MSP RECOVERY, INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations.

MSP RECOVERY INC.'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF

                 FINANCIAL CONDITION AND RESULTS OF 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 condition. The discussion should be read
together with "Selected Historical Combined and Consolidated Financial and
Operating Data of MSP" and the historical audited annual combined and
consolidated financial statements as of and for the years ended December 31,
2021 and 2020 included in the S-1 Registration Statement filed on July 7, 2022
with the Securities and Exchange Commission (the "SEC"), and 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
"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
based upon MSP's current expectations, estimates and projections that involve
risks and uncertainties. Actual results could 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."

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 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.

Our Business

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

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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 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.

Our Business Model

Recovery Model

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.

Chase to Pay

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.

Claims Recovery Services

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.

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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.

Key Factors Affecting Our Results

Our Claims Portfolio

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.

Key Performance Indicators

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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, we
anticipate 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
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

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

                                                          As of and for the,
                            Nine Months     Six Months    Three Months    Year Ended
                               Ended          Ended          Ended       December 31,        Year Ended
                           September 30,     June 30,      March 31,       

2021 December 31, 2020

                               2022            2022           2022
$ in billions
Paid Amount                $       373.3   $      370.2   $      366.9   $       364.4   $              58.4
Paid Value of Potentially           89.2           88.3           87.3            86.6                  14.7
Recoverable Claims
Billed Value of
Potentially Recoverable            376.1          371.3          367.8           363.2                  52.3
Claims
Recovery Multiple                 N/A(1)         N/A(1)         N/A(1)          N/A(1)                N/A(1)
Penetration Status of               85.8 %         76.3 %         76.3 %          75.6 %                 N/A
Portfolio


(1)

During the nine months ended September 30, 2022, the Company has received total
recoveries of $4.0 million with a recovery multiple of 3.7x. However, the
settlement amounts do not provide a large enough sample to be statistically
significant, and are therefore not shown in the table.

Healthcare Industry

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 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
expansion or contraction of healthcare coverage and spending, which directly
affects the number of claims available. The 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 adversely affect
our business. Our ability to generate future revenue is therefore significantly
dependent on factors outside our control.

Impact of the COVID-19 Pandemic

The impact of the 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 reduced court dockets and the availability of
associates, employees, and business partners. While we were able to continue
operations throughout these periods, these delays potentially impacted timing of
resolving pending legal matters as a result of court, administrative and other
closures and could impact any potential future legislation or 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 material impact to our operations or
financial results including total claims recovery, claims recovery service
revenue or cost of recoveries. In addition, changes in KPIs such as Paid Amount,
Paid Value of Potentially Recoverable Claims, Recovery Multiple and Penetration
Status of Portfolio were not materially impacted for the three and nine months
ended September 30, 2022 and 2021 and the years ended December 31, 2021 and 2020
and the number of Assignors or 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."

Key Components of Sales and Expenses

The following represent the components of our results of operations.

Claims Recovery Income

Our 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 we become the owner of those rights. As such, this
income is not generated from the transfer of control of 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 amounts are

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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, 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 gross basis, as we are entitled to the full value of proceeds
and 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.

Claims Recovery Service Income

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

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

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

Operating Expenses

General and Administrative Expenses

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
office expenses.

As we continue to grow as a company and build out our team, we expect that our
sales, general and administrative costs will increase. We also expect to incur
additional expenses as a result of operating as a public company, 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 obligations pursuant to the rules and regulations of the SEC, as well
as higher expenses for general and director and officer insurance, investor
relations, and professional services.

Professional Fees

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

Professional Fees - legal

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

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.

Interest Expense

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.

Interest income consists primarily of interest on short term investments.

Other Income (expense)

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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 Warrant and Derivative Liabilities

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

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

Income Tax Benefit

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.


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Results of Operations

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.

                                                  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          2,670           -       2,670         100    %
derivative liabilities
Net loss before provision for income     $ (27,060 ) $ (10,259 ) $ (16,801 )       164    %
taxes
Provision for income tax benefit         $       -   $       -   $       -        (100 )  %
(expense)
Net loss                                 $ (27,060 ) $ (10,259 ) $ (16,801 )       164    %
Less: Net (income) loss attributable to  $  26,597   $     (16 ) $  26,613    (166331)    %
non-controlling members
Net loss attributable to controlling     $    (463 ) $ (10,275 ) $   9,812         (95 )  %
members


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 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.

                                       31
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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.

                                                   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      (11,683 )          -      (11,683 )        (100 )  %
derivative liabilities
Net loss before provision for income  $ (118,401 ) $  (23,411 ) $  (94,990 )         406    %
taxes
Provision for income tax benefit      $      326   $        -   $      326           100    %
(expense)
Net loss                              $ (118,075 ) $  (23,411 ) $  (94,664 )         404    %
Less: Net (income) loss attributable  $  116,324   $      (16 ) $  116,340      (727125)    %
to non-controlling members
Net loss attributable to controlling  $   (1,751 ) $  (23,427 ) $   21,676           (93 )  %
members


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.

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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.

Non-GAAP Financial Measures

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:

                                                  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 )

Liquidity and Capital Resources

Sources of Liquidity

Since inception, we have financed our operations primarily from partnership
contributions. As of September 30, 2022, we had $14.3 million in cash and cash
equivalents. As of 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

                                       33
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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.

MSP Principals Promissory Note

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.

Nomura Promissory Note

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 Business
Combination. The maturity date of the promissory note is May 29, 2023. On the
maturity date, the Company is required to pay Nomura an amount in cash equal to
the 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.

OTC Equity Prepaid Forward Agreement

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 CF at the closing of
the Business Combination in exchange for a pro rata amount of the funds held in
the Trust 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 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.

Committed Equity Facility

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

                                       34
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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.

Assignment and Sale of Proceeds 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 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 future. The expenditures associated with the development and
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".

PPP Loan

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.

Claims Financing Obligations

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, upon final resolution of the claims, the investor
receives from proceeds an amount that is less than the 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.


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Tax Receivable Agreement

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 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 otherwise been available to us, and, to the extent
that we are unable to 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.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

                                                            Nine Months ended
                                                              September 30,
(in thousands)                                             2022            2021
Net cash used in operating activities                  $    (70,764 )   $    (6,256 )
Net cash used in investing activities                        (4,563 )        (1,857 )
Net cash provided by (used in) financing activities          99,351          (2,412 )
Net increase (decrease) in cash and cash equivalents         24,024         (10,525 )
and restricted cash
Cash and cash equivalents and restricted cash at              1,664         

11,879

beginning of period
Cash and cash equivalents and restricted cash at end   $     25,688     $     1,354
of period

Cash Flows Used in Operating Activities

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.

Cash Flows Used in Investing Activities

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.

Cash Flows Provided by (Used in) Financing Activities

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 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.

Contractual Obligations, Commitments and Contingencies

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

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

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


(1)

Operating lease expires before or during the year ending December 31, 2023

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 claims recoveries are received to
cover the required return or in some cases by 2031.

Off-Balance Sheet Commitments and Arrangements

As of the balance sheet dates of September 30, 2022 and December 31, 2021, we
have not engaged in any off-balance sheet arrangements, as defined in the rules
and regulations of the SEC.

Critical Accounting Policies

Our consolidated financial statements and the related notes thereto included
elsewhere in this Form 10-Q are prepared in accordance with GAAP. The
preparation of our consolidated financial statements requires 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 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
judgment and complexity. Accordingly, these are the policies we believe are the
most critical to aid in fully understanding and evaluating our consolidated
financial condition and results of 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.

Revenue Recognition

Claims Recovery Income

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 is recognized.

Claims Recovery Service Income

We recognize claims recovery service income for our services to third parties
for our services to assist those entities with pursuit of claims recovery
rights. We have determined that 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 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.

Impairment of Intangible Assets

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.

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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 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
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 fraction of the potential
recoveries, it would typically take a substantial negative event (such as an
unfavorable court ruling upheld on 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.