Note 18. QUARTERLY FINANCIAL DATA (UNAUDITED) RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the issuance of the interim financial information as of and for the periods ended June 30, 2022 and September 30, 2022, management identified material errors in such financial information. As disclosed within Note 4, Asset Acquisitions, the Company acquired various intangible assets in connection with the Business Combination. The Company identified an error in the accounting for these acquisitions, in that the Class A market price as of the Closing Date utilized in the valuation included the value of the New Warrants, whereas the Up-C Units provided in the acquisition did not have rights to New Warrants. Therefore, the Class A market price didn't equate to the value of the Up-C Units until the opening of the day after the Closing Date when the New Warrants became detached from the Class A shares. This error impacts the intangible assets value that was acquired as of the Closing Date and the resulting amortization of those assets.

In addition, the Company also determined, based on analysis of the rights to cash flows from the Series and the related guaranty obligation, that the Company is the primary beneficiary of the Series, and therefore should consolidate as of the transaction date. This error impacts the intangible assets and indemnification asset value that was acquired as the balance is now reflected in Intangible Assets, net and is therefore amortized rather than recorded as a financial asset; as a result of this change, the indemnification asset is no longer recorded and the Virage Guaranty is accreted through interest expense. The Company's financial statements should also include the activity of the Series from the date of acquisition as it is now consolidated.

As a result of these errors, the Company determined that the valuation of the asset acquisitions and impacts of consolidating the Series were misstated in the Company's financial statements for the periods ending June 30 and September 30, 2022. In the following tables, the Company has presented a reconciliation of its unaudited condensed consolidated financial information as originally reported, to the as restated amounts as of and for the three and six months ended June 30, 2022, and the three and nine months ended September 30, 2022. The restatements will be reflected in the comparative financial statements included in our future filings of our 2023 unaudited condensed consolidated financial statements within our Quarterly Reports on Form 10-Q.

The table below sets forth the unaudited condensed consolidated balance sheet information, including the balances as reported, adjustments and the balances as restated:


	For the reporting period
(In thousands except per share amounts)	June 30, 2022
	As previously			Restatement
	reported			Adjustments			As Restated
ASSETS
Current assets:
Accounts receivable	$	901			17		$	918
Indemnification asset		719,413			(719,413	)		-
Total current assets		795,780			(719,396	)		76,384
Deferred tax asset		857			(857	)		-
Intangible assets, net		2,095,735			1,441,475			3,537,210
Investment in rights to claim recovery cash flows		3,673,610			(3,673,610	)		-
Total assets	$	6,566,932		$	(2,952,388	)	$	3,614,544

Stockholders' Equity (Deficit):
Additional paid-in capital	$	187,269			(60,479	)	$	126,790
Accumulated deficit		(23,074	)		(592	)		(23,666	)
Total Stockholders' Equity (Deficit)	$	164,517		$	(61,071	)	$	103,446
Non-controlling interest		5,251,837			(2,891,317	)		2,360,520
Total equity	$	5,416,354		$	(2,952,388	)	$	2,463,966
Total liabilities and equity	$	6,566,932		$	(2,952,388	)	$	3,614,544


	For the reporting period
	September 30, 2022
	As previously			Restatement
(In thousands except per share amounts)	reported			Adjustments			As Restated
ASSETS
Current assets:
Accounts receivable	$	7,525			138		$	7,663
Indemnification asset		752,510			(752,510	)		-
Total current assets		820,157			(752,372	)		67,785
Deferred tax asset		857			(857	)		-
Intangible assets, net		2,077,571			1,395,955			3,473,526
Investment in rights to claim recovery cash flows		3,673,610			(3,673,610	)		-
Total assets	$	6,574,675		$	(3,030,884	)		3,543,791

Stockholders' Equity (Deficit):
Additional paid-in capital	$	201,656			(66,689	)	$	134,967
Accumulated deficit		(23,537	)		(2,201	)		(25,738	)
Total Stockholders' Equity (Deficit)	$	178,441		$	(68,890	)		109,551
Non-controlling interest		5,213,812			(2,961,994	)		2,251,818
Total equity	$	5,392,253		$	(3,030,884	)		2,361,369
Total liabilities and equity	$	6,574,675		$	(3,030,884	)		3,543,791

The tables below set forth the unaudited condensed consolidated statements of operations, including the balances as reported, adjustments and the as restated balances:


	For the three months ended June 30, 2022									For the six months ended June 30, 2022
(In thousands except per share amounts)	As Reported			Restatement Adjustments			As Restated			As Reported			Restatement Adjustments			As Restated
Claims recovery income	$	1,319			38		$	1,357		$	1,428			38		$	1,466
Claims recovery service income		3,971			-			3,971			12,047			-			12,047
Total Claims Recovery	$	5,290		$	38		$	5,328		$	13,475		$	38		$	13,513
Operating expenses
Cost of claim recoveries		694			8			702			701			8			709
Claims amortization expense		23,818			15,173			38,991			26,535			15,173			41,708
Professional fees		3,118			13			3,131			5,056			13			5,069
Total operating expenses		57,449			15,194			72,643			69,108			15,194			84,302
Operating Loss	$	(52,159	)	$	(15,156	)	$	(67,315	)	$	(55,633	)	$	(15,156	)	$	(70,789	)
Interest expense		(10,977	)		(13,375	)		(24,352	)		(21,392	)		(13,375	)		(34,767	)
Net loss before provision for income taxes	$	(77,450	)	$	(28,531	)	$	(105,981	)	$	(91,341	)	$	(28,531	)	$	(119,872	)
Provision for income tax benefit (expense)		326			(326	)		-			326			(326	)		-
Net loss	$	(77,124	)	$	(28,857	)	$	(105,981	)	$	(91,015	)	$	(28,857	)	$	(119,872	)
Less: Net (income) loss attributable to non-controlling members		75,836			28,265			104,101			89,727			28,265			117,992
Net loss attributable to controlling members	$	(1,288	)	$	(592	)	$	(1,880	)	$	(1,288	)	$	(592	)	$	(1,880	)

Basic and diluted weighted average shares outstanding, Class A Common Stock		13,607,255		N/A				13,607,255			13,607,255		N/A				13,607,255
Basic and diluted net income per share, Class A Common Stock	$	(0.09	)	N/A			$	(0.14	)	$	(0.09	)	N/A			$	(0.14	)


	For the three months ended September 30, 2022									For the nine months ended September 30, 2022
(In thousands except per share amounts)	As Reported			Restatement Adjustments			As Restated			As Reported			Restatement Adjustments			As Restated
Claims recovery income	$	2,571			188		$	2,759		$	3,999		$	226		$	4,225
Total Claims Recovery	$	8,319		$	188		$	8,507		$	21,794		$	226		$	22,020
Operating expenses
Cost of claim recoveries		1,160			38			1,198			1,861			45			1,906
Claims amortization expense		66,331			45,520			111,851			92,866			60,694			153,560
Professional fees		5,875			29			5,904			10,931			42			10,973
Total operating expenses		88,104			45,587			133,691			157,212			60,781			217,993
Operating Loss	$	(79,785	)	$	(45,399	)	$	(125,184	)	$	(135,418	)	$	(60,555	)	$	(195,973	)
Interest expense		(13,083	)		(33,097	)		(46,180	)		(34,475	)		(46,472	)		(80,947	)
Net loss before provision for income taxes	$	(27,060	)	$	(78,496	)	$	(105,556	)	$	(118,401	)	$	(107,027	)	$	(225,428	)
Provision for income tax benefit (expense)		-			-			-			326			(326	)		-
Net loss	$	(27,060	)	$	(78,496	)	$	(105,556	)	$	(118,075	)	$	(107,353	)	$	(225,428	)
Less: Net (income) loss attributable to non-controlling members		26,597			76,887			103,484			116,324			105,152			221,476
Net loss attributable to controlling members	$	(463	)	$	(1,609	)	$	(2,072	)	$	(1,751	)	$	(2,201	)	$	(3,952	)

Basic and diluted weighted average shares outstanding, Class A Common Stock		69,036,899			—			69,036,899			53,138,474			—			53,138,474
Basic and diluted net income per share, Class A Common Stock	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.03	)	$	(0.04	)	$	(0.07	)

The table below sets forth the unaudited condensed consolidated statements of cash flows, including balances as reported, adjustments and balances as restated amounts. Note that only amounts that have changed have been disclosed:


	For the six months ended June 30,
(In thousands)	As Previously Reported			Restatement Adjustments			As Restated
Cash flows from operating activities:
Net loss	$	(91,015	)	$	(28,857	)	$	(119,872	)
Claims amortization expense		26,535			15,173			41,708
Paid in kind interest		21,369			13,375			34,744
Deferred income taxes		(857	)		326			(531	)
Change in operating assets and liabilities:
Accounts receivable		(901	)		(17	)		(918	)
Net cash used in operating activities		(60,912	)		—			(60,912	)
Net cash used in investing activities		(3,015	)		—			(3,015	)
Net cash provided by (used in) financing activities		98,728			—			98,728


	For the nine months ended September 30, 2022
(In thousands)	As Previously Reported			Restatement Adjustments			As Restated
Cash flows from operating activities:
Net loss	$	(118,075	)	$	(107,353	)	$	(225,428	)
Claims amortization expense		92,866			60,694		$	153,560
Paid in kind interest		34,475			46,472		$	80,947
Deferred income taxes		(857	)		326		$	(531	)
Accounts receivable		(7,525	)		(139	)	$	(7,664	)
Net cash used in operating activities		(70,764	)		—			(70,764	)
Net cash used in investing activities		(4,563	)		—			(4,563	)
Net cash provided by (used in) financing activities		99,351			—			99,351

The table below sets forth the unaudited condensed consolidated statements of changes in equity, including balances as reported, adjustments and balances as restated amounts. Note that only amounts that have changed have been disclosed:


	For the reporting period June 30, 2022
	As Previously Reported											Restatement Adjustments												As Restated
(In thousands except shares)	Additional Paid-in Capital		Accumulated Deficit			Non- Controlling Interests			Total Equity			Additional Paid-in Capital			Accumulated Deficit			Non- Controlling Interests			Total Equity			Additional Paid-in Capital		Accumulated Deficit			Non- Controlling Interests			Total Equity
Balance at December 31, 2021	$	—	$	—		$	4,348		$	(151,408	)													$	—	$	—		$	4,348		$	(151,408	)
Contributions prior to recapitalization transaction		—		—			—			15															—		—			—			15
Distributions prior to recapitalization transaction		—		—			—			(147	)														—		—			—			(147	)
Net loss prior to recapitalization transaction		—		—			—			(28,640	)														—		—			—			(28,640	)
Cumulative effect of recapitalization transaction		48,773		—			5,406,736			5,640,353			(7,496	)					(2,915,985	)		(2,923,481	)		41,277		—			2,490,751			2,716,872
Opening net assets of Lionheart II Holdings, LLC acquired		—		(21,786	)		—			(21,786	)														—		(21,786	)		—			(21,786	)
Adjustment for value of derivative on temporary equity		9,003		—			—			9,003															9,003		—			—			9,003
Conversion of Warrants		20,462		—			(12,287	)		8,177			(6,627	)								(6,627	)		13,835		—			(12,287	)		1,550
Class A Issuances		109,031		—			(85,872	)		23,164			(46,356	)								(46,356	)		62,675		—			(85,872	)		(23,192	)
Net loss		—		(1,288	)		(61,088	)		(62,376	)					(592	)		24,668			24,075			—		(1,880	)		(36,420	)		(38,301	)
Balance at June 30, 2022	$	187,269	$	(23,074	)	$	5,251,837		$	5,416,354		$	(60,479	)	$	(592	)	$	(2,891,317	)	$	(2,952,388	)	$	126,790	$	(23,666	)	$	2,360,520		$	2,463,966


	For the reporting period September 30, 2022
	As Previously Reported											Restatement Adjustments												As Restated
(In thousands except shares)	Additional Paid-in Capital		Accumulated Deficit			Non- Controlling Interests			Total Equity			Additional Paid-in Capital			Accumulated Deficit			Non- Controlling Interests			Total Equity			Additional Paid-in Capital		Accumulated Deficit			Non- Controlling Interests			Total Equity
Balance at December 31, 2021	$	—	$	—		$	4,348		$	(151,408	)													$	—	$	—		$	4,348		$	(151,408	)
Contributions prior to recapitalization transaction		—		—			—			15															—		—			—			15
Distributions prior to recapitalization transaction		—		—			—			(147	)														—		—			—			(147	)
Net loss prior to recapitalization transaction		—		—			—			(28,640	)														—		—			—			(28,640	)
Cumulative effect of recapitalization transaction		48,773		—			5,406,736			5,640,352			(7,496	)					(2,915,985	)		(2,923,481	)		41,277		—			2,490,751			2,716,871
Opening net assets of Lionheart II Holdings, LLC acquired		—		(21,786	)		—			(21,786	)														—		(21,786	)		—			(21,786	)
Adjustment for value of derivative on temporary equity		10,065		—			—			10,065															10,065		—			—			10,065
Conversion of Warrants		22,895		—			(13,444	)		9,452			(7,255	)								(7,255	)		15,640		—			(13,444	)		2,197
Class A Issuances		119,923		—			(96,144	)		23,785			(51,938	)								(51,938	)		67,985		—			(96,144	)		(28,153	)
Net loss		—		(1,751	)		(87,684	)		(89,435	)					(2,201	)		(46,009	)		(48,210	)		—		(3,952	)		(133,693	)		(137,645	)
Balance at September 30, 2022	$	201,656	$	(23,537	)	$	5,213,812		$	5,392,253		$	(66,689	)	$	(2,201	)	$	(2,961,994	)	$	(3,030,884	)	$	134,967	$	(25,738	)	$	2,251,818		$	2,361,369