UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 6, 2020
FlexShopper, Inc.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 001-37945 | 20-5456087 | ||
| (State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
| of incorporation) | Identification No.) |
| 901 Yamato Road, Suite 260 | ||
| Boca Raton, Florida | 33431 | |
| (Address of principal executive offices) (Zip Code) |
Registrant’s telephone number, including area code: (855) 353-9289
(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 | ||
| Common Stock, par value $0.0001 per share | FPAY | The Nasdaq Stock Market LLC |
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”)
May 6, 2020
| 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 March 31, 2020, highlighted by an increase in net revenues and gross lease originations. 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 May 6, 2020. |
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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: May 6, 2020 | By: | /s/ Richard House, Jr. |
| Richard House, Jr. | ||
| Chief Executive Officer | ||
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Exhibit 99.1
FlexShopper, Inc. Reports 2020 First Quarter Financial Results;
Net Revenues Up 8.8% to $23.7 million; Gross Lease Originations up 20.6% to 36,153
Online Shopping Remains Active
BOCA RATON, Fla., May 6, 2020 (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 March 31, 2020, highlighted by growth in gross lease originations and net revenues.
Results for Quarter ended March 31, 2020 vs. Quarter ended March 31, 2019:
| ● | Net lease revenues and fees increased 8.8% to $23.7 million from $21.8 million. |
| ● | FlexShopper originated 36,153 gross leases, up 20.6% from 29,972 leases. |
| ● | Gross lease originations increased by $3.1 million, or 21.9%, to $17.2 million from $14.1 million. |
| ● | Average origination value increased to $475 from $470. |
| ● | Net income was $52,000 compared with net income of $504,000. |
| ● | Net loss attributable to common stockholders increased to $(1.2) million, or $(0.06) per diluted share, compared to $(0.1) million, or $(0.01) per diluted share. |
| ● | Gross profit increased 16.4% to $8.0 million from $6.9 million. |
| ● | Adjusted EBITDA1 decreased to $2.0 million compared to $2.3 million. |
¹Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures.”
First Quarter 2020 Highlights and Recent Developments
| ● | Growth in originations and net revenues. FlexShopper recorded growth in both gross lease originations and net revenues in the first quarter of 2020, although the pace of growth moderated later in the quarter due to the broader COVID-19 driven slowdown in economic activity. |
| ● | Payments activity remains firm. As of March 31, 2020, FlexShopper had not observed a material decline in payments activity by its customers. FlexShopper continues to closely monitor payments on a weekly basis and intends to modify its marketing and underwriting guidelines as needed. |
| ● | B to B to C channel rollouts are delayed due to COVID-19. Previously-planned pilot programs with new retail partners that were originally scheduled to take place in late Q1 and Q2 2020 have been put on hold. The Company remains in close communication with its retail partners and intends to move forward with the roll-out of pilot programs as soon as practicable. |
| ● | Withdrawing 2020 financial guidance. In light of the unknown duration and ultimate impact of COVID-19 mitigation measures by governmental authorities, FlexShopper is withdrawing previously-issued 2020 financial guidance. |
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Rich House, CEO, stated, “2020 got off to a solid start although the COVID-19 driven economic contraction began to impact our business late in the quarter. Gross lease originations in Q1 were up 20.6% versus the same period last year. As of March 31, we had not observed a material change in customer payment activity and continue to monitor this weekly data point. Our online lease-to-own platform is fully operational and provides customers a valuable shopping option while adhering to ‘stay at home’ restrictions.”
Mr. House continued, “Our retail partners have seen a decrease in store traffic and that has negatively impacted our originations in that channel, as well as the delay of the launch of pilot programs that were due to begin in late Q1 or early Q2. We remain in regular communication with all of our retail partners and expect the lifting of ‘stay at home’ restrictions to have a positive impact on retail partner originations and pilot rollouts, although the timing is unknown. Given that uncertainty, we are withdrawing our previously-issued financial guidance.”
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, May 7, 2020 |
| Time: | 11:00 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://78449.themediaframe.com/dataconf/productusers/fpay/mediaframe/37617/indexl.html. An audio replay of the call will
be archived on the Company’s website.
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FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the three months ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenues: | ||||||||
| Lease revenues and fees, net | $ | 23,697,705 | $ | 21,784,779 | ||||
| Lease merchandise sold | 1,145,042 | 946,618 | ||||||
| Total revenues | 24,842,747 | 22,731,397 | ||||||
| Costs and expenses: | ||||||||
| Cost of lease revenues, consisting of depreciation and impairment of lease merchandise | 16,196,949 | 15,277,939 | ||||||
| Cost of lease merchandise sold | 630,781 | 565,007 | ||||||
| Marketing | 1,031,145 | 848,546 | ||||||
| Salaries and benefits | 2,548,869 | 1,758,087 | ||||||
| Operating expenses | 3,171,692 | 2,596,282 | ||||||
| Total costs and expenses | 23,579,436 | 21,045,861 | ||||||
| Operating income | 1,263,311 | 1,685,536 | ||||||
| Interest expense including amortization of debt issuance costs | 1,211,626 | 1,181,993 | ||||||
| Net Income | 51,685 | 503,543 | ||||||
| Dividends on Series 2 Convertible Preferred Shares | 609,717 | 609,168 | ||||||
| Deemed dividend from exchange offer of warrants | 713,212 | - | ||||||
| Net loss attributable to common shareholders | $ | (1,271,244 | ) | $ | (105,625 | ) | ||
| Basic and diluted (loss) per common share: | ||||||||
| Basic and diluted | $ | (0.06 | ) | $ | (0.01 | ) | ||
| WEIGHTED AVERAGE COMMON SHARES: | ||||||||
| Basic and diluted | 19,903,435 | 17,650,847 | ||||||
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FLEXSHOPPER, INC.
CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 5,454,520 | $ | 6,868,472 | ||||
| Accounts receivable, net | 8,459,944 | 8,272,332 | ||||||
| Prepaid expenses | 760,610 | 672,242 | ||||||
| Lease merchandise, net | 29,898,676 | 31,063,104 | ||||||
| Total current assets | 44,573,750 | 46,876,150 | ||||||
| PROPERTY AND EQUIPMENT, net | 5,414,740 | 5,260,407 | ||||||
| OTHER ASSETS, net | 74,623 | 78,335 | ||||||
| $ | 50,063,113 | $ | 52,214,892 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 3,161,491 | $ | 4,567,889 | ||||
| Accrued payroll and related taxes | 293,004 | 513,267 | ||||||
| Loan payable under credit agreement to beneficial shareholder, net of $16,244 at 2020 of unamortized issuance costs | 2,294,829 | - | ||||||
| Promissory notes to related parties, net of $1,333 at 2020 and $5,333 at 2019 of unamortized issuance costs, including accrued interest | 1,212,777 | 1,067,740 | ||||||
| Accrued expenses | 1,600,988 | 1,372,901 | ||||||
| Lease liability - current portion | 129,203 | 27,726 | ||||||
| Total current liabilities | 8,692,292 | 7,549,523 | ||||||
| Loan payable under credit agreement to beneficial shareholder, net of $178,687 at 2020 and $281,138 at 2019 of unamortized issuance costs and current portion | 25,243,117 | 28,904,738 | ||||||
| Promissory notes to related parties, net of $20,690 at 2020 and $24,828 at 2019 of unamortized issuance costs and current portion | 3,729,310 | 3,725,172 | ||||||
| Lease liabilities less current portion | 2,031,370 | 2,067,184 | ||||||
| Total liabilities | 39,696,089 | 42,246,617 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series 1 Convertible Preferred Stock, $0.001 par value - authorized 250,000 shares, issued and outstanding 171,191 shares at $5.00 stated value | 855,955 | 855,955 | ||||||
| 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 21,351,643 shares at 2020 and 17,783,960 shares at 2019 | 2,135 | 1,779 | ||||||
| Additional paid in capital | 35,660,429 | 35,313,721 | ||||||
| Accumulated deficit | (48,103,495 | ) | (48,155,180 | ) | ||||
| Total stockholders’ equity | 10,367,024 | 9,968,275 | ||||||
| $ | 50,063,113 | $ | 52,214,892 | |||||
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FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2020 and 2019
(unaudited)
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 51,685 | $ | 503,543 | ||||
| Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and impairment of lease merchandise | 16,196,949 | 15,277,939 | ||||||
| Other depreciation and amortization | 554,359 | 584,968 | ||||||
| Compensation expense related to issuance of stock options and warrants | 215,814 | 36,729 | ||||||
| Provision for doubtful accounts | 7,682,927 | 7,344,944 | ||||||
| Interest in kind added to promissory notes balance | 141,038 | 167,119 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (7,870,539 | ) | (7,479,319 | ) | ||||
| Prepaid expenses and other | (87,873 | ) | (17,624 | ) | ||||
| Lease merchandise | (15,032,521 | ) | (11,095,183 | ) | ||||
| Security deposits | 2,943 | (60,000 | ) | |||||
| Accounts payable | (1,406,398 | ) | (5,211,226 | ) | ||||
| Accrued payroll and related taxes | (220,263 | ) | (197,565 | ) | ||||
| Accrued expenses | 330,408 | (320,979 | ) | |||||
| Net cash provided by (used in) operating activities | 558,529 | (466,654 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment, including capitalized software costs | (646,414 | ) | (553,184 | ) | ||||
| Net cash used in investing activities | (646,414 | ) | (553,184 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Principal payment under finance lease obligation | (1,515 | ) | - | |||||
| Refund of equity issuance related costs | - | 13,147 | ||||||
| Proceeds from exercise of warrants | 131,250 | - | ||||||
| Proceeds from promissory notes, net of fees | - | 2,940,000 | ||||||
| Proceeds from loan payable under credit agreement | 1,900,000 | 1,241,328 | ||||||
| Repayment of loan payable under credit agreement | (3,353,000 | ) | (6,665,989 | ) | ||||
| Repayment of installment loan | (2,802 | ) | (2,802 | ) | ||||
| Net cash used in financing activities | (1,326,067 | ) | (2,474,316 | ) | ||||
| DECREASE IN CASH | (1,413,952 | ) | (3,494,154 | ) | ||||
| CASH, beginning of period | $ | 6,868,472 | $ | 6,141,210 | ||||
| CASH, end of period | $ | 5,454,520 | $ | 2,647,056 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | 985,763 | $ | 993,544 | ||||
| Deemed dividend from exchange offer of warrants | $ | 713,212 | $ | - | ||||
| Conversion of preferred stock to common stock | $ | - | $ | 341,070 | ||||
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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 months ended March 31, 2020 and 2019 were as follows:
| Three months ended March 31, | ||||||||||||||||
| 2020 | 2019 | $ Change | % Change | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Net income | $ | 51,685 | $ | 503,543 | $ | (451,858 | ) | (89.7 | ) | |||||||
| Amortization of debt costs | 94,346 | 60,265 | 34,081 | 56.6 | ||||||||||||
| Other amortization and depreciation | 460,013 | 524,703 | (64,690 | ) | (12.3 | ) | ||||||||||
| Interest expense | 1,117,281 | 1,121,728 | (4,447 | ) | (0.4 | ) | ||||||||||
| Stock compensation | 171,815 | 25,529 | 146,286 | 573.0 | ||||||||||||
| Non-recurring product/infrastructure expenses | 104,663 | 92,297 | 12,366 | 13.4 | ||||||||||||
| Adjusted EBITDA | $ | 1,999,803 | $ | 2,328,065 | $ | (328,262 | ) | - | ||||||||
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.
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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 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 impact of the COVID-19 pandemic on our business and industry, and the other risks and uncertainties described in the Risk Factors and Management’s Discussion and Analysis sections of our Annual Report on Form 10-K and 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 required by federal securities laws.
Contact:
Jeremy Hellman
Vice President
The Equity Group
212-836-9626
jhellman@equityny.com
FlexShopper, Inc.
Investor Relations
ir@flexshopper.com
FlexShopper, Inc.
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