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): November 9, 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”)

 

November 9, 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 September 30, 2020, highlighted by growth in net revenue and orginations. 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 9, 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: November 9, 2020 By: /s/ Richard House, Jr.
    Richard House, Jr.
    Chief Executive Officer

 

 

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 Exhibit 99.1

 

 

 

FlexShopper, Inc. Reports 2020 Third Quarter Financial Results;

Net Revenues Up 5.0% to $23.4 million; Originations Ramped Up Into Quarter End

 

BOCA RATON, Fla., November 9, 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 September 30, 2020, highlighted by sharp growth in originations in the last month of the quarter.

 

Results for Quarter Ended September 30, 2020 vs. Quarter Ended September 30, 2019:

 

Net lease revenues and fees increased 5.0% to $23.4 million from $22.3 million
   
FlexShopper originated 47,317 gross leases, up 29.5% from 36,531
   
Gross lease originations increased $5.6 million, or 32.8%, to $22.7 million from $17.1 million
   
The average origination value increased by 2.5%, to $480 from $468
   
Net income of $289 thousand compared with net income of $1.4 million
   
Net loss attributable to common stockholders of $(0.3) million, or $(0.02) per diluted share, compared net income of $0.8 million, or $0.04 per diluted share
   
Gross profit increased 8.4% to $8.9 million from $8.2 million
   
Adjusted EBITDA1 decreased to $2.1 million compared to $3.2 million

 

Results for Nine Months Ended September 30, 2020 vs. Nine Months Ended September 30, 2019:

 

Net lease revenues and fees increased 9.4% to $69.9 million from $63.9 million
   
FlexShopper originated 117,294 gross leases, up 22.5% from 95,731
   
Gross lease originations increased $10.5 million, or 23.5%, to $55.1 million from $44.6 million
   
The average origination value increased to $470 from $466
   
Net income of $79 thousand compared with net income of $1.6 million
   
Net loss attributable to common stockholders, inclusive of deemed dividend expense of $0.7 million in Q1, of $(2.4) million, or $(0.12) per diluted share, compared to $(0.2) million, or $(0.01) per diluted share
   
Gross profit increased 15.5% to $24.3 million from $21 million
   
Adjusted EBITDA1 decreased to $6.2 million from $7.3 million

 

¹Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures”.

 

 

 

 

Third Quarter 2020 Highlights and Recent Developments

 

Rate of origination growth accelerated through the quarter. FlexShopper recorded growth in gross lease originations of 32.8% in the third quarter with month of September originations representing the largest non-holiday month of originations in the Company’s history. The strong activity experienced in September followed market testing in August and into early September that was undertaken in order to confirm payment activity would conform to expectations.

 

Payments activity continues to be firm. Continuing the trend cited by the Company on its Q2 earnings call, customer payment activity has remained firm. Additionally, market testing performed by the company beginning late in the second quarter and continuing through mid-third quarter demonstrated a continuation of this trend.

 

  B-to-B lease originations in September set a record high.  The addition of new retail partners and the rebounding from COVID and optimizing of existing retail relationships made September our largest B2B lease origination month since inception. We are also successfully broadening our retail categories across tires, furniture and electronics.

 

Investments in marketing during the third quarter and continuing in the fourth quarter. Following market testing noted earlier, FlexShopper began ramping up its digital marketing during the third quarter and expects to continue doing so in the fourth quarter. This marketing program began to yield results as originations accelerated into quarter-end and have continued into the fourth quarter.

 

Enhanced underwriting methodologies are expected to drive improved returns. As noted on prior investor calls, the company has emphasized a focus on Return on Investment/Return on Capital-oriented management. The company has worked to bolster its underwriting algorithms which, coupled with renewed investment in marketing, are expected to produce revenue growth and further improvements in profitability.

 

Rich House, CEO, stated, “We have discussed previously our methodical approach to marketing and underwriting in response to the COVID-impacted landscape. In particular, we thought it prudent to conduct market testing before pursuing significant origination growth in the B-to-C channel. I am pleased to report that our testing yielded the results we desired and, as a result, we sharply increased our digital marketing efforts during the third quarter for the B-to-C segment. That push resulted in significant growth in originations in September, with the month’s originations of 13,575 leases, representing the best non-holiday month for B-to-C originations in the Company’s history.”

 

Mr. House continued, “Our historical retail partners are still contending with physical store activity that is roughly 20% below pre-COVID levels and that impacts the volume of originations we have seen in our B-to-B channel. At the same time, our new partners, that we mentioned on the last call, enabled September to be the largest B-to-B channel origination month in the Company’s history. Although significant, virus-driven macro uncertainty exists, we believe our business is poised for growth.”

 

Additionally, Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition of this measure under “Non-GAAP Measures.”

 

Conference Call Details

Date: Tuesday, November 10, 2020

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://78449.themediaframe.com/dataconf/productusers/fpay/mediaframe/41428/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
September 30,
   For the nine months ended
September 30,
 
   2020   2019   2020   2019 
                 
Revenues:                
Lease revenues and fees, net  $23,391,348   $22,267,261   $69,989,333   $63,953,196 
Lease merchandise sold   1,178,716    665,074    3,953,608    2,374,876 
Total revenues   24,570,064    22,932,335    73,942,941    66,328,072 
                     
Costs and expenses:                    
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise   14,886,798    14,248,969    46,982,002    43,787,216 
Cost of lease merchandise sold   763,728    457,399    2,685,599    1,521,244 
Marketing   1,650,717    868,452    3,619,911    2,031,227 
Salaries and benefits   2,499,235    2,189,629    7,324,620    5,984,797 
Operating expenses   3,528,890    2,718,110    10,037,743    8,156,238 
Total costs and expenses   23,329,368    20,482,559    70,649,875    61,480,722 
                     
Operating income   1,240,696    2,449,776    3,293,066    4,847,350 
                     
Interest expense including amortization of debt issuance costs   951,336    1,061,794    3,214,083    3,265,771 
Net income   289,360    1,387,982    78,983    1,581,579 
                     
Deemed dividend from exchange offer of warrants   -    -    713,212    - 
Dividends on Series 2 Convertible Preferred Shares   609,772    609,717    1,829,217    1,828,167 
Net income/ (loss) attributable to common stockholders  $(320,412)  $778,265   $(2,463,446)  $(246,588)
                     
Basic and diluted loss per common share:                    
Basic and diluted  $(0.02)  $0.04   $(0.12)  $(0.01)
                     
WEIGHTED AVERAGE COMMON SHARES:                    
Basic   21,358,141    17,666,193    20,872,940    17,661,134 
Diluted   21,358,141    19,798,386    20,872,940    17,661,134 

 

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FLEXSHOPPER, INC.

CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2020   2019 
   (unaudited)     
ASSETS        
CURRENT ASSETS:        
Cash  $6,750,019   $6,868,472 
Accounts receivable, net   7,855,320    8,272,332 
Prepaid expenses   794,089    672,242 
Lease merchandise, net   30,658,104    31,063,104 
Total current assets   46,057,532    46,876,150 
           
PROPERTY AND EQUIPMENT, net   5,563,604    5,260,407 
           
OTHER ASSETS, net   73,085    78,335 
Total assets  $51,694,221   $52,214,892 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES:          
Accounts payable  $5,053,768   $4,567,889 
Accrued payroll and related taxes   307,120    513,267 
Current portion of loan payable under credit agreement to beneficial shareholder, net of $37,685 at 2020 of unamortized issuance costs   14,297,514    - 
Current portion of promissory notes to related parties, net of $12,414 at 2020 and $5,333 at 2019 of unamortized issuance costs, including accrued interest   4,797,051    1,067,740 
Current portion of promissory note - Paycheck Protection Program   1,170,602    - 
Accrued expenses   1,454,303    1,372,901 
Lease liability - current portion   159,521    27,726 
Total current liabilities   27,239,879    7,549,523 
           
Loan payable under credit agreement to beneficial shareholder, net of $26,918 at 2020 and $281,138 at 2019 of unamortized issuance costs and current portion   10,212,510    28,904,738 
Promissory notes to related parties, net of $24,828 at 2019 of unamortized issuance costs and current portion   -    3,725,172 
Promissory note - Paycheck Protection Program, net of current portion   751,312    - 
Accrued payroll and related taxes less current portion   268,255    - 
Lease liabilities less current portion   1,986,209    2,067,184 
Total liabilities   40,458,165    42,246,617 
           
STOCKHOLDERS’ EQUITY          
Series 1 Convertible Preferred Stock, $0.001 par value - authorized 250,000 shares, issued and outstanding 170,332 shares at 2020 and 171,191 shares at 2019 at $5.00 stated value   851,660    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 21,359,445 shares at 2020 and 17,783,960 shares at 2019   2,136    1,779 
Additional paid in capital   36,506,457    35,313,721 
Accumulated deficit   (48,076,197)   (48,155,180)
Total stockholders’ equity   11,236,056    9,968,275 
   $51,694,221   $52,214,892 

 

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FLEXSHOPPER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months ended September 30, 2020 and 2019

(unaudited)

 

   2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income  $78,983   $1,581,579 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and impairment of lease merchandise   46,982,002    43,787,216 
Other depreciation and amortization   1,889,690    1,879,935 
Compensation expense related to issuance of stock options and warrants   1,052,281    530,724 
Provision for doubtful accounts   23,643,556    25,075,156 
Interest in kind added to promissory notes balance   7,814    - 
Changes in operating assets and liabilities:          
Accounts receivable   (23,226,544)   (26,675,773)
Prepaid expenses and other   (120,482)   (290,556)
Lease merchandise   (46,577,002)   (35,764,135)
Security deposits   2,943    1,334 
Accounts payable   485,878    (5,656,655)
Accrued payroll and related taxes   62,108    (161,009)
Accrued expenses   273,903    (317,173)
Net cash provided by operating activities   4,555,130    3,990,643 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchases of property and equipment, including capitalized software costs   (2,099,654)   (1,664,580)
Net cash used in investing activities   (2,099,654)   (1,664,580)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Principal payment under finance lease obligation   (4,891)   (1,243)
Refund of equity issuance related costs   -    23,147 
Proceeds from exercise of warrants   131,250    - 
Proceeds from exercise of stock options   5,267    - 
Proceeds from promissory notes - Paycheck Protection Program, net of fees   1,914,100    - 
Proceeds from promissory notes to related parties, net of fees   -    3,440,000 
Proceeds from loan payable under credit agreement   2,412,000    2,523,828 
Repayment of loan payable under credit agreement   (7,023,250)   (10,528,488)
Repayment of promissory note   -    (500,000)
Repayment of instalment loan   (8,405)   (8,405)
Debt issuance related costs   -    (243,750)
Net cash used in financing activities   (2,573,929)   (5,294,911)
           
DECREASE IN CASH   (118,453)   (2,968,848)
           
CASH, beginning of period  $6,868,472   $6,141,210 
           
CASH, end of period  $6,750,019   $3,172,362 
           
Supplemental cash flow information:          
Interest paid  $3,021,833   $2,700,709 
Deemed dividend from exchange offer of warrants  $713,212   $- 
Conversion of preferred stock to common stock  $4,295   $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 and nine months ended September 30, 2020 and 2019 were as follows:

 

   Three months ended
September 30,
         
   2020   2019   $ Change   % Change 
Adjusted EBITDA:                
Net income  $289,360   $1,387,982    (1,098,622)   (79.2)
Amortization of debt costs   50,050    111,506    (61,456)   (55.1)
Other amortization and depreciation   593,267    531,289    61,978    11.7 
Interest expense   901,286    950,288    (49,002)   (5.2)
Stock compensation   169,393    117,134    52,259    44.6 
Non-recurring product/infrastructure expenses   97,390    79,272    18,118    22.9 
Adjusted EBITDA  $2,100,746   $3,177,471    (1,076,725)   (33.9)

 

   Nine months ended
September 30,
         
   2020   2019   $ Change   % Change 
Adjusted EBITDA:                
Net income  $78,983   $1,581,579   $(1,502,596)   (95.0)
Amortization of debt costs   234,283    230,340    3,943    1.7 
Other amortization and depreciation   1,655,406    1,649,597    5,809    0.4 
Interest expense   2,979,800    3,035,431    (55,631)   (1.8)
Stock compensation   793,241    445,906    347,335    77.9 
Non-recurring product/infrastructure expenses   281,830    306,383    (24,553)   (8.0)
Warrants compensation- consulting agreement   139,480    43,200    96,280    222.9 
Adjusted EBITDA  $6,163,023   $7,292,436   $(1,129,413)   (15.0)

 

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 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include the Company’s financial guidance for fiscal year 2019. 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.

 

 

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