Note 7. Commitments and Contingencies Leases The Company leases its office under an operating lease beginning March 1, 2014 and ending July 31, 2019. Future minimum lease payments due under this lease as of September 30, 2018 are as follows: Years Ending December 31, 2018 $ 86,000 2019 101,000 $ 187,000 The Company shares this space and the related costs associated with this operating lease with a related party which generates $168,000 of annual rental income (see Note 4) that also performs legal services associated with the collection of delinquent assessments. The Companys sub-lease to an unrelated party usually generates $71,000 of annual rental income, however they are currently in default on their sub-lease. Legal Proceedings Other than the lawsuit described below, we are not currently a party to material litigation proceedings. However, we frequently become party to litigation in the ordinary course of business, including either the prosecution or defense of claims arising from contracts by and between us and client Associations. Regardless of the outcome, litigation can have an adverse impact on us because of prosecution, defense, and settlement costs, diversion of management resources and other factors. The Company accrues for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is reasonably estimable. As facts concerning contingencies become known, the Company reassesses its position and makes appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters. We were a defendant in an action entitled Solaris at Brickell Bay Condominium Association, Inc. v. LM Funding, LLC , which was brought before the Circuit Court of the Eleventh Judicial Circuit, Miami-Dade Civil Division on July 31, 2014. In this matter, which was initially preliminarily settled in August 2017, the plaintiff (an association under contract with us) alleged claims such as a usurious loan transaction, state and federal civil Racketeer Influenced and Corrupt Organization Act claims, Florida Deceptive and Unfair Trade Practices Act (FDUTPA) violations, and other related claims, and the plaintiff requested rescission of their agreement with us, forfeiture of all amounts lent by us to the plaintiff, a declaratory judgment that we have violated FDUTPA, other damages for breach of contract and violations of FDUTPA, and attorneys fees. On August 4, 2017, an order by the court was entered on Plaintiffs Motion for Preliminary Approval of Class Action Settlement Agreement. In the order, the motion of the Plaintiff, Solaris at Brickell Bay Condominium Association, Inc., individually and on behalf of the certified plaintiff class (Plaintiffs), for approval of the Class Action Settlement Agreement (the Settlement Agreement) with Defendant LM Funding, LLC was granted. Despite our belief that we are not liable for the claims asserted and that we have good defenses thereto, we nevertheless agreed to enter into the Settlement Agreement in order to: (1) avoid any further expense, inconvenience, and distraction of burdensome and protracted litigation and its consequential negative financial effects to our operations; (2) obtain the releases, orders, and final judgment contemplated by the Settlement Agreement; and (3) put to rest and terminate with finality all claims that had been or could have been asserted against us by the Plaintiffs arising from the facts alleged in the lawsuit. Pursuant to the agreement subsequently reached between counsel, all required actions and deadlines set forth in the Settlement Agreement are currently stayed. On March 1, 2018 a continuation of the abatement was granted until April 2, 2018. As of December 31, 2017, the Company had accrued costs of $505,000 as part of the Settlement Agreement. The settlement amount was contingent upon the Company obtaining sufficient financing within the allotted timeframe of the Settlement Agreement. On April 2, 2018, the Plaintiffs withdrew from the Settlement Agreement. On August 14, 2018, the parties to the Solaris class action litigation entered into a revised settlement in which the Plaintiffs amended their complaint (the Fourth Amended Complaint) to reflect no demand for damages and only a claim for declarative and injunctive relief and amended the class definition to reflect a requirement that class members must have active units still under contract with LMF under a Traditional Model waterfall in the Allocation of Collection Proceeds. This was submitted to the court who approved the amended Complaint and Class Action Settlement Agreement. On November 6, 2018, the court entered an order granting Plaintiffs Motion for Final Approval of Class Action Settlement. The New Settlement Agreement will also reimburse the Plaintiffs opposing counsel $99,000 plus an administrative fee. As such, the Company adjusted the class action accrual to $100,000 and recorded a $405,000 class action reversal to the statement of operations. The amount was paid in the third quarter ended September 30, 2018. The Company received a $200,000 insurance reimbursement for a previously resolved case that is reflected as a reduction of professional fees for the three and nine months ended September 30, 2018.