UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact Name of Registrant as Specified in Charter)
| (State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
| of incorporation) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
(Former Name or Former Address, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
CURRENT REPORT ON FORM 8-K
FlexShopper, Inc. (the “Company”)
March 30, 2022
Item 2.02. Results of Operations and Financial Condition.
FlexShopper, Inc. (Nasdaq:FPAY) (“FlexShopper”), a leading national online lease-to-own (“LTO”) retailer and LTO payment solution provider, today announced its financial results for the quarter and year ended December 31, 2021, highlighted by increase in revenue and net income. A copy of the press release is furnished with this report as Exhibit 99.1. Such information, including the Exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
| (a) | Exhibits. The exhibit listed in the following Exhibit Index is filed as part of this current report. |
| Exhibit No. | Description | |
| 99.1 | Press Release issued by FlexShopper, Inc. on March 30, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FLEXSHOPPER, INC. | ||
| Date: March 30, 2022 | By: | /s/ Richard House, Jr. |
| Richard House, Jr. | ||
| Chief Executive Officer | ||
2
Exhibit 99.1
FlexShopper, Inc. Reports 2021 Fourth Quarter and Year End Financial Results
FY 2021 Net Revenues Up 22.9% to $125.4 million; Net Income of $3.3 million
BOCA RATON, Fla., March 30, 2022 (GLOBE NEWSWIRE) -- FlexShopper, Inc. (Nasdaq:FPAY) (“FlexShopper”), a leading national online lease-to-own (“LTO”) retailer and LTO payment solution provider, today announced its financial results for the quarter and fiscal year ended December 31, 2021, highlighted by increase in revenue and net income.
Results for Quarter Ended December 31, 2021 vs. Quarter Ended December 31, 2020:
| ● | Total net revenues and fees increased 10.5% to $31.1 million from $28.1 million | |
| ● | Originated 51,071 gross leases, down 28.4% from 71,350; average origination value increased by 13.6% to $527 | |
| ● | Net income of $633 thousand compared with net loss of $(419) thousand | |
| ● | Net income attributable to common stockholders of $23 thousand, or $0.00 per diluted share, compared to net loss of $(1.0) million, or $(0.05) per diluted share | |
| ● | Gross profit increased 10.3% to $12.2 million from $11.1 million | |
| ● | Adjusted EBITDA1 decreased to $2.0 million compared to $2.6 million |
Results for Twelve Months Ended December 31, 2021 vs. Twelve Months Ended December 31, 2020:
| ● | Total net revenues and fees increased 22.9% to $125.4 million from $102.1 million | |
| ● | Originated 159,217 gross leases, down 15.5% from 188,468; average origination value increased by 12.0% to $524 | |
| ● | Net income of $3.3 million compared with net loss of $(340) thousand | |
| ● | Net income attributable to common stockholders of $0.8 million, or $0.04 per diluted share, compared to $(3.5) million, or $(0.17) per diluted share in the prior year. | |
| ● | Gross profit increased 30.8% to $46.2 million from $35.4 million | |
| ● | Adjusted EBITDA1 improved to $11.4 million from $8.7 million | |
| ¹ | Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures”. |
Fourth Quarter 2021 Highlights and Recent Developments
| ● | Retail partner rollouts resuming as pandemic impacts recede. FlexShopper currently expects to add over 500 partner store locations during the first half of the year as new and existing pilot programs expand. |
| ● | Expanded borrowing capacity provides capital to support expected growth. The Company recently announced an expansion of its credit facility from $52 million to $82.5 million. The additional capacity is expected to support continued growth of the business. |
| ● | Company expects Adjusted EBITDA growth rate to continue or accelerate. FlexShopper expects demand for alternative finance solutions among subprime customers to continue normalizing in 2022 and, as a result, expects 2022 Adjusted EBITDA to grow at or above the rate in 2021. |
Rich House, CEO, stated, “2021 was a challenging year across our industry as subprime consumers benefitted from a range of government stimulus programs which, in turn, reduced their demand for alternative financing products and solutions. This negatively impacted our new lease originations for the full year. Despite the headwind for much of the year, we were able to grow our bottom line. For the year, we reported net income of $0.8 million after accounting for non-cash preferred dividend accrual, compared with a loss of $3.5 million in the prior year, with Adjusted EBITDA growing 31% to $11.4 million. Importantly, we achieved this improved profitability without compromising our underwriting. Across our industry we saw many participants do the opposite to maintain volume in the face of reduced demand for alternative financing solutions resulting from massive government stimulus. Those competitors now appear to be reversing course, which is a positive for FlexShopper.”
Mr. House continued, “As the recent COVID surge has receded, we have seen our industry steadily returning to normal. Notably, we have seen existing and new retail partners eager to resume rolling out our lease to own solution. We currently expect to add over 500 stores over the first half of the year, consisting of new pilot programs and other full roll outs. We have also recently introduced a consumer lending product to further support our retail partners. Lease to own contracts are limited to durable goods, leaving a gap for our tire store partners when subprime customers need service work such as wheel alignments. Our new lending product addresses this need, providing a value-added solution for our partners and their customers. Initial interest in this product has been positive and we expect to see continued growth through the year, eventually creating a material impact on our financial results.”
Additionally, Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition of this measure under “Non-GAAP Measures.”
Conference Call Details
Date: Thursday, March 31, 2022
Time: 9:00 a.m. Eastern Time
Participant Dial-In Numbers:
Domestic callers: (877) 407-3944
International callers: (412) 902-0038
Access by Webcast
The call will also be simultaneously webcast over the Internet via the “Investor” section of the Company’s website at www.flexshopper.com or by clicking on the conference call link:
https://themediaframe.com/mediaframe/webcast.html?webcastid=5vm0GSlj. An audio replay of the call will be archived on the Company’s website.
2
FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the three months ended | For the twelve months ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues: | ||||||||||||||||
| Lease revenues and fees, net | 29,479,017 | 26,950,434 | 118,355,184 | 96,939,767 | ||||||||||||
| Lease merchandise sold | 1,614,581 | 1,191,139 | 7,071,572 | 5,144,747 | ||||||||||||
| Total revenues | 31,093,598 | 28,141,573 | 125,426,756 | 102,084,514 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of lease revenues, consisting of depreciation and impairment of lease merchandise | 17,614,938 | 16,326,208 | 73,616,293 | 63,308,210 | ||||||||||||
| Cost of lease merchandise sold | 1,261,369 | 739,281 | 5,561,593 | 3,424,880 | ||||||||||||
| Marketing | 3,557,825 | 2,260,152 | 9,129,062 | 5,880,063 | ||||||||||||
| Salaries and benefits | 3,160,020 | 3,116,073 | 11,489,208 | 10,440,693 | ||||||||||||
| Operating expenses | 4,611,743 | 4,367,210 | 18,265,781 | 14,404,953 | ||||||||||||
| Total costs and expenses | 30,205,895 | 26,808,924 | 118,061,937 | 97,458,799 | ||||||||||||
| Operating income | 887,703 | 1,332,649 | 7,364,819 | 4,625,715 | ||||||||||||
| Gain on extinguishment of debt | - | - | 1,931,825 | - | ||||||||||||
| Interest expense including amortization of debt issuance costs | (1,383,546 | ) | 1,088,478 | (5,238,560 | ) | (4,302,561 | ) | |||||||||
| Income/(loss) before income taxes | (495,843 | ) | 244,171 | 4,058,084 | 323,154 | |||||||||||
| Provision for income taxes | 1,129,163 | (663,050 | ) | (785,310 | ) | (663,050 | ) | |||||||||
| Net income/(loss) | 633,320 | (418,879 | ) | 3,272,774 | (339,896 | ) | ||||||||||
| Deemed dividend from exchange offer of warrants | - | - | - | 713,212 | ||||||||||||
| Dividends on Series 2 Convertible Preferred Shares | 609,777 | 609,771 | 2,439,099 | 2,438,988 | ||||||||||||
| Net income/(loss) attributable to common shareholders | $ | 23,543 | $ | (1,028,650 | ) | $ | 833,675 | $ | (3,492,096 | ) | ||||||
| Basic and diluted income/(loss) per common share: | ||||||||||||||||
| Basic | $ | - | $ | (0.05 | ) | $ | 0.04 | $ | (0.17 | ) | ||||||
| Diluted | $ | - | $ | (0.05 | ) | $ | 0.04 | $ | (0.17 | ) | ||||||
| WEIGHTED AVERAGE COMMON SHARES: | ||||||||||||||||
| Basic | 20,712,772 | 21,359,912 | 21,387,960 | 20,995,349 | ||||||||||||
| Diluted | 22,455,815 | 21,359,912 | 23,227,964 | 20,995,349 | ||||||||||||
3
FLEXSHOPPER, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 5,094,642 | $ | 8,541,232 | ||||
| Accounts receivable, net | 29,898,991 | 10,032,714 | ||||||
| Prepaid expenses | 957,527 | 869,081 | ||||||
| Lease merchandise, net | 40,942,112 | 42,822,340 | ||||||
| Total current assets | 76,893,272 | 62,265,367 | ||||||
| PROPERTY AND EQUIPMENT, net | 7,841,206 | 5,911,696 | ||||||
| OTHER ASSETS, net | 77,578 | 72,316 | ||||||
| Total assets | $ | 84,812,056 | $ | 68,249,379 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 7,982,180 | $ | 7,907,619 | ||||
| Accrued payroll and related taxes | 391,078 | 352,102 | ||||||
| Current portion of promissory notes to related parties, net of $1,247 at 2021 and $8,276 at 2020 of unamortized issuance costs, including accrued interest | 1,053,088 | 4,815,546 | ||||||
| Current portion of promissory note – Paycheck Protection Program | - | 1,184,952 | ||||||
| Accrued expenses | 2,987,646 | 2,646,800 | ||||||
| Lease liability - current portion | 172,732 | 160,726 | ||||||
| Total current liabilities | 12,586,724 | 17,067,745 | ||||||
| Loan payable under credit agreement to beneficial shareholder, net of $1,274 at 2021 and $61,617 at 2020 of unamortized issuance costs and current portion | 50,061,924 | 37,134,009 | ||||||
| Promissory notes to related parties, net of current portion | 3,750,000 | - | ||||||
| Promissory note – Paycheck Protection Program, net of current portion | - | 741,787 | ||||||
| Accrued payroll and related taxes net of current portion | - | 204,437 | ||||||
| Deferred income tax liability | 495,166 | - | ||||||
| Lease liabilities less current portion | 1,774,623 | 1,947,355 | ||||||
| Total liabilities | 68,668,437 | 57,095,333 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series 1 Convertible Preferred Stock, $0.001 par value - authorized 250,000 shares, issued and outstanding 170,332 shares at $5.00 stated value | 851,660 | 851,660 | ||||||
| Series 2 Convertible Preferred Stock, $0.001 par value - authorized 25,000 shares, issued and outstanding 21,952 shares at $1,000 stated value | 21,952,000 | 21,952,000 | ||||||
| Common stock, $0.0001 par value- authorized 40,000,000 shares, issued and outstanding 21,442,278 shares at 2021 and 21,359,945 shares at 2020 | 2,144 | 2,136 | ||||||
| Additional paid in capital | 38,560,117 | 36,843,326 | ||||||
| Accumulated deficit | (45,222,302 | ) | (48,495,076 | ) | ||||
| Total stockholders’ equity | 16,143,619 | 11,154,046 | ||||||
| $ | 84,812,056 | $ | 68,249,379 | |||||
4
FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2021 and 2020
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income/(loss) | $ | 3,272,774 | $ | (339,896 | ) | |||
| Adjustments to reconcile net income/ (loss) to net cash used in operating activities: | ||||||||
| Depreciation and impairment of lease merchandise | 73,616,293 | 63,308,210 | ||||||
| Other depreciation and amortization | 2,871,541 | 2,577,084 | ||||||
| Amortization of debt issuance cost | 220,816 | 305,797 | ||||||
| Compensation expense related to issuance of stock options and warrants | 1,648,627 | 1,388,755 | ||||||
| Provision for doubtful accounts | 40,489,540 | 31,930,714 | ||||||
| Interest in kind added to promissory notes balance | 9,460 | 13,388 | ||||||
| Write off of capitalized software costs | 4,361 | - | ||||||
| Deferred income tax | 495,166 | - | ||||||
| Gain on debt extinguishment | (1,931,825 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (60,355,817 | ) | (33,691,096 | ) | ||||
| Prepaid expenses and other | (87,394 | ) | (195,104 | ) | ||||
| Lease merchandise | (71,736,065 | ) | (75,067,446 | ) | ||||
| Security deposits | (8,338 | ) | 2,943 | |||||
| Accounts payable | 74,561 | 3,339,730 | ||||||
| Lease liabilities | (5,811 | ) | 198,528 | |||||
| Accrued payroll and related taxes | (165,461 | ) | 43,271 | |||||
| Accrued expenses | 331,541 | 1,283,372 | ||||||
| Net cash used in operating activities | (11,256,031 | ) | (5,207,547 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment, including capitalized software costs | (4,949,544 | ) | (3,098,194 | ) | ||||
| Net cash used in investing activities | (4,949,544 | ) | (3,098,194 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from loan payable under credit agreement | 19,850,000 | 15,033,000 | ||||||
| Repayment of loan payable under credit agreement | (6,575,000 | ) | (7,023,250 | ) | ||||
| Proceeds from promissory notes- Paycheck Protection Program, net of fees | - | 1,914,100 | ||||||
| Principal payment under finance lease obligation | (7,707 | ) | (6,664 | ) | ||||
| Proceeds from exercise of warrants | - | 131,250 | ||||||
| Proceeds from exercise of stock options | 68,172 | 5,662 | ||||||
| Repayment of installment loan | (11,207 | ) | (11,207 | ) | ||||
| Debt issuance related costs | (565,273 | ) | (64,390 | ) | ||||
| Net cash provided by financing activities | 12,758,985 | 9,978,501 | ||||||
| (DECREASE)/ INCREASE IN CASH | (3,446,590 | ) | 1,672,760 | |||||
| CASH, beginning of period | 8,541,232 | 6,868,472 | ||||||
| CASH, end of period | $ | 5,094,642 | $ | 8,541,232 | ||||
5
Non-GAAP Measures
We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Adjusted EBITDA represents net income before interest, stock-based compensation, taxes, depreciation (other than depreciation of leased inventory), amortization, and one-time or non-recurring items. We believe that Adjusted EBITDA provides us with an understanding of one aspect of earnings before the impact of investing and financing charges and income taxes.
Key performance metrics for the three and twelve months ended December 31, 2021 and 2020 were as follows:
| Three months ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2021 | 2020 | $ Change | % Change | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Net income/ (loss) | 633,320 | (418,879 | ) | 1,052,199 | 251.2 | |||||||||||
| Provision for income taxes | (1,129,163 | ) | 663,050 | (1,792,213 | ) | (270.3 | ) | |||||||||
| Amortization of debt costs | 43,169 | 71,514 | (28,345 | ) | (39.6 | ) | ||||||||||
| Other amortization and depreciation | 867,497 | 615,881 | 251,616 | 40.9 | ||||||||||||
| Interest expense, excluding amortization of debt costs | 1,340,377 | 1,016,964 | 323,413 | 31.8 | ||||||||||||
| Stock compensation | 230,927 | 188,020 | 42,907 | 22.8 | ||||||||||||
| Product/infrastructure expense | - | 17,457 | (17,457 | ) | - | |||||||||||
| Executive separation agreement | - | 396,090 | (396,090 | ) | - | |||||||||||
| Adjusted EBITDA | $ | 1,986,127 | $ | 2,550,097 | $ | (563,970 | ) | (22.1 | ) | |||||||
| Twelve months ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2021 | 2020 | $ Change | % Change | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
Net income/ (loss) | 3,272,774 | (339,896 | ) | 3,612,670 | 1,062.9 | |||||||||||
| Provision for income taxes | 785,310 | 663,050 | 122,260 | 18.4 | ||||||||||||
| Amortization of debt costs | 220,816 | 305,797 | (84,981 | ) | (27.8 | ) | ||||||||||
| Other amortization and depreciation | 2,875,902 | 2,271,287 | 604,615 | 26.6 | ||||||||||||
| Interest expense | 5,017,744 | 3,996,764 | 1,020,980 | 25.5 | ||||||||||||
| Stock compensation | 1,125,819 | 981,261 | 144,558 | 14.7 | ||||||||||||
| Product/infrastructure expense | 10,000 | 299,287 | (289,287 | ) | (96.7 | ) | ||||||||||
| Warrants compensation-consulting agreement | - | 139,480 | (139,480 | ) | - | |||||||||||
| Executive separation agreement | - | 396,090 | (396,090 | ) | - | |||||||||||
| Gain on debt extinguishment | (1,931,825 | ) | - | (1,931,825 | ) | - | ||||||||||
| Adjusted EBITDA | $ | 11,376,540 | $ | 8,713,120 | $ | 2,663,420 | 30.6 | |||||||||
The Company refers to Adjusted EBITDA in the above table as the Company uses this measure to evaluate operating performance and to make strategic decisions about the Company. Management believes that Adjusted EBITDA provides relevant and useful information which is widely used by analysts, investors and competitors in its industry in assessing performance.
About FlexShopper
FlexShopper, LLC, a wholly owned subsidiary of FlexShopper, Inc. (FPAY), is a financial and technology company that provides brand name electronics, home furnishings and other durable goods to consumers on a lease-to-own (LTO) basis through its e-commerce marketplace (www.FlexShopper.com) as well as its patented and patent pending systems. FlexShopper also provides LTO technology platforms to retailers and e-retailers to facilitate transactions with consumers that want to acquire their products, but do not have sufficient cash or credit. FlexShopper approves consumers utilizing its proprietary consumer screening model, collects from consumers under an LTO contract and funds the LTO transactions by paying merchants for the goods.
6
Forward-Looking Statements
All statements in this release that are not based on historical fact are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “could,” “seek,” “intend,” “plan,” “goal,” “estimate,” “anticipate,” or other comparable terms. Examples of forward-looking statements include, among others, statements we make regarding expectations of lease originations during the holiday season, the expansion of our lease-to-own program; expectations concerning our partnerships with retail partners; investments in, and the success of, our underwriting technology and risk analytics platform; our ability to collect payments due from customers; expected future operating results and; expectations concerning our business strategy. Forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, as a result of various factors including, among others, the following: our limited operating history, limited cash and history of losses; our ability to obtain adequate financing to fund our business operations in the future; the failure to successfully manage and grow our FlexShopper.com e-commerce platform; our ability to maintain compliance with financial covenants under our credit agreement; our dependence on the success of our third-party retail partners and our continued relationships with them; our compliance with various federal, state and local laws and regulations, including those related to consumer protection; the failure to protect the integrity and security of customer and employee information; and the other risks and uncertainties described in the Risk Factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of our Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q. The forward-looking statements made in this release speak only as of the date of this release, and FlexShopper assumes no obligation to update any such forward-looking statements to reflect actual results or changes in expectations, except as otherwise required by law.
Contact:
Jeremy Hellman
Vice President
The Equity Group
212-836-9626
jhellman@equityny.com
FlexShopper, Inc.
Investor Relations
ir@flexshopper.com
FlexShopper, Inc.
7