Form 8-K - Current report

 

 

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 14, 2024

 

FLEXSHOPPER, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware		001-37945		20-5456087
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer 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: [phone]

 

 

(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 14, 2024

 

Item 2.02. Results of Operations and Financial Condition.

 

FlexShopper, Inc. (Nasdaq:FPAY) (“FlexShopper”), a leading national online lease-to-own (“LTO”) retailer and payment solution provider for underserved consumes, today announced its financial results for the quarter ended September 30, 2024. 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 14, 2024.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

1

 

 

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 19, 2024	By:	/s/ H. Russell Heiser Jr.
		H. Russell Heiser Jr.
		Chief Executive Officer

 

 

2

 

 

Exhibit 99.1

 

NEWS RELEASE

 

FlexShopper, Inc. Reports Record

2024 Third-Quarter Financial Results

 

Strategic transformation produced record quarterly total revenue of $38.6 million,
with earnings increasing to $0.05 per diluted share for the third quarter of 2024

 

Adjusted EBITDA increased 45% year-over-year to a quarterly record of $12.2 million

 

Boca Raton, Fla., -- November 14, 2024 -- FlexShopper, Inc. (Nasdaq: FPAY) (“FlexShopper”), a leading national online lease-to-own (“LTO”) retailer and payment solution provider for underserved consumers, today announced its financial results for the quarter ended September 30, 2024.

 

Russ Heiser, Jr, Chief Executive Officer, stated, “2024 is shaping up to be a transformative year for FlexShopper as the strategies we are pursuing to profitably grow our business take hold and more retail partners and consumers recognize the value of our unique payment solutions. We are successfully adding new retail partners, and to date, have expanded our signed store count to over 7,800 retail locations – a nearly 250% increase since the beginning of the year. In addition, we continue to grow retail revenue and gross margin through our FlexShopper.com marketplace.”

 

Mr. Heiser continued, “As we pursue multiple growth initiatives, we remain focused on managing risk, improving customer performance, and attracting higher credit quality customers. As a result, the provision for doubtful accounts as a percentage of gross lease billings was 22% for the third quarter of 2024, a 1,000-basis point improvement over the prior year period. Strong payment performance, combined with the benefits of our strategic plan, are driving significant improvements in profitability, and I am encouraged by the return to GAAP net income, as well as the 45% increase in adjusted EBITDA during the third quarter of 2024.”

 

“We continue to follow strategies to profitably grow our business, while pursuing multiple corporate actions that we believe have the potential to create significant value for our shareholders. This includes the patent infringement lawsuits we filed initially against two of our competitors in which we expect a favorable outcome. In addition, we are working to complete our previously announced accretive rights offering to reduce our cost of capital and pursue the opportunity to redeem 91% of our Series 2 Preferred Stock at a 50+% discount to its liquidation preference. Overall, we believe tailwinds from the growth strategies we are pursuing will continue to support our business in 2025 and beyond, while we simultaneously pursue opportunities to create lasting value for our shareholders,” concluded Mr. Heiser.

 

Results for the Third Quarter Ended September 30, 2024, vs. the Third Quarter Ended September 30, 2023:

 

●

Total lease funding approvals increased 111.2% to $122.2 million from $57.9 million

 

●

Total revenues increased 22.9% to $38.6 million from $31.4 million

 

●

Gross profit increased 32.9% to $22.5 million from $16.9 million

 

●

Gross profit margin increased 400 basis points to 58% from 54%

 

●

Adjusted EBITDA(1) increased by 44.9% to $12.2 million from $8.4 million

 

●

Operating income of $9.6 million, compared with operating income of $6.0 million

 

●

Net income attributable to common stockholders of $1.2 million, or $0.05 per diluted share, compared to net loss attributable to common stockholders of ($129,000), or ($0.01) per diluted share

 

Results for the Nine Months Ended September 30, 2024, vs. the Nine Months Ended September 30, 2023:

 

●

Total lease funding approvals increased 88.5% to $240.4 million from $127.5 million

 

●

Total revenues increased 20.3% to $104.3 million from $86.7 million

 

●

Gross profit increased 44.6% to $56.3 million from $38.9 million

 

●

Gross profit margin increased 900 basis points to 54% from 45%

 

●

Adjusted EBITDA(1) increased 63.4% to $24.6 million, compared to $15.1 million

 

●

Operating income of $17.0 million, compared with operating income of $8.1 million

 

●

Net loss attributable to common stockholders of ($2.8) million, or ($0.13) per diluted share, compared to net loss attributable to common stockholders of ($7.6) million, or ($0.35) 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”.

 

Conference Call and Webcast Details

 

Conference Call Information:

Date: November 14, 2024

Time: 8:30 a.m. Eastern Time

Toll Free Dial In: [phone]

International Dial In: [phone]

Conference ID: 13749662

 

Webcast Link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=L7CNW8vm

 

The call will also be simultaneously webcast over the Internet via the “Investor” section of the Company’s website at https://investors.flexshopper.com/.

 

An audio replay of the call will be archived on the Company’s website at https://investors.flexshopper.com/.

 

About FlexShopper

 

FlexShopper, Inc. is a leading national financial technology company that offers innovative payment options to consumers. FlexShopper provides a variety of flexible funding options for underserved consumers through its direct-to-consumer online marketplace at Flexshopper.com and in partnership with merchants both online and at brick-and-mortar locations. FlexShopper’s solutions are crafted to meet the needs of a wide range of consumer segments through lease-to-own and lending products.

 

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, 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 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.

2

 

FLEXSHOPPER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

		For the Three Months Ended  September 30,								For the Nine Months Ended September 30,
		2024				2023				2024				2023
Revenues:
Lease revenues and fees, net		$	28,364,190			$	21,082,199			$	81,271,973			$	68,703,201
Loan revenues and fees, net of changes in fair value			9,047,165				10,304,247				19,692,817				18,001,057
Retail revenues			1,177,146				-				3,327,468				-
Total revenues			38,588,501				31,386,446				104,292,258				86,704,258
Costs and expenses:
Depreciation and impairment of lease merchandise			14,486,564				13,061,958				43,021,351				42,893,163
Loan origination costs and fees			677,913				1,389,107				2,395,780				4,878,158
Cost of retail revenues			923,203				-				2,593,505				-
Marketing			2,005,559				1,671,137				6,316,945				4,258,904
Salaries and benefits			4,049,422				3,231,100				12,357,955				8,933,998
Operating expenses			6,888,348				6,080,725				20,628,182				17,666,366
Total costs and expenses			29,031,009				25,434,027				87,313,718				78,630,589
Operating income			9,557,492				5,952,419				16,978,540				8,073,669
Interest expense including amortization of debt issuance costs			(5,672,594	)			(4,746,801	)			(16,213,843	)			(13,846,685	)
Income/ (loss) before income taxes			3,884,898				1,205,618				764,697				(5,773,016	)
Income taxes (expense)/ benefit			(1,518,514	)			(265,517	)			(215,550	)			1,185,247
Net income/ (loss)			2,366,384				940,101				549,147				(4,587,769	)
Dividends on Series 2 Convertible Preferred Shares			(1,176,402	)			(1,069,456	)			(3,337,600	)			(3,034,182	)
Net income/ (loss) attributable to common and Series 1 Convertible Preferred shareholders		$	1,189,982			$	(129,355	)		$	(2,788,453	)		$	(7,621,951	)
Basic and diluted income/ (loss) per common share:
Basic		$	0.05			$	(0.01	)		$	(0.13	)		$	(0.35	)
Diluted		$	0.05			$	(0.01	)		$	(0.13	)		$	(0.35	)
WEIGHTED AVERAGE COMMON SHARES:
Basic			21,586,935				21,716,852				21,547,702				21,740,027
Diluted			22,231,788				21,716,852				21,547,702				21,740,027

 

3

 

FLEXSHOPPER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		September 30, 2024				December 31, 2023
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	7,330,542			$	4,413,130
Lease receivables, net			66,181,471				44,795,090
Loan receivables at fair value		$	47,116,140				35,794,290
Prepaid expenses and other assets			4,583,392				3,300,677
Lease merchandise, net		$	24,087,010				29,131,440
Total current assets			149,298,555				117,434,627
Property and equipment, net			9,495,192				9,308,859
Right of use asset, net			1,093,551				1,237,010
Intangible assets, net			12,064,118				13,391,305
Other assets, net			2,528,397				2,175,215
Deferred tax asset, net			12,781,946				12,943,361
Total assets		$	187,261,759			$	156,490,377
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	3,604,816			$	7,139,848
Accrued payroll and related taxes			744,371				578,197
Promissory notes to related parties, including accrued interest			10,616,988				198,624
Accrued expenses			3,477,386				3,972,397
Lease liability - current portion			275,029				245,052
Total current liabilities			18,718,590				12,134,118
Loan payable under credit agreement to beneficial shareholder, net of unamortized issuance costs of $1,332,712 at June 30, 2024 and $70,780 at December 31, 2023			130,274,365				96,384,220
Promissory notes to related parties, net of unamortized issuance costs of $420,558 at June 30, 2024 and $649,953 at December 31, 2023 and net of current portion			—				10,100,047
Loan payable under Basepoint credit agreement, net of unamortized issuance costs of $73,730 at June 30, 2024 and $92,964 at December 31, 2023			7,348,492				7,319,641
Lease liabilities, net of current portion			1,111,740				1,321,578
Total liabilities			157,453,187				127,259,604
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 21,988,711 shares at June 30, 2024 and 21,752,304 shares at December 31, 2023			2,200				2,176
Treasury shares, at cost- 346,258 shares at June 30, 2024 and 164,029 shares at December 31, 2023			(563,537	)			(166,757	)
Additional paid in capital			42,841,302				42,415,894
Accumulated deficit			(35,275,053	)			(35,824,200	)
Total stockholders’ equity			29,808,572				29,230,773
		$	187,261,759			$	156,490,377

 

4

 

FLEXSHOPPER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2024 and 2023

(unaudited)

 

		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/ (loss)			549,147			$	(4,587,769	)
Adjustments to reconcile net income/ (loss) to net cash (used in)/ provided by operating activities:
Depreciation and impairment of lease merchandise			43,021,351				42,893,163
Other depreciation and amortization			7,134,573				5,674,931
Amortization of debt issuance costs			824,499				376,857
Amortization of discount on the promissory note related to acquisition			-				177,714
Compensation expense related to stock-based compensation			528,920				1,336,367
Provision for doubtful accounts			25,373,485				32,123,950
Deferred income tax			161,415				(1,192,223	)
Net changes in the fair value of loans receivables at fair value			(11,165,374	)			(6,258,279	)
Changes in operating assets and liabilities:
Lease receivables			(46,759,866	)			(38,004,947	)
Loans receivables at fair value			(156,476	)			7,510,901
Prepaid expenses and other assets			(1,404,487	)			641,039
Lease merchandise			(37,976,921	)			(34,939,330	)
Purchase consideration payable related to acquisition			-				208,921
Lease liabilities			(31,801	)			(19,566	)
Accounts payable			(3,535,032	)			(2,501,399	)
Accrued payroll and related taxes			166,174				293,018
Accrued expenses			(520,787	)			(1,170,585	)
Net cash (used in)/ provided by operating activities			(23,791,180	)			2,562,763
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, including capitalized software costs			(4,889,386	)			(4,565,819	)
Purchases of data costs			(1,335,743	)			(570,820	)
Net cash used in investing activities			(6,225,129	)			(5,136,639	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan payable under credit agreement			34,961,690				7,800,000
Repayment of loan payable under credit agreement			-				(2,795,000	)
Repayment of promissory notes to related parties							(1,000,000	)
Repayment of loan payable under Basepoint credit agreement			-				(1,500,000	)
Debt issuance related costs			(1,523,100	)			(115,403	)
Proceeds from exercise of stock options			-				1,185
Principal payment under finance lease obligation			(4,601	)			(7,308	)
Repayment of purchase consideration payable related to acquisition			-				(144,913	)
Tax payments associated with equity-based compensation transactions			(103,488	)			-
Purchase of treasury stock			(396,780	)			(100,225	)
Net cash provided by  financing activities			32,933,721				2,138,336
INCREASE/ (DECREASE) IN CASH			2,917,412				(435,540	)
CASH, beginning of period			4,413,130				6,173,349
CASH, end of period		$	7,330,542			$	5,737,809
Supplemental cash flow information:
Interest paid		$	14,759,775			$	12,811,332
Noncash investing and financing activities
Due date extension of warrants		$	-			$	917,581

 

5

 

Non-GAAP Financial 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 merchandise), 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 September 30, 2024, and September 30, 2023 are as follows:

 

		Three Months Ended September 30,
		2024				2023				$ Change				% Change
Gross Profit:
Gross lease billings and fees		$	36,381,080			$	31,266,666			$	5,114,414				16.4	%
Provision for doubtful accounts			(8,083,009	)			(10,038,122	)			1,955,113				(19.5	)%
Gain on sale of lease receivables			15,791				(146,345	)			162,136				(110.8	)%
Lease placement collections			50,328				-				50,328				-
Net lease billing and fees		$	28,364,190			$	21,082,199			$	7,281,991				34.5	%
Loan revenues and fees			2,780,667				3,208,920				(428,253	)			(13.3	)%
Net changes in the fair value of loans receivable			6,266,498				7,095,327				(828,829	)			(11.7	)%
Net loan revenue			9,047,165				10,304,247				(1,257,082	)			(12.2	)%
Retail revenue			1,177,146				-				1,177,146				-
Total revenues		$	38,588,501			$	31,386,446			$	7,202,055				22.9	%
Depreciation and impairment of lease merchandise			(14,486,564	)			(13,061,958	)			(1,424,606	)			10.9	%
Loans origination costs and fees			(677,913	)			(1,389,107	)			711,194				(51.2	)%
Cost of retail revenues			(923,203	)			—				(923,203	)			—	%
Gross profit		$	22,500,821			$	16,935,381			$	5,565,440				32.9	%
Gross profit margin			58	%			54	%

 

		Three Months Ended September 30,
		2024				2023				$ Change				% Change
Adjusted EBITDA:
Net income		$	2,366,384			$	940,101			$	1,426,283				151.7	%
Income taxes expense			1,518,514				265,517				1,252,997				471.9	%
Amortization of debt issuance costs			314,702				194,682				120,020				61.6	%
Amortization of discount on the promissory note related to acquisition			-				59,238				(59,238	)			(100.0	)%
Other amortization and depreciation			2,436,357				1,964,229				472,128				24.0	%
Interest expense			5,357,892				4,492,881				865,011				19.3	%
Stock-based compensation			156,922				471,819				(314,897	)			(66.7	)%
Adjusted EBITDA		$	12,150,771			$	8,388,467			$	3,762,304				44.9	%

 

6

 

Key performance metrics for the nine months ended September 30, 2024 and 2023 are as follows:

 

		Nine Months Ended September 30,
		2024				2023				$ Change				% Change
Gross Profit:
Gross lease billings and fees		$	106,352,849			$	98,023,406			$	8,329,443				8.5	%
Provision for doubtful accounts			(25,373,485	)			(32,123,950	)			6,750,465				(21.0	)%
Gain on sale of lease receivables			77,225				2,803,745				(2,726,520	)			(97.2	)%
Lease placement collections			215,384				-				215,384				-
Net lease billing and fees		$	81,271,973			$	68,703,201			$	12,568,772				18.3	%
Loan revenues and fees			8,527,443				11,742,778				(3,215,335	)			(27.4	)%
Net changes in the fair value of loans receivable			11,165,374				6,258,279				4,907,095				78.4	%
Net loan revenues		$	19,692,817			$	18,001,057			$	1,691,760				9.4	%
Retail revenues			3,327,468				-				3,327,468				-
Total revenues		$	104,292,258			$	86,704,258			$	17,588,000				20.3	%
Depreciation and impairment of lease merchandise			(43,021,351	)			(42,893,163	)			(128,188	)			0.3	%
Loans origination costs and fees			(2,395,780	)			(4,878,158	)			2,482,378				(50.9	)%
Cost of retail revenues			(2,593,505	)			-				(2,593,505	)			-
Gross profit		$	56,281,622			$	38,932,937			$	17,348,685				44.6	%
Gross profit margin			54	%			45	%

 

		Nine Months Ended September 30,
		2024				2023				$ Change				% Change
Adjusted EBITDA:
Net income/ (loss)		$	549,147			$	(4,587,769	)		$	5,136,916				(112.0	)%
Income taxes expense/ (benefit)			215,550				(1,185,247	)			1,400,797				(118.2	)%
Amortization of debt issuance costs			824,499				376,857				447,642				118.8	%
Amortization of discount on the promissory note related to acquisition			-				177,714				(177,714	)			(100.0	)%
Other amortization and depreciation			7,134,573				5,674,931				1,459,642				25.7	%
Interest expense			15,389,344				13,292,114				2,097,230				15.8	%
Stock-based compensation			528,920				1,336,367				(807,447	)			(60.4	)%
Adjusted EBITDA		$	24,642,033			$	15,084,967			$	9,557,066				63.4	%

 

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.

 

7

Cover	Nov. 14, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 14, 2024
Entity File Number	001-37945
Entity Registrant Name	FLEXSHOPPER, INC.
Entity Central Index Key	0001397047
Entity Tax Identification Number	20-5456087
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	901 Yamato Road
Entity Address, Address Line Two	Suite 260
Entity Address, City or Town	Boca Raton
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33431
City Area Code	855
Local Phone Number	353-9289
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	FPAY
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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