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Form 10-Q LM FUNDING AMERICA, INC. For: Jun 30

August 17, 2022 3:08 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2022

OR

 

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

 

For the transition period from                  to                 

Commission file number 001-37605

 

LM FUNDING AMERICA, INC.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

47-3844457

(State or other jurisdiction of

incorporation or organization)

(I.R.S. employer

identification no.)

 

 

1200 West Platt Street

Suite 100

Tampa, FL

33606

(Address of principal executive offices)

(Zip code)

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

 

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

 

Title of each class:

Trading symbol

Name of each exchange on which registered

Common Stock par value $0.001 per share

LMFA

The Nasdaq Stock Market LLC

 

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

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

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

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

 

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

The registrant had 13,091,883 shares of Common Stock, par value $0.001 per share, outstanding as of August 9, 2022.

 

 

 

 


 

LM FUNDING AMERICA, INC.

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

LM Funding America, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
June 30, 2022 (unaudited) and December 31, 2021

3

 

 

 

 

LM Funding America, Inc. and Subsidiaries Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 2022 and 2021 (unaudited)
            

4

 

 

 

 

LM Funding America, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2022 and 2021 (unaudited)

5

 

 

 

 

LM Funding America, Inc. and Subsidiaries Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021 (unaudited)

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

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

24

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

PART II.

OTHER INFORMATION

32

 

 

 

Item 1.

Legal Proceedings

32

 

 

 

Item 1A.

Risk Factors

32

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

 

 

 

Item 3.

Defaults Upon Senior Securities

33

 

 

 

Item 5.

Other Information

33

 

 

 

Item 6.

Exhibits

34

 

 

SIGNATURES

35

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

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

 

 

 

June 30, 2022

 

 

December 31,

2021

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Cash

 

$

17,046,595

 

 

$

32,559,185

 

Finance receivables:

 

 

 

 

 

 

 

 

Original product - net

 

 

2,520

 

 

 

13,993

 

Special product - New Neighbor Guaranty program, net of allowance for credit losses of

 

 

21,077

 

 

 

14,200

 

Short-term investments - convertible debt securities (Note 7)

 

 

-

 

 

 

539,351

 

Marketable securities (Note 7)

 

 

37,220

 

 

 

2,132,051

 

Short-term investments - debt security (Note 7)

 

 

2,185,863

 

 

 

2,000,000

 

Prepaid expenses and other assets

 

 

1,389,562

 

 

 

1,251,852

 

Income tax receivable (Note 4)

 

 

143,822

 

 

 

-

 

Note receivable from related party (Note 7)

 

 

910,000

 

 

 

-

 

Digital assets (Note 10)

 

 

408,879

 

 

 

-

 

Current assets

 

 

22,145,538

 

 

 

38,510,632

 

Fixed assets, net (Note 9)

 

 

15,084,921

 

 

 

17,914

 

Real estate assets owned

 

 

80,057

 

 

 

80,057

 

Operating lease - right of use assets (Note 5)

 

 

313,629

 

 

 

59,969

 

Long-term investments - equity securities (Note 7)

 

 

516,420

 

 

 

1,973,413

 

Investments in unconsolidated affiliates (Note 7)

 

 

17,362,125

 

 

 

4,676,130

 

Deposits on mining equipment and hosting (Note 8)

 

 

14,466,162

 

 

 

16,775,100

 

Other assets

 

 

10,726

 

 

 

10,726

 

Long-term assets

 

 

47,834,040

 

 

 

23,593,309

 

Total assets

 

$

69,979,578

 

 

$

62,103,941

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

436,479

 

 

$

463,646

 

Note payable - short-term (Note 3)

 

 

-

 

 

 

114,688

 

Due to related party (Note 2)

 

 

371,179

 

 

 

121,220

 

Current portion of lease liability (Note 5)

 

 

90,030

 

 

 

68,002

 

Income tax payable (Note 4)

 

 

-

 

 

 

326,178

 

Total current liabilities

 

 

897,688

 

 

 

1,093,734

 

Lease liability - long-term (Note 5)

 

 

226,319

 

 

 

-

 

Long-term liabilities

 

 

226,319

 

 

 

-

 

Total liabilities

 

 

1,124,007

 

 

 

1,093,734

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, par value $.001; 150,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

-

 

 

 

-

 

Common stock, par value $0.001; 350,000,000 shares authorized; 13,091,883 and 13,017,943 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

13,092

 

 

 

13,018

 

Additional paid-in capital

 

 

81,821,510

 

 

 

74,525,106

 

Accumulated deficit

 

 

(16,660,717

)

 

 

(13,777,006

)

Total stockholders’ equity

 

 

65,173,885

 

 

 

60,761,118

 

Non-controlling interest

 

 

3,681,686

 

 

 

249,089

 

Total stockholders’ equity

 

 

68,855,571

 

 

 

61,010,207

 

Total liabilities and stockholders’ equity

 

$

69,979,578

 

 

$

62,103,941

 

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

3


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

 

 

 

For the Three Months

Ended June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on delinquent association fees

 

$

112,140

 

 

$

62,673

 

 

$

213,408

 

 

$

140,117

 

Administrative and late fees

 

 

19,698

 

 

 

16,861

 

 

 

36,406

 

 

 

31,932

 

Recoveries in excess of cost - special product

 

 

35,990

 

 

 

178,769

 

 

 

53,355

 

 

 

208,242

 

Underwriting and other revenues

 

 

26,125

 

 

 

35,494

 

 

 

42,916

 

 

 

58,197

 

Rental revenue

 

 

40,580

 

 

 

34,588

 

 

 

79,452

 

 

 

66,505

 

Total revenues

 

 

234,533

 

 

 

328,385

 

 

 

425,537

 

 

 

504,993

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Staff costs and payroll

 

 

4,296,695

 

 

 

246,040

 

 

 

8,588,892

 

 

 

1,548,021

 

Professional fees

 

 

1,031,431

 

 

 

360,024

 

 

 

1,806,251

 

 

 

842,967

 

Settlement costs with associations

 

 

-

 

 

 

-

 

 

 

160

 

 

 

-

 

Selling, general and administrative

 

 

122,271

 

 

 

96,015

 

 

 

237,191

 

 

 

195,784

 

Recovery of cost from related party receivable

 

 

-

 

 

 

(100,000

)

 

 

-

 

 

 

(100,000

)

Provision for credit losses

 

 

500

 

 

 

-

 

 

 

500

 

 

 

(10,000

)

Real estate management and disposal

 

 

22,414

 

 

 

29,478

 

 

 

53,895

 

 

 

47,768

 

Depreciation and amortization

 

 

2,007

 

 

 

3,298

 

 

 

5,101

 

 

 

4,994

 

Collection costs

 

 

(7,906

)

 

 

2,701

 

 

 

(11,726

)

 

 

4,749

 

Other operating expenses

 

 

141,009

 

 

 

4,069

 

 

 

149,393

 

 

 

11,614

 

Total operating expenses

 

 

5,608,421

 

 

 

641,625

 

 

 

10,829,657

 

 

 

2,545,897

 

Operating loss

 

 

(5,373,888

)

 

 

(313,240

)

 

 

(10,404,120

)

 

 

(2,040,904

)

Realized gain (loss) on securities

 

 

45,261

 

 

 

8,453,570

 

 

 

(349,920

)

 

 

14,125,034

 

Realized gain on convertible debt securities

 

 

287,778

 

 

 

-

 

 

 

287,778

 

 

 

-

 

Unrealized gain (loss) on convertible debt security

 

 

(288,320

)

 

 

2,501,600

 

 

 

-

 

 

 

2,501,600

 

Unrealized loss on marketable securities

 

 

(24,030

)

 

 

-

 

 

 

(23,900

)

 

 

-

 

Impairment loss on digital assets

 

 

(377,707

)

 

 

-

 

 

 

(377,707

)

 

 

-

 

Unrealized gain on investment and equity securities

 

 

12,215,401

 

 

 

552,494

 

 

 

11,229,002

 

 

 

1,147,886

 

Digital assets other income

 

 

1,292

 

 

 

-

 

 

 

5,658

 

 

 

-

 

Interest income

 

 

80,975

 

 

 

73,884

 

 

 

179,345

 

 

 

86,939

 

Interest expense

 

 

-

 

 

 

(189

)

 

 

-

 

 

 

(653

)

Dividend income

 

 

1,375

 

 

 

-

 

 

 

2,750

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

6,568,137

 

 

 

11,268,119

 

 

 

548,886

 

 

 

15,819,902

 

Income tax expense

 

 

-

 

 

 

(13,780

)

 

 

-

 

 

 

(17,264

)

Net income

 

 

6,568,137

 

 

 

11,254,339

 

 

 

548,886

 

 

 

15,802,638

 

Less: Net income attributable to non-controlling interest

 

 

(3,723,797

)

 

 

(146,857

)

 

 

(3,432,597

)

 

 

(318,723

)

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

 

$

2,844,340

 

 

$

11,107,482

 

 

$

(2,883,711

)

 

$

15,483,915

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings/(loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.22

 

 

$

2.05

 

 

$

(0.22

)

 

$

2.96

 

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

 

$

0.22

 

 

$

2.05

 

 

$

(0.22

)

 

$

2.95

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,091,882

 

 

 

5,414,296

 

 

 

13,076,359

 

 

 

5,231,909

 

Diluted

 

 

13,091,882

 

 

 

5,423,162

 

 

 

13,076,359

 

 

 

5,245,656

 

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

4


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

(unaudited) 

 

 

For the Six Months

Ended June 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

548,886

 

 

$

15,802,638

 

Adjustments to reconcile net income to cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,101

 

 

 

4,994

 

Right to use asset non cash lease expense

 

 

47,127

 

 

 

49,797

 

Stock compensation

 

 

658,999

 

 

 

-

 

Stock option expense

 

 

6,637,479

 

 

 

-

 

Debt forgiveness

 

 

-

 

 

 

(157,251

)

Accrued investment income

 

 

(176,438

)

 

 

(86,938

)

Gain on deconsolidation of  affiliate

 

 

-

 

 

 

(43,623

)

Unrealized gain on convertible debt security

 

 

-

 

 

 

(2,501,600

)

Unrealized loss on marketable securities

 

 

23,900

 

 

 

-

 

Impairment loss on digital assts

 

 

377,707

 

 

 

-

 

Unrealized gain on investment and equity securities

 

 

(11,229,002

)

 

 

(1,147,886

)

Realized (gain) loss on securities

 

 

349,920

 

 

 

(14,125,034

)

Realized gain on convertible note securities

 

 

(287,778

)

 

 

-

 

Investment in securities

 

 

-

 

 

 

(15,547,454

)

Proceeds from securities

 

 

2,565,893

 

 

 

29,672,488

 

Investment in convertible note receivable

 

 

-

 

 

 

(5,000,000

)

Convertible note receivable converted into marketable security

 

 

844,882

 

 

 

 

 

Investment in marketable Securities

 

 

(844,882

)

 

 

(247,997

)

Change in assets and liabilities

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

623,511

 

 

 

11,105

 

Accounts payable and accrued expenses

 

 

(27,168

)

 

 

184,239

 

Advances from related party

 

 

249,959

 

 

 

142,191

 

Lease liability payments

 

 

(52,440

)

 

 

(50,353

)

Income tax payable

 

 

(326,178

)

 

 

-

 

Income tax receivable

 

 

(143,822

)

 

 

-

 

Deferred taxes

 

 

-

 

 

 

17,264

 

Net cash provided by (used in) operating activities

 

 

(154,344

)

 

 

6,976,580

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Net collections of finance receivables - original product

 

 

11,473

 

 

 

30,831

 

Net collections of finance receivables - special product

 

 

(6,877

)

 

 

(454

)

Payments for real estate assets owned

 

 

-

 

 

 

(64,857

)

Capital expenditures

 

 

(13,235

)

 

 

(3,185

)

Deposits for mining equipment and hosting

 

 

(13,538,333

)

 

 

-

 

Investments in digital assets

 

 

(786,586

)

 

 

-

 

Loan to purchase securities

 

 

-

 

 

 

1,784,250

 

Investment in note receivable - related party

 

 

(910,000

)

 

 

 

 

Repayment of loan to purchase securities

 

 

-

 

 

 

(1,784,250

)

Investment in unconsolidated affiliate

 

 

-

 

 

 

(5,738,000

)

Net cash (used in) investing activities

 

 

(15,243,558

)

 

 

(5,775,665

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Principal repayments

 

 

-

 

 

 

(28,534

)

Insurance financing repayments

 

 

(114,688

)

 

 

(96,257

)

Exercise of warrants

 

 

-

 

 

 

9,544,623

 

Net cash provided by (used in) financing activities

 

 

(114,688

)

 

 

9,419,832

 

NET INCREASE (DECREASE) IN CASH

 

 

(15,512,590

)

 

 

10,620,747

 

CASH - BEGINNING OF YEAR

 

 

32,559,185

 

 

 

11,552,943

 

CASH - END OF YEAR

 

$

17,046,595

 

 

$

22,173,690

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF NON-CASHFLOW INFORMATION

 

 

 

 

 

 

 

 

ROU assets and operating lease obligation recognized

 

$

300,787

 

 

$

-

 

Reclassification of mining equipment deposit to fixed assets, net

 

$

15,058,872

 

 

$

-

 

SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

 

$

1,892

 

Cash paid for income taxes

 

$

470,000

 

 

$

-

 

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

5


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

For the Three and Six Months Ended June 30, 2022 and 2021

(unaudited)

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional paid in capital

 

 

Accumulated Deficit

 

 

Non-Controlling Interest

 

 

Total Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2020

 

 

3,083,760

 

 

$

3,084

 

 

$

29,996,257

 

 

$

(18,536,224

)

 

$

5,191

 

 

$

11,468,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for warrants exercised

 

 

2,330,536

 

 

 

2,330

 

 

 

9,542,293

 

 

 

-

 

 

 

-

 

 

 

9,544,623