FlexShopper(US:FPAY)2024-04-01 20:01Financial Performance - For the year ended December 31, 2023, FlexShopper generated approximately $132 million in gross lease revenues and fees[17]. - Total revenues for 2023 increased to $116,975,007, up 3% from $113,056,173 in 2022[210]. - Lease revenues and fees decreased by 13% to $91,943,729 from $105,936,072 in 2022[210]. - Loan revenues and fees significantly increased to $25,031,278, up 251% from $7,120,101 in 2022[210]. - Total costs and expenses decreased to $103,284,660, down 13.5% from $119,359,383 in 2022[210]. - Operating income improved to $13,690,347 compared to an operating loss of $6,303,210 in 2022[210]. - Net loss for 2023 was $4,233,617, a decline from a net income of $13,631,719 in 2022[210]. - Basic and diluted loss per common share for 2023 was $(0.51), compared to earnings of $0.45 and $0.44 in 2022 respectively[210]. - Interest expense increased to $(18,913,773) from $(11,161,396) in 2022, reflecting higher borrowing costs[210]. Loan and Lease Operations - In 2023, FlexShopper purchased $390 thousand in loan participations and recognized $2.4 million in interest income[18]. - FlexShopper's bank partner for the loan model exited the high APR business in 2023, prompting the company to seek a new bank partner[18]. - The average APR for FlexShopper's loan products is approximately 150%, with a minimum APR of 62%[26]. - Approximately 1% of net loan originations for the year ended December 31, 2023, were generated from loans originated by the bank partner, which ceased operations with the company in 2023[66]. - The company originated 96,118 gross leases in 2023, down from 128,100 in 2022, indicating a decrease in volume due to tightening approval rates[143]. Assets and Liabilities - As of December 31, 2023, the outstanding balance under the Credit Agreement was $96,455,000, with a borrowing capacity of up to $150,000,000[63]. - Total current assets as of December 31, 2023, increased to $117,434,627 from $109,685,473 as of December 31, 2022, reflecting a growth of approximately 7.1%[208]. - Total assets grew to $156,490,377 in 2023, up from $148,289,510 in 2022, marking an increase of about 5.5%[208]. - Total liabilities increased to $127,259,604 in 2023 from $117,254,837 in 2022, reflecting a rise of approximately 8.9%[208]. - The accumulated deficit as of December 31, 2023, was $(35,824,200), compared to $(31,590,583) in 2022, indicating a worsening of the deficit by about 13.5%[208]. Marketing and Customer Acquisition - The company utilizes a multi-channel marketing approach, including television and digital advertising, to acquire new customers at a targeted acquisition cost[47]. - The company’s marketing strategies include direct response television advertising and digital acquisition efforts such as pay-per-click and social media programs[48]. - FlexShopper's online presence and instant underwriting process allow for easy scalability and onboarding of new retailers[46]. Regulatory and Compliance Risks - The company faces regulatory scrutiny, with federal and state laws requiring compliance that may impose higher standards on its operations[52]. - The company faces regulatory risks related to LTO transactions, with nearly every state regulating these transactions[80]. - Changes in privacy laws and customer data protection could lead to substantial compliance costs and operational changes[83]. - Employee misconduct or third-party misconduct could lead to significant legal liabilities and reputational harm, impacting customer relationships[88]. Operational Challenges - The company relies on third-party processors for weekly collections, which may be considered high risk due to customer payment issues[73]. - Timely contact with delinquent customers is crucial to avoid increased charge-offs, and operational costs may rise with higher delinquency rates[78]. - System interruptions and lack of redundancy in order entry systems could adversely affect net sales and customer satisfaction[94]. - The company must respond to technological changes to avoid obsolescence and maintain competitiveness in the e-commerce space[97]. Employee and Management - The company had 204 full-time employees as of December 31, 2023, with no employees governed by collective bargaining agreements[58]. - The company relies heavily on hourly employees, facing high turnover rates which can increase training and retention costs[87]. - The company’s future financial performance depends on retaining key management personnel, with potential turnover posing risks[85]. Strategic Initiatives - FlexShopper aims to expand its customer base by evaluating new product and market opportunities, including risk-based pricing products[34]. - The company plans to pursue additional strategic retail partnerships to enhance its B2B sales channels and reduce customer acquisition costs[35]. - FlexShopper has been granted multiple U.S. patents since 2018, which are central to its business model and competitive advantage[54]. Financial Management - The company has never declared or paid cash dividends on its common stock and does not anticipate doing so in the foreseeable future[112]. - The company is required to maintain a minimum closing bid price of $1.00 per share to satisfy Nasdaq listing standards[110]. - The company maintains private liability insurance to mitigate financial risks from cybersecurity incidents, but there is no guarantee that it will cover all losses[102].