LM Funding America(LMFA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company's financial statements for the period ended June 30, 2025, show a decrease in total assets to $39.0 million from $44.0 million at year-end 2024, primarily due to a reduction in fixed assets, while total liabilities slightly increased to $8.9 million, and net income for Q2 2025 improved significantly to $60,500 from a net loss of $6.2 million in Q2 2024, largely driven by a substantial gain on the fair value of Bitcoin, though the six-month net loss widened to $5.3 million from $3.8 million year-over-year, with cash flow from operations remaining negative at ($5.7) million for the first six months of 2025 Consolidated Balance Sheets As of June 30, 2025, total assets were $39.0 million, a decrease from $44.0 million at December 31, 2024, mainly due to a decline in fixed assets from $18.4 million to $14.5 million, while total liabilities increased slightly to $8.9 million from $8.7 million, and total stockholders' equity decreased to $30.1 million from $35.3 million over the same period Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash | $353.6 | $3,378.2 | | Digital assets - current | $11,677.8 | $9,021.9 | | Fixed assets, net | $14,517.9 | $18,376.9 | | Total assets | $39,033.9 | $44,047.2 | | Liabilities & Equity | | | | Total current liabilities | $3,382.4 | $1,562.8 | | Total liabilities | $8,909.7 | $8,704.7 | | Total stockholders' equity | $30,124.2 | $35,342.6 | | Total liabilities and stockholders' equity | $39,033.9 | $44,047.2 | Consolidated Statements of Operations For the three months ended June 30, 2025, the company reported net income of $60,500, compared to a net loss of $6.2 million in the same period of 2024, primarily driven by a $3.8 million gain on the fair value of Bitcoin, contrasting with a $1.3 million loss in the prior year, while for the six-month period, the net loss increased to $5.3 million in 2025 from $3.8 million in 2024, as total revenues fell to $4.3 million from $7.8 million Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,928.3 | $3,011.3 | $4,299.7 | $7,759.0 | | Digital mining revenues | $1,806.4 | $2,893.1 | $4,080.3 | $7,491.0 | | Operating Income (Loss) | $423.5 | $(4,313.0) | $(4,676.3) | $(3,308.7) | | Net Income (Loss) | $60.5 | $(6,183.0) | $(5,346.5) | $(3,829.1) | | Net Income (Loss) Attributable to LMFA | $100.6 | $(5,608.5) | $(5,298.1) | $(3,668.9) | | Basic EPS | $0.02 | $(2.26) | $(1.03) | $(1.49) | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $5.7 million, net cash provided by investing activities was $3.1 million, primarily from $3.3 million in proceeds from the sale of Bitcoin, and net cash used in financing activities was $0.4 million, resulting in a net decrease in cash of $3.0 million, with the cash balance ending at $353,580 Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,713.5) | $(5,988.3) | | Net cash provided by investing activities | $3,106.1 | $2,715.9 | | Net cash provided by (used in) financing activities | $(417.2) | $1,016.2 | | Net Decrease in Cash | $(3,024.6) | $(2,256.2) | | Cash - Beginning of Period | $3,378.2 | $2,401.8 | | Cash - End of Period | $353.6 | $145.6 | Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity decreased from $35.3 million at the end of 2024 to $30.1 million as of June 30, 2025, primarily driven by a net loss of $5.3 million for the six-month period - Stockholders' equity decreased by approximately $5.2 million in the first six months of 2025, moving from $35.3 million to $30.1 million, mainly due to the net loss incurred during the period[12] Notes to Unaudited Consolidated Financial Statements The notes detail the company's two primary business lines: Bitcoin mining and specialty finance, a significant accounting policy change was the early adoption of ASU 2023-08, requiring crypto assets like Bitcoin to be measured at fair value, as of June 30, 2025, the company held 155.5 Bitcoin with a fair value of $16.7 million, the company is involved in ongoing litigation with Uptime Armory over non-delivery of mining equipment, and subsequent to the quarter-end, the company entered an agreement to acquire a new mining site in Mississippi - The company operates two main business segments: Bitcoin mining through its subsidiary US Digital, and a specialty finance business providing funding to nonprofit community associations[18][19] - Effective January 1, 2024, the company early adopted ASU 2023-08, which requires measuring crypto assets at fair value, resulting in a $614 thousand cumulative-effect adjustment to beginning accumulated deficit[25] - The company is in a legal dispute with Uptime Armory and related entities over the non-delivery of $3.15 million worth of mining containers and the non-refund of an $0.8 million hosting deposit, with the case proceeding to arbitration and the likelihood of recovery being uncertain[114][115] - On August 1, 2025, the company entered into an asset purchase agreement to acquire a mining site in Columbus, Mississippi, with 11 MW of potential capacity for approximately $3.9 million[138] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q2 2025 revenue decrease of $1.1 million year-over-year primarily to the Bitcoin halving event in April 2024, which reduced the number of Bitcoins mined, although this was partially offset by higher average Bitcoin prices, operating expenses fell sharply by $5.8 million in Q2 2025, mainly due to a $3.8 million gain on the fair value of Bitcoin, for the first six months of 2025, the net loss widened to $5.3 million from $3.7 million in the prior year, the company's liquidity is primarily derived from cash and its Bitcoin holdings, which totaled $12.0 million (excluding collateralized assets) at quarter-end, and management also presents non-GAAP measures like Core EBITDA, which was $2.6 million in Q2 2025 compared to a loss of $2.3 million in Q2 2024 Results of Operations For Q2 2025, revenues decreased to $1.9 million from $3.0 million in Q2 2024, driven by a 58% reduction in Bitcoin mined (18.4 vs 44.1) due to the halving, despite a higher average Bitcoin price ($98k vs $66k), operating expenses dropped significantly to $1.5 million from $7.3 million, largely due to a $3.8 million gain on Bitcoin's fair value, leading to a net income of $0.1 million in Q2 2025, versus a $5.6 million net loss in Q2 2024, while for the six-month period, revenues fell to $4.3 million from $7.8 million, and the net loss attributable to the company increased to $5.3 million from $3.7 million Comparison of Operations for the Three Months Ended June 30 | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1.9M | $3.0M | $(1.1)M | | Bitcoin Mined | 18.4 | 44.1 | (25.7) | | Operating Expenses | $1.5M | $7.3M | $(5.8)M | | Net Income (Loss) Attributable to LMFA | $0.1M | $(5.6)M | $5.7M | Comparison of Operations for the Six Months Ended June 30 | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $4.3M | $7.8M | $(3.5)M | | Bitcoin Mined | 42.7 | 130.4 | (87.7) | | Operating Expenses | $9.0M | $11.1M | $(2.1)M | | Net Loss Attributable to LMFA | $(5.3)M | $(3.7)M | $(1.6)M | - The decrease in Bitcoin mining revenue was primarily caused by the halving event in April 2024, which reduced the quantity of Bitcoin mined, and an increased network difficulty rate, partially offset by a significant increase in the average price of Bitcoin[169][185] Liquidity and Capital Resources The company's primary liquidity sources are cash and Bitcoin holdings, with cash at $0.4 million and current Bitcoin holdings valued at $11.7 million as of June 30, 2025, resulting in working capital of $9.3 million, for the first six months of 2025, the company used $5.7 million in cash from operations and generated $3.1 million from investing activities, mainly through Bitcoin sales, with total debt outstanding at $6.6 million as of quarter-end Liquidity Position (in millions) | Component | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $0.4 | $3.4 | | Bitcoin - current portion | $11.7 | $9.0 | | Total Current Liquidity | $12.1 | $12.4 | - Net cash used in operations was $5.7 million for the first six months of 2025, while the company generated $3.3 million from selling Bitcoin, which is classified as an investing activity[204][205] - Total debt outstanding was approximately $6.6 million as of June 30, 2025, with $6.5 million maturing in 2026[208] Non-GAAP Financial Measures The company uses non-GAAP measures such as EBITDA and Core EBITDA to provide additional insight into its operating performance, with Q2 2025 EBITDA at $2.3 million and Core EBITDA at $2.6 million, a significant improvement from the negative figures of ($4.3) million and ($2.3) million, respectively, in Q2 2024, while for the first six months of 2025, Core EBITDA was negative $0.2 million compared to a positive $2.2 million in the prior year period Reconciliation of Net Income (Loss) to Core EBITDA (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $60.5 | $(6,183.0) | $(5,346.5) | $(3,829.1) | | EBITDA | $2,327.4 | $(4,270.7) | $(821.1) | $130.1 | | Core EBITDA | $2,582.5 | $(2,264.0) | $(242.5) | $2,163.9 | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, LM Funding America, Inc. is not required to provide disclosures for this item - The company is not required to make disclosures under this item as it qualifies as a smaller reporting company[216] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[218] - No changes occurred in the company's internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[219] PART II. OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is detailed in Note 7 of the financial statements, which covers commitments and contingencies - Details on legal proceedings are incorporated by reference from Note 7, "Commitments and Contingencies," in Part I, Item 1 of this report[222] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have been made to the risk factors disclosed in the company's 2024 Form 10-K[223] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities, no specific use of proceeds from registered offerings, and no repurchases of its securities during the period - The company reported no activity under this item for the period[224] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, forms of warrants, promissory notes, and officer certifications - The report includes various exhibits, such as the Certificate of Incorporation, By-Laws, forms of warrants, and certifications by the Principal Executive Officer and Principal Financial Officer[228]