LM Funding America, Inc.

Greetings and welcome to the LM Funding America Incorporated second quarter 2024 business update call. At this time all participants are on a listen-only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Ted Avas, Investor Relations. Sir, you may begin.

Good morning and thank you for joining LM Funding America's 2024 Second Quarter Financial Results and Business Update Conference Call. On the call with us today are Bruce Rogers, Chief Executive Officer, and Richard Russell, Chief Financial Officer of LM Funding. This morning, the company announced its operating results for the quarter ended June 30, 2024, and its financial condition as of that date. The press release is posted on the company's website, lmfunding.com. In addition, the company has filed its quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission, which can also be accessed on the company's website, as well as the SEC's website at www.sec.gov. If you have any questions after the call or would like any additional information about the company, please contact Prescendo Communications at 212-671-1020. Before management reviews the company's operating results for the three and six months ended June 30, 2024, and its financial condition as of that date, we would like to remind everyone that this conference call may contain forward-looking statements. All statements other than statements of historical facts contained in this conference call, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations are forward-looking statements. These forward-looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect its financial condition, result of operations, strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to various risks, uncertainties, and assumptions as described in the company's Form 10-K, followed with the U.S. Securities and Exchange Commission on April 1, 2024. Because of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in the conference call may not occur, and actual results could differ materially and adversely from those anticipated or applied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although the company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, level of activity, performance, or achievement. In addition, neither the company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The company disclaims any duty to update any of the forward-looking statements. All forward-looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements, as well as others made in this conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. In addition, today's discussion will include references to non-GAAP measures. The company believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. With that, I would now like to turn the call over to Bruce Rogers, Chairman and CEO of LM Funding. Bruce?

Thanks, Ted. Good morning, and thanks to everyone who joins us today. On behalf of the LM Funding team, I'd like to thank all of our shareholders for your ongoing support and for joining us on this call this morning. April was an eventful month with the Bitcoin halving event. Despite this transition reducing miners' rewards by 50%, we are pleased that we successfully mined 44.1 bitcoins during the quarter, valued at approximately $2.9 million. Notwithstanding the halving event, we are extremely pleased that several expensive hosting contracts have recently expired, allowing us to relocate these machines to more cost-effective mining sites. As of July 31st, we had approximately 3,800 miners placed at several hosting sites, and our potential hash rate remains strong, 639 petahash. We believe that this positions LN funding for even greater mining success in the future. I would now like to turn the call over to our CFO, Rick Russell, for a review of the financial highlights for the 2024 second quarter. Rick? Thank you, Bruce. As of June 30, 2024, the company had approximately 1,900 Bitcoin mining machines in operation at various hosting sites. We have subsequently placed an additional 2,000 machines into service at the Arthur mining site. In total, our 5,900 miners provide the company with approximately 639 petahash of mining capacity. We mined 44.1 Bitcoins in the second quarter of 2024, generating $2.9 million in revenue at an average Bitcoin price at $65,600. As of June 30, 2024, the company held 160.4 bitcoins valued at approximately $10 million. Total revenue for the second quarter of 2024 was approximately $3 million, a decrease of $184,000 from the same period last year. Digital mining revenue was relatively flat at $2.9 million in the second quarter of 2024 versus $3 million in Q2 of 2023. This change was the result of the effects of the April 2024 Bitcoin halving event and the repositioning of miners during the month of June, offset in part by the increase in Bitcoin prices. Operating expenses for the quarter ended June 30, 2024, rose to $7.8 million from $6.4 million year-over-year due to a $1.3 million loss in Bitcoin fair value and a $1.2 million increase in depreciation and amortization costs, offset in part by a $1.6 million decrease in staff costs and payroll. Additionally, we reported net loss attributable to shareholders of approximately $6.1 million, including a $1.9 million unrealized loss in securities compared to a $4.5 million net loss in the prior year. Moreover, we reported that our core EBITDA loss was $2.2 million in Q2 2024 from $0.1 million in Q2 of 2023. However, we achieved positive core EVA for the first half of 2024 of $2.2 million. I'll turn it back over to Bruce for our business overview. Thanks, Rick. I'd now like to focus our attention on our overall business and strategic focus for 2024, 2025, and beyond. We recently announced that the company has entered into a letter of intent to acquire a mining site in Texas. This site offers an initial power capacity of 12 megawatts with the potential to expand by an additional 60 megawatts. This acquisition will provide us with a cost-effective location to power all of our existing machines. The mining site is currently generating 55 petahash of mining capacity using immersion mining techniques. And our primary goal with this acquisition is to invest capital to mine the full potential 72 megawatts. We are leveraging our Bitcoin holdings to finance the acquisition of market price power. which can be used for Bitcoin mining or resold to the grid. We now have a clear path to grow from our current transitory position to quickly mining 12 megawatts and then to a steady leveraged capital expansion plan aimed at growing our Texas site's mining capacity to 72 megawatts, which is projected to yield about 1,000 Bitcoin annually at current network difficulty rates. Additionally, the company has partnered with Arthur Mining to establish a new 15-megawatt hosting facility near Oklahoma City, where we have already relocated approximately 3,000 of our Bitmain S19J Pro machines. Arthur Mining has agreed to host these machines at cost for 10 months, significantly reducing operating expenses for LM funding. The companies are also considering a new 60-megawatt site adjacent to the existing Oklahoma facility. We believe these sites provide us with cost-effective, short- and long-term solutions to host our S19J pros, allowing us to rapidly scale our Bitcoin mining capabilities. The strategic alliance with Arthur Mining enables LM Funding to capitalize on Arthur's hosting expertise in infrastructure and allows us to focus on our core competencies while minimizing operational integration risks, thus positioning the company for what we believe will be a period of accelerated growth and increased profitability. In order to facilitate these expansion initiatives, the company secured a $5 million non-convertible loan, the proceeds of which will be dedicated to acquiring additional miners, further bolstering the company's mining capabilities. Our legacy business, which provides funding to nonprofit community associations, has been stable since the end of 2023. Looking ahead, we anticipate growth due to increased demand for reserve funding, spurred by legislative changes following the 2023 Seaside Tower collapse in South Florida. New Florida laws now mandate that associations fully fund building maintenance reserves, which may lead to higher association dues and more homeowners unable to pay. Our experience collecting over 12,000 delinquent condominium owners' accounts may afford us an opportunity to address the fully funded reserve problem faced by Florida condominium associations. So to wrap up, we are committed to reinvesting our mining revenue into purchasing additional cutting-edge miners. Perhaps more important is our laser focus on integrating sophisticated software and technologies into our mining operations, enabling us to enhance the hash rate of our existing machines. We are excited about our new initiatives to acquire the mining facility in Texas in our partnership with Arthur Mining to establish a new 15-megawatt hosting facility near Oklahoma City, and possibly a new 60-megawatt site adjacent to that facility. We are confident that these initiatives will provide ELIN funding with cost-effective and efficient hosting solutions for our S19J pros, benefiting us in both the short and long term. By implementing these initiatives, we are well-positioned to significantly accelerate our Bitcoin mining operations. Furthermore, we believe these efforts will drive increased shareholder value for our investors in the future. I would now like to open the call up for questions. Operator, can you assist us with that?