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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, 2021

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 5,414,296 shares of Common Stock, par value $0.001 per share, outstanding as of August 6, 2021.

 

 

 

 


 

LM FUNDING AMERICA, INC.

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

LM Funding America, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
June 30, 2021 (unaudited) and December 31, 2020

3

 

 

 

 

LM Funding America, Inc. and Subsidiaries Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

4

 

 

 

 

LM Funding America, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2021 and 2020 (unaudited)

6

 

 

 

 

LM Funding America, Inc. and Subsidiaries Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

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

21

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

 

 

 

Item 4.

Controls and Procedures

26

 

 

 

PART II.

OTHER INFORMATION

28

 

 

 

Item 1.

Legal Proceedings

28

 

 

 

Item 1A.

Risk Factors

28

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

 

 

 

Item 3.

Defaults Upon Senior Securities

29

 

 

 

Item 5.

Other Information

29

 

 

 

Item 6.

Exhibits

30

 

 

SIGNATURES

31

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

LM Funding America, Inc. and Subsidiaries Condensed Consolidated Balance Sheets

 

 

 

June 30, 2021

 

 

December 31,

2020

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Cash

 

$

22,173,690

 

 

$

11,552,943

 

Finance receivables:

 

 

 

 

 

 

 

 

Original product - net (Note 2)

 

 

85,186

 

 

 

116,017

 

Special product - New Neighbor Guaranty program, net of allowance for credit losses of (Note 3)

 

 

53,211

 

 

 

52,757

 

Short-term investments - convertible debt securities (Note 9)

 

 

7,588,538

 

 

 

-

 

Marketable securities

 

 

248,100

 

 

 

-

 

Prepaid expenses and other assets

 

 

157,195

 

 

 

399,124

 

Current assets

 

 

30,305,920

 

 

 

12,120,841

 

Fixed assets, net

 

 

7,929

 

 

 

6,171

 

Real estate assets owned

 

 

80,057

 

 

 

18,767

 

Operating lease - right of use assets (Note 7)

 

 

110,870

 

 

 

160,667

 

Long-term investments - equity securities (Note 9)

 

 

2,295,200

 

 

 

-

 

Investments in unconsolidated affiliates (Note 9)

 

 

4,615,583

 

 

 

-

 

Other assets

 

 

10,984

 

 

 

10,984

 

Long-term assets

 

 

7,120,623

 

 

 

196,589

 

Total assets

 

$

37,426,543

 

 

$

12,317,430

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Note payable (Note 5)

 

 

-

 

 

 

96,257

 

Accounts payable and accrued expenses

 

 

298,239

 

 

 

237,033

 

Due to related party (Note 4)

 

 

174,176

 

 

 

158,399

 

Current portion of lease liability (Note 7)

 

 

108,611

 

 

 

-

 

Total current liabilities

 

 

581,026

 

 

 

491,689

 

 

 

 

 

 

 

 

 

 

Lease liability - long-term (Note 7)

 

 

12,684

 

 

 

171,648

 

Deferred taxes (Note 6)

 

 

17,264

 

 

 

-

 

Note payable - long-term (Note 5)

 

 

-

 

 

 

185,785

 

Long-term liabilities

 

 

29,948

 

 

 

357,433

 

Total liabilities

 

 

610,974

 

 

 

849,122

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, par value $0.001; 30,000,000 shares authorized; 5,414,296 and 3,083,760 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

5,414

 

 

 

3,084

 

Additional paid-in capital

 

 

39,538,550

 

 

 

29,996,257

 

Accumulated deficit

 

 

(3,052,309

)

 

 

(18,536,224

)

Total stockholders’ equity

 

 

36,491,655

 

 

 

11,463,117

 

Non-controlling interest

 

 

323,914

 

 

 

5,191

 

Total stockholders’ equity

 

 

36,815,569

 

 

 

11,468,308

 

Total liabilities and stockholders’ equity

 

$

37,426,543

 

 

$

12,317,430

 

 

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

 


3


 

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

 

 

 

For the Three Months

Ended June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on delinquent association fees

 

$

62,673

 

 

$

170,174

 

 

$

140,117

 

 

$

389,688

 

Administrative and late fees

 

 

16,861

 

 

 

35,423

 

 

 

31,932

 

 

 

58,468

 

Recoveries in excess of cost - special product

 

 

178,769

 

 

 

62,362

 

 

 

208,242

 

 

 

84,990

 

Underwriting and other revenues

 

 

35,494

 

 

 

41,235

 

 

 

58,197

 

 

 

69,164

 

Rental revenue

 

 

34,588

 

 

 

33,344

 

 

 

66,505

 

 

 

81,424

 

Total revenues

 

 

328,385

 

 

 

342,538

 

 

 

504,993

 

 

 

683,734

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Staff costs and payroll

 

 

246,040

 

 

 

312,493

 

 

 

1,548,021

 

 

 

628,552

 

Professional fees

 

 

360,024

 

 

 

479,581

 

 

 

842,967

 

 

 

986,576

 

Settlement costs with associations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,920

 

Selling, general and administrative

 

 

96,015

 

 

 

74,728

 

 

 

195,784

 

 

 

154,951

 

Recovery of cost from related party receivable

 

 

(100,000

)

 

 

(100,000

)

 

 

(100,000

)

 

 

(200,000

)

Provision for credit losses

 

 

-

 

 

 

-

 

 

 

(10,000

)

 

 

-

 

Real estate management and disposal

 

 

29,478

 

 

 

14,108

 

 

 

47,768

 

 

 

99,450

 

Depreciation and amortization

 

 

3,298

 

 

 

7,954

 

 

 

4,994

 

 

 

13,766

 

Collection costs

 

 

2,701

 

 

 

(20,934

)

 

 

4,749

 

 

 

(29,255

)

Other operating expenses

 

 

4,069

 

 

 

6,844

 

 

 

11,614

 

 

 

10,638

 

Total operating expenses

 

 

641,625

 

 

 

774,774

 

 

 

2,545,897

 

 

 

1,676,598

 

Operating loss from continuing operations

 

 

(313,240

)

 

 

(432,236

)

 

 

(2,040,904

)

 

 

(992,864

)

Realized gain on securities

 

 

8,453,570

 

 

 

-

 

 

 

14,125,034

 

 

 

-

 

Unrealized gain on convertible debt security

 

 

2,501,600

 

 

 

-

 

 

 

2,501,600

 

 

 

-

 

Unrealized gain on investment and equity securities

 

 

552,494

 

 

 

-

 

 

 

1,147,886

 

 

 

-

 

Interest income

 

 

73,884

 

 

 

-

 

 

 

86,939

 

 

 

-

 

Interest expense

 

 

(189

)

 

 

(5,732

)

 

 

(653

)

 

 

(12,626

)

Income (loss) from continuing operations before income taxes

 

 

11,268,119

 

 

 

(437,968

)

 

 

15,819,902

 

 

 

(1,005,490

)

Income tax expense

 

 

(13,780

)

 

 

-

 

 

 

(17,264

)

 

 

-

 

Net income (loss) from continuing operations

 

 

11,254,339

 

 

 

(437,968

)

 

 

15,802,638

 

 

 

(1,005,490

)

Gain from operations of discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,428

 

Net gain from discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,428

 

Net income (loss)

 

 

11,254,339

 

 

 

(437,968

)

 

 

15,802,638

 

 

 

(989,062

)

Less: Net income attributable to non-controlling interest

 

 

(146,857

)

 

 

-

 

 

 

(318,723

)

 

 

-

 

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

 

$

11,107,482

 

 

$

(437,968

)

 

$

15,483,915

 

 

$

(989,062

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings/(loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share - continuing operations

 

$

2.05

 

 

$

(0.56

)

 

$

2.96

 

 

$

(1.41

)

Basic income/(loss) per common share - discontinued operations

 

$

-

 

 

$

-

 

 

$

-

 

 

$

0.02

 

4


Basic income (loss) per common share - net income (loss) - attributable to LM Funding

 

$

2.05

 

 

$

(0.56

)

 

$

2.96

 

 

$

(1.38

)

Diluted income (loss) per common share - continuing operations

 

$

2.05

 

 

$

(0.56

)

 

$

2.95

 

 

$

(1.41

)

Diluted earnings/(loss) per common share - discontinued operations

 

$

-

 

 

$

-

 

 

$

-

 

 

$

0.02

 

Diluted income (loss) per common share - net income (loss) - attributable to LM Funding

 

$

2.05

 

 

$

(0.56

)

 

$

2.95

 

 

$

(1.38

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

5,414,296

 

 

 

783,433

 

 

 

5,231,909

 

 

 

715,020

 

Diluted

 

 

5,423,162

 

 

 

783,433

 

 

 

5,245,656

 

 

 

715,020

 

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

 

5


 

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

(unaudited)

 

 

 

For the Six Months

Ended June 30,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

15,802,638

 

 

$

(989,062

)

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,994

 

 

 

11,727

 

Right to use asset depreciation

 

 

49,797

 

 

 

51,229

 

Stock compensation

 

 

-

 

 

 

132,244

 

Debt forgiveness

 

 

(157,251

)

 

 

-

 

Recovery of uncollectible related party receivables

 

 

-

 

 

 

(200,000

)

Accrued investment income

 

 

(86,938

)

 

 

-

 

Gain from operations of discontinued operations

 

 

-

 

 

 

(16,426

)

Deconsolidation of  affiliate

 

 

(43,623

)

 

 

-

 

Unrealized gain on investment and equity securities

 

 

(1,147,886

)

 

 

-

 

Unrealized gain on convertible debt security

 

 

(2,501,600

)

 

 

-

 

Investment in convertible note receivable

 

 

(5,000,000

)

 

 

-

 

Realized gain on securities

 

 

(14,125,034

)

 

 

-

 

Investment in securities

 

 

(15,547,454

)

 

 

-

 

Proceeds from securities

 

 

29,672,488

 

 

 

49,828

 

Investment in marketable securities

 

 

(247,997

)

 

 

-

 

Change in assets and liabilities

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

11,105

 

 

 

49,059

 

Accounts payable and accrued expenses

 

 

184,239

 

 

 

21,858

 

Advances (repayments) from related party

 

 

142,191

 

 

 

496,546

 

Lease liability payments

 

 

(50,353

)

 

 

(45,742

)

Deferred taxes

 

 

17,264

 

 

 

-

 

Net cash provided by (used in) operating activities

 

 

6,976,580

 

 

 

(438,739

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Net collections of finance receivables - original product

 

 

30,831

 

 

 

61,590

 

Net collections of finance receivables - special product

 

 

(454

)

 

 

32,076

 

(Payments) for real estate assets owned

 

 

(64,857

)

 

 

(2,055

)

Capital expenditures

 

 

(3,185

)

 

 

-

 

Net cash payment for IIU disposal

 

 

-

 

 

 

(246,914

)

Proceeds from investment in note receivable

 

 

-

 

 

 

1,500,000

 

Loan to purchase securities

 

 

1,784,250

 

 

 

-

 

Repayment of loan to purchase securities

 

 

(1,784,250

)

 

 

-

 

Investment in unconsolidated affiliate

 

 

(5,738,000

)

 

 

-

 

Net cash (used in) provided by investing activities

 

 

(5,775,665

)

 

 

1,344,697

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Borrowings

 

 

-

 

 

 

185,785

 

Principal repayments

 

 

(28,534

)

 

 

-

 

Insurance financing repayments

 

 

(96,257

)

 

 

(69,540

)

Exercise of warrants

 

 

9,544,623

 

 

 

2,946,480

 

Proceeds from stock subscription

 

 

-

 

 

 

1,250,000

 

Net cash provided by financing activities

 

 

9,419,832

 

 

 

4,312,725

 

NET INCREASE IN CASH

 

 

10,620,747

 

 

 

5,218,683

 

CASH - BEGINNING OF YEAR

 

 

11,552,943

 

 

 

1,069,823

 

CASH - END OF YEAR

 

$

22,173,690

 

 

$

6,288,506

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION

 

 

 

 

 

 

 

 

Cash paid for taxes

 

$

-

 

 

$

-

 

Cash paid for interest

 

$

1,892

 

 

$

12,626

 

 

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

6


LM Funding America, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

For the Three and Six Months Ended June 30, 2021 and 2020

(unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional paid in capital

 

 

Accumulated Deficit

 

 

Non-Controlling Interest

 

 

Total Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2019

 

 

626,852

 

 

$

627

 

 

$

17,329,060

 

 

$

(14,494,762

)

 

$

-

 

 

$

2,834,925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

37,200

 

 

 

37

 

 

 

128,810

 

 

 

-

 

 

 

-

 

 

 

128,847

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(551,094

)

 

 

-

 

 

 

(551,094

)

 

Balance - March 31, 2020

 

 

664,052

 

 

$

664

 

 

$

17,457,870

 

 

$

(15,045,856

)

 

$

-

 

 

$

2,412,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued

 

 

104,168

 

 

 

104

 

 

 

1,249,896

 

 

 

-

 

 

 

-

 

 

 

1,250,000

 

 

Warrant exercise for cash

 

 

245,540

 

 

 

246

 

 

 

2,946,234

 

 

 

-

 

 

 

-

 

 

 

2,946,480

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

3,397

 

 

 

-

 

 

 

-

 

 

 

3,397

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(437,968

)

 

 

-

 

 

 

(437,968

)

 

Balance - June 30, 2020

 

 

1,013,760

 

 

$

1,014

 

 

$

21,657,397

 

 

$

(15,483,824

)

 

$

-

 

 

$

6,174,587