10-Q: LM Funding America Reports Q1 2026 Results, Net Loss Widens

LM Funding America, Inc. reported a net loss of $10.1 million for the first quarter of 2026, a significant increase from the prior year's loss, driven by a substantial fair market adjustment on digital assets and increased operating expenses.

Summary

• LM Funding America, Inc. reported a net loss of $10.1 million for the first quarter ended March 31, 2026, compared to a net loss of $5.4 million for the same period in 2025.
• Total revenues decreased to $2.1 million from $2.4 million, primarily due to a decline in digital mining revenue.
• Operating expenses increased to $8.5 million from $7.5 million, largely driven by a $3.8 million loss on the fair value of mined digital assets and higher digital mining costs.
• The company's cash position decreased to $0.8 million from $1.4 million.
• LM Funding America entered into an at-the-market (ATM) offering agreement to sell up to $75 million in common stock.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to the significant increase in net loss, declining revenues, and rising operating expenses, despite the ongoing Bitcoin treasury strategy and ATM program availability.

Positives

• The company's Bitcoin mining operations generated $1.98 million in revenue.
• The company has an active ATM program with $75 million available for future capital raises.
• The company's specialty finance segment generated $0.13 million in revenue.
• The company has implemented controls and procedures to maintain and protect the integrity of its IT systems and data.

Negatives

• Net loss attributable to LM Funding America, Inc. increased to $10.1 million for Q1 2026 from $5.4 million in Q1 2025.
• Total revenues decreased by $0.3 million to $2.1 million in Q1 2026 compared to $2.4 million in Q1 2025.
• Operating expenses increased by $1.0 million to $8.5 million in Q1 2026 compared to $7.5 million in Q1 2025.
• The fair market adjustment on mined digital assets resulted in a loss of $3.8 million in Q1 2026, compared to a loss of $1.8 million in Q1 2025.
• Cash and cash equivalents decreased to $0.8 million as of March 31, 2026, from $1.4 million as of December 31, 2025.
• The company's Bitcoin holdings decreased from 211.4 to 164.2 between December 31, 2025, and March 31, 2026.

Risks

• Volatility surrounding the value of Bitcoin and other cryptocurrencies.
• Uncertainty surrounding the Bitcoin mining business in general.
• Bankruptcy or financial problems of hosting vendors in the mining business.
• The company's Bitcoin treasury strategy has not been tested over an extended period or under different market conditions.
• The company's treasury strategy is concentrated on Bitcoin.
• Counterparty risks, including risks related to custodians.
• The ability to scale the mining business.
• Changes in government regulations that affect the ability to collect sufficient amounts on defaulted consumer Association receivables.
• The impact of class action suits and other litigation on business or operations.
• The likelihood and amount of recovery from the Uptime Purchase Agreement matter and the CFTC enforcement action cannot be estimated at this time.

Future Outlook

The company's Bitcoin treasury strategy for the next twelve months includes acquiring and holding Bitcoin using cash flows from operations that exceed working capital requirements, and potentially issuing equity or debt securities to purchase more Bitcoin. Decisions to purchase or sell Bitcoin are made on a case-by-case basis at management's discretion. The company does not currently engage in hedging activities but may do so in the future. The company expects to incur negative operating cash flows as it works to increase digital mining revenue and maintain operational efficiencies.

Management Comments

• Decisions to purchase or sell Bitcoin are made on a case-by-case basis at management's discretion, taking into account factors such as our liquidity, general market conditions, and anticipated cash requirements.
• We do not currently engage in hedging activities. We have not implemented derivative transactions, futures, options, swaps, or other financial instruments to reduce our exposure to Bitcoin price volatility.
• We expect to incur negative operating cash flows as we work to increase our digital mining revenue and maintain operational efficiencies.

Industry Context

StockSavvy.ai notes that LM Funding America's Q1 2026 results reflect the ongoing volatility and challenges within the cryptocurrency mining sector, particularly the impact of Bitcoin price fluctuations and increasing network difficulty on profitability. The company's diversification into specialty finance offers a potential hedge, but the significant losses in mining operations continue to weigh on overall financial performance.

Comparison to Industry Standards

• The company's cost of mining one Bitcoin, including energy/hosting fees only, was 76% of the average Bitcoin mining revenue in Q1 2026, compared to 62% in Q1 2025. This indicates a worsening cost efficiency relative to revenue.
• The cost of mining one Bitcoin, including miner-related depreciation expense, was 108% of the average Bitcoin mining revenue in Q1 2026, compared to 149% in Q1 2025. While this shows an improvement, the cost still exceeds revenue, indicating unprofitability on a per-Bitcoin basis when depreciation is considered.
• Competitors like Marathon Digital Holdings and Riot Platforms also face challenges with energy costs and Bitcoin price volatility, but often report higher revenue and more efficient operations due to scale and strategic power agreements.

Legal Proceedings

• Uptime Purchase Agreement Matter: Lawsuit filed against Uptime and Bit5ive for breach of contract and violation of Florida Deceptive and Unfair Trade Practices Act. Arbitration ordered, arbitrator ruled in favor of US Digital. Proof of Claim filed for $3.2 million. Likelihood and amount of recovery cannot be estimated.
• Uptime Hosting Agreement Matter: Lawsuit filed against Uptime Hosting LLC for return of deposit and other damages. Amended complaint adds claims against additional defendants. Likelihood and amount of recovery cannot be estimated.
• CFTC enforcement action: CFTC filed an enforcement action against various defendants, including entities previously involved in state court ABC proceedings. The company's claims against certain defendants are now part of this action. A receiver has been appointed, and the receiver is identifying and recovering assets. Likelihood and amount of recovery cannot be estimated.

Related Party Transactions

• The company shares office space, personnel, and related common expenses with BLGAL, a law firm where Bruce M. Rodgers (Chairman and CEO) is a 50% owner and Ms. Gould (Director) is the General Manager. BLGAL is charged for office sub-lease and shared expenses.
• Amounts paid to BLGAL for legal services were $129,000 for the three months ended March 31, 2026 and 2025.
• Amounts payable to BLGAL as of March 31, 2026 were $65,000.

Stakeholder Impact

• Shareholders: Potential dilution from the ATM program, but also potential for capital infusion to support operations. Increased net loss may negatively impact share price.
• Creditors: Increased debt and potential for future debt financing could impact repayment capacity.
• Employees: Continued operations and potential expansion may secure employment, but financial performance could lead to cost-cutting measures.
• Suppliers: Continued operations imply ongoing business for suppliers, but financial distress could impact payment terms.

Next Steps

• Continue to monitor market conditions for additional Bitcoin purchases.
• Potentially sell Bitcoin for general corporate purposes or tax benefits.
• Enter into additional capital raising transactions, potentially collateralized by Bitcoin holdings.
• Consider strategies to create income streams or generate funds using Bitcoin holdings.
• Continue to manage operations and expand the Bitcoin mining business.
• Utilize the ATM program for potential capital raises.

Key Dates

Recommendation

While the company has a strategy for Bitcoin treasury and mining, and an ATM program for capital raises, the significant increase in net loss, declining revenues, and ongoing legal proceedings present considerable risks. The current financial performance does not warrant a buy recommendation, but the potential for recovery in the crypto market and the availability of capital suggest holding the stock for now, pending improved operational results and clearer resolution of legal matters.

Keywords

LM Funding America, 10-Q, Quarterly Report, Bitcoin Mining, Digital Assets, Specialty Finance, Financial Results, Net Loss, SEC Filing, Cryptocurrency