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): August 10, 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”)

 

August 10, 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 June 30, 2020, highlighted by growth in adjusted EBITDA and net revenues. 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 August 10, 2020.

 

2

 

 

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: August 10, 2020 By: /s/ Richard House, Jr.
    Richard House, Jr.
    Chief Executive Officer

 

3

 

Exhibit 99.1

 

 

FlexShopper, Inc. Reports 2020 Second Quarter Financial Results;

Net Revenues Up 15.1% to $22.9 million; Adjusted EBITDA up 12.7% to $2.0 million

 

BOCA RATON, Fla., August 10, 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 June 30, 2020, highlighted by growth in adjusted EBITDA and net revenues.

 

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

·Net lease revenues and fees increased 15.1% to $22.9 million from $19.9 million
·FlexShopper originated 33,941 gross leases, up 16.0% from 29,252
·Gross lease originations increased $2.1 million, or 15.8%, to $15.3 million from $13.2 million
·The average origination value remained flat at $452
·Net loss of $(262) thousand compared with a net loss of $(310) thousand
·Net loss attributable to common stockholders of $(0.9) million, or $(0.04) per diluted share, compared to $(0.9) million, or $(0.05) per diluted share
·Gross profit increased 25.8% to $7.4 million from $5.9 million
·Adjusted EBITDA1 increased to $2.0 million compared to $1.8 million

 

Results for Six Months Ended June 30, 2020 vs. Six Months Ended June 30, 2019:

·Net lease revenues and fees increased 11.8% to $46.6 million from $41.7 million
·FlexShopper originated 70,068 gross leases, up 18.3% from 59,245
·Gross lease originations increased $4.8 million, or 17.3%, to $32.5 million from $27.7 million
·The average origination value decreased to $464 from $467
·Net loss of $(210) thousand compared with net income of $194 thousand
·Net loss attributable to common stockholders, inclusive of deemed dividend expense of $0.7 million in Q1, of $(2.1) million, or $(0.10) per diluted share, compared to $(1.0) million, or $(0.06) per diluted share
·Gross profit increased 20.0% to $15.4 million from $12.8 million
·Adjusted EBITDA1 remained flat at $4.1 million

 

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

 

 

 

Second 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 second quarter. Retail partner lease originations saw improvement from COVID-19 restriction-driven lows experienced at the end of Q1/early in Q2 but remained below pre-pandemic levels.

 

·Payments activity remains firm. As of June 30, 2020, FlexShopper observed an improvement in payments activity by its customers compared to the same period last year. The Company continues to closely monitor payments on a weekly basis and intends to modify its marketing and underwriting as needed.

 

·Retailer rollouts were delayed due to COVID-19. Previously-planned programs with new retail partners that were originally scheduled for late Q1 and/or Q2 were delayed. Since the end of Q2, the Company has been able to move forward with some of these new programs.

 

Rich House, CEO, stated, “Over the course of the second quarter we saw states progress through phased economic reopenings. As they did so, we followed suit as we felt an increased marketing push would yield a positive return. On our first quarter earnings call we noted that our payment activity had remained firm and that continues to be the case.

Mr. House continued, “Our retail partners have seen their store traffic begin to return as states moved through phased reopening of in-person businesses. That has, in turn, led to an increase in leases originated through this channel although activity remains below levels experienced prior to COVID-19. We are now moving forward with new partner trials and rollouts that were delayed earlier in the year.”

 

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 , August 11, 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/37617/indexl.html. An audio replay of the call will be archived on the Company’s website.

 

 

 

FLEXSHOPPER, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   For the three months ended
June 30,
   For the six months ended
June 30,
 
   2020   2019   2020   2019 
                 
Revenues:                
Lease revenues and fees, net  $22,900,280   $19,901,156   $46,597,985   $41,685,935 
Lease merchandise sold   1,629,850    763,184    2,774,892    1,709,802 
Total revenues   24,530,130    20,664,340    49,372,877    43,395,737 
                     
Costs and expenses:                    
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise   15,898,255    14,260,308    32,095,204    29,538,247 
Cost of lease merchandise sold   1,291,090    498,838    1,921,871    1,063,845 
Marketing   938,049    314,229    1,969,194    1,162,775 
Salaries and benefits   2,276,516    2,037,081    4,825,385    3,795,168 
Operating expenses   3,337,162    2,841,846    6,508,853    5,438,128 
Total costs and expenses   23,741,072    19,952,302    47,320,507    40,998,163 
                     
Operating income   789,058    712,038    2,052,370    2,397,574 
                     
Interest expense including amortization of debt issuance costs   1,051,120    1,021,984    2,262,747    2,203,977 
Net (loss)/ income   (262,062)   (309,946)   (210,377)   193,597 
                     
Deemed dividend from exchange offer of warrants   -      -      713,212    -   
Dividends on Series 2 Convertible Preferred Shares   609,728    609,282    1,219,445    1,218,450 
Net loss attributable to common shareholders  $(871,790)  $(919,228)  $(2,143,034)  $(1,024,853)
                     
Basic and diluted loss per common share:                    
Basic and diluted  $(0.04)  $(0.05)  $(0.10)  $(0.06)
                     
WEIGHTED AVERAGE COMMON SHARES:                    
Basic and diluted   21,351,914    17,666,193    20,627,674    17,658,562 

  

 

 

FLEXSHOPPER, INC.

CONSOLIDATED BALANCE SHEETS

 

   June 30,   December 31, 
   2020   2019 
   (unaudited)     
ASSETS        
CURRENT ASSETS:        
Cash  $9,851,009   $6,868,472 
Accounts receivable, net   7,969,997    8,272,332 
Prepaid expenses   591,276    672,242 
Lease merchandise, net   26,081,242    31,063,104 
Total current assets   44,493,524    46,876,150 
           
PROPERTY AND EQUIPMENT, net   5,489,986    5,260,407 
           
OTHER ASSETS, net   73,854    78,335 
   $50,057,364   $52,214,892 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES:          
Accounts payable  $3,079,283   $4,567,889 
Accrued payroll and related taxes   513,098    513,267 
Loan payable under credit agreement to beneficial shareholder, net of $36,838 at 2020 of unamortized issuance costs   8,541,037    -   
Promissory notes to related parties, net of $16,552 at 2020 and $5,333 at 2019 of unamortized issuance costs, including accrued interest   4,793,918    1,067,740 
Promissory note   845,047    -   
Accrued expenses   1,210,665    1,372,901 
Lease liability - current portion   151,146    27,726 
Total current liabilities   19,134,194    7,549,523 
           
Loan payable under credit agreement to beneficial shareholder, net of $73,676 at 2020 and $281,138 at 2019 of unamortized issuance costs and current portion   17,082,075    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   1,072,042    -   
Accrued payroll and related taxes less current portion   85,091    -   
Lease liabilities less current portion   2,028,852    2,067,184 
Total liabilities   39,402,254    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 21,356,112 shares at 2020 and 17,783,960 shares at 2019   2,136    1,779 
Additional paid in capital   36,214,871    35,313,721 
Accumulated deficit   (48,365,557)   (48,155,180)
Total stockholders’ equity   10,665,110    9,968,275 
   $50,057,364   $52,214,892 

 

 

 

FLEXSHOPPER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2020 and 2019

(unaudited)

 

   2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net (loss)/ income  $(210,377)  $193,597 
Adjustments to reconcile net income/(loss) to net cash provided by operating  activities:          
Depreciation and impairment of lease merchandise   32,095,204    29,538,247 
Other depreciation and amortization   1,246,372    1,237,143 
Compensation expense related to issuance of stock options and warrants   763,328    371,972 
Provision for doubtful accounts   15,564,198    15,774,830 
Interest in kind added to promissory notes balance   2,989    -   
Changes in operating assets and liabilities:          
Accounts receivable   (15,261,863)   (16,296,288)
Prepaid expenses and other   81,916    (198,666)
Lease merchandise   (27,113,342)   (21,598,717)
Security deposits   2,943    (40,801)
Accounts payable   (1,488,607)   (5,745,326)
Accrued payroll and related taxes   84,922    (28,436)
Accrued expenses   27,258    (511,712)
Net cash provided by operating activities   5,794,941    2,695,843 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchases of property and equipment, including capitalized software costs   (1,399,360)   (1,105,122)
Net cash used in investing activities   (1,399,360)   (1,105,122)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Principal payment under finance lease obligation   (3,175)   -   
Refund of equity issuance related costs   -      23,147 
Proceeds from exercise of warrants   131,250    -   
Proceeds from exercise of stock options   2,634    -   
Proceeds from promissory notes, net of fees   1,914,100    3,440,000 
Proceeds from loan payable under credit agreement   2,412,000    1,358,343 
Repayment of loan payable under credit agreement   (5,864,250)   (9,255,988)
Repayment of promissory note   -      (500,000)
Repayment of instalment loan   (5,603)   (5,604)
Net cash used in financing activities   (1,413,044)   (4,940,102)
           
INCREASE/ (DECREASE) IN CASH   2,982,537    (3,349,381)
           
CASH, beginning of period  $6,868,472   $6,141,210 
           
CASH, end of period  $9,851,009   $2,791,829 
           
Supplemental cash flow information:          
Interest paid  $2,120,502   $1,936,218 
Deemed dividend from exchange offer of warrants  $713,212   $-   
Conversion of preferred stock to common stock  $4,295   $341,070 

 

 

 

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 six months ended June 30, 2020 and 2019 were as follows:

 

   Three months ended
June 30,
         
   2020   2019   $ Change   % Change 
Adjusted EBITDA:                
Net loss  $(262,062)  $(309,946)  $47,884    (15.4)
Amortization of debt costs   89,888    58,569    31,319    53.5 
Other amortization and depreciation   602,126    593,605    8,521    1.4 
Interest expense   961,233    963,415    (2,182)   (0.2)
Stock compensation   452,033    303,243    148,790    49.1 
Non-recurring product/infrastructure expenses   63,376    134,814    (71,438)   (53.0)
Warrants compensation- consulting agreement   95,481    32,000    63,481    198.4 
Adjusted EBITDA  $2,002,075   $1,775,700   $226,375    12.7 

 

   Six months ended
June 30,
         
   2020   2019   $ Change   % Change 
Adjusted EBITDA:                
Net income/ (loss)  $(210,377)  $193,597   $(403,974)   (208.7)
Amortization of debt costs   184,233    118,834    65,399    55.0 
Other amortization and depreciation   1,062,139    1,118,308    (56,169)   (5.0)
Interest expense   2,078,514    2,085,143    (6,629)   (0.3)
Stock compensation   623,848    328,772    295,076    89.8 
Non-recurring product/infrastructure expenses   184,440    227,111    (42,671)   (18.8)
Warrants compensation- consulting agreement   139,480    43,200    96,280    222.9 
Adjusted EBITDA  $4,062,277   $4,114,965   $(52,688)   (1.3)

 

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.

 

 

 

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.