, state and local income tax ~~consequences attributable~~purposes. As a partnership, MSP Recovery, LLC is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by MSP Recovery, LLC is passed through to and included in the taxable income or loss of its partners, including MSP Recovery, Inc. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to the Company’s allocable share of income of MSP Recovery, LLC.

The Company's deferred tax balances reflect the impact of temporary differences between the ~~financial statements~~ carrying ~~amounts~~amount of ~~existing~~ assets and liabilities and ~~their respective~~the Company's tax ~~bases. Deferred tax assets and liabilities~~basis. The balances are ~~measured using enacted~~stated at the tax rates ~~expected to apply to taxable income~~ in effect when the ~~years in which those~~ temporary differences are expected to be recovered or settled. The ~~effect on~~Company reviewed the anticipated future realization of the tax benefit of the Company's existing deferred tax assets and ~~liabilities of a change in tax rates~~concluded that it is ~~recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.~~

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not tothat all of the deferred tax assets will not be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accruedrealized in the future.

Recent Accounting Pronouncements

New Accounting Pronouncements Recently Adopted

ASU 2019-12, Simplifying the Accounting for interest and penalties as of June 30, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

~~The provision~~Income Taxes (Topic 740). In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This standard simplifies the accounting for income taxes ~~was deemed~~by eliminating certain exceptions to ~~be de minimis~~the guidance in ASC 740 related to the approach for intra-period tax allocation, the ~~three~~methodology for calculating income taxes in an interim period and ~~six months ended~~the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. The Company adopted this guidance on January 1, 2022 and it had no material impact on our condensed consolidated financial statements.

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This standard is effective for all entities as of March 12, 2020 through December 31, 2022. Early adoption is permitted. The Company adopted this guidance on January 1, 2022 and it had no material impact on our condensed consolidated financial statements.

ASU 2020-06, Debt — Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815- 40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. On August 5, 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The amendments simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted. The Company adopted this guidance on January 1, 2022 and it had no material impact on our condensed consolidated financial statements.

ASU 2022-03, Fair Value Measurement (Topic 820) - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. On June 30, ~~2020.~~

~~On March 27, 2020, President Trump signed~~2022, the ~~Coronavirus Aid, Relief,~~FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendment clarifies that contractual sale restrictions should not be considered when measuring the equity security's fair value and ~~Economic Security “CARES” Act into law.~~prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. The ~~CARES Act includes several significant business tax provisions~~standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024. Early adoption is permitted. The Company adopted this guidance in June 2022, which resulted in the Company recognizing the assets acquired as part of the Business Combination at values that ~~among other things, would eliminate~~were not discounted for contractual sale restrictions, which had a material impact on the ~~taxable income limit for certain net operating losses (“NOL) and allow businesses to carry back NOLs arising~~Company's condensed consolidated financial statements in ~~2018, 2019 and 2020~~relation to the ~~five prior years, suspend~~asset acquisitions as noted in Note 4, Asset Acquisitions.

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MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

New Accounting Pronouncements Issued but Not Yet Adopted

In February 2016, the ~~excess business loss rules, accelerate refunds~~FASB issued ASU 2016-02, Leases, to increase transparency and comparability among organizations by recognizing right of ~~previously generated corporate alternative minimum tax credits, generally loosen~~use assets and lease liabilities on the ~~business interest limitation under IRC section 163(j) from 30 percent~~balance sheet and disclosing key information about leasing arrangements. In July 2018, ASU 2018-10, Codification Improvements to ~~50 percent among other technical corrections included~~ASC 2016-02, Leases, was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Furthermore, in July 2018, the FASB issued ASU 2018-11, Leases: Targeted Improvements, which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the ~~Tax Cuts~~period of adoption. Furthermore, in March 2020, ASU 2020-03, Codification Improvements to Financial Instruments, Leases, was issued to provide more detailed guidance and ~~Jobs Act tax provisions.~~

~~Net Loss per Common Share~~

Net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period, excluding shares of common stock subject to forfeiture. Weighted average shares were reducedadditional clarification for ~~the effect of an aggregate of 750,000 shares of common stock that were subject to forfeiture if the over-allotment option was not exercised by the underwriters (see Note 5). At~~implementing ASU 2016-02.Additionally, on June ~~30,~~3, 2020, the ~~Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into shares of common stock and then share in~~FASB deferred by one year the ~~earnings~~effective date of the ~~Company. As a result, diluted loss per share is~~new leases standard for private companies, private not-for-profits and public not-for-profits that have not yet issued (or made available for issuance) financial statements reflecting the ~~same as basic loss per share~~new standard. Furthermore, in June 2020, ASU 2020-05,Revenue from Contracts with Customers and Leases, was issued to defer effective dates of adoption of the new leasing standard for ~~the~~fiscal years beginning after December 15, 2021, and interim periods ~~presented.~~

~~Concentration of Credit Risk~~

~~Financial instruments that potentially subject~~within fiscal years beginning after December 15, 2022.While the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account.

~~Fair value of Financial Instruments~~

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.

~~Recent Accounting Standards~~

~~Management~~ does not ~~believe that any recently issued, but not yet effective, accounting standards update, if currently adopted,~~anticipate the implementation would have a material effect on the Company’s condensed consolidated operating results, cash flows, financial ~~statements.~~condition and related disclosures, the Company is currently evaluating the effect that implementation of this standard will have.

ASU 2016-13, Financial Instruments –Credit Losses (Topic 326): Measurement of Credit Losses. In 2016 and subsequently, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments including subsequent amendments to the initial guidance: ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825. Financial Instruments, ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief, ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 326, and ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures and related amendments require credit losses on financial instruments measured at amortized cost basis to be presented at the net amount expected to be collected, replacing the current incurred loss approach with an expected loss methodology that is referred to as CECL. This ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.While the Company does not anticipate the implementation would have a material effect on the Company’s condensed consolidated operating results, cash flows, financial condition and related disclosures, the Company is currently evaluating the effect that implementation of this standard will have.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1 million of such Working Capital Loans may be convertible into units identical to the Private Placement Units at a price of $10.00 per unit.

The Company is subject to certain legal proceedings, claims, investigations, and administrative proceedings in the ordinary course of its business. The Company records a provision for a liability when it is both probable that the liability has been incurred and the amount of the liability can be reasonably estimated. These provisions, if any, are reviewed and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Depending on the nature and timing of any such proceedings that may arise, an unfavorable resolution of a matter could materially affect the

Company’s future consolidated results of operations, cash flows or financial position in a particular period. As of September 30, 2022, there was no material pending or threatened litigation against us.

The Company pursues claims recoveries through settlement, arbitration and legal proceedings. The accounting policy for these activities is discussed under Claims recovery income in Note 2, Basis of presentation and summary of significant accounting policies.

Approximately 88% of the Company's expected recoveries arise from claims being brought under the Medicare Secondary Payer Act. This law allows the Company to pursue recoveries against primary payers for reimbursement of medical expenses that the Company's assignors paid for when primary payers (i.e. liability insurers) were responsible for payment. The Repair Abuses of MSP Payments Act ("RAMP Act") introduced to the U.S. House of Representatives in June 2022 seeks to repeal the private cause of action under the Medicare Secondary Payer Act – a fundamental component of how the Company is able to calculate damages. The Medicare Secondary Payer Act’s private cause of action incentivizes private parties, such as MSP Recovery, to pursue reimbursement of conditional payments by rewarding them with double damages. The repeal of the private cause of action would remove the possibility of recovering double damages. If the Medicare Secondary Payer Act is substantially changed or repealed, or if the RAMP Act were enacted to apply retroactively, it could significantly reduce the Company's potential recoveries and have a material adverse effect on its business, financial condition and results of operations.

Note 15. NET LOSS PER COMMON SHARE

Basic earnings per share of Class A common stock ~~and the warrants issued as part of such units (and any shares of Class A~~is computed by dividing net income attributable to common stock issuable upon the exercise of the Private Placement Warrants and warrants included as part of the units that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder’s Shares) will be entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder’s Shares, only after conversion to the Company’s Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

~~Underwriting Agreement~~

The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

~~Forward Purchase Agreement~~

Nomura entered into a forward purchase agreement with the Company, which provides for the purchase by Nomura of the Company’s Public Shares for an aggregate purchase price of up to $100.0 million through, other than as described below, open market purchases or privately negotiated transactions with one or more third parties. In lieu of purchasing Public Shares in the open market or privately negotiated transactions, up to $85.0 million of such aggregate purchase price may instead be in the form of an investment in the Company’s equity securities on terms to be mutually agreed between Nomura and the Company, to occur concurrently with the closing of a Business Combination. In consideration of the forward purchase commitment, the Company will pay to Nomura (i) an amount equal to 2% of the aggregate purchase price of the purchases or investment requestedshareholders by the Company pursuant to the forward purchase agreement (the “commitment fee”) plus (ii) an amount equal to the internal charges and carrying costs incurred by Nomura in connection with the forward purchase commitment (the “commitment carrying costs”) on a monthly basis during the period from and including the date the Company executes a definitive agreement for a Business Combination through the earlier of (x) the consummation of a Business Combination and (y) the date the Company notifies Nomura in writing that the Company does not require Nomura to provide the forward purchase commitment. Up to $1.0 million of aggregate commitment carrying costs, to the extent timely paid pursuant to the forward purchase agreement, may be credited against the commitment fee. If the Company requests that Nomura purchase or invest the full $100.0 million forward purchase commitment pursuant to the forward purchase agreement, a maximum of $1.0 million of the commitment carrying costs will not be credited toward the commitment fee. The decision to make such an investment in other equity securities will not reduce the aggregate purchase price. However, Nomura will be excused from its purchase obligation in connection with a specific business combination unless, within five business days following written notice delivered by the Company of its intention to enter into such Business Combination, Nomura notifies the Company that it has decided to proceed with the purchase in whole or in part. Nomura may decide not to proceed with the purchase for any reason, including, without limitation, if it has determined that such purchase would constitute a conflict of interest. Nomura will also be restricted from making purchases if they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act.

Nomura has also indicated its intent, if so requested by the Company, to use its commercially reasonable efforts to underwrite, arrange and/or syndicate up to $400 million of additional financing for the Company in the form of equity or debt (or a combination thereof) in connection with a Business Combination, subject to market conditions and on terms and conditions satisfactory in all respects to Nomura in its sole judgment and determination.

~~LIONHEART ACQUISITION CORPORATION II~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

~~Right of First Refusal~~

The Company has agreed that, if the investor offers to purchase any securities under the forward purchase agreement, it will have a “right of first refusal” to act as a bookrunner on any capital markets transaction issued in order to complete a Business Combination. In addition, so long as the investor owns 5% or more of the outstanding common stock of the post-business combination company on a fully-diluted basis, the Sponsor has agreed to use its best efforts and influence on the successor company to offer the investor a bookrunner role on any capital markets transaction. Any such bookrunner role will be pursuant to a separate agreement containing terms and conditions customary for the investor and mutually agreed upon by the Company or its successor company, as applicable. Notwithstanding the foregoing, the right of first refusal will not have a duration of more than three years from the date of commencement of sales of the Initial Public Offering.

~~NOTE 7. STOCKHOLDER’S EQUITY~~

~~Preferred Stock~~ — On January 30, 2020, the Company amended Certificate of Incorporation such that the Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. At June 30, 2020, there were no shares of preferred stock issued or outstanding. At December 31, 2019, the Company had no authorized, issued or outstanding shares of preferred stock.

~~Class A Common Stock~~ — On January 30, 2020, the Company amended its Certificate of Incorporation such that the Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At June 30, 2020, there were no shares of Class A common stock issued or outstanding. At December 31, 2019, the Company had no authorized, issued or outstanding shares of Class A common stock.

~~Class B Common Stock~~ — On January 30, 2020, the Company amended its Certificate of Incorporation such that the Company is authorized to issue 10,000,000 shares of common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At June 30, 2020, there were 5,750,000 shares of common stock issued and outstanding. At December 31, 2019, the Company had no issued or outstanding shares of Class B common stock.

Holders of Class A common stock and Class B common stock are entitled to one vote for each share. Holders of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders, except as required by law.

The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that theweighted-average number of shares of Class A common stock ~~issuable upon conversion of all shares of Class B common stock will equal, in~~outstanding during the ~~aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares~~period. Diluted earnings per share of Class A common stock ~~and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or~~is computed by dividing net income attributable to ~~be issued, to any seller in a Business Combination).~~

~~Warrants~~ — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

~~The Company will not be obligated to deliver any shares of Class A~~ common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue any shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.

~~LIONHEART ACQUISITION CORPORATION II~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~JUNE 30, 2020~~

~~(Unaudited)~~

The Company has agreed that as soon as practicable, but in no event later than 30 days, after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statementshareholders adjusted for the ~~registration under the Securities Act~~assumed exchange of the shares of Class A common stock issuable upon exercise of the warrants and thereafter will use its reasonable best efforts to cause the same to become effective within 60 business days following the Business Combination and to maintain a current prospectus relating to the Class A common stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effectiveall potentially dilutive securities, by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.

~~Once the warrants become exercisable, the Company may redeem the Public Warrants:~~

~~in whole and not in part;~~

~~at a price of $0.01 per warrant;~~

~~upon not less than 30 days’ prior written notice of redemption to each warrant holder; and~~

if, and only if, the reported last reported sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending the third trading day prior to the date on which the Company sends the notice of redemption to each warrant holder.

If the Company calls the Public Warrants for redemption for cash, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price andweighted-average number of shares of Class A common stock ~~issuable upon exercise~~outstanding adjusted to give effect to potentially dilutive elements. Diluted loss per share for all period presented is the same as basic loss per share as the inclusion of the ~~warrants may~~potentially issuable shares would be ~~adjusted in certain circumstances including~~anti-dilutive.

Prior to the Business Combination, the equity structure of MSP Recovery, LLC included units which shared in the ~~event~~profits and losses of ~~a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below,~~MSP Recovery, LLC. In reviewing the ~~warrants will~~calculation of earnings per unit for periods prior to the Business Combination, the Company concluded that it resulted in values that would not be ~~adjusted~~meaningful to the users of the unaudited condensed consolidated financial statements. As such, earnings per share information for ~~issuance~~the three and nine months ended September 30, 2021 has not been presented. The basic and diluted earnings per share for the three and nine months ended September 30, 2022 represent income (loss) from only the period from the Closing Date to September 30, 2022 for the Company.

The following table sets forth the computation of basic and diluted earnings per share of Class A common stock:

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MSP RECOVERY, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)


(In thousands except shares and per share amounts)	Three months ended September 30, 2022			Nine months ended September 30, 2022
Numerator - basic and diluted:
Net loss	$	(27,060	)	$	(118,075	)
Less: Net loss attributable to MSP Recovery, LLC pre Business Combination		-			28,639
Less: Net loss attributable to the noncontrolling interest post Business Combination	$	26,597		$	87,685
Net loss attributable to common shareholders	$	(463	)	$	(1,751	)
Denominator - basic and diluted:
Weighed-average shares of Class A common stock outstanding		69,036,899			53,138,474

Earnings per share of Class A common stock - basic and diluted	$	(0.01	)	$	(0.03	)

Shares of the Company’s Class V common stock ~~at a price below its exercise price. Additionally,~~do not participate in ~~no event will~~the earnings or losses of the Company ~~be required to net cash settle~~and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class V common stock under the ~~warrants. If~~two-class method has not been presented.

In the calculation for earnings per share for the three and nine months ended September 30, 2022, the Company ~~is unable~~excluded from the calculation of diluted earnings per share 3,148,720,212 shares of Class V common stock, 3,916,725 Public Warrants outstanding, and 1,028,046,326 shares of New Warrants outstanding because their effect would have been anti-dilutive.

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Lionheart Acquisition Corporation II. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to Lionheart Equities, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’sItem 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations” regarding the Company’s~~Operations.

The following discussion and analysis provides information that MSP’s management believes is relevant to an assessment and understanding of MSP’s consolidated results of operations and financial ~~position, business strategy~~condition. The discussion should be read together with “Selected Historical Combined and Consolidated Financial and Operating Data of MSP” and the ~~plans~~historical audited annual combined and ~~objectives~~consolidated financial statements as of ~~management~~and for ~~future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek”~~the years ended December 31, 2021 and ~~variations~~2020 included in the S-1 Registration Statement filed on July 7, 2022 with the Securities and ~~similar words~~Exchange Commission (the “SEC”), and ~~expressions are intended~~our condensed consolidated financial statements and the related notes and other information included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”). Unless the context otherwise requires, all references in this subsection to ~~identify such forward-looking statements. Such~~“We”, “the Company” or “MSP” refers to the business of the MSP Companies prior to the consummation of the Business Combination, which will be the business of the Post-Combination Company and its subsidiaries following the consummation of the Business Combination. This discussion may contain forward-looking statements ~~relate to future events or future performance, but reflect management’s~~based upon MSP’s current ~~beliefs, based on information currently available. A number of factors~~expectations, estimates and projections that involve risks and uncertainties. Actual results could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in these forward-looking statements due to, among other considerations, the matters discussed under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

This Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intend," "plan" and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts, including for example guidance for 2022 portfolio recovery and revenue. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. As a result, these statements are not guarantees of future performance or results and actual events may differ materially from those expressed in or suggested by the forward-looking statements. Any forward-looking statement made by MSP Recovery herein speaks only as of the date made. New risks and uncertainties come up from time to time, and it is impossible for MSP to predict or identify all such events or how they may affect it. MSP has no obligation, and does not intend, to update any forward-looking statements ~~please refer~~after the date hereof, except as required by federal securities laws. Factors that could cause these differences include, but are not limited to, MSP’s ability to capitalize on its assignment agreements and recover monies that were paid by the assignors; the inherent uncertainty surrounding settlement negotiations and/or litigation, including with respect to both the amount and timing of any such results; the validity of the assignments of claims to MSP; the ability to successfully expand the scope of MSP’s claims or obtain new data and claims from MSP’s existing assignor base or otherwise; MSP’s ability to innovate and develop new solutions, and whether those solutions will be adopted by MSP’s existing and potential assignors; negative publicity concerning healthcare data analytics and payment accuracy; and those other factors included in MSP’s Quarterly Reports on Form 10-Q and other reports filed by it with the SEC. These statements constitute the Company's cautionary statements under the Private Securities Litigation Reform Act of 1995.

We are a leading healthcare recoveries and data analytics company. We focus on the Medicare, Medicaid and commercial insurance spaces. We are disrupting the antiquated healthcare reimbursement system, using data and analytics to identify and recover improper payments made by Medicare, Medicaid, and Commercial Health Insurers.

Medicare and Medicaid are payers of last resort. Too often, they end up being the first and only payers, because the responsible payer is not identified or billed. Because Medicare and Medicaid pay a far lower rate than what other insurers are often billed, this costs the healthcare system (and the supporting taxpayers) tens of billions of dollars a year in improper billing and lost recoveries. By discovering, quantifying and settling the billed-to-paid gap on a large scale basis, MSP is positioned to generate meaningful annual recovery revenue at high profit margins.

Our access to large volumes of data, sophisticated data analytics and a leading technology platform provide a unique opportunity to discover and recover claims. We have developed over 1,400 proprietary algorithms which help identify billions in waste, fraud and abuse in the Medicare, Medicaid, and Commercial Health Insurance segments. Our deep team of data scientists and medical professionals analyze historical medical claims data to identify recoverable opportunities. Once these potential recoveries are reviewed by our team, they are aggregated and pursued. Through federal statutory law and a series of legal cases and precedents, we believe we have an established basis for future recoveries.

We differ from some of our competitors because we receive our recovery rights through irrevocable assignments of claims. When we are assigned these rights, we take on a risk that our competitors do not. Rather than provide services under a third-party vendor services contract, we receive the rights to certain recovery proceeds from our Assignors’ claims (and, in many cases, actually take assignment of the claims themselves, which allow us to step into the Assignors' shoes). In the instances where we take claims by assignment, we have total control over the direction of the litigation. We would be the plaintiff in any action filed and would have total

control over the direction of the lawsuit. By receiving claims through assignment, we can pursue additional recoveries under numerous legal theories that our competitors cannot. In the cases where we take claims by assignment, we typically agree that 50% of the recoveries generated by those claims is paid to the ~~Risk~~applicable Assignor. In the cases where we do not take claims by assignment, we typically would still be entitled to receive 50% of the recoveries generated by those claims, subject to certain expenses. Although we typically own assigned claims, for a significant portion of assigned claims our ability to pursue recoveries depends on our ongoing access to data through data access rights granted to us. In these cases, termination of such health care data access would affect our ability to generate recoveries on those claims.

Our current portfolio has scaled significantly. We are entitled to a portion of any recovery rights associated with approximately $1,568 billion in Billed Amount (and approximately $373 billion in Paid Amount), which contains approximately $89 billion in Paid Value of Potentially Recoverable Claims, as of September 30, 2022. We are typically entitled to 50% of recovery rights pursuant to our CCRAs but in certain cases we have also purchased from our Assignors, from time to time, rights to 100% of the recovery. We believe it would take any competitor a long time to amass the portfolio of claims rights currently owned by us due, among things, to the volume of our claims data retained and strength of our data analytics, which we believe are key to attracting counterparties willing to assign claims to us.

In our current business model, we receive irrevocable assignments of health claims recovery rights through Claims Cost Recovery Agreements (“CCRA”) from a variety of sources including, but not limited to, MAOs, MSOs, HMOs, Hospitals, and other at risk entities. Prior to executing a CCRA, we utilize our proprietary internal data analytics platform to review the set of claims and identify claims with probable recovery paths.

Once claims have been assigned, our data analysts run proprietary algorithms to identify potential recoveries. Results are then analyzed by our internal Medical Team. Each claim is then reviewed on an individual basis to ensure that the identified claim can be pursued. We contract with the Law Firm and various other firms across the country. After the Data and Medical teams review the claims, they are aggregated and ready to be pursued through the legal system. The Law Firm then reaches out to the liable parties to pay the amounts that are owed. Prior to litigation, there is an incentive for the primary insurer to settle. If legal action is required for recovery from primary insurers, claimholders are entitled to “double damages” under the Medicare Secondary Payer Act.

We are engaged on an Assignor by Assignor basis. As compensation for identifying and pursuing the assigned claims, under our typical assignment arrangement, our Assignors assign a percentage, typically 50%, of the net proceeds of any recovery made on the assigned claims. In some instances, we may purchase outright an Assignor’s recovery rights and, in such an instance, we are entitled to the entire recovery. In some cases, we have entered into arrangements to transfer CCRAs or rights to proceeds from CCRAs to other parties. Such sales include variable consideration in the form of payments that will be made only upon achievement of certain recoveries or based on a percentage of actual recoveries.

We have yet to generate substantial revenue from the Recovery Model. To date, the majority of our revenue has been generated by claims recovery services which are either performance-based or fee for service arrangements as described below.

Over time, we plan to pivot the business to the “Chase to Pay” model. Chase to Pay is a real-time analytics driven platform that identifies the proper primary insurer at the point of care. Chase to Pay is intended to plug into the real-time medical utilization platforms used by providers at the points of care. Rather than allow an MAO to make a wrongful payment whereby we need to chase down the Primary Payer and collect a reimbursement for the MAO, Chase to Pay is intended to prevent the MAO from making a wrongful payment and ensures that the correct payer pays in the first instance. Furthermore, the Primary Payer typically will make payments at a higher multiple than the MAO would have paid, and MSP will be entitled to receive its portion of the recovery proceeds on the amounts paid by the Primary Payer.

As Chase to Pay works at the point of care, it is expected to decrease legal costs of recovery. As a result, Chase to Pay would improve the net recovery margin as the recovery multiple grows and variable legal costs to recover decline.

We have yet to generate revenue from this model, nor have we executed any agreements with customers to date. We are currently in the process of determining the pricing and form of these arrangements. As part of our “Chase to Pay” model, we launched LifeWallet in January 2022, a platform powered by our sophisticated data analysis, designed to locate and organize users’ medical records, facilitating efficient access to enable informed decision-making and improved patient care.

We also recognize claims recovery service revenue from our services to customers to assist those entities with the pursuit of claims recovery rights. We provide services to other parties in identifying recoverable claims as well as provide data matching and legal services. Under our claims recovery services model, we do not own the rights to claims but provide our services for a fee based on budgeted expenses for the month with an adjustment for the variance between budget and actual expense from the prior month.

We are party to that certain Recovery Services Agreement (the “MSP RH Series 01 Recovery Services Agreement”), dated as of October 23, 2020, by and between MSP Recovery Holdings Series 01, LLC (“MSP RH Series 01”) and MSP Recovery, LLC, pursuant to which MSP Recovery will provide services including identifying, processing, prosecuting and recovering money for certain claims of MSP RH Series 01. In return for these services, MSP RH Series 01 paid a one-time fee of approximately $7.2 million and has agreed to pay annual service fees of approximately $3.0 million commencing January 1, 2021, subject to adjustment based on the aggregate value of claims of MSP RH Series 01 that is subject to the MSP RH Series 01 Recovery Services Agreement.

The fees received pursuant to this agreement are related to expenses incurred and are not tied to the Billed Amount or potential recovery amounts. Although we believe our future business to be highly tied to the Recovery Model and Chase to Pay, we will continue to enter into these contracts as the market dictates.

We differ from some of our competitors because we receive our recovery rights through irrevocable assignments. When we are assigned these rights, we take on the risk that such claims may not be recoverable. We are entitled to a portion of any recovery rights associated with approximately $1,568 billion in Billed Amount (and approximately $373 billion in Paid Amount), which contained approximately $89 billion in Paid Value of Potentially Recoverable Claims, as of September 30, 2022. We are typically entitled to 50% of recovery rights pursuant to our CCRAs but in certain cases we have also purchased from our Assignors, from time to time, rights to 100% of the recovery. By discovering, quantifying, and settling the gap between Billed Amount and Paid Amount on a large scale, we believe we are positioned to generate substantial annual recovery revenue at high profit margins for our assigned claims. In litigation, we have a competitive advantage by our experienced management and legal teams. While our model of being assigned the claim rights allows us the flexibility to direct the litigation and potentially generate higher margins, we have, on an opportunistic basis, paid the Assignor an upfront purchase price for these rights.

To date, we have not generated substantial revenue from our claims portfolio, and our business model is dependent of achieving revenue from this model in the future. If we are unable to recover the upfront purchase price from the assigned claims or the investments we have made in pursuing recoveries, it would have an adverse effect on our profitability and business.

Our potential claims recovery revenue in a given period will be impacted by the amount of claims we review and ultimately pursue. The number of claims that we review is driven by the claims we receive through assignment. As we are assigned more claims, we can review the claims and identify additional recoveries. To expand our Assignor base and obtain more claims, we plan to implement new strategies to secure new Assignors. These strategies will include a platform to educate potential Assignors about our company, making strategic business partnerships, potential mergers, acquisitions of personnel, as well as other marketing strategies. Our Assignors have grown from 32 in 2015, to 105 in 2018, to 123 in 2019, to 134 in 2020 and over 160 Assignors to date. If we are unable to continue to attract new Assignors to our platform, this could adversely affect future profitability.

In addition to obtaining new claims, our ability to collect on identified claims on our estimated multiples is key to our future profitability. Per the Medicare Secondary Payer Act, we are entitled to reasonable and customary rates. Under existing statutory and case law, the private cause of action under the Medicare Secondary Payer Act permits an award of double damages when a primary plan fails to provide for primary payment or appropriate reimbursement. In addition to double damages, MSP is entitled to interest from Primary Payers on any amounts owed. Federal law also provides express authority to assess interest on Medicare Secondary Payer debts. Further, the Medicare, Medicaid and SCHIP Extension Act (“MMSEA”) requires defendants and healthcare providers to report certain settlements with Medicare beneficiaries. The MMSEA statute includes a $1,000 per day, per claim penalty for inaccurate or untimely reporting.

As a result, we are able to pursue double damages, interest, and applicable penalties for non-compliance from Primary Payers in our Medicare Secondary Payer Act-related recoveries. We can recover these amounts under either the Recovery Model or the Chase to Pay Model. Federal law also expressly provides MAOs with the right to charge providers for the Billed Amount when auto insurer liability exists. Per the terms of various legal services agreements that MSP has with the Law Firm, for legal services provided, the Law Firm would receive a percentage of the total claim recovery which would include double damages and additional penalties. In the near term, we believe our claims portfolio can achieve a 1.9x Recovery Multiple. As we continue to expand our claims portfolio and data matching capabilities, we believe we can reach up to 2.9x Recovery Multiple. Our ability to pursue double damages may be impacted by the Repair Abuses of MSP Payments Act (“RAMP Act”) as disclosed in Note 12, Commitments and Contingencies.

Our claims recovery revenue is typically recognized upon reaching a binding settlement or arbitration with the counterparty or when the legal proceedings, including any appellate process, are resolved. A decrease in the willingness of courts to grant these judgments, a change in the requirements for filing these cases or obtaining these judgments, or a decrease in our ability to collect on these judgments could have an adverse effect on our business, financial condition and operating results. Of our Property & Casualty portfolio as of September 30, 2022, approximately 76% of claims are already in the recovery process, which are claims where either the recovery process has been initiated, data has been collected and matched or resolution discussions are in process.

To evaluate our business, key trends, risks and opportunities, prepare projections, make strategic decisions and measure our performance, we track several key performance indicators (“KPIs”). As our company has yet to achieve significant revenues and the drivers of expected revenues require significant lead time before revenue can be generated, MSP’s management utilizes KPIs to assist in tracking progress and believes such KPIs are useful in evaluating the performance of our business, in addition to our financial results prepared in accordance with GAAP. The KPIs are Total Paid Amount, Paid Value of Potentially Recoverable Claims, Recovery Multiple and Penetration Status of Portfolio.

Total Paid Amount: Total Paid Amount represents the total within the claims portfolio of the amount actually paid to the provider from the health plan, including incorporation of capitated amounts. As we continue to expand, weanticipate our revenue growth will be greatly dependent on our ability to increase the Total Paid Amount and, correspondingly, the Paid Value of Potentially Recoverable Claims, in our portfolio. Management believes this metric is a useful measure to investors and is useful in managing or monitoring company performance because we view an increase in Paid Amount as a positive indicator as it should provide the Company with the ability to increase the Paid Value of Potentially Recoverable Claims. Conversely, a decrease would produce a diminishing expectation of the Paid Value of Potentially Recoverable Claims.

Paid Value of Potentially Recoverable Claims: The Paid Value of Potentially Recoverable Claims (“PVPRC”) represents the cumulative Paid Amount of potentially recoverable claims. We analyze our claims portfolio and identify potentially recoverable claims using MSP proprietary algorithms that comb through historical paid claims data and search for possible recoveries based on our approximately 600 Funnels and 1,100 Layers. The PVPRC is a measure of the actual Paid Amount that has been paid to providers in respect of those potentially recoverable claims. 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. We believe our ability to generate future claims recovery income is largely dependent on our ability to accurately identify potentially recoverable claims through our data analytics and ultimately recover on these claims. Management believes this metric is a useful measure to investors and in managing or monitoring company performance because we view an increase in PVPRC as a positive indicator as it should provide the Company with the ability to increase claims recovery income and otherwise shows growth.

Billed Value of Potentially Recoverable Claims: Billed Value of Potentially Recoverable Claims (“BVPRC”) represents the cumulative Billed Amount of potentially recoverable claims. We analyze our claims portfolio and identify potentially recoverable claims using MSP proprietary algorithms that comb through historical paid claims data and search for possible recoveries based on our approximately 600 Funnels and 1,100 Layers. For a majority of our claims, the Company believes it has the ability to recover in excess of the Paid Amount by collecting the Billed Amount plus interest plus double damages under applicable law. Under existing statutory and case law, the private cause of action under the Medicare Secondary Payer Act permits an award of double damages when a primary plan fails to provide for primary payment or appropriate reimbursement. Federal law expressly provides MAOs with the right to charge providers for the Billed Amount when auto insurer liability exists. We believe our ability to generate future claim recovery income is largely dependent on our ability to accurately identify potentially recoverable claims through our data analytics and ultimately recover on these claims. Management believes this metric is a useful measure to investors and in managing or monitoring company performance because we view an increase in BVPRC as a positive indicator as it should provide the Company with the ability to increase claims recovery income and otherwise shows growth.

Recovery Multiple: The Recovery Multiple is the amount of income of any generated claims recovery income obtained by the Company in respect of any claims as compared to the Paid Amount of those claims (e.g., on a $600 recovery, if the paid amount for said claim was $100, the Recovery Multiple is 6x). For these purposes, we record values under the Recovery Multiple only once we have recorded claims recovery income either through the receipt of cash or recognition of accounts receivable on the claims. Management believes this metric is useful to investors and is useful in managing or monitoring company performance because the Recovery Multiple provides a measure of the Company’s ~~final prospectus~~ability to recover on its claims recovery rights. A Recovery Multiple above 1x would illustrate the Company’s ability to collect in excess of the Paid Amount.To date, because actual recoveries have been limited, this measure has had limited utility in historical periods. However, management believes this measure will become more meaningful during the next 12 months and beyond to the extent the Company begins to report actual increases in recoveries during those periods. As of September 30, 2022, the Company has obtained settlements with two counterparties where the Recovery Multiple was or would be in excess of the Paid Amount. However, the settlement amounts have not been finally tabulated on these settlements and therefore do not provide a large enough sample to be statistically significant and are therefore not shown in the table.Because the Recovery Multiple is based on actual recoveries, this measure is not based on the Penetration Status of Portfolio, as described below.

Penetration Status of Portfolio: Penetration Status of Portfolio provides a measure of the Company’s recovery efforts by taking into account the current stages of recovery of claims in the portfolio and tying it in with the estimated market share of the related Primary Payers. The total percentage represents the estimated aggregate market share for the respective Primary Payers in which the Company is in some stage of recovery. As the Company initiates additional recovery efforts against additional Primary Payers, the Company expects this number to increase. These stages of recovery include where (1) the recovery process has been initiated, (2) data has been collected and matched or (3) potential resolution discussions are in process. The Company uses third-party sources to estimate the aggregate market share of those Primary Payers in the property and casualty auto insurance market with whom the Company is engaged in one of these stages of recovery. Management believes this metric is useful to investors and in managing or monitoring company performance because it provides insight as to the estimated share of the market that is covered by existing recovery efforts. We estimate

that cases that are in the potential resolution discussions and/or data matching are closer to generating potential future claims recovery income.

Our business is directly related to the healthcare industry and is affected by healthcare spending and complexity in the healthcare industry. We estimate that our total addressable market is over $150 billion annually. Our primary focus is on the Medicare and Medicaid market segments. Medicare is the second largest government program, with estimated annual expenditures during 2021 of approximately $923 billion and approximately 63.5 million enrollees. Medicaid has a combined estimated annual expenditure during 2021 of approximately $684 billion with approximately 76.5 million enrollees. Of the billions spent yearly by Medicare on medical expenses for its ~~Initial Public Offering filed with~~beneficiaries, we estimate that at least 10% of this was improperly paid by private Medicare plans.

Our addressable market and therefore revenue potential is impacted by the ~~U.S. Securities~~expansion or contraction of healthcare coverage and ~~Exchange Commission (the “SEC”).~~spending, which directly affects the number of claims available. The ~~Company’s securities filings~~Centers for Medicare & Medicaid Services ("CMS") has projected that health spending will continue to grow at an average rate of 5.4% a year between 2019 and 2028. We also believe reimbursement models may become more complex as healthcare payers accommodate new markets and lines of business and as advancements in medical care increase the number of testing and treatment options available. As reimbursement models grow more complex and healthcare coverage increases, the complexity and number of claims may also increase, which could impact the demand for our solutions. Such changes could have a further impact on our results of operations.

As of September 30, 2022, approximately 93% of our expected recoveries arise from claims being brought under the Medicare Secondary Payer Act. While we believe the act has bipartisan support, changes to the laws on which we base our recoveries, particularly the Medicare Secondary Payer Act, can ~~be accessed~~adversely affect our business. Our ability to generate future revenue is therefore significantly dependent on ~~the EDGAR section~~factors outside our control.

Impact of the ~~SEC’s website at www.sec.gov. Except as expressly required by applicable securities law,~~COVID-19 Pandemic

The impact of the ~~Company disclaims any intention~~COVID-19 pandemic (“COVID-19”) and related stay-at-home orders and social distancing guidelines caused significant disruptions in many of the jurisdictions in which we operate. These measures had an impact on many aspects of our business operations, including delays within the court system due to court/administrative closures or ~~obligation~~reduced court dockets and the availability of associates, employees, and business partners. While we were able to ~~update or revise any forward-looking statements whether~~continue operations throughout these periods, these delays potentially impacted timing of resolving pending legal matters as a result of ~~new information,~~court, administrative and other closures and could impact any potential future ~~events~~legislation or ~~otherwise.~~

~~We are~~litigation. For the three and nine months ended September 30, 2022 and 2021 and the years ended December 31, 2021 and 2020, there was not a ~~blank check company formed under the laws~~material impact to our operations or financial results including total claims recovery, claims recovery service revenue or cost of ~~the State~~recoveries. In addition, changes in KPIs such as Paid Amount, Paid Value of ~~Delaware on December 23, 2019~~Potentially Recoverable Claims, Recovery Multiple and Penetration Status of Portfolio were not materially impacted for the ~~purpose~~three and nine months ended September 30, 2022 and 2021 and the years ended December 31, 2021 and 2020 and the number of ~~effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization~~Assignors or ~~other similar Business Combination~~Clients has also not been negatively impacted by COVID-19. For more information on our operations and risks related to health epidemics, including the coronavirus. Please see the section Item 1A “Risk Factors.”

Our primary income-producing activities are associated with ~~one or more businesses. We intend~~the pursuit and recovery of proceeds related to ~~effectuate our Business Combination using cash~~claims recovery rights that the Company obtains through CCRAs, in which we become the owner of those rights. As such, this income is not generated from the ~~proceeds~~transfer of ~~the Initial Public Offering and the sale~~control of ~~the Private Placement Units,~~goods or services to customers, but through the proceeds realized from perfection of claims recoveries from rights we hold outright. We recognize claims recovery income based on a gain contingency model – that is, when the ~~sale~~amounts are

reasonably certain of ~~our shares~~collection. This typically occurs upon reaching a binding settlement or arbitration with the counterparty or when the legal proceedings, including any appellate process, are resolved.

In some cases, we would owe an additional payment to the original assignor in connection with the realized value of the recovery right. Claims recovery income is recognized on a ~~Business Combination (pursuant~~gross basis, as we are entitled to the ~~forward purchase agreement with Nomura~~full value of proceeds and ~~pursuant to forward purchase agreements or backstop agreements, shares issued~~make payment to the original assignor similar to a royalty arrangement. Such payments to prior owners are recognized as cost of claims recovery in the same period the claims recovery income is recognized.

We also recognize claims recovery service income for our services to a related party and a third party to assist those entities with pursuit of claims recovery rights. We have determined we have a single performance obligation for the series of daily activities that comprise claims recovery services, which are recognized over time using a time-based progress measure. We enter into claims recovery service contracts with third parties. Amounts payable for services to third parties are typically based on budgeted expenses for the current month with an adjustment for the variance between budget and actual expenses from the prior month.

Costs of recoveries consist of all directly attributable costs specifically associated with claims processing activities, including contingent payments payable to assignors (i.e., settlement expenses).

Claims Amortization Expense consists of the ~~target, debt issued~~amortization of CCRA intangible assets for those CCRAs
in which we made upfront payments or commitments in order to ~~bank or~~acquire claims recovery rights.

General and administrative expenses consist primarily of personnel-related expenses for employees involved in general corporate, sales and marketing functions, including executive management and administration, legal, human resources, accounting, finance, tax, and information technology. Personnel-related expenses primarily include wages and bonuses. General and administrative expenses also consist of rent, IT costs, insurance, and other ~~lenders or the owners of the target, or~~office expenses.

company and build out our team, we expect that our sales, general and administrative costs will increase. We have neither engaged in any operations nor generated any revenues to date. Our only activities from December 23, 2019 (inception) through June 30, 2020 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. We do notalso expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We incur additional expenses as a result of ~~being~~operating as a public company, ~~(for legal, financial~~including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting ~~accounting~~obligations pursuant to the rules and ~~auditing compliance),~~regulations of the SEC, as well as higher expenses for general and director and officer insurance, investor relations, and professional services.

Professional Fees consist of consulting, accounting, and other professional services from third party providers.

Professional Fees - legal consist of payments for the expenses of the Law Firm covered by the Legal Services Agreement and other legal professional services from third party providers including payments to co-counsel.

Depreciation and amortization expense consist of depreciation and amortization of property and equipment related to our investments in leasehold improvements, office and computer equipment, and internally generated capitalized software development costs. We provide for depreciation and amortization using the straight-line method to allocate the cost of depreciable assets over their estimated useful lives.

In some cases, we have entered into arrangements to transfer CCRAs or rights to proceeds from CCRAs to other parties. When such transfers are considered to be sales of future revenue that are debt-like in nature as defined in Accounting Standards Codification (“ASC”) 470, these arrangements are recognized as debt based on the proceeds received, and are imputed an interest rate based on the expected timing and amount of payments to achieve contractual hurdles. Our interest expense consists of the imputed interest on these payments. We anticipate that as we recognize claims recoveries related to CCRAs in these arrangements, the interest expense on these arrangements will decrease.

Other income consists of equity investment earnings and some affiliate related income. Other expenses consist of bank service charges, airing fees, tax penalties, settlement expense, political contributions and donations, and some affiliate related expense.

Changes in fair value of warrants and derivative liabilities consists of the mark to market of warrant liabilities and derivatives as part of the OTC Equity Prepaid Forward Transaction noted in Note 16, Derivative Liability in the notes to condensed consolidated financial statements.

Net (income) loss attributable to non-controlling members consists of income or loss of attributable to Class V shareholders.

The various entities that comprise MSP are each currently treated as partnerships for U.S. federal and most applicable state and local income tax purposes. As a partnership, our taxable income or loss is passed through to and included in the tax returns of its members. Consequently, no income tax, income tax payable, or deferred tax assets and liabilities are recorded for any financial reporting date.

Three months ended September 30, 2022 versus three months ended September 30, 2021

The following table sets forth a summary of our consolidated results of operations for the three months ended September 30, 2022 to three months ended September 30, 2021 indicated.

Claims recovery income. Claims recovery income increased by $2.5 million for the three months ended September 30, 2022 driven by increased settlements during the period.

Claims recovery service income. Claims recoveries service income increased by $3.3 million, or 136%, to $5.7 million for the three months ended September 30, 2022 from $2.4 million for the three months ended September 30, 2021, primarily driven by an increase in third party service fees due ~~diligence~~to a $5.0 million servicing contract completed during the three months ended September 30, 2022.

Cost of claims recoveries. Cost of claims recoveries increased by $1.1 million, or 7,633%, driven by assignor and law firm costs on increased claims recovery income.

Claims amortization expense. Claims amortization expense increased by $66.3 million primarily driven by increased amortization due to the acquisition of CCRAs obtained as part of the business combination. In addition to the aforementioned CCRAs acquired as part of the Business Combination, the Company also purchased additional CCRAs during the three months ended September 30, 2022, included in Intangible assets, which further contributed to the increase in claims amortization expense.

General and administrative. General and administrative increased by $3.7 million, to $6.6 million in three months ended September 30, 2022 from $2.9 million for the three months ended September 30, 2021, primarily driven by increases in wages of $3.1 million and advertising of $1.1 million as compared to the three months ended September 30, 2021.

Professional fees. Professional fees increased by $3.3 million, or 95%, to $5.0 million for the three months ended September 30, 2022 from $2.5 million for the three months ended September 30, 2021, primarily driven by an increase in consulting fees.

Professional fees - legal. Professional fees - legal increased by $8.0 million, driven by fees to outsourced law firms and Law Firm expenses of $4.6 million covered through the prepaid.

Interest expense. Interest expense increased by $6.1 million, or 87%, to $13.1 million in three months ended September 30, 2022 from $7.0 million for the three months ended September 30, 2021, primarily driven by an increase in the basis for which interest is incurred on our Claims Financing Obligations and accrued interest on the related party loan obtained in June 2022.

Other income (expense), net. Other income, net increased by $63.3 million to $63.1 million in three months ended September 30, 2022 from a loss of $169 thousand for the three months ended September 30, 2021, driven by a gain associated with the settlement of the Brickell Key Investment debt extinguishment.

Change in fair value of warrant and derivative liabilities. For the three months ended September 30, 2022 $2.7 million of gain was recorded related to mark to market adjustments for the fair value of warrants for $3.7 million and a loss for the fair value of derivative liabilities related to the Committed Equity facility for $1.0 million.

Nine months ended September 30, 2022 versus nine months ended September 30, 2021

The following table sets forth a summary of our consolidated results of operations for the nine months ended September 30, 2022 and September 30, 2021 indicated.

Claims recovery income. Claims recovery income increased by $3.9 million for the nine months ended September 30, 2022 driven by an increase in settlements during the period.

Claims recovery service income. Claims recoveries service income increased by $8.6 million, or 93%, to $17.8 million for the nine months ended September 30, 2022 from $9.2 million for the nine months ended September 30, 2021, primarily driven by an increase in third party service fees due to volume as the headcount needed and related operational expenses to service the claims expanded and a $5.0 million servicing contract completed during the three months ended September 30, 2022.

Cost of claims recoveries. Cost of claims recoveries increased by $1.8 thousand, to $1.9 thousand for the nine months ended September 30, 2022 from $1.8 thousand for the nine months ended September 30, 2021, primarily driven by payments due to assignors and the Law Firm on claims recoveries during the period.

Claims amortization expense. Claims amortization expense increased by $92.8 million, to $92.9 million for the nine months ended September 30, 2022 from $114 thousand for the nine months ended September 30, 2021, primarily driven by increased amortization due to the acquisition of CCRAs obtained as part of the business combination. In addition, the Company purchased additional CCRAs during the nine months ended September 30, 2022, included in Intangible assets, which further contributed to the increase in claims amortization expense.

General and administrative. General and administrative increased by $8.8 million, or 108%, to $17.0 million for the nine months ended September 30, 2022 from $8.2 million for the nine months ended September 30, 2021, primarily driven by increase in wages of $4.2 million and advertising expenses of $2.9 million.

Professional fees. Professional fees increased by $5.3 million, or 79%, to $10.0 million for the nine months ended September 30, 2022 from $5.6 million for the nine months ended September 30, 2021, primarily driven by an increase in accounting and consulting fees due to the Business Combination.

Professional fees - legal. Professional fees - legal increased by $34.2 million for the nine months ended September 30, 2022, primarily driven by a one-time share based payment expense of $20.1 million and fees to outsourced law firms.

Interest expense. Interest expense increased by $14.9 million, or 76%, to $34.5 million for the nine months ended September 30, 2022 from $19.6 million for the nine months ended September 30, 2021, primarily driven by an increase in the basis for which interest is incurred on our Claims Financing Obligations, additional interest on commitments incurred at the end of 2021 and accrued interest on the related party loan obtained in June 2022.

Other income, net. Other income increased by $62.0 million, to $63.2 million for the nine months ended September 30, 2022 from $1.2 million for the nine months ended September 30, 2021 driven by a gain associated with the settlement of the Brickell Key Investment debt extinguishment.

Change in fair value of warrant and derivative liabilities. For the nine months ended September 30, 2022, $11.7 million of loss was recorded related to mark to market adjustments for the fair value of warrants for $1.6 million and for the fair value of derivative liabilities related to the Committed Equity facility for $10.1 million.

Provision for income tax benefit. For the nine months ended September 30, 2022, a $0.3 million income tax benefit was recognized related to the increase in the deferred tax asset for current period losses.

In addition to the financial measures prepared in accordance with GAAP, this Form 10-Q also contains Non-GAAP financial measures. We consider "adjusted net loss" and "adjusted operating loss" as non-GAAP financial measures and important indicators of performance and useful metrics for management and investors to evaluate our business's ongoing operating performance on a consistent basis across reporting periods. Adjusted net loss represents Net loss adjusted for certain non-cash and non-recurring expenses, and adjusted operating loss items represents Operating loss adjusted for certain non-cash and non-recurring expenses. These measures provide useful information to investors, and a reconciliation of these measures to the most directly comparable GAAP measures and other information relating to these Non-GAAP measures is included in Note 2 to our consolidated financial statements appearing elsewhere in this Form 10-Q. A reconciliation of these Non-GAAP measures is included below:

Since inception, we have financed our operations primarily from partnership contributions. As of ~~June~~September 30, ~~2020,~~2022, we had $14.3 million in cash and cash equivalents. As of ~~$18,378. Until~~September 30, 2022, we had loan payables of $170.8 million consisting of our Claims Financing Obligations and notes payable. We had $1.5 million in interest payable related to our Claims Financing Obligations. In addition, we had a loan from related parties with a balance of $125.8 million. This loan bears interest at an annual rate of 4%, payable in kind, and will mature on the four year anniversary of the issuance and the terms were more favorable than we could have obtained from another party.

As an early stage growth company, we have incurred substantial net losses since inception. Our liquidity will depend on our ability to generate substantial claims recovery income and claims recovery services income in the near future. Our principal liquidity needs have been, and will continue to be, capital expenditures, working capital and claims obligation financing. Our capital expenditures support investments in our underlying infrastructure to enhance our solutions and technology for future growth. We expect our capital expenditures to increase primarily due to investments in our technology stack. Our strategy includes the expansion of our existing solutions and the development of new solutions, which will require cash expenditures over the next several years and will be funded primarily by cash provided by operating activities and the cash from the Business Combination. We also expect our operating expenses to increase as we hire additional employees to support to the claim recovery team. We expect these investments to be a key driver of our long-term growth and competitiveness but to negatively impact our free cash flow.

We believe that our cash on hand of $14.3 million, along with our other current assets and available resources, will be sufficient to meet our operating expenditure and working capital requirements for a period of at least twelve months from the date of this Form 10-Q. If we are required to raise additional capital to finance our operations, which may include seeking additional capital through equity offerings or debt financings, the amount and timing of our future funding will depend on many factors, including the pace and results of our claims recovery efforts. We may be unable to obtain any such additional financing on reasonable terms or at all. Our ability to access capital when needed is not assured and, if capital is not available to us when, and in the amounts needed, we could be required

to delay, scale back or abandon some or all of our claims recovery efforts and other operations, which could materially harm our business, prospects, financial condition and operating results.

On June 16, 2022, to finance the Company’s operations, the MSP Principals provided cash to the Company in an aggregate amount of $112.8 million. The Company issued the MSP Principals Promissory Note to the MSP Principals in an aggregate principal amount of $112.8 million that has an annual interest rate of 4%, payable in kind, and matures on the day that is the four year anniversary of the issuance. On the maturity date, the Company is required to pay the MSP Principals an amount in cash equal to the outstanding principal amount, plus accrued and unpaid interest. The promissory note is prepayable by the Company at any time, without prepayment penalties, fees or other expenses. A portion of the proceeds under the MSP Principals Promissory Note in an amount equal to $36.5 million was advanced to the Law Firm for certain operating expenses as contemplated by the Legal Services Agreement. The MSP Principals Promissory Note contains customary events of default that would allow the MSP Principals to declare the MSP Principals Promissory Note immediately due and payable or the MSP Principals Promissory Note will immediately and automatically become due and payable without notice, presentment, demand, protest or other request of any kind. In addition, the MSP Principals Promissory Note may be accelerated by the MSP Principals if the board of directors of the Company (excluding the MSP Principals) terminates the Legal Services Agreement.

On May 27, 2022, the Company issued an unsecured promissory note to Nomura in a principal amount of approximately $24.5 million related to advisory fees and deferred underwriting fees and expenses that became due and payable by the Company to Nomura, in connection with the consummation of the ~~Initial Public Offering, our only source~~Business Combination. The maturity date of ~~liquidity was~~the promissory note is May 29, 2023. On the maturity date, the Company is required to pay Nomura an ~~initial purchase of common stock by the Sponsor and loans from our Sponsor.~~

~~Subsequent~~amount in cash equal to the ~~quarterly period covered~~outstanding principal amount, plus accrued and unpaid interest, plus any other obligations then due or payable under the promissory note. Upon two days prior written notice to Nomura, the Company may prepay all or any portion of the then outstanding principal amount under the promissory note together with all accrued and unpaid interest thereon.

On May 17, 2022, the Company and CF entered into the Prepaid Forward. Pursuant to the terms of the Prepaid Forward, CF agreed to (a) transfer to MSP for cancellation any New Warrants received as a result of being the stockholder of record of any shares of Class A Common Stock as of the close of business on the closing date of the Business Combination, in connection with the New Warrant Dividend, and (b) waive any redemption right that would require the redemption of the number of shares of Class A Common Stock owned by ~~this Quarterly Report, on August 18, 2020, we consummated the Initial Public Offering of 20,000,000 Units~~CF at ~~a price of $10.00 per Unit, generating gross proceeds of $200,000,000. Simultaneously with~~ the closing of the ~~Initial Public Offering, we consummated the sale of 650,000 Private Placement Units at~~Business Combination in exchange for a ~~price of $10.00 per Private Placement Unit in a private placement to our stockholders, generating gross proceeds of $6,500,000.~~

On August 24, 2020, in connection with the underwriters’ election to fully exercise of their option to purchase additional Units, we consummated the sale of an additional 3,000,000 Units, generating total gross proceeds of $30,000,000.

Following the Initial Public Offering, the full exercise of the over-allotment option by the underwriters’ and the sale of the Private Placement Units, a total of $230,000,000 was placed in the Trust Account and we had $2,039,384 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, and available for working capital purposes. We incurred $13,128,937 in transaction costs, including $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting fees and $478,937 of other offering costs.

~~We intend to use substantially all~~pro rata amount of the funds held in the Trust ~~Account, including any amounts representing interest earned on~~Account.

At closing of the Business Combination, the Company transferred from the trust account to an escrow account an amount equal to (a) the aggregate number of the Subject Shares (as defined below) (approximately 1.1 million shares), multiplied by (b) the per share redemption price for shares out of the Trust Account, as a prepayment to ~~complete~~CF of the amount to be paid to CF in settlement of the Prepaid Forward for the Subject Shares. CF may sell the Subject Shares at its sole discretion in one or more transactions, publicly or privately. Any such sale shall constitute an optional early termination of the Prepaid Forward upon which (a) CF will receive from the escrow account an amount equal to the positive excess, if any, of (x) the product of the redemption price and the aggregate number of shares over (y) an amount equal to the proceeds received by CF in connection with sales of the shares, and (b) the Company will receive from the escrow account the amount set forth in (y) above. Any shares not sold will be returned to the Company and the redemption price relating to such shares will be released to CF.

Pursuant to the terms of the Prepaid Forward, CF purchased 1,129,589 shares of Class A Common Stock prior to the approval of the Business Combination and outside of the redemption process in connection with the Business Combination, for a purchase price of $10.11 per share, reflecting an aggregate purchase price of approximately $11.4 million. Pursuant to the terms of the Prepaid Forward, 133,291,502 of the New Warrants will be transferred for cancelation to the Company.

On May 17, 2022, the Company entered into the CF Purchase Agreement with CF. Pursuant to the CF Purchase Agreement, after the closing of the Business Combination, the Company will have the right to sell to CF from time to time at its option up to $1 billion in Class A common stock shares, subject to the terms, conditions and limitations set forth in the CF Purchase Agreement.

Sales of the shares of the Company’s common stock to CF under the CF Purchase Agreement, and the timing of any such sales, will be determined by the Company from time to time in its sole discretion and will depend on a variety of factors, including, among other things, market conditions, the trading price of the common stock, as well as determinations by the Company about the use of proceeds of such common stock sales. The net proceeds from any such sales under the CF Purchase Agreement will depend on the frequency with, and the price at, which the shares of common stock are sold to CF.

Upon the initial satisfaction of the conditions to CF’s obligation to purchase shares of common stock set forth under the CF Purchase Agreement, the Company will have the right, but not the obligation, from time to time, at its sole discretion and on the terms and subject to the limitations contained in the CF Purchase Agreement, until no later than the first day of the month following the 36 month

anniversary of the date that the registration statement of the shares is declared effective, to direct CF to purchase up to a specified maximum amount of common stock as set forth in the CF Purchase Agreement by delivering written notice to CF prior to the commencement of trading on any trading day. The purchase price of the common stock that the Company elects to sell to CF pursuant to the CF Purchase Agreement will be 98% of the VWAP of the common stock during the applicable purchase date on which the Company has timely delivered a written notice to CF, directing it to purchase common stock under the CF Purchase Agreement.

On June 30, 2022, the Company entered into an Assignment and Sale of Proceeds Agreement (the “Assignment Agreement”) and a Recovery Services Agreement (the “Services Agreement” and collectively, the “Agreements”) with the Prudent Group (“Prudent”) in order to monetize up to $250 million of the value of the Company’s net recovery interest in claim demand letters that the Company has commenced sending to insurers who admitted they had primary payer responsibility for the underlying accidents to the federal government (“MSPR’s Net Recovery Proceeds”). Pursuant to the Agreements, at the Company’s sole and absolute discretion, the Company has the right to direct Prudent to acquire, on a non-recourse basis, a percentage of MSPR’s Net Recovery Proceeds, up to an aggregate of $250 million, at a purchase price of 90% of MSPR's Net Recovery Proceeds of such claim.

Under the Services Agreement, the Company will service and recover on the demand letters and will retain any revenues generated in excess of the amount received from Prudent, plus up to an 18% annual return on the amount Prudent paid for MSPR’s Net Recovery Proceeds. Prudent may terminate the Services Agreement upon sixty (60) days prior written notice to the Company.

Actual results, including sources and uses of cash, may differ from our ~~Business Combination. We~~current estimates due to the inherent uncertainty involved in making those estimates and any such differences may ~~withdraw interest~~impact the Company’s ability to ~~pay franchise~~continue as a going concern in the future. The expenditures associated with the development and ~~income taxes.~~launch of our additional recovery services and the anticipated increase in claims recovery capacity are subject to significant risks and uncertainties, many of which are beyond our control, which may affect the timing and magnitude of these anticipated expenditures. These risk and uncertainties are described in more detail in the section entitled “Risk Factors”.

During 2020, we obtained funds under the Paycheck Protection Program (the “PPP Loans”) in the amount of $1.1 million. As of December 31, 2021, all of the PPP Loans have been forgiven.

On February 20, 2015, the Company entered into a Claims Proceeds Investment Agreement with a third-party investor to invest directly and indirectly in claims, disputes, and litigation and arbitration claims. For such investment, the Company has assigned to the investor a portion of the future proceeds of certain claims, albeit the Company remains the sole owner and assignee of rights to claims because the investor is only acquiring rights to a portion of the proceeds of the claims. The investor return is based on its investment ($23 million between the original and amended agreements) and an internal rate of return of 30% calculated from the Closing Date. The investor has priority of payment regarding any proceeds until full payment of the investment is satisfied. To the extent that, our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operationsupon final resolution of the ~~target business or businesses, make other acquisitions and pursue our growth strategies.~~

~~We intend to use~~claims, the ~~funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and~~investor receives from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.

~~In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor,~~proceeds an affiliate of the Sponsor, or our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the eventamount that a Business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,000,000 of such loans may be convertible into units, at a price of $10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. The loans would be repaid upon consummation of a Business Combination, without interest.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination areis less than the ~~actual~~agreed-upon return, the investor has no recourse to recover such deficit from the Company. See Note 10 to our consolidated financial statements for a description of the claims financing obligations.

Under the terms of the Tax Receivable Agreement, we generally will be required to pay to the Members, and to each other person from time to time that becomes a “TRA Party” under the Tax Receivable Agreement, 85% of the tax savings, if any, that we are deemed to realize in certain circumstances as a result of certain tax attributes that exist following the Business Combination and that are created thereafter, including as a result of payments made under the Tax Receivable Agreement. The term of the Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless we exercise our right to terminate the Tax Receivable Agreement for an amount ~~necessary to do so, we may~~representing the present value of anticipated future tax benefits under the Tax Receivable Agreement or certain other acceleration events occur. Any payments made by us under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have ~~insufficient funds~~otherwise been available to ~~operate our business prior~~us, and, to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the ~~completion of our Business Combination. If~~extent that we are unable to ~~complete~~make payments under the Tax Receivable Agreement for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid by us.

Net cash used in operating activities increased by $64.5 million to $70.8 million for the nine months ended September 30, 2022 compared to net cash used of $6.3 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, net cash used in operating activities was impacted primarily by our net loss, an increase in Prepaid and other assets of $32.6 million and decrease in affiliate payable of $25.4 million. This was partially offset by a $15.5 million increase in accounts payable and accrued liabilities. Net cash used in operating activities was further impacted by non-cash charges including a $63.4 gain on debt extinguishment partially offset by claims amortization expense of $92.9 million, paid in kind interest of $34.5 million, share-based compensation of $20.1 million and change in fair value of derivatives of $10.1 million and change in fair value of warrant liabilities of $1.6 million.

Net cash used in investing activities increased by $2.7 million to $4.6 million for the nine months ended September 30, 2022 compared to $1.9 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, our cash used in investing activities was primarily due to acquisition of additional CCRAs included in Intangible assets, net, of which $2.7 million was paid for in cash and $1.9 million of additions to property, plant and equipment.

Net cash provided by in financing activities increased to $99.4 million for the nine months ended September 30, 2022 compared to $2.4 million net cash used in financing activities for the nine months ended September 30, 2021. This is primarily due to proceeds from the related party loan of $125.8 million, proceeds from the Business Combination ~~because we do not~~of $12.0 million, and $8.6 million from the issuance of common stock. These were partially offset by $49.6 million of transaction costs incurred in connection with the Business Combination.

The following table and the information that follows summarizes our contractual obligations as of September 30, 2022.

The future minimum lease payments under non-cancelable operating leases as of September 30, 2022 are as follows:

Based on claims financing obligations and notes payable agreements, as of September 30, 2022 and December 31, 2021, the present value of amounts owed under these obligations were $172.3 million and $201.4 million, respectively, including unpaid interest to date of $1.5 million and $94.5 million, respectively. The weighted average interest rate is 5.8% based on the current book value of $172.3 million with rates that range from 2% to 11%. The Company is expected to repay these obligations from cash flows from claim recovery income.

As of September 30, 2022, the minimum required payments on these agreements are $330.5 million. Certain of these agreements have priority of payment regarding any proceeds until full payment of the balance due is satisfied. The maturity of the commitments range from the date sufficient ~~funds available~~claims recoveries are received to ~~us, we will be forced to cease operations and liquidate~~cover the ~~Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing~~required return or in ~~order to meet our obligations.~~some cases by 2031.

~~We did~~As of the balance sheet dates of September 30, 2022 and December 31, 2021, we have not ~~have~~engaged in any off-balance sheet arrangements, as ~~of June 30, 2020.~~

~~We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay~~defined in the ~~Sponsor a monthly fee of $15,000 for office space, utilities~~rules and ~~secretarial and administrative support to the Company. We began incurring these fees on August 14, 2020 and will continue to incur these fees monthly until the earlier~~regulations of the ~~completion of the Business Combination~~SEC.

~~The underwriters~~related notes thereto included elsewhere in this Form 10-Q are ~~entitled to a deferred fee of $0.35 per Unit, or $8,050,000~~prepared in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

accordance with GAAP. The preparation of ~~condensed~~our consolidated financial statements ~~and related disclosures in conformity with accounting principles generally accepted in the United States of America~~ requires ~~management~~us to make estimates and assumptions that affect the reported amounts and related disclosures in our financial statements and accompanying notes. We base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities ~~disclosure~~that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions due to the inherent uncertainty involved in making those estimates and any such differences may be material.

We believe that the following accounting policies involve a high degree of ~~contingent assets~~judgment and ~~liabilities at~~complexity. Accordingly, these are the ~~date~~policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of ~~the~~our operations. See Note 2, Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Form 10-Q for a description of our other significant accounting policies.

We recognize revenue based on a gain contingency model when the amounts are reasonably certain of collection, typically upon reaching a binding settlement or arbitration with the counterparty or when the legal proceedings, including any appellate process, are resolved. Claims recovery income is recognized on a gross basis, as the Company is entitled to the full value of proceeds and makes a payment to the original assignor similar to a royalty arrangement. Such payments to prior owners are recognized as cost of claims recovery in the same period the claims recovery income ~~and expenses during the periods reported. Actual results could materially differ from~~is recognized.

We recognize claims recovery service income for our services to third parties for our services to assist those ~~estimates.~~entities with pursuit of claims recovery rights. We have ~~not identified any critical accounting policies.~~

~~Management does not believe~~determined that ~~any recently issued,~~we have a single performance obligation for the series of daily activities that comprise claims recovery services, which are recognized over time using a time-based progress measure. Amounts owed under existing arrangements or as a result of actual settlements or resolved litigation are recognized as accounts receivable. Amounts estimated and recognized, but not yet ~~effective, accounting standards,~~fully settled or resolved as part of litigation are recognized as contract assets. We enter into claims recovery service contracts with third parties. Amounts for services to third parties are typically based on budgeted expenses for the current month with an adjustment for the variance between budget and actual expenses from the prior month.

We evaluate long-lived assets, such as property and equipment, and finite-lived intangibles, such as claims recovery rights and capitalized software costs, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset group are less than the carrying value, a write-down would be recorded to reduce the related asset group to its estimated fair value. There were no impairment indicators or charges in the three and nine months ended September 30, 2022 and 2021 and the years ended December 31, 2021 and 2020.

For the CCRA intangibles, we will also assess the intangible assets recognized for CCRAs for impairment in accordance with ASC 350-30-35-14, whereby an impairment loss shall be recognized if ~~currently adopted,~~the carrying amount of the intangible asset is not recoverable and its carrying amount exceeds its fair value based on the model for long-lived assets to be held and used under ASC 360-10. ASC 360-10 requires entities to evaluate long-lived assets (including finite-lived intangible assets) when indicators are present. Impairment indicators would ~~have~~result only when the potential recoveries under the claim paths of all remaining claims suggests the unamortized carrying value is not recoverable. As the amount of upfront payments for CCRAs is typically only a ~~material effect~~fraction of the potential recoveries, it would typically take a substantial negative event (such as an unfavorable court ruling upheld on ~~our condensed financial statements.~~appeal or a change in law/statute with retroactive effect) to suggest an impairment may be triggered. There were no impairment indicators or charges in the three and nine months ended September 30, 2022 and 2021 or the years ended December 31, 2021 and 2020.

~~Not required for~~We are a smaller reporting ~~companies.~~company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed ~~by us~~ in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2020, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

~~Changes~~Management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in ~~Internal Control~~accordance with GAAP. Management is likewise required, on a quarterly basis, to evaluate the effectiveness of its internal controls and to disclose any changes and material weaknesses identified through such evaluation of those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of MSP’s annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We expect to take steps to remediate the material weakness, but there is no assurance that any remediation efforts will ultimately have the intended effects. Prior to the Business Combination, material weaknesses were disclosed for both legacy MSP and LCAP. These are outlined below. As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial ~~Reporting~~

~~There was no change~~Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due to the material weaknesses in our internal control over financial reporting related to the items noted below.

Following the issuance of the “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies” by the staff of the SEC (the “SEC Staff Statement”), and after consultation with LCAP’s independent registered public accounting firm, LCAP’s management and audit committee concluded that, ~~occurred~~in light of the SEC Staff Statement, it was appropriate to restate previously issued and audited financial statements as of and for the period ended December 31, 2020.

Additionally, LCAP previously recorded a portion of its Class A common stock subject to possible redemption in permanent equity. In accordance with SEC Staff guidance on redeemable equity instruments, ASC 480-10-S99, “Distinguishing Liabilities from Equity”, and EITF Topic D-98, “Classification and Measurement of Redeemable Securities”, redemption provisions not solely within the control of the issuing company require common stock subject to redemption to be classified outside of permanent equity. LCAP’s management re-evaluated the effectiveness of our disclosure controls and procedures and concluded that the misclassification of the Class A common stock was quantitatively material to individual line items within the balance sheet. LCAP concluded that the restatement of the Class A common stock represents a material weakness. In addition, on March 31, 2022, LCAP’s management and its audit committee concluded that a disclosure in regard to related parties was not disclosed within the notes to LCAP’s audited Financial Statements for the year ended December 31, 2021. As a result, LCAP identified a material weakness in its internal controls over financial reporting.

LCAP also identified a material weakness in its internal control over financial reporting related to the accounting for complex financial instruments. As a result of this material weakness, LCAP’s management concluded that its internal control over financial reporting was not effective as of December 31, 2020. This material weakness resulted in a material misstatement of LCAP’s derivative liabilities, change in fair value of derivative liabilities, Class A Common Stock subject to possible redemption, Class A Common Stock,

additional paid-in capital, accumulated deficit and related financial disclosures for the period from December 23, 2019 (inception) through December 31, 2020. For a discussion of management’s consideration of the material weakness identified related to LCAP’s accounting for a significant and unusual transaction related to the warrants LCAP issued in connection with the IPO, see “Note 2-Restatement of Previously Issued Financial Statements” to LCAP’s audited financial statements included in the S-1 Registration Statement filed on July 7, 2022 with the SEC. In addition, LCAP identified a material weakness in its internal controls over financial reporting as a result of not including certain disclosure in regard to related parties within the notes to its audited Financial Statements for the year ended December 31, 2021. As a result, such financial statements were amended in order to appropriately disclose the related party transaction. See “Certain Relationships and Related Party Transactions ” included in the S-1 Registration Statement filed on July 7, 2022 with the SEC.

LCAP had concluded that its internal control over financial reporting was ineffective as of December 31, 2020 and 2021, and MSP Recovery concluded that its internal control over financial reporting was ineffective as of June 30, 2022, because material weaknesses existed in LCAP’s internal control over financial reporting and they have not been remediated to date. MSP Recovery has taken a number of measures to remediate the material weaknesses described herein; however, if it is unable to remediate its material weaknesses in a timely manner or MSP Recovery identifies additional material weaknesses, it may be unable to provide required financial information in a timely and reliable manner, and MSP Recovery may incorrectly report financial information.

As of December 31, 2021 and 2020, the Company has identified material weaknesses in its internal control over financial reporting. The material weaknesses the Company identified were as follows:

These control deficiencies did not result in errors that were material to the Company’s annual financial statements. However, these control deficiencies could result in a misstatement in MSP’s accounts or disclosures that would result in a material misstatement to the annual financial statements that would not be prevented or detected. Accordingly, the Company determined that these control deficiencies constitute material weaknesses.

The Company is in the process of implementing measures designed to improve their internal control over financial reporting and remediate the control deficiencies that led to the material weaknesses. During 2022, MSP has hired key accounting personnel with appropriate levels of U.S. generally accepted accounting principles expertise and financial reporting knowledge and experience as well

as has begun developing formal accounting policies and procedures, designing a control environment over how transactions are initiated, recorded, processed and reported, and implementing period end close procedures. The Company also has implemented certain accounting systems to automate manual processes, to help implement segregation of duties and to assist in consolidation and period end close. However, the Company is still in the process of addressing these deficiencies and there is no assurance that these measures will significantly improve or remediate the material weaknesses described above. The Company and their independent registered public accounting firm, were not required to perform an evaluation of the Company's internal control over financial reporting as of December 31, 2021 in accordance with the provisions of the Sarbanes-Oxley Act and as such, there is no assurance that the Company has identified all material weaknesses or that there will not be additional material weaknesses or deficiencies that are identified. While the Company’s independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after the Company is no longer an “emerging growth company” as defined in the JOBS Act, a failure to design, implement or maintain effective internal control over financial reporting could adversely affect the results of annual independent registered public accounting firm audit reports regarding the effectiveness of the Company’s internal control over financial reporting that the Company will eventually be required to include in reports that will be filed with the SEC. If at such time, the Company’s independent registered public accounting firm issue an audit report that is adverse due to one or more material weaknesses in the Company’s internal control over financial reporting, this could have a material and adverse effect on the Company’s business, results of operations and financial condition, and it could cause a decline in the trading price of the Company’s Class A common stock.

There were no changes in our internal control over financial reporting during the most recent fiscal quarter ~~of 2020 covered by this Quarterly Report on Form 10-Q~~ that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

~~None.~~
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently party to any material legal proceedings. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors and there can be no assurances that favorable outcomes will be obtained.

Factors that could cause our ~~actual~~ results to differ materially from those in this report ~~include~~are any of the risks described in our prior quarter report on Form 10-Q and prospectus filed with the SEC on August 12, 2022. As of the date of this report, there have been no material changes in our risk factors ~~described~~from those disclosed in our final prospectus filed with the SEC or our second quarter report on ~~August 14, 2020. As of the date of this Report, other than as described below, there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC.~~Form 10-Q.

The securities in which we invest the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share.

The proceeds held in the Trust Account are invested only in U.S. government treasury obligations with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our Amended and Restated Certificate of Incorporation, our public stockholders are entitled to receive their pro-rata share of the proceeds held in the Trust Account, plus any interest income not released to us, net of taxes payable. Negative interest rates could impact the per-share redemption amount that may be received by public stockholders.

On August 18, 2020, we consummated our Initial Public Offering of 20,000,000 Units. On August 24, 2020, in connection with underwriters’ election to fully exercise their option to purchase additional Units, we sold an additional 3,000,000 Units. The Units were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $230,000,0000. Nomura Securities International, Inc. and Cantor Fitzgerald & Co. acted asOver the ~~joint book running manager~~course of the ~~offering. The~~third quarter, MSPR has issued 399,324 unregistered securities ~~sold~~to Palantir in ~~the offering were registered under the Securities Act~~exchange for services provided in reliance on ~~a registration statement on Form S-1 (No. 333-240130). The SEC declared the registration statement effective on August 12, 2020.~~

Simultaneously with the consummation of the Initial Public Offering and the option to purchase additional Units, we consummated a private placement of 650,000 Private Placement Units to our Sponsor at a price of $10.00 per Private Placement Unit, generating total proceeds of $6,500,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the U.S. Securities ~~Act.~~

~~Of the gross proceeds received from the Initial Public Offering, the closing~~Act of ~~the over-allotment option and the Private Placement Units, $2,300,000 was placed in the Trust Account.~~1933.

We paid a total of $4,600,000 in underwriting discounts and commissions and $478,937 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer up to $8,050,000 in underwriting discounts and commissions.

~~For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.~~

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

~~In accordance with~~ the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on

~~Delaware~~		~~84-4117825~~
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)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
~~Units,~~Class A common stock, $0.0001 par value per share	MSPR	The Nasdaq Global Market
Redeemable warrants, each ~~consisting of~~whole warrant exercisable for one share of Class A ~~Common Stock~~ ~~and one-half~~common stock at an exercise price of ~~one Redeemable Warrant~~$11.50 per share	~~LCAPU~~ MSPRW	The Nasdaq ~~Capital~~Global Market ~~LLC~~
~~Class A Common Stock, par value $0.0001 per share~~	~~LCAP~~	~~The Nasdaq Capital Market LLC~~
Redeemable ~~Warrants,~~warrants, each whole warrant exercisable for one share of Class A ~~Common Stock~~common stock at an exercise price of ~~$11.50~~$0.0001 per share	~~LCAPW~~ MSPRZ	The Nasdaq ~~Capital~~Global Market ~~LLC~~

		~~Page~~
~~PART 1 – FINANCIAL INFORMATION~~		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	2
	Condensed ~~Balance Sheet~~Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	1 3

	Condensed ~~Statements of Operations~~	2

	~~Condensed~~Consolidated Statements of Changes in ~~Stockholder’s~~ Equity for the three and nine months ended September 30, 2022 and 2021	3 4

	Condensed ~~Statement~~Consolidated Statements of Cash Flows for thenine months ended September 30, 2022 and 2021	4 6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
	~~Notes to Condensed Financial Statements~~	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13 24

Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	14 38
Item 4.	Controls and Procedures	38
~~Item 4.~~ PART II.	~~Control and Procedures~~OTHER INFORMATION	15
Item 1.	Legal Proceedings	40
~~PART II – OTHER INFORMATION~~ Item 1A.	Risk Factors	40

~~Item 1.~~	~~Legal Proceedings~~	15

~~Item 1A.~~	~~Risk Factors~~	15

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16 40

Item 3.	Defaults Upon Senior Securities	16 40

Item 4.	Mine Safety Disclosures	15 40
Item 5.	Other Information	40
Item 5.6.	~~Other Information~~Exhibits	16 40
Signatures
~~Item 6.~~	~~Exhibits~~	16

~~SIGNATURES~~		17 42


	September 30,			December 31,
(In thousands except per share amounts)	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	14,268		$	1,664
Restricted cash		11,420			-
Accounts receivable		7,525			-
Affiliate receivable (1)		1,774			4,070
Indemnification asset (1)		752,510			-
Prepaid expenses and other current assets (1)		32,660			13,304
Total current assets		820,157			19,038
Property, plant and equipment, net		2,480			750
Deferred tax asset		857			-
Intangible assets, net		2,077,571			84,218
Investment in rights to claim recovery cash flows		3,673,610			-
Total assets	$	6,574,675		$	104,006

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	32,468		$	4,609
Affiliate payable (1)		19,822			45,252
Commission payable		540			465
Deferred service fee income		249			249
Derivative Liability		10,065			-
Warrant Liability		4,700			-
Guaranty obligation (1)		752,510			-
Other current liabilities		62,638			3,489
Total current liabilities		882,992			54,064
Claims financing obligation and notes payable (1)		170,844			106,805
Loan from related parties (1)		125,759			-
Interest payable		1,471			94,545
Total liabilities	$	1,181,066		$	255,414
Commitments and contingencies (Note 12)

Class A common stock subject to possible redemption, 1,129,589 shares at redemption value as of September 30, 2022.		1,356			-

Stockholders' Equity (Deficit):
Class A common stock, $0.0001 par value; 5,500,000,000 shares authorized; 72,909,609 issued and outstanding as of September 30, 2022	$	7		$	-
Class V common stock, $0.0001 par value; 3,250,000,000 shares authorized; 3,148,720,212 issued and outstanding as of September 30, 2022		315			-
Additional paid-in capital		201,656			-
Members' equity		-			(155,756	)
Accumulated deficit		(23,537	)		-
Total Stockholders' Equity (Deficit)	$	178,441		$	(155,756	)
Non-controlling interest		5,213,812			4,348
Total equity	$	5,392,253		$	(151,408	)
Total liabilities and equity	$	6,574,675		$	104,006


Series PMPI (in thousands)	September 30, 2022		December 31, 2021
Total Assets	$	3,841		5,390
Total Liabilities	$	274		266


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨
Large accelerated filer	¨	☐		Accelerated filer	☐
x
Non-accelerated filer	x	☒		Smaller reporting company	☒
		x	~~emerging~~
Emerging growth company		☒

	June 30, 2020			December 31, 2019
	(unaudited)			(audited)
ASSETS
Current asset - cash	$	18,378		$	—
Deferred offering costs		125,483			26,171
TOTAL ASSETS	$	143,861			26,171

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Accounts payable and accrued expenses	$	1,000		$	1,000
Accrued offering costs		45,690			26,171
Promissory note — Related party		73,171			—
Total Current Liabilities		119,861			27,171

Commitments

Stockholder’s Equity
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; no issued and outstanding		—			—
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding as of June 30, 2020 and December 31, 2019⁽¹⁾		575			—
Additional paid-in capital		24,425			—
Accumulated deficit		(1,000	)		(1,000	)
Total Stockholder’s Equity		24,000			(1,000	)
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	143,861		$	26,171

	Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
Formation costs	$	—		$	—
Net loss	$	—		$	—

Weighted average shares outstanding, basic and diluted ⁽¹⁾		5,000,000			4,725,275

Basic and diluted net loss per common share	$	(0.00	)	$	(0.00	)

	Class B Common Stock				Additional Paid-in		Accumulated			Total Stockholder’s
	Shares		Amount		Capital		Deficit			Equity
Balance — January 1, 2020		—	$	—	$	—	$	(1,000	)	$	(1,000	)

Issuance of Class B common stock to Sponsor ⁽¹⁾		5,750,000		575		24,425		—			25,000

Net loss		—		—		—		—			—

Balance — March 31, 2020		5,750,000		575		24,425		(1,000	)		24,000

Net loss		—		—		—		—			—

Balance — June 30, 2020		5,750,000	$	575	$	24,425	$	(1,000	)	$	24,000

Cash Flows from Financing Activities:
Proceeds from issuance of Class B common stock to Sponsor		25,000
Proceeds from promissory note—related party		73,171
Payment of offering costs		(79,793	)
Net cash provided by financing activities		18,378

Net Change in Cash		18,378
Cash — Beginning		—
Cash — Ending	$	18,378

Non-cash investing and financing activities:
Deferred offering costs included in accrued offering costs	$	45,690


	For the three months ended,						For the nine months ended,
Series PMPI (in thousands)	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Revenue	$	16			-			16			1
Amortization		500			500			1,500			1,500
Other expenses		8			-			8			-
Profit (Loss)	$	(492	)		(500	)		(1,492	)		(1,499	)


(in thousands)	CCRAs Amortization
2022 (remaining)	$	67,849
2023		271,397
2024		271,324
2025		271,272
2026		271,272
Thereafter		924,457
Total	$	2,077,571


(In thousands)	Lease Payments
Year Ending December 31,
2022 (remaining)	$	58
2023 (1)		217
Total	$	275


	Common Units		Ownership Percentage
Ownership of Class A Common Units		72,909,609		2.3	%
Ownership of Class V Common Units		3,148,720,212		97.7	%
Balance at end of period		3,221,629,821		100.0	%


	As of and for the,
	Nine Months Ended September 30, 2022			Six Months Ended June 30, 2022			Three Months Ended March 31, 2022			Year Ended December 31, 2021			Year Ended December 31, 2020
$ in billions
Paid Amount	$	373.3		$	370.2		$	366.9		$	364.4		$	58.4
Paid Value of Potentially Recoverable Claims		89.2			88.3			87.3			86.6			14.7
Billed Value of Potentially Recoverable Claims		376.1			371.3			367.8			363.2			52.3
Recovery Multiple	N/A(1)			N/A(1)			N/A(1)			N/A(1)			N/A(1)
Penetration Status of Portfolio		85.8	%		76.3	%		76.3	%		75.6	%	N/A


	Three Months Ended September 30
(in thousands except for percentages)		2022			2021		$ Change			% Change
Claims recovery income	$	2,571		$	48		$	2,523			5,256		%
Claims recovery service income		5,748			2,439			3,309			136		%
Total Claims Recovery	$	8,319		$	2,487		$	5,832			234		%
Operating expenses
Cost of claims recoveries	$	1,160		$	15		$	1,145			7,633		%
Claims amortization expense		66,331			47			66,284			141,030		%
General and administrative		6,621			2,871			3,750			131		%
Professional fees		5,875			2,539			3,336			131		%
Professional fees - legal		8,014			26			7,988			30,723		%
Depreciation and amortization		103			89			14			16		%
Total operating expenses	$	88,104		$	5,587		$	82,517			1,477		%
Operating Income/ (Loss)	$	(79,785	)	$	(3,100	)	$	(76,685	)		2,474		%
Interest expense	$	(13,083	)	$	(6,990	)	$	(6,093	)		87		%
Other income (expense), net		63,138			(169	)		63,307		(37460)			%
Change in fair value of warrant and derivative liabilities		2,670			-			2,670			100		%
Net loss before provision for income taxes	$	(27,060	)	$	(10,259	)	$	(16,801	)		164		%
Provision for income tax benefit (expense)	$	-		$	-		$	-			(100	)	%
Net loss	$	(27,060	)	$	(10,259	)	$	(16,801	)		164		%
Less: Net (income) loss attributable to non-controlling members	$	26,597		$	(16	)	$	26,613		(166331)			%
Net loss attributable to controlling members	$	(463	)	$	(10,275	)	$	9,812			(95	)	%


	Nine Months Ended September 30
(in thousands except for percentages)		2022			2021		$ Change			% Change
Claims recovery income	$	3,999		$	63		$	3,936			6,248		%
Claims recovery service income		17,795			9,213			8,582			93		%
Total Claims Recovery	$	21,794		$	9,276		$	12,518			135		%
Operating expenses
Cost of claims recoveries	$	1,861		$	23		$	1,838			7,991		%
Claims amortization expense		92,866			114			92,752			81,361		%
General and administrative		17,049			8,207			8,842			108		%
Professional fees		10,931			5,606			5,325			95		%
Professional fees - legal		34,251			56			34,195			61,063		%
Depreciation and amortization		254			256			(2	)		(1	)	%
Total operating expenses	$	157,212		$	14,262		$	142,950			1,002		%
Operating Income/ (Loss)	$	(135,418	)	$	(4,986	)	$	(130,432	)		2,616		%
Interest expense	$	(34,475	)	$	(19,579	)	$	(14,896	)		76		%
Other income (expense), net		63,175			1,154			62,021			5,374		%
Change in fair value of warrant and derivative liabilities		(11,683	)		-			(11,683	)		(100	)	%
Net loss before provision for income taxes	$	(118,401	)	$	(23,411	)	$	(94,990	)		406		%
Provision for income tax benefit (expense)	$	326		$	-		$	326			100		%
Net loss	$	(118,075	)	$	(23,411	)	$	(94,664	)		404		%
Less: Net (income) loss attributable to non-controlling members	$	116,324		$	(16	)	$	116,340		(727125)			%
Net loss attributable to controlling members	$	(1,751	)	$	(23,427	)	$	21,676			(93	)	%


	Three months ended			Nine months ended
(In thousands)	September 30, 2022			September 30, 2022
GAAP Operating Loss	$	(79,785	)	$	(135,418	)
Share based compensation		—			20,055
Claims amortization expense		66,331			92,866
Adjusted operating loss	$	(13,454	)	$	(22,497	)

GAAP Net Loss	$	(27,060	)	$	(118,075	)
Share based compensation		—			20,055
Claims amortization expense		66,331			92,866
Gain on debt extinguishment		(63,367	)		(63,367	)
Paid-in-kind Interest		13,083			34,475
Change in fair value of warrant and derivative liabilities		(2,670	)		11,683
Adjusted net loss	$	(13,683	)	$	(22,363	)

~~No.~~		~~Description of Exhibit~~
~~1.1~~ Exhibit Number		~~Underwriting Agreement, dated August 13, 2020, by and among the Registrant and Nomura and Cantor Fitzgerald & Co., as representatives of the several underwriters~~ ⁽¹⁾ Description
~~3.1~~ 10.1*		~~Amended and Restated Certificate of Incorporation of the Company~~ ⁽¹⁾Warrant Agreement
~~3.2~~ 31.1*		~~Amended and Restated Bylaws of the Company~~ ⁽¹⁾
~~4.1~~		~~Warrant Agreement, dated August 13, 2020, by and between the Registrant and Continental Stock Transfer & Trust Company, LLC~~ ⁽¹⁾
~~10.1~~		~~Letter Agreement, dated August 13, 2020, by and among the Registrant and its officers, directors, Nomura and the Sponsor~~ ⁽¹⁾
~~10.2~~		~~Investment Management Trust Agreement, dated August 13, 2020, by and between the Registrant and Continental Stock Transfer & Trust Company, LLC~~ ⁽¹⁾
~~10.3~~		~~Registration Rights Agreement, dated August 13, 2020, by and among the Registrant and certain security holders~~ ⁽¹⁾
~~10.4~~		~~Securities Purchase Agreement, dated July 27, 2020, by and between the Sponsor and Nomura~~ ⁽¹⁾
~~10.5~~		~~Private Placement Unit Subscription Agreement, dated August 13, 2020, by and between the Registrant and the Sponsor~~ ⁽¹⁾
~~10.6~~		~~Private Placement Unit Subscription Agreement, dated August 13, 2020, by and between the Registrant and Nomura~~ ⁽¹⁾
~~10.7~~		~~Indemnity Agreements, each dated as of August 13, 2020, by and between the Registrant and each of the officers and directors of the Registrant~~ ⁽¹⁾
~~10.8~~		~~Administrative Support Agreement, dated August 13, 2020, by and between the Registrant and the Sponsor~~ ⁽¹⁾
~~10.9~~		~~Forward Purchase Agreement, dated August 13, 2020, by and between the Company and Nomura~~ ⁽¹⁾
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act ~~Rules 13a-14(a) and 15(d)-14(a),~~of 1934, as ~~adopted~~Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act ~~Rules 13a-14(a) and 15(d)-14(a),~~of 1934, as ~~adopted~~Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as ~~adopted~~Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.
32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as ~~adopted~~Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.
101.INS* 101.INS		XBRL Instance Document
101.CAL* 101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH* 101.DEF		~~XBRL Taxonomy Extension Schema Document~~
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* 101.LAB		XBRL Taxonomy Extension ~~Labels~~Label Linkbase Document
101.PRE* 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

	~~LIONHEART ACQUISITION CORPORATION II~~
		MSP Recovery, Inc.
~~Date: September 25, 2020~~	~~By:~~	~~/s/ Ophir Sternberg~~
Date: November 10, 2022	~~Name:~~	~~Ophir Sternberg~~ By:	/s/ Calvin Hamstra
	~~Title:~~	~~Chief Executive Officer~~	Calvin Hamstra
		~~(Principal Executive Officer)~~

	~~By:~~	~~/s/ Paul Rapisarda~~
	~~Name:~~	~~Paul Rapisarda~~
	~~Title:~~	Chief Financial Officer
		~~(Principal Accounting and Financial Officer)~~