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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 June 30, 2023

OR

 

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

 

For the transition period from to

Commission file number 001-37605

 

LM FUNDING AMERICA, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware

47-3844457

(State or other jurisdiction of

incorporation or organization)

(I.R.S. employer

identification no.)

 

 

1200 West Platt Street

Suite 100

Tampa, FL

33606

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: 813-222-8996

 

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

 

Title of each class:

Trading symbol

Name of each exchange on which registered

Common Stock par value $0.001 per share

LMFA

The Nasdaq Stock 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

The registrant had 14,651,883 shares of Common Stock, par value $0.001 per share, outstanding as of August 7, 2023.

 

 

 

 


 

LM FUNDING AMERICA, INC.

TABLE OF CONTENTS

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements

3

 

 

 

LM Funding America, Inc. and Subsidiaries Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022

3

 

 

 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)

4

 

 

 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (unaudited)

5

 

 

 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)

6

Notes to Unaudited Consolidated Financial Statements

7

 

 

 

Item 2.

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

28

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

 

 

 

Item 4.

Controls and Procedures

34

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

36

 

 

 

Item 1A.

Risk Factors

36

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

 

 

 

Item 3.

Defaults Upon Senior Securities

36

 

 

 

Item 4.

Mine Safety Disclosures

36

 

 

 

Item 5.

Other Information

37

 

 

 

Item 6.

Exhibits

38

 

 

SIGNATURES

39

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

LM Funding America, Inc. and Subsidiaries Consolidated Balance Sheets

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash

 

$

1,847,239

 

 

$

4,238,006

 

Digital Assets (Note 2)

 

 

1,992,557

 

 

 

888,026

 

Finance receivables

 

 

14,097

 

 

 

26,802

 

Marketable securities (Note 5)

 

 

8,668

 

 

 

4,290

 

Notes receivable from Seastar Medical Holding Corporation (Note 5)

 

 

2,238,442

 

 

 

3,807,749

 

Prepaid expenses and other assets

 

 

1,425,585

 

 

 

1,233,322

 

Income tax receivable

 

 

293,466

 

 

 

293,466

 

Current assets

 

 

7,820,054

 

 

 

10,491,661

 

 

 

 

 

 

 

 

Fixed assets, net (Note 3)

 

 

27,208,981

 

 

 

27,192,317

 

Deposits on mining equipment (Note 4)

 

 

282,171

 

 

 

525,219

 

Hosting services deposits (Note 4)

 

 

2,357,658

 

 

 

2,200,452

 

Real estate assets owned

 

 

80,057

 

 

 

80,057

 

Long-term investments - debt security (Note 5)

 

 

-

 

 

 

2,402,542

 

Less: Allowance for losses on debt security (Note 5)

 

 

-

 

 

 

(1,052,542

)

Long-term investments - debt security, net (Note 5)

 

 

-

 

 

 

1,350,000

 

Long-term investments - equity securities (Note 5)

 

 

188,493

 

 

 

464,778

 

Investment in Seastar Medical Holding Corporation (Note 5)

 

 

1,345,500

 

 

 

10,608,750

 

Symbiont intangible assets (Note 11)

 

 

2,804,902

 

 

 

-

 

Operating lease - right of use assets (Note 8)

 

 

239,671

 

 

 

265,658

 

Other assets

 

 

10,726

 

 

 

10,726

 

Long-term assets

 

 

34,518,159

 

 

 

42,697,957

 

Total assets

 

$

42,338,213

 

 

$

53,189,618

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

2,005,147

 

 

 

1,570,906

 

Note payable - short-term (Note 6)

 

 

119,353

 

 

 

475,775

 

Due to related parties (Note 7)

 

 

68,217

 

 

 

75,488

 

Current portion of lease liability (Note 8)

 

 

94,509

 

 

 

90,823

 

Total current liabilities

 

 

2,287,226

 

 

 

2,212,992

 

 

 

 

 

 

 

 

Lease liability - net of current portion (Note 8)

 

 

151,685

 

 

 

179,397

 

Long-term liabilities

 

 

151,685

 

 

 

179,397

 

Total liabilities

 

 

2,438,911

 

 

 

2,392,389

 

 

 

 

 

 

 

 

Stockholders' equity (Note 9)

 

 

 

 

 

 

Preferred stock, par value $.001; 150,000,000 shares authorized; no shares issued and outstanding as of June 30, 2023 and December 31, 2022

 

 

-

 

 

 

-

 

Common stock, par value $.001; 350,000,000 shares authorized; 14,651,883 shares issued and outstanding as of June 30, 2023 and 13,091,883 as of December 31, 2022

 

 

14,652

 

 

 

13,092

 

Additional paid-in capital

 

 

94,100,806

 

 

 

92,195,341

 

Accumulated deficit

 

 

(52,952,718

)

 

 

(43,017,207

)

Total LM Funding America stockholders' equity

 

 

41,162,740

 

 

 

49,191,226

 

   Non-controlling interest

 

 

(1,263,438

)

 

 

1,606,003

 

Total stockholders' equity

 

 

39,899,302

 

 

 

50,797,229

 

Total liabilities and stockholders’ equity

 

$

42,338,213

 

 

$

53,189,618

 

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

 

3


 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Digital mining revenues

 

$

2,968,322

 

 

$

-

 

 

$

5,059,173

 

 

$

-

 

Specialty finance revenue

 

 

190,173

 

 

 

193,953

 

 

 

373,009

 

 

 

346,085

 

Rental revenue

 

 

37,155

 

 

 

40,580

 

 

 

76,986

 

 

 

79,452

 

           Total revenues

 

 

3,195,650

 

 

 

234,533

 

 

 

5,509,168

 

 

 

425,537

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Digital mining cost of revenues (exclusive of depreciation and amortization shown below)

 

 

2,361,825

 

 

 

-

 

 

 

4,029,498

 

 

 

-

 

Staff costs & payroll

 

 

2,463,440

 

 

 

4,296,695

 

 

 

3,396,275

 

 

 

8,588,892

 

Professional fees

 

 

236,974

 

 

 

1,031,431

 

 

 

809,330

 

 

 

1,806,251

 

Settlement costs with associations

 

 

10,000

 

 

 

-

 

 

 

10,000

 

 

 

160

 

Selling, general and administrative

 

 

242,559

 

 

 

122,271

 

 

 

482,023

 

 

 

237,191

 

Real estate management and disposal

 

 

69,355

 

 

 

22,414

 

 

 

101,158

 

 

 

53,895

 

Depreciation and amortization

 

 

1,169,120

 

 

 

2,007

 

 

 

1,970,993

 

 

 

5,101

 

Collection costs

 

 

(373

)

 

 

(7,906

)

 

 

9,435

 

 

 

(11,726

)

Impairment loss on mined digital assets

 

 

239,599

 

 

 

-

 

 

 

439,153

 

 

 

-

 

Realized gain on sale of mined digital assets

 

 

(646,458

)

 

 

-

 

 

 

(1,070,791

)

 

 

-

 

Other operating costs

 

 

205,943

 

 

 

141,509

 

 

 

457,854

 

 

 

149,893

 

Total operating costs and expenses

 

 

6,351,984

 

 

 

5,608,421

 

 

 

10,634,928

 

 

 

10,829,657

 

Operating loss

 

 

(3,156,334

)

 

 

(5,373,888

)

 

 

(5,125,760

)

 

 

(10,404,120

)

Realized gain (loss) on securities

 

 

-

 

 

 

45,261

 

 

 

-

 

 

 

(349,920

)

Realized gain on convertible debt securities

 

 

-

 

 

 

287,778

 

 

 

-

 

 

 

287,778

 

Unrealized loss on convertible debt security

 

 

-

 

 

 

(288,320

)

 

 

-

 

 

 

-

 

Unrealized gain (loss) on marketable securities

 

 

(1,412

)

 

 

(24,030

)

 

 

4,378

 

 

 

(23,900

)

Impairment loss on hosting deposits

 

 

-

 

 

 

-

 

 

 

(36,691

)

 

 

-

 

Unrealized gain (loss) on investment and equity securities

 

 

(3,716,681

)

 

 

12,215,401

 

 

 

(9,539,535

)

 

 

11,229,002

 

Impairment loss on digital assets

 

 

-

 

 

 

(377,707

)

 

 

-

 

 

 

(377,707

)

Realized gain on sale of purchased digital assets

 

 

-

 

 

 

-

 

 

 

1,917

 

 

 

-

 

Digital assets other income

 

 

-

 

 

 

1,292

 

 

 

-

 

 

 

5,658

 

Other income - coupon sales

 

 

25,721

 

 

 

-

 

 

 

629,312

 

 

 

-

 

Gain on adjustment of note receivable allowance

 

 

1,052,543

 

 

 

-

 

 

 

1,052,543

 

 

 

-

 

Other income - finance revenue

 

 

37,660

 

 

 

-

 

 

 

37,660

 

 

 

-

 

Dividend income

 

 

-

 

 

 

1,375

 

 

 

-

 

 

 

2,750

 

Interest income

 

 

116,147

 

 

 

80,975

 

 

 

171,224

 

 

 

179,345

 

Income (loss) before income taxes

 

 

(5,642,356

)

 

 

6,568,137

 

 

 

(12,804,952

)

 

 

548,886

 

Income tax expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income (loss)

 

$

(5,642,356

)

 

$

6,568,137

 

 

$

(12,804,952

)

 

$

548,886

 

Less: loss (income) attributable to non-controlling interest

 

 

1,093,177

 

 

 

(3,723,797

)

 

 

2,869,441

 

 

 

(3,432,597

)

Net income (loss) attributable to LM Funding America Inc.

 

$

(4,549,179

)

 

$

2,844,340

 

 

$

(9,935,511

)

 

$

(2,883,711

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share

 

$

(0.35

)

 

$

0.22

 

 

$

(0.76

)

 

$

(0.22

)

Diluted income (loss) per common share

 

$

(0.35

)

 

$

0.22

 

 

$

(0.76

)

 

$

(0.22

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,182,162

 

 

 

13,091,882

 

 

 

13,153,038

 

 

 

13,076,359

 

Diluted

 

 

13,182,162

 

 

 

13,091,882

 

 

 

13,153,038

 

 

 

13,076,359

 

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

 

4


 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Cash Flows

(unaudited)

 

Six Months ended June 30,

 

 

2023

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$

(12,804,952

)

 

$

548,886

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

1,970,993

 

 

 

5,101

 

Noncash lease expense

 

 

47,874

 

 

 

47,127

 

Stock compensation

 

 

564,930

 

 

 

658,999

 

Stock option expense

 

 

1,342,095

 

 

 

6,637,479

 

Accrued investment income

 

 

(91,864

)

 

 

(176,438

)

Impairment loss on digital assets

 

 

439,153

 

 

 

377,707

 

Impairment loss on hosting deposits

 

 

36,691

 

 

 

-

 

Unrealized loss (gain) on marketable securities

 

 

(4,378

)

 

 

23,900

 

Unrealized loss (gain) on investment and equity securities

 

 

9,539,535

 

 

 

(11,229,002

)

Realized loss (gain) on securities

 

 

-

 

 

 

349,920

 

Realized gain on convertible note receivable

 

 

-

 

 

 

(287,778

)

Realized gain on sale of digital assets

 

 

(1,072,708

)

 

 

-

 

Proceeds from securities

 

 

-

 

 

 

2,565,893

 

Convertible debt and interest converted into marketable securities

 

 

-

 

 

 

844,882

 

Investments in marketable securities

 

 

-

 

 

 

(844,882

)

Reversal of allowance loss on debt security

 

 

(1,052,543

)

 

 

-

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(85,713

)

 

 

623,511

 

Hosting deposits

 

 

(193,897

)

 

 

-

 

Advances (repayments) to related party

 

 

(7,271

)

 

 

249,959

 

Accounts payable and accrued expenses

 

 

434,241

 

 

 

(27,168

)

Mining of digital assets

 

 

(5,059,173

)

 

 

-

 

Proceeds from sale of digital assets

 

 

4,579,676

 

 

 

-

 

Lease liability payments

 

 

(45,913

)

 

 

(52,440

)

Deferred taxes and taxes payable

 

 

-

 

 

 

(326,178

)

Income taxes receivable

 

 

-

 

 

 

(143,822

)

Net cash used in operating activities

 

 

(1,463,224

)

 

 

(154,344

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Net collections of finance receivables - original product

 

 

(1,824

)

 

 

11,473

 

Net collections of finance receivables - special product

 

 

14,529

 

 

 

(6,877

)

Capital expenditures

 

 

(1,744,609

)

 

 

(13,235

)

Investment in note receivable

 

 

-

 

 

 

(910,000

)

Collection of note receivable

 

 

1,661,171

 

 

 

-

 

Investment in digital assets

 

 

(35,157

)

 

 

(786,586

)

Proceeds from sale of purchased digital assets

 

 

43,678

 

 

 

-

 

Symbiont asset acquisition

 

 

(402,359

)

 

 

-

 

Deposits for mining equipment

 

 

-

 

 

 

(13,538,333

)

Net cash used in investing activities

 

 

(464,571

)

 

 

(15,243,558

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Insurance financing repayments

 

 

(357,649

)

 

 

(114,688

)

Insurance financing

 

 

1,227

 

 

 

-

 

Issue costs from the issuance of common stock

 

 

(106,550

)

 

 

-

 

Net cash used in financing activities

 

 

(462,972

)

 

 

(114,688

)

NET DECREASE IN CASH

 

 

(2,390,767

)

 

 

(15,512,590

)

CASH - BEGINNING OF YEAR

 

 

4,238,006

 

 

 

32,559,185

 

CASH - END OF YEAR

 

$

1,847,239

 

 

$

17,046,595

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES