UNITED STATES
SECURITIS AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒ |
| Filed by a Party other than the Registrant ☐ |
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Pursuant to §240.14a-12 |
LM FUNDING AMERICA, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required. |
☐ | Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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| (4) | Date Filed: |
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
April 15, 2020November 17, 2021
TO OUR SHAREHOLDERS:
You are cordially invited to attend our Annual Shareholders’Stockholders’ Meeting, which will be held at 1200 Platt Street, Suite 100 Tampa, Florida 33606, on Monday, May 11, 2020,Friday, December 10, 2021, at 33:00 p.m., local time. ShareholdersStockholders will be admitted beginning at 2:3045 p.m.
The attached notice of annual meetingAnnual Meeting of shareholdersStockholders and proxy statement cover the formal business of the annual meetingAnnual Meeting and contains a discussion of the matters to be voted upon at the annual meeting.Annual Meeting. At the annual meeting,Annual Meeting, our management will also provide a report on our operations and achievements during the past year.
Your vote is very important. Whether or not you plan to attend the meeting in person, please vote your shares by completing, signing and returning the accompanying proxy card, or by following the instructions on the card for voting by telephone or internet. If you later decide to attend the annual meetingAnnual Meeting and vote in person, you may revoke your proxy at that time.
We currently intend to hold the Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19) situation, as we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments and health officials may impose or recommend. In the event we determine it is not possible or advisable to hold the Annual Meeting in person, we will publicly announce alternative arrangements for the meeting as promptly as practicable before the meeting, which may include holding the meeting solely by means of remote communication (i.e., a virtual-only annual meeting). Please monitor our website at www.lmfunding.com for updated information. If you are planning to attend our meeting, please check the website prior to the meeting date.
Bruce M. Rodgers, Esq.
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LM Funding America, Inc. •1200 West Platt Street, Suite 100, Tampa, FL 33606 • T (813) 222-8996 • F (813) 221-7909 • lmfunding.com
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF LM FUNDING AMERICA, INC.:
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By Order of the Board of Directors,
Bruce M. Rodgers
Chairman of the Board
Chief Executive Officer
LM Funding America, Inc. •1200 West Platt Street, Suite 100, Tampa, FL 33606 • T (813) 222-8996 • F (813) 221-7909 • lmfunding.com
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF LM FUNDING AMERICA, INC.:
By Order of the Board of Directors,
Bruce M. Rodgers
Chairman of the Board
Chief Executive Officer
LM Funding America, Inc. •1200 West Platt Street, Suite 100, Tampa, FL 33606 • T (813) 222-8996 • F (813) 221-7909 • lmfunding.com
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 10, 2021
TO THE STOCKHOLDERS OF LM FUNDING AMERICA, INC.: | November 17, 2021 |
This proxy statement and the form of proxy are delivered in connection with the solicitation by the Board of Directors of LM Funding America, Inc. (the “company,” “we,” “us,” or “our”), a Delaware corporation, of proxies to be voted at our below-described Annual Meeting of Stockholders and at any adjournments or postponements thereof.
You are invited to attend our Annual Meeting of Stockholders on Friday, December 10, 2021, beginning at 3:00 p.m.. The Annual Meeting will be held at 1200 West Platt Street, Suite 100, Tampa, Florida 33606. Stockholders will be admitted beginning at 2:45 p.m.
Your vote is very important. Therefore, whether you plan to attend the Annual Meeting or not and regardless of the number of shares you own, please date, sign and return the enclosed proxy card promptly or follow the instructions on the card for voting by telephone or internet.
At the meeting, the use of cameras, audio or video recording equipment, communications devices or similar equipment will be prohibited.
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to be Held on December 10, 2021:
This proxy statement and the 2020 Annual Report to Stockholders, as amended, are available at www.proxydocs.com/LMFA.
Upon your written request, we will provide you with a copy of our 2020 annual report on Form 10-K, as amended, including exhibits, free of charge. Send your request to LM Funding America, Inc., Attention: Bruce M. Rodgers, Chief Executive Officer, 1200 West Platt Street, Suite 100, Tampa, Florida 33606.
LM Funding America, Inc. •1200 West Platt Street, Suite 100, Tampa, FL 33606 • T (813) 222-8996 • F (813) 221-7909 • lmfunding.com
ABOUT THE ANNUAL MEETING
What is the purpose of the meeting?
The principal purposes of the Annual Meeting are to ratify the appointment of our outside auditors; elect two directors to the company’s Board of Directors; to approve an amendment to the company’s Certificate of Incorporation, as amended, to increase the number of the company’s authorized shares of common stock, par value $0.001 per share, from 30,000,000 to 350,000,000 shares and to increase the number of the company’s authorized shares of preferred stock, par value $0.001 per share, from 5,000,000 to 150,000,000 shares; to approve the LM Funding America, Inc. 2021 Omnibus Incentive Plan; to approve, on an advisory, non-binding basis, the compensation of our named executive officers; and to approve on a non-binding advisory basis the compensation of our named executive officers every three years. In addition, our management will report on our performance during 2020, discuss challenges ahead and respond to questions from stockholders.
When were these materials mailed?
We began mailing this proxy statement on or about November 17, 2021.
Who is entitled to vote?
Stockholders of record at the close of business on the record date, October 19, 2021, are entitled to vote in person or by proxy at the Annual Meeting. In general, stockholders are entitled to one vote per share on each matter voted upon. In an election for directors, however, stockholders are entitled to vote the number of shares they own for as many director candidates as there are directors to be elected. The Board of Directors has determined that the Board of Directors should include two Class II directorships. Accordingly, since two directors are to be elected at this Annual Meeting, in electing directors, each share will entitle the stockholder to two votes, one per director. Stockholders may not cumulate their votes. As of October 19, 2021, there were 12,677,442 common shares outstanding.
What constitutes a quorum?
The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares outstanding will constitute a quorum, permitting us to conduct the business of the meeting.
What is the difference between a shareholder of record and a beneficial owner?
If your shares are registered directly in your name with our transfer agent, V Stock Transfer, LLC, then you are a “shareholder of record.” This Notice of Meeting and proxy statement has been provided directly to you by LM Funding America, Inc. You may vote by ballot at the meeting or vote by proxy. To vote by proxy, sign, date and return the enclosed proxy card or follow the instructions on the proxy card for voting by telephone or internet.
If your shares are held for you in a brokerage, bank or other institutional account (that is, held in “street name”), then you are not a shareholder of record. Rather, the institution is the shareholder of record and you are the “beneficial owner” of the shares. The accompanying Notice of Meeting and this proxy statement have been forwarded to you by that institution. If you complete and properly sign the accompanying proxy card and return it in the enclosed envelope, or follow the instructions on the proxy card for voting by telephone or internet, the institution will cause your shares to be voted in accordance with your instructions. If you are a beneficial owner of shares and wish to vote in person at the Annual Meeting, then you must obtain a proxy, executed in your favor, from the holder of record (the institution).
How do I vote?
By Ballot at the Meeting. If you are a shareholder of record and attend the Annual Meeting, you may vote in person by ballot at the Annual Meeting. To vote by ballot, you must register and confirm your shareholder status at the meeting. If the shareholder of record is a corporation, partnership, limited liability company or other entity of which you are an officer or other authorized person, then you should bring evidence of your authority to vote the shares on behalf of the entity. If your shares are held for you in a brokerage, bank or other institutional account (that is, in “street name”), you must obtain a proxy, executed in your favor, from that institution (the holder of record) to vote your beneficially-owned shares by ballot at the Annual Meeting. In the election of directors (Proposal No. 1), each share held by a shareholder of record will be entitled to two votes, one for each director to be elected.
By Proxy. If you complete, sign and return the accompanying proxy card or follow the instructions on the proxy card for voting by telephone or internet, then your shares will be voted as you direct. In the election of directors (Proposal No. 1), your options with respect to each director are to direct a vote “FOR” or to “WITHHOLD AUTHORITY.”
If you are a shareholder of record, then you may opt to deliver your completed proxy card in person at the Annual Meeting.
Can I vote by telephone or internet?
Yes. If you follow the instructions on the proxy card for voting by telephone or internet, your shares will be voted as you direct.
How Abstentions and Broker Non-Votes Are Treated
Abstentions will be counted as shares that are present for purposes of determining a quorum. For the election of directors, abstentions are excluded entirely from the vote and do not have any effect on the outcome. Broker non-votes occur when a broker or other nominee holding shares for a beneficial owner does not have discretionary voting power on a matter and has not received instructions from the beneficial owner. Broker non-votes are included in the determination of the number of shares represented at the Annual Meeting for purposes of determining whether a quorum is present. If you do not provide your broker or other nominee with instructions on how to vote your “street name” shares, your broker or nominee will not be permitted to vote them on nonroutine matters such as Proposal No. 1. Shares subject to a broker non-vote will not be considered entitled to vote with respect to Proposal No. 1 and will not affect the outcome of Proposal No. 1.
What does it mean if I receive more than one proxy card?
You will receive separate proxy cards when you own shares in different ways. For example, you may own shares individually, as a joint tenant, in an individual retirement account, in trust or in one or more brokerage accounts. You should complete, sign and return each proxy card you receive or follow the telephone or internet instructions on each card. The instructions on each proxy card may differ. Be sure to follow the instructions on each card.
Can I change my vote or instruction?
Yes. You may follow the instructions on the proxy card to change your votes or instructions any time before midnight the day before the meeting. In addition, if you are a shareholder of record, you may revoke your proxy any time before your shares are voted by filing with the secretary of the company a written notice of revocation or submitting a duly executed proxy bearing a later date. If you file a notice of revocation, you may then vote (or abstain from voting) your shares in person at the Annual Meeting. If you submit a later dated proxy, then your shares will be voted in accordance with that later dated proxy. No such notice of revocation or later dated proxy, however, will be effective unless received by us at or before the Annual Meeting and before your shares have been voted. Unless the proxy is revoked, the shares represented thereby will be voted at the Annual Meeting or any adjournment thereof as indicated on the proxy card. Sending in a proxy does not affect your right to vote in person if you attend the meeting, although attendance at the meeting will not by itself revoke a previously granted proxy.
If I submit a proxy card, how will my shares be voted?
Your shares will be voted as you instruct on the proxy card.
What happens if I submit a proxy card and do not give specific voting instructions?
If you are a shareholder of record and sign and return the proxy card without indicating your instructions, your shares will be voted in accordance with the recommendations of the Board of Directors. With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, at their own discretion. As of the date this proxy statement went to print, we did not know of any other matters to be raised at the Annual Meeting.
What are the Board of Directors’ recommendations?
The Board of Directors recommends votes:
➢ | FOR election of the |
Douglas I. McCree
Joel E. Rodgers
➢ | FOR the proposal to ratify the appointment of
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➢ | FOR the proposal to approve the LM Funding America, Inc. 2021 Omnibus Incentive Plan. | ||||||||||||||||||||||
➢ | FOR the proposal to approve, on an advisory, non-binding basis, the compensation of our named executive officers. | ||||||||||||||||||||||
➢ ➢ | FOR the proposal to approve, on an advisory, non-binding basis, the compensation of our named executive officers every three years. FOR the authority to transact such other business as may properly come before the stockholders at |
What vote is required to approve each item?
The vote required to approve each matter to be voted on at the Annual Meeting is described below. We do not anticipate other matters coming to a vote at the Annual Meeting. Should any other matter be brought to a vote, the matter will be approved by the affirmative vote of the majority of the outstanding shares present in person or by proxy at the Annual Meeting and entitled to vote on the subject matter at a meeting at which a quorum is present unless a greater number of affirmative votes is required for approval of that matter under our Certificate of Incorporation, Bylaws, or the Delaware General Corporation Law.
Under the Delaware General Corporation Law, an abstaining vote is considered present and entitled to vote and, therefore, is included for purposes of determining whether a quorum is present at the Annual Meeting. Pursuant to our Bylaws, abstentions are not considered to be ‘‘votes cast’’ for the election of directors in Proposal No. 1 and will not affect the outcome of the election of directors. Abstentions are considered both present and “entitled to vote” on a matter. Accordingly, an abstention counts as a vote “against” any proposal where the voting standard is “a majority of the shares present and entitled to vote” or “a majority of the outstanding shares.”
A broker ‘‘non-vote’’ occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. Under the Delaware General Corporation Law, a broker ‘‘non-vote’’ is not deemed to be a ‘‘vote cast’’ and, therefore, will not affect the outcome of the election of directors. While a broker ‘‘non-vote’’ is considered present for purposes of determining whether a quorum is present at the Annual Meeting, it is not considered ‘‘entitled to vote’’ and, therefore, not included in the tabulation of the voting results on matters requiring approval of the holders of a majority of the shares present in person or represented by proxy and entitled to vote. When the voting standard is approval of “a majority of the outstanding shares,” broker non-votes have the same effect as a vote “against” the proposal.
The required vote for each of the proposals expected to be acted upon at the Annual Meeting is summarized below:
Proposal No. 1 — Election of directors. Directors are elected by a plurality, with the two nominees obtaining the most votes being elected. Because there is no minimum vote required, abstentions and broker non-votes will be entirely excluded from the vote and will havenoeffectonitsoutcome.Underthepluralityvotestandard,anysharesthatarenotvoted,whetherbyabstention,broker non-votes or otherwise, will not affect the election ofdirectors.
Proposal No. 2 — Ratification of independent registered public accounting firm. This proposal must be approved by the affirmative vote of the majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote, assuming a
quorum is present. Abstentions count as a vote “against” the proposal and broker non-votes will be entirely excluded from the vote and will have no effect on its outcome.
Proposal No. 3 – Approval of the amendment to the company’s Certificate of Incorporation, as amended, to increase our authorized shares of common stock, par value $0.001 per share, from 30,000,000 to 350,000,000 shares and to increase our authorized shares of preferred stock, par value $0.001 per share, from 5,000,000 to 150,000,000 shares. This proposal must be approved by the affirmative vote of the holders of a majority of the common stock outstanding and entitled to vote. Abstentions and broker non-votes will have the same effect as a vote against the this proposal.
Proposal No. 4 — Approval of the LM Funding America, Inc. 2021 Omnibus Incentive Plan.This proposal must be approved by the affirmative vote of the majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote, assuming a quorum is present. Abstentions count as a vote “against” the proposal and broker non-votes will be entirely excluded from the vote and will have no effect on its outcome.
Proposal No. 5 — Approval, on an advisory, non-binding basis, the compensation of our named executive officers. While this proposal is advisory in nature and non-binding, the Board will review the voting results and expects to take such results into consideration when making future decisions regarding executive compensation. Abstentions and broker non-votes will be entirely excluded from the vote and will have no effect on its outcome.
Proposal No. 6 — Approval, on an advisory, non-binding basis, the compensation of our named executive officers every three years. The voting frequency option that receives the highest number of votes cast by stockholders will be deemed the frequency for the advisory vote on executive compensation that has been selected by stockholders. Abstentions and broker non-votes will be entirely excluded from the vote and will have no effect on its outcome.
How will votes be counted?
All votes will be tabulated by the secretary of the company. We have engaged Broadridge Financial Solutions, Inc. to collect and tabulate proxy instructions.
Who is paying for the preparation and mailing of the proxy materials and how will solicitations be made?
We will pay the expenses of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees in person or by mail, telephone, facsimile or electronic transmission. We have requested brokerage houses and other custodians, nominees and fiduciaries to forward soliciting material to beneficial owners and have agreed to reimburse those institutions for their out-of-pocket expenses.
PROPOSAL 1
ELECTION OF DIRECTORS
Two directors are to be elected at the Annual Meeting. In accordance with the company’s Certificate of Incorporation, the Board of Directors is divided into three classes. Class I and Class II each consists of two directors, and Class III consists of three directors. All directors within a class have the same three-year terms of office. The class terms expire at successive annual meetings so that each year a class of directors is elected. The current terms of director classes were originallyare scheduled to expire at the annual meeting of shareholdersstockholders in 20192023 (Class I directors) 2020, 2021 (Class II directors) and 20212022 (Class III directors). However, because we did not have an annual meeting of shareholders in 2019,Accordingly, the Class III directors will be elected at this Annual Meeting of Shareholders, with the Class II directors being elected at the next annual meeting of shareholders
following this Annual Meeting of Shareholders.Stockholders. Each of the Class III directors elected at this Annual Meeting will be elected to serve a three-year term.
With the recommendation of the nominating and governance committee, the Board of Directors has nominated the following persons to stand for election as Class III directors at this Annual Meeting of Shareholders,Stockholders, with terms expiring at the third annual meeting of shareholdersstockholders following their election:
Mr. Bruce M.
Douglas I. McCree
Joel E. Rodgers
Ms. Carollinn Gould
Each of the nominees for election as a director has consented to serve if elected. If, as a result of circumstances not now known or foreseen, one or more of the nominees should be unavailable or unwilling to serve as a director, proxies may be voted for the election of such other persons as the Board of Directors may select. The Board of Directors has no reason to believe that any of the nominees will be unable or unwilling to serve.
The persons named in the enclosed proxy card intend, unless otherwise directed, to vote such proxy “FOR” the election of Mr. Bruce M.Douglas I. McCree and Mr. Joel E. Rodgers and Ms. Carollinn Gould as Class III directors of LM Funding America, Inc. The nominees receiving the two highest “FOR” vote totals will be elected as directors.
In the election of directors, the two highest recipients of “FOR” votes will be elected. A properly executed proxy card marked “WITHHOLD AUTHORITY” with respect to the election of one or more director nominees will not be voted with respect to the director or directors indicated, even though it will be counted for purposes of determining whether there is a quorum present at the Annual Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF EACH OF THE NOMINEES AS
DIRECTORS OF THE COMPANY
ITEM 1 ON YOUR PROXY CARD.
DIRECTORS
Set forth below is a summary of the background and experience of each director nominee and director. There is no family relationship among any of the directors and/or executive officers of the company except as follows: Mr. Bruce M. Rodgers, our Chairman, Chief Executive Officer and President, and Ms. Carollinn Gould, our Vice President—General Manager, Secretary, and director, have been married since 2004 and Joel E. Rodgers, Sr. is the father of Bruce M. Rodgers and the father-in-law of Carollinn Gould.
Directors Standing for Election (Class I)
Bruce M. Rodgers. Mr. Rodgers, age 56, serves as the Chairman of the Board of Directors, Chief Executive Officer and President of the company. Prior to that, Mr. Rodgers owned Business Law Group, P.A. (“BLG”) and served as counsel to the founders of LM Funding, LLC (“LMF”). Mr. Rodgers was instrumental in developing the company’s business model prior to inception. Mr. Rodgers transferred his interest in BLG to attorneys within the firm by means of redemption of such interest in BLG prior to the company going public in 2015. Mr. Rodgers is a former business transactions attorney and was an associate of Macfarlane, Ferguson, & McMullen, P.A. from 1991 to 1995 and a partner from 1995-1998 and was an equity partner of Foley & Lardner LLP from 1998 to 2003. Originally from Bowling Green, Kentucky, Mr. Rodgers holds an engineering degree from Vanderbilt University (1985) and a Juris Doctor, with honors, from the University of Florida (1991). Mr. Rodgers also served as an officer in the United States Navy from 1985-1989 rising to the rank of Lieutenant, Surface Warfare Officer. Mr. Rodgers is a member of the Florida Bar and holds an AV-Preeminent rating from Martindale Hubbell.
Mr. Rodgers brings to the Board of Directors considerable experience in business, management and law, and because of those experiences and his education, he possesses analytical and legal skills which are considered of importance to the operations of the company, the oversight of its performance and the evaluation of its future growth opportunities. Furthermore, his performance as Chief Executive Officer has indicated an in-depth understanding of the Company’s business.
Carollinn Gould. Ms. Gould, age 56, co-founded LMF in January 2008, and currently serves as Vice President—General Manager, Secretary and a director of the company. Prior to joining LMF, Ms. Gould owned and operated a recruiting company
specializing in the placement of financial services personnel. Prior to that, Ms. Gould worked at Outback Steakhouse (“OSI”) where she opened the first restaurant in 1989 and finished her career at OSI in 2006 as shared services controller for over 1,000 restaurants. Ms. Gould holds a Bachelor’s Degree in Business Management from Nova Southeastern University.
As a co-founder of LMF, Ms. Gould brings to our Board of Directors an encyclopedia of knowledge regarding LMF’s growth, operation, and procedures. Since inception, Ms. Gould has controlled all bank accounts of the company and managed its internal control systems. Ms. Gould also brings public company audit experience from her duties as controller at OSI as well as a wealth of personnel management and human resources skills.
Directors Continuing in Office
Directors whose present terms continue until the next annual meeting of shareholders (Class II):
Douglas I. McCree. Mr. McCree, age 54,56, has served as a director of the company since its initial public offering in October 2015. Mr. McCree has been with First Housing Development Corporation of Florida (“First Housing”) since 2000 and has served as its Chief Executive Officer since 2004. From 1987 through 2000, Mr. McCree held various positions with Bank of America, N.A. including Senior Vice President—Affordable Housing Lending. Mr. McCree serves on numerous professional and civic boards. He received a B.S. from Vanderbilt University majoring in economics. Mr. McCree brings to the Board of Directors many years of banking experience and a strong perspective on public company operational requirements from his experience as Chief Executive Officer of First Housing.
Joel E. Rodgers, Sr. Mr. Rodgers, age 82,84, has served as a director of the company since its initial public offering in October 2015. Mr. Rodgers has been Vice President of Allied Signal, Inc. (1987-1992) and CEO of Baron Blakeslee, Inc. (1985-1987). Since 1995, Mr. Rodgers has served as a part-time Professor at Nova Southeastern University teaching finance, statistics, marketing, operation, and strategy. He has published numerous articles dealing with empowerment and corporate leadership. Mr. Rodgers represented the United States State Department in China, Mexico and Brazil in negotiations regarding the Montreal Protocol, which dealt with limiting fluorocarbon discharge. Mr. Rodgers’ civic work extends to service on the library, hospital and municipal utility boards of Bowling Green, Kentucky. Mr. Rodgers holds a Doctorate of Business Administration from Nova Southeastern University, a Masters of Business Administration from University of Kentucky, a B.S. in Mechanical Engineering from University of New Mexico and was a University of Illinois PhD candidate. He brings to our Board of Directors a lifetime of management, finance and marketing experience as well as an academic career of study in each.
Directors Continuing in Office
Directors whose present terms continue until the secondnext annual meeting of shareholders following this Annual Meetingstockholders (Class III):
Martin A. TraberFrank Silcox. Mr. Traber,Silcox, age 74,57, has served as a director of the company since its initial public offering in OctoberJanuary 2021. Mr. Silcox has been a Managing Director of Osprey Capital since March 2015. From 2008 until 2015, Mr. Traber is currently Chairman of Skyway Capital Markets, LLC. From 1994 until 2016, Mr. TraberSilcox was co-founder and a partner of Foley & Lardner LLP, in Tampa, Florida, representing clients in securities law matters and corporate transactions. Mr. Traber is a founder of NorthStar Bank in Tampa, Florida and from 2007 to 2011 served as aManaging member of LM Funding, LLC, a wholly-owned subsidiary of the Boardcompany (“LMF”). Mr. Silcox has owned FS Ventures since 2003, which makes a variety of Directors of that institution.investments in real estate ventures. Mr. Traber served on the Board of Directors of JHS Capital Holdings, Tampa, Florida and on the Advisory Board of Platinum Bank, Tampa, Florida. From 2012 to 2013, he served on the Board of Directors of Exeter Trust Company, Portsmouth, New Hampshire. Mr. TraberSilcox holds a Bachelor of Arts and a Juris DoctorScience from Indiana University.the University of Tampa.
Mr. TraberSilcox brings considerable legal, financial and business experience to the Board of Directors. He has counseled and observed numerous businesses in a wide range of industries. The knowledge gained from his observations and his knowledge and experience in business transactions and securities law are considered important in monitoring the company’s performance and whewhen we consider and pursue business acquisitions and financial transactions. As a corporate and securities lawyer, Mr. Traber has a fundamental understanding of governance principles and business ethics. His knowledge of other businesses and industries are useful in determining management and director compensation.
Andrew L. Graham Graham.Mr. Graham, age 62,63, has served as a director of the company since its initial public offering in October 2015. Since June 2008, Mr. Graham has served as Vice President, General Counsel and Secretary of HCI Group, Inc. (NYSE:HCI). From 1999 to 2007, Mr. Graham served in various capacities, including as General Counsel, for Trinsic, Inc. (previously named Z-Tel Technologies, Inc.), a publicly-held provider of communications services headquartered in Tampa, Florida. Since 2011, Mr. Graham has served on the Internal Audit Committee of Hillsborough County, Florida. From 2007 to 2011, he served on the Board of Trustees of Hillsborough Community College, a state institution serving over 45,000 students annually.
Mr. Graham holds a Bachelor of Science, major in Accounting, from Florida State University and a Juris Doctor, as well as a Master of Laws (L.L.M.) in Taxation, from the University of Florida College of Law. Mr. Graham was licensed in Florida as a Certified Public Accountant from 1982 to 2001. As a Certified Public Accountant, he audited, reviewed and
compiled financial statements and prepared tax returns. Mr. Graham’s experience serving as general counsel to publicly-held companies brings to our Board of Directors a comprehensive understanding of public company operations, financial reporting, disclosure and corporate governance, as well a perspective regarding potential acquisitions. With his accounting education and experience, he also brings a sophisticated understanding of accounting principles, auditing standards, internal accounting control and financial presentation and analysisanalysis.
Frederick MillsMills. Mr. Mills age 62,63, has served as a director of the company since August 2018and2018 and has been a partner with the law firm Morrison & Mills, PA since 1989, a Tampa, Florida law firm that focuses on business law. Mr. Mills is also a founder and board member of Apex Labs, IncInc. (toxicology lab in Tampa FL). Mr. Mills serves on numerous professional and civic boards. He received a B.S. from the University of Florida majoring in accounting and received a J.D. from the University of Florida. Mr. Mills will bring to the Board of Directors many years of business and financial experience from his past experience as a founding board member and Audit Committee Chairman for Nature Coast Bank (OTCQB:NCBF), which was a publicly-held company, and his business law practice.
Directors whose present terms continue until the second annual meeting of stockholders following this Annual Meeting (Class I):
Bruce M. Rodgers. Mr. Rodgers, age 57, serves as the Chairman of the Board of Directors, Chief Executive Officer and President of the company. Prior to that, Mr. Rodgers owned Business Law Group, P.A. (“BLG”) and served as counsel to the founders of LM Funding, LLC, the company’s predecessor and wholly-owned subsidiary. Mr. Rodgers was instrumental in developing the company’s business model prior to inception. Mr. Rodgers transferred his interest in BLG to attorneys within the firm by means of redemption of such interest in BLG prior to the company going public in 2015. Mr. Rodgers is also Chief Executive Officer,
President and Chairman of the Board of Directors of LMF Acquisition Opportunities Inc a Nasdaq special purpose acquisition public company. Mr. Rodgers is a former business transactions attorney and was an associate of Macfarlane, Ferguson, & McMullen, P.A. from 1991 to 1995 and a partner from 1995-1998 and was an equity partner of Foley & Lardner LLP from 1998 to 2003. Originally from Bowling Green, Kentucky, Mr. Rodgers holds an engineering degree from Vanderbilt University (1985) and a Juris Doctor, with honors, from the University of Florida (1991). Mr. Rodgers also served as an officer in the United States Navy from 1985-1989 rising to the rank of Lieutenant, Surface Warfare Officer. Mr. Rodgers is a member of the Florida Bar and holds an AV-Preeminent rating from Martindale Hubbell.
Mr. Rodgers brings to the Board of Directors considerable experience in business, management and law, and because of those experiences and his education, he possesses analytical and legal skills which are considered of importance to the operations of the company, the oversight of its performance and the evaluation of its future growth opportunities. Furthermore, his performance as Chief Executive Officer has indicated an in-depth understanding of the company’s business.
Carollinn Gould. Ms. Gould, age 58, co-founded LMF in January 2008, and currently serves as a director of the company. From January 2008 to September 30, 2020, Mrs. Gould served as Vice President—General Manager, Secretary. Prior to joining LMF, Ms. Gould owned and operated a recruiting company specializing in the placement of financial services personnel. Prior to that, Ms. Gould worked at Outback Steakhouse (“OSI”) where she opened the first restaurant in 1989 and finished her career at OSI in 2006 as shared services controller for over 1,000 restaurants. Ms. Gould holds a Bachelor’s Degree in Business Management from Nova Southeastern University.
As a co-founder of LMF, Ms. Gould brings to our Board of Directors an encyclopedia of knowledge regarding LMF’s growth, operation, and procedures. Since inception, Ms. Gould has controlled all bank accounts of the company and managed its internal control systems. Ms. Gould also brings public company audit experience from her duties as controller at OSI as well as a wealth of personnel management and human resources skills.
Arrangements as to Selection and Nomination of Directors
We are aware of no arrangements as to the selection and nomination of directors.
Independent Directors
Based upon recommendations of our nominating and governance committee, the Board of Directors has determined that current directorseach of Messrs. McCree, Graham, Mills and TraberSilcox are “independent directors” meeting the independence tests set forth byin the rules of the NASDAQ Stock Market and Rule 10A-3(b)(i) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including having no material relationship with the company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). In the case of Mr. Traber, theThe Board of Directors considered his previous role as a partner of Foley & Lardner LLP, which provides legal services to the company. Mr. Traber is currently Chairman of Skyway Capital Markets to which we paid a total of $15,000 and $135,000 in 2018 and 2019, respectively, for a $125,000 fairness opinion for the acquisition of IIU, Inc. and a $25,000 deposit for another fairness opinion. We have has determined that the fees receivedJoel E. Rodgers, Sr. is not independent by the law firm amountreason of his family relationship to less than 1% of the firm’s total annual revenue, that the fees paid to Skyway Capital Markets was less than 1% of that firm’s total annual revenue, and also considered Mr. Traber’s personal financial substance, his other sources of income and his lack of dependence upon fees from the company.our Chief Executive Officer.
DIRECTOR COMPENSATION
The compensation of our non-employee directors is determined by the Board of Directors, which solicits a recommendation from the compensation committee.
Directors who are employees of the company do not receive any additional compensation for their service as directors. During 2018 and 2019, the company’s non-employee directors weredid not awardedearn any fees or other compensation for service to the company, which includes attendance at Board of Directors and committee meetings held during 2018 and 2019. In September 2020, the Board of Directors, based on the recommendation of the compensation committee, approved a special payment for each outside director to compensate its outside directors for the company’s non-payment of certain compensation since 2015. Such special payment was approved in the amount of $15,000 for each outside director for each year from 2017 to 2020 for which no payment was made to the outside directors. This payment was made in October 2020.
The following table sets forth information with respectbelow summarizes the compensation paid by the company to compensationnon-employee directors or earned by each of ourthe non-employee directors (other than “named executive officers”) duringfor the fiscal year ended December 31, 2018 and 2019.2020.
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(1) Bruce Rodgers, our chairman and chief executive officer, is not included in this table because he was an employee in 2020 and thus received no compensation for his services as director. The compensation received by Mr. Rodgers is set forth in the Summary Compensation Table below. Carollinn Gould was employed by LMF as its Vice President—General Manager and Secretary until September 30, 2020. Ms. Gould served as an executive officer of the company, but not a named executive officer, who did not receive any additional compensation for services provided as a director for the company’s fiscal year ended December 31, 2020. The compensation received by Ms. Gould as an employee of LMF is set forth in the section below entitled “Transactions With Related Persons.” (2) Represents fees paid in October 2020 for the period from January 1, 2017 through December 31, 2020, $15,000 of which is attributable to the period from January 1, 2020 through December 31, 2020. * Mr. Traber ceased to be a director of our company in January 2021. On October 27, 2021, we adopted a non-employee director compensation program that provides for annual retainer fees and equity awards for our non-employee directors. The program was adopted under the 2021 Omnibus Incentive Plan, which is described in more detail below. Under the non-employee director compensation program, each non-employee director receives an annual cash retainer of $60,000 (or $90,000 for audit committee members) payable in arrears in equal quarterly payments and pro-rated for partial years. Non-employee directors will also receive an annual stock option award to purchase a number of shares equal to $60,000 (or $90,000 for audit committee members) divided by the option exercise price (which will be equal to the fair market value of the company’s common stock on the date of grant), which annual awards will vest one-half on the 180th day after the grant date and one-half on the first anniversary of the grant date. The annual option award will be granted on the day of the company’s annual stockholder meeting each year. The program also provides for an initial option grant on the date on which a person first becomes a director of the company for a number of shares equal to $25,000 divided by the exercise price, and it provides for the grant of an option on October 28, 2021 to each non-employee director then serving on the board of directors to purchase a number of shares equal to $60,000 ($75,000 for audit committee members) divided by the exercise price, which was $5.95 per share. Options granted under the non-employee director compensation program will be subject to accelerated vesting upon a change of control of the company (as defined in the 2021 Omnibus Plan), and the options granted on October 28, 2021 will be subject to accelerated vesting in the event that the closing price of the company’s common stock exceeds $12.00 for ten consecutive trading days. The options granted on October 28, 2021 will not be exercisable unless and until the 2021 Omnibus Plan is approved by the company’s stockholders. |
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TRANSACTIONS WITH RELATED PERSONS
Transactions with Business Law Group
LMF has engaged BLG on behalf of many of its Associationincorporated nonprofit community association clients, or “Associations,” to service and collect the accounts and to distribute the proceeds as required by Florida law and the provisions of the purchase agreements between LMF and the Associations. In addition, Ms. Gould entered an employment agreement to work part-time for LMF.LMF, pursuant to which she received $119,431 and $132,693 for the years ended December 31, 2020 and 2019, respectively. Ms. Gould’s employment agreement with LMF permits her to also work as General Manager of BLG, which pays her additional compensation of $150,000
$300,000 per year.Ms. Gould terminated her employment with the company on September 30, 2020. Ms. Gould received a $450,000 severance payment in 2020 in connection with the termination of her employment.
Frank Silcox, a director of the company has been employed by BLG since 2021 as business development director in which he is paid $24,000 a year in cash compensation and health benefits in the amount of approximately $6,720 per year. The amount paid to Mr. Silcox by BLG in 2020 and 2019 was $0 and $0 in cash, respectively, and $0 and $0 in health benefits, respectively.
IIU Acquisition and Disposal
On November 2, 2018, the Company invested cash by purchasingcompany purchased a Securities Purchase AgreementSenior Convertible Promissory Note in the original principal amount of $1,500,000 (the “IIU SPA”Note”) from IIU, Inc. (“IIU”), a synergistic Virginia based travel insurance brokerage company controlled by Craven House North America, LLC (“Craven”) N.A., (whose At the time of the investment, Craven’s ownership in the our company, excluding unexercised warrants, was approximately 20% of the Company’sour company’s outstanding stock at the time of the acquisition) pursuant to which IIU issued to the Company a Senior Convertible Promissory Note (“IIU Note”) in the original principal amount of $1,500,000.stock. The maturity date of the IIU Note was 360 datesdays after the date of issuance (subject to acceleration upon an event of default). The IIU Note carried a 3.0% interest rate, with accrued but unpaid interest being payable on the IIU Note’s maturity date.
On January 16, 2019, the Companycompany entered into a Stock Purchase Agreement with Craven (the “IIU SPA”) to purchase all of outstanding capital stock of IIU as a possible synergistic effort to diversify revenue sources that are believed to be accretive to earnings. IIU provides global medical insurance products for international travelers, specializing in policies covering high-risk destinations, emerging markets and foreign travelers coming to the United States. All policies are fully underwritten with no claim risk remaining with IIU.
The Company purchased 100% of the issued and outstanding capital stock of IIU, from Cravenand such transaction closed on the same date. The purchase price paid by the company for $5,089,357 subject to adjustment as set forth in the IIU SPA. IIU was required to have a minimum net working capital of $15,000 and at least $152,000 in cash. The Company paid the Purchase Priceacquired stock under the IIU SPA at closing as follows:
The Company cancelledconsisted of (1) the company’s cancellation of all principal and accrued interest ofoutstanding under the IIU Note which consistedand (2) the company’s issuance of a convertible promissory note to Craven in the aggregate principal indebtedness and accrued interestamount of $1,507,375 as of January 16, 2019.
The Company issued to Craven a $3,581,982 Senior Convertible Promissory Note$3,581,982.16 (the “Craven Convertible Note”) for. Also on January 16, 2019, Mark Pajak, the balance of the purchase price. At the optionPresident and Chairman of Craven, became the Craven Convertible Note could be paid in restricted sharesChief Operating Officer of our common stock or cash. The Craven Convertible Note bore simple interest at 3% per annum. The Craven Convertible Note was due and payable 360 days from the closing date of the IIU SPA. If repaid by the Company in restricted common stock, the outstanding principal and interest of the Craven Convertible Note would be paid by the Company by issuing to Craven a number of restricted common shares equal to the adjusted principal and accrued interest owing to Craven under the Craven Convertible Note divided by $2.41.company.
Pursuant to the terms of the IIU SPA, the purchase price was subsequently reduced by $120,200, to $4,969,200.
On December 20, 2019, the Company loaned $1.5 million to Craven (“Craven Secured Promissory Note”) which had an initial maturity date of April 15, 2020 and carried an interest rate of 0.5% that is to be paid monthly. The Company subsequently extended the due date of the Craven Secured Promissory Note to August 1, 2021. The Craven Secured Promissory Note is secured by, among other things, Stock Pledge of Craven’s 640,000 Common Shares of the Company and the Assignment of the assets of Craven in favor of the Company.
IIU Disposal
On January 8, 2020, the Companycompany entered into a Stock Purchase Agreement (“SPA”SPA”) with Craven pursuant to which the Companycompany sold back to Craven all of the issued and outstanding shares of IIU Inc., a Virginia based travel insurance brokerage company and wholly owned subsidiary of LMFA (“IIU”), for $3,562,569. The purchase price was paid by Craven through the cancellation of the $3,461,782Craven Convertible Promissory Note issued by LMFA to Craven dated January 16, 2019 plus forgiveness of $100,787 of accrued interest. LMFA originally paid $4,969,200 forIn connection with the purchase of IIU in January 2019, which included a negative $720,386 net fair value of assets and $5,689,586 of goodwill. LMFA estimates the sale of IIU will result in a loss of approximately $1.65 million.
One oftransaction, Mark Pajak resigned as our directors, Martin A. Traber, is a former partner at the law firm of Foley & Lardner LLP retiring in 2016. Since our inception in 2015, the firm has provided legal representation to us. During 2019, 2018 and 2017, Foley & Lardner LLP billed us approximately $58,000, $239,000 and $50,000, respectively, which represents less than 1% of Foley & Lardner’s annual fee revenue. These services were provided on an arm’s-length basis and paid for at fair market value. We believe that such services were performed on term at least as favorable to us as those that would have been realized in transactions with unaffiliated entities or individuals.company’s Chief Operating Officer.
Consulting Services
One of our directors, Martin A. Traber, is a former director of the company, who resigned in January 2021. Mr. Traber serves as Chairman atof Skyway Capital Markets, which billed us $15,000 in 2018 and $110,000$135,000 in 2019 for a fairness opinion and $25,000 in 2019 for a future fairness opinion, the total ofopinions, which represents less than 1% of Skyway Capital MarketsMarkets’ annual revenue. These services were provided on an arm’s-length basis and paid for at fair market value. We believe that such services were performed on termterms at least as favorable to us as those that would have been realized in transactions with unaffiliated entities or individuals.
ADVERSE INTERESTS
We are not aware of any material proceedings in which an executive officer or director is a party adverse to the company or has a material interest adverse to the company.
Delinquent Section 16(a) ReportsDELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our executive officers and directors, and beneficial owners of more than 10% of our common stock to file reports regarding ownership of, and transactions in, our securities with the SEC and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us we believe that during the twelve months ended December 31, 2019,2020, all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were timely complied with, except for an inadvertent late Form 4 filing made by Craven House Capital North America LLC on June 7, 2019, which pertained to a reportable transaction that occurred on May 30, 2019 and an inadvertent late Form 4 filing made by Craven House Capital North America LLC on August 28, 2019, which pertained to a reportable transaction that occurred on August 22, 2019.with.
CODE OF ETHICS
We have adopted a code of ethics applicable to all employees and directors, including our Chief Executive Officer and Chief Financial Officer. We have posted the text of our code of ethics to our internet web site:website: www.lmfunding.com by clicking “Investors” at the top and then “Corporate Governance” and then the appropriate “Code of Ethics”. We intend to disclose any change to or waiver from our code of ethics by posting such change or waiver to our internet web sitewebsite within the same section as described aboveabove.
CORPORATE GOVERNANCE GUIDELINES
We have adopted Corporate Governance Guidelines to promote effective governance of the company. A current copy of our Corporate Governance Guidelines is available on our website www.lmfunding.com by clicking “Investors” at the top and then “Corporate Governance” and then “Corporate Governance Guidelines.”
ANTI-HEDGING POLICIES
Our Board of Directors has adopted an Insider Trading Policy which applies to all of our directors, officers and designated employees. The policy prohibits our directors, officers and designated employees from engaging in hedging transactions, short sales and transactions in publicly traded options, such as puts, calls and other derivatives, involving our equity securities.
MEETINGS OF THE BOARD OF DIRECTORS
TheDuring 2020, our Board of Directors held ten meetings in 2018meetings. During each of 2019 and eight meetings in 2019. During 2018 or 2019,2020, no director attended less than 75% of the Board of DirectorsDirectors’ and applicable committee meetings. In addition, the independent directors met in executive session periodically in 2020 and all seven directors attended either telephonically or in person the annual meeting of stockholders held on Monday, May 11, 2020..
BoardWe have not established a policy with regard to the attendance of board members are encouraged, but not required to attend the Annual Meeting of the Shareholders.at annual stockholder meetings.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
We have established procedures by which shareholdersstockholders may communicate with members of the Board of Directors, individually or as a group. ShareholdersStockholders wishing to communicate with the Board of Directors or a specified member of the Board may send written communications addressed to: Board of Directors, LM Funding America, Inc., Attention: Bruce M. Rodgers, Chief Executive Officer, 1200 West Platt Street, Suite 100, Tampa, Florida 33606. The mailing envelope should clearly specify the intended recipient or recipients, which may be the Board of Directors as a group or an individual member of the Board. The communication should include the shareholder’sstockholder’s name and the number of shares owned. Communications that are
not racially, ethically or religiously offensive, commercial, pornographic, obscene, vulgar, profane, defamatory, abusive, harassing, threatening, malicious, false or frivolous in nature will be promptly forwarded to the specified members of the Board of Directors. We have also established procedures by which all interested parties (not just shareholders)stockholders) may communicate directly with our non-management or independent directors as a group. Any interested party wishing to communicate with our non-management or independent directors as a group may send written communications addressed to: Board of Directors, LM Funding America, Inc., Attention: Bruce M. Rodgers, Chief Executive Officer, 1200 West Platt Street, Suite 100, Tampa, Florida 33606. The mailing envelope should clearly specify the intended recipients, which may be the non-management directors or the independent directors as a group. The envelope will be promptly forwarded for distribution to the intended recipients.recipients.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an audit committee, a compensation committee and a nominating and governance committee.
Audit Committee
The company has a separately-designated standing audit committee established in accordance with the Securities and Exchange Act of 1934. The audit committee’s responsibilities include the following:
| assisting our Board of Directors in its oversight of the quality and integrity of our accounting, auditing, and reporting practices;
The audit committee is composed of three members: Andrew Graham, its chairman, Fred Mills and Douglas I. McCree. Since our common shares are listed on the Nasdaq Capital A current copy of the charter is available on our website www.lmfunding.com by clicking “Investors” and then “Corporate Governance.” Compensation Committee The compensation committee’s responsibilities include the following: reviewing and approving the compensation programs applicable to our executive officers; recommending to the Board of Directors and periodically reviewing policies for the administration of the executive compensation programs; reviewing and approving the corporate goals and objectives relevant to the compensation of the executive officers, evaluating the performance of the executive officers in light of those goals, objectives and strategies, and setting the compensation level of the executive officers based on this evaluation; reviewing on a periodic basis the operation of our executive compensation programs to determine whether they are properly coordinated and achieving their intended purposes; administering and making awards under the company’s 2015 Omnibus Incentive Plan and monitoring and supervising the administration of any other benefit plans the company may have; and reviewing and approving compensation to outside directors. The compensation committee has the authority to determine the compensation of the named executive officers, except the
A current copy of the charter is available on our website www.lmfunding.com by clicking “Investors” and then “Corporate Governance.” Nominating and Governance Committee The nominating and governance committee’s responsibilities include the following:
The nominating and governance committee is composed of three members: Andrew Graham, its chairman, Douglas I. McCree, Each of the proposed director nominees was recommended by the nominating and governance committee to the Board of Directors. The nominating and governance committee identifies director candidates in numerous ways. Generally, the candidates are known to and recommended by members of the Board of Directors or management. In evaluating director candidates, the nominating and governance committee considers a variety of attributes, criteria and factors, including experience, skills, expertise, diversity, personal and professional integrity, character, temperament, business judgment, time availability, dedication and conflicts of interest. At a minimum, director candidates must be at least 18 years of age and have such business, financial, technological or legal experience or education to enable them to make informed decisions on behalf of the company. The nominating and governance committee has not adopted a specific policy on diversity. The nominating and governance committee will consider director candidates recommended by A Board of Directors Leadership Structure Our business and affairs are managed under the direction of the Board of Directors. Under our current leadership structure, Bruce M. Rodgers serves as Chairman of the Board of Directors, Chief Executive Officer and President. Mr. Rodgers’ role includes providing continuous feedback on the direction and performance of the company, serving as chairman of regular meetings of the Board of Directors, setting the agenda for the meetings of the Board of Directors and leading the Board of Directors in anticipating and responding to changes in our business. Mr. Rodgers plays a significant role also in formulating and executing the company’s strategic plans, financing activity and investment decisions. We believe board oversight and planning is a collaborative effort among the directors, each of whom has unique skills, experience and education, and this structure facilitates collaboration and communication among the directors and management and makes the best use of their respective skills. The Board of Directors periodically reviews the board leadership structure to evaluate whether the structure remains appropriate for the company and may determine to alter this leadership structure anytime based on then existing circumstances. Board of Directors’ Role in Risk Oversight The Board of Directors plays a significant role in monitoring risks to the company. Where major risks are involved, the Board of Directors takes a direct role in reviewing those matters. The Board of Directors also approves any strategic initiatives and any large or unusual investment or other such expenditure of the company’s resources. The Board of Directors has established committees to assist in ensuring that material risks are identified and managed appropriately. Among them are the audit committee, the compensation committee, and the nominating and governance committee. The Board of Directors and its committees regularly review material operational, financial, compensation and compliance risks with executive management. The audit committee is responsible for assisting the Board of Directors in its oversight of the quality and integrity of our accounting, auditing, and reporting practices and discussing with management our processes to manage business and financial risk. The compensation committee considers risk in connection with its design of our compensation programs for our executives. The nominating and governance committee regularly reviews the company’s corporate governance structure and board committee assignments. Each committee regularly reports to the Board of Directors.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Malone Bailey LLP was our principal registered public accounting firm for AUDIT FEES The following table sets forth the aggregate fees for services related to the years ended December 31,
PRE-APPROVAL POLICIES All auditing services and non-auditing services are pre-approved by the audit committee. The audit committee has delegated this authority to the chairman of the audit committee for situations when pre-approval by the full audit committee is inconvenient. Any decisions by the chairman of the audit committee must be disclosed at the next audit committee meeting. AUDIT COMMITTEE REPORT The audit committee oversees the financial reporting processes of LM Funding America, Inc. on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the audit committee reviewed the audited financial statements in the Annual Report with management and discussed with management the quality, in addition to the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The audit committee reviewed with representatives of Malone Bailey LLP, the company’s independent registered public accounting firm responsible for auditing the company’s financial statements and expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States of America, their judgments as to the quality, not just the acceptability, of the company’s accounting principles. The audit committee has discussed with the independent registered public accounting firm the matters required to be discussed under auditing standards adopted by the Public Company Accounting Oversight Board. The audit committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. The audit committee discussed with representatives of Malone Bailey LLP, the overall scope and plans for their audit. The audit committee met with representatives of Malone Bailey LLP, with and without management present, to discuss the results of their examinations, their evaluations of the company’s internal controls, and the overall quality of the company’s financial reporting. In reliance on the reviews and discussions referred to above, the audit committee recommended to the Board of Directors the inclusion of the audited financial statements in the company’s Annual Reports on Form 10-K for the year ended December 31, This report of the audit committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such acts. AUDIT COMMITTEE Andrew Graham, Chairman Fred Mills
PROPOSAL 2 RATIFICATION OF MALONE BAILEY LLP
The Our Bylaws do not require that the stockholders ratify the appointment of Malone Bailey as our independent registered public accounting firm. We are seeking ratification because we believe it is a sound corporate governance practice. If the stockholders do not ratify the appointment, We expect that representatives of Malone Bailey, LLP will be either physically present or available via phone at the Annual Meeting. They will be given the opportunity to make a statement if they desire to do so, and they will be available to respond to appropriate questions after the RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF MALONE BAILEY LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT YEAR.
ITEM 2 ON YOUR PROXY CARD.
PROPOSAL 3 APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, TO
General You are being asked to approve an amendment Current Capitalization As of October 25, 2021, we were authorized to
As of October 25, 2021, we were authorized to Purpose and Effects of Amendment Our Board of Directors is recommending the Our Board of Directors believes it is in the best interest of the company to increase the number of authorized shares of common stock and preferred stock in order to give the company greater flexibility in considering and planning for future potential business needs. Having the additional authorized common shares and preferred shares available is important to our If this proposal is approved, the additional authorized common shares and preferred shares may be issued at the discretion of our Board of Directors
Effectiveness of the Amendment If the proposed amendment to
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION ITEM 3 ON YOUR PROXY CARD.
PROPOSAL 4
APPROVAL OF OUR 2021 OMNIBUS INCENTIVE PLAN General On October 27, 2021, our Board of Directors adopted the LM Funding America, Inc. 2021 Omnibus Incentive Plan (the “Plan” or the “2021 Omnibus Plan”) and recommended that the Plan be submitted for the approval our stockholders at the Annual Meeting. If approved by our stockholders, the Plan authorizes the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code (the “Code”), to our employees and any of our parent and subsidiary corporations’ employees, and the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to our employees, directors and consultants and any of our future subsidiary corporations’ employees and consultants. The 2021 Omnibus Plan is intended to allow us to continue to use equity awards as part of our ongoing compensation strategy for our key employees. Awards under the Plan will support the creation of long-term value and returns for our stockholders. The purpose of the Plan is to promote the best interests of the company and our stockholders by providing key employees, consultants and non-employee directors with an opportunity to acquire our shares or receive monetary payments. The Plan is intended to promote management continuity and increased incentive and personal interest in the welfare of the company by those key employees who are primarily responsible for shaping and carrying out our long-range plans and securing our continued growth and financial success. In addition, by encouraging stock ownership by non-employee directors, we seek to attract and retain highly competent board members and to provide a further incentive to serve as a director of our company. The 2021 Omnibus Plan became effective on October 27, 2021, provided that no options or stock appreciation rights granted under the Plan will be exercisable and no shares or restricted stock units may be granted under the Plan unless and until the Plan has been approved by the stockholders of the ompany, which approval must occur on or within twelve (12) months of the date on which the Plan became effective. Background of the Plan; Dilutive Impact Prior to the 2021 Omnibus Plan, we maintained the LM Funding America, Inc. 2015 Omnibus Incentive Plan (the “2015 Plan”). The 2015 Plan originally authorized the grant of equity awards with respect to an aggregate of 12,000 shares of our common stock, and as of October 19, 2021, there were outstanding options under the 2015 Plan with respect to an aggregate of 3,860 shares. Accordingly, an aggregate of only approximately 8,140 shares remain available for the grant of new awards under the 2015 Plan. The Board of Directors believes that this is insufficient for our future growth and recommended that 5,000,000 shares be authorized for awards under the 2021 Omnibus Plan, subject to annual increases as described below. Our Board of Directors believes that approval of the 2021 Omnibus Plan is essential to build and grow our business by making available a pool of equity awards that can be granted to directors, officers, and employees of our company, as the Board of Directors believes that such awards motivate high levels of performance, align the interests of our employees and stockholders by giving employees the perspective of an owner with an equity stake in the company, and provide an effective means of recognizing employee contributions to the success of the company. The Board believes that equity awards are a competitive necessity in the environment in which we operate and are essential to our future success at recruiting and retaining the highly qualified technical and other key personnel who will help the company meet its goals, as well as rewarding and encouraging current employees. The Board believes that the ability to continue to grant meaningful equity awards will be important to our future success. In setting the new amount of shares authorized under the 2021 Omnibus Plan, the Board considered, among other factors, the historical amounts of equity awards granted by the company, the potential future grants over the next several years, and the recommendations by the company’s officers. Based solely on the closing price of our common stock as reported on the NASDAQ Capital Market on October 19, 2021, the approximate aggregate market value of the 5,000,000 shares that could potentially be initially issued under the Plan Amendment (before annual increases) is $30,500,000. Upon the adoption of the Plan, the Board terminated the 2015 Plan, provided that the 2015 Plan will continue to govern outstanding awards previously made under such plan. Accordingly, no new awards will be granted under the 2015 Plan. Summary of the Terms of the 2021 Omnibus Plan The following is a summary of certain terms and conditions of the Plan. This summary is qualified in its entirety by reference to the Plan, a copy of which is attached as Appendix B to this Proxy Statement. You are encouraged to read the full text of the 2021 Omnibus Plan. Plan Administration The 2021 Omnibus Plan is administered by our Board of Directors or our compensation committee, or any other committee or subcommittee or one or more of our officers to whom authority has been delegated (collectively, the “Administrator”). The Administrator has the authority to interpret the 2021 Omnibus Plan and award agreements entered into with respect to the 2021 Omnibus Plan; to make, change and rescind rules and regulations relating to the 2021 Omnibus Plan; to make changes to, or reconcile any inconsistency in, the 2021 Omnibus Plan or any award agreement covering an award; and to take any other actions needed to administer the 2021 Omnibus Plan. Eligibility The Administrator may designate any of the following as a participant under the 2021 Omnibus Plan: any officer or employee, or individuals engaged to become an officer or employee, of our company or our affiliates; and consultants of our company or our affiliates, and our directors, including our non-employee directors. As of October 19, 2021, we had an total of fourteen employees, directors, and officers eligible to be a participant under the 2021 Omnibus Plan. Types of Awards The 2021 Omnibus Plan permits the Administrator to grant stock options, stock appreciation rights (“SARs”), performance shares, performance units, shares of common stock, restricted stock, restricted stock units (“RSUs”), cash incentive awards, dividend equivalent units, or any other type of award permitted under the 2021 Omnibus Plan. The Administrator may grant any type of award to any participant it selects, but only our employees or our subsidiaries’ employees may receive grants of incentive stock options within the meaning of Section 422 of the Code. Awards may be granted alone or in addition to, in tandem with, or (subject to the repricing prohibition described below) in substitution for any other award (or any other award granted under another plan of our company or any affiliate, including the plan of an acquired entity). Shares Reserved Under the 2021 Omnibus Plan The 2021 Omnibus Plan provides that 5,000,000 shares of our common stock are initially reserved for issuance under the 2021 Omnibus Plan, all of which may be issued pursuant to the exercise of incentive stock options. The number of shares available for issuance under our 2021 Omnibus Plan will also include an annual increase on the first day of each fiscal year beginning with our 2023 fiscal year (so long as the number of authorized shares of common stock in the company’s certificate of incorporation has been increased to at least 100,000,000 shares prior to such date), equal to the lesser of: 1,000,000 shares; 10% of the outstanding shares of all class of our common stock as of the last day of the immediately preceding fiscal year; or such other amount as our Board of Directors may determine. The number of shares reserved for issuance under the 2021 Omnibus Plan will be reduced on the date of the grant of any award by the maximum number of shares, if any, with respect to which such award is granted. However, an award that may be settled solely in cash will not deplete the 2021 Omnibus Plan’s share reserve at the time the award is granted. If (a) an award expires, is canceled, or terminates without issuance of shares or is settled in cash, (b) the Administrator determines that the shares granted under an award will not be issuable because the conditions for issuance will not be satisfied, (c) shares are forfeited under an award, (d) shares are issued under any award and we reacquire them pursuant to our reserved rights upon the issuance of the shares, (e) shares are tendered or withheld in payment of the exercise price of an option or as a result of the net settlement of outstanding stock appreciation rights or (f) shares are tendered or withheld to satisfy federal, state or local tax withholding obligations, then those shares are added back to the reserve and may again be used for new awards under the 2021 Omnibus Plan. However, shares added back to the reserve pursuant to clauses (d), (e) or (f) in the preceding sentence may not be issued pursuant to incentive stock options. Options and Stock Appreciation Rights. The Administrator may grant stock options and determine all terms and conditions of each stock option, which include the number of stock options granted, whether a stock option is to be an incentive stock option (“ISO”) or non-qualified stock option (“NQSO”), and the grant date for the stock option. However, the exercise price per share of common stock may never be less than the fair market value of a share of common stock on the date of grant and the expiration date may not be later than 10 years after the date of grant. Stock options will be exercisable and vest at such times and be subject to such restrictions and conditions as are determined by the Administrator, including with respect to the manner of payment of the exercise price of such stock options. The Administrator may also grant SARs, which represent the right of a participant to receive cash in an amount, or common stock with a fair market value, equal to the appreciation of the fair market value of a share of common stock during a specified period of time. The 2021 Omnibus Plan provides that the Administrator will determine all terms and conditions of each SAR, including, among other things: (a) whether the SAR is granted independently of a stock option or relates to a stock option, (b) the grant price, which may never be less than the fair market value of our common stock as determined on the date of grant, (c) a term that must be no later than 10 years after the date of grant, and (d) whether the SAR will settle in cash, common stock or a combination of the two. Performance and Stock Awards. The Administrator may grant awards of shares of common stock, restricted stock, RSUs, performance shares or performance units. Restricted stock means shares of common stock that are subject to a risk of forfeiture or restrictions on transfer, which may lapse upon the achievement or partial achievement of performance goals (as described below) or upon the completion of a period of service. An RSU grants the participant the right to receive cash or shares of common stock the value of which is equal to the fair market value of one share of common stock, to the extent performance goals are achieved or upon the completion of a period of service. Performance shares give the participant the right to receive shares of common stock to the extent performance goals are achieved. Performance units give the participant the right to receive cash or shares of common stock valued in relation to a unit that has a designated dollar value or the value of which is equal to the fair market value of one or more shares of common stock, to the extent performance goals are achieved. Cash Incentive Awards The Administrator may grant cash incentive awards. An incentive award is the right to receive a cash payment to the extent one or more performance goals are achieved. The Administrator will determine all terms and conditions of a cash incentive award, including, but not limited to, the performance goals (described below), the performance period, the potential amount payable, and the timing of payment. While the 2021 Omnibus Plan permits cash incentive awards to be granted under the 2021 Omnibus Plan, we may also make cash incentive awards outside of the 2021 Omnibus Plan. The Administrator will determine all terms and conditions of the awards including (a) whether performance goals must be achieved for the participant to realize any portion of the benefit provided under the award, (b) the length of the vesting or performance period and, if different, the date that payment of the benefit will be made, (c) with respect to performance units, whether to measure the value of each unit in relation to a designated dollar value or the fair market value of one or more shares of common stock, and (d) with respect to performance shares, performance units, and RSUs, whether the awards will settle in cash, in shares of common stock (including restricted stock), or in a combination of the two. Performance Goals For purposes of the 2021 Omnibus Plan, the Administrator may establish objective or subjective performance goals which may apply to any performance award. Such performance goals may include, but are not limited to, one or more of the following measures with respect to our company or any one or more of our subsidiaries, affiliates, or other business units: basic earnings per common share for our company on a consolidated basis; diluted earnings per common share for our company on a consolidated basis; total stockholder return; fair market value of shares; net sales; cost of sales; gross profit; selling, general and administrative expenses; operating income; earnings before interest and the provision for income taxes (EBIT); earnings before interest, the provision for income taxes, depreciation, and amortization (EBITDA); net income; accounts receivable; return on equity; return on assets; return on invested capital; return on sales; economic value added, or other measure of profitability that considers the cost of capital employed; free cash flow; net cash provided by operating activities; net increase (decrease) in cash and cash equivalents; customer satisfaction; market share; and/or quality.. Performance goals may also relate to a participant’s individual performance. The Administrator reserves the right to adjust any performance goals or modify the manner of measuring or evaluating a performance goal. Dividend equivalent rights. The Administrator may grant dividend equivalent units. A dividend equivalent unit gives the participant the right to receive a payment, in cash or shares of common stock, equal to the cash dividends or other distributions that we pay with respect to a share of common stock. We determine all terms and conditions of a dividend equivalent unit award, except that dividend equivalent units may not be granted in connection with a stock option or SAR, and dividend equivalent unit awards granted in connection with another award cannot provide for payment until the date such award vests or is earned, as applicable. Other stock-based awards. The Administrator may grant to any participant shares of unrestricted stock as a replacement for other compensation to which such participant is entitled, such as in payment of director fees, in lieu of cash compensation, in exchange for cancellation of a compensation right or as a bonus. Transferability Awards are not transferable, including to any financial institution, other than by will or the laws of descent and distribution, unless the Administrator allows a participant to (a) designate in writing a beneficiary to exercise the award or receive payment under the award after the participant’s death, (b) transfer an award to a former spouse as required by a domestic relations order incident to a divorce, or (c) transfer an award without receiving any consideration. Adjustments If (a) we are involved in a merger or other transaction in which our shares of common stock are changed or exchanged; (b) we subdivide or combine shares of common stock or declare a dividend payable in shares of common stock, other securities, or other property (other than stock purchase rights issued pursuant to a stockholder rights agreement); (c) we effect a cash dividend that exceeds 10% of the fair market value of a share of common stock or any other dividend or distribution in the form of cash or a repurchase of shares of common stock that our Board of Directors determines is special or extraordinary, or that is in connection with a recapitalization or reorganization; or (d) any other event occurs that in the Administrator’s judgment requires an adjustment to prevent dilution or enlargement of the benefits intended to be made available under the 2021 Omnibus Plan, then the Administrator will, in a manner it deems equitable, adjust any or all of (1) the number and type of shares subject to the 2021 Omnibus Plan and which may, after the event, be made the subject of awards; (2) the number and type of shares of common stock subject to outstanding awards; (3) the grant, purchase, or exercise price with respect to any award; and (4) the performance goals of an award. In any such case, the Administrator may also provide for a cash payment to the holder of an outstanding award in exchange for the cancellation of all or a portion of the award, subject to the terms of the 2021 Omnibus Plan. The Administrator may, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, authorize the issuance or assumption of awards upon terms and conditions we deem appropriate without affecting the number of shares of common stock otherwise reserved or available under the 2021 Omnibus Plan. Change of Control Upon a change of control (as defined in the 2021 Omnibus Plan), in order to preserve a participant’s rights under an award, the Administrator in its discretion may, at the time an award is made or at any time thereafter, take one or more of the following actions: (a) provide for the acceleration of any time period, or the deemed achievement of any performance Goals, relating to the exercise or realization of the award; (b) provide for the purchase or cancellation of the award for an amount of cash or other property that could have been received upon the exercise or realization of the award had the award been currently exercisable or payable (or the cancellation of awards in exchange for no payment to the extent that no cash or other property would be received upon the exercise or realization of the award in such circumstances); (c) adjust the terms of the award in the manner determined by the Administrator to reflect the change of control; (d) cause the award to be assumed, or new right substituted therefor, by another entity; or (e) make such other provision as the Administrator may consider equitable and in the best interests of our company. Non-Employee Directors Non-employee directors will be eligible to receive all types of awards (except for incentive stock options) under our 2021 Omnibus Plan. To provide a maximum limit on the cash compensation and equity awards that can be made to our non-employee directors, the 2021 Omnibus Plan provides that in any given fiscal year, an outside director may not be granted shares under our 2021 Omnibus Plan with an aggregate grant date fair value, when added to any cash compensation received by the non-employee directors, of greater than $300,000. Term of Plan Unless earlier terminated by our Board of Directors, the 2021 Omnibus Plan will terminate on, and no further awards may be granted, after the 10th anniversary of its effective date. Termination and Amendment of Plan Our Board of Directors or the Administrator may amend, alter, suspend, discontinue or terminate the 2021 Omnibus Plan at any time, subject to the following limitations: Our Board of Directors must approve any amendment to the 2021 Omnibus Plan if we determine such approval is required by prior action of our Board of Directors, applicable corporate law, or any other applicable law; Stockholders must approve any amendment to the 2021 Omnibus Plan, which may include an amendment to materially increase the number of shares reserved under the 2021 Omnibus Plan, if we determine that such approval is required by Section 16 of the Securities Exchange Act of 1934, as amended, the Internal Revenue Code, the listing requirements of any principal securities exchange or market on which the shares are then traded, or any other applicable law; and Stockholders must approve any amendment to the 2021 Omnibus Plan that would diminish the protections afforded by the participant award limits or repricing and backdating prohibitions. Amendment, Modification, Cancellation and Disgorgement of Awards Subject to the requirements of the 2021 Omnibus Plan, the Administrator may modify or amend any award or waive any restrictions or conditions applicable to any award or the exercise of the award, or amend, modify, or cancel any terms and conditions applicable to any award, in each case, by mutual agreement of the Administrator and the participant or any other person that may have an interest in the award, so long as any such action does not increase the number of shares of common stock issuable under the 2021 Omnibus Plan. We do not need to obtain participant (or other interested party) consent for any such action (a) that is permitted pursuant to the adjustment provisions of the 2021 Omnibus Plan; (b) to the extent we deem the action necessary to comply with any applicable law or the listing requirements of any principal securities exchange or market on which our common stock is then traded; (c) to the extent we deem the action is necessary to preserve favorable accounting or tax treatment of any award for us; or (d) to the extent we determine that such action does not materially and adversely affect the value of an award or that such action is in the best interest of the affected participant or any other person as may then have an interest in the award. The Administrator can cause a participant to forfeit any award, and require the participant to disgorge any gains attributable to the award, if the participant engages in any action constituting, as determined by the Administrator in its discretion, cause for termination, or a breach of a material company policy, any award agreement or any other agreement between the participant and us or one of our affiliates concerning noncompetition, nonsolicitation, confidentiality, trade secrets, intellectual property, nondisparagement or similar obligations. Any awards granted under the 2021 Omnibus Plan, and any shares of common stock issued or cash paid under an award, will be subject to any recoupment or clawback policy that we adopt, or any recoupment or similar requirement otherwise made applicable by law, regulation or listing standards to us. Repricing and Backdating Prohibited Except for the adjustments provided for in the 2021 Omnibus Plan, neither the Administrator nor any other person may amend the terms of outstanding stock options or SARs to reduce their exercise or grant price, cancel outstanding stock options or SARs in exchange for stock options or SARs with an exercise or grant price that is less than the exercise or grant price of the awards being cancelled, or cancel outstanding stock options or SARs with an exercise or grant price above the current fair market value of a share in exchange for cash or other securities. In addition, the Administrator may not grant a stock option or SAR with a grant date that is effective prior to the date the Administrator takes action to approve such award. Certain Federal Income Tax Consequences for the 2021 Plan The following is a general summary of the federal income tax consequences under current U.S. tax law to the company and to participants in the 2021 Omnibus Plan who are individual citizens or residents of the United States for federal income tax purposes (“U.S. Participants”) of stock options, stock appreciation rights, performance shares, performance units, restricted stock, restricted stock units, shares of our common stock, dividend equivalent units, or incentive cash awards. It does not purport to cover all of the special rules including special rules relating to limitations on the ability of the company to deduct the amounts for federal income tax purposes of certain compensation, special rules relating to deferred compensation, golden parachutes, participants subject to Section 16(b) of the Exchange Act or the exercise of a stock option with previously acquired shares of the company’s common stock. For purposes of this summary, it is assumed that U.S. Participants will hold their shares of the company’s common stock received under the 2021 Omnibus Plan as capital assets within the meaning of Section 1221 of the Code. In addition, this summary does not address the non-U.S. state or local income or other tax consequences, or any U.S. federal non-income tax consequences, inherent in the acquisition, ownership, vesting, exercise, termination or disposition of an award under the 2021 Omnibus Plan, or shares of the company’s common stock issued pursuant thereto. All participants are urged to consult with their own tax advisors concerning the tax consequences to them of an award under the 2021 Omnibus Plan or shares of the company’s common stock issued thereto pursuant to the 2021 Omnibus Plan. A U.S. Participant does not recognize taxable income upon the grant of a NQSO or an ISO. Upon the exercise of a NQSO, the U.S. Participant recognizes ordinary income in an amount equal to the excess, if any, of the fair market value of the shares acquired on the date of exercise over the exercise price paid therefor under the NQSO, and the company will generally be entitled to a deduction for such amount at that time. If the U.S. Participant later sells shares acquired pursuant to the exercise of a NQSO, the U.S. Participant recognizes long-term or short-term capital gain or loss, depending on the period for which the shares were held. Long-term capital gain is generally subject to more favorable tax treatment than ordinary income or short-term capital gain. Upon the exercise of an ISO, the U.S. Participant does not recognize taxable income. If the U.S. Participant disposes of the shares acquired pursuant to the exercise of an ISO more than two years after the date of grant and more than one year after the transfer of the shares to the U.S. Participant, the U.S. Participant recognizes long-term capital gain or loss and the company will not be entitled to a deduction. However, if the U.S. Participant disposes of such shares prior to the end of the required holding period, all or a portion of the gain is treated as ordinary income and the company is generally entitled to deduct such amount. In addition to the tax consequences described above, a U.S. Participant may be subject to the alternative minimum tax, which is payable to the extent it exceeds the U.S. Participant’s regular tax. For this purpose, upon the exercise of an ISO, the excess of the fair market value of the shares over the exercise price paid therefor under the ISO is a preference item for alternative minimum taxable income determination purposes. In addition, the U.S. Participant’s basis in such shares is increased by such excess for purposes of computing the gain or loss on the disposition of the shares for alternative minimum tax purposes. A U.S. Participant does not recognize taxable income upon the grant of an SAR. The U.S. Participant has ordinary compensation income upon exercise of the SAR equal to the increase in the value of the underlying shares, and the company will generally be entitled to a deduction for such amount. A U.S. Participant does not recognize taxable income upon the receipt of a performance share award until the shares are received. At such time, the U.S. Participant recognizes ordinary compensation income equal to the excess, if any, of the fair market value of the shares over any amount thereby paid for the shares, and the company will generally be entitled to deduct such amount at such time. A U.S. Participant does not recognize taxable income upon the receipt of a performance unit award, restricted stock unit award or dividend equivalent right award until a cash payment is received. At such time, the U.S. Participant recognizes ordinary compensation income equal to the amount of cash received, and the company will generally be entitled to deduct such amount at such time. A U.S. Participant who receives a grant of restricted stock generally recognizes ordinary compensation income equal to the excess, if any, of the fair market value of such shares of stock at the time the restriction lapses over any amount paid timely for the shares. Alternatively, the U.S. Participant may elect to be taxed on the fair market value of such shares at the time of grant. The company thereby will generally be entitled to a deduction at the same time and in the same amount as the income required to be included by the U.S. Participant. A U.S. Participant who receives an award of restricted stock units generally will recognize ordinary income on the market value of unrestricted shares of our common stock on the date that such shares are transferred to the participant or settled in cash, as the case may be, under the award (reduced by any amount paid by the participant for such restricted stock unit), and the capital gain/loss holding period for such shares will also commence on such date. New Plan Benefits The table below sets forth awards that the Committee approved under the 2021 Omnibus Incentive Plan, with the option grant awards not being exercisable until stockholder approval of such Plan and the share grants being contingent on stockholder approval of the Plan. If the 2021 Omnibus Incentive Plan is not approved by our stockholders at the Annual Meeting, then the awards set forth in the table below will be null and void.
(1) Represents options to purchase common stock of the company with an exercise price of $5.95 per share that will vest as follows: 1/3 on the first anniversary of the grant date with the remainder vesting monthly in 24 equal amounts, subject to accelerated vesting upon a change in control of our company or upon the closing price of our common stock exceeding $12.00 for ten consecutive days. The options were granted on October 28, 2021 but are not exercisable unless and until the company’s stockholders approve the Plan. (2) Represents options to purchase common stock of the company with an exercise price of $5.95 per share vesting in two equal tranches on the date that is six months following the grant date and on the anniversary of the grant date, subject to accelerated vesting upon a change in control of our company or upon the closing price of our common stock exceeding $12.00 for ten consecutive days. The options were granted on October 28, 2021 but are not exercisable unless and until the company’s stockholders approve the Plan. (3) Represents vested shares issuable under employment agreements contingent on stockholder approval of Plan. (4) Carollinn Gould was employed by the company as its Vice President—General Manager and Secretary until September 30, 2020 and was one of our named executive officers until September 2020. Except as set forth in the table above, the company currently cannot determine the awards that may be granted under the 2021 Omnibus Incentive Plan in the future to eligible participants. The Administrator will make future awards under the 2021 Omnibus Incentive Plan in its discretion from time to time, and the benefits received will depend on the fair market value of the company’s common stock at various future dates and the extent to which performance goals set by the Administrator are met. Securities Authorized for Issuance Under Equity Compensation Plans The table below sets forth information with respect to shares of common stock that may be issued under our 2015 Omnibus Incentive Plan, as of December 31, 2020:
RECOMMENDATION OF THE BOARD OF DIRECTORS THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL THE 2021 OMNIBUS INCENTIVE PLAN ITEM 4 ON YOUR PROXY CARD. PROPOSAL 5 ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS We view executive compensation as an important matter both to us and to our stockholders. As required by Section 14A of the Exchange Act, we are asking stockholders to vote, on a non-binding, advisory basis, on a resolution approving the compensation of our named executive officers as disclosed in the section of this proxy statement entitled “Executive Compensation and Related Information” that follows. This advisory vote on the compensation of our named executive officers allows our stockholders to express their views on our executive compensation programs. The Board of Directors would like the support of the company’s stockholders for the compensation of our named executive officers as disclosed in this proxy statement. Accordingly, for the reasons discussed above, the Board of Directors recommends that stockholders vote in favor of the following resolution: “RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the named executive officers as disclosed pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion contained in this proxy statement.” This advisory vote on the compensation of our named executive officers is not binding on the company, the Board of Directors or the compensation committee of the Board of Directors. However, the Board of Directors and the compensation committee of the Board of Directors will review and consider the outcome of this advisory vote when making future compensation decisions for our named executive officers. RECOMMENDATION OF THE BOARD OF DIRECTORS THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL ON A NON-BINDING, ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS. ITEM 5 ON YOUR PROXY CARD. PROPOSAL 6 ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS Summary The ompany’s stockholders are entitled to vote at the Annual Meeting regarding whether the stockholder vote to approve the compensation of the named executive officers (as described in proposal 5 of this proxy statement) should occur every one, two or three years. Under the rules issued by the SEC, stockholders shall also have the option to abstain from voting on the matter. The stockholder vote on the frequency of the stockholder vote to approve executive compensation is an advisory vote only, and it is not binding on the company or our Board of Directors. Although the vote is non-binding, our compensation committee and Board of Directors value the opinions of our stockholders and will consider the outcome of the vote when determining the frequency of the stockholder vote on executive compensation. The Board of Directors has determined that a stockholder advisory vote on executive compensation every three years is the best approach for the company based on a number of considerations, including the following: Our compensation program is designed to induce performance over a multi-year period. A vote held every three years would be more consistent with and provide better input on, our long-term compensation, which constitutes a significant portion of the compensation of our named executive officers; A three-year vote cycle gives the Board of Directors sufficient time to thoughtfully consider the results of the advisory vote and to implement any desired changes to our executive compensation policies and procedures; and A three-year vote cycle will provide stockholders sufficient time to evaluate the effectiveness of our short- and long-term compensation strategies and the related business outcomes of the company. RECOMMENDATION OF THE BOARD OF DIRECTORS THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THREE YEARS. ITEM 6 ON YOUR PROXY CARD. EXECUTIVE OFFICERS The following table provides information with respect to our executive officers as of
Bruce M. Rodgers. Mr. Rodgers background and experience is contained above in the section of the Proxy Statement entitled Richard Russell Mr. Russell, age
Ryan
We are aware of no arrangements as to the selection or appointment of executive officers. EXECUTIVE COMPENSATION AND RELATED INFORMATION SUMMARY COMPENSATION TABLE The following table provides summary information concerning compensation for services rendered in all capacities awarded to, earned by or paid to our named executive officers during the years ended December 31, 2020, 2019
Employment Agreements Certain executives’ compensation and other arrangements are set forth in employment agreements. These employment agreements are described below. Bruce M. Rodgers. On sum bonus upon any change of control (as defined in the agreement) during the term of the agreement, and all unvested restricted shares were to vest upon a change of control. The term of the Mr. Rodgers’ employment agreement In October 2021, Mr. Rodgers’ employment agreement was amended and restated to increase his base salary to $750,000. The restated employment agreement deletes the quarterly grants of restricted common stock of the company with a grant date fair value equal to $48,125, as they were never paid, and instead provides for a grant of 48,662 shares of the company’s common stock to be paid if and after the company’s stockholders approve the 2021 Omnibus Incentive Plan. An amount of shares equal to the taxes payable by Mr. Rodgers with respect to the grant will be withheld to satisfy such taxes. The restated employment agreement provides for a lump-sum transaction bonus upon any change of control (as defined in the amended employment agreement) of 2% of the value of the transaction, provided that if the change of control transaction is not one in which the company is acquired, Mr. Rodgers will receive a cash transaction bonus equal to $15.0 million. The terms of the restated employment agreement are otherwise materially same as Mr. Rodgers’ September 30, 2020 employment agreement. Richard Russell. On
Ryan Duran. times his base salary if he is terminated “without cause” (including a non-renewal of the agreement by the company) or he terminates his own employment for a “good reason event”, as those terms are defined in the agreement, in addition to any accrued bonus as of the termination date and the accelerated vesting of any unvested options and other equity awards. Mr. Duran’s employment agreement contains certain non-competition covenants and confidentiality provisions. Outstanding Equity Awards at Fiscal Year-End The following table provides information on exercisable and unexercisable options held by the named executive officers on December 31,
PRINCIPAL SHAREHOLDERS The following table sets forth information regarding the beneficial ownership of our common stock as of
The number and percentage of shares beneficially owned are based on by them. Unless otherwise indicated
OTHER MATTERS We do not expect any other matters to be brought before the meeting. However, if any other matters are presented, it is the intention of the persons named in the proxy to vote the proxy as recommended by the Board of Directors or, if no recommendation is given, in their own discretion using their best judgment.
SHAREHOLDER PROPOSALS FOR PRESENTATION AT THE ANNUAL MEETING
Address proposals to LM Funding America, Inc., Attention: Bruce M. Rodgers, Chief Executive Officer, 1200 West Platt Street, Suite 100, Tampa, Florida 33606. The specific requirements for submitting shareholder proposals are set forth in Article II, Section 11 of our bylaws.
DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement and annual report to stockholders may have been sent to multiple stockholders in your household. The company will promptly deliver a separate copy of any of these documents to you if you contact us at the following address or telephone number: LM Funding America, Inc., Attention: Bruce M. Rodgers, Chief Executive Officer, 1200 West Platt Street, Suite 100, Tampa, Florida 33606, telephone: 813-222-8996. If you want to receive separate copies of the proxy statement or annual report to stockholders in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker, or other nominee record holder, or you may contact the company at the above address or telephone number.
CERTIFICATE OF AMENDMENT TO THE LM Funding America, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that: 1. The name of the Corporation is LM Funding America, Inc. The date of filing of the Corporation's original Certificate of Incorporation with the Secretary of State of the State of Delaware was April 20, 2015, as amended on August 7, 2015, September 5, 2018, 2. This Certificate of Amendment to the Certificate of Incorporation was duly authorized and adopted by the Corporation's Board of Directors and stockholders in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware and amends the provisions of the 3. The amendment to the existing Certificate of Incorporation, as amended, being effected hereby is as follows:
4. The amendment of the Certificate of Incorporation herein certified has been duly adopted and authorized by the
APPENDIX B LM FUNDING AMERICA, INC. 2021 OMNIBUS INCENTIVE PLAN
i)such Person or any of such Person’s Affiliates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates until such tendered securities are accepted for purchase; ii)such Person or any of such Person’s Affiliates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and iii)are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in clause (ii) above) or disposing of any voting securities of the Company.
i)any Person (other than (A) the Company or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under any employee benefit plan of the Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock in the Company (“Excluded Persons”)) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the Effective Date, pursuant to express authorization by the Board that refers to this exception) representing fifty percent (50%) or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or (ii)the following individuals cease for any reason to constitute a majority of the number of directors of the Company then serving: (A) individuals who, on the Effective Date, constituted the Board and (B) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Act) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the Effective Date, or whose appointment, election or nomination for election was previously so approved (collectively the “Continuing Directors”); provided, however, that individuals who are appointed to the Board pursuant to or in accordance with the terms of an agreement relating to a merger, consolidation, or share exchange involving the Company (or any direct or indirect Subsidiary of the Company) shall not be Continuing Directors for purposes of this Agreement until after such individuals are first nominated for election by a vote of at least two-thirds (2/3) of the then Continuing Directors and are thereafter elected as directors by the shareholders of the Company at a meeting of shareholders held following consummation of such merger, consolidation, or share exchange; and, provided further, that in such persons appointed to the Board to be Continuing Directors results in a Change of Control, the subsequent qualification of such persons as Continuing Directors shall not alter the fact that a Change of Control occurred; or (iii)the consummation of a merger, consolidation or share exchange of the Company with any other corporation or the issuance of voting securities of the Company in connection with a merger, consolidation or share exchange of the Company (or any direct or indirect Subsidiary of the Company), in each case, which requires approval of the shareholders of the Company, other than (A) a merger, consolidation or share exchange which would result in the voting securities of the Company outstanding immediately prior to such merger, consolidation or share exchange continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger, consolidation or share exchange, or (B) a merger, consolidation or share exchange effected to implement a recapitalization of the Company (or similar transaction) in which no Person (other than an Excluded Person) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the Effective Date, pursuant to express authorization by the Board that refers to this exception) representing twenty percent (20%) or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding voting securities; or (iv)the consummation of a plan of complete liquidation or dissolution of the Company or a sale or disposition by the Company of all or substantially all of the Company’s assets (in one transaction or a series of related transactions within any period of twenty-four (24) consecutive months), in each case, which requires approval of the shareholders of the Company, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity at least seventy-five percent (75%) of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, no “Change of Control” shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to own, directly or indirectly, in the same proportions as their ownership in the Company, an entity that owns all or substantially all of the assets or voting securities of the Company immediately following such transaction or series of transactions. Notwithstanding the foregoing, if an Award is considered deferred compensation subject to the provisions of Code Section 409A, and if a payment under such Award is triggered upon a “Change of Control,” then the foregoing definition shall be deemed amended as necessary to comply with Code Section 409A.
hh)“Stock” means the common stock, par value $0.001 per share, of the Company. ii)“Stock Appreciation Right” or “SAR” means the right to receive a cash payment, and/or Shares with a Fair Market Value, equal to the appreciation of the Fair Market Value of a Share during a specified period of time.
Without limitation, in the event of any reorganization, merger, consolidation, combination or other similar corporate transaction or event, whether or not constituting a Change of Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Stock is not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Administrator may substitute, on an equitable basis as the Administrator determines, for each Share then subject to an Award and the Shares subject to this Plan (if the Plan will continue in effect), the number and kind of shares of stock, other securities, cash or other property to which holders of Stock are or will be entitled in respect of each Share pursuant to the transaction.
Notwithstanding the foregoing, for purposes of an Award that constitutes “nonqualified deferred compensation” subject to Code Section 409A, if a Participant’s termination of employment or service triggers the payment of such nonqualified deferred compensation under such Award, then the Participant will be deemed to have terminated employment or service upon his or her “separation from service” within the meaning of Code Section 409A. Notwithstanding any other provision in this Plan or an Award to the contrary, if any Participant is a “specified employee” within the meaning of Code Section 409A as of the date of his or her “separation from service” within the meaning of Code Section 409A, then, to the extent required to avoid the imposition of additional taxes under Code Section 409A, any payment of nonqualified deferred compensation made to the Participant on account of such separation from service shall not be made before a date that is six (6) months after the date of the separation from service.
VOTE BY INTERNET - www.proxyvote.com UsetheInternetto transmityourvotinginstructionsandfor electronicdeliveryof informationupuntil11:59 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS Ifyouwouldliketoreducethecosts incurredbyourcompanyinmailingproxymaterials, youcanconsenttoreceivingallfutureproxystatements, proxycardsandannualreports electronicallyviae-mailortheInternet.Tosignupforelectronicdelivery,pleasefollow theinstructionsabovetovoteusingtheInternetand,whenprompted,indicatethat you agree toreceive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Useanytouch-tonetelephonetotransmityourvotinginstructionsupuntil11:59 VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it toVote Processing, c/oBroadridge, 51 Mercedes Way,Edgewood, NY 11717. KEEP THIS PORTION FOR YOUR RECORDS TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:D62530-P63649 LM FUNDING AMERICA, INC.
2. company's independent auditor to audit the 2021 financial statements; To approve an amendment
4.To approve the LM Funding America, Inc. 2021 Omnibus Incentive Plan; 5.To conduct an advisory vote on the compensation of our named executive officers as statement; Please indicate if you plan to attend this meeting Please sign exactly as your name(s) appear(s) hereon. When signing as administrator, or other fiduciary, please give full personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available D62531-P63649 LM FUNDING AMERICA, INC. Annual Meeting of Stockholders December 10, 2021 3:00 PM This proxy is solicited by the Board of Directors The undersigned hereby appoints Bruce M. Rodgers and Carollinn Gould, or either of them, as proxies, each with the power to appoint his/her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. Continued and to be signed on reverse side
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