Financial Performance - Total revenues for Q1 2022 were $28,955,236, a decrease of 11.1% from $32,783,670 in Q1 2021[14] - Net loss for Q1 2022 was $2,380,935, compared to a net income of $1,237 in Q1 2021, resulting in a basic and diluted loss per common share of $(0.14) compared to $(0.03) in Q1 2021[14] - Operating loss for Q1 2022 was $(1,282,647), a decline from an operating income of $1,400,234 in Q1 2021[14] - Adjusted EBITDA for Q1 2022 was $(40,356), a decrease of $2,482,250 compared to $2,441,894 in Q1 2021[138] - For the three months ended March 31, 2022, the net loss attributable to common and Series 1 Convertible Preferred Shareholders was $2,990,712 compared to a net loss of $608,535 for the same period in 2021[49] Assets and Liabilities - Total current assets increased to $78,524,992 as of March 31, 2022, from $76,893,272 as of December 31, 2021, primarily driven by an increase in accounts receivable[12] - Total liabilities rose to $72,820,725 as of March 31, 2022, compared to $68,668,437 as of December 31, 2021, reflecting an increase in loan payable under credit agreements[12] - Total stockholders' equity decreased to $14,204,970 as of March 31, 2022, from $16,143,619 as of December 31, 2021, primarily due to the net loss incurred[12] - The net leased merchandise balance as of March 31, 2022, was $36,597,829, down from $40,942,112 as of December 31, 2021[31] Cash Flow and Liquidity - Cash and cash equivalents decreased to $4,319,701 at the end of Q1 2022 from $5,094,642 at the end of Q4 2021, indicating a cash outflow[17] - The Company’s liquidity as of March 31, 2022, was $4,319,701, exceeding the required minimum of $1,500,000[84] - Net cash used in operating activities was $7,940,659 for the three months ended March 31, 2022, primarily due to purchases of leased merchandise and changes in accounts receivable and accounts payable[166] - Net cash provided by financing activities was $8,719,528 for the three months ended March 31, 2022, due to $6,800,000 drawn on the Credit Agreement and $3,000,000 from Promissory Notes[169] Accounts Receivable and Credit Risk - The company reported a provision for doubtful accounts of $11,831,117 in Q1 2022, up from $8,833,349 in Q1 2021, indicating increased credit risk[17] - As of March 31, 2022, accounts receivable totaled $51,988,768, with an allowance for doubtful accounts of $22,450,828, resulting in net accounts receivable of $29,537,940[29] - The provision for doubtful accounts increased to $11,831,117 for the three months ended March 31, 2022, compared to $8,833,349 for the same period in 2021, indicating a rise in expected credit losses[38] - The company recognized charge-offs of $17,083,567 for accounts receivable during the three months ended March 31, 2022, compared to $7,036,164 for the same period in 2021[127] Marketing and Operating Expenses - Marketing expenses increased to $2,014,115 in Q1 2022, compared to $1,832,740 in Q1 2021, reflecting a strategic push in customer acquisition[14] - Other operating expenses rose to $5,673,202 in Q1 2022, an increase of $1,558,778 or 37.9% from $4,114,424 in Q1 2021[145] - Travel expenses surged by $169,893 or 291.5% to $228,179 in Q1 2022, attributed to the expansion of retail partner rollouts[148] - Customer verification expenses decreased by $715,068 or 83.4% to $142,757 for the three months ended March 31, 2022, compared to $857,825 in the same period of 2021[149] Financing Activities - The company generated $6,800,000 in proceeds from loan payable under credit agreements in Q1 2022, compared to $3,500,000 in Q1 2021, indicating increased financing activity[17] - Interest expense under the Credit Agreement for Q1 2022 was $1,551,844, compared to $1,125,239 for Q1 2021, with an outstanding balance of $56,150,000 as of March 31, 2022[86] - The Commitment Amount under the Credit Agreement was increased to $82,500,000 as of March 8, 2022, allowing for greater borrowing capacity[83] Stock and Equity - The Company sold 20,000 shares of Series 2 Convertible Preferred Stock for gross proceeds of $20.0 million, with cumulative accrued dividends totaling approximately $13,880,950 as of March 31, 2022[90] - Total stock-based compensation expense for Q1 2022 was $305,229, down from $380,263 in Q1 2021, with unrecognized compensation cost related to non-vested options and PSUs amounting to approximately $802,271[104] - The outstanding balance under the Credit Agreement was presented as a non-current liability as no principal is expected to be repaid in the next twelve months[86] Tax and Valuation - The effective income tax rate for the three months ended March 31, 2022, was approximately 27%, higher than the expected federal rate of 21% due to valuation allowances and non-taxable income[111] - The company has recorded a valuation allowance against certain deferred tax assets as of March 31, 2022, due to uncertainty regarding their realization[112] Business Expansion and Strategy - The company began marketing an unsecured consumer loan product in 2022, expanding its offerings to current customers and retailer partners[124] - The company’s online LTO platforms provide consumers access to durable goods, supporting expansion opportunities in the U.S. consumer e-commerce market[123] - The company anticipates substantial capital resources will be needed to support its growth[152] - The company believes liquidity needs for future growth can be met by cash flow from operations and additional borrowings against the Credit Agreement[173]
FlexShopper(FPAY) - 2022 Q1 - Quarterly Report