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 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 CEOLM Funding America,
Inc.Tel (813) 222-8996investors@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
|
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.
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