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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