LM Funding Reports Second Quarter 2018 Financial Results and Class Action Settlement
August 14 2018 - 4:15PM
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 EcksteinKCSA Strategic
Communications Tel (212) 896-1254 / (212) 896-1210valter@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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