LM FUNDING AMERICA, INC.

Previous wording

This Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and Notes for the three months ended March 31, 2025, and with the Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

This Management’s Discussion and Analysis should be read in conjunction with the Unaudited Consolidated Financial Statements and Notes for the three and six months ended June 30, 2025, and with the Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

Generally, a Bitcoin mining rig’s chance of solving a block on the Bitcoin blockchain and earning a Bitcoin reward is a function of the mining rig’s hash rate, relative to the global network hash rate (i.e., the aggregate amount of computing power devoted to supporting the Bitcoin blockchain at a given time). As demand for Bitcoin increases, the global network hash rate rapidly increases, and as more adoption of Bitcoin occurs, we expect the demand for new Bitcoin will likewise increase as more mining companies are drawn into the industry by this increase in demand. Further, as more and increasingly powerful mining rigs are deployed, the network difficulty for Bitcoin increases. Network difficulty is a measure of how difficult it is to solve a block on the Bitcoin blockchain, which is adjusted every 2,016 blocks, or approximately every two weeks, so that the average time between each block is approximately ten minutes. A high difficulty means that it will take more computing power to solve a block and earn a new Bitcoin reward which, in turn, makes the

Current wording

Generally, a Bitcoin mining rig’s chance of solving a block on the Bitcoin blockchain and earning a Bitcoin reward is a function of the mining rig’s hash rate, relative to the global network hash rate (i.e., the aggregate amount of computing power devoted to supporting the Bitcoin blockchain at a given time). As demand for Bitcoin increases, the global network hash rate rapidly increases, and as more adoption of Bitcoin occurs, we expect the demand for new Bitcoin will likewise increase as more mining companies are drawn into the industry by this increase in demand. Further, as more and increasingly powerful mining rigs are deployed, the network difficulty for Bitcoin increases. Network difficulty is a measure of how difficult it is to solve a block on the Bitcoin blockchain, which is adjusted every 2,016 blocks, or approximately every two weeks, so that the average time between each block is approximately ten minutes. A high difficulty means that it will take more computing power to solve a block and earn a new Bitcoin reward which, in turn, makes the Bitcoin network more secure by limiting the possibility of one miner or mining pool gaining control of the network. Therefore, as new and existing miners deploy additional hash rate, the global network hash rate will continue to increase, meaning a miner’s share of the global network hash rate (and therefore its chance of earning Bitcoin rewards) will decline if it fails to deploy additional hash rate at pace with the industry.

Previous wording

As of March 31, 2025 and December 31, 2024, we held approximately 160 and 150 Bitcoin, respectively. The carrying value of our Bitcoin as of March 31, 2025 and December 31, 2024 was approximately $13.2 million and $14.0 million, respectively, on our consolidated balance sheet.

Current wording

As of June 30, 2025 and December 31, 2024, we held approximately 156 and 150 Bitcoin, respectively. The carrying value of our Bitcoin as of June 30, 2025 and December 31, 2024 was approximately $16.7 million and $14.0 million, respectively, on our consolidated balance sheet.

Previous wording

As of March 31, 2025 and December 31, 2024 approximately 61 Bitcoin and 54 Bitcoin, respectively (with an approximate fair value of $5.0 million) 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.

Current wording

As of June 30, 2025 and December 31, 2024 approximately 47 Bitcoin and 54 Bitcoin, respectively (with an approximate fair value of $5.0 million) 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.

Previous wording

The following is a summary of the average cost of revenues for mining each Bitcoin during the three months ended March 31, 2025 and 2024:

Current wording

The following is a summary of the average cost of revenues for mining each Bitcoin during the three and six months ended June 30, 2025 and 2024:

Previous wording

The Company's Bitcoin unit activity during the three months ended March 31, 2025 and 2024 was as follows:

Current wording

The Company's Bitcoin unit activity during the six months ended June 30, 2025 and 2024 was as follows:

Previous wording

The Company records depreciation expense (a non-cash expense) on its miners on a straight-line basis over the miners' expected useful life. Such non-cash depreciation amounts are recorded within the consolidated statements of operations and comprehensive loss as “Depreciation and Amortization”. Although the Company recognizes depreciation with respect to its mining assets, it does not consider depreciation in determining whether it is economical to operate its mining equipment since depreciation expense is not an avoidable operating cost, such as energy costs. The table above presents the non-cash miner depreciation expense on a “per Bitcoin” basis, calculated by dividing miner depreciation expense in our hosted facilities by the number of Bitcoin mined in the hosted facilities. On a “per Bitcoin” ratio, direct costs to mine including miner depreciation expense was approximately $139 thousand and $54 thousand for the three months ended March 31, 2025, and 2024, respectively.

Current wording

The Company records depreciation expense (a non-cash expense) on its miners on a straight-line basis over the miners' expected useful life. Such non-cash depreciation amounts are recorded within the consolidated statements of operations and comprehensive loss as “Depreciation and Amortization”. Although the Company recognizes depreciation with respect to its mining assets, it does not consider depreciation in determining whether it is economical to operate its mining equipment since depreciation expense is not an avoidable operating cost, such as energy costs. The table above presents the non-cash miner depreciation expense on a “per Bitcoin” basis, calculated by dividing miner depreciation expense in our hosted facilities by the number of Bitcoin mined in the hosted facilities. On a “per Bitcoin” ratio, direct costs to mine including miner depreciation expense was approximately $166 thousand and

Previous wording

As of December 31, 2024, we own a 15 MW hosting site located in Oklahoma (the “Oklahoma site”) with 3,006 installed S19J Pro Antminer machines which have a total projected hashrate of 301 PH. As of March 31, 2025, we have 4,320 installed S19 J Pro Antminer machines at this location which have a total projected hashrate of 432 PH. We have another 496 mining machines in storage at the Oklahoma site. We have another 800 machines which have a total projected hashrate of 130 PH at a hosting facility which were relocated to our Oklahoma site in May 2025.

Current wording

As of December 31, 2024, approximately 3,000 mining machines were installed at our 15 MW hosting site located in Oklahoma (the “Oklahoma site”) with a total projected hashrate of 301 PH. As of June 30, 2025, we have approximately 4,320 installed mining machines at this location which have a total projected hashrate of 475 PH. We have another approximately 1,240 mining machines in storage at the Oklahoma site.

Previous wording

As of March 31, 2025, we own approximately 5,600 machines with total hashing capacity of approximately 0.612 EH/s.

Current wording

As of June 30, 2025, we own approximately 5,560 machines with total hashing capacity of approximately 0.606 EH/s.

Previous wording

During the three months ended March 31, 2025, total revenues decreased by $2.3 million, to $2.4 million from $4.7 million for the three months ended March 31, 2024.

Current wording

During the three months ended June 30, 2025, total revenues decreased by $1.1 million, to $1.9 million from $3.0 million for the three months ended June 30, 2024.

Previous wording

Digital mining revenue decreased in the three months ended March 31, 2025 by $2.3 million to $2.3 million from $4.6 million for the three months ended March 31, 2024.

Current wording

Digital mining revenue decreased in the three months ended June 30, 2025 by $1.1 million to $1.8 million from $2.9 million for the three months ended June 30, 2024.

Previous wording

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 March 31, 2025, we mined 24.3 Bitcoin with an average Bitcoin price of approximately $94 thousand as compared to 86.4 Bitcoin with an average Bitcoin price of approximately $53 thousand during the three months ended March 31, 2024. The decrease in Bitcoin mining revenue for the three months ended March 31, 2025 was attributable to the reduction in the number of Bitcoins mined during the period due to the halving event in April 2024, machines that were not being relocated from hosting sites, the increased difficulty rate, which reduced our share of the global hashrate, offset in part by the increase in Bitcoin prices.

Current wording

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 June 30, 2025, we mined 18.4 Bitcoin with an average Bitcoin price of approximately $98 thousand as compared to 44.1 Bitcoin with an average Bitcoin price of approximately $66 thousand during the three months ended June 30, 2024. The decrease in Bitcoin mining revenue for the three months ended June 30, 2025 was attributable to the reduction in the number of Bitcoins mined during the period due to the halving event in April 2024, machines that were being relocated from hosting sites, the increased difficulty rate, which reduced our share of the global hashrate, offset in part by the increase in Bitcoin prices.

Previous wording

During the three months ended March 31, 2025, operating expenses increased $3.8 million to $7.5 million from $3.7 million for the three months ended March 31, 2024. The increase in operating expenses is primarily due to the following factors:

Current wording

During the three months ended June 30, 2025, operating expenses decreased $5.8 million to $1.5 million from $7.3 million for the three months ended June 30, 2024. The decrease in operating expenses is primarily due to the following factors:

Previous wording

The fair market adjustment on mined digital assets resulted in a loss of $1.8 million for the three months ended March 31, 2025 compared to a gain of $4.3 million for the three months ended March 31, 2024.

Current wording

The fair market adjustment on mined digital assets resulted in a gain of $3.8 million for the three months ended June 30, 2025 compared to a loss of $1.3 million for the three months ended June 30, 2024.

Previous wording

Compensation costs for three months ended March 31, 2025 decreased by $0.1 million to $1.1 million from $1.2 million for the three months ended March 31, 2024 primarily due primarily to the $0.1 million reduction of stock based compensation associated with employee stock options and restricted stock.

Current wording

Compensation costs for three months ended June 30, 2025 increased by $0.3 million to $1.1 million from $0.8 million for the three months ended June 30, 2024 primarily due to staff costs associated with the Oklahoma site and bonuses.

Previous wording

The Company recognized an unrealized loss on securities $26 thousand for the three months ended March 31, 2025 as compared to an unrealized gain of $1.4 million for the three months ended March 31, 2024 from the revaluation of Seastar Medical's common stock and private placement warrants.

Current wording

The Company recognized an unrealized loss on securities $131 thousand for the three months ended June 30, 2025 as compared to an unrealized loss of $1.9 million for the three months ended June 30, 2024 from the revaluation of Seastar Medical's common stock and private placement warrants.

Previous wording

The Company recognized $221 thousand of interest expense for the three months ended March 31, 2025 as compared to $71 thousand for the three months ended March 31, 2024 due to an increase in secured borrowings in 2024.

Current wording

The Company recognized $228 thousand of interest expense for the three months ended June 30, 2025 as compared to $37 thousand for the three months ended June 30, 2024 due to an increase in secured borrowings.

Previous wording

During the three months ended March 31, 2025, the Company generated a $5.4 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 benefit of $1.4 million which resulted in no income tax expense being recognized for the three months ended March 31, 2025. During the three months ended March 31, 2024, the Company generated $2.4 million net income before income taxes and the Company increased its income tax valuation allowance by $0.6 million, which offset the Company’s incurred net income tax expense of $0.6 million, resulting in no income tax expense being recognized during the period.

Current wording

During the three months ended June 30, 2025, the Company generated a $60 thousand net income before income taxes and the Company increased its income tax valuation allowance by $0.1 million, which offset the Company’s incurred net income tax benefit of $0.1 million which resulted in no income tax expense being recognized for the three months ended June 30, 2025. During the three months ended June 30, 2024, the Company generated $6.2 million net loss before income taxes and the Company increased its income tax valuation allowance by $1.7 million, which offset the Company’s incurred net income tax benefit of $1.7 million, resulting in no income tax expense being recognized during the period.

Previous wording

The Company owns 69.5% of the equity interests of Sponsor. As such, there is an $8 thousand net loss for the three months ended March 31, 2025 attributable to the Non-Controlling Interest as compared to a $0.4 million net gain for the three months ended March 31, 2024.

Current wording

The Company owns 69.5% of the equity interests of Sponsor. As such, there is a $40 thousand net loss for the three months ended June 30, 2025 attributable to the Non-Controlling Interest as compared to a $574 thousand net loss for the three months ended June 30, 2024.

Previous wording

Bitcoin mining costs decreased by $1.3 million to $1.4 million for the three months ended March 31, 2025 from $2.7 million for the three months ended March 31, 2024 is primarily due to the lower overall operating costs at our Oklahoma facility as compared to third party hosting sites, and the idling of some mining machines during the 2025 quarter. Mining costs as a percentage of revenue increased to 61.5% from 57.7% due to the lower relative number of Bitcoin mined as compared to the prior year and the idling of mining machines.

Current wording

Bitcoin mining costs decreased by $2.2 million to $2.8 million for the six months ended June 30, 2025 from $5.0 million for the six months ended June 30, 2024 primarily due to the lower overall operating costs at our Oklahoma site as compared to third party hosting sites, and the idling of some mining machines during 2025. Mining costs as a percentage of revenue increased to 69.5% from 66.9% primarily due to the lower relative number of Bitcoin mined as compared to the prior year and the idling of mining machines.

Previous wording

During the three months ended March 31, 2024 the Company incurred a $1.2 million impairment on mining equipment related to machines disposed in April 2024. There was no impairment loss for the three months ended March 31, 2025.

Current wording

During the six months ended June 30, 2024 the Company incurred a $1.2 million impairment on mining equipment related to machines disposed in April 2024. There was no impairment loss for the six months ended June 30, 2025.

Previous wording

During the three months ended March 31, 2025, net loss was $5.4 million as compared to net income of $1.9 million for the three months ended March 31, 2024.

Current wording

During the six months ended June 30, 2025, net loss was $5.3 million as compared to net loss of $3.8 million for the six months ended June 30, 2024.

Previous wording

During the three months ended March 31, 2025, net loss attributable to LM Funding America, Inc. was $5.4 million as compared to net income of $1.9 million for the three months ended March 31, 2024.

Current wording

During the six months ended June 30, 2025, net loss attributable to LM Funding America, Inc. was $5.3 million as compared to net loss of $3.7 million for the six months ended June 30, 2024.

Previous wording

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 March 31, 2025 and December 31, 2024, we had cash, cash equivalents and Bitcoin, excluding $5.0 million of Bitcoin was pledged as collateral against outstanding borrowings, of $9.3 million and $12.4 million, respectively. As of March 31, 2025, we had working capital of $8.3 million reflecting a decrease of $3.7 million since December 31, 2024. 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.

Current wording

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 June 30, 2025 and December 31, 2024, we had cash, cash equivalents and Bitcoin, excluding $5.0 million of Bitcoin was pledged as collateral against outstanding borrowings, of $12.0 million and $12.4 million, respectively. As of June 30, 2025, we had working capital of $9.3 million reflecting a decrease of $2.6 million since December 31, 2024. 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.

Previous wording

The Company's cash flow summary for the three months ended March 31, 2025 and 2024 are as follows:

Current wording

The Company's cash flow summary for the six months ended June 30, 2025 and 2024 are as follows:

Previous wording

Net cash used in operations was $2.9 million during the three months ended March 31, 2025 compared with net cash used in operations of $3.0 million during the three months ended March 31, 2024. The mining of Bitcoin is considered a noncash item for operating purposes which totaled $2.3 million and $4.6 million for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Net cash used in operations was $5.7 million during the six months ended June 30, 2025 compared with net cash used in operations of $6.0 million during the six months ended June 30, 2024. The mining of Bitcoin is considered a noncash item for operating purposes which totaled $4.1 million and $7.5 million for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

For the three months ended March 31, 2025 net cash provided by investing activities was $0.7 million as compared to net cash provided by investing activities of $1.6 million for the three months ended March 31, 2024. The proceeds from the sale of Bitcoin is considered an investing activity which totaled $1.2 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, the Company received net payments of approximately $0.2 million from the collection of Symbiont sale receivable while investing $0.2 million for capital expenditures and $0.5 million on deposits for Bitcoin mining equipment. For the three months ended March 31, 2024 the Company received net payments of approximately $1.4 million from SeaStar Medical related to the payment of outstanding notes receivable while investing $1.1 million for capital expenditures including Bitcoin mining equipment.

Current wording

For the six months ended June 30, 2025 net cash provided by investing activities was $3.1 million as compared to net cash provided by investing activities of $2.7 million for the six months ended June 30, 2024. The proceeds from the sale of Bitcoin is considered an investing activity which totaled $3.3 million and $4.5 million for the six months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025, the Company received net payments of approximately $0.2 million from the collection of Symbiont sale receivable while investing $1.0 million on deposits for Bitcoin mining equipment. For the six months ended June 30, 2024 the Company received net payments of approximately $1.4 million from SeaStar Medical related to the payment of outstanding notes receivable while investing $1.2 million for capital expenditures including Bitcoin mining equipment and $2.1 million investment in a note receivable.

Previous wording

Net cash used in financing activities was $0.2 million for the three months ended March 31, 2025 and 2024 and primarily relates to the repayment of insurance financing.

Current wording

Net cash used in financing activities was $0.4 million for the six months ended June 30, 2025 as compared to net cash from financing activities of $1.0 million for the six months ended June 30, 2024.

Previous wording

The Company had no cash infusions from equity financing transactions during the three months ended March 31, 2025 and 2024.

Current wording

The Company had no cash infusions from equity financing transactions during the six months ended June 30, 2025 and 2024.

Previous wording

The following tables reconcile net loss, which we believe is the most comparable GAAP measure, to EBITDA and Core EBITDA:

Current wording

The following tables reconcile net income (loss), which we believe is the most comparable GAAP measure, to EBITDA and Core EBITDA:

Previous wording

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. There are no critical accounting estimates for the three months ended March 31, 2025.

Current wording

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. There are no critical accounting estimates for the three and six months ended June 30, 2025.

Previous wording

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.

Current wording

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 unaudited consolidated financial statements in this Quarterly Report on Form 10-Q.