SCHEDULE 13D/A: Key Insiders and Investment Firms Boost Stake in FlexShopper, Citing Undervaluation

A group of investors led by director Howard S. Dvorkin has significantly increased its beneficial ownership in FlexShopper, Inc. to 36.0%, participating in a recent rights offering and expressing belief in the company's undervaluation.

Summary

• Howard S. Dvorkin, NRNS Capital Holdings, LLC, Beta Investment Group, Inc., and PITA Holdings, LLC have formed a group and collectively reported beneficial ownership of 10,591,635 shares of FlexShopper, Inc. common stock, representing 36.0% of the outstanding shares as of January 24, 2025.
• This filing is an Amendment No. 1 to the Schedule 13D, adding NRNS Capital Holdings, LLC, Beta Investment Group, Inc., and PITA Holdings, LLC as Reporting Persons.
• The Reporting Persons acquired shares through open market purchases and participation in the Issuer's Rights Offering on January 16, 2025.
• In the Rights Offering, PITA acquired 1,470,000 shares and NRNS acquired 1,470,589 shares.
• NRNS's participation in the Rights Offering included purchasing $2.5 million of units by converting outstanding principal and accrued interest under subordinated promissory notes payable by FlexShopper to NRNS.
• The Reporting Persons state their belief that the shares were undervalued and represented an attractive investment opportunity.
• They intend to review their investment continuously and may increase or decrease their position, engage with management and the board, discuss with other stockholders, and propose changes to capitalization, ownership, or board structure.

Sentiment

Score: 8

Explanation: The filing indicates strong confidence from a significant investor group, including a director, who increased their stake and converted debt to equity, explicitly stating their belief that the shares are undervalued. This suggests a very positive outlook from their perspective.

Positives

• A significant group of investors, including a director, has increased their stake, indicating confidence in the company's value.
• The Reporting Persons explicitly state their belief that FlexShopper's shares are undervalued, suggesting potential upside.
• Participation in the Rights Offering, including the conversion of $2.5 million in debt to equity by NRNS, strengthens the company's balance sheet by reducing debt.

Risks

• The Reporting Persons' ability to fully exercise common stock purchase warrants (753,697 shares for NRNS and 1,190,000 shares for PITA) is limited to prevent exceeding 4.99% beneficial ownership, which can only be increased to 9.99% with 61 days' notice. This limits immediate flexibility in increasing their stake via warrants.
• Future actions of the Reporting Persons, such as selling shares or proposing significant changes, could impact the company's stock price or strategic direction.

Future Outlook

The Reporting Persons intend to continuously review their investment in FlexShopper, Inc. They may increase or decrease their position based on market conditions and other investment opportunities. They also reserve the right to engage with management and the Board, discuss with other stockholders, and propose changes to the company's capitalization, ownership structure, board composition, or suggest improvements to financial and operational performance.

Management Comments

• "The Reporting Persons purchased the shares based on the Reporting Persons' belief that the shares, when purchased, were undervalued and represented an attractive investment opportunity."
• "The Reporting Persons intend to review their investment in the Issuer on a continuing basis."
• "Depending on various factors... the Reporting Persons may in the future take such actions with respect to their investment in the Issuer as they deem appropriate including, without limitation, engaging in additional communications with management and the Board of Directors of the Issuer, engaging in discussions with stockholders of the Issuer or other third parties about the Issuer and the Reporting Persons' investment, including potential business combinations or dispositions involving the Issuer or certain of its businesses, making recommendations or proposals to the Issuer concerning changes to the capitalization, ownership structure, board structure (including board composition), potential business combinations or dispositions involving the Issuer or certain of its businesses, or suggestions for improving the Issuer's financial and/or operational performance, purchasing additional shares, selling some or all of their shares, engaging in short selling of or any hedging or similar transaction with respect to the shares, including swaps and other derivative instruments, or changing their intention with respect to any and all matters referred to in Item 4."

Industry Context

FlexShopper, Inc. operates in the lease-to-own industry, providing flexible payment options for consumers. This filing primarily concerns a significant ownership stake by a group of investors, including a director, indicating a strategic investment rather than a direct reflection of broader industry trends. However, the investors' belief in undervaluation suggests a positive outlook on the company's position within its sector.

Corporate Governance

Related Party Transactions

• NRNS Capital Holdings, LLC, managed by Howard S. Dvorkin (a director of FlexShopper), purchased $2.5 million of units in the Rights Offering by converting outstanding principal and accrued interest under subordinated promissory notes payable by FlexShopper to NRNS.

Stakeholder Impact

• Shareholders: Increased insider ownership may signal confidence, but the stated intent to potentially propose changes to capitalization, ownership, or board structure could lead to future strategic shifts. The debt-to-equity conversion is generally positive for existing equity holders as it reduces debt burden.
• Management/Board: The Reporting Persons intend to engage in communications and potentially make recommendations regarding strategic and operational performance, indicating potential for increased oversight or influence.
• Creditors: The conversion of $2.5 million in subordinated promissory notes to equity reduces the company's debt obligations, which is positive for remaining creditors.

Next Steps

• The Reporting Persons intend to continuously review their investment in FlexShopper.
• They may increase or decrease their position in the Issuer through open market purchases, private transactions, or otherwise.
• They may engage in additional communications with FlexShopper's management and Board of Directors.
• They may engage in discussions with other stockholders or third parties about FlexShopper and their investment.
• They may make recommendations or proposals to FlexShopper concerning changes to capitalization, ownership structure, board structure (including composition), potential business combinations or dispositions.
• They may suggest improvements for FlexShopper's financial and/or operational performance.
• They may engage in short selling or hedging transactions with respect to the shares.

Key Dates

Recommendation

Keywords

FlexShopper, SEC filing, Schedule 13D, beneficial ownership, rights offering, investment, common stock, Howard S. Dvorkin, NRNS Capital Holdings, Beta Investment Group, PITA Holdings, undervalued, corporate governance, debt conversion