Operator: Good morning, everyone, and welcome to the LM Funding America Fourth Quarter Business Update Conference Call. At this time, all participants are in placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Ted Ayvas. Sir, the floor is yours.

Ted Ayvas: Good morning, and thank you for joining LM Funding America’s 2023 financial results and business update conference call. On the call with us today are Bruce Rodgers, Chief Executive Officer; and Richard Russell, Chief Financial Officer of LM Funding. This morning, the company announced its operating results for the fourth quarter and year ended December 31, 2023, 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 annual report on Form 10-K 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 Cresendo Communications at (212) 671-1020.

Before management reviews the company’s operating results for the three months and year ended December 31, 2023, 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, results of operations, strategy, short-term and long-term business operations and objectives and financial needs.

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These forward-looking statements are subject to various risks, uncertainties and assumptions as described in the company’s Form 10-K filed 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 this conference call may not occur, and actual results could differ materially and adversely from those anticipated or implied in these forward-looking statements. You should not rely on 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 achievements.

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 these 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 will now turn the call over to Bruce Rodgers, Chairman and CEO of LM Funding. Bruce?

Bruce Rodgers: Thanks, Ted. Good morning, and thanks to everyone for joining us today. On behalf of the LM Funding team, I want to thank our shareholders for your continued support and for joining us this morning. I’m proud to report that our business is fire in all cylinders and our strategy is working. As evidenced, let me walk you through a few key metrics. First of all, we mined 423 big points in 2023 valued at approximately $12.3 million at an average market revenue value of approximately $29,000 per Bitcoin. Obviously, with Bitcoin market prices recently at near record highs of approximately $70,000, we believe that this validates our strategy. Second, our revenue grew over 600% versus last year, which was based on the average $29,000 Bitcoin price for 2023, which is now substantially higher.

Additionally, we reported positive core EBITDA for the fourth quarter of 2023, a major milestone for the company. Last and possibly most important, I’d like to highlight the fact that we have stockholders’ equity of $36.2 million or $14.52 per share as of December 31, 2023. We believe we are creating value for shareholders. If you give us absolutely no value for future growth, our stockholders’ equity per share is roughly 4 times our current stock price. We are clearly executing on our strategy and remain committed to delivering value for our shareholders. We also believe that as we start to get our story out, the intrinsic value of our company will be more accurately reflected in our market share price. In 2023, our first full year as a Bitcoin mining company.

We made tremendous progress in implementing our approach to mining Bitcoin. As of December 31, 2023, our Bitcoin mining operations included about 5,900 mining machines actively engaged in mining at various hosting facilities, providing approximately 614 petahash per second of mining capacity. Our company held approximately 95 Bitcoin on December 31, 2023, valued at approximately $3.4 million. Mining activity from January and February of this year brought that total to approximately 154 Bitcoin held on February 29, 2024, valued at approximately $10.8 million based on the recent Bitcoin price of approximately $70,000. In December ’23, we sold Symbiont’s blockchain technology, which we had acquired earlier in 2023 as debtor-in-possession in Symbiont Chapter 11 bankruptcy case.

We sold for $2 million to Photonic Holdings, Inc. This transaction provided the company with additional capital to grow our Bitcoin business. Additionally, the transaction provided the company with additional working capital to strengthen our balance sheet. As most people likely know, Bitcoin having is an event where the reward for mining new Bitcoin blocks is cut in half, resulting in miners receiving 50% fewer Bitcoin for verifying transactions. Having is built into the Bitcoin algorithm and designed to limit the supply of new Bitcoin, it is anticipated that the next having event will occur in late April or early May of this year. In anticipation of the upcoming having event, the company has invested approximately $1.1 million and acquired a 300 BITMAIN S21 Antminer units.

These machines are known for their high efficiency and substantial hash rate capabilities, specifically designed for mining the Shaw 256 algorithm. Each unit most a hash rate of 200 terahash per second while consuming 3,500 watts of power. We expect the delivery of the machines by the end of March or early April and plan to locate, energize and commence mining with them by mid-April, which may increase the company’s mining capacity to 674 petahash per second. We remain committed to investing our resources, including the proceeds from our Bitcoin mining activities towards acquiring the most efficient Bitcoin mining hardware on the market. We are confident that the S21 machines will stand out as top performers during this year’s having event and will continue to play a significant role in driving revenue growth over the long term, including through and beyond the next having event anticipated to take place sometime in 2028.

We are concentrating our capital investments on Bitcoin and Bitcoin mining machines whose value closely follows that of Bitcoin itself. However, we are open to investing in opportunities to lower our mining costs and to eventually provide hosting facilities for artificial intelligence machines. If historical patterns continue and expected events materialize as predicted, we expect to create meaningful value for shareholders. This value creation is expected to mirror both the appreciation of our Bitcoin holdings as well as the enhanced value of our mining equipment. In addition to the purchase of the S21 mining machines, the company has upgraded approximately 1,000 of its mining machines with Braiins OS+ software. This enhancement is anticipated to boost the hash rate of these machines and improve efficiency by as much as 20%.

As a result, this improvement should lead to an increase in the number of Bitcoin that the company can mine and an increase in the profitability using these upgraded machines. An additional benefit of utilizing Braiins’ OS+ software or Bitcoin mining, is that machines equipped with this software have the flexibility to mine with any pool or specifically with the Braiins’ pool without incurring any pool fees to Braiins. With respect to our legacy business, which involves offering funding to nonprofit community associations, the business has remained fairly stable since the conclusion of 2022. We see opportunities in the future to grow this business from demand from reserve funding requirements and active in response through to the collapse of seaside tower in South Florida.

We continue to be extremely frustrated by the considerable disparity between our stockholders’ equity, which as I stated earlier, was valued at $36.2 million or $14.52 per share as of 12/31 ’23 and the recent trading price of our shares at around $3.66, which represents a discount of around 75% from book value. Although we acknowledge the ongoing issues affecting the microcap market, our outlook for the business has never been more optimistic. Our optimism is rooted in our dedication to achieving strategic objectives in enhancing our Bitcoin mining activities in a prudent manner, which we believe will eventually be recognized by the market. On that note, I would like to turn the call over to Rick Russell, Chief Financial Officer of LM Funding, who will review the financial results for the year ended December 31, 2023.

Rick?

Richard Russell: Thanks, Bruce, and good morning, everyone. Total revenue for the quarter ended December 31, 2023, was approximately $4.1 million, an increase of $2.9 million or approximately 262% of compared to $1.1 million for the fourth quarter of 2022. Total revenue for the year ended December 31, 2023, was approximately $13 million, an increase $11.3 million from the $1.7 million in 2022. These increases were primarily due to digital mining revenue of $3.9 million and $12.3 million in the three months and year ended December 31, 2023, compared with $0.9 million for both comparable periods in 2022 as the company commenced our Bitcoin mining operations in late September 2022. The average Bitcoin price for three months and year ended December 31, 2023, recognized as revenue was approximately $36,500 and $29,000, respectively.

Operating expenses totaled $23 million for the year ended December 31, 2023, compared to $26.4 million for the year ended December 31, 2022. The decrease is primarily due to a $13.6 million decrease in staff call payroll and a $1.3 million decrease of professional fees, partially offset by an $8.4 million increase in digital mining costs and a $4.5 million increase in depreciation as compared to 2022. Net loss attributable to LM Funding shareholders for the three months ended December 31, 2023, was approximately $1.6 million, which included a $500,000 noncash unrealized gain on investments in equity securities compared to a net loss of approximately $19.7 million for the 2022 comparable quarter, which included a $6.6 million noncash unrealized loss on investment in equity securities and a $4.9 million impairment loss on various OTT assets.

Net loss attributable to LM Funding shareholders for the year ended December 31, 2023, was approximately $15.9 million, which included a $9.8 million noncash unrealized loss on investments in equity securities compared to a net loss of approximately $29.2 million for the year ended December 31, 2022, which included a $4.4 million noncash unrealized gain on investment in equity securities and a $4.9 million impairment loss on various hosting assets. Core EBITDA was positive for the three months ended December 31, 2023, which totaled approximately $0.3 million compared to a core EBITDA loss of $2.8 million in the prior year’s comparable quarter. Core EBITDA loss for the 12 months ended December 31, 2023, totaled approximately $0.2 million compared with core EBITDA loss of $6.5 million in 2022.

Improvement in core EBITDA for the three and 12 months period ended December 31, 2023, was primarily due to the existence of material Bitcoin mining operations in the current year that did not exist in the prior year. Core EBITDA is a non-GAAP financial measure and a reconciliation of core EBITDA to net loss can be found in our press release. Turning to our balance sheet. Cash was approximately $2.4 million, with digital assets of $3.4 million and working capital of $7.4 million as of December 31, 2023. Based on 95.1 Bitcoin at a price of approximately $36,000 as of December 31, 2023. The current bitcoin market price has fluctuated recently, but is around $70,000 in recent weeks. In 2023, the company also received approximately $2.7 million from SeaStar Medical Holdings as a partial repayment of their outstanding note receivable.

Total LM Funding cycles equity was approximately $36.2 million or $0.1452 per share as of December 31, 2023. That concludes our prepared remarks. I would now like to open the call for questions. Operator, could you please assist us with that?

Operator: [Operator Instructions] Thank you. Your first question is coming from Kevin Dede from H.C. Wainwright. Your line is live.

Kevin Dede: Good morning, Bruce. Great. Thanks so much for having me on. Can you hear me guys?

Bruce Rodgers: Yes.

Kevin Dede: Okay. Listen, congrats on all the mining improvement over the year. Appreciate the hard work that you put in on that. A couple of questions, I guess. The — if you’ll allow me, the 300 new machines I think need what, about a megawatt for those. Can you give me some insight on where you think you’re going to put them, if you think you’re going to replace existing plugs. That brings your total petahash to almost 700 if you keep everything you have. And then maybe some insight on the Braiins’ software. Your fleet is a lot larger than the, I guess, the amount of seats that you’ve bought. So maybe you give us some thinking on that?

Bruce Rodgers: Sure. The three new machines, we’re going to be putting over at core — agree to that. And we also had an addendum to our contract to be able to put up to 1,100 new machines at or if we want to. We’re going to actually take those take three machines out of core right now and stick them over at Giga. And Giga is where we run our Braiins software. They have about 1,000 — 1,100 machines right now. So we’ll move those 300 machines over there, and they will be running the Braiins software. Those core does not run Braiins.

Kevin Dede: Okay. That helps. Thanks. So no retirement, just some moving around?

Bruce Rodgers: Correct.

Kevin Dede: Okay. Understand, you sold Symbion and understand that you received a partial payment on SeaStar, can you offer a little bit more color on where you stand with SeaStar, what’s left? And how are you looking at that investment through the course of this year? And maybe, Rick, you could touch on — I mean, I looked at the core EBITDA reconciliation in the press release, but it doesn’t really point to the lines of business that you’re considering core.

Bruce Rodgers: Okay. So for SeaStar, we received all of the cash that was on the intercompany loans so far. I think, all the way through this year. So that’s now receivable is all fully paid. As opposed to core, let me back up and for SeaStar, we have our common stock with them. So we’ll see how that investment continues. We believe it’s still a solid investment. They are solely progressing on getting more hospital studies in FDA approval. For Core, what was that question? I’m sorry?

Kevin Dede: Yes. No, no. I think that kind of summed it up, right? Because right now, as it is, you’re just holding outstanding SeaStar stock. Could you remind us on how much that is, but its operations aren’t flowing through your P&L at all?

Bruce Rodgers: Correct. We own about 2.6 million shares and SeaStar was about being traded between $0.70 and $0.80 right now. We also have approximately 5.7 million warrants, which I believe are being traded — the public warrants, which are similar hours are being traded around $0.14 per share. SeaStar’s almost $0.80 right now, so.

Kevin Dede: Okay. Given — for as long as I’ve known you, I don’t know that you’ve had as strong a financial position in the past. So I’m just sort of wondering — I’m wondering how you’re thinking about — understand the BITMAIN purchase, but I’m just maybe a little insight on how you’re looking at the balance of the year — and what other commitments you might make in terms of growing your hash rate?

Richard Russell: Bruce, you want to chime in?

Bruce Rodgers: Yes. We are going to continue to hold Bitcoin into buy efficient machines at whatever excess proceeds we have. We may find some opportunities to go vertical and depart from our infrastructure light plan. If we can find a few megawatts at a really good price that gives us some control, we probably would do that. That’s where we’re pointing for the balance of the year.

Kevin Dede: Okay. Thanks. That helps. I’ll pass the floor on. Thank you very much for entertaining my questions.

Operator: Thank you. [Operator Instructions] Your next question is coming from Jack [indiscernible] from Express Center. Your line is live.

Unidentified Participant: Yes. Can you hear me?

Bruce Rodgers: Sure. I can hear you, Jack.

Unidentified Participant: Thank you for the call, Bruce and Roger (ph). Very good presentation. Just a couple of questions. I didn’t get the name of the first caller, but he answered several of them. Roger, you mentioned you have 5,900 active rigs. Is that correct?

Bruce Rodgers: More or less, approximately [Technical Difficulty]

Unidentified Participant: I didn’t understand that. All right. Our most of those rigs polymer rigs are they S19’s?

Bruce Rodgers: No. We do have [Technical Difficulty].

Unidentified Participant: Yeah. That’s good. Do you have a chart or a spreadsheet of your mix, does not like a view that’s public, I don’t know. I’m just trying to get a balance of what you have, the S19, the XPs and now the S21s.

Bruce Rodgers: I think we disclosed in the [Technical Difficulty] that we have approximately [Technical Difficulty] we always do answer, but we have to look up what we’ve published. Yeah.

Unidentified Participant: And I’m not looking for exact numbers here. I’m not holding in, but anything I just want an idea alter but the plan is like numbers.

Richard Russell: We have about — we have ballpark around 500 XPs.

Unidentified Participant: Okay. And then you’ve got — and so the balance will then be more or less S19s?

Richard Russell: Yes. You can get the S21 online.

Unidentified Participant: And then you got the S21s, Okay. That answers that question. Okay. All right. Rick, I — your last reported quarter, is it — we’re talking about fourth quarter 2023. What is the balance — what is the balance — what is the company holding in inventory for Bitcoin right now? What is that number?

Bruce Rodgers: So we reported as of end of February, and we had 153 Bitcoin [Technical Difficulty] in February, in December was like 93-ish, whatever 95-ish. And we’ve mined about 80 — I think 58 Bitcoin in the first two months of this year. So you can kind of calculate what that may be through the first quarter.

Unidentified Participant: Got it. Okay. Again, answers my question. Thank you. 80-C in 2024 (ph). Okay. All right. Let’s see now. Do you have any plans for any further purchases of the S21 after this 300 that comes in?

Richard Russell: We’re looking at additional investments about S21 and as Bruce possible small hosting joint venture, and they do something worthwhile at [indiscernible] megawatt price. So we’ve got a Bitcoin cash that we had. There’s a good opportunity for [indiscernible].

Bruce Rodgers: We have the opportunity because we’re private with BITMAIN. We don’t go through over — so if we – BITMAIN provides opportunities sometimes to buy these machines that discounts to market and with rebates and things like that. So there’s always the opportunity when buy board to put together groups and do things to purchase them. We don’t have anything on the table right now.

Unidentified Participant: Got it. Okay. And then my last question, and thank you. Everything is getting to answer very efficiently, by the way here. Has anyone done a breakeven rate on — let’s just stick with the S19s, has anyone done a breakeven rate on the S19s regarding [Technical Difficulty].

Richard Russell: So obviously, you’re on a breakeven rate on everything, but there’s two important variables. What is the price of Bitcoin and what’s the price of the electricity you’re putting in.

Unidentified Participant: That’s the random. That’s the bottom line. I agree.

Richard Russell: So yes, we run that all the time. I think that the generally published information out there would tell you that the 19s are with having teed up in the price of Bitcoin in the 70s, I think it’s just that most people are right at the cutting edge or whether those things breakeven are losing depending on where the power contracts are and that’s to be expected, right, having the [indiscernible].

Unidentified Participant: I agree. And again, your — you’ve answered the question spot on in a roundabout way. The — I remember I was on — you may or may not remember, I was on a call, maybe two, six months ago, two quarters ago, maybe — in any event, you — Rick, you had told me that on average, you’re paying about $0.085 — 8.5-ish on hosting fees per kilowatt at this point. I just kind of want to confirm that number if it’s gotten any better or not?

Richard Russell: A little bit better. So it’s a little bit lower, but — and we’re working to look at options a little bit more.

Unidentified Participant: Okay.

Bruce Rodgers: And also remember, hosting involves the guy with the screwdriver, the building, the rack, the land and the electricity. A lot of folks will approach in their electric price. We’ve got a total of really two guys that run the Bitcoin mining business. And you can do that because we’re paying a little more than $0.08 to get up the other marginal costs that roll into it.

Unidentified Participant: Yeah. I agree. I agree. Who — and just as a side note, when you do get a failure on a BITMAIN product does the Element a have to pay to get those fixed — or is it hosting to pain for that hardware base? The physical hardware.

Richard Russell: Well, generally, a certain period of time was a bit in warranty. And then after that is on us, generally, are hosting partners are able to get those fixed.

Unidentified Participant: Okay. All right. So they generally can go fix them pretty easy that and pretty cheap.

Richard Russell: That’s what I’m — Yes.

Unidentified Participant: I mean there’s not yes. So — and I’m not trying to put words in your mouth, but I’m hearing, it’s not a big deal, basically.

Richard Russell: No, it’s not.

Unidentified Participant: It’s not a huge line item Okay. I’m good. Thank you. I’ll turn it over to the next person.

Operator: That concludes our Q&A session. I will now hand the conference back to our host for closing remarks. Please go ahead.

Bruce Rodgers: Thank you, everyone, for joining our 2023 financial results and business update conference call. Our company’s transition towards Bitcoin mining is clearly working as we continue to experience encouraging results. We remain committed to reinvesting our mining revenues into acquiring more mining machines without incurring debt and also integrating advanced software aimed at enhancing the ash rate of our current machines. With the price of bitcoin reaching a record high of approximately $74,000 earlier in March of 2024 and currently trading at approximately $70,000, our belief in the long-term value of bitcoin and asset class has never been stronger. We believe the momentum with which we ended 2023 will continue to accelerate as we acquire and electrify more mining machines in 2024 and beyond.

We’re thankful for the ongoing support of our shareholders and we’ll continue to provide updates on our progress as new developments emerge. Thank you again for attending our call.

Operator: Thank you, everyone. This concludes today’s event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.

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LM FUNDING AMERICA INC

Q4 2023

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