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LM Funding Reports Second Quarter 2018 Financial Results and Class Action Settlement

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TAMPA, Fla., Aug. 14, 2018 (GLOBE NEWSWIRE) -- LM Funding America, Inc. (NASDAQ:LMFA) ("LM Funding" or the "Company"), a technology-based specialty finance company offering unique funding solutions to community associations, today announced its financial results for the second quarter ended June 30, 2018.

"During the second quarter, we continued to see positive results from the steps we have taken to maximize our rental revenue and improve our cost structure," said Bruce Rodgers, LM Funding's Chief Executive Officer. "We reduced operating expenses by approximately 55% and entered into a revised settlement for the Solaris class action litigation resulting in a reversal of over $400,000 in accrued expenses which led to positive net income during the quarter and first six months as compared to a net loss for the same periods the prior year. Going forward, we will continue to leverage our proprietary technology to unlock the significant value of our receivables portfolio as we focus our marketing efforts to grow our portfolio and explore new avenues to diversify our revenue streams."

Second Quarter 2018 Financial and Operational Highlights:

  • Operating revenues totaled $877,986 for the second quarter of 2018 as compared to $977,600 for the same period the year prior;
  • Rental revenue, which accounted for 24.8% of total operating revenue during the quarter, increased 28% to $217,904 as compared to $170,283 for the same period the year prior;
  • Operating expenses decreased by 54.5% to $733,170 as compared to $1.6 million in the prior year period driven by a significant reduction in staff costs and payroll, professional fees, and SG&A expenses;
  • Generated net income of $455,240 as compared to a net loss of $794,511 for the second quarter 2017;
  • During the second quarter 2018, decreased the $505,000 Solaris class action accrual incurred in the comparable 2017 period, to $100,000 due to a revised settlement with the $405,000 change reflected as income;
  • As of June 30, 2018, the Company had $1.2 million in cash; and
  • Shareholder equity increased to $1.5 million or $0.24 per share as of June 30, 2018, compared to shareholder equity of $896,983 or $0.14 per share as of December 31, 2017.

On August 14, 2018, the Solaris court approved a revised settlement of the Solaris class action litigation.  The settlement approves the Plaintiff's Fourth Amended Complaint seeking no damages and providing only a claim for declarative and injunctive relief.  Plaintiffs with existing active units being serviced by LM Funding may opt to change from the standard distribution agreement to LMF's 50/50 distribution agreement on a prospective basis. In the settlement Agreement LM Funding will pay Plaintiff's counsel $99,000 plus an administrative fee.

Second Quarter and Six-Month Financial Results:
For the quarter ended June 30, 2018, total operating revenues were $877,986, compared to $977,600 in the second quarter of 2017. This includes an approximate $48,000 increase in rental revenue to $217,904, compared to $170,283 for the quarter ended June 30, 2017, due to continued improvement in the utilization of the Company's rental properties. For the six months ended June 30, 2018, total revenues were $1.8 million as compared to $2.0 million for the same period the year prior.

Operating expenses for the second quarter of 2018 decreased 54.5% to $733,170, compared to $1.6 million in the prior year period. This is primarily attributable to approximately $197,000 in reduced staffing costs, $471,000 in lower professional fees (including a $200,00 insurance reimbursement for legal fees in 2018) and a $128,000 decline in selling, general and administrative costs as compared to the comparable period in 2017. For the six months ended June 30, 2018, total operating expenses decreased to $1.7 million as compared to $3.1 million for the same period the year prior.

Net income for the quarter ended June 30, 2018 was $455,240, compared to a net loss of $794,511 for the second quarter of 2017. For the six months ended June 30, 2018, net income was approximately $446,000 as compared to a net loss of $1.2 million.

At June 30, 2018, the Company had cash and cash equivalents of $1.2 million, compared with $590,394 at December 31, 2017. Total stockholder's equity increased to $1.5 million for the period ended June 30, 2018 as compared to $896,983 for the period ended December 31, 2017.

About LM Funding America:
LM Funding America, Inc., together with its subsidiaries, is a technology-based specialty finance company that provides funding to nonprofit community associations (Associations) primarily located in the state of Florida, as well as in the states of Washington, Colorado and Illinois. The company offers funding to Associations by purchasing a certain portion of the associations' rights to delinquent accounts that are selected by the Associations arising from unpaid Association assessments. It is also involved in the business of purchasing delinquent accounts on various terms tailored to suit each Association's financial needs, including under its New Neighbor Guaranty™ program.

Forward-Looking Statements:
This press release may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "estimate," "expect," "intend," "plan," and "project" and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the SEC. The occurrence of any of these risks and uncertainties could have a material adverse effect on the company's business, financial condition, and results of operations.

Company Contact:  
Bruce Rodgers, Chairman and CEO  
LM Funding America, Inc.  
Tel (813) 222-8996  
investors@lmfunding.com
Investor Contacts:
Valter Pinto / Scott Eckstein
KCSA Strategic Communications
Tel (212) 896-1254 / (212) 896-1210
valter@kcsa.com / seckstein@kcsa.com


LM Funding America, Inc. and Subsidiaries Condensed Consolidated Balance Sheets

    June 30, 
2018
    December 31,
2017
 
    (Unaudited)          
ASSETS                
Cash   $ 1,202,382     $ 590,394  
Finance receivables:                
Original product - net     504,687       637,937  
Special product - New Neighbor Guaranty program - net     268,833       339,471  
Prepaid expenses and other assets     240,255       101,339  
Fixed assets, net     47,839       69,505  
Real estate assets owned     141,518       196,707  
Other Assets     32,964       32,964  
Total assets   $ 2,438,478     $ 1,968,317  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Notes payable                
Principal amount   $ 431,297     $ 39,028  
Accounts payable and accrued expenses     303,066       477,953  
Due to related party     71,289       -  
Accrued loss litigation settlement     100,000       505,000  
Other liabilities and obligations     27,076       49,353  
Total liabilities     932,728       1,071,334  
Stockholders' equity:                
Common stock, par value $.001; 10,000,000 shares authorized; 6,253,189 shares issued and outstanding     6,253       6,253  
Additional paid-in capital     12,070,900       11,908,455  
Accumulated deficit     (10,571,403 )     (11,017,725 )
Total stockholders' equity     1,505,750       896,983  
Total liabilities and stockholders' equity   $ 2,438,478     $ 1,968,317  


LM Funding America, Inc. and Subsidiaries Condensed Consolidated Statements of Operations
(unaudited)

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
Revenues:                                
Interest on delinquent association fees   $ 564,593     $ 602,944     $ 1,115,455     $ 1,294,592  
Administrative and late fees     50,301       75,889       118,629       153,924  
Recoveries in excess of cost - special product     (8,437 )     63,434       59,100       84,373  
Underwriting and other revenues     53,625       65,050       108,186       133,779  
Rental revenue     217,904       170,283       440,349       334,888  
Total revenues     877,986       977,600       1,841,719       2,001,556  
                                 
Operating Expenses:                                
Staff costs and payroll     298,651       495,955       700,934       1,009,176  
Professional fees     121,577       593,037       456,684       1,105,687  
Settlement costs with associations     11,403       90,596       27,115       156,081  
Selling, general and administrative     79,667       207,175       152,215       451,852  
Provision for credit losses     -       -       581       -  
Real estate management and disposal     162,578       139,815       281,940       269,935  
Depreciation and amortization     22,156       30,752       44,311       46,190  
Collection costs     29,560       50,402       30,162       98,496  
Other operating expenses     7,578       3,743       11,879       6,815  
Total operating expenses     733,170       1,611,475       1,705,821       3,144,232  
Operating income (loss)     144,816       (633,875 )     135,898       (1,142,676 )
Interest expense     (94,576 )     126,024       (94,576 )     252,636  
Gain (loss) on litigation     405,000       (505,000 )     405,000 )     (505,000 )
Income (loss) before income taxes     455,240       (1,264,899 )     446,322       (1,900,312 )
Income tax expense (benefit)     -       (470,388 )     -       (702,900 )
Net income (loss)   $ 455,240     $ (794,511 )   $ 446,322     $ (1,197,412 )
                                 
Net income (loss) per share:                                
Basic   $ 0.07     $ (0.24 )   $ 0.07     $ (0.36 )
Diluted     0.07       (0.24 )     0.07       (0.36 )
Weighted average number of common shares outstanding:                                
Basic     6,253,189       3,300,000       6,253,189       3,300,000  
Diluted     6,253,189       3,300,000       6,253,189       3,300,000  


LM Funding America, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows
(unaudited) 

    Six Months ended June 30,  
    2018   2017  
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net income (loss)   $ 446,322   $ (1,197,412 )
               
Adjustments to reconcile net loss to cash used in operating activities              
Depreciation and amortization     44,311     45,178  
Amortization of debt discount     75,638     -  
Stock compensation     7,769     21,442  
Amortization of debt issuance costs     5,705     49,281  
(Gain) loss on litigation     (405,000 )   505,000  
               
 Change in assets and liabilities              
Prepaid expenses and other assets     (51,901 )   (90,847 )
Accounts payable     (41,379 )   (3,867 )
Accrued expenses     (133,508 )   (36,282 )
Advances (repayments) to related party     71,289     (25,441 )
Other liabilities     (22,277 )   20,972  
Deferred taxes     -     (702,900 )
Net cash used in operating activities     (3,031 )   (1,414,876 )
               
CASH FLOWS FROM INVESTING ACTIVITIES:              
Net collections of finance receivables - original product     133,250     47,135  
Net collections of finance receivables - special product     70,635     115,349  
Capital expenditures     -     (3,255 )
Proceeds for real estate assets owned     32,544     187,297  
Net cash provided by investing activities     236,429     346,526  
               
CASH FLOWS FROM FINANCING ACTIVITIES:              
Proceeds from borrowing     500,000     -  
Principal repayments     (39,028 )   (379,000 )
Debt issue costs     (82,382 )   -  
Net cash provided by (used in) financing activities     378,590     (379,000 )
               
NET INCREASE (DECREASE) IN CASH     611,988     (1,447,350 )
CASH - BEGINNING OF YEAR     590,394     2,268,180  
               
CASH - END OF YEAR   $ 1,202,382   $ 820,830  
               
SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION              
Cash paid for interest   $ -   $ 221,359  
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:              
Debt discount on issuance of warrants   $ 154,676   $ -  
Insurance financing     87,012     -  
               

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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