Powercompute, Inc 10-Q for FY2024 Q3
Powercompute, Inc. (PWCM)
About this 10-Q
Powercompute, Inc filed this 10-Q on November 13, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.26M
- down 63.3% from $3.42M a year earlier
- Net loss
- $4.7M
- compared with a net loss of $4.42M a year earlier
- Diluted EPS
- -$2.41
- compared with -$1.97 a year earlier
UNITEDSTATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) |
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(Address of principal executive offices) |
(Zip code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: |
Trading symbol |
Name of each exchange on which registered |
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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
LM FUNDING AMERICA, INC.
TABLE OF CONTENTS
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Page |
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PART I. |
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Item 1. |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
LM Funding America, Inc. and Subsidiaries Consolidated Balance Sheets
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September 30, |
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December 31, |
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2024 (Unaudited) |
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2023 |
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Assets |
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Cash |
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$ |
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$ |
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Digital assets - current (Note 2) |
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Finance receivables |
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Marketable securities (Note 5) |
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Receivable from sale of Symbiont assets (Note 5) |
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Current portion of notes receivable from Tech Infrastructure JV I LLC (Note 5) |
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- |
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Prepaid expenses and other assets |
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Income tax receivable |
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Current assets |
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Fixed assets, net (Note 3) |
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Deposits on mining equipment (Note 4) |
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Notes receivable from Seastar Medical Holding Corporation (Note 5) |
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- |
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Notes receivable from Tech Infrastructure JV I LLC - net of current portion (Note 5) |
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- |
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Long-term investments - equity securities (Note 5) |
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Digital assets - long-term (Note 2) |
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- |
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Operating lease - right of use assets (Note 7) |
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Other assets |
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Long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Accounts payable and accrued expenses |
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Note payable - short-term (Note 6) |
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(Note 10) |
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Current portion of lease liability (Note 7) |
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Total current liabilities |
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Note payable - long-term (Note 6) |
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- |
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Lease liability - net of current portion (Note 7) |
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Long-term liabilities |
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Total liabilities |
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Stockholders' equity (Note 8) |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total LM Funding America stockholders' equity |
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Non-controlling interest |
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Total stockholders' equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenues: |
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Digital mining revenues |
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$ |
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$ |
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$ |
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$ |
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Specialty finance revenue |
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Rental revenue |
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Total revenues |
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Operating costs and expenses: |
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Digital mining cost of revenues (exclusive of depreciation and amortization shown below) |
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Staff costs and payroll |
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Depreciation and amortization |
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Gain on fair value of Bitcoin, net |
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( |
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- |
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( |
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- |
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Impairment loss on mining equipment |
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- |
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- |
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- |
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Impairment loss on mined digital assets |
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- |
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- |
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Realized gain on sale of mined digital assets |
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- |
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( |
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- |
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Professional fees |
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Selling, general and administrative |
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Real estate management and disposal |
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Collection costs |
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Settlement costs with associations |
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- |
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- |
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- |
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Loss on disposal of assets |
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- |
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Other operating costs |
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Total operating costs and expenses |
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Operating loss |
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Unrealized gain (loss) on marketable securities |
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( |
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Impairment loss on prepaid machine deposits |
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( |
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- |
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( |
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( |
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Unrealized loss on investment and equity securities |
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( |
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( |
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( |
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Impairment loss on Symbiont assets |
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- |
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( |
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- |
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( |
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Gain on fair value of purchased Bitcoin, net |
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- |
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- |
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- |
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Realized gain on securities |
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Realized gain on sale of purchased digital assets |
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- |
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- |
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- |
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Credit loss on Seastar Medical Holding Corporation notes receivable |
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- |
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( |
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- |
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Gain on adjustment of note receivable allowance |
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- |
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- |
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- |
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Other income - coupon sales |
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- |
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Other income - financing revenue |
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- |
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- |
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- |
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Interest expense |
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( |
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- |
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Interest income |
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Loss before income taxes |
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( |
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Income tax expense |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Less: loss attributable to non-controlling interest |
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Net loss attributable to LM Funding America Inc. |
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$ |
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$ |
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$ |
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$ |
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Less: deemed dividends (Note 8) |
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( |
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- |
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( |
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- |
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Net loss attributable to common shareholders |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Basic loss per common share (Note 1) |
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$ |
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$ |
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$ |
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Diluted loss per common share (Note 1) |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average number of common shares outstanding |
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Basic |
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Diluted |
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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)
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Nine Months Ended September 30, |
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2024 |
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2023 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities |
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Depreciation and amortization |
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Noncash lease expense |
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Stock compensation |
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Stock option expense |
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Professional fees paid in common shares |
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Accrued investment income |
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( |
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( |
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Digital assets other income |
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( |
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Gain on fair value of Bitcoin, net |
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( |
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Impairment loss on mining machines |
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Impairment loss on digital assets |
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Impairment loss on hosting deposits |
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Impairment loss on Symbiont assets |
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Unrealized gain on marketable securities |
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( |
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( |
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Realized gain on securities |
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Unrealized loss on investment and equity securities |
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Loss on disposal of fixed assets |
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Proceeds from securities |
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Realized gain on sale of digital assets |
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( |
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Credit loss on Seastar Medical Holding Corporation notes receivable |
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Reversal of allowance loss on debt security |
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( |
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Investments in marketable securities |
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( |
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Change in operating assets and liabilities: |
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Prepaid expenses and other assets |
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( |
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Hosting deposits |
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( |
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Advances (repayments) to related party |
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( |
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Accounts payable and accrued expenses |
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( |
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Mining of digital assets |
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( |
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( |
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Proceeds from sale of digital assets |
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Lease liability payments |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Net collections of finance receivables - original product |
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( |
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( |
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Net collections of finance receivables - special product |
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( |
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Capital expenditures |
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( |
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( |
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Proceeds from sale of fixed assets |
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Investment in Tech Infrastructure JV I LLC note receivable |
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( |
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Investment in note receivable |
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( |
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Collection of notes receivable |
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Investment in digital assets |
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( |
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Proceeds from sale of digital assets |
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Proceeds from the sale of tether |
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Symbiont asset acquisition |
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( |
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Distribution to members |
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( |
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Net cash from (used in) investing activities |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from borrowings |
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Insurance financing repayments |
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( |
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Insurance financing |
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Exercise of options |
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Proceeds from equity offering |
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Issue costs for equity offering |
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( |
) |
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( |
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Net cash from (used in) financing activities |
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( |
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NET DECREASE IN CASH |
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( |
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CASH - BEGINNING OF PERIOD |
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CASH - END OF PERIOD |
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$ |
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SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES |
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ROU assets and operating lease obligation recognized |
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$ |
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$ |
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Reclassification of mining equipment deposit to fixed assets, net |
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$ |
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$ |
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Change in accounting principle (see Note 1) |
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$ |
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$ |
- |
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SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION |
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Cash paid for taxes |
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$ |
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$ |
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Cash paid for interest |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
LM Funding America, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity
For the Three and Nine Months Ended September 30, 2024 and 2023
(unaudited)
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Common Stock |
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Shares |
|
|
Amount |
|
|
Additional paid-in capital |
|
|
Accumulated Deficit |
|
|
Non-Controlling Interest |
|
|
Total Equity |
|
||||||
Balance - December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance - March 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Issuance of restricted stock |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance - June 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Issuance of restricted stock |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance - September 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance - December 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Stock compensation |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Cumulative effect of change in accounting principle (See Note 1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|||
Balance - March 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Stock compensation |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Member distributions |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance - June 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Stock issued for option exercise |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
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|
||||
Stock issued for services |
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|
|
|
|
|
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|
|
|
|
- |
|
|
|
- |
|
|
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|
||||
Warrant exercise |
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Shares issued for cash in public offering, net |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance - September 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
LM FUNDING AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
(UNAUDITED)
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
LM Funding America, Inc. (“we”, “our”, “LMFA” or the “Company”) was formed as a Delaware corporation on April 20, 2015.
LMFA is the sole member of several entities including LM Funding, LLC, which was organized in January 2008, US Digital Mining and Hosting Co., LLC, which was formed on September 10, 2021 (“US Digital”); LMFA Financing LLC, formed on November 23, 2020; and LMFAO Sponsor LLC, formed on October 29, 2020 (LMFA is a majority member of LMFAO Sponsor LLC). Additionally, US Digital has formed various
LMFAO Sponsor LLC formed a majority owned subsidiary, LMF Acquisition Opportunities Inc. (“LMAO”) on October 29, 2020, which was organized as a special purpose acquisition company that completed an initial public offering in January 2021, whereupon the Company ceased to be majority owned by LMFA. LMF Acquisition Opportunities Inc. was subsequently merged with Seastar Medical Holding Corporation on October 28, 2022.
The Company also from time to time organizes other subsidiaries to serve a specific purpose or hold a specific asset.
Lines of Business
The Company currently operates two lines of business: our cryptocurrency mining business and our specialty finance business.
The Bitcoin mining operation deploys our computing power to mine Bitcoin on the Bitcoin network. We conduct this business through our wholly owned subsidiary, US Digital, a Florida limited liability company, which we formed in 2021 to develop and operate our cryptocurrency mining business.
With respect to our specialty finance business, the Company has historically engaged in the business of providing funding to nonprofit community associations primarily located in the state of Florida. We offer incorporated nonprofit community associations, which we refer to as “Associations,” a variety of financial products customized to each Association’s financial needs.
Bitcoin Mining Business
We obtain Bitcoin as a result of our mining operations, and we sell Bitcoin from time to time, to support our operations and strategic growth. We plan to convert our Bitcoin to U.S. dollars. We may engage in regular trading of Bitcoin or engage in hedging activities related to our holding of Bitcoin. However, our decisions to hold or sell Bitcoin at any given time may be impacted by the Bitcoin market, which has been historically characterized by significant volatility. Currently, we do not use a formula or specific methodology to determine whether or when we will sell Bitcoin that we hold, or the number of Bitcoins we will sell. Rather, decisions to hold or sell Bitcoins are currently determined by management based on working cash needs and by monitoring the market in real time.
As of September 30, 2024 and December 31, 2023, the Company had approximately
Specialty Finance Company
In our specialty finance business, we purchase an Association’s right to receive a portion of the Association’s collected proceeds from owners that are not paying their assessments. After taking assignment of an Association’s right to receive a portion of the Association’s proceeds from the collection of delinquent assessments, we engage law firms to perform collection work on a deferred billing basis wherein the law firms receive payment upon collection from the account debtors or a predetermined contracted amount if payment from account debtors is less than legal fees and costs owed.
Principles of Consolidation
The consolidated financial statements include the accounts of LMFA and its wholly-owned subsidiaries: LM Funding, LLC; LMF October 2010 Fund, LLC; REO Management Holdings, LLC (including all
7
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The interim consolidated financial statements as of September 30, 2024 and for the three and nine months ended September 30, 2024 and September 30, 2023, respectively, are unaudited. In the opinion of management, the interim consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of the results for the interim periods. The accompanying consolidated balance sheet as of December 31, 2023, is derived from the audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K for fiscal the year ended December 31, 2023.
Recently adopted accounting pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-08, Intangible - Goodwill and Other -Crypto Assets (Subtopic 350-60) (“ASC 350-60”). ASC 350-60 requires entities with certain crypto assets to subsequently measure such assets at fair value, with changes in fair value recorded in net income in each reporting period. In addition, entities are required to provide additional disclosures about the holdings of certain crypto assets. Crypto assets that meet all the following criteria are within the scope of the ASC 350-60:
(1) meet the definition of intangible assets as defined in the Codification
(2) do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets
(3) are created or reside on a distributed ledger based on blockchain or similar technology
(4) are secured through cryptography
(5) are fungible, and
(6) are not created or issued by the reporting entity or its related parties.
Bitcoin, which is the sole crypto asset mined by the Company, meets each of these criteria. For all entities, the ASC 350-60 amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The Company has elected to early adopt the new guidance effective January 1, 2024 resulting in a $
Segment and Reporting Unit Information
Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Chief Executive Officer and Chief Financial Officer of the Company comprise the CODM, as a group. The Company has
Reclassification
Certain prior period immaterial amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on the reported results of operations.
Liquidity
The accompanying consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The evaluation of going concern under the accounting guidance requires significant judgment which involves the Company to consider that it has historically incurred losses in recent years as it has prepared to grow its business through expansion and acquisition opportunities. The Company must also consider its current liquidity as well as future market and economic conditions that may be deemed outside the control of the Company as it relates to obtaining financing and generating future profits. As of September 30, 2024, the Company had $
8
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates include the evaluation of probable losses on balances due from third parties, the realization of deferred tax assets, the evaluation of contingent losses related to litigation and reserves on notes receivables. We consider our critical accounting estimates to be those related to long-lived asset impairment assessments. Our estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the consolidated financial statements.
Cash
The Company maintains cash balances at several financial institutions that are insured under the Federal Deposit Insurance Corporation’s (“FDIC”) Transition Account Guarantee Program. Balances with the financial institutions may exceed federally insured limits. As of September 30, 2024 and December 31, 2023 we have approximately $
Digital Assets
Bitcoin are included in current assets in the consolidated balance sheets due to the Company’s ability to sell Bitcoin in a highly liquid marketplace and such Bitcoin holdings are expected to be realized in cash or sold or consumed during the normal operating cycle of the Company. As a result of adopting ASC 350-60 on January 1, 2024, Bitcoin is measured at fair value as of each reporting period (see Recently Issued Accounting Pronouncements). The fair value of Bitcoin is measured using the period-end closing Bitcoin price from its principal market in accordance with ASC 820, Fair Value Measurement. Since Bitcoin is traded on a 24-hour period, the Company utilizes the price as of midnight UTC time, which aligns with the Company's revenue recognition cut-off. The increase and decrease in fair value from each reporting period is reflected on the consolidated statements of operation as "Gain on fair value of Bitcoin, net". The Company sells Bitcoin and such gains and losses from such transactions are measured as the difference between the cash proceeds and the carrying basis of Bitcoin as determined on a First In-First Out ("FIFO") basis and are recorded within "Gain on fair value of Bitcoin, net".
Prior to issuance of the ASU 2023-08 and adoption of ASC 350-60, Bitcoin were recorded at cost less impairment and were classified as indefinite-lived intangible assets in accordance with ASC 350, Intangibles — Goodwill and Other. An intangible asset with an indefinite useful life was not amortized but was assessed for impairment annually, or more frequently, when events or changes in circumstances occurred indicating that it was more likely than not that the carrying amount of the indefinite-lived asset exceeded its fair value. The Company determined the fair value of Bitcoin in accordance with ASC 820, Fair Value Measurement, based on lowest intraday quoted prices from our principal market for such assets (Level 1 inputs). We performed an analysis each month to identify whether events or changes in circumstances indicate that it is more likely than not that our digital assets were impaired. If the carrying value of a digital asset exceeded the fair value so determined, an impairment loss had occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value. To the extent an impairment loss was recognized, the loss established the new cost basis of the asset and subsequent reversal of impairment losses was not permitted under ASC 350, Intangibles – Goodwill and Other. Additionally, in the previous guidance, subsequent increases in Bitcoin prices are not allowed to be recorded (unrealized gains) unless the Bitcoin is sold, at which point the gain is recognized. Accordingly, gains (losses) recognized on fair value of Bitcoin in fiscal year 2024 are not comparable to fiscal year 2023.
Bitcoin, which is non-cash consideration earned by the Company through its mining activities, are included as a reconciling item as a cash outflow within operating activities on the accompanying consolidated statements of cash flows. The cash proceeds from the sales of Bitcoin are classified based on the holding period in which the Bitcoin are held. ASC 350-60 specifies that Bitcoin converted nearly immediately into cash would qualify as cash flows from operating activities and all other sales would qualify as investing activities. In prior fiscal periods, the Company did not hold its Bitcoin for extended periods of time and such sales proceeds prior to the adoption of ASC 350-60 were reported as cash flows from operating activities. Upon adoption of ASC 350-60, the Company evaluates its sales of Bitcoin and will record Bitcoin sold nearly immediately as operating cash flows and the remainder will be recorded as investing activities. During the nine months ended September 30, 2024, all proceeds from Bitcoin sales were classified as investing activities.
9
Investment in Securities
Investment in Securities includes investments in common stocks and convertible notes receivables. Investments in securities are reported at fair value with changes in unrecognized gains or losses included in other income on the income statement.
Investments in Unconsolidated Entities
We account for investments in less than
Fair Value of Financial Instruments
FASB ASC 825-10, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet.
Fixed Assets
The Company capitalizes all acquisitions of fixed assets in excess of $
The Company classifies mining machine deposit payments within "Deposits on mining equipment" in the consolidated balance sheets. As mining machines are received, the respective cost of the mining machines plus the related shipping and customs fees are reclassified from "Deposits on mining equipment" to "Fixed assets, net" in the consolidated balance sheets. Refer to Note 4 - Deposits on Mining Equipment and Hosting Services. In addition, as part of its periodic review of its fixed asset groups during the fourth quarter of 2023, the Company changed the estimated useful life for its mining machines from
The Company operates in an emerging industry for which limited data is available to make estimates of the useful economic lives of mining machines. To the extent that any of the assumptions underlying management’s estimate of useful life of its mining machines are subject to revision in a future reporting period, either as a result of changes in circumstances or through the availability of greater quantities of data, then the estimated useful life could change and have a prospective impact on depreciation expense and the carrying amounts of these assets.
Equipment Purchases
We ordered 300 S21 Bitmain machines in January 2024 for an aggregate purchase price of approximately $
Right to Use Assets
The Company capitalizes all leased assets pursuant to ASU 2016-02, Leases (Topic 842), which requires lessees to recognize right-of-use assets and lease liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer than 12 months and classified as either financing or operating leases. As of September 30, 2024 and December 31, 2023 right to use assets, net of accumulated amortization, was $
Impairment of Long-Lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment amount is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There was
Hosting Contracts
The Company currently uses three companies to host its miners: Core Scientific Inc. ("Core"), Giga Energy Inc ("GIGA") and Tech Infrastructure JV I LLC ("Tech Infrastructure").
On September 5, 2022, the Company, through its wholly-owned subsidiary US Digital, entered into a hosting agreement (the “Core Hosting Agreement”) with Core pursuant to which Core, under various additional orders, agreed to host approximately
10
Company's Bitcoin miner machines at a secure location and provide power, maintenance and other services specified in the contract with a term of one year, with automatic renewals unless either party notifies the other party in writing not less than ninety (
As required under the Core Hosting Agreement, the Company paid a $
On May 5, 2023, the Company entered into a hosting agreement (the “GIGA Hosting Agreement”) with GIGA pursuant to which GIGA agreed to host
On May 6, 2024, the Company entered into a hosting agreement (the “Arthur Hosting Agreement”) with Tech Infrastructure pursuant to which Tech Infrastructure agreed to host approximately
Revenue Recognition – Bitcoin Mining
We recognize revenue in accordance with generally accepted accounting principles as outlined in ASC 606, Revenue From Contracts with Customers, which requires that five steps be followed in evaluating revenue recognition: (i) identify the contract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation.
Our accounting policy on revenue recognition for our Bitcoin mining segment is provided below.
Step 1: The Company enters into a contract with a Bitcoin mining pool operator (i.e., the Customer) to provide hash calculations to the mining pools. The contract is terminable at any time by either party and thus the contract term is shorter than a 24-hour period and the contracts are continuously renewed. The Customer provides services solely for bitcoin mining and the fees charged during the three and nine months ended September 30, 2024 were approximately
Applying the criteria per ASC 606-10-25-1, the contract arises at the point that the Company provides hash calculations to the Customer, which is considered at contract inception, because customer consumption is in tandem with daily earnings of delivery of the computing power.
Step 2: In order to identify the performance obligations in a contract with a customer, the Company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
• The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
• The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has a single performance obligation in providing hash calculations to the Customer. The continuous renewal options do not represent material rights because they do not provide the Customer with the right to purchase additional goods or services at a discount. Specifically, the contract is renewed at the same terms, conditions, and rate as the current contract which is consistent with market rates, and there are no upfront or incremental fees in the initial contract. The Company has full control of the mining equipment utilized in the mining pool and if the Company determines it will increase or decrease the processing power of its machines and/or fleet (i.e., for repairs or when power costs are excessive) the computing power provided to the customer will be reduced.
11
Step 3: The transaction consideration the Company earns is non-cash consideration in the form of Bitcoin, which the Company measures at fair value at 23:59:59 UTC on the date of contract inception using the Company's principal market for Bitcoin. Although the contract renews continuously throughout the day, and thus the value of the consideration should be assessed continuously throughout the day, the Company has concluded that using the 23:59:59 UTC bitcoin price each day does not result in a materially different outcome. According to the Customer contract, daily settlements are made to the Company by the Customer based on the hash calculations provided over contract periods and the payout is made at approximately 04:00 UTC the following day.
When participating in ratable share pools, in exchange for providing hash calculations the Company is entitled to a fractional share of the Bitcoin award the Customer receives for successfully adding a block to the blockchain, plus a fractional share of the transaction fees attached to that blockchain. The Company’s fractional share is based on the proportion of hash calculations the Company contributed to the Customer compared to the total hash calculations contributed by all mining pool participants in solving the current algorithm. When participating in a Full Pay Per Share (“FPPS”) mining pool, in exchange for providing hash calculations to the pool the Company is entitled to compensation, calculated on a daily basis, at an amount that approximates the total Bitcoin that could have been mined using the Company’s hash calculations, calculated on a look-back basis across previous blocks using the pools hash rate index.
The transaction consideration the Company earns is variable since it is dependent on the daily computing power provided by the Company under the FPPS model and total Bitcoin earned by the under the ratable share model. There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.
The sum of the block reward and transaction fees earned by the Company is reduced by mining pool fees charged by the Customer for operating the mining pool based on a rate schedule per the mining pool contract. The mining pool fee is only incurred to the extent we perform hash calculations and generate revenue in accordance with the Customer’s payout formula during the continuously renewed contract periods beginning mid-night UTC and ending 23:59:59 UTC daily. This amount represents consideration paid to the Customer and is thus reported as a reduction in revenue.
Step 4: The transaction price is allocated to the single performance obligation upon verification for the provision of hash calculations to the Customer, and total Bitcoin rewards earned by the pool, when applicable under a ratable share model. There is a single performance obligation (i.e., hashrate) for the contract; therefore, all consideration from the Customer is allocated to this single performance obligation.
Step 5: The Company’s performance is complete in transferring the hash calculations over-time to the customer and the customer obtains control of the contributed hashrate.The performance obligation of hash calculations is fulfilled over time, as opposed to a point in time, because the Company provides the hash calculations throughout the contract period and the customer simultaneously obtains control of it and uses the asset to produce bitcoin. There are no deferred revenues or other liability obligations recorded by the Company since there are no payments in advance of the performance.
Bitcoin earned by the Company through its mining activities are included within operating activities on the accompanying consolidated statements of cash flows.
Cost of Revenues
The Company includes energy costs and external co-location mining hosting fees in cost of revenues. Depreciation of mining machines is included within "Depreciation and amortization" in the Consolidated Statements of Operations.
Revenue Recognition - Specialty Finance
Accounting Standards Codification (“ASC”) 606 of the Financial Accounting Standards Board (“FASB”) states an entity needs to conclude at the inception of the contract that collectability of the consideration to which it will be entitled in exchange for the goods and services that will be transferred to the customer is probable. That is, in some circumstances, an entity may not need to assess its ability to collect all of the consideration in the contract. The Company provides funding to Associations by purchasing their rights under delinquent accounts from unpaid assessments due from property owners. Collections on the Accounts may vary greatly in both the timing and amount ultimately recovered compared with the total revenues earned on the Accounts because of a variety of economic and social factors affecting the real estate environment in general.
The Company’s contracts with its specialty finance customers have very specific performance obligations. The Company has determined that the known amount of cash to be realized or realizable on its revenue generating activities cannot be reasonably estimate and as such, classifies its finance receivables as nonaccrual and recognizes revenues in the accompanying statements of income on the cash basis or cost recovery method in accordance with ASC 310-10, Receivables. The Company’s operations also consist of rental revenue earned from tenants under leasing arrangements which provide for rent income. The leases have been accounted for as operating leases. For operating leases, revenue is recorded based on cash rental payments was collected during the period. The Company analyzed its remaining revenue streams and concluded there were no changes in revenue recognition with the adoption of the new standard.
12
Under ASC 606, the Company applies the cash basis method to its original product and the cost recovery method to its special product as follows:
Finance Receivables—Original Product: Under the Company’s original product, delinquent assessments are funded only up to the Super Lien Amount as discussed above. Recoverability of funded amounts is generally assured because of the protection of the Super Lien Amount. As such, payments by unit owners on the Company’s original product are recorded to income when received in accordance with the provisions of the Florida Statute (718.116(3)) and the provisions of the purchase agreements entered into between the Company and Associations. Those provisions require that all payments be applied in the following order: first to interest, then to late fees, then to costs of collection, then to legal fees expended by the Company and then to assessments owed. In accordance with the cash basis method of recognizing revenue and the provisions of the statute, the Company records revenues for interest and late fees when cash is received. In the event the Company determines the ultimate collectability of amounts funded under its original product are in doubt, payments are applied to first reduce the funded or principal amount.
Finance Receivables—Special Product (New Neighbor Guaranty program): During 2012, the Company began offering associations an alternative product under the New Neighbor Guaranty program whereby the Company will fund amounts in excess of the Super Lien Amount. Under this special product, the Company purchases substantially all of the delinquent assessments owed to the association, in addition to all accrued interest and late fees, in exchange for payment by the Company of (i) a negotiated amount or (ii) on a going forward basis, all monthly assessments due for a period up to
Net Commission Revenue: The Company acts as an agent in providing health travel insurance policies. As a result, the Company revenue is recorded at net. The Company has determined that the known amount of cash to be realized or realizable on its revenue generating activities can be reasonably estimated and as such, classifies its receivables as accrual and recognizes revenues in the accompanying statements of income on the accrual basis. If a policy is not effective as of the end of a period, then the associated revenue and underwriting costs are deferred until the effective date. The majority of the commission revenue is underwritten by two policy underwriters who pays the Company commissions.
Coupon Sales
From time to time the Company receives coupons from Bitmain to incentivize purchases of equipment. Coupons have a stated face value in dollars and can be applied against future invoices for purchased machines. Coupons are transferable and there are not restrictions on the sale to third parties. Occasionally, the Company sells coupons to third parties in exchange for cash consideration or digital assets. As there is currently no active market for the buying and selling of Bitmain coupons, the Company has determined that the fair value of coupons received is nil at the time of receipt therefore revenue associated with the sale of such coupons is not recognized until the sale transaction has been completed and consideration has been received from the third party. During the three and nine months ended September 30, 2024, the Company sold Bitmain coupons for and $
Income Taxes
The Company’s calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. The Company recognizes tax liabilities for uncertain tax positions based on management’s estimate of whether it is more likely than not that additional taxes will be required. The Company had
Deferred income taxes are recognized in the consolidated financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates. Temporary differences arise from net operating losses, differences in depreciation methods of archived images, and property and equipment, stock-based and other compensation, and other accrued expenses. A valuation allowance is established when it is determined that it is more likely than not that some or all of the deferred tax assets will not be realized.
The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability for U.S., or the various state jurisdictions, may be materially different from managements estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities. Interest and penalties are included in tax expense.
Income tax expense/(benefit) from operations for the three and nine months ended September 30, 2024 and 2023 was
13
Income (Loss) Per Share
Basic income (loss) per share is calculated as net income (loss) to common stockholders divided by the weighted average number of common shares outstanding during the period. For the three and nine months ended September 30, 2024, the value transferred as a result of the warrant repricing of $
The weighted average shares used in calculating loss per share for the three and nine months ended September 30, 2024 includes
Diluted income (loss) per share for the periods equal to basic income (loss) per share as the effect of any convertible notes, stock-based compensation awards, stock warrants, and warrant repricing would be anti-dilutive.
The anti-dilutive stock-based compensation awards consisted of:
|
|
|
|
|
|
|
||
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Stock Options |
|
|
|
|
|
|
||
Stock Warrants |
|
|
|
|
|
|
||
Restricted Shares |
|
|
- |
|
|
|
|
|
The following table illustrates the computation of basic and diluted EPS for the three and nine months ended September 30, 2024 and 2023:
|
Three months ended September 30, 2024 |
|
|
Three months ended September 30, 2023 |
|
||||||||||||||||||
|
Income (Numerator) |
|
|
Shares (Denominator) |
|
|
Per-Share Amount |
|
|
Income (Numerator) |
|
|
Shares (Denominator) |
|
|
Per-Share Amount |
|
||||||
Net loss attributable to LM Funding America Inc. |
$ |
( |
) |
|
|
|
|
|
|
|
$ |
( |
) |
|
|
|
|
|
|
||||
Less: deemed dividends |
|
( |
) |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
||||
Basic and diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
||||||
Net loss attributable to common shareholders |
|
( |
) |
|
|
|
|
$ |
( |
) |
|
|
( |
) |
|
|
|
|
$ |
( |
) |
||
|
Nine months ended September 30, 2024 |
|
|
Nine months ended September 30, 2023 |
|
||||||||||||||||||
|
Income (Numerator) |
|
|
Shares (Denominator) |
|
|
Per-Share Amount |
|
|
Income (Numerator) |
|
|
Shares (Denominator) |
|
|
Per-Share Amount |
|
||||||
Net loss attributable to LM Funding America Inc. |
$ |
( |
) |
|
|
|
|
|
|
|
$ |
( |
) |
|
|
|
|
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|
||||
Less: deemed dividends |
|
( |
) |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
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|
||||
Basic and diluted EPS |
|
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|
|
|
|
|
|
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|
||||||
Net loss attributable to common shareholders |
|
( |
) |
|
|
|
|
$ |
( |
) |
|
|
( |
) |
|
|
|
|
$ |
( |
) |
||
Contingencies
The Company accrues for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is reasonably estimable. As facts concerning contingencies become known, the Company reassesses its position and makes appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal and other regulatory matters.
14
Stock-Based Compensation
The Company records all equity-based incentive grants to employees and non-employee members of the Company’s Board of Directors in operating expenses in the Company’s Consolidated Statements of Operations based on their fair values determined on the date of grant. Stock-based compensation expense, reduced for estimated forfeitures, is recognized over the requisite service period of the award, which is generally the vesting term of the outstanding equity awards. The expense attribution method is straight-line or accelerated graded-vesting depending on the nature of the award.
Non-cash Activities
ROU assets and operating lease obligation recognized - Due to the execution of its office equipment operating lease during the nine months ended September 30, 2024 and 2023, the Company recognized a lease liability and ROU asset associated with the lease in the amount of
Reclassification of mining equipment deposit to fixed assets, net - During the nine months ended September 30, 2024 and 2023 as mining machines were received, the Company reclassified
Change in equity due to change in accounting principal ASC 350-60 - The Company has elected to early adopt the new guidance effective January 1, 2024 resulting in a $
15
Note 2. Digital Asset
Digital assets consisted of the following:
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|
September 30, 2023 |
|
|||
Bitcoin |
$ |
|
|
|
$ |
|
|
$ |
|
|||
Tether |
|
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|
|
|
|
|
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|
|||
Digital assets - current |
|
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|
|
|
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|
|||
Bitcoin - long-term |
|
|
|
|
|
- |
|
|
|
- |
|
|
Total digital assets |
$ |
|
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
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|
|||
Bitcoin |
|
|
|
|
|
|
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|
|||
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|
September 30, 2023 |
|
|||
Number of Bitcoin held |
|
|
|
|
|
|
|
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|
|||
Carrying basis - per Bitcoin |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Fair value - per Bitcoin |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Carrying basis of Bitcoin |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Fair value of Bitcoin |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The carrying basis represents the valuation of Bitcoin at the time the Company earns the Bitcoin through mining activities. The carrying basis for Bitcoin held prior to the adoption of ASU 2023-08 was determined on the "cost less impairment" basis. Fair value of Bitcoin was determined using Level 1 inputs. As of September 30, 2024 and December 31, 2023 approximately
The following table presents a roll-forward of Bitcoin for the nine months ended September 30, 2024, based on the fair value model under ASU 2023-08:
|
|
September 30, 2024 |
|
|
Bitcoin as of December 31, 2023 |
$ |
|
|
|
Cumulative effect of the adoption of ASU 2023-08 (See Note 1) |
|
|
|
|
Beginning balance: Bitcoin as of January 1, 2024 |
|
|
|
|
Addition of Bitcoin from mining activities |
|
|
|
|
Disposition of Bitcoin from sales |
|
|
( |
) |
Gain on fair value of Bitcoin, net |
|
|
|
|
End of period |
$ |
|
|
|
During the three and nine months ended September 30, 2024, the Company realized total gains on Bitcoin of $
The following table presents a roll-forward of Bitcoin for the nine months ended September 30, 2023, prior to the adoption of ASU 2023-08, based on the cost less impairment model under ASC 350:
|
|
September 30, 2023 |
|
|
Beginning of year |
|
$ |
|
|
Purchase of Bitcoin |
|
|
|
|
Production of Bitcoin |
|
|
|
|
Impairment loss on mined Bitcoin |
|
|
( |
) |
Carrying amount of Bitcoin sold |
|
|
( |
) |
End of period |
|
|
|
|
16
Note 3. Fixed Assets, net
The components of fixed assets as of September 30, 2024 and December 31, 2023 are as follows:
|
|
Useful Life (Years) |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||
Mining machines |
|
|
$ |
|
|
|
$ |
|
|
|||
Real estate assets owned |
|
|
|
|
|
|
|
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|
|||
Furniture, computer and office equipment |
|
|
|
|
|
|
|
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|
|||
Gross fixed assets |
|
|
|
|
|
|
|
|
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|
||
Less: accumulated depreciation |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
Fixed assets, net |
|
|
|
$ |
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
As of September 30, 2024 and December 31, 2023, there were approximately
In order to accommodate an expected incoming shipment of S
On April 16, 2024, the
There was
Note 4. Deposits on Mining Equipment and Hosting Services
As further described in Note 1, the Company has entered into a series of mining machine purchase agreements, hosting and colocation service agreements in connection with our cryptocurrency mining operations which required deposits to be paid in advance of the respective asset or service being received.
As of September 30, 2024 and December 31, 2023, the Company had a total of $
As of September 30, 2024 and December 31, 2023, the Company had a total of $
Note 5. Investments
Marketable Securities
Our marketable equity securities are publicly traded stocks measured at fair value using quoted prices for identical assets in active markets and classified as Level 1 within the fair value hierarchy.
|
|
Cost |
|
|
Cost of Shares Sold |
|
|
Gross Unrealized Gain (Loss) |
|
|
Fair Value |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities, September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities, December 31, 2023 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
17
Notes receivable from Sale of Symbiont assets
The Company entered into a secured promissory note and loan agreement with Symbiont.IO, Inc. (“Symbiont”) on
Symbiont filed for bankruptcy on December 1, 2022. On June 5, 2023, the Company purchased substantially all of the assets of Symbiont (the “Symbiont Assets”) by means of a credit bid of the full amount of the note payable owed by Symbiont to the Company. The Symbiont Assets were comprised principally of intellectual property and software code relating to Symbiont’s financial services blockchain enterprise platform. The assets were recorded as intangible assets at an amount equal to the total consideration of $
On December 26, 2023, the Company entered into an asset purchase agreement with Platonic Holdings, Inc. (“Platonic”) pursuant to which we agreed to sell to Platonic the Symbiont Assets. The sale of the Symbiont Assets closed on December 27, 2023. The sales proceeds were $
Notes receivable from Seastar Medical Holding Corporation
As of September 30, 2024, there was
As of September 30, 2024, there was
On January 29, 2024 Seastar fully repaid the remaining balance of principal and accrued interest on the Notes which totaled approximately $
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|
September 30, 2023 |
|
|||
|
|
|
|
|
|
|
|
|
|||
Notes receivable from Seastar Medical Holding Corporation |
$ |
- |
|
|
$ |
|
|
$ |
|
||
End of period |
$ |
- |
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|||
|
September 30, 2024 |
|
|
|
|
|
September 30, 2023 |
|
|||
|
|
|
|
|
|
|
|
|
|||
Beginning of year |
$ |
|
|
|
|
|
$ |
|
|||
Repayment of Seastar Medical Holding Corporation notes receivable |
|
( |
) |
|
|
|
|
|
( |
) |
|
Accrued interest income |
|
|
|
|
|
|
|
|
|||
Allowance for losses on Seastar Medical Holding Corporation notes receivable |
|
- |
|
|
|
|
|
|
( |
) |
|
End of period |
$ |
- |
|
|
|
|
|
$ |
|
||
Long-term Investments
On June 6, 2024, we, through our wholly-owned subsidiary LMFA Financing, LLC (“LMFAF”), entered into a Loan Agreement (the “Loan Agreement”) with Tech Infrastructure JV I LLC (“Tech Infrastructure”), pursuant to which LMFAF agreed to extend to Tech Infrastructure a non-revolving credit line of up to $
18
through the Change Date and be paid monthly after the Change Date, and payment of principal will be amortized over a period of
As of September 30, 2024, $
I
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|
September 30, 2023 |
|
|||
|
|
|
|
|
|
|
|
|
|||
Current portion of notes receivable from Tech Infrastructure JV I LLC |
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
Notes receivable from Tech Infrastructure JV I LLC - net of current portion |
|
|
|
|
|
|
|
|
|||
End of period |
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|||
|
September 30, 2024 |
|
|
|
|
|
September 30, 2023 |
|
|||
|
|
|
|
|
|
|
|
|
|||
Beginning of year |
$ |
|
|
|
|
|
$ |
- |
|
||
Borrowings |
|
|
|
|
|
|
|
- |
|
||
Accrued interest income |
|
|
|
|
|
|
|
- |
|
||
End of period |
$ |
|
|
|
|
|
$ |
- |
|
||
The Tech Infrastructure loan is considered a variable interest in a VIE for which we are not the primary beneficiary as the Company does not have the power to direct the activities that most significantly impact Tech Infrastructure’s economic performance, and accordingly, we do not consolidate. Other than the Loan, no additional financial support has been provided or is expected to be provided as it relates to Tech Infrastructure’s operations.
(in millions) |
|
Financial Statement |
|
|
Maximum |
|
||||
|
|
Carrying Amount |
|
|
exposure to loss |
|
||||
Tech Infrastructure JV I LLC |
|
$ |
|
|
|
$ |
|
|
||
The financial statement carrying amount consists of the loan principal and accrued interest accounted for at fair value. The maximum exposure to loss as of September 30, 2024 is limited to the financial statement carrying amount of our loan investment.
Long-term investments held to maturity in equity securities consist of the following:
LMF Acquisition Opportunities Inc. and SeaStar Medical - Warrants
The Company, through its affiliate LMFA Sponsor LLC ("Sponsor"), owns an aggregate
Long-term investments in Seastar Medical private placement warrants consist of the following:
19
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|
September 30, 2023 |
|
|||
|
|
|
|
|
|
|
|
|
|||
Seastar Medical Holding Corporation (formerly LMAO) warrants |
$ |
|
|
$ |
|
|
$ |
|
|||
End of period |
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
September 30, 2024 |
|
|
|
|
|
September 30, 2023 |
|
|||
|
|
|
|
|
|
|
|
|
|||
Beginning of year |
$ |
|
|
|
|
|
$ |
|
|||
Unrealized loss on equity securities |
|
( |
) |
|
|
|
|
|
( |
) |
|
End of period |
$ |
|
|
|
|
|
$ |
|
|||
SeaStar Medical Holding Corporation - Common Stock
As of September 30, 2024 and December 31, 2023, Sponsor holds
Our investment in SeaStar Medical common stock qualifies for equity-method accounting, for which we have elected the fair value option which requires the Company to remeasure our retained interest in SeaStar Medical at fair value and include any resulting adjustments as part of a gain or loss on investment. The fair value calculation related to our retained interest in SeaStar Medical is based upon the observable trading price of SeaStar Medicals Class A common stock.
The Company determined that our investment in SeaStar Medical meets the criteria for the equity method of accounting, for which we have elected the fair value option. We remeasure our retained interest in SeaStar Medical's common stock at fair value and include any resulting adjustments as part of our gain or loss on investments. The fair value of our retained interest in SeaStar Medical's common stock is classified as Level 1 in the fair value hierarchy as the fair value is based upon the observable trading price of ICU common stock. The trading price of ICU common stock as of September 30, 2024 and 2023 was $
Changes in fair value are recorded in the income statement during the period of change. For the three and nine months ended September 30, 2024 and 2023, our re-measurement of the fair value of ICU common stock resulted in an unrealized loss of $
Long-term investments for the SeaStar Medical common stock consist of the following:
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|
September 30, 2023 |
|
|||
|
|
|
|
|
|
|
|
|
|||
Seastar Medical Holding Corporation common stock |
$ |
|
|
$ |
|
|
$ |
|
|||
End of period |
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
September 30, 2024 |
|
|
|
|
|
September 30, 2023 |
|
|||
|
|
|
|
|
|
|
|
|
|||
Beginning of year |
$ |
|
|
|
|
|
$ |
|
|||
Unrealized loss on equity investment |
|
( |
) |
|
|
|
|
|
( |
) |
|
End of period |
$ |
|
|
|
|
|
$ |
|
|||
The net unrealized loss on securities from the Company’s investment in SeaStar Medical's common stock and warrants for the three and nine months ended September 30, 2024 and 2023 totaled $
20
Note 6. Debt and Other Financing Arrangements
On May 13, 2024, the Company entered into a $
On August 6, 2024,the Company entered into a $
Debt of the Company consisted of the following at September 30, 2024 and December 31, 2023:
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $ |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $ |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $ |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $ |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
||
Secured loan with Brown Family Enterprises LLC. The note matures on |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
||
Loan with SE & SJ Liebel Limited Partnership. $ |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
||
Debt discount |
|
|
( |
) |
|
|
|
|
|
|
$ |
|
|
$ |
|
||
Minimum required principal payments on the Company's debt as of September 30, 2024 are as follows:
Maturity |
|
Amount |
|
|
2024 |
|
$ |
|
|
2025 |
|
$ |
|
|
2026 |
|
$ |
|
|
|
|
$ |
|
|
|
|
|
|
|
21
22
Note 7. Commitments and Contingencies
Leases
The Company leases certain office space and office equipment under non-cancelable operating leases. Leases with an initial term of one year or less are not recorded on the balance sheet, and the Company generally recognizes lease expense for these leases on a straight-line basis over the lease term. As of September 30, 2024, the Company’s long term operating leases have remaining lease terms of
The Company determines if an arrangement is a lease at inception. Operating lease right-of-use ("ROU") assets and current and long-term operating lease liabilities are separately stated on the consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The present value of future lease payments is discounted using either the implicit rate in the lease, if known, or the Company’s incremental borrowing rate for the specific lease as of the lease commencement date. The ROU asset is also adjusted for any prepayments made or incentives received. The lease terms include options to extend or terminate the lease only to the extent it is reasonably certain any of those options will be exercised. Lease expense is recognized on a straight-line basis over the lease term. The Company accounts for lease components (e.g., fixed payments) separate from the non-lease components (e.g., common-area maintenance costs) for its building lease. For office equipment, the company does not separate lease components (e.g., fixed payments) from the non-lease components (e.g., service costs).
The Company’s office lease began
On February 27, 2023, the Company executed a lease for office equipment which has been classified as an operating lease. The lease term is
Lease expense recognized for the three and nine months ended September 30, 2024 and 2023 was approximately $
The following table presents supplemental balance sheet information related to operating leases as of September 30, 2024 and December 31, 2023:
|
|
Balance Sheet Line Item |
September 30, 2024 |
|
December 31, 2023 |
|
||
Assets |
|
|
|
|
|
|
||
ROU assets |
|
Right of use asset, net |
$ |
|
$ |
|
||
Total lease assets |
|
|
$ |
|
$ |
|
||
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Current lease liabilities |
|
Lease liability |
$ |
|
$ |
|
||
Long-term lease liabilities |
|
Lease liability |
|
|
|
|
||
Total lease liabilities |
|
|
$ |
|
$ |
|
||
|
|
|
|
|
|
|
||
Weighted-average remaining lease term (in years) |
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
|
% |
|
% |
||
|
|
|
|
|
|
|
||
23
The following table presents supplemental cash flow information and non-cash activity related to operating leases for the three and nine months ended September 30, 2024 and 2023:
|
|
|
September 30, |
|
||||
|
|
|
2024 |
|
2023 |
|
||
Operating cash flow information |
|
|
|
|
|
|
||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
$ |
( |
) |
$ |
( |
) |
Non-cashflow information |
|
|
|
|
|
|
||
ROU assets and operating lease obligation recognized |
|
|
$ |
- |
|
$ |
|
|
The following table presents maturities of operating lease liabilities on an undiscounted basis as of September 30, 2024:
Lease Maturity Table |
|
|
|
|
|
|
|
|
Operating Leases |
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
(less: imputed interest) |
|
|
|
( |
) |
|
|
|
$ |
|
|
Legal Proceedings
Except as described below, we are not currently a party to material pending or known threatened litigation proceedings. However, we frequently become party to litigation in the ordinary course of business, including either the prosecution or defense of claims arising from contracts by and between us and client Associations. Regardless of the outcome, litigation can have an adverse impact on us because of prosecution, defense, and settlement costs, diversion of management resources and other factors.
The Company accrues for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is reasonably estimable. As facts concerning contingencies become known, the Company reassesses its position and makes appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters.
In October 2021, we entered into a sale and purchase agreement (the “Uptime Purchase Agreement”) with Uptime Armory LLC (“Uptime”) pursuant to which US Digital agreed to purchase, and Uptime agreed to supply to US Digital, an aggregate of
On November 8, 2022, LMFA filed an action in Florida circuit court against Uptime Armory, LLC and Bit5ive, LLC in a case styled US Digital Mining and Hosting Co. LLC v. Uptime Amory, LLC and Bit5ive, LLC (Fla. 11thCir. Ct., November 8, 2022). In that action, we alleged breach of contract and violation of the Florida Deceptive and Unfair Trade Practices Act and are seeking, among other things, damages of $
In October 2021, US Digital also entered into a hosting agreement with Uptime Hosting LLC (the “Hosting Agreement”) to host the Company’s
On
24
damages, alleging breach of contract and violation of the Florida Deceptive and Unfair Trade Practices Act. LMFA has amended its complaint.
This is now an action for (i) breach of contract against Uptime and Bit5ive, (ii) violation of Florida’s Uniform Fraudulent Transfer Act against Uptime; (iii) violation of Florida’s Uniform Fraudulent Transfer Act against Bit5ive; (iv) violation of Florida’s Uniform Fraudulent Transfer Act against Block Consulting and Robert Collazo (v) violation of Florida Fraudulent Asset Conversion against Block Consulting Services, 6301 Southwest Ranches, LLC, Robert D Collazo, Jr. and Elyam Moral-Collazo; (vi) violation of Florida Deceptive and Unfair Trade Practices Act against all Defendants, (vii) equitable lien against Robert D Collazo, Jr., Elyam Moral-Collazo and 6301 Southwest Ranches, LLC., and (viii) equitable lien against Defendants Robert D Collazo, Jr., Elyam Moral-Collazo and 6301 Southwest Ranches, LLC. Currently the proceedings have been stayed by the court.
Note 8. Stockholders’ Equity
Reverse Stock Split
Stock Options
The following is a summary of the stock option plan activity during the nine months ended September 30, 2024 and 2023:
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
Number of |
|
|
Weighted Average |
|
|
Number of |
|
|
Weighted Average |
|
||||
|
|
Options |
|
|
Exercise Price |
|
|
Options |
|
|
Exercise Price |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options outstanding at beginning of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options outstanding at September 30, |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options exercisable at September 30, |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Stock compensation expense recognized for the three and nine months ended September 30, 2024 and 2023 related to stock options was approximately $
The aggregate intrinsic value of the outstanding common stock options as of September 30, 2024 and December 31, 2023 was
Stock Issuance
On August 16, 2024, the Company and an institutional investor (the “Purchaser”) entered into a securities purchase agreement (the “Securities Purchase Agreement”), pursuant to which the Company agreed to issue to the Purchaser, (i) in a registered direct offering,
25
A Warrant and Series B Warrant in the Transaction was $
Certain outstanding and exercisable warrants include price protection provisions requiring a reduction in the instrument's exercise price in the event that the Company subsequently issues shares at a purchase price, or warrants at an exercise price, lower than the instrument's original exercise price. As a result of the Transactions, the provision was triggered and the exercise price for
On August 9, 2024, the Company issued
The following is a summary of the restricted share activity during the nine months ended September 30, 2024 and 2023:
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
Number of |
|
|
Weighted Average |
|
|
Number of |
|
|
Weighted Average |
|
||||
|
|
Restricted Shares |
|
|
Award Price |
|
|
Restricted Shares |
|
|
Award Price |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted Shares outstanding at beginning of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Vested |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Restricted Shares outstanding at September 30, |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
26
Stock compensation expense for restricted stock for the three and nine months ended September 30, 2024 and 2023 was approximately
Warrants
The following is a summary of the warrant activity during the nine months ended September 30, 2024 and 2023:
|
|
2024 |
|
|
2023 |
|
||||||||||
|
|
Number of Warrants |
|
|
Weighted Average Exercise Price |
|
|
Number of Warrants |
|
|
Weighted Average Exercise Price |
|
||||
Warrants outstanding at beginning of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Issued |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Forfeited |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants outstanding and exercisable at September 30, |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
The aggregate intrinsic value of the outstanding common stock warrants as of September 30, 2024 and 2023 was $
Note 9. Segment Information
The Company applies ASC 280 Segment Reporting in determining its reportable segments. The Company has
No operating segments have been aggregated to form the reportable segments. The corporate oversight function, and other components that may earn revenues that are only incidental to the activities of the Company are aggregated and included in the “All Other” category.
The Specialty Finance segment generates revenue from providing funding to nonprofit community associations. The Mining Operations segment generates revenue from the Bitcoin the Company earns through its mining activities.
|
Three Months Ended September 30, 2024 |
|
||||||||||
|
Specialty Finance |
|
Mining Operations |
|
All Other |
|
Total |
|
||||
Revenue, net |
$ |
|
$ |
|
$ |
|
$ |
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
||||
Operating loss |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Unrealized loss on investment and equity securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Unrealized loss on marketable securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Impairment loss on prepaid mining machine deposits |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Interest income |
|
- |
|
|
- |
|
|
|
|
|
||
Interest expense |
|
- |
|
|
|
|
( |
) |
|
( |
) |
|
Loss before income taxes |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Fixed asset additions |
|
- |
|
|
- |
|
|
|
|
|
||
27
|
Nine Months Ended September 30, 2024 |
|
||||||||||
|
Specialty Finance |
|
Mining Operations |
|
All Other |
|
Total |
|
||||
Revenue, net |
$ |
|
$ |
|
$ |
- |
|
$ |
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
||||
Operating loss |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Unrealized loss on investment and equity securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Unrealized gain on marketable securities |
|
- |
|
|
- |
|
|
|
|
|
||
Gain on fair value of purchased Bitcoin, net |
|
- |
|
|
- |
|
|
|
|
|
||
Impairment loss on prepaid mining machine deposits |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Other income - coupon sales |
|
- |
|
|
|
|
- |
|
|
|
||
Interest income |
|
- |
|
|
- |
|
|
|
|
|
||
Interest expense |
|
- |
|
|
( |
) |
|
( |
) |
|
( |
) |
Loss before income taxes |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Fixed asset additions |
|
- |
|
|
|
|
|
|
|
|||
|
Three Months Ended September 30, 2023 |
|
||||||||||
|
Specialty Finance |
|
Mining Operations |
|
All Other |
|
Total |
|
||||
Revenue, net |
$ |
|
$ |
|
$ |
- |
|
$ |
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
||||
Operating loss |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Unrealized loss on investment and equity securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Realized gain on securities |
|
- |
|
|
- |
|
|
|
|
|
||
Unrealized loss on marketable securities |
|
- |
|
|
- |
|
|
|
|
|
||
Impairment loss on Symbiont assets |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Credit loss on Seastar Medical Holding Corporation notes receivable |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Other income - coupon sales |
|
- |
|
|
|
|
- |
|
|
|
||
Interest income |
|
- |
|
|
- |
|
|
|
|
|
||
Loss before income taxes |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Fixed asset additions |
|
|
|
|
|
|
|
|
||||
|
Nine Months Ended September 30, 2023 |
|
||||||||||
|
Specialty Finance |
|
Mining Operations |
|
All Other |
|
Total |
|
||||
Revenue, net |
$ |
|
|
|
$ |
- |
|
$ |
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
||||
Operating loss |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Unrealized loss on investment and equity securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Unrealized gain on marketable securities |
|
- |
|
|
- |
|
|
|
|
|
||
Realized gain on securities |
|
- |
|
|
- |
|
|
|
|
|
||
Impairment loss on prepaid machine deposits |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Credit loss on Seastar Medical Holding Corporation notes receivable |
|
|
|
- |
|
|
( |
) |
|
( |
) |
|
Symbiont credit reserve reversal |
|
- |
|
|
- |
|
|
|
|
|
||
Impairment loss on Symbiont assets |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Realized gain on sale of purchased digital assets |
|
- |
|
|
- |
|
|
|
|
|
||
Other income - coupon sales |
|
- |
|
|
|
|
- |
|
|
|
||
Other income - financing revenue |
|
- |
|
|
- |
|
|
|
|
|
||
Interest income |
|
- |
|
|
- |
|
|
|
|
|
||
Loss before income taxes |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Fixed asset additions |
|
|
|
|
|
|
|
|
||||
28
Note 10. Related Party Transactions
Legal services for the Company associated with the collection of delinquent assessments from property owners was performed by a law firm (Business Law Group, or “BLG”) which was owned solely by Bruce M. Rodgers, the chairman and CEO of the Company, until and through the date of its initial public offering in 2015. Following the initial public offering, Mr. Rodgers transferred his interest in BLG to other attorneys at the firm through a redemption of his interest in the firm. The law firm has historically performed collection work primarily on a deferred billing basis wherein the law firm receives payment for services rendered upon collection from the property owners or at amounts ultimately subject to negotiations with the Company.
On February 1, 2022, the Company consented to the assignment by BLG to the law firm BLG Association Law, PLLC (“BLGAL”) of the Services Agreement, dated April 15, 2015, previously entered into by the Company and Business Law Group, P.A. (the “Services Agreement”). The Services Agreement had set forth the terms under which Business Law Group, P.A. would act as the primary law firm used by the Company and its association clients for the servicing and collection of association accounts. Bruce M. Rodgers is a
Under the agreement, the Company paid BLG a fixed monthly fee of $
The Company had originally engaged BLG on behalf of many of its Association clients to service and collect the Accounts and to distribute the proceeds as required by Florida law and the provisions of the purchase agreements between LMF and the Associations. This engagement was subsequently assigned to BLGAL as described above. Ms. Gould, who is a Director of the Company, worked as the General Manager of BLG and works as the General Manager of BLGAL.
Amounts paid to BLGAL for the three and nine months ended September 30, 2024 and 2023 were approximately $
Under the Services Agreement in effect during the three and nine months ended September 30, 2024 and 2023, the Company pays all costs (lien filing fees, process and serve costs) incurred in connection with the collection of amounts due from property owners. Any recovery of these collection costs is accounted for as a reduction in expense incurred. The Company incurred expenses related to collection costs for the three and nine months ended September 30, 2024 and 2023 in the amounts of approximately $
The Company also shares office space, personnel and related common expenses with BLGAL. All shared expenses, including rent, are charged to BLGAL based on an estimate of actual usage. Any expenses of BLGAL paid by the Company that have not been reimbursed or settled against other amounts are reflected as due from related parties in the accompanying consolidated balance sheet. BLGAL was charged for office sub-lease for three and nine months ended September 30, 2024 and 2023 for a total of approximately $
Amounts payable to BLGAL as of September 30, 2024 and December 31, 2023 were approximately $
Note 11. Subsequent Events
On October 25, 2024, the Company issued
29
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and Notes for the three and nine months ended September 30, 2024, and with the Annual Report on Form 10-K for the year ended December 31, 2023.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs, and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” “believes,” or the negative thereof or any variation thereon or similar terminology or expressions.
We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties, and assumptions about us that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Important factors which could materially affect our results and our future performance include, without limitation:
Except as required by law, we assume no duty to update or revise any forward-looking statements.
30
Overview
The Company currently operates two lines of business: our cryptocurrency mining business and our specialty finance business.
The Bitcoin mining operation deploys our computing power to mine Bitcoin on the Bitcoin network. We conduct this business through our wholly owned subsidiary, US Digital, a Florida limited liability company, which we formed in 2021 to develop and operate our cryptocurrency mining business.
With respect to our specialty finance business, the Company has historically engaged in the business of providing funding to nonprofit community associations primarily located in the state of Florida. We offer incorporated nonprofit community associations, which we refer to as “Associations,” a variety of financial products customized to each Association’s financial needs. Our original product offering consists of providing funding to Associations by purchasing their rights under delinquent accounts that are selected by the Associations arising from unpaid Association assessments. Historically, we provided funding against such delinquent accounts, which we refer to as “Accounts,” in exchange for a portion of the proceeds collected by the Associations from the account debtors on the Accounts. In addition to our original product offering, we also purchase Accounts on varying terms tailored to suit each Association’s financial needs, including under our New Neighbor Guaranty™ program.
Corporate History
The Company was originally organized in January 2008 as a Florida limited liability company under the name LM Funding, LLC. Prior to our initial public offering in 2015, all of our business was conducted through LM Funding, LLC and its subsidiaries. Immediately prior to our initial public offering in October 2015, the members of the LM Funding, LLC contributed all of their membership interests to LM Funding America, Inc., a Delaware corporation incorporated on April 20, 2015 (“LMFA”), in exchange for shares of the common stock of LMFA. Immediately after such contribution and exchange, the former members of LM Funding, LLC became the holders of 100% of the issued and outstanding common stock of LMFA, thereby making LM Funding, LLC a wholly-owned subsidiary of LMFA.
The Company organized two new subsidiaries in 2020: LMFA Financing LLC, a Florida limited liability company, on November 21, 2020, and LMFAO Sponsor LLC, a Florida limited liability company, on October 29, 2020. LMFAO Sponsor LLC organized a subsidiary, LMF Acquisition Opportunities Inc., on October 29, 2020. LM Funding America Inc. organized a subsidiary, US Digital (and 100% subsidiaries), on September 10, 2021. US Digital has formed 100% owned subsidiaries to engage in business in various states in connection with its Bitcoin mining business. The Company also from time to time organizes other subsidiaries to serve a specific purpose or hold a specific asset. LMF Acquisition Opportunities Inc. was merged with Seastar Medical Holding Corporation on October 28, 2022.
Cryptocurrency Mining Business
Bitcoin was introduced in 2008 with the goal of serving as a digital means of exchanging and storing value. Bitcoin is a form of digital currency that depends upon a consensus-based network and a public ledger called a “blockchain”, which contains a record of every Bitcoin transaction ever processed. The Bitcoin network is the first decentralized peer-to-peer payment network, powered by users participating in the consensus protocol, with no central authority or middlemen, that has wide network participation. The authenticity of each Bitcoin transaction is protected through digital signatures that correspond with addresses of users that send and receive Bitcoin. Users have full control over remitting Bitcoin from their own sending addresses. All transactions on the Bitcoin blockchain are transparent, allowing those running the appropriate software to confirm the validity of each transaction. To be recorded on the blockchain, each Bitcoin transaction is validated through a proof-of-work consensus method, which entails solving complex mathematical problems to validate transactions and post them on the blockchain. This process is called mining. Miners are rewarded with Bitcoins, both in the form of newly-created Bitcoins and transaction fees in Bitcoin, for successfully solving the mathematical problems and providing computing power to the network.
We obtain Bitcoin as a result of our mining operations, and we sell Bitcoin from time to time, to support our operations and strategic growth. We plan to convert our Bitcoin to U.S. dollars. We may engage in regular trading of Bitcoin or engage in hedging activities related to our holding of Bitcoin. However, our decisions to hold or sell Bitcoin at any given time may be impacted by the Bitcoin market, which has been historically characterized by significant volatility. Currently, we do not use a formula or specific methodology to determine whether or when we will sell Bitcoin that we hold, or the number of Bitcoins we will sell. Rather, decisions to hold or sell Bitcoins are currently determined by management by monitoring the market in real time.
Factors such as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining. In Bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the Bitcoin network. A company’s computing power measured in hashrate is generally considered to be one of the most important metrics for evaluating Bitcoin mining companies.
As of each of September 30, 2024 and 2023, the Company owned approximately 5,900 machines, which translated into our operating mining units being capable of producing over 639 petahash and 615 petahash per second (“EH/s”) of computing power as of September 30, 2024 and 2023. There were approximately 3,700 and 5,900 miners online as of September 30, 2024 and 2023,
31
respectively. We have an additional 2,200 miners in a third-party warehouse for redeployment. We expect to continue increasing our computing power through 2025 and beyond as we expand the number of active mining machines.
The Company currently uses three companies to host its miners: Core Scientific Inc. ("Core"), Giga Energy Inc ("GIGA") and Tech Infrastructure JV I LLC ("Tech Infrastructure").
On September 5, 2022, the Company, through its wholly-owned subsidiary US Digital, entered into a hosting agreement (the “Core Hosting Agreement”) with Core pursuant to which Core, under various additional orders, agreed to host approximately 3,000 of the Company's Bitcoin miner machines at a secure location and provide power, maintenance and other services specified in the contract with a term of one year, with automatic renewals unless either party notifies the other party in writing not less than ninety (90) calendar days before such renewal of its desire for the order not to renew unless terminated sooner pursuant to the terms of the Core Hosting Agreement. The Company entered into a number of amendments in 2023 and 2024 that resulted in Core hosting a total of approximately 4,870 miners. The amended Hosting Agreement results in the terms of the hosting arrangement expiring with respect to approximately 4,000 miners on May 31, 2024 while allowing the terms of the hosting arrangement to continue with respect to approximately 800 miners through December 31, 2024.
As required under the Core Hosting Agreement, the Company paid a $2.2 million deposit as of December 31, 2023. Under the terms of the amended Hosting Agreement, the deposit related to the 4,000 miners that were removed was applied to our invoices. As of September 30, 2024 and December 31, 2023, the Company had nil and $2.1 million of the prepaid deposit remaining with Core, respectively. In December 2022, Core filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. Core's bankruptcy filing has not negatively impacted our mining ability at their sites as of the date of this filing.
On May 5, 2023, the Company entered into a hosting agreement (the “GIGA Hosting Agreement”) with GIGA pursuant to which GIGA agreed to host 1,080 of the Company's Bitcoin Miner S19J Pro machines at a secure location and provide power, maintenance and other services specified in the contract with a term of one year. On April 12, 2024, the Company amended the contract to allow for an extension of the contract with a 60 day termination notice. As required under the GIGA Hosting Agreement, the Company paid $173 thousand as a pre-payment in May 2023 and paid a refundable deposit of $173 thousand in August 2023. As of September 30, 2024 and December 31, 2023, respectively, the Company had nil and $117 thousand of prepaid deposits remaining with GIGA, respectively. All of the machines hosted by Giga were moved to a third-party warehouse in July 2024 and are awaiting a new hosting site.
On May 6, 2024, the Company entered into a hosting agreement (the “Arthur Hosting Agreement”) with Tech Infrastructure pursuant to which Tech Infrastructure agreed to host approximately 3,000 of the Company's Bitcoin Miner S19J Pro machines at a secure location and provide power, maintenance and other services specified in the contract with a term of nine months. On July 17, 2024, the Company amended the contract to allow for an extension of the contract of one month. This contract’s energy rate is approximately $0.04 per Kilowatt.
Results of Operations
Summarized Consolidated Statements of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
1,255,473 |
|
|
$ |
3,419,508 |
|
|
$ |
9,014,424 |
|
|
$ |
8,928,676 |
|
Operating costs and expenses |
|
|
5,669,795 |
|
|
|
6,589,927 |
|
|
|
17,651,681 |
|
|
|
17,224,855 |
|
Operating loss |
|
|
(4,414,322 |
) |
|
|
(3,170,419 |
) |
|
|
(8,637,257 |
) |
|
|
(8,296,179 |
) |
Other loss |
|
|
(388,795 |
) |
|
|
(1,497,437 |
) |
|
|
(909,223 |
) |
|
|
(9,176,629 |
) |
Loss before income taxes |
|
|
(4,803,117 |
) |
|
|
(4,667,856 |
) |
|
|
(9,546,480 |
) |
|
|
(17,472,808 |
) |
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net loss |
|
|
(4,803,117 |
) |
|
|
(4,667,856 |
) |
|
|
(9,546,480 |
) |
|
|
(17,472,808 |
) |
Less: loss attributable to non-controlling interest |
|
|
105,043 |
|
|
|
250,880 |
|
|
|
265,296 |
|
|
|
3,120,321 |
|
Net loss attributable to LM Funding America Inc. |
|
$ |
(4,698,074 |
) |
|
$ |
(4,416,976 |
) |
|
$ |
(9,281,184 |
) |
|
$ |
(14,352,487 |
) |
Less: deemed dividends |
|
|
(1,704,305 |
) |
|
|
- |
|
|
|
(1,704,305 |
) |
|
|
- |
|
Net loss attributable to common shareholders |
|
$ |
(6,402,379 |
) |
|
$ |
(4,416,976 |
) |
|
$ |
(10,985,489 |
) |
|
$ |
(14,352,487 |
) |
32
Range of intraday Bitcoin prices |
|
|
|
|
|
||
Quarterly Reporting Periods Ended |
Minimum Price |
|
|
Maximum Price |
|
||
December 31, 2022 |
$ |
15,486 |
|
|
$ |
21,474 |
|
March 31, 2023 |
$ |
16,489 |
|
|
$ |
29,178 |
|
June 30, 2023 |
$ |
24,750 |
|
|
$ |
31,422 |
|
September 30, 2023 |
$ |
24,915 |
|
|
$ |
31,838 |
|
December 31, 2023 |
$ |
26,544 |
|
|
$ |
44,800 |
|
March 31, 2024 |
$ |
38,512 |
|
|
$ |
73,798 |
|
June 30, 2024 |
$ |
56,500 |
|
|
$ |
72,777 |
|
September 30, 2024 |
$ |
49,050 |
|
|
$ |
70,000 |
|
|
|
|
|
|
|
||
Effective January 1, 2024, we adopted ASC 350-60 which required Bitcoin to be measured at fair value. See Note 1 - Summary of Significant Accounting Policies for more details on impact of implementation to the financial statements. As a result, the carrying value of each Bitcoin we held at the end of September 30, 2024 and each subsequent reporting period reflects the price of one Bitcoin quoted on the active exchange at the end of the reporting period. Therefore, negative swings in the market price of Bitcoin could have a material impact on our earnings and on the carrying value of our Bitcoin.
The following reflects the financial summary of Bitcoin holdings:
Bitcoin |
|
|
|
|
|
|
|
|
|
|||
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|
September 30, 2023 |
|
|||
Number of Bitcoin held |
|
|
142.3 |
|
|
|
95.1 |
|
|
|
90.1 |
|
Carrying basis - per Bitcoin |
|
$ |
58,409 |
|
|
$ |
35,816 |
|
|
$ |
24,932 |
|
Fair value - per Bitcoin |
|
$ |
63,301 |
|
|
$ |
42,273 |
|
|
$ |
26,974 |
|
Carrying basis of Bitcoin |
|
$ |
8,310,473 |
|
|
$ |
3,406,096 |
|
|
$ |
2,246,340 |
|
Fair value of Bitcoin |
|
$ |
8,972,153 |
|
|
$ |
4,020,202 |
|
|
$ |
2,430,330 |
|
As of September 30, 2024 and December 31, 2023 approximately 79 Bitcoin (with an approximate fair value of $5.0 million) and nil Bitcoin were held in a custody account as collateral for the $5.0 million Liebel loan and were classified within "Digital assets - long-term" on the consolidated balance sheets.
The following is a summary of the average cost of revenues for mining each Bitcoin during the three and nine months ended September 30, 2024 and 2023:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Cost of Revenues - Analysis of costs to mine one Bitcoin (per Bitcoin amounts are actual) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bitcoin Mined |
|
|
18.5 |
|
|
|
117.1 |
|
|
|
149.0 |
|
|
|
315.4 |
|
Digital mining revenues |
|
$ |
1,127,455 |
|
|
$ |
3,283,473 |
|
|
$ |
8,618,436 |
|
|
$ |
8,342,646 |
|
Average revenue of each Bitcoin mined (1) |
|
$ |
60,870 |
|
|
$ |
28,040 |
|
|
$ |
57,858 |
|
|
$ |
26,451 |
|
Hosting fee expense |
|
$ |
730,716 |
|
|
$ |
2,708,473 |
|
|
$ |
5,742,773 |
|
|
$ |
6,737,971 |
|
Miner depreciation |
|
|
2,347,437 |
|
|
|
1,457,272 |
|
|
|
7,107,294 |
|
|
|
3,423,383 |
|
Direct costs to mine including non-cash depreciation |
|
$ |
3,078,153 |
|
|
$ |
4,165,745 |
|
|
$ |
12,850,067 |
|
|
$ |
10,161,354 |
|
Direct costs to mine one Bitcoin - hosting fees only |
|
$ |
39,450 |
|
|
$ |
23,130 |
|
|
$ |
38,553 |
|
|
$ |
21,363 |
|
Direct costs to mine one Bitcoin - including miner depreciation expense |
|
$ |
166,186 |
|
|
$ |
35,574 |
|
|
$ |
86,267 |
|
|
$ |
32,217 |
|
Cost of mining one Bitcoin as % of average Bitcoin mining revenue - hosting fees only |
|
|
64.81 |
% |
|
|
82.49 |
% |
|
|
66.63 |
% |
|
|
80.76 |
% |
Cost of mining one Bitcoin as % of average Bitcoin mining revenue - including miner depreciation expense |
|
|
273.02 |
% |
|
|
126.87 |
% |
|
|
149.10 |
% |
|
|
121.80 |
% |
(1) Average revenue of each Bitcoin mined is calculated by dividing the sum of Bitcoin mining revenue by the total number of Bitcoin mined during the respective periods. See the table "Range of intraday Bitcoin prices" for information on the range of intraday Bitcoin prices for quarterly periods.
33
The Company's Bitcoin unit activity during the nine months ended September 30, 2024 and 2023 was as follows:
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||
Beginning of Year |
|
95.1 |
|
|
|
54.9 |
|
Production of Bitcoin |
|
149.0 |
|
|
|
315.4 |
|
Purchase of Bitcoin |
|
- |
|
|
|
2.0 |
|
Sale of Bitcoin |
|
(101.5 |
) |
|
|
(282.0 |
) |
Fees |
|
(0.3 |
) |
|
|
(0.2 |
) |
End of Period |
|
142.3 |
|
|
|
90.1 |
|
The Three Months Ended September 30, 2024 compared with the Three Months Ended September 30, 2023
Revenues
During the three months ended September 30, 2024, total revenues decreased by $2.2 million, to $1.3 million from $3.4 million for the three months ended September 30, 2023.
Digital mining revenue decreased in the three months ended September 30, 2024 by $2.2 million to $1.1 million from $3.3 million for the three months ended September 30, 2023.
Bitcoin mining revenues are determined by two main drivers: quantity of Bitcoin mined and the price of Bitcoin on the date the Bitcoin is mined. During the three months ended September 30, 2024, we mined 18.4 Bitcoin with an average Bitcoin price of approximately $61 thousand as compared to 117.1 Bitcoin with an average Bitcoin price of approximately $28 thousand during the three months ended September 30, 2023. The decrease in Bitcoin mining revenue for the three months ended September 30, 2024 was attributable to the reduction in the number of Bitcoins mined during the period due to the temporary idling of mining machines that were in transit as well as the increased difficulty rate, which reduced our share of the global hashrate, offset in part by the increase in Bitcoin prices.
Operating Expenses
During the three months ended September 30, 2024, operating expenses decreased $0.9 million to $5.7 million from $6.6 million for the three months ended September 30, 2023. The increase in operating expenses is primarily due to the following factors:
Digital mining cost of revenues
Bitcoin mining costs decreased by $2.0 million to $0.7 million for the three months ended September 30, 2024 from $2.7 million for the three months ended September 30, 2023 due to the temporary idling of mining machines that were in transit and lower hosting costs per machine.
Staff costs and payroll
Compensation costs for three months ended September 30, 2024 increased by $0.2 million to $1.6 million from $1.3 million for the three months ended September 30, 2023 primarily due to the award of executive bonuses based on 2023 results offset in part by the reduction of stock based compensation associated with employee stock options.
Depreciation and amortization
Depreciation and amortization increased by $0.8 million to $2.3 million from $1.5 million for the three months ended September 30, 2024 primarily due to the change in useful life of mining machines from 5 years to 4 years.
Impairment loss on mined digital assets
Impairment loss on mined digital assets was nil and $0.4 million for the three months ended September 30, 2024 and 2023, respectively with no impairment recognized in 2024 due to the implementation of ASC 350-60 effective January 1, 2024.
Realized gain on sale of mined digital assets
Realized gain on sale of mined digital assets for the three months ended September 30, 2024 and 2023 was nil and $0.3 million, respectively.
Prior to adoption of ASC Topic 350-60 - Intangibles - Goodwill and Other - Crypto Assets, Bitcoin was classified as indefinite-lived intangible assets and were measured at cost less impairment. Additionally, in the previous guidance, subsequent increases in Bitcoin prices are not allowed to be recorded unrealized gains unless the Bitcoin is sold, at which point the gain is recognized. Accordingly, (gains) losses recognized on fair value of Bitcoin in fiscal year 2024 are not comparable to fiscal year 2023.
34
The Company sold 37 Bitcoins during the three months ended September 30, 2024 and 107 Bitcoins during the three months ended September 30, 2023.
Other Income (Expense)
The Company recognized an unrealized loss on securities of $0.4 million for the three months ended September 30, 2024 as compared to an unrealized loss of $0.8 million for the three months ended September 30, 2023 from the revaluation of Seastar's common stock and private placement warrants.
The Company recognized $98 thousand of interest income for the three months ended September 30, 2024 as compared to $40 thousand of interest income for the three months ended September 30, 2023 due to the payoff of a note payable by Seastar Medical in January 2024 while issuing a new loan of $2.8 million to a different entity in 2024.
The Company recognized $124 thousand of interest expense for the three months ended September 30, 2024 as compared to nil for the three months ended September 30, 2023 due to an increase in secured borrowings in 2024.
Income Tax Expense
During the three months ended September 30, 2024, the Company generated a $4.8 million net loss before income taxes and the Company increased its income tax valuation allowance by $1.2 million, which offset the Company’s incurred net income tax benefit of $1.2 million which resulted in no income tax expense being recognized for the three months ended September 30, 2024. During the three months ended September 30, 2023, the Company generated a $4.7 million net loss before income taxes and the Company increased its income tax valuation allowance by $1.4 million, which offset the Company’s incurred net income tax expense of $1.4 million, resulting in no income tax expense being recognized during the period.
Net Loss
During the three months ended September 30, 2024, net loss was $4.8 million as compared to net loss of $4.7 million for the three months ended September 30, 2023.
Net Loss Attributable to Non-Controlling Interest
The Company owns 69.5% of Sponsor. As such, there is a $0.1 million net loss for the three months ended September 30, 2024 attributable to the Non-Controlling Interest as compared to a $0.3 million net loss for the three months ended September 30, 2023.
Net Loss Attributable to LM Funding America, Inc.
During the three months ended September 30, 2024, net loss attributable to LM Funding America, Inc. was $4.7 million as compared to net loss of $4.4 million for the three months ended September 30, 2023.
Net Loss Attributable to Common Shareholders
During three months ended September 30, 2024, net loss attributable to common shareholders was increased by $1.7 million compared to net loss attributable to LM Funding America, Inc. due to deemed dividends related to warrant repricing. During the three months ended September 30, 2024, net loss attributable to common shareholders was $6.4 million as compared to $4.4 million for the three months ended September 30, 2023.
The Nine Months Ended September 30, 2024 compared with the Nine Months Ended September 30, 2023
Revenues
During the nine months ended September 30, 2024, total revenues increased by $0.1 million, to $9.0 million from $8.9 million for the nine months ended September 30, 2023.
Digital mining revenue increased in the nine months ended September 30, 2024 by $0.3 million to $8.6 million from $8.3 million for the nine months ended September 30, 2023.
Bitcoin mining revenues are determined by two main drivers: quantity of Bitcoin mined and the price of Bitcoin on the date the Bitcoin is mined. During the nine months ended September 30, 2024, we mined 148.9 Bitcoin with an average Bitcoin price of approximately $58 thousand as compared to 315.4 Bitcoin with an average Bitcoin price of approximately $26 thousand during the nine months ended September 30, 2023. The increase in Bitcoin mining revenue for the nine months ended September 30, 2024 was attributable to the increase in Bitcoin prices offset in part by the temporary idling of mining machines that were in transit as well as the increased difficulty rate, which reduced our share of the global hashrate.
Specialty finance revenue decreased in the nine months ended September 30, 2024 by $190 thousand to $396 thousand from $586 thousand for the nine months ended September 30, 2023.
35
Operating Expenses
During the nine months ended September 30, 2024, operating expenses increased $0.5 million to $17.7 million from $17.2 million for the nine months ended September 30, 2023. The increase in operating expenses is primarily due to the following factors:
Digital mining cost of revenues
Bitcoin mining costs decreased by $1.0 million to $5.8 million for the nine months ended September 30, 2024 from $6.7 million for the nine months ended September 30, 2023 due to the temporary idling of mining machines that were in transit and lower hosting costs per machine.
Staff costs and payroll
Compensation costs for nine months ended September 30, 2024 decreased by $1.1 million to $3.6 million from $4.7 million for the nine months ended September 30, 2023 primarily due to the reduction of stock based compensation associated with employee stock options offset in part by the award of executive bonuses based on 2023 results.
Depreciation and amortization
Depreciation and amortization increased by $3.6 million to $7.1 million for the nine months ended September 30, 2024 from $3.5 million for the nine months ended September 30, 2023 primarily due to the increased number of Bitcoin mining machines placed into service earning Bitcoins as well as the change in useful life of mining machines from 5 years to 4 years.
Professional fees
Professional fees increased by $0.4 million to $1.6 million for the nine months ended September 30, 2024 from $1.2 million for the nine months ended September 30, 2023 primarily due to $0.3 million of contract termination costs paid to a service provider.
Loss (gain) on fair value of Bitcoin, net
The gain on fair value of Bitcoin, net for the nine months ended September 30, 2024 and 2023 was $3.1 million and nil, respectively. As discussed in Note 2 above, the Company adopted the amendments per ASC 350-60 as of January 1, 2024, accordingly, we measured crypto assets at fair value in accordance with ASC Topic 820 - Fair Value Measurement and included the gains and losses from remeasurement in net income. The gain pertains to the change in Bitcoin's fair value from January 1, 2024, through September 30, 2024. The fair value of Bitcoin was approximately $63 thousand per Bitcoin at September 30, 2024 and $42 thousand per Bitcoin at December 31, 2023.
Impairment loss on mining equipment
The Company incurred a $1.2 million impairment and nil loss on mining equipment for the nine months ended September 30, 2024 and 2023, respectively, related to machines disposed of in April 2024.
Impairment loss on mined digital assets
Impairment loss on mined digital assets was nil and $0.8 million for the nine months ended September 30, 2024 and 2023, respectively with no impairment recognized in 2024 due to the implementation of ASC 350-60 effective January 1, 2024.
Realized gain on sale of mined digital assets
Realized gain on sale of mined digital assets for the nine months ended September 30, 2024 and 2023 was nil and $1.3 million respectively.
Prior to adoption of ASC 350-60 - Crypto Assets, Bitcoin was classified as indefinite-lived intangible assets and were measured at cost less impairment. Additionally, in the previous guidance, subsequent increases in Bitcoin prices are not allowed to be recorded (unrealized gains) unless the Bitcoin is sold, at which point the gain is recognized. Accordingly, gains (losses) recognized on fair value of Bitcoin in fiscal year 2024 are not comparable to fiscal year 2023.
The Company sold 101.5 Bitcoins during the nine months ended September 30, 2024 and 282.0 Bitcoins during the nine months ended September 30, 2023.
Other Income (Expense)
The Company recognized an unrealized loss on securities of $0.9 million for the nine months ended September 30, 2024 as compared to an unrealized loss of $10.3 million for the nine months ended September 30, 2023 from the revaluation of Seastar's common stock and private placement warrants.
The Company recognized $4 thousand on the sale of Bitmain coupons received from the purchase of Bitcoin mining equipment for the nine months ended September 30, 2024 compared to $0.6 million for the nine months ended September 30, 2023.
36
The Company recognized a reversal of a valuation allowance of nil and $1.0 million for the nine months ended September 30, 2024 and 2023, respectively, from the revaluation of the Symbiont note receivable and subsequent acquisition of the Symbiont assets. The Company also recognized an impairment loss of nil and $0.8 million for the nine months ended September 30, 2024 and 2023, respectively, related to impairment of Symbiont Assets.
The Company recognized $125 thousand of interest income for the nine months ended September 30, 2024 as compared to $211 thousand of interest income for the nine months ended September 30, 2023 due to the payoff of a note payable by Seastar Medical in January 2024 while issuing a new loan of $2.8 million to a different entity in 2024.
The Company recognized $232 thousand of interest expense for the nine months ended September 30, 2024 as compared to nil for the nine months ended September 30, 2023 due to an increase in secured borrowings.
Income Tax Expense
During the nine months ended September 30, 2024, the Company generated a $9.5 million net loss before income taxes and the Company increased its income tax valuation allowance by $2.4 million, which offset the Company’s incurred net income tax benefit of $2.4 million which resulted in no income tax expense being recognized during this period. This net activity resulted in no recognized income tax expense for the nine months ended September 30, 2024. During the nine months ended September 30, 2023, the Company generated a $17.5 million net loss before income taxes and the Company increased its income tax valuation allowance by $2.1 million, which offset the Company’s incurred net income tax expense of $2.1 million, resulting in no income tax expense being recognized during the period.
Net Loss
During the nine months ended September 30, 2024, net loss was $9.5 million as compared to net loss of $17.5 million for the nine months ended September 30, 2023.
Net Loss Attributable to Non-Controlling Interest
The Company owns 69.5% of Sponsor. As such, there is a $0.3 million net loss for the nine months ended September 30, 2024 attributable to the Non-Controlling Interest as compared to a $3.1 million net loss for the nine months ended September 30, 2023.
Net Loss Attributable to LM Funding America, Inc.
During the nine months ended September 30, 2024, net loss attributable to LM Funding America, Inc. was $9.3 million as compared to net loss of $14.4 million for the nine months ended September 30, 2023.
Net Loss Attributable to Common Shareholders
During nine months ended September 30, 2024, net loss attributable to common shareholders was increased by $1.7 million compared to net loss attributable to LM Funding America, Inc. due to deemed dividends related to warrant repricing. During the nine months ended September 30, 2024, net loss attributable to common shareholders was $11.0 million as compared to $14.4 million for the nine months ended September 30, 2023.
Liquidity and Capital Resources
General
Our primary sources of liquidity are our cash and cash equivalents, Bitcoin generated from our digital mining operations, proceeds from borrowings and cash from our note receivables. At September 30, 2024, we had cash, cash equivalents and Bitcoin, excluding $5.0 million Bitcoin held as collateral, of $9.9 million compared to cash, cash equivalents and Bitcoin of $5.8 million at December 31, 2023. As of September 30, 2024 and December 31, 2023, $5.0 million and nil of Bitcoin was pledged as collateral against outstanding borrowings. As of September 30, 2024, we had working capital of $8.2 million reflecting an increase of $0.8 million since December 31, 2023. We have access to equity financing through equity and debt financing. Cash management continues to be a top priority. We expect to incur negative operating cash flows as we work to increase our digital mining revenue and maintain operational efficiencies.
Our working capital needs may increase in the future as we continue to expand and enhance our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources may depend on the financial success of our then current business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control. No assurance can be given that we will be successful in raising the required capital at a reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on our future financing and operating activities. If we require additional capital and are unsuccessful in raising that capital, we may not be able to continue our business operations in the cryptocurrency mining industry which could adversely impact our business, financial condition and results of operations.
37
As of September 30, 2024 and December 31, 2023, our liquidity was comprised of:
|
|
September 30, 2024 |
|
|
|
December 31, 2023 |
|
||
Cash and cash equivalents |
$ |
|
5,913,215 |
|
|
$ |
|
2,401,831 |
|
Bitcoin - current portion |
|
|
3,983,800 |
|
|
|
|
3,416,256 |
|
Marketable securities |
|
|
18,844 |
|
|
|
|
17,860 |
|
End of Period |
$ |
|
9,915,859 |
|
|
$ |
|
5,835,947 |
|
|
|
|
|
|
|
|
|
||
The Company's cash flow summary for the nine months ended September 30, 2024 and 2023 are as follows:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash Flows used in Operating Activities |
|
$ |
(8,690,014 |
) |
|
$ |
(2,609,712 |
) |
Cash Flows provided by (used in) Investing Activities |
|
|
4,230,632 |
|
|
|
(640,170 |
) |
Cash Flows provided by (used in) Financing Activities |
|
|
7,970,766 |
|
|
|
(519,117 |
) |
Net increase (decrease) in Cash |
|
|
3,511,384 |
|
|
|
(3,768,999 |
) |
Cash - Beginning of Year |
|
|
2,401,831 |
|
|
|
4,238,006 |
|
Cash - End of Period |
|
$ |
5,913,215 |
|
|
$ |
469,007 |
|
Contractual Obligations
The Company has digital mining hosting contracts that expire between December 2024 and April 2025. These contracts currently require total monthly payments of approximately $200 thousand to $400 thousand monthly.
Cash from Operations
Net cash used in operations was $8.7 million during the nine months ended September 30, 2024 compared with net cash used in operations of $2.6 million during the nine months ended September 30, 2023. This change in cash used in operating activities was primarily driven by the classification of $6.8 million in Bitcoin proceeds from mining (i.e. Bitcoin) as investing activities during the nine months ended September 30, 2024 due to the adoption of ASU 350-60 as compared to the classification of mining revenues as operating activities for the nine months ended September 30, 2023. The mining of Bitcoin is considered a non cash item for operating purposes which totaled $8.6 million and $8.4 million for the nine months ended September 30, 2024 and 2023, respectively.
Cash from Investing Activities
For the nine months ended September 30, 2024 net cash provided by investing activities was $4.2 million as compared to net cash used in investing activities of $0.6 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, the Company received net payments of approximately $1.4 million from SeaStar Medical related to the payment of outstanding notes receivable, and received proceeds of $6.8 million from the sale of digital assets while investing $1.2 million for capital expenditures including Bitcoin mining equipment which was offset in part by a $2.9 million investment in the Tech Infrastructure JV I LLC note receivable. For the nine months ended September 30, 2023 the Company received $1.8 million from SeaStar Medical related to the payment of outstanding notes receivable while investing $1.9 million for Bitcoin mining equipment and investing $0.4 million for the Symbiont Asset acquisition.
Cash from Financing Activities
Net cash provided by financing activities was $8.0 million for the nine months ended September 30, 2024 compared to $0.5 million used in financing activities for the nine months ended September 30, 2023. During the nine months ended September 30, 2024 and 2023, the Company received $2.3 million and nil of proceeds from equity offerings, respectively, and $6.4 million and nil of proceeds from borrowings, respectively.
Equity Financing Transactions
The Company had a cash infusion of $2.3 million and nil from equity financing transactions during the nine months ended September 30, 2024 and 2023, respectively, as described below.
On August 16, 2024, the Company and an institutional investor (the “Purchaser”) entered into a securities purchase agreement (the “Securities Purchase Agreement”), pursuant to which the Company agreed to issue to the Purchaser, (i) in a registered direct offering, 278,000 shares (the “Shares”) of the Company’s common stock and pre-funded warrants to purchase 590,185 shares of common stock (the “Pre-Funded Warrants”) with an exercise price of $0.0001 per share, and (ii) in a concurrent private placement, Series A warrants to purchase 868,185 shares of common stock (the “Series A Common Warrants”) and Series B warrants to purchase 868,185 shares of common stock (the “Series B Common Warrants” and together with the Series A Common Warrants, the “Common Warrants”), each with an exercise price of $2.98. Such registered direct offering and concurrent private placement are referred to herein as the
38
“Transactions.” The combined effective offering price for each Share (or pre-funded warrant in lieu thereof) and accompanying Series A Warrant and Series B Warrant in the Transaction was $2.98. The Series A Common Warrants will expire on the fifth anniversary of the Stockholder Approval Date and the Series B Common Warrants will expire on the second anniversary of the Stockholder Approval Date. The Pre-Funded Warrants will not expire and will be exercisable commencing on the date of issuance and at any time until all of the Pre-Funded Warrants are exercised in full. The Transactions closed on August 19, 2024. In connection with the Transactions, on August 16, 2024, the Company entered into a placement agency agreement with Maxim Group LLC (the “Placement Agent”), pursuant to which the Company engaged the Placement Agent as the exclusive placement agent for the Company. The Company agreed to pay the Placement Agent a cash fee equal to 7.5% of the aggregate gross proceeds raised in the Transactions and reimburse the Placement Agent for certain of its expenses in an aggregate amount up to $60,000. The Company received aggregate gross proceeds from the Transactions of approximately $2.6 million, before deducting fees to the Placement Agent of approximately $0.3 million and other estimated offering expenses payable by the Company of approximately $0.2 million.
Certain outstanding and exercisable warrants include price protection provisions requiring a reduction in the instrument's exercise price in the event that the Company subsequently issues shares at a purchase price, or warrants at an exercise price, lower than the instrument's original exercise price. As a result of the Transactions, the provision was triggered and the exercise price of 1,247,807 warrants was reduced from $30.00 to $2.88. In accordance with ASC 260, when an instrument's exercise price is reduced in accordance with a price protection provision, the issuer is required to determine the value that was transferred to the holder of the warrant as calculated by comparing the hypothetical fair value of the warrant immediately before and immediately after the exercise price reduction and record the amount as a reduction to retained earnings and increase to additional paid in capital (i.e. deemed dividend). Due to the absence of retained earnings, the Company recorded the transaction within additional paid in capital, which resulted in a nil net impact to the statements of equity. Loss attributable to common shareholders was increased by the calculated value transferred to the holder of $1.7 million in the basic and diluted EPS calculations for the three and nine months ended September 30, 2024 and nil in the basic and diluted EPS calculations for the three and nine months ended September 30, 2023. On September 25, 2024, 149,185 of the Pre-Funded Warrants were exercised for $0.0001 per share.
On August 9, 2024, the Company issued 29,674 shares of common stock pursuant to a termination agreement with a service provider which required the delivery of such shares and a cash payment of $150 thousand. The total fair value of the shares at the time of issuance was approximately $100 thousand, of which we expensed $100 thousand and nil for the three and nine months ended September 30, 2024 and 2023, respectively.
Debt
On May 13, 2024, the Company entered into a $1.5 million secured loan ("Secured Note") with Brown Family Enterprises LLC which pays ten percent (10%) interest per annum, simple interest on a monthly basis until the Secured Note is paid in full. The note matures on May 14, 2025. The Company granted to the holders of the Secured Note a secured interest in substantially all of the Company's assets and interests.
On August 6, 2024, the Company entered into a $5.0 million senior secured term loan agreement ("Senior Note") with SE & AJ Liebel Limited Partnership ("Liebel"). The Senior Note is secured by Bitcoin with a fair market value equal to no less than $5.0 million which is held as collateral in a specified custody account. The Company has also granted Liebel a first perfected security interest in substantially all the assets of the Company. Further, in connection with the Senior Note, the Company entered into an Intercreditor Agreement, dated August 6, 2024 (the “Intercreditor Agreement”), with Brown Family, pursuant to which the First Lien Obligations and the Second Lien Obligations (as each are defined in the Intercreditor Agreement) are subject to customary intercreditor arrangements. The loan bears interest at a rate of 12.0% per annum and will mature on August 6, 2026 (the “Maturity Date”). The Company will make monthly interest payments in the amount of $50,000 each month until the Maturity Date, and on such date the entire principal balance, together with accrued and unpaid interest, shall become payable.
39
Debt of the Company consisted of the following at September 30, 2024 and December 31, 2023:
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $14,040 was required upfront. Two installment payments of $14,830 and eight installment payments of $717 are to be made over the loan term. The note matures on July 1, 2025. Annualized interest is 10.4%. |
|
|
20,564 |
|
|
|
- |
|
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $3,438 was required upfront and equal installment payments of $3,658 to be made over a 11 month period. The note matured on July 1, 2024. Annualized interest is 12.05%. |
|
|
- |
|
|
|
21,945 |
|
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $36,544 was required upfront and equal installment payments of $41,879 to be made over an 10 month period. The note matured on August 1, 2024. Annualized interest is 9.6%. |
|
|
- |
|
|
|
335,022 |
|
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $30,000 was required upfront and equal installment payments of $35,103 to be made over a 6 month period. The note matured on June 1, 2024. Annualized interest is 12.05%. |
|
|
- |
|
|
|
210,619 |
|
|
|
|
|
|
|
|
||
Secured loan with Brown Family Enterprises LLC. The note matures on May 14, 2025. Interest is 10% per annum. |
|
|
1,500,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
||
Loan with SE & SJ Liebel Limited Partnership. $5.0 million of Bitcoin has been pledged as collateral. The note matures on August 6, 2026. Interest is 12% per annum. |
|
|
5,000,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
||
Debt discount |
|
|
(155,916 |
) |
|
|
|
|
|
|
$ |
6,364,648 |
|
|
$ |
567,586 |
|
The following table presents maturities of debt on an undiscounted basis as of September 30, 2024:
Maturity |
|
Amount |
|
|
2024 |
|
$ |
16,263 |
|
2025 |
|
$ |
1,504,301 |
|
2026 |
|
$ |
5,000,000 |
|
|
|
$ |
6,520,564 |
|
|
|
|
|
|
Non-GAAP Financial Measures
Our reported results are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). We also disclose Earnings before Interest, Tax, Depreciation and Amortization ("EBITDA") and Core Earnings before Interest, Tax, Depreciation and Amortization ("Core EBITDA") which adjusts for unrealized loss on investment and equity securities, impairment loss on mined digital assets, impairment of long-lived assets, impairment of prepaid hosting deposits, contract termination costs and stock compensation expense and option expense, all of which are non-GAAP financial measures. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of Bitcoin miners.
The following tables reconcile net loss, which we believe is the most comparable GAAP measure, to EBITDA and Core EBITDA:
40
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(4,803,117 |
) |
|
$ |
(4,667,856 |
) |
|
|
$ |
(9,546,480 |
) |
|
$ |
(17,472,808 |
) |
Interest expense |
|
|
124,035 |
|
|
|
- |
|
|
|
|
231,754 |
|
|
|
- |
|
Depreciation and amortization |
|
|
2,349,634 |
|
|
|
1,516,873 |
|
|
|
|
7,115,404 |
|
|
|
3,487,866 |
|
Income (loss) before interest, taxes & depreciation |
|
$ |
(2,329,448 |
) |
|
$ |
(3,150,983 |
) |
|
|
$ |
(2,199,322 |
) |
|
$ |
(13,984,942 |
) |
Unrealized loss on investment and equity securities |
|
|
346,866 |
|
|
|
778,078 |
|
|
|
|
852,624 |
|
|
|
10,317,613 |
|
Gain on adjustment of note receivable allowance |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
(1,052,543 |
) |
Impairment loss on mined digital assets |
|
|
- |
|
|
|
383,497 |
|
|
|
|
- |
|
|
|
822,650 |
|
Impairment loss on prepaid hosting deposits |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
36,691 |
|
Costs associated with At-the-Market Equity program |
|
|
- |
|
|
|
- |
|
|
|
|
119,050 |
|
|
|
- |
|
Contract termination costs |
|
|
250,001 |
|
|
|
- |
|
|
|
|
250,001 |
|
|
|
- |
|
Impairment loss on Symbiont assets |
|
|
- |
|
|
|
750,678 |
|
|
|
|
- |
|
|
|
750,678 |
|
Impairment loss on mining equipment |
|
|
- |
|
|
|
- |
|
|
|
|
1,188,058 |
|
|
|
- |
|
Stock compensation and option expense |
|
|
110,806 |
|
|
|
621,827 |
|
|
|
|
408,737 |
|
|
|
2,528,852 |
|
Core income (loss) before interest, taxes & depreciation |
|
$ |
(1,621,775 |
) |
|
$ |
(616,903 |
) |
|
|
$ |
619,148 |
|
|
$ |
(581,001 |
) |
Critical Accounting Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure or inclusion of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. Our critical accounting policies include revenue recognition, digital assets, and policies related to long-lived assets. We consider our critical accounting estimates to be those related to long-lived asset impairment assessments.
There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our Annual Report on Form 10-K. For a description of our critical accounting policies and estimates, see Part I, Item 1, Note 1, "Summary of Significant Accounting Policies" in our notes to the consolidated financial statements in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
Please refer to Note 1 in our unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of September 30, 2024.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to make disclosures under this item.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of September 30, 2024.
41
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
42
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Legal Proceedings are set forth under Note 7 "Commitments and Contingencies" included in Part I, Item 1 of this Quarterly Report on Form 10-Q and are incorporated herein by reference.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Sales of Unregistered Securities.
None.
(b) Use of Proceeds.
None.
(c) Repurchase of Securities.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
a) None.
b) None.
c) During the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
43
Item 6. Exhibits
The following documents are filed as a part of this report or are incorporated herein by reference.
EXHIBIT NUMBER |
DESCRIPTION |
|
3.1 |
||
3.2 |
||
4.1 |
||
4.2 |
||
4.3 |
||
4.4 |
||
10.1 |
||
10.2 |
||
10.3 |
||
10.4 |
||
10.5 |
||
10.6 |
||
10.7 |
||
10.8 |
||
31.1* |
Rule 13a – 14(a) Certification of the Principal Executive Officer |
|
31.2* |
Rule 13a – 14(a) Certification of the Principal Financial Officer |
|
32.1* |
Written Statement of the Principal Executive Officer, Pursuant to 18 U.S.C. § 1350 |
|
32.2* |
Written Statement of the Principal Financial Officer, Pursuant to 18 U.S.C. § 1350 |
|
|
|
|
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
|
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
* Filed herewith.
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
|
|
LM FUNDING AMERICA, INC. |
|
|
|
|
|
Date: November 13, 2024 |
|
By: |
/s/ Bruce M. Rodgers |
|
|
|
Bruce M. Rodgers |
|
|
|
Chief Executive Officer and Chairman of the Board |
|
|
|
(Principal Executive Officer) |
|
|
|
|
Date: November 13, 2024 |
|
By: |
/s/ Richard Russell |
|
|
|
Richard Russell |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Accounting Officer) |
45
Exhibit 31.1
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Bruce Rodgers, certify that:
1. I have reviewed this quarterly report on Form 10-Q of LM Funding America, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Bruce Rodgers |
November 13, 2024 |
|
Bruce Rodgers |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
A signed original of this document has been provided to LM Funding America, Inc. and will be retained by LM Funding America, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Richard Russell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of LM Funding America, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Richard Russell |
November 13, 2024 |
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Richard Russell |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
A signed original of this document has been provided to LM Funding America, Inc. and will be retained by LM Funding America, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.1
Written Statement of the Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350
Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned Chief Executive Officer of LM Funding America, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2024 as filed with the Securities and Exchange Commission on November 13, 2024 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Bruce Rodgers |
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Bruce Rodgers |
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Chief Executive Officer |
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(Principal Executive Officer) November 13, 2024 |
A signed original of this document has been provided to LM Funding America, Inc. and will be retained by LM Funding America, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Written Statement of the Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350
Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned Chief Executive Officer of LM Funding America, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2024 as filed with the Securities and Exchange Commission on November 13, 2024 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Richard Russell |
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Richard Russell |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) November 13, 2024 |
A signed original of this document has been provided to LM Funding America, Inc. and will be retained by LM Funding America, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.