Greetings, and welcome to the LM Funding America Incorporated Second Quarter 2024 Business Update Call. At this time all participant are on a listen-only mode and question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Ted Ayvas, 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 Rodgers, 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 Crescendo 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, results 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 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 the conference call may not occur and…

Thank you, Ted. Good morning, and thanks to everyone, who joined 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 approximately $2.9 million. Notwithstanding the halving event, we’re 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 31, we had approximately 3,800 miners placed at several hosting sites, and our potential hash rate remains strong at 639 petahash. We believe that this positions LM 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 machine operations 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 provides 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 of $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 a 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 of 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 on 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 EBITDA for the first half of 2024 of $2.2 million. I want to 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-priced 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 leverage 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 Pro, 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 and infrastructure and allows us to…

Thank you. At this time, we will be conducting our question-and-answer session. [Operator Instructions] Our first question is coming from Michael Donovan with H.C. Wainwright. Your line is live.

Thank you, operator. Congrats on the quarter, Bruce and Rick. Can you help us get a better read on Texas and Oklahoma just in terms of the build-out? I know you mentioned immersion. Do you plan on just dropping containers there? Or do you expect to have a larger build-out? Also, what are you thinking about in terms of power? Are transformers going to be needed at – additional transformers needed at both of these sites? Thank you.

Thanks, Michael. Bundled question there. Okay. Texas and Oklahoma are two different places. Both sites will operate using containers – I’m sorry, Texas actually does have a – well, yes, Texas will be immersion containers. Right now, the Oklahoma site is air containers, right, and that is 15 megawatts is fully built out right now. The Texas site, they’ve got four new immersion containers that were put in service once we buy the three slightly older suburb immersion containers that are active right now. And then, of course, we will buy more immersion containers to fill out the other 6 megawatts of the site at Texas.

Okay.

Second part of your question, Michael, was yes, there are transformers on the ground in Texas. There are in Oklahoma, but there are costs for – additional costs per build-out at both in tranches to build more megawatts.

Okay. Now in terms of the potential for AI or HPC hosting, what sort of connectivity do these sites offer either for fiber connectivity? And what sort of water sources do you have nearby just for this potentiality?

We’ve not priced or valued the sites for HPC uses. I only have general knowledge and stuff like that. To us, it’s securing the power. So it’s 72 megawatts in Texas, and there would be an additional 60 potential in Oklahoma, what we’ve got there. So just not our business yet.

Got you. Fair enough. Now Oklahoma, so it’s going to be at cost for 10 months for the – running the 3,000 miners there. After the 10 months, have you guys discussed what that looks like or what a potential deal would be after the initial…

It’s in the agreement, Michael. It’s in the agreement in the docs. It goes to market price after the 10 months. So the big picture of that is we – rather than provide a hosting company with a deposit that they use to build, do something, we loan them on a secured basis, the money they needed to build it out. And then to make money on our money, they’re mining for us for cost for these first 10 months. And then after that, we plan to be elsewhere, and they’ll rent our space out to somebody that will pay market rates and be able to pay off that loan to us.

Okay. Thank you. Now in terms of the timeline that took to transition those 3,000 miners, was that in June and July? I think, I believe that they’re all over there now, right, the 3,000? So just that...

Correct.

That were – that had interrupted operations?

Yes, it took probably a good 45-ish days to transition over, right? Just get a move set up, few kinks worked out with the new site as usual, but they’re all installed there now at this point, the 3,000.

Okay. And can you remind us where that be the new machines that you S21 and where – are they located at a third-party site? I believe you’re expecting them to rise in March, April. Can just help with that?

Yes. They came in, I want to say April and very solid at the core location in Kentucky with our XPs. So we have about 800 S21s and XPs combined over there.

Okay. And for your third-party hostings, is there anything with core now? Or do you still have some at Giga?

No. We transitioned out of Giga, and they went into a warehouse. And we’re looking to move some of those over to the Texas side once that’s done.

So hosting, we have core, and then the Arthur site is a hosting site?

Yes.

Great. Now more of a big picture question, though, with that – the $5 million loan, I believe you spoke to some of that being for immersion. Is this going to be mostly for infrastructure or purchasing new machines to? How should we think about that?

Mostly has a number attached to it? Whatever infrastructure it takes plus whatever machines the infrastructure will support, that’s the plan.

Okay. Okay. So mix. Good. All right.

10 megawatts of capacity doesn’t do you any good if you don’t have any machines to plug into it. So you got to kind of think of it like that.

Fair enough. Thank you so much Bruce.

Thank you.

Thank you. [Operator Instructions] Okay. As we currently have no further questions in queue, I will hand it back to management for closing comments.

Thank you all for joining us on today’s call. With 2024 halving event behind us, we now turn our focus towards enhancing our Bitcoin mining operations in anticipation of the next halving event expected to occur in 2028. With our current initiatives providing cost-effective locations to power all of our existing machines, we are extremely excited about what the future holds for LM Funding and its shareholders. We are grateful for the ongoing support of our shareholders, and look forward to updating you on the future progress. Thank you.

Thank you. This concludes today’s call, and you may disconnect your lines at this time. And we thank you for your participation.