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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2021

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

For the transition period from                  to                  

Commission File No. 001-39445

Lionheart Acquisition Corporation II

(Exact name of registrant as specified in its charter)

Delaware

    

84-4117825

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.) 

4218 NE 2nd Avenue
Miami, FL 33137

(Address of Principal Executive Offices, Zip Code)

(305) 573-3900

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class

   

Trading Symbol(s)

   

Name of each exchange on which registered

Units, each consisting of one share of Class A Common Stock and one-half of one Redeemable Warrant

LCAPU

The Nasdaq Capital Market LLC

Class A Common Stock, par value $0.0001 per share

LCAP

The Nasdaq Capital Market LLC

Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50

LCAPW

The Nasdaq Capital Market LLC

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

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

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

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

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

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

As of November 15, 2021 there were 23,650,000 shares of Class A common stock, $0.0001 par value and 5,750,000 shares of Class B common stock, $0.0001 par value, issued and outstanding.

Table of Contents

LIONHEART ACQUISITION CORPORATION II

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

 

 

Page

PART 1 – FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

1

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020

2

 

Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the three and nine months ended September 30, 2021 and 2020

3

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

4

 

Notes to Condensed Consolidated Financial Statements

5

 

Item 2.

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

25

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

29

 

Item 4.

Control and Procedures

30

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

30

 

Item 1A.

Risk Factors

30

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

 

Item 3.

Defaults Upon Senior Securities

31

 

Item 4.

Mine Safety Disclosures

31

 

Item 5.

Other Information

31

Item 6.

Exhibits

32

 

SIGNATURES

33

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LIONHEART ACQUISITION CORPORATION II

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 

December 31, 

    

2021

    

2020

(Unaudited)

(As restated)1

ASSETS

 

  

 

  

Current assets

Cash

$

353,032

$

1,017,137

Prepaid expenses

48,944

124,766

Total Current Assets

401,976

1,141,903

Marketable securities held in Trust Account

230,008,192

230,011,254

TOTAL ASSETS

$

230,410,168

$

231,153,157

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable and accrued expenses

$

2,918,987

$

1,163,558

Accrued offering costs

 

 

5,450

Total Current Liabilities

 

2,918,987

 

1,169,008

Warrant liability

10,176,000

13,365,500

Deferred underwriting fee payable

8,050,000

8,050,000

TOTAL LIABILITIES

21,144,987

22,584,508

Commitments and Contingencies (Note 7)

 

  

 

  

Class A common stock subject to possible redemption, 23,000,000 shares at redemption value as of September 30, 2021 and December 31, 2020.

230,000,000

230,000,000

Stockholders' Deficit

 

 

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding

Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 650,000 issued and outstanding (excluding 23,000,000 shares subject to possible redemption) as of September 30, 2021 and December 31, 2020.

 

65

 

65

Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020.

 

575

 

575

Accumulated deficit

 

(20,735,459)

 

(21,431,991)

Total Stockholders' Deficit

 

(20,734,819)

 

(21,431,351)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

230,410,168

$

231,153,157

(1)As restated due to review of the treatment of common stock subject to redemptions (see Note 2)

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

1

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LIONHEART ACQUISITION CORPORATION II

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months

Nine Months

Ended

Ended

September 30,

September 30,

    

2021

    

2020(1)

    

2021

    

2020(1)

Operating and formation costs

$

349,966

$

88,889

$

2,503,274

$

88,889

Loss from operations

(349,966)

(88,889)

(2,503,274)

(88,889)

Other income (expense):

Interest earned on marketable securities held in Trust Account

3,473

6,646

10,306

6,646

Transactions costs associated with the Initial Public Offering

(837,355)

(837,355)

Change in fair value of warrant liabilities

1,070,750

466,500

3,189,500

466,500

Other income (expense), net

1,074,223

(364,209)

3,199,806

(364,209)

Net Income (Loss)

$

724,257

$

(453,098)

$

696,532

$

(453,098)

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

23,650,000

10,858,152

23,650,000

3,645,803

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

$

0.02

$

(0.03)

$

0.02

$

(0.05)

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

5,750,000

5,301,630

5,750,000

4,918,796

Basic and diluted net income per share, Class B Common Stock

$

0.02

$

(0.03)

$

0.02

$

(0.05)

(1)As restated due to review of the treatment of common stock subject to redemptions (see Note 2)

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

2

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LIONHEART ACQUISITION CORPORATION II

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

(Unaudited)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

Class A

Class B

Additional

Total

Common Stock

Common Stock

Paid-in

Accumulated

Stockholders'

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Deficit

Balance — January 1, 2021 (1)

 

650,000

$

65

 

5,750,000

$

575

$

$

(21,431,991)

$

(21,431,351)

Net income

 

 

 

 

 

 

4,641,710

 

4,641,710

Balance - March 31, 2021 (1)

650,000

65

 

5,750,000

575

$

(16,790,281)

(16,789,641)

Net loss

(4,669,435)

(4,669,435)

Balance — June 30, 2021(1)

650,000

65

 

5,750,000

575

$

$

(21,459,716)

$

(21,459,076)

Net income

724,257

724,257

Balance - September 30, 2021

 

650,000

$

65

 

5,750,000

$

575

$

$

(20,735,459)

$

(20,734,819)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020

Class A

Class B

Additional

Total

Common Stock

Common Stock

Paid-in

Accumulated

Stockholders'

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Deficit

Balance — January 1, 2020

 

$

 

$

$

$

(1,000)

$

(1,000)

Issuance of Class B common stock to Sponsor

5,750,000

575

24,425

25,000

Balance - March 31, 2020

5,750,000

575

24,425

(1,000)

24,000

Net income (loss)

Balance — June 30, 2020(1)

5,750,000

575

24,425

(1,000)

24,000

Sale of 23,000,000 Units, net of underwriting discounts and offering expenses

Sale of 650,000 Private Placement Units

650,000

65

6,123,809

6,123,874

Accretion to common stock subject to redemption amount

(6,148,234)

(19,369,222)

(25,517,456)

Net loss

(453,098)

(453,098)

Balance — September 30, 2020(1)

650,000

$

65

5,750,000

$

575

$

$

(19,823,320)

$

(19,822,680)

(1)As restated due to review of the treatment of common stock subject to redemptions (see Note 2)

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

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LIONHEART ACQUISITION CORPORATION II

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended

September 30, 

    

2021

    

2020(1)

Cash Flows from Operating Activities:

Net income (loss)

$

696,532

$

(453,098)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Change in fair value of warrant liability

(3,189,500)

(466,500)

Transaction costs associated with the Initial Public Offering

837,355

Interest earned on marketable securities held in Trust Account

(10,306)

(6,646)

Changes in operating assets and liabilities:

Prepaid expenses

75,822

(163,745)

Accounts payable and accrued expenses

1,755,429

69,833

Net cash used in operating activities

(672,023)

(182,801)

Cash Flows from Investing Activities:

Investment of cash into Trust Account

(230,000,000)

Cash withdrawn from Trust Account to pay franchise and income taxes

13,368

Net cash provided by (used in) investing activities

13,368

(230,000,000)

Cash Flows from Financing Activities:

  

Proceeds from issuance of Class B common stock to Sponsor

 

25,000

Proceeds from sale of Units, net of underwriting discounts paid

 

225,400,000

Proceeds from sale of Private Placement Units

6,500,000

Proceeds from promissory note – related party

140,671

Repayment of promissory note – related party

(140,671)

Payment of offering costs

 

(5,450)

(473,487)

Net cash (used in) provided by financing activities

 

(5,450)

231,451,513

Net Change in Cash

 

(664,105)

1,268,712

Cash — Beginning

 

1,017,137

Cash — Ending

$

353,032

$

1,268,712

Non-cash investing and financing activities:

 

 

  

Offering costs included in accrued offering costs

$

$

5,450

Initial classification of Class A common stock subject to possible redemption

$

$

230,000,000

Deferred underwriting fee payable

$

$

8,050,000

(1)As restated due to review of the treatment of common stock subject to redemptions (see Note 2)

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

4

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LIONHEART ACQUISITION CORPORATION II

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Lionheart Acquisition Corporation II (formerly known as Lionheart Acquisition Corp.) (the “Company”) was incorporated in Delaware on December 23, 2019. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies. The Company has one subsidiary, Lionheart II Holdings, LLC, a wholly owned subsidiary incorporated in Delaware on July 9, 2021.

As of September 30, 2021, the Company had not commenced any operations. All activity for the period from December 23, 2019 (inception) through September 30, 2021 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination, in particular activities in connection with the potential acquisition of MSP Recovery (see Proposed Business Combination within Note 1). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.

The registration statement for the Company’s Initial Public Offering was declared effective on August 12, 2020. On August 18, 2020, the Company consummated the Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $200,000,000, which is described in Note 4.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 650,000 units (the “Private Placement Units”) at a price of $10.00 per Private Placement Unit in a private placement to Lionheart Equities, LLC, a Delaware Limited Liability Company (the “Sponsor”), and Nomura Securities International, Inc. (“Nomura”), an underwriter in the Initial Public Offering, generating gross proceeds of $6,500,000, which is described in Note 5.

Following the closing of the Initial Public Offering on August 18, 2020, an amount of $200,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Units was placed in a trust account (the “Trust Account”) located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account, as described below.

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

Transaction costs amounted to $13,128,937 consisting of $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting fees and $478,937 of other offering costs.

5

Table of Contents

LIONHEART ACQUISITION CORPORATION II

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward completing a Business Combination. The Company must complete a Business Combination with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the agreement to enter into a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to complete a Business Combination successfully.

The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor, officers and directors and Nomura have agreed to vote their Founder Shares (as defined in Note 6), Private Placement Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against the proposed Business Combination.

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

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

6

Table of Contents

LIONHEART ACQUISITION CORPORATION II

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

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

The Sponsor and Nomura have agreed to waive their liquidation rights with respect to the Private Placement Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders or any of their respective affiliates acquire Public Shares after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).

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

Liquidity and Going Concern

The Company has principally financed its operations from inception using proceeds from the sale of its equity securities to its stockholders prior to the Initial Public Offering and such amount of proceeds from the Initial Public Offering that were placed in an account outside of the Trust Account for working capital purposes. At September 30, 2021, the Company had cash outside the trust of $353,032 and working capital deficit of $2,508,819. The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. On February 21, 2021, the Sponsor committed up to $750,000 in loans to the Company for continuing operations to consummate a business combination. The loans are non-interest bearing, unsecured, and to be repaid upon the consummation of a business combination. On July 29, 2021, the Sponsor committed up to an additional $250,000 in loans to the Company for continuing operations to consummate a business combination. The loans are non-interest bearing, unsecured, and to be repaid upon the consummation of a business combination. In the event that a business combination does not occur, then all loaned amounts under this commitment will be forgiven except to the extent that the Company has funds available to it outside the trust account. The Sponsor has committed an aggregate of $1,000,000.

7

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LIONHEART ACQUISITION CORPORATION II

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

In the event that a business combination does not occur, then all loaned amounts under this commitment will be forgiven except to the extent that the Company has funds available to it outside the trust account. In addition, the Sponsor, an affiliate of the Sponsor, or our officers and directors may, but are not obligated to, loan us funds as may be required (see Note 6 Related Party Loans). The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.

The Company will need to raise further additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. In addition to the loan commitment described herein, the Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through February 18, 2022, the current date that the Company will be required to cease all operations, except for the purpose of winding up, if a Business Combination is not consummated. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Proposed Business Combination

On July 11, 2021, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) by and among the Company, Lionheart II Holdings, LLC, a newly formed wholly owned subsidiary of the Company (“Purchaser”), each limited liability company set forth on Schedule 2.1(a) thereto (the “MSP Purchased Companies”), the members of the MSP Purchased Companies listed on Schedule 2.1(b) thereto (the “Members”), and John H. Ruiz, as the representative of the Members.

Subject to the terms and conditions set forth in the MIPA, including the approval of the Company’s stockholders, the parties thereto will enter into a business combination transaction (the “Business Combination”), pursuant to which, among other things, the Members will sell and assign all of their membership interests in the MSP Purchased Companies to Purchaser in exchange for non-economic voting shares of Class V common stock, par value $0.0001, of the Company (“Class V Common Stock”) and non-voting economic Class B Units of Purchaser (“Class B Units,” and each pair consisting of one share of Class V Common Stock and one Class B Unit, an “Up-C Unit”), with Up-C Units being exchangeable on a one-for-one basis for shares of the Company’s Class A common stock. Following the closing of the Business Combination (the “MIPA Closing”), the Company will own all of the voting Class A Units of Purchaser and the Members or their designees will own all of the non-voting economic Class B Units of Purchaser. Subject to the terms and conditions set forth in the MIPA, the aggregate consideration to be paid to the Members (or their designees) will consist of a number of (i) Up-C Units equal to (a) $32.5 billion divided by (b) $10.00 and (ii) rights to receive payments under the Tax Receivable Agreement (as defined below). Of the Up-C Units to be issued to certain Members at the MIPA Closing, 6,000,000 (the “Escrow Units”) will be deposited into an escrow account with Continental Stock Transfer and Trust, to satisfy potential indemnification claims brought pursuant to the MIPA. Additionally, in connection with the Business Combination, the Company intends, subject to compliance with applicable law, to declare a dividend comprising approximately 1,029,000,000 newly issued warrants, each to purchase one share of Class A common stock for an exercise price of $11.50 per share, conditioned upon the consummation of any redemptions by the Company’s stockholders and the MIPA, to the holders of record of Class A common stock as of the close of business on the date of the MIPA Closing, after giving effect to the waiver of the right to participate in such dividend by the Members.

The MIPA contains customary representations, warranties and covenants by the parties thereto and the closing is subject to certain conditions as further described in the MIPA.

8

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LIONHEART ACQUISITION CORPORATION II

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

On November 10, 2021, the Company filed with the U.S. Securities and Exchange Commission (“SEC”) in preliminary form a registration statement on Form S-4 (the “Registration Statement”) which contains a preliminary proxy statement/prospectus, in connection with the proposed business combination between the Company and MSP Recovery announced on July 12, 2021. While the Registration Statement has not yet become effective and the information contained therein is subject to change, it provides important information about MSP Recovery, LCAP, and the proposed business combination.

Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and the World. As of the date the financial statements were issued, there was considerable uncertainty around the expected duration of this pandemic. The Company has concluded that while it is reasonably possible that COVID-19 could have a negative effect on identifying a target company for a Business Combination, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

In connection with the preparation of the Company’s financial statements as of September 30, 2021, management identified errors made in its historical financial statements where, at the closing of the Company’s Initial Public Offering, the Company improperly valued its Class A common stock subject to possible redemption. The Company previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of Class A common stock while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the Class A common stock issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include all shares of Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification error related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.

In connection with the change in presentation for the Class A common stock subject to redemption, the Company also restated its income (loss) per common stock calculated to allocate net income (loss) evenly to Class A and Class B common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of common stock pro rata in the income (loss) of the Company. There is no impact to the reported amounts for total assets, total liabilities, cash flows, or net income (loss).

The impact of the restatement on the Company’s financial statements is reflected in the following table.

9

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LIONHEART ACQUISITION CORPORATION II

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

    

As Previously

    

    

Balance Sheet as of August 18, 2020 (audited)

Reported

Adjustment

As Restated

Class A common stock subject to possible redemption

$

176,443,060

$

23,556,940

$

200,000,000

Class A common stock

$

301

$

(236)

$

65

Additional paid-in capital

$

5,837,483

$

(5,837,483)

$

Accumulated deficit

$

(838,356)

$

(17,719,221)

$

(18,557,577)

Total Stockholders' Equity (Deficit)

$

5,000,003

$

(23,556,940)

$

(18,556,937)

Balance Sheet as of September 30, 2020 (unaudited)

Class A common stock subject to possible redemption

$

205,177,310

$

24,822,690

$

230,000,000

Class A common stock

$

313

$

(248)

$

65

Additional paid-in capital

$

5,453,221

$

(5,453,221)

$

Accumulated deficit

$

(454,099)

$

(19,369,221)

$

(19,823,320)

Total Stockholders' Equity (Deficit)

$

5,000,010

$

(24,822,690)

$

(19,822,680)

Balance Sheet as of December 31, 2020 (audited)

Class A common stock subject to possible redemption

$

203,568,640

$

26,431,360

$

230,000,000

Class A common stock

$

329

$

(264)

$

65

Additional paid-in capital

$

7,061,874

$

(7,061,874)

$

Accumulated deficit

$

(2,062,769)

$

(19,369,222)

$

(21,431,991)

Total Stockholders’ Equity (Deficit)

$

5,000,009

$

(26,431,360)

$

(21,431,351)

Balance Sheet as of March 31, 2021 (unaudited)

Class A common stock subject to possible redemption

$

208,210,350

$

21,789,650

$

230,000,000

Class A common stock

$

283

$

(218)

$

65

Additional paid-in capital

$

2,420,210

$

(2,420,210)

$

Accumulated deficit

$

2,578,941

$

(19,369,222)

$

(16,790,281)

Total Stockholders' Equity (Deficit)

$

5,000,009

$

(21,789,650)

$

(16,789,641)

Balance Sheet as June 30, 2021 (unaudited)

Class A common stock subject to possible redemption

$

203,540,920

$

26,459,080

$

230,000,000

Class A common stock

$

330

$

(265)

$

65

Additional paid-in capital

$

7,089,593

$

(7,089,593)

$

Accumulated deficit

$

(2,090,494)

$

(19,369,222)

$

(21,459,716)

Total Stockholders' Equity (Deficit)

$

5,000,004

$

(26,459,080)

$

(21,459,076)

Statement of Operations for the Three Months Ended September 30, 2020 (unaudited)

 

  

 

  

 

  

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

 

18,952,768

 

(8,094,616)

 

10,858,152

Basic and diluted net (loss) per share, Class A

$

$

(.03)

$

(.03)

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

 

3,374,881

 

(1,926,749)

 

5,301,630

Basic and diluted net (loss) per share, Class B Common Stock

$

$

(.03)

$

(.03)

Statement of Operations for the Nine Months Ended September 30, 2020 (unaudited)

 

  

 

  

 

  

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

 

18,952,768

 

(15,306,965)

 

3,645,803

Basic and diluted net (loss) per share, Class A

$

$

(.05)

$

(.05)

10

Table of Contents

LIONHEART ACQUISITION CORPORATION II

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(Unaudited)

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

 

3,424,425

 

1,494,371

 

4,918,796

Basic and diluted net (loss) per share, Class B Common Stock

$

$

(.05)

$

(.05)

Statement of Operations for the Year Ended December 31, 2020 (audited)

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

20,323,974

181,518

20,505,492

Basic and diluted net (loss) per share, Class A

$

$

(0.08)

$

(0.08)

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

2,318,726

2,809,006

5,127,732

Basic and diluted net (loss) per share, Class B Common Stock

$

(0.89)

$

0.81

$

(0.08)

Statement of Operations for the Three Months Ended March 31, 2021 (unaudited)

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

21,693,414

1,956,586

23,650,000

Basic and diluted net (loss) per share, Class A

$

$

0.16

$

0.16

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

9,043,136

(3,293,136)

5,750,000

Basic and diluted net (loss) per share, Class B Common Stock

$

0.51

$

(0.35)

$

0.16

Statement of Operations for the Three Months Ended June 30, 2021 (unaudited)

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

20,821,035

2,828,965

23,650,000

Basic and diluted net (loss) per share, Class A

$

$

(0.16)

$

(0.16)

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

8,485,715

(2,735,715)

5,750,000

Basic and diluted net (loss) per share, Class B Common Stock

$

(0.54)

$

0.38

$

(0.16)

Statement of Operations for the Six Months Ended June 30, 2020 (unaudited)

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

21,926,782

1,723,218

23,650,000

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

8,809,768

(3,059,768)

5,750,000

Statement of Cash Flows for the Nine Months Ended September 30, 2020 (unaudited)

Initial classification of Class A common stock subject to possible redemption

$

204,793,060

$

25,206,940

$

230,000,000

Change in value of Class A common stock subject to possible redemption

$

384,250

$

(384,250)

$

Statement of Cash Flows for the Year Ended December 31, 2020 (audited)

Initial classification of Class A common stock subject to possible redemption

$

204,793,060

$