UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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CURRENT REPORT ON FORM 8-K
FlexShopper, Inc. (the “Company”)
November 10, 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 ended September 30, 2022. 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 November 10, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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: November 10, 2022 | By: | /s/ Richard House, Jr. |
| Richard House, Jr. | ||
| Chief Executive Officer | ||
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Exhibit 99.1
FlexShopper, Inc. Reports Third Quarter 2022 Financial Results
BOCA RATON, Fla., November 10, 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 ended September 30, 2022.
Results for Quarter Ended September 30, 2022 vs. Quarter Ended September 30, 2021:
| ● | Total fundings increased 60.1% to $25.8 million from $16.1 million consisting of gross lease originations decreasing from $15.9 to $15.7 million and loan participations up ~4,350% from $226 thousand to $10.1 million |
| ● | Total net lease revenues and fees decreased 20.3% to $24.5 million from $30.7 million |
| ● | Total net loan revenues and fees increased 1,249% to $1.6 million from $121 thousand |
| ● | Gross profit decreased 49.8% to $6.4 million from $12.7 million |
| ● | Adjusted EBITDA1 decreased to $(2.9) million compared to $4.8 million |
| ● | Net loss of $(6.3) million compared with net income of $1.7 million |
| ● | Net loss attributable to common stockholders of $(6.9) million, or $(0.32) per diluted share, compared to net income attributable to common stockholders of $1.1 million, or $0.05 per diluted share |
Results for Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021:
| ● | Total fundings increased 38.3% to $78.9 million from $57.0 million consisting of gross lease originations decreasing from $56.6 to $51.9 million and loan participations up ~6,753% from $395 thousand to $27.0 million |
| ● | Total net lease revenues and fees decreased 12.1% to $82.7 million from $94.2 million |
| ● | Total net loan revenues and fees increased 4,864% to $8.9 million from $179 thousand |
| ● | Gross profit decreased 2.2% to $33.3 million from $34.0 million |
| ● | Adjusted EBITDA1 decreased to $3.4 million compared to $9.4 million |
| ● | Net income of $5.7 million compared with net income of $2.6 million |
| ● | Net income attributable to common stockholders of $3.9 million, or $0.17 per diluted share, compared to net income attributable to common stockholders of $810 thousand, or $0.03 per diluted share |
| ¹ | Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures”. |
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“FlexShopper is feeling the same headwind on consumer demand experienced by both traditional retailers and our peers in this challenging economic environment. As a result, we are observing a decline in response rates and approval rates which has created a gap in our near-term earnings. Despite the decrease in the online marketplace business, our retail partnership channel and repeat volume continue to grow in this environment.” said Richard House, CEO of FlexShopper.
FlexShopper CEO, Richard House, FlexShopper CFO, Russ Heiser and FlexShopper COO, John Davis will discuss the Company’s recent quarter, including financial and operating results, and strategic outlook on the Company’s earnings conference call and webcast.
Conference Call and Webcast Details
Conference call
Date: Friday, November 11, 2022
Time: 9:30 a.m. Eastern Time
Participant Dial-In Numbers:
Domestic callers: (877) 407-2988
International callers: (201) 389-0923
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://event.choruscall.com/mediaframe/webcast.html?webcastid=Fpl90J10
An audio replay of the call will be archived on the Company’s website.
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FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues: | ||||||||||||||||
| Lease revenues and fees, net | $ | 24,512,086 | $ | 30,740,119 | $ | 82,746,874 | $ | 94,153,920 | ||||||||
| Loan revenues and fees, net of changes in fair value | 1,629,365 | 120,816 | 8,897,964 | 179,238 | ||||||||||||
| Total revenues | 26,141,451 | 30,860,935 | 91,644,838 | 94,333,158 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of lease revenues and merchandise sold | 18,746,897 | 18,005,170 | 56,114,813 | 59,959,590 | ||||||||||||
| Loan origination costs and fees | 1,027,097 | 166,805 | 2,256,838 | 341,989 | ||||||||||||
| Marketing | 2,393,185 | 1,824,402 | 8,178,120 | 5,571,237 | ||||||||||||
| Salaries and benefits | 2,820,033 | 2,672,864 | 8,799,395 | 8,329,188 | ||||||||||||
| Operating expenses | 5,702,800 | 4,325,825 | 17,124,288 | 13,654,038 | ||||||||||||
| Total costs and expenses | 30,690,012 | 26,995,066 | 92,473,454 | 87,856,042 | ||||||||||||
| Operating (loss)/ income | (4,548,561 | ) | 3,865,869 | (828,616 | ) | 6,477,116 | ||||||||||
| Gain on extinguishment of debt | - | - | - | 1,931,825 | ||||||||||||
| Interest expense including amortization of debt issuance costs | (3,030,142 | ) | (1,233,617 | ) | (7,336,048 | ) | (3,855,014 | ) | ||||||||
| (Loss)/income before income taxes | (7,578,703 | ) | 2,632,252 | (8,164,664 | ) | 4,553,927 | ||||||||||
| Benefit /(expense) from income taxes | 1,298,269 | (936,229 | ) | 13,892,516 | (1,914,473 | ) | ||||||||||
| Net (loss)/ income | (6,280,434 | ) | 1,696,023 | 5,727,852 | 2,639,454 | |||||||||||
| Dividends on Series 2 Convertible Preferred Shares | 609,778 | 609,777 | 1,829,332 | 1,829,322 | ||||||||||||
| Net income/(loss) attributable to common and Series 1 Convertible Preferred shareholders | $ | (6,890,212 | ) | 1,086,246 | 3,898,520 | 810,132 | ||||||||||
| Basic and diluted income/(loss) per common share: | ||||||||||||||||
| Basic | $ | (0.32 | ) | $ | 0.05 | $ | 0.18 | $ | 0.04 | |||||||
| Diluted | $ | (0.32 | ) | $ | 0.05 | $ | 0.17 | $ | 0.03 | |||||||
| WEIGHTED AVERAGE COMMON SHARES: | ||||||||||||||||
| Basic | 21,681,853 | 21,383,647 | 21,611,879 | 21,377,978 | ||||||||||||
| Diluted | 21,681,853 | 23,577,179 | 22,403,447 | 23,682,265 | ||||||||||||
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FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 5,274,219 | $ | 4,986,559 | ||||
| Restricted cash | 481,867 | 108,083 | ||||||
| Lease receivables, net | 33,425,123 | 25,473,154 | ||||||
| Loan receivables at fair value | 26,591,546 | 3,560,108 | ||||||
| Prepaid expenses and other assets | 1,478,800 | 1,823,256 | ||||||
| Lease merchandise, net | 30,652,824 | 40,942,112 | ||||||
| Total current assets | 97,904,379 | 76,893,272 | ||||||
| Property and equipment, net | 7,416,249 | 5,490,434 | ||||||
| Right of use asset, net | 1,445,159 | 1,553,330 | ||||||
| Other assets, net | 1,726,443 | 875,020 | ||||||
| Deferred tax asset, net | 13,607,949 | - | ||||||
| Total assets | $ | 122,100,179 | $ | 84,812,056 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 3,875,469 | $ | 7,982,180 | ||||
| Accrued payroll and related taxes | 703,465 | 391,078 | ||||||
| Promissory notes to related parties, net of $0 at 2022 and $1,274 at 2021 of unamortized issuance costs, including accrued interest | 1,182,585 | 1,053,088 | ||||||
| Accrued expenses | 3,243,570 | 2,987,646 | ||||||
| Lease liability - current portion | 198,853 | 172,732 | ||||||
| Total current liabilities | 9,203,942 | 12,586,724 | ||||||
| Loan payable under credit agreement to beneficial shareholder, net of $338,113 at 2022 and $413,076 at 2021 of unamortized issuance costs | 77,261,887 | 50,061,924 | ||||||
| Promissory notes to related parties, net of current portion | 10,750,000 | 3,750,000 | ||||||
| Deferred income tax liability | 178,160 | 495,166 | ||||||
| Lease liabilities net of current portion | 1,623,211 | 1,774,623 | ||||||
| Total liabilities | 99,017,200 | 68,668,437 | ||||||
| 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 21,750,804 shares at September 30, 2022 and 21,442,278 shares at December 31, 2021 | 2,176 | 2,144 | ||||||
| Additional paid in capital | 39,771,593 | 38,560,117 | ||||||
| Accumulated deficit | (39,494,450 | ) | (45,222,302 | ) | ||||
| Total stockholders’ equity | 23,082,979 | 16,143,619 | ||||||
| $ | 122,100,179 | $ | 84,812,056 | |||||
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FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2022 and 2021
(unaudited)
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 5,727,852 | $ | 2,639,454 | ||||
| Adjustments to reconcile net income to net cash (used in)/ provided by operating activities: | ||||||||
| Depreciation and impairment of lease merchandise | 56,114,813 | 59,959,590 | ||||||
| Other depreciation and amortization | 3,303,591 | 2,032,811 | ||||||
| Amortization of debt issuance costs | 163,169 | 177,647 | ||||||
| Compensation expense related to stock-based compensation and warrants | 950,003 | 1,417,699 | ||||||
| Provision for doubtful accounts | 42,639,102 | 30,566,352 | ||||||
| Proceeds from sale of lease receivables | 7,611,586 | - | ||||||
| Interest in kind added to promissory notes balance | 128,223 | 9,460 | ||||||
| Deferred income tax | (13,924,955 | ) | 700,199 | |||||
| Gain on debt extinguishment | - | (1,931,825 | ) | |||||
| Net changes in the fair value of loan receivables at fair value | 1,938,570 | 54,236 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Lease receivables | (58,202,657 | ) | (39,915,536 | ) | ||||
| Loan receivables at fair value | (24,970,008 | ) | (490,995 | ) | ||||
| Prepaid expenses and other assets | 344,766 | (80,795 | ) | |||||
| Lease merchandise | (45,825,525 | ) | (50,470,104 | ) | ||||
| Security deposits | (4,956 | ) | (8,338 | ) | ||||
| Lease liabilities | (8,732 | ) | (2,595 | ) | ||||
| Accounts payable | (4,106,711 | ) | (4,563,434 | ) | ||||
| Accrued payroll and related taxes | 312,387 | 277,774 | ||||||
| Accrued expenses | 264,019 | 788,228 | ||||||
| Net cash (used in)/ provided by operating activities | (27,545,463 | ) | 1,159,828 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment, including capitalized software costs | (4,855,150 | ) | (2,998,044 | ) | ||||
| Purchases of data costs | (1,220,722 | ) | (461,379 | ) | ||||
| Net cash used in investing activities | (6,075,872 | ) | (3,459,424 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from loan payable under credit agreement | 32,855,000 | 4,000,000 | ||||||
| Repayment of loan payable under credit agreement | (5,730,000 | ) | (6,575,000 | ) | ||||
| Debt issuance related costs | (86,932 | ) | (529,608 | ) | ||||
| Proceeds from exercise of stock options | 261,505 | 24,988 | ||||||
| Proceeds from promissory notes | 7,000,000 | - | ||||||
| Principal payment under finance lease obligation | (8,388 | ) | (5,684 | ) | ||||
| Repayment of installment loan | (8,406 | ) | (8,406 | ) | ||||
| Net cash provided by/(used in) financing activities | 34,282,779 | (3,093,710 | ) | |||||
| INCREASE / (DECREASE) IN CASH and RESTRICTED CASH | 661,444 | (5,393,306 | ) | |||||
| CASH and RESTRICTED CASH, beginning of period | 5,094,642 | 8,541,232 | ||||||
| CASH and RESTRICTED CASH, end of period | $ | 5,756,086 | $ | 3,147,926 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | 6,828,663 | $ | 3,702,949 | ||||
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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 nine months ended September 30, 2022 and 2021 were as follows:
| Three months ended September 30, | ||||||||||||||||
| 2022 | 2021 | $ Change | % Change | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Net (loss)/income | $ | (6,280,434 | ) | $ | 1,696,023 | $ | (7,976,457 | ) | (470.3 | ) | ||||||
| Income taxes | (1,298,269 | ) | 936,229 | (2,234,498 | ) | (238.7 | ) | |||||||||
| Amortization of debt issuance costs | 56,283 | 43,067 | 13,216 | 30.7 | ||||||||||||
| Other amortization and depreciation | 1,244,267 | 708,762 | 535,505 | 75.6 | ||||||||||||
| Interest expense | 2,973,859 | 1,190,550 | 1,783,309 | 149.8 | ||||||||||||
| Stock-based compensation | 387,298 | 265,407 | 121,891 | 45.9 | ||||||||||||
| Adjusted EBITDA | $ | (2,916,996 | ) | $ | 4,840,038 | $ | (7,757,034 | ) | (160.3 | ) | ||||||
| Nine months ended September 30, | ||||||||||||||||
| 2022 | 2021 | $ Change | % Change | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Net income | $ | 5,727,852 | $ | 2,639,454 | $ | 3,088,398 | 117.0 | |||||||||
| Income taxes | (13,892,516 | ) | 1,914,473 | (15,806,989 | ) | (825.7 | ) | |||||||||
| Amortization of debt issuance costs | 163,169 | 177,647 | (14,478 | ) | (8.1 | ) | ||||||||||
| Other amortization and depreciation | 3,303,590 | 2,032,811 | 1,270,779 | 62.5 | ||||||||||||
| Interest expense | 7,172,879 | 3,677,367 | 3,495,512 | 95.1 | ||||||||||||
| Stock-based compensation | 950,003 | 894,892 | 55,111 | 6.2 | ||||||||||||
| Product/ infrastructure expenses | - | 10,000 | (10,000 | ) | ||||||||||||
| Gain on debt extinguishment | - | (1,931,825 | ) | 1,931,825 | - | |||||||||||
| Adjusted EBITDA | $ | 3,424,977 | $ | 9,414,819 | $ | (5,989,842 | ) | (63.6 | ) | |||||||
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 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.
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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:
FlexShopper, Inc.
Investor Relations
ir@flexshopper.com
FlexShopper, Inc.
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