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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 08, 2022

 

 

MSP Recovery, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-39445	84-4117825
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
2701 Le Jeune Road Floor 10
Coral Gables, Florida				33134
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (305) 614-2222

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A common stock, par value $0.0001 per share		MSPR		The NASDAQ Global Market
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share		MSPRW		The NASDAQ Global Market
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $0.0001 per share		MSPRZ		The NASDAQ Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☒

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

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Item 2.02 Results of Operations and Financial Condition.

 

On November 8, 2022, MSP Recovery, Inc. issued a press release announcing its results of operations for the third quarter ended September 30, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is furnished as part of this Current Report on Form 8-K.

Exhibit No.			Description of Document
99.1			Press Release issued by MSP Recovery, Inc. on November 8, 2022.
104			Cover Page Interactive Data File--the cover page XBRL tags are embedded within the Inline XBRL document.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			MSP Recovery, Inc.
Date:	November 8, 2022	By:	/s/ Calvin Hamstra
			Calvin Hamstra, Chief Financial Officer

 

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For Investors:

ICR, Inc.

Marc Griffin

Marc.Griffin@icrinc.com

 

For Media:

ICR, Inc.

MSP@icrinc.com

 

 

MSP Recovery Announces Fiscal Third Quarter 2022 Financial Results
Recognized Gain on Debt Extinguishment of $63 million During the Quarter

Paid Value of Potentially Recoverable Claims Grew to $89.2 billion During Quarter

Increase in Total Claims Recovery Income and Service Income of $3.0 million over the Second Quarter

Purchased additional $48.2 million in CCRAs and signed a $7.5 million licensing deal for LifeWallet

 

Coral Gables, Florida, – November 8, 2022 – MSP Recovery, Inc. (NASDAQ: MSPR)("MSPR," "MSP Recovery," or the "Company"), a Medicare, Medicaid, commercial, and secondary payer reimbursement recovery and technology leader, today announced financial results for the third quarter ended September 30, 2022.

MSPR continued to successfully execute and advance its business strategy as the paid value of recoverable claims increased by about $870 million to $89.2 billion in the third quarter from the second quarter 2022, reflecting continued strong demand from health plans, providers, and self-insured entities for MSPR’s services, expertise, and portfolio of revenue streams. MSPR also acquired $48.2 million in recovery rights, whereby MSPR acquired 100% of the future recoveries associated with assigned claims.

The Company settled an accident-related case for $1.75 million, with the average recovery on claims settled exceeding 2x the Paid Value of Potentially Recoverable Claims ("PVPRC"). The Company also settled with a group health plan, recovering $1.15 million for an increase in Total Claims Recovery Income and Service Income of $3 million from the second quarter. Initial payments received through the third quarter on individual demand claims, averaged a recovery multiple of 2.1x the projected PVPRC.

Based on current cases pending in litigation, and the volume of claims being processed as it relates to individual demands, the Company believes it has a clear path towards monetizing assets. Additionally, since recovery rights are liquidated damages, the assets owned by MSPR increase in value to the extent that interest continues to accrue on liquidated damages claims.
 

The Company also reached a new warrant agreement with Brickell Key Investments, LP. (“Brickell Key”), that reduced debt by $63 million and resulted in a $40 million per year reduction in accrued interest. By exchanging part

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of their debt into an equity position, Brickell Key demonstrates their continued confidence in the Company.
 

LifeWallet entered into a licensing agreement with a new client for a $7.5 million fee and expected prospective fees of $1 million per year for continued servicing. LifeWallet also launched the LifeWallet Legal Referral Service to enable LifeWallet to generate revenue from lawyers across the nation. The LifeChain blockchain technology is being implemented for several clients and MSPR expects to begin monetizing the technology during the fourth quarter. Last month, MSPR announced that it had expanded its partnership with Tokenology Labs to include the development of multiple blockchain initiatives.
 

“During the third quarter, we expanded our portfolio of recoverable claims and added to our potential revenue streams while significantly reducing our debt,” said MSP Recovery Founder and CEO, John H. Ruiz. “This is all further proof of the growing recognition in the healthcare, healthcare data and law community of MSPR’s unique value proposition.”

“Some of our most exciting new potential revenue opportunities come thanks to the astounding early success of LifeWallet, which we launched less than a year ago, said MSP Recovery Co-Founder and Chief Legal Officer, Frank C. Quesada.

“LifeWallet is a powerful and effective tool for both patients and healthcare providers alike. Thanks to our expanded partnership with Tokenology, LifeWallet’s LifeChain will connect providers and payers to tokenized medical claims, which is expected to transform standard medical claim forms into unique digital versions on blockchain (NFTs or non-fungible tokens).”

“We continue to build on what we believe is an insurmountable head start when it comes to creating and deploying advanced technology tools alongside industry-leading legal acumen to wring waste, inefficiency and fraud from the healthcare claim process,” added Mr. Ruiz. “We have seen a large number of healthcare solutions and are confident that our unique technology continues to disrupt the healthcare system as it relates to data ingestion as well as patient efficiencies and proper payments.”

 

 

 

Third Quarter 2022 Financial Highlights

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Third Quarter 2022 Key Metrics

Since announcing the business combination with Lionheart Acquisition Corporation II, our portfolio has continued to grow. Below is detail on the increase in our portfolio since the announcement:

Select Portfolio Metrics
As of	September 30				December 31				March 31				June 30				September 30
(in millions)	2021				2021				2022				2022				2022
Total Paid Amount	$	67,162			$	364,438			$	366,879			$	370,154			$	373,294
Paid Value of Potentially Recoverable Claims (PVPRC)		15,248				86,629				87,284				88,305				89,176
Billed Value of Potentially Recoverable Claims (BVPRC)		55,366				363,231				367,836				371,321				376,125

As of September 30, 2022, MSPR had the following developments:

Portfolio Growth:

MSPR seeks assignment of recovery rights from secondary payers and providers by acquiring the recovery rights to claims from secondary payers via Claims Cost Recovery Agreements (“CCRA”). The Company utilizes its proprietary internal data analytics platform to review claims and identify which have probable recovery paths. MSPR’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. The table below outlines the

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Company's growth in data received in the most recent periods. The amounts represent data received from current and new assignors:

 

MSP's Recovery Portfolio Claims Growth By Year
As of			Claims Count				PVPRC				BVPRC
			(thousands)				(millions)				(millions)
December 31, 2021				632,919			$	86,630			$	363,231
March 31, 2022				6,689				655				4,605
June 30, 2022				7,348				1,020				3,484
September 30, 2022				7,452				871				4,804
Total				654,408			$	89,176			$	376,125

 

Demand Letters:

MSPR recently announced a strategy whereby the Company is sending out individual demand letters on identified recoverable claims to responsible payers for prompt payment. We expect this strategy to result in more predictable and visible revenues. The table below outlines specific dollar amounts identified by the Company, broken down by litigation and demand letter type, that it plans to pursue against different responsible parties:

 

Recoveries Being Sought by Category
($'s in millions)	Identified Incidents				Total Claims				Paid Amounts				Billed Amounts Sought
Accident Related:
Data Matching (1)		341,622				61,944,178			$	4,964.4			$	18,906.5
Demand Letters (2):
1st Party Demands		11,790				1,327,547			$	117.6			$	818.1
3rd Party Demands		16,202				2,433,171				227.4				1,631.2
Case and Lien Recoveries		1,809				212,087				18.5				77.1
Fraud & Misconduct Cases:
Private Lien Resolution Programs (3)	84					19,484				2.8				14.1
Big Pharma/Product Liability (2)		1,683,811				56,635,380				5,274.7				17,032.1
Group Health Plan Recovery		1,073				13,311				2.1				10.9

 

Financial Outlook

MSP Recovery is providing guidance for its full year 2022 as follows:

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Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading “Non-GAAP Financial Measures.” A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.

Quarterly Conference Call

MSP Recovery will host a conference call and live webcast to review the Company’s third quarter results for investors and analysts at 8:00 a.m. Eastern Time on Wednesday, November 9, 2022. To access this call, we encourage you to pre-register using this link: MSP Recovery Q3 2022 Earnings Pre Registration. A replay of the webcast will be archived and accessible at https://investors.msprecovery.com/.

 

About MSP Recovery

Founded in 2014, MSP Recovery has become a Medicare, Medicaid, commercial, and secondary payer reimbursement recovery leader, disrupting the antiquated healthcare reimbursement system with data-driven solutions to secure recoveries against responsible parties. MSP Recovery provides the healthcare industry with comprehensive compliance solutions, while innovating technologies to help save lives. For more information, visit: www.msprecovery.com.

Forward Looking Statements
 

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This press release 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 total gross recoverables. 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 MSPR to predict or identify all such events or how they may affect it. MSPR has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws. Factors that could cause these differences include, but are not limited to, MSPR’s ability to capitalize on its assignment agreements and recover monies that were paid by the assignors; litigation results; the validity of the assignments of claims to MSPR; the ability to successfully expand the scope of MSPR’s claims or obtain new data and claims from MSPR’s existing assignor base or otherwise; MSPR’s ability to innovate and develop new solutions, and whether those solutions will be adopted by MSPR’s existing and potential assignors; negative publicity concerning healthcare data analytics and payment accuracy; and those other factors included in MSPR’s S-1 Registration Statement dated July 7, 2022, 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.

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MSP RECOVERY, INC. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 

		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			1,774				4,070
Indemnification asset			752,510				-
Prepaid expenses and other current assets			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			19,822				45,252
Commission payable			540				465
Deferred service fee income			249				249
Derivative Liability			10,065				-
Warrant Liability			4,700				-
Guaranty obligation			752,510				-
Other current liabilities			62,638				3,489
Total current liabilities			882,992				54,064
Claims financing obligation and notes payable			170,844				106,805
Loan from related parties			125,759				-
Interest payable			1,471				94,545
Total liabilities		$	1,181,066			$	255,414
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

 

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MSP RECOVERY, INC. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

		For the three months ended September 30,								For the 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			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			1,160				15				1,861				23
Claims amortization expense			66,331				47				92,866				114
General and administrative			6,621				2,871				17,049				8,207
Professional fees			5,875				2,539				10,931				5,606
Professional fees - legal			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			-				-				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			69,036,899			N/A					53,138,474			N/A
Basic and diluted net income per share, Class A Common Stock		$	(0.01	)		N/A				$	(0.03	)		N/A

 

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Non-GAAP Financial Measures

MSP RECOVERY, INC. and Subsidiaries

Non-GAAP Reconciliation

(Unaudited)

 

	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	)

 

In addition to the financial measures prepared in accordance with GAAP, this press release also contains Non-GAAP financial measures. We consider "Net loss excluding non-cash and one-time expenses" and "Operating loss excluding non-cash or one-time items" 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. Net loss excluding non-cash and one-time expenses represents Net loss adjusted for certain non-cash and non-recurring expenses, and Operating loss excluding non-cash or one-time 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 will be included in Management's Discussion and Analysis in the Form 10-Q.

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