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LM Funding Reports Third Quarter 2018 Financial Results

TAMPA, Fla., Nov. 14, 2018 (GLOBE NEWSWIRE) -- LM Funding America, Inc. (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 third quarter ended September 30, 2018.

“In the third quarter, we took critical steps to improve our capitalization structure and balance sheet,” said Bruce Rodgers, LM Funding’s Chief Executive Officer. “We were successful in closing a $6 million financing transaction that has significantly improved our financial flexibility and allowed us to regain compliance with NASDAQ. With this additional working capital, we can focus on providing solutions to condominium and homeowner associations.”

Third Quarter 2018 Financial and Operational Highlights:

  • Operating revenues totaled $781,510 for the third quarter of 2018 as compared to $1,042,371 for the same period the year prior;
  • Rental revenue, which accounted for 19.3% of total operating revenue during the quarter, totaled $151,204 as compared to $161,726 for the same period the year prior;
  • Operating expenses decreased by 33.5% to $990,927 as compared to $1.5 million in the prior year period driven by a significant reduction in staff costs and payroll, professional fees, and SG&A expenses;
  • During the third quarter 2018, the Company incurred $377,387 of interest expense due to the expensing of the $200,000 commitment fee associated with the $5 million equity credit line, the $77,955 expense associated with the warrants issued as part of the $500,000 bridge loan and deferred financing costs;
  • Generated a net loss of $586,804 as compared to a net loss of $4.7 million for the third quarter 2017; and
  • For the nine months ended September 30, 2018, the Net Cash Used by Operating activities of $305,240 was partially offset by the Net Cash Provided by Investing activities of $292,185 for a net cash outflow before Financing activities of $13,055 as compared to Net Cash Used by Operating activities of $1,718,141 which was partially offset by the Net Cash Provided by Investing activities of $627,151 for a net cash outflow of $1,090,990 before Financing activities.  This activity reflects the $100,000 payment due as part of the class action settlement. Net Cash Provided by financing activities for the comparable 2018 period was $351,810 versus $574,611 of Net Cash Used in Financing activities for the comparable 2017 period.
  • As of September 30, 2018, the Company had $929,149 in cash which doesn’t include the proceeds generated by the public offering.

On November 1, 2018, the Company closed an underwritten public offering that included the underwriters’ exercise of its option to purchase additional shares, which resulted in the issuance of 2,875,000 shares of its common stock (or pre-funded warrants to purchase common stock in lieu thereof) and common warrants to up to 2,875,000 shares of the Company’s common stock. At closing, LM Funding received gross proceeds from the offering of approximately $6.0 million, before deducting underwriting discounts and commissions and other expenses payable by the Company. As a result of the offering, the Company’s stockholders’ equity will exceed $2.5 million and its publicly held shares (i.e., shares not held directly or indirectly by an officer, director, or greater-than-10% of the total shares outstanding) will be approximately 1.1 million shares.

After cancelling the Stock Purchase, Registration Rights, and Purchase Agreements originally entered into on April 2, 2018, the Company repaid the $500,000 note and accrued interest on October 5, 2018 and paid the $200,000 commitment fee on November 2, 2018.

Third Quarter and Nine-Month Financial Results:
For the quarter ended September 30, 2018, total operating revenues were $781,510, compared to $1,042,371 in the third quarter of 2017. This includes an approximate $11,000 decrease in rental revenue to $151,204, compared to $161,726 for the quarter ended September 30, 2017, due to the stabilization in the utilization of the Company’s rental properties. For the nine months ended September 30, 2018, total revenues were $2.6 million as compared to $3.0 million for the same period the year prior.

Operating expenses for the third quarter of 2018 decreased 33.5% to $990,927, compared to $1.5 million in the prior year period. This is primarily attributable to approximately $197,000 in reduced staffing costs, $101,000 in lower professional fees, a $29,000 decrease in collection expense and a $107,000 decline in selling, general and administrative costs as compared to the comparable period in 2017. For the nine months ended September 30, 2018, total operating expenses decreased to $2.7 million as compared to $4.6 million for the same period the year prior.

Net loss for the quarter ended September 30, 2018 was $586,804, compared to a net loss of $4.7 million for the third quarter of 2017. For the nine months ended September 30, 2018, net loss was approximately $140,482 as compared to a net loss of $5.9 million for the prior year period.

At September 30, 2018, the Company had cash and cash equivalents of $929,149, compared with $590,394 at December 31, 2017. For the nine months ended September 30, 2018, the net cash from our operating and investing activities was a net use of cash of $13,055 as compared to a net use of cash of $1,090,990 for the comparable 2017 period (see table below).

  Nine Months Ended September 30, Nine Months Ended September 30,
  2018 2017
Net cash used in operating activities $   (305,240 ) $   (1,715,141 )
Net cash provided by investing activities   292,185     627,151  
Net cash provided by (used in) financing activities   351,810     (574,611 )
             

This activity reflects the $100,000 payment due as part of the class action settlement.

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. The company is also involved in the business of purchasing delinquent accounts on various terms tailored to suit each Association's financial needs, including under the company’s 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 most recent Annual Report on Form 10-K and its other filings with the SEC, which are available at www.sec.gov. 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

  September 30,
2018
    December 31,
2017
 
  (Unaudited)          
ASSETS              
Cash $ 929,149     $ 590,394  
Finance receivables:              
Original product - net   465,004       637,937  
Special product - New Neighbor Guaranty program - net   263,835       339,471  
Prepaid expenses and other assets   233,967       101,339  
Fixed assets, net   42,813       69,505  
Real estate assets owned   124,586       196,707  
Other Assets   32,036       32,964  
Total assets $ 2,091,390     $ 1,968,317  
               
LIABILITIES AND STOCKHOLDERS' EQUITY              
Notes payable              
Principal amount, net $ 569,610     $ 39,028  
Accounts payable and accrued expenses   520,373       477,953  
Due to related party   46,010       -  
Accrued loss litigation settlement   -       505,000  
Other liabilities and obligations   27,950       49,353  
Total liabilities   1,163,943       1,071,334  
Stockholders’ equity:              
Common stock, par value $.001; 30,000,000 shares authorized; 625,318 shares issued and outstanding   625       625  
Additional paid-in capital   12,085,029       11,914,083  
Accumulated deficit   (11,158,207 )     (11,017,725 )
Total stockholders’ equity   927,447       896,983  
Total liabilities and stockholders’ equity $ 2,091,390     $ 1,968,317  
               

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

  Three Months Ended     Nine Months Ended  
  September 30,     September 30,  
  2018     2017     2018     2017  
Revenues:                              
Interest on delinquent association fees $ 459,505     $ 593,613     $ 1,574,960     $ 1,888,205  
Administrative and late fees   59,517       64,959       178,146       218,883  
Recoveries in excess of cost - special product   31,446       134,787       90,546       219,160  
Underwriting and other revenues   79,838       87,286       188,024       221,065  
Rental revenue   151,204       161,726       591,553       496,614  
Total revenues   781,510       1,042,371       2,623,229       3,043,927  
                               
Operating Expenses:                              
Staff costs and payroll   273,400       470,056       974,334       1,479,232  
Professional fees   432,265       533,591       888,949       1,639,278  
Settlement costs with associations   11,731       101,175       38,846       257,256  
Selling, general and administrative   71,864       178,615       224,079       630,466  
Provision for credit losses   -       -       581       -  
Real estate management and disposal   178,372       144,992       460,312       414,928  
Depreciation and amortization   10,884       18,825       55,195       65,015  
Collection costs   8,797       37,994       38,959       136,489  
Other operating expenses   3,614       4,153       15,493       10,969  
Total operating expenses   990,927       1,489,401       2,696,748       4,633,633  
Operating loss   (209,417 )     (447,030 )     (73,519 )     (1,589,706 )
Other income (loss)                              
Interest expense   (377,387 )     (122,406 )     (471,963 )     (375,042 )
Gain (loss) on litigation   -       -       405,000       (505,000 )
Loss before income taxes   (586,804 )     (569,436 )     (140,482 )     (2,469,748 )
Income tax expense   -       4,134,436       -       3,431,536  
Net Loss $ (586,804 )   $ (4,703,872 )   $ (140,482 )   $ (5,901,284 )
                               
Net loss per share:                              
Basic $ (0.94 )   $ (14.25 )   $ (0.22 )   $ (17.88 )
Diluted   (0.94 )     (14.25 )     (0.22 )     (17.88 )
Weighted average number of common shares outstanding:                              
Basic   625,318       330,000       625,318       330,000  
Diluted   625,318       330,000       625,318       330,000  
                               

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

  Nine Months ended September 30,  
  2018     2017  
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net loss $ (140,482 )   $ (5,901,284 )
               
Adjustments to reconcile net loss to cash used in operating activities              
Depreciation and amortization   55,195       64,003  
Amortization of debt discount   154,676       -  
Stock compensation   16,270       21,799  
Amortization of debt issuance costs   291,760       73,922  
(Gain) loss on litigation   (405,000 )     505,000  
               
 Change in assets and liabilities              
Prepaid expenses and other assets   (44,686 )     14,571  
Accounts payable   (41,408 )     5,050  
Accrued expenses   (216,172 )     20,355  
Advances (repayments) to related party   46,010       94  
Other liabilities   (21,403 )     46,813  
Deferred taxes   -       3,431,536  
Net cash used in operating activities   (305,240 )     (1,718,141 )
               
CASH FLOWS FROM INVESTING ACTIVITIES:              
Net collections of finance receivables - original product   172,933       152,810  
Net collections of finance receivables - special product   75,633       157,812  
Capital expenditures   -       (4,468 )
Proceeds for real estate assets owned   43,619       320,997  
Net cash provided by investing activities   292,185       627,151  
               
CASH FLOWS FROM FINANCING ACTIVITIES:              
Proceeds from borrowing   500,000       -  
Principal repayments   (56,430 )     (574,611 )
Debt issue costs   (91,760 )     -  
Net cash provided by (used in) financing activities   351,810       (574,611 )
               
NET INCREASE (DECREASE) IN CASH   338,755       (1,665,601 )
CASH - BEGINNING OF YEAR   590,394       2,268,180  
               
CASH - END OF YEAR $ 929,149     $ 602,579  
               
SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION              
Cash paid for interest $ -     $ 313,042  
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.