Flexshopper
Annual Report 2016

Plain-text annual report

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016or☐☐ TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _______ to _______Commission File Number: 000-52589 FLEXSHOPPER, INC. (Exact name of Registrant as specified in its charter) Delaware 20-5456087(State of jurisdiction of (I.R.S. Employerincorporation or organization) Identification Number) 2700 North Military Trail, Ste. 200 Boca Raton, FL 33431 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (866) 950-6669Securities registered pursuant to Section 12 (b) of the Act: Common Stock, $.0001 Par ValueSecurities registered pursuant to Section 12 (g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filingrequirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act: Large Accelerated Filer:☐Accelerated Filer:☐Non-accelerated Filer:☐Smaller Reporting Company:☒(Do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, as of the last business day of theRegistrant’s most recently completed second fiscal quarter was approximately $31,412,000 (based on the closing price of the Registrant’s Common Stock onJune 30, 2016 of $6.00 per share) The number of shares outstanding of the Registrant’s Common Stock, as of March 18, 2017, was 5,287,391. Documents incorporated by reference: The Registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days after the end ofthe fiscal year ended December 31, 2016. Portions of such proxy statement are incorporated by reference into Part III of this Form 10-K.  FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, andSection 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the useof forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “could,” “seek,” “intend,” “plan,” “estimate,” “anticipate” or othercomparable terms. All statements other than statements of historical facts included in this Annual Report on Form 10-K regarding our strategies, prospects,financial condition, operations, costs, plans and objectives are forward-looking statements. Forward-looking statements involve inherent risks anduncertainties which are difficult to predict and could cause actual results to differ materially from those in the forward-looking statements, as a result ofvarious factors including those risks and uncertainties described in the Risk Factors and in Management's Discussion and Analysis of Financial Conditionand Results of Operations sections of this Annual Report on Form 10-K and our subsequently filed Quarterly Reports on Form 10-Q. We urge you to considerthose risks and uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-lookingstatements, which speak only as of the date made. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking topublicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations withregard thereto or any change in events, conditions or circumstances on which any such statement is based. We qualify all the forward-looking statements contained in this Form 10-K by the foregoing cautionary statements.  PART I Item 1. Business Introduction FlexShopper, Inc. (“we,” “us,” “our,” “FlexShopper” or the “Company”) is a corporation organized under the laws of the State of Delaware. We wereincorporated on August 16, 2006 under the laws of the State of Delaware as BTHC XI, Inc. On April 4, 2007, we changed our corporate name to AnchorFunding Services, Inc. On October 16, 2013, we changed our corporate name to FlexShopper, Inc. FlexShopper owns 100% of FlexShopper, LLC, a limitedliability company organized under the laws of North Carolina on June 24, 2013. Since the sale of the assets of Anchor Funding Services LLC, which sale wascompleted in a series of transactions between April and June 2014, FlexShopper is a holding corporation with no operations except for those conducted byFlexShopper, LLC. FlexShopper, LLC owns two wholly-owned Delaware subsidiaries, FlexShopper 1, LLC and FlexShopper 2, LLC. All references to thebusiness operations of FlexShopper refer to FlexShopper, LLC and its wholly-owned subsidiaries, unless the context indicates otherwise. Overview Since June 2013, FlexShopper, through its wholly-owned subsidiary, FlexShopper, LLC, has been engaged in the business of providing certaintypes of durable goods to consumers on a lease-to-own basis and providing lease-to-own (“LTO”) terms to consumers of third party retailers and e-tailers.FlexShopper generated revenues from this new line of business since December 2013. Management believes that the introduction of FlexShopper's lease-to-own programs support broad untapped expansion opportunities within the U.S. consumer e-commerce and retail marketplaces. FlexShopper and its onlineLTO products provide consumers the ability to acquire durable goods, including electronics, computers and furniture, on an affordable payment, lease basis.Concurrently, FlexShopper’s model provides e-tailers and retailers an opportunity to increase their sales by utilizing FlexShopper's online channels toconnect with consumers that want to acquire products on an LTO basis. GROWTH OPPORTUNITIES AND STRATEGIES FlexShopper believes there is significant opportunity to expand the LTO industry online and into mainstream retail and e-tail. The LTO industrycurrently serves approximately six million consumers annually, generating approximately $10.0 billion in sales primarily through approximately 10,000LTO brick and mortar stores. Through its strategic sales channels, FlexShopper believes it can expand the LTO industry, also known as the rent-to-own orRTO industry. FlexShopper has successfully developed and is currently processing LTO transactions using its proprietary technology that automates theprocess of consumers receiving spending limits and entering into leases for durable goods generally within a few minutes. This technology is the basis forFlexShopper’s primary sales channels which provide consumers four distinct ways of obtaining brand name durable goods on an LTO basis: (1) atFlexShopper’s LTO e-commerce marketplace, www.flexshopper.com, where consumers can choose from over 80,000 different items including electronics,furniture, musical instruments, and equipment; (2) on third party e-commerce sites featuring FlexShopper’s LTO payment method, where consumers canactivate FlexShopper’s payment button at checkout; (3) at FlexShopper’s automated kiosks located in certain retail locations; and (4) with the FlexShopperWallet, a mobile application enabling consumers to get durable goods from major retailers with their smartphones. 1  FlexShopper launched its online LTO marketplace in March 2014 and FlexShopper launched its patent-pending LTO payment method in December2014. Retailers and e-tailers that sell furniture, electronics, computers, appliances and other durable goods and partner with FlexShopper have three channelswhich provide an opportunity to increase their sales: (i) in the store, (ii) online and (iii) on our marketplace. FlexShopper aims to enable merchants to sell tomore than 50 million consumers that do not have sufficient credit or cash to buy from them. In addition, FlexShopper pays the merchant 100% of the retailprice. An excerpt of our marketing literature presented below depicts our offerings to retail merchants: COMPETITIVE STRENGTHS We believe the following competitive strengths differentiate us: ●We currently address the LTO market through online channels which include our online marketplace and patent pending LTO payment method.These channels give us the ability to currently originate leases in forty-five states without the operating expenses associated with havingphysical store-fronts in those states. ●We believe our three channels described above provide a compelling package for retailers to adopt to increase their sales with a vast customerbase. ●Our LTO online marketplace and patent pending LTO payment method offer consumers more choices in products and retailers than traditionalbrick and mortar LTO storefronts. Our digital channels provide consumers with a selection of over 80,000 items including brand name productsfrom recognized retailers. KEY BENEFITS FOR OUR CUSTOMERS Broad Selection and Choice: We offer consumers through our online marketplace a vast selection of over 80,000 durable goods, includingelectronics and furniture that they may acquire on an LTO basis. We believe our broad selection, often fulfilled by name brand retailers, is more appealingthan in-store LTO options. Easy, Online Access to LTO Programs: We believe that LTO consumers want to shop online like other consumers and our marketplace and LTOpayment method provide such access, simply and quickly. KEY BENEFITS FOR OUR RETAIL PARTNERS Incremental Sales from Our LTO Marketplace: Our retailer partners that provide products for our marketplace receive incremental sales with no riskand no acquisition cost. “Saving the Sale” in-Store and at Checkout on their E-Commerce Site: Our financial and technology platform enables retailers to “save the sale”when consumers are declined for credit in-store and at checkout on their websites. 2  INDUSTRY OVERVIEW The lease-to-own industry offers customers an alternative to traditional methods of obtaining electronics, computers, home furnishings andappliances. In a typical industry lease-to-own transaction, the customer has the option to acquire merchandise over a fixed term, usually 12 to 24 months,normally by making weekly lease payments. The customers may cancel the agreement as prescribed in the lease agreement by returning the merchandise,generally with no further lease obligation if their account is current. If customers lease the item to the full term, they obtain ownership of the item, thoughthey can choose to buy it at any time. FlexShopper’s current fixed term to acquire ownership is fifty-two weeks. The lease-to-own concept is particularly popular with consumers who cannot pay the full purchase price for merchandise at once or who lack thecredit to qualify under conventional financing programs. Lease-to-own is also popular with consumers who, despite good credit, do not wish to incuradditional debt, have only a temporary need for the merchandise or want to try out a particular brand or model before buying it. We believe that there is significant market opportunity to expand the LTO market beyond traditional brick and mortar stores by creating an onlinepresence through an LTO e-commerce site and payment method. We believe that the segment of the population targeted by the industry comprises more than50 million people in the United States and the needs of these consumers are generally underserved. UNDERWRITING PROCESS AND RISK MANAGEMENT FlexShopper has developed a proprietary decision engine that automates the process of consumers receiving spending limits on LTO products andentering into leases for durable goods generally within a few minutes. Included in this determination of a consumer’s spending limit are factors such asincome, frequency that such consumer overdraws his or her bank account, fraud reports, repayment history and charge-off history. The Company obtains suchconsumer data from multiple third party sources which are monitored and analyzed by our risk department. We continually update our underwriting modelsto manage risk of default. Our decision engine also includes fraud tools and information from third party data sources to combat online fraud. We arecontinuously developing and implementing improvements to reduce losses related to fraudulent activity. In 2016, the Company enhanced its risk departmentby hiring a Chief Risk Officer. See Key Employees in Part III. CUSTOMERS FlexShopper’s customers typically do not have sufficient cash or credit to obtain durable goods. These consumers find the short-term nature andaffordable payments of lease-to-own attractive. The lease-to-own industry serves a highly diverse customer base. According to the Association of ProgressiveRental Organizations, approximately 74 percent of lease to-own customers have household incomes between $15,000 and $50,000 per year. We believe wecan expand the LTO market beyond brick and mortar stores with our LTO e-commerce site and online payment method. These sales channels will enable usto serve and target more than 50 million people that we believe do not have sufficient cash or access to reasonable credit for durable goods. SALES AND MARKETING We promote our FlexShopper products and services through print and television advertisements, Internet sites and direct response marketing, all ofwhich are designed to increase our lease transactions and name recognition. Our advertisements emphasize such features as instant spending limit andaffordable weekly payments. We believe that as the FlexShopper name gains familiarity and national recognition through our advertising efforts, we willcontinue to educate our existing and potential customers about the lease-to-own payment alternative as well as solidify our reputation as a leading providerof high quality branded merchandise and services. 3  For each sales channel FlexShopper has a marketing strategy that includes the following: Online LTO Marketplace Patent Pending LTO Payment Method In-store LTO Technology PlatformSearch engine optimization; pay-per click Direct to retailers/e-tailers Direct to retailers/e-tailersOnline affiliate networks Partnerships with payment aggregators Consultants & strategic relationshipsDirect response television campaigns Consultants & strategic relationships Direct mail MANAGEMENT INFORMATION SYSTEMS FlexShopper uses computer-based management information systems to facilitate its entire business model, including underwriting, processingtransactions through its sales channels, managing collections and monitoring leased inventory. Through the use of our proprietary software developed in-house, each of our retail partners uses our online merchant portal that automates the process of consumers receiving spending limits and entering into leasesfor durable goods generally within a few minutes. The management information system generates reports which enable us to meet our financial reportingrequirements. GOVERNMENT REGULATIONS The lease-to-own industry is regulated by and subject to the requirements of various federal, state and local laws and regulations, many of which arein place for consumer protection. In general such laws regulate, among other items, applications for leases, late fees, other finance rates, the form of disclosurestatements, the substance and sequence of required disclosures, the content of advertising materials and certain collection procedures. Violations of certainprovisions of these laws and regulations may result in penalties ranging from nominal amounts up to and including forfeiture of fees and other amounts dueon leases. We are unable to predict the nature or effect on our operations or earnings of unknown future legislation, regulations and judicial decisions orfuture interpretations of existing and future legislation or regulations relating to our operations, and there can be no assurance that future laws, decisions orinterpretations will not have a material adverse effect on our operations and earnings. In 2016, the Company enhanced its compliance department by hiring aChief Compliance Counsel. See the section captioned “Risk Factors” below for more information with respect to governmental laws and regulations and theireffect on our business. COMPETITION The lease-to-own industry is highly competitive. Our operation competes with other national, regional and local lease-to-own businesses, as well aswith rental stores that do not offer their customers a purchase option. Some of these companies have, or may develop, systems that enable consumers to obtainthrough online facilities spending limits and payment terms and to enter into leases nearly instantaneously, in a manner similar to that provided byFlexShopper’s proprietary technology. Many of our competitors have substantially more resources and greater experience in the lease-to-own business thanFlexShopper. With respect to customers desiring to purchase merchandise for cash or on credit, we also compete with retail stores. Competition is basedprimarily on store location, product selection and availability, customer service, and lease rates and terms. We believe that currently we do not havesignificant competition for our on-line LTO marketplace and patent pending LTO payment method, however, there is no assurance that other companies maynot develop similar or competing concepts that could adversely impact the usage or value of our online LTO marketplace or our LTO payment method. 4  INTELLECTUAL PROPERTY FlexShopper has two non-provisional patent applications pending in the U.S. Patent and Trademark Office (“USPTO”) for systems that enableconsumers to obtain products on an LTO basis using mobile devices and tablets and for a lease-to-own method of payment at check-out on e-commerce sites.We can provide no assurances that FlexShopper will be granted any patents by the USPTO. We regard our pending patents, trademarks, service marks,copyrights, trade dress, trade secrets, proprietary technology, and similar intellectual property as critical to our success. In particular, we believe certainproprietary information, including but not limited to our underwriting model, and patent pending systems are central to our business model and we believegive us a key competitive advantage. We also rely on trademark and copyright law, trade secret protection, and confidentiality, license and work productagreements with our employees, customers, and others to protect our proprietary rights. See the section captioned “Risk Factors” below for more informationon and risk associated with respect to our intellectual property. OPERATIONS AND EMPLOYEES OF FLEXSHOPPER Brad Bernstein, our Chief Executive Officer, manages our day-to-day operations and internal growth and oversees our growth strategy.FlexShopper’s management includes an Executive Vice President of Operations, Chief Financial Officer, Chief Technology Officer with oversight of theCompany’s development team, a Chief Marketing Officer, a Chief Compliance Counsel and a Chief Risk Officer. In addition, FlexShopper has a customerservice and collections call center. As of December 31, 2016, FlexShopper had 125 employees, all of whom were full time. Item 1A. Risk Factors You should carefully consider the following risk factors, in addition to the other information presented in this Form 10-K, in evaluating us and ourbusiness. Any of the following risks, as well as other risks and uncertainties, could harm our business and financial results and cause the value of oursecurities to decline, which in turn could cause you to lose all or part of your investment. An investment in our common stock involves a high degree of risk. You should consider carefully the following risks and other informationcontained in this Form 10-K before you decide whether to buy our common stock. If any of the events contemplated by the following discussion of risksshould occur, our business, results of operations and financial condition could suffer significantly. As a result, the market price of our common stock coulddecline, and you may lose all or part of the money you paid to buy our common stock. In addition, the risks described below are not the only ones facing ourcompany. Additional risks and uncertainties of which we are unaware or currently deem immaterial may also become important factors that may harm ourbusiness. Business Risks Limited operating history. FlexShopper, LLC, which was formed in June 2013 to enter the LTO business, has a limited operating history upon whichinvestors may judge our performance. Our new FlexShopper business has generated revenues over a limited operating history and has incurred net losses. Ourability to achieve profitability in this business will depend upon many factors, including, without limitation, our ability to execute our growth strategy andtechnology development, obtain sufficient capital, develop relationships with third party retail partners, adapt to fluctuations in the economy and modify ourstrategy based on the degree and nature of competition. Our senior management team has limited experience in the lease-to-own industry. While we believeour FlexShopper business model will be successful, prior success of our senior management in other businesses should not viewed as an indication that wewill be profitable. We can provide no assurances that our operations will ever be profitable. We expect to require additional financing to achieve our business plans. We believe with our proprietary technology there is a significant marketopportunity to expand the LTO market. However, the LTO market is subject to intense and increasing competition and rapidly evolving technologies.Accordingly, for our business plans to succeed we believe it will be important for us to move quickly to introduce our technology and capture market share.As a small company, we may be unable to successfully implement our ambitions of targeting very large markets in an intensely competitive industry segmentwithout significantly increasing our resources. We do not currently have sufficient funds to fully implement our business plan. We expect that we will need toraise capital through new financings. Such financings could include equity financing, which may be dilutive to stockholders, or debt financing, which wouldlikely restrict our ability to borrow from other sources. In addition, such securities may contain rights, preferences or privileges senior to those of the rights ofour current stockholders. There can be no assurance that additional funds will be available on terms attractive to us, or at all. If adequate funds are notavailable, we may be required to curtail or reduce our operations. We could be forced to sell or dispose of our rights or assets. Any inability to raise adequatefunds on commercially reasonable terms could have a material adverse effect on our business, results of operation and financial condition, including thepossibility that a lack of funds could cause our business to fail and liquidate with little or no return to investors. 5  Our business liquidity and capital resources are dependent upon our credit agreement with an institutional lender and our compliance with theterms thereof. On March 6, 2015, FlexShopper, through FlexShopper 2, LLC, a wholly-owned subsidiary of the Company (the “Borrower”), entered into acredit agreement (the “Credit Agreement”) among FlexShopper 2, LLC, Wells Fargo Bank, National Association, various Lenders from time to time partythereto and WE2014-1, LLC (the “Lender”). The Borrower is permitted to borrow funds under the Credit Agreement based on the Borrower’s cash on handand the Amortized Order Value of the Borrower’s Eligible Leases (as such terms are defined in the Credit Agreement) less certain deductions described in theCredit Agreement. Under the terms of the Credit Agreement, subject to the satisfaction of certain conditions, the Borrower may borrow up to $25,000,000from the Lender for a term of two years; however, as of December 31, 2016, there was only approximately $14,211,792 in additional availability under theCredit Agreement. As of December 31, 2016, the outstanding balance under the Credit Agreement was $10,788,208. The borrowing term may be extended foran additional twelve months in the sole discretion of the Lender. The Credit Agreement contemplates that the Lender may provide additional debt financingto the Borrower, up to $100 million in total, under two uncommitted accordions following satisfaction of certain covenants and other terms and conditions.The Lender will receive security interests in certain leases as collateral under the Credit Agreement. For the term of the Credit Agreement, FlexShopper and itssubsidiaries may not incur additional indebtedness (other than certain indebtedness expressly permitted under the Credit Agreement) without the permissionof the Lender. The Lender and its affiliates will have a right of first refusal on certain subsequent FlexShopper transactions involving leases or other financialproducts during the term of the Credit Agreement and up to three months following the termination thereof. The Credit Agreement includes customary eventsof default, including, among others, failures to make payment of principal and interest, breaches or defaults under the terms of the Credit Agreement andrelated agreements entered into with the Lender, breaches of representations, warranties or certifications made by or on behalf of the Borrower in the CreditAgreement and related documents (including certain financial and expense covenants), deficiencies in the borrowing base, certain judgments against theBorrower and bankruptcy events. On March 29, 2016, the Borrower entered into a fourth amendment and waiver (the “Fourth Amendment”) to the Credit Agreement pursuant towhich the Lender waived the violation of the Equity Book Value covenant at December 31, 2015, as well as compliance with financial covenants (other thanthe unrestricted cash covenant) through the completion of FlexShopper’s raising at least $10 million in equity funding, which occurred upon the issuance ofSeries 2 Preferred Stock on June 10, 2016. In addition, the Fourth Amendment, among other things, provided that Borrower maintain Unrestricted Cash of atleast $500,000 on each day and $1,000,000 at the end of each calendar month. On January 27, 2017, the Borrower entered into a fifth amendment (the “Omnibus Amendment”) to the Credit Agreement. The Omnibus Amendmentamended the Credit Agreement to, among other things, extend the Commitment Termination Date (as defined in the Credit Agreement), require the Borrowerto refinance the debt under the Credit Agreement upon a Permitted Change of Control (as defined in the Credit Agreement) and modify certain permitted debtand financial covenants. FlexShopper LTO revenue and earnings growth depend on our ability to execute our growth strategies. Our primary growth strategies are the saleof our FlexShopper LTO online products to consumers and utilization by retailers of FlexShopper’s online channels to connect with customers that want toacquire products on a LTO basis. Effectively managing the development and growth can be challenging, particularly as we develop the management andoperational systems necessary to develop this line of business. If we are unable to successfully execute these growth strategies, revenue from this line ofbusiness will grow slowly or not at all, and we may never achieve profitability. Our LTO business depends on the success of our third-party retail partners and our continued relationships with them. Our LTO revenues dependin part on the ability of unaffiliated third-party retailers to attract customers. In addition, in most cases, our agreements with such third-party retailers may beterminated at the retailer's election. The failure of our third-party retail partners to maintain quality and consistency in their operations and their ability tocontinue to provide products and services, or the loss of the relationship with any of these third-party retailers and an inability to replace them, could causeour LTO business to lose customers, substantially decreasing the revenues and earnings growth in our LTO business. Our growth will depend on our ability to develop our brands, and these efforts may be costly. Our ability to develop the FlexShopper brand will becritical to achieving widespread acceptance of our services, and will require a continued focus on active marketing efforts. We will need to continue to spendsubstantial amounts of money on, and devote substantial resources to, advertising, marketing, and other efforts to create and maintain brand loyalty amongour customers. If we fail to promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand,our business would be harmed. 6  Our LTO business will depend on the continued growth of online and mobile commerce. The business of selling goods over the Internet and mobilenetworks is dynamic and relatively new. Concerns about fraud, privacy and other problems may discourage additional consumers from adopting the Internetor mobile devices as modes of commerce, or may prompt consumers to offline channels. In order to expand our user base, we must appeal to and acquireconsumers who historically have used traditional means of commerce to purchase goods and may prefer Internet analogues to such traditional retail means,such as the retailer's own website, to our offerings. If these consumers prove to be less active than we expect due to lower levels of willingness to use theInternet or mobile devices for commerce for any reason, including lack of access to high-speed communications equipment, traffic congestion on the Internetor mobile network outages or delays, disruptions or other damage to users' computers or mobile devices, and we are unable to gain efficiencies in ouroperating costs, including our cost of acquiring new users, our business could be adversely impacted. The success of our business is dependent on factors affecting consumer spending that are not under our control. Consumer spending is affected bygeneral economic conditions and other factors including levels of employment, disposable consumer income, prevailing interest rates, consumer debt andavailability of credit, costs of fuel, inflation, recession and fears of recession, tax rates and rate increases, timing of receipt of tax refunds, consumerconfidence in future economic conditions and political conditions, and consumer perceptions of personal well-being and security. Unfavorable changes infactors affecting discretionary spending could reduce demand for our products and services resulting in lower revenue and negatively impacting the businessand its financial results. Our customer base presents significant risk of default for non-payment. We bear the risk of non-payment or slow payment by our customers. Thenature of our customer base makes it sensitive to adverse economic conditions and less likely to meet our prevailing underwriting standards, which may bemore restrictive in an adverse economic environment. As a result, during such periods we may experience decreases in the growth of new customers, and wemay curtail spending limits to existing customers, which may adversely affect our net sales and potential profitability. Our customers can return merchandise without penalty. When our customers acquire merchandise through the FlexShopper LTO program, weactually purchase the merchandise from the retailer and enter the lease-to-own relationship with the customer. Because our customers can return merchandisewithout penalty, there is risk that we may end up owning a significant amount of merchandise that is difficult to monetize. While we have factored customerreturns into our business model, customer return volume may exceed the levels we expect, which could adversely impact our collections, revenues and ourfinancial performance. Returns totaled 3.9% leased merchandise at December 31, 2016. We rely on third party credit/debit card and ACH (Automated Clearing House) processors to process collections from customers on a weeklybasis. Our ability to collect from customers could be impaired if these processors do not work with us. These third-party payment processors may considerour business a high risk since our customer base could have a high incidence of insufficient funds and rejected payments. This could cause a processor todiscontinue its services to us, and we may not be able to find a replacement processor. If this occurred, we would have to collect from our customers using lessefficient methods, which could adversely impact our collections, revenues and our financial performance. We rely on internal models to manage risk, to provide accounting estimates and to make other business decisions. Our results could be adverselyaffected if those models do not provide reliable estimates or predictions of future activity. The accurate modeling of risks is critical to our business,particularly with respect to managing underwriting and spending limits for our customers. Our expectations regarding customer repayment levels, as well asour allowances for doubtful accounts and other accounting estimates, are based in large part on internal modeling. We also rely heavily on internal models inmaking a variety of other decisions crucial to the successful operation of our business. It is therefore important that our models are accurate, and any failure inthis regard could have a material adverse effect on our results. Models are inherently imperfect predictors of actual results because they are based on historicaldata available to us and our assumptions about factors such as demand, payment rates, default rates, delinquency rates and other factors that may overstate orunderstate future experience. Our models could produce unreliable results for a number of reasons, including the limitations or lack of historical data topredict results, invalid or incorrect assumptions underlying the models, the need for manual adjustments in response to rapid changes in economicconditions, incorrect coding of the models, incorrect data being used by the models or inappropriate application of a model to products or events outside ofthe model’s intended use. In particular, models are less dependable when the economic environment is outside of historical experience, as has been the caserecently. Due to the factors described above, unanticipated and excessive default and charge-off experience can adversely affect our profitability andfinancial condition, breach covenants in future credit facilities, limit our ability to secure a credit facility and adversely affect our ability to finance ourbusiness. 7  Our operations are regulated by and subject to the requirements of various federal and state laws and regulations. These laws and regulations,which may be amended or supplemented or interpreted by the courts from time to time, could expose us to significant compliance costs or burdens or forceus to change our business practices in a manner that may be materially adverse to our operations, prospects or financial condition. Currently, 47 states andthe District of Columbia specifically regulate rent-to-own, lease-to-own transactions. At the present time, no federal law specifically regulates the rent-to-ownindustry, although federal legislation to regulate the industry has been proposed from time to time. Any adverse changes in existing laws, or the passage ofnew adverse legislation by states or the federal government could materially increase both our costs of complying with laws and the risk that we could besued or be subject to government sanctions if we are not in compliance. In addition, new burdensome legislation might force us to change our business modeland might reduce the economic potential of our sales and lease ownership operations. Most of the states that regulate rent-to-own transactions have enacteddisclosure laws that require rent-to-own companies to disclose to their customers the total number of payments, total amount and timing of all payments toacquire ownership of any item, any other charges that may be imposed and miscellaneous other items. The more restrictive state lease purchase laws limit thetotal amount that a customer may be charged for an item, or regulate the "cost-of-rental" amount that rent-to-own companies may charge on rent-to-owntransactions, generally defining "cost-of-rental" as lease fees paid in excess of the “retail” price of the goods. There has been increased legislative attention inthe United States, at both the federal and state levels, on consumer debt transactions in general, which may result in an increase in legislative regulatoryefforts directed at the rent-to-own industry. We cannot guarantee that the federal government or states will not enact additional or different legislation thatwould be disadvantageous or otherwise materially adverse to us. In addition to the risk of lawsuits related to the laws that regulate rent-to-own and consumerlease transactions, we could be subject to lawsuits alleging violations of federal and/or state laws and regulations and consumer tort law, including fraud,consumer protection, information security and privacy laws, because of the consumer-oriented nature of the rent-to-own industry. A large judgment againstFlexShopper could adversely affect our financial condition and results of operations. Moreover, an adverse outcome from a lawsuit, even one against one ofour competitors, could result in changes in the way we and others in the industry do business, possibly leading to significant costs or decreased revenues orprofitability. FlexShopper’s lease-to-own business differs in some potentially significant respects from the risks of traditional store-based lease-to-ownbusinesses. The risks could have a material negative effect on FlexShopper. FlexShopper offers its lease-to-own products directly to consumers through itse-commerce marketplace and through the stores and e-commerce sites of third party retailers. Potential risks include, among others: ●FlexShopper’s reliance on third party retailers over whom FlexShopper cannot exercise control and oversight of certain business functions,from advertising through assistance with lease transaction applications; ●possibly different regulatory risks due to the non-traditional, online nature of FlexShopper’s business that regulators may target and/or newregulations or legislation could be adopted (or existing laws and regulations may be interpreted) that negatively impact FlexShopper’sbusiness; and ●reliance on automatic bank account drafts for lease payments, which may become disfavored as a payment method for these transactions byregulators. 8  If we fail to protect the integrity and security of customer and employee information, we could be exposed to litigation or regulatory enforcement,and our business could be adversely impacted. We collect and store certain personal information provided to us by our customers and employees in theordinary course of our business. Despite instituted safeguards for the protection of such information, we cannot be certain that all of our systems are entirelyfree from vulnerability to attack. Computer hackers may attempt to penetrate our network security and, if successful, misappropriate confidential customer oremployee information. In addition, one of our employees, contractors or other third party with whom we do business may attempt to circumvent our securitymeasures in order to obtain such information, or inadvertently cause a breach involving such information. Loss of customer or employee information coulddisrupt our operations, damage our reputation and expose us to claims from customers, employees, regulators and other persons, any of which could have anadverse effect on our business, financial condition and results of operations. In addition, the costs associated with information security, such as increasedinvestment in technology, the costs of compliance with privacy laws and costs incurred to prevent or remediate information security breaches, couldadversely impact our business. The loss of any of our key personnel could harm our business. Our future financial performance will depend to a significant extent on our ability tomotivate and retain key management personnel. Further, FlexShopper is seeking to hire additional qualified management for its FlexShopper business.Competition for qualified management personnel is intense, and there can be no assurance that we will be able to hire additional qualified management onterms satisfactory to FlexShopper. Further, in the event we experience turnover in our senior management positions, we cannot assure you that we will be ableto recruit suitable replacements. We must also successfully integrate all new management and other key positions within our organization to achieve ouroperating objectives. Even if we are successful, turnover in key management positions may temporarily harm our financial performance and results ofoperations until new management becomes familiar with our business. At present, we do not maintain key-man life insurance on any of our executive officers,although we entered into an employment contract with Brad Bernstein, Chief Executive Officer and President. Our Board of Directors is responsible forapproval of all future employment contracts with our executive officers. We can provide no assurances that said future employment contracts and/or theircurrent compensation is or will be on commercially reasonable terms to us in order to retain our key personnel. The loss of any of our key personnel couldharm our business. Competition in the LTO business is intense. The lease-to-own industry is highly competitive. Our operation competes with other national, regionaland local lease-to-own businesses, as well as with rental stores that do not offer their customers a purchase option. Some of these companies have, or maydevelop, systems that enable consumers to obtain through online facilities spending limits and payment terms and to enter into leases nearly instantaneously,in a manner similar to that provided by FlexShopper’s proprietary technology. Many of our competitors have substantially more resources and greaterexperience in the lease-to-own business of FlexShopper. With respect to customers desiring to purchase merchandise for cash or on credit, we also competewith retail stores. Competition is based primarily on store location, product selection and availability, customer service and lease rates and terms. We believewe do not currently have significant competition for our on-line LTO marketplace and patent pending LTO payment method. However, such competition islikely to develop over time, and we may be unable to successfully compete in our target markets. We can provide no assurances that we will be able tosuccessfully compete in the LTO industry. Changes in regulations or customer concerns, in particular as they relate to privacy and protection of customer data, could adversely affect ourbusiness. Our business is subject to laws relating to the collection, use, retention, security and transfer of personally identifiable information about ourcustomers. The interpretation and application of privacy and customer data protection laws are in a state of flux and may vary from jurisdiction tojurisdiction. These laws may be interpreted and applied inconsistently and our current data protection policies and practices may not be consistent with thoseinterpretations and applications. Complying with these varying requirements could cause us to incur substantial costs or require us to change our businesspractices in a manner adverse to our business. Any failure, or perceived failure, by us to comply with our own privacy policies or with any regulatoryrequirements or orders or other privacy or consumer protection related laws and regulations could result in proceedings or actions against us by governmentalentities or others, subject us to significant penalties and negative publicity and adversely affect our operating results. 9  System interruption and the lack of integration and redundancy in our order entry and online systems may adversely affect our net sales. Customer access to our customer service center and websites is key to the continued flow of new orders. Anything that would hamper or interrupt such accesscould adversely affect our net sales, operating results and customer satisfaction. Examples of risks that could affect access include problems with the Internetor telecommunication infrastructure, limited web access by our customers, local or more systemic impairment of computer systems due to viruses or malware,or impaired access due to breaches of Internet security or denial of service attacks. Changes in the policies of service providers or others that increase the costof telephone or Internet access could inhibit our ability to market our products or transact orders with customers. In addition, our ability to operate ourbusiness from day-to-day largely depends on the efficient operation of our computer hardware and software systems and communications systems. Ourcomputer and communications systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, earthquakes,acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins or denial of service attacks, improper operation by employees andsimilar events or disruptions. Any of these events could cause system interruption, delays and loss of critical data and could prevent us from accepting andfulfilling customer orders and providing services or threaten our relationships with our third-party retail customers, all of which would impair our operations.Certain of our systems are not redundant, and we have not fully implemented a disaster recovery plan. In addition, we may have inadequate insurancecoverage to compensate us for any related losses. Interruptions to customer ordering, particularly if prolonged, could damage our reputation and be expensiveto remedy and have significant adverse effects on our financial results. We face risk related to the strength of our operational, technological and organizational infrastructure. We are exposed to operational risks thatcan be manifested in many ways, such as errors related to failed or inadequate processes, faulty or disabled computer systems, fraud by employees, contractorsor third parties and exposure to external events. In addition, we are heavily dependent on the strength and capability of our technology systems that we use tomanage our internal financial, credit and other systems, interface with our customers and develop and implement effective marketing campaigns. Our abilityto operate our business to meet the needs of our existing customers and attract new ones and to run our business in compliance with applicable laws andregulations depends on the functionality of our operational and technology systems. Any disruptions or failures of our operational and technology systems,including those associated with improvements or modifications to such systems, could cause us to be unable to market and manage our products and servicesand to report our financial results in a timely and accurate manner, all of which could have a negative impact on our results of operations. In some cases, weoutsource delivery, maintenance and development of our operational and technological functionality to third parties. These third parties may experienceerrors or disruptions that could adversely impact us and over which we may have limited control. Any increase in the amount of our infrastructure that weoutsource to third parties may increase our exposure to these risks. If we do not respond to technological changes, our services could become obsolete, and we could lose customers. To remain competitive, we mustcontinue to enhance and improve the functionality and features of our e-commerce websites and other technologies. We may face material delays inintroducing new products and enhancements. If this happens, our customers may forego the use of our websites and use those of our competitors. The Internetand the online commerce industry are rapidly changing. If competitors introduce new products and services using new technologies or if new industrystandards and practices emerge, our existing websites and our proprietary technology and systems may become obsolete. Our failure to respond totechnological change or to adequately maintain, upgrade and develop our computer network and the systems used to process customers’ orders and paymentscould harm our business, prospects, financial condition and results of operations. We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of thirdparties. We have filed two non-provisional patent applications for systems that enable consumers to buy products on a LTO basis using mobile devices andtablets and for a lease-to-own method of payment at check-out on e-commerce sites. We can provide no assurances that we will be granted any patents by theU.S. Patent and Trademark Office. We regard our pending patents, trademarks, service marks, copyrights, trade dress, trade secrets, proprietary technology,and similar intellectual property as critical to our success. In particular, we believe certain proprietary information, including but not limited to ourunderwriting model, and patent pending systems are central to our business model, and we believe give us a key competitive advantage. We rely ontrademark and copyright law, trade secret protection, and confidentiality, license and work product agreements with our employees, customers and others toprotect our proprietary rights. We may be unable to prevent third parties from acquiring trademarks, service marks and domain names that are similar to,infringe upon, or diminish the value of our trademarks and other proprietary rights. Failure to protect our domain names could affect adversely our reputationand brand, and make it more difficult for users to find our website. We may be unable to discover or determine the extent of any unauthorized use of ourproprietary rights. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. In addition, thesteps we take to protect our intellectual property may not adequately protect our rights or prevent parties from infringing or misappropriating our proprietaryrights. We can be at risk that others will independently develop or acquire equivalent or superior technology or other intellectual property rights. The use ofour technology or similar technology by others could reduce or eliminate any competitive advantage we have developed, cause us to lose sales or otherwiseharm our business. 10  We cannot be certain that the intellectual property used in our business does not and will not infringe the intellectual property rights of others, andwe are from time to time subject to third party infringement claims. Due to recent changes in patent law, we face the risk of a temporary increase in patentlitigation due to new restrictions on including unrelated defendants in patent infringement lawsuits in the future particularly from entities that own patentsbut that do not make products or services covered by the patents. Any third party infringement claims against us, whether or not meritorious, may result in theexpenditure of significant financial and managerial resources, injunctions against us or the payment of damages. Moreover, should we be found liable forinfringement, we may be required to seek to enter into licensing agreements, which may not be available on acceptable terms or at all. In deciding whether to provide a spending limit to customers, we rely on the accuracy and completeness of information furnished to us by or onbehalf of our customers. If we and our systems are unable to detect any misrepresentations in this information, this could have a material adverse effect onour results of operations and financial condition. In deciding whether to provide a customer with a spending amount, we rely heavily on informationfurnished to us by or on behalf of our customers and our ability to validate such information through third-party services, including personal financialinformation. If a significant percentage of our customers intentionally or negligently misrepresents any of this information, and we or our systems do not ordid not detect such misrepresentations, it could have a material adverse effect on our ability to effectively manage our risk, which could have a materialadverse effect on our results of operations and financial condition. If we fail to timely contact delinquent customers, then the number of delinquent customer receivables eventually being charged off could increase. We contact customers with delinquent account balances soon after the account becomes delinquent. During periods of increased delinquencies, it isimportant that we are proactive in dealing with these customers rather than simply allowing customer receivables to go to charge-off. During periods ofincreased delinquencies, it becomes extremely important that we are properly staffed and trained to assist customers in bringing the delinquent balancecurrent and ultimately avoiding charge-off. If we do not properly staff and train our collections personnel, or if we incur any downtime or other issues withour information systems that assist us with our collection efforts, then the number of accounts in a delinquent status or charged-off could increase. Inaddition, managing a substantially higher volume of delinquent customer receivables typically increases our operational costs. A rise in delinquencies orcharge-offs could have a material adverse effect on our business, financial condition, liquidity and results of operations. Our management information systems may not be adequate to meet our evolving business and emerging regulatory needs and the failure tosuccessfully implement them could negatively impact the business and its financial results. We are investing significant capital in new informationtechnology systems to support our growth plan. These investments include redundancies, and acquiring new systems and hardware with updatedfunctionality. We are taking appropriate actions to ensure the successful implementation of these initiatives, including the testing of new systems, withminimal disruptions to the business. These efforts may take longer and may require greater financial and other resources than anticipated, may causedistraction of key personnel, may cause disruptions to our systems and our business, and may not provide the anticipated benefits. The disruption in ourinformation technology systems, or our inability to improve, integrate or expand our systems to meet our evolving business and emerging regulatoryrequirements, could impair our ability to achieve critical strategic initiatives and could adversely impact our sales, collections efforts, cash flows andfinancial condition. 11  If we fail to maintain adequate systems and processes to detect and prevent fraudulent activity, our business could be adversely impacted.Criminals are using increasingly sophisticated methods to engage in illegal activities such as paper instrument counterfeiting, fraudulent payment or refundschemes and identity theft. As we make more of our services available over the internet and other media we subject ourselves to consumer fraud risk. We use avariety of tools to protect against fraud; however, these tools may not always be successful. Our failure to maintain an effective system of internal controls could result in inaccurate reporting of financial results and harm our business. Weare required to comply with a variety of reporting, accounting and other rules and regulations. As such, we maintain a system of internal control overfinancial reporting, but there are limitations inherent in internal control systems. A control system can provide only reasonable, not absolute, assurance thatthe objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefitof controls must be appropriate relative to their costs. Furthermore, compliance with existing requirements is expensive and we may need to implementadditional finance and accounting and other systems, procedures and controls to satisfy our reporting requirements. If our internal control over financialreporting is determined to be ineffective, such failure could cause investors to lose confidence in our reported financial information, negatively affect themarket price of our common stock, subject us to regulatory investigations and penalties, and adversely impact our business and financial condition. Because of their significant stock ownership and ability to select nominees to our Board of Directors, certain beneficial owners of our stock, aswell as our executive officers and directors, will be able to exert control over the Company and significant corporate decision. B2 FIE V LLC (“B2 FIE”), aholder of Series 2 Convertible Preferred Stock described under “Recent Financings” in Item 7 below, beneficially owns 31.8% of our outstanding CommonStock as of the filing date of this Form 10-K. Our secured lender described under this Item 1 and Item 7 and Item 13 below beneficially owns 27.5% of ouroutstanding Common Stock as of the filing date of this Form 10-K. Also, our executive officers and directors beneficially own an additional 12.1% of ourCommon Stock as of the same date. In the event that they act in concert on future stockholder matters, such persons may have the ability to affect the electionof all of our directors and the outcome of all issues submitted to our stockholders. Such concentration of ownership could limit the price that certain investorsmight be willing to pay in the future for shares of Common Stock and could have the effect of making it more difficult for a third party to acquire, or ofdiscouraging a third party from attempting to acquire, control of us. Additionally, pursuant to Investor Rights Agreements entered into in connection with their investments in the Company, each of B2 FIE and oursecured lender currently has the right to designate on our Board of Directors two and one nominee, respectively. As a result, the presence of directors on ourBoard of Directors nominated by these investors enables such investors to influence and impact future actions taken by our Board of Directors. The price of our Common Stock may fluctuate significantly. The market price for our Common Stock can fluctuate as a result of a variety of factors,including the factors listed above, many of which are beyond our control. These factors include: actual or anticipated variations in quarterly operatingresults; announcements of new services by our competitors or us; announcements relating to strategic relationships or acquisitions; changes in financialestimates or other statements by securities analysts; and other changes in general economic conditions. Because of this, we may fail to meet or exceed theexpectations of our stockholders or others, and the market price for our Common Stock could fluctuate as a result. In addition, the securities markets havefrom time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Thesemarket fluctuations may also materially and adversely affect the market price of our Common Stock. We have never declared or paid cash dividends on our Common Stock, and we do not anticipate paying any cash dividends on our Common Stockin the foreseeable future. We currently intend to retain future earnings, if any, to fund the development and growth of our FlexShopper business. Any futuredetermination to pay cash dividends will be dependent upon our financial condition, operating results, capital requirements, applicable contractualrestrictions and other such factors as our Board of Directors may deem relevant. 12  If we sell shares of our Common Stock or securities convertible into our Common Stock in future financings, the ownership interest of existingshareholders will be diluted and, as a result, our stock price may go down. We may from time to time issue additional shares of Common Stock at a discountfrom the current trading price of our Common Stock. As a result, our existing shareholders will experience immediate dilution upon the purchase of anyshares of our Common Stock sold at a discount. For example, in connection with the sale of Series 2 Preferred Stock, in June 2016 FlexShopper raisedapproximately $22.0 million in net proceeds through direct sales of 21,952 shares of FlexShopper Series 2 Preferred Stock, each share of which is convertibleinto 124 shares of Common Stock. As other capital raising opportunities present themselves, we may enter into financing or similar arrangements in thefuture. If we issue common stock or securities convertible into common stock, our shareholders will experience dilution and this dilution will be greater if wefind it necessary to sell securities at a discount to prevailing market prices. Item 1B. Unresolved Staff Comments None Item 2. Properties On August 1, 2013, FlexShopper entered into a 39 month lease for office space in Boca Raton, Florida to accommodate FlexShopper’s business andits employees. The monthly rent was approximately $6,800. This lease agreement was amended in January 2014 to reflect a 63 month term for a larger suite inan adjoining building. Upon commencement the monthly base rent including operating expenses for the first year was approximately $9,600 with annualthree percent increases throughout the lease term. On September 1, 2015, FlexShopper entered into a 48 month lease for additional office space in Fort Lauderdale, Florida to accommodate our calland customer service center. The monthly base rent including operating expenses is approximately $5,200 with annual three percent increases throughout thelease term. Item 3. Legal Proceedings We are not currently a party to any material pending legal proceedings. To our knowledge, no governmental authority is contemplatingcommencing a legal proceeding in which we would be named as a party. Item 4. Mine Safety Disclosures Not applicable Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our Common Stock is quoted on the Nasdaq Capital Market under the symbol “FPAY.” The following table sets forth the range of high and lowclosing sale prices of our Common Stock for each full quarterly period within the two most recent fiscal years. All prices in the table below reflect the 1 for 10reverse stock split of our Common Stock effected in October 2016. High Low 2015 - Quarter Ended December 31 $6.00 $4.70 September 30 7.00 4.50 June 30 9.60 6.50 March 31 10.00 5.50 2016 - Quarter Ended December 31 $6.75 $4.80 September 30 5.50 4.80 June 30 6.00 4.60 March 31 6.80 4.90 13  Holders of Record As of December 31, 2016, there were 540 holders of record of shares of Common Stock and 64 holders of record of our Series 1 Preferred Stock.FlexShopper's transfer agent is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, NY 10004. Dividend Policy The holders of our Series 1 Preferred Stock were entitled to receive dividends from issuance in 2007 through December 31, 2009 as more fullydescribed below. We have not paid or declared any cash dividends on our Common Stock. We currently intend to retain any earnings for future growth and,therefore, do not expect to pay cash dividends on our Common Stock in the foreseeable future. Cumulative annual dividends were payable in shares of Series1 Preferred Stock or, in certain instances in cash, at an annual rate of 8% ($.40 per share of Series 1 Preferred Stock), on December 31 of each yearcommencing December 31, 2007 through December 31, 2009. Shares of Series 2 Preferred Stock accrue dividends on the Stated Value (as defined in theSeries 2 Preferred Stock’s Certificate of Designations) at an annual rate of 10% compounded annually. Item 6. Selected Financial Data Not applicable. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in thisForm 10-K. Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, as amended that are intended to be covered by the “safe harbor” created by those sections.Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified bythe use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “could,” “seek,” “intend,” “plan,” “estimate,” “anticipate” or othercomparable terms. All statements other than statements of historical facts included in this Annual Report on Form 10-K regarding our strategies, prospects,financial condition, operations, costs, plans and objectives are forward-looking statements. Forward-looking statements involve inherent risks anduncertainties which are difficult to predict and could cause actual results to differ materially from those in the forward-looking statements, as a result ofvarious factors including those risks and uncertainties described in the Risk Factors and in Management's Discussion and Analysis of Financial Conditionand Results of Operations sections of this Annual Report on Form 10-K and our subsequently filed Quarterly Reports on Form 10-Q. We urge you to considerthose risks and uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-lookingstatements, which speak only as of the date made. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking topublicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations withregard thereto or any change in events, conditions or circumstances on which any such statement is based. 14  Executive Overview The results of operations from continuing operations below principally reflect the operations of FlexShopper, LLC, a wholly owned subsidiary of theCompany, which provides certain types of durable goods to consumers on a lease-to-own basis and also provides lease-to-own terms to consumers of thirdparty retailers and e-tailers. FlexShopper began generating revenues from this line of business in December 2013. Management believes that the introductionof FlexShopper's lease-to-own (“LTO”) programs support broad untapped expansion opportunities within the U.S. consumer e-commerce and retailmarketplaces. FlexShopper and its online LTO platforms provide consumers the ability to acquire durable goods, including electronics, computers andfurniture on an affordable payment, lease basis. Concurrently, e-tailers and retailers that work with FlexShopper may increase their sales by utilizingFlexShopper's online channels to connect with consumers that want to acquire products on an LTO basis. FlexShopper’s sales channels include: 1) serving asthe financial and technology partner for durable goods retailers and e-tailers; 2) selling directly to consumers via the online FlexShopper LTO Marketplacefeaturing thousands of durable goods; and 3) utilizing FlexShopper’s patent pending LTO payment method at check out on e-commerce sites. Summary of Critical Accounting Policies Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our financial statements, which have beenprepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an on-going basis, managementevaluates its estimates and judgments, including those related to credit provisions, intangible assets, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experience as well as various other factors that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following criticalaccounting policies, among others, reflect the more significant judgments and estimates used in the preparation of our financial statements. Accounts Receivable and Allowance for Doubtful Accounts – FlexShopper seeks to collect amounts owed under its leases from each customer on a weeklybasis by charging their bank accounts or credit cards. Accounts receivable are principally comprised of lease payments currently owed to FlexShopper whichare past due as FlexShopper has been unable to successfully collect in the manner described above. Through June 30, 2016, an allowance for doubtfulaccounts was estimated by reserving all accounts in excess of four payments in arrears, adjusted for subsequent collections. Commencing in the quarter endedSeptember 30, 2016, the estimate was revised to provide for doubtful accounts based upon revenues and historical experience of balances charged off as apercentage of revenues. The accounts receivable balances consisted of the following as of December 31, 2016 and December 31, 2015: December 31,2016 December 31,2015 Accounts receivable $11,690,495 $5,479,437 Allowance for doubtful accounts 9,508,708 4,727,278 Accounts receivable, net $2,181,787 $752,159 The allowance is a significant percentage of the balance because FlexShopper does not charge off any customer account until it has exhausted all collectionefforts with respect to each account including attempts to repossess items. In addition, while collections are pursued, the same delinquent customers willcontinue to accrue weekly charges until they are charged off. During the years ended December 31, 2016 and 2015, $8,541,289 and $2,300,708 of accountsreceivable balances respectively were charged off against the allowance. 15  Lease Merchandise – Until all payment obligations for ownership are satisfied under the lease agreement, the Company maintains ownership of the leasemerchandise. Lease merchandise consists primarily of residential furniture, consumer electronics, computers, appliances and household accessories and isrecorded at cost net of accumulated depreciation. The Company depreciates leased merchandise using the straight line method over the applicable agreementperiod for a consumer to acquire ownership, generally twelve months with no salvage value. Upon transfer of ownership of merchandise to customersresulting from satisfaction of their lease obligations, the related cost and accumulated depreciation are eliminated from lease merchandise. For leasemerchandise returned or anticipated to be returned either voluntarily or through repossession, the Company provides an impairment reserve for theundepreciated balance of the merchandise net of any estimated salvage value with a corresponding charge to cost of lease revenue. The cost, accumulateddepreciation and impairment reserve related to such merchandise are written off upon determination that no salvage value is obtainable. The impairmentcharge amounted to approximately $5,021,000 and $1,500,000 for the years ended December 31, 2016 and 2015 respectively. The net leased merchandisebalances consisted of the following as of December 31, 2016 and 2015: December 31,2016 December 31,2015 Lease merchandise at cost $33,264,810 $19,504,645 Accumulated depreciation 11,578,267 7,473,363 Impairment reserve 3,116,083 827,146 Lease merchandise, net $18,570,460 $11,204,136 Cost of lease merchandise sold represents the undepreciated cost of rental merchandise at the time of sale. Stock Based Compensation - The fair value of transactions in which FlexShopper exchanges its equity instruments for employee services (share-basedpayment transactions) is recognized as an expense in the financial statements as services are performed. Compensation expense is determined by reference tothe fair value of an award on the date of grant and is amortized on a straight-line basis over the vesting period. We have elected to use the Black Scholespricing model (BSM) to determine the fair value of all stock option awards. Results of Operations The following table details the operating results from continuing operations for the twelve months ended December 31, 2016 and 2015. 2016 2015 $ Change % Change Total revenues $47,579,585 $20,680,062 $26,899,523 130.0 Cost of lease revenue and merchandise sold 23,422,544 11,067,484 12,355,060 111.6 Provision for doubtful accounts 13,281,242 5,647,084 7,634,158 135.2 Marketing 10,193,052 4,606,874 5,586,178 121.3 Salaries and benefits 5,946,401 4,190,606 1,755,795 41.8 Operating expenses 5,064,869 3,171,180 1,893,689 59.7 Operating loss (10,328,523) (8,003,166) (2,325,357) (29.1)Interest expense 1,925,184 994,115 931,069 93.7 Income tax benefit - 78,388 (78,388) - Loss from continuing operations $(12,253,707) $(8,918,893) $(3,334,814) (37.4) Lease revenues for the twelve months ended December 31, 2016 were $47,579,585 compared to $20,680,062 for the year ended December 31, 2015,representing an increase of 130.0%. FlexShopper originated 76,496 leases in the year ended December 31, 2016 compared to 38,731 leases in year endedDecember 31, 2015. The Company spent approximately $5,586,000 more on marketing in the year ended December 31, 2016 compared to the prior year andthis increased marketing expense is primarily responsible for the increase in revenues and leases. 16  Cost of lease revenue and merchandise sold for the year ended December 31, 2016 was comprised of depreciation expense on lease merchandise of$21,163,590, the net book value of merchandise sold of $687,991 and a reserve for inventory impairment of $1,011,478. Cost of lease revenue andmerchandise sold for the year ended December 31, 2015 was comprised of depreciation expense on lease merchandise of $10,452,587, the net book value ofmerchandise sold of $314,751 and a charge for inventory impairment of $300,146. As the Company’s lease revenues increase, the direct costs associated withthem also increase. Provision for bad debts was $13,281,242 and $5,647,084 for the years ended December 31, 2016 and 2015, respectively. A factor that causes theprovision to increase is that the Company does not charge off any customer accounts until it has exhausted all collection efforts including attempts torepossess items. While collection efforts are pursued, delinquent customers continue to accrue weekly charges resulting in a significant balance requiring areserve. The Company anticipates continued improvement as it continues to refine its underwriting model, enhances its risk department and accumulatesadditional lease data. The Company has charged off $8,541,289 and $2,300,708 of customer accounts to the allowance for doubtful accounts in the yearended December 31, 2016 and 2015 respectively, after it exhausted all collection efforts with respect to such accounts. Marketing expenses for the year ended December 31, 2016 were $10,193,052, compared to $4,606,874 in the same period of 2015 for an increase of$5,586,178. The increase in marketing expense is the primary driver for the increase in revenues and leases. Salary and benefits expenses for the year ended December 31, 2016 were $5,946,401, compared to $4,190,606 in the same period of 2015 for anincrease of $1,755,795. The staff needed to support the increase in leases and revenue is the primary reason for the increase in salaries and benefits. Operating expenses for the years ended December 31, 2016 and 2015 were $5,064,869 and $3,171,180 respectively. Key operating expenses for theyears ended December 31, 2016 and 2015 included the following: Year ended Year ended December 31,2016 December 31,2015 Amortization and depreciation $1,566,507 $1,073,041 Computer and internet expenses 265,505 538,812 Legal and professional fees 465,620 372,016 Merchant bank fees 612,260 254,056 Stock compensation expense 136,308 78,600 Total $3,046,200 $2,316,525 The increased revenues were offset by the increase in expenses to scale the Company’s lease-to-own channels and support its growth resulting in aloss from continuing operations after income tax benefit of $12,253,707 and $8,918,893 for the years ended December 31, 2016 and 2015 respectively.These losses were incurred in part by the increase in expenses required to scale the Company’s lease-to-own channels and support its continued growth. Plan of Operation We plan to promote our FlexShopper products and services across all sales channels through strategic partnerships, direct response marketing, andaffiliate and internet marketing, all of which are designed to increase our lease transactions and name recognition. Our advertisements emphasize suchfeatures as instant spending limit, and affordable weekly payments. We believe that as the FlexShopper name gains familiarity and national recognitionthrough our advertising efforts, we will continue to educate our customers and potential customers about the lease-to-own payment alternative as well assolidify our reputation as a leading provider of high quality branded merchandise and services. 17  For each of our sales channels, FlexShopper has a marketing strategy that includes the following: Online LTO Marketplace Patent pending LTO Payment Method In-store LTO technology platformSearch engine optimization; pay-per click Direct to retailers/e-tailers Direct to retailers/e-tailersOnline affiliate networks Partnerships with payment aggregators Consultants & strategic relationshipsDirect response television campaigns Consultants & strategic relationships Direct mail The Company believes it has a competitive advantage by providing all three channels as a bundled package. Management is anticipating a rapiddevelopment of the FlexShopper business as we are able to penetrate each of our sales channels. To support our anticipated growth, FlexShopper will needthe availability of substantial capital resources. See the section captioned “Liquidity and Capital Resources” below. Liquidity and Capital Resources As of December 31, 2016, the Company had cash of $5,412,495 compared to $3,396,206 on the same date in 2015. As of December 31, 2016, Company had accounts receivables of $11,690,494 net of an allowance of $9,508,708 totaling $2,181,787. Accountsreceivable are principally comprised of lease payments owed to the Company. An allowance for doubtful accounts is estimated based upon historicalcollection and delinquency percentages. Recent Financings Since January 1, 2015, FlexShopper completed the following transactions, each of which has provided liquidity and cash resources to FlexShopper. 1.On March 6, 2015, FlexShopper, through its wholly owned indirect subsidiary, entered into a credit agreement (the “Credit Agreement”) amongFlexShopper 2, LLC, Wells Fargo Bank, National Association, various Lenders from time to time party thereto and WE2014-1, LLC (the “Lender”).FlexShopper is permitted to borrow funds under the Credit Agreement based on FlexShopper’s cash on hand and the Amortized Order Value of itsEligible Leases (as such terms are defined in the Credit Agreement) less certain deductions described in the Credit Agreement. Under the terms of theCredit Agreement, subject to the satisfaction of certain conditions, FlexShopper may borrow up to $25,000,000 from the Lender for a term of twoyears; however, as of the date hereof, there was only approximately $15,380,000 in additional availability under the Credit Agreement. The CreditAgreement contemplates that the Lender may provide additional debt financing to FlexShopper, up to $100 million in total, under two uncommittedaccordions following satisfaction of certain covenants and other terms and conditions. The Lender will receive security interests in certain leases ascollateral under the Credit Agreement. In connection with entering into the Credit Agreement, on March 6, 2015, FlexShopper raised approximately$8.6 million in net proceeds through direct sales of 1.70 million shares of FlexShopper common stock to certain affiliates of the Lender and otheraccredited investors for a purchase price of $5.50 per share (as adjusted for the 1 for 10 reverse stock split). 2.On February 11, 2016, FlexShopper entered into a secured promissory note with a principal stockholder for $1,000,000 at an interest rate of 15% perannum, payable upon demand, secured by substantially all of the Company’s assets. 18  3.On March 29, 2016, we entered into a fourth amendment and waiver (the “Fourth Amendment”) to the Credit Agreement. The Fourth Amendmentamends the Credit Agreement to, among other things, increase the amount of the Borrowing Base (as defined in the Credit Agreement) until theearlier of (i) April 1, 2017 and (ii) the successful raising by the Company of at least $10,000,000 in equity funding (the “Equity Raise”). The FourthAmendment also includes a waiver of (i) breaches resulting from the Borrower’s non-compliance with certain financial covenants under the CreditAgreement that occurred prior to the effectiveness of the Fourth Amendment and (ii) compliance with certain financial covenants under the CreditAgreement for the period from the date of the Fourth Amendment through the earlier of April 1, 2017 or the completion of the Equity Raise. If wewere not in compliance with the financial covenants under the Credit Agreement by the earlier of April 1, 2017 or the completion of the EquityRaise or we fail to maintain compliance with the covenants thereafter, the Lender would be able to accelerate the required repayment of amounts dueunder the Credit Agreement and, if they are not repaid, could foreclose upon our assets securing our obligations under the Credit Agreement. 4.On June 10, 2016, the Company entered into a Subscription Agreement with B2 FIE V LLC, an entity affiliated with Pacific InvestmentManagement Company LLC, providing for the issuance and sale of 20,000 shares of Series 2 Convertible Preferred Stock for gross proceeds of $20.0million. In addition, the Company sold an additional 1,950 shares of Series 2 Convertible Preferred Stock to certain other investors at a subsequentclosing in June 2016 for gross proceeds of $1.95 million. 5.On January 27, 2017, the Borrower entered into a fifth amendment (the "Omnibus Amendment") to the Credit Agreement. The Omnibus Amendmentamends the Credit Agreement to, among other things, extend the Commitment Termination Date (as defined in the Credit Agreement ), require theBorrower to refinance the debt under the Credit Agreement upon a Permitted Change of Control (as defined in the Credit Agreement) and modifycertain permitted debt and financial covenants. Cash Flow Summary Cash Flows from Operating Activities Net cash used by operating activities was $17,372,429 for the year ended December 31, 2016 and was primarily due to the net loss for the period combinedwith cash used for the purchases of leased merchandise. Net cash used by operating activities was $14,156,286 for the year ended December 31, 2015 and was primarily due to the net loss for the period combinedwith cash used for the purchases of leased merchandise. Cash Flows from Investing Activities For the year ended December 31, 2016, net cash used in investing activities was $1,855,088 comprised of $81,514 for the purchase of property andequipment and $1,773,574 for capitalized software costs. For the year ended December 31, 2015, net cash used in investing activities was $1,328,113 comprised of $185,191 for the purchase of property andequipment and $1,142,992 for capitalized software costs. Cash Flows from Financing Activities Net cash provided by financing activities was $21,243,806 for the year ended December 31, 2016 primarily due to the proceeds from the sale of Series 2Convertible Preferred Stock of $21,952,000 offset by related costs of $1,519,339, funds drawn on the Credit Agreement of $5,341,359, offset by repaymentsof amounts borrowed under the Credit Agreement of $4,172,714. Net cash provided by financing activities was $15,997,256 for the year ended December 31, 2015 due to: (i) proceeds of $9,619,563 offset by $1,170,501 ofrelated costs incurred by the Company’s entering into the Credit Agreement with the Lender, (ii) $9,350,000 of proceeds from the sale of the Company’sstock, offset by payments of $801,806 in issuance costs and (iii) a cost of $1,000,000 to repayment of a note held by a shareholder of the Company. 19  Capital Resources and Financial Condition The funds derived from the sale of FlexShopper’s Common Stock and Series 2 Convertible Preferred Stock and FlexShopper’s ability to borrow funds underthe Credit Agreement have provided the liquidity and capital resources necessary for FlexShopper to purchase durable goods pursuant to lease-to-owntransactions and to support FlexShopper’s current general working capital needs. Management believes that the financing transactions described in thissection above provide sufficient liquidity and capital resources for our anticipated needs through at least March 31, 2018. However, unless we are able toincrease our revenues and achieve profitability we will likely require additional investment capital thereafter to fund our operations. Impact of Inflation and Changing Prices During the three most recent fiscal years, inflation and changing prices have not had a material effect on our business and we do not expect that inflation orchanging prices will materially affect our business in the foreseeable future. Off-Balance Sheet Arrangements The Company does not have any off balance sheet arrangements. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. The information required by Item 7A is not required to be provided by issuers that satisfy the definition of "smaller reporting company" under SEC rules. Item 8. Financial Statements and Supplementary Data. Consolidated Financial Statements The reports of the Independent Registered Public Accounting Firm, Consolidated Financial Statements and Schedules are set forth beginning on thefollowing page. 20  FLEXSHOPPER, INC. CONTENTS YEARS ENDED DECEMBER 31, 2016 AND 2015 PAGEFINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F-2Consolidated Balance Sheets as of December 31, 2016 and 2015 F-3Consolidated Statements of Operations F-4Consolidated Statements of Stockholders' Equity F-5Consolidated Statements of Cash Flows F-6Notes to Consolidated Financial Statements F-7 F-1  Report of Independent Registered Public Accounting Firm_______ The Board of Directors and Stockholders ofFlexShopper, Inc. We have audited the accompanying consolidated balance sheets of FlexShopper, Inc. (the “Company”) as of December 31, 2016 and 2015 and the relatedconsolidated statements of operations, stockholders’ equity, and cash flows for each of the years then ended. These financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of FlexShopper, Inc. as ofDecember 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with accountingprinciples generally accepted in the United States of America. /s/ EisnerAmper LLP New York, New YorkMarch 31, 2017 F-2  FLEXSHOPPER, INC.CONSOLIDATED BALANCE SHEETSDecember 31, 2016 2015 ASSETS CURRENT ASSETS: Cash $5,412,495 $3,396,206 Accounts receivable, net 2,181,787 752,159 Prepaid expenses 361,777 237,069 Lease merchandise, net 18,570,460 11,204,136 Total current assets 26,526,519 15,589,570 PROPERTY AND EQUIPMENT, net 2,540,514 1,797,553 OTHER ASSETS: Intangible assets, net 20,340 23,416 Security deposits 68,251 66,758 88,591 90,174 $29,155,624 $17,477,297 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $3,917,747 $1,783,929 Accrued payroll and related taxes 296,333 251,519 Accrued expenses 259,104 487,120 Total current liabilities 4,473,184 2,522,568 Loan payable under credit agreement to beneficial shareholder net of $631,488 in 2016 and $832,792 in 2015 of unamortized issuance costs 10,156,719 8,786,770 Total liabilities 14,629,903 11,309,338 COMMITMENTS (Note 12) STOCKHOLDERS’ EQUITY Series 1 Convertible Preferred stock, $0.001 par value- authorized 2,000,000 shares, issued and outstanding 243,065 shares in 2016 and 328,197 in 2015 at $5.00 stated value 1,215,325 1,640,985 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 - Common stock, $0.0001 par value- authorized 100,000,000 shares, issued and Outstanding 5,287,391 shares in 2016 and 5,210,408 in 2015 529 521 Additional paid in capital 22,298,439 23,213,318 Accumulated deficit (30,940,572) (18,686,865) 14,525,721 6,167,959 $29,155,624 $17,477,297 The accompanying notes to consolidated financial statements are an integral part of these statements. F-3  FLEXSHOPPER, INC.CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2016 2015 Revenues: Lease revenues and fees $46,513,235 $20,131,063 Lease merchandise sold 1,066,350 548,999 Total revenues 47,579,585 20,680,062 Costs and expenses: Cost of lease revenues, consisting of depreciation and impairment of lease merchandise 22,734,553 10,752,733 Cost of lease merchandise sold 687,991 314,751 Provision for doubtful accounts 13,281,242 5,647,084 Marketing 10,193,052 4,606,874 Salaries and benefits 5,946,401 4,190,606 Other operating expenses 5,064,869 3,171,180 Total costs and expenses 57,908,108 28,683,228 Operating loss (10,328,523) (8,003,166)Interest expense including amortization of debt issuance costs 1,925,184 994,115 Loss from continuing operations, before income tax benefit (12,253,707) (8,997,281)Income tax benefit - 78,388 Loss from continuing operations (12,253,707) (8,918,893)Income from discontinued operations consisting of gain from sale of discontinued operations, net of income taxes - 127,789 Net loss (12,253,707) (8,791,104)Cumulative dividends on Series 2 Convertible Preferred Shares 1,211,964 - Net loss attributable to common shareholders $(13,465,671) $(8,791,104) Basic and diluted (loss) income per common share: Loss from continuing operations $(2.57) $(1.80)Income from discontinued operations - 0.00 Net loss $(2.57) $(1.80) Weighted average common shares outstanding: Basic and diluted 5,249,476 4,868,778 The accompanying notes to consolidated financial statements are an integral part of these statements. F-4  FLEXSHOPPER, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYFor the years ended December 31, 2016 and 2015 Series 1 ConvertiblePreferred Stock Series 2 ConvertiblePreferred Stock Common Stock AdditionalPaid in Accumulated Shares Amount Shares Amount Shares Amount Capital Deficit Total Balance, January1, 2015 342,219 $1,711,095 - - 3,501,532 $350 $14,516,585 $(9,895,761) $6,332,269 Provision forcompensationexpenserelated toissued stockoptions - - - - - - 78,600 - 78,600 Sale of commonstock - - - - 1,700,000 170 9,349,830 - 9,350,000 Costs related tosale ofcommonstock - - - - - - (801,806) - (801,806)Conversion ofpreferredshares tocommonstock (14,022) (70,110) - - 8,876 1 70,109 - - Net loss (8,791,104) (8,791,104)Balance,December 31,2015 328,197 1,640,985 - - 5,210,408 521 23,213,318 (18,686,865) 6,167,959 Sale of Series 2PreferredStock - - 21,952 $21,952,000 - - - - 21,952,000 Fair value ofwarrantsissued toplacementagent inconjunctionwith sale ofSeries 2PreferredStock - - - - - - 150,451 - 150,451 Costs related tosale of Series2 PreferredStock - - - - - - (1,669,790) - (1,669,790)Provision forcompensationexpenserelated toissued stockoptions - - - - - - 136,308 - 136,308 Conversion ofpreferredstock tocommonstock (85,132) (425,660) - - 51,983 5 425,655 - - Exercise ofstock options - - - - 25,000 3 42,497 - 42,500 Net loss - - - - - - - (12,253,707) (12,253,707)Balance,December 31,2016 243,065 $1,215,325 21,952 $21,952,000 5,287,391 $529 $22,298,439 $(30,940,572) $14,525,721 The accompanying notes to consolidated financial statements are an integral part of these statements. F-5  FLEXSHOPPER, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(12,253,707) $(8,791,104)Adjustments to reconcile net loss to net cash used in operating activities: (Income) from discontinued operation before income taxes - (206,176)Depreciation and impairment of lease merchandise 22,734,553 10,752,733 Other depreciation and amortization 1,566,507 1,073,041 Compensation expense related to issuance of stock options and warrants 136,308 78,600 Provision for uncollectible accounts 13,281,242 5,647,084 Changes in operating assets and liabilities: (Increase) in accounts receivable (14,710,870) (6,270,409)(Increase) in prepaid expenses and other (124,707) (124,995)(Increase) in lease merchandise (30,100,878) (17,714,951)(Increase) in security deposits (1,493) (11,755)Increase in accounts payable 2,133,818 947,138 Increase in accrued payroll and related taxes 44,814 119,923 Increase in accrued expenses (78,016) 139,536 Net cash used in operating activities - continuing operations (17,372,429) (14,361,335)Net cash provided by operating activities - discontinued operations - 205,049 Net cash (used in) operating activities (17,372,429) (14,156,286) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment, including capitalized software costs (1,855,088) (1,328,113)Net cash (used in) investing activities (1,855,088) (1,328,113) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds of loans from shareholder 1,000,000 (1,000,000)Repayment of loans from shareholder (1,000,000) - Proceeds from loan payable under credit agreement, net of $400,000 and $1,170,501 of related costs in 2016 and2015 respectively 4,941,359 8,449,062 Repayment of loan payable under credit agreement (4,172,714) Proceeds from sale of common stock, net of related costs of $801,806 - 8,548,194 Proceeds from exercise of stock options 42,500 - Proceeds from sale of Series 2 Convertible Preferred Stock, net of related costs of $1,519,339 20,432,661 - Net cash provided by financing operations 21,243,806 15,997,256 INCREASE IN CASH 2,016,289 512,857 CASH, beginning of year 3,396,206 2,883,349 CASH, end of year $5,412,495 $3,396,206 Supplemental cash flow information: Interest paid $1,459,756 $443,360 Non-cash financing activities: Conversion of preferred stock to common stock $425,660 $70,110 Fees payable to lender in connection with modification of credit agreement - 150,000 Warrants issued to placement agent in conjunction with sale of Series 2 Preferred Stock $150,451 - The accompanying notes to consolidated financial statements are an integral part of these statements. F-6  Notes To Consolidated Financial Statements December 31, 2016 and 2015 1. BUSINESS: FlexShopper, Inc. (the “Company”) is a corporation organized under the laws of the State of Delaware on August 16, 2006. The Company owns 100% ofFlexShopper, LLC, a limited liability company incorporated under the laws of North Carolina on June 24, 2013. Since the sale of the assets of AnchorFunding Services LLC (“Anchor”), which sale was completed in a series of transactions between April and June 2014, the Company is a holding corporationwith no operations except for those conducted by FlexShopper LLC. FlexShopper LLC provides through e-commerce sites, certain types of durable goods toconsumers on a lease-to-own basis (“LTO”) including consumers of third party retailers and e-tailers. In January 2015, in connection with the credit agreement entered into in March 2015, (see Note 7) FlexShopper 1 LLC and FlexShopper 2 LLC wereorganized as wholly owned Delaware subsidiaries of FlexShopper LLC to conduct operations. FlexShopper LLC together with its subsidiaries is hereafterreferred to as “FlexShopper.” During 2013, the Company decided to concentrate its efforts on the operations of FlexShopper and subsequently, an agreement was entered into with afinancial institution to sell substantially all of the operating assets of Anchor which provided accounts receivable funding to businesses located throughoutthe United States. The sale was finalized in June 2014 (see Note 3). The consolidated statements of operations and cash flows reflect the historical operationsof Anchor as discontinued operations. We have generally presented the notes to our consolidated financial statements on the basis of continuing operations. 2. REVERSE STOCK SPLIT On October 14, 2016, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment (the “Certificate of Amendment”) toits certificate of incorporation, which Certificate of Amendment effectuated as of October 24, 2016 at 11:59 p.m. Eastern Time (the “Effective Time”) areverse split of the Company’s common stock by a ratio of one-for-10 (the “Reverse Split”). At the Effective Time, 52,870,398 outstanding shares of theCompany’s common stock were exchanged for 5,287,040 shares of the Company’s common stock. All per share amounts and number of shares in theconsolidated financial statements and related notes have been retroactively restated to reflect the Reverse Split resulting in the transfer of $3,152 fromcommon stock to additional paid in capital at January 1, 2015. No fractional shares were, or shall be, issued in connection with the Reverse Split. Astockholder who would otherwise be entitled to receive a fractional share of common stock is entitled to receive the fractional share rounded up to the nextwhole share. The Reverse Split did not change the number of shares of common or preferred stock that the Company is authorized to issue, or the par value ofthe Company’s common or preferred stock. The Reverse Split resulted in a proportionate adjustment to the per share conversion or exercise price and the number of shares of common stock issuableupon the conversion or exercise of outstanding preferred stock, stock options and warrants, as well as the number of shares of common stock eligible forissuance under the Company’s 2007 Omnibus Equity Compensation Plan and 2015 Omnibus Equity Compensation Plan. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiariesafter elimination of intercompany balances and transactions. Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requiresmanagement to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-7  Revenue Recognition - Merchandise is leased to customers pursuant to lease purchase agreements which provide for weekly lease terms with non-refundablelease payments. Generally the customer has the right to acquire title either through a 90 day same as cash option, an early purchase option, or throughpayments of all required lease payments, generally 52 weeks, for ownership. On any current lease, customers have the option to cancel the agreement inaccordance with lease terms and return the merchandise. Accordingly, customer agreements are accounted for as operating leases with lease revenuesrecognized in the month they are due on the accrual basis of accounting. Merchandise sales revenue is recognized when the customer exercises the purchaseoption and pays the purchase price. Revenue from processing fees earned upon exercise by the customer of the 90 day purchase option is recorded uponrecognition of the related merchandise sales. Commencing in the quarter ended June 30, 2016, the Company discontinued charging a separate fee uponexercise of such option. Revenue for lease payments received prior to their due date is deferred and recognized as revenue in the period to which thepayments relate. Revenues from leases and sales are reported net of sales taxes. Accounts Receivable and Allowance for Doubtful Accounts – FlexShopper seeks to collect amounts owed under its leases from each customer on a weeklybasis by charging their bank accounts or credit cards. Accounts receivable are principally comprised of lease payments currently owed to FlexShopper whichare past due as FlexShopper has been unable to successfully collect in the manner described above. Through June 30, 2016, an allowance for doubtfulaccounts was estimated by reserving all accounts in excess of four payments in arrears, adjusted for subsequent collections. Commencing in the quarter endedSeptember 30, 2016, the estimate was revised to provide for doubtful accounts based upon revenues and historical experience of balances charged off as apercentage of revenues. The accounts receivable balances consisted of the following as of December 31, 2016 and December 31, 2015: December 31,2016 December 31,2015 Accounts receivable $11,690,495 $5,479,437 Allowance for doubtful accounts 9,508,708 4,727,278 Accounts receivable, net $2,181,787 $752,159 The allowance is a significant percentage of the balance because FlexShopper does not charge off any customer account until it has exhausted all collectionefforts with respect to each account including attempts to repossess items. In addition, while collections are pursued, the same delinquent customers willcontinue to accrue weekly charges until they are charged off. During the years ended December 31, 2016 and 2015, $8,541,289 and $2,300,708 of accountsreceivable balances respectively were charged off against the allowance. Lease Merchandise – Until all payment obligations for ownership are satisfied under the lease agreement, the Company maintains ownership of the leasemerchandise. Lease merchandise consists primarily of residential furniture, consumer electronics, computers, appliances and household accessories and isrecorded at cost net of accumulated depreciation. The Company depreciates leased merchandise using the straight line method over the applicable agreementperiod for a consumer to acquire ownership, generally twelve months with no salvage value. Upon transfer of ownership of merchandise to customersresulting from satisfaction of their lease obligations, the related cost and accumulated depreciation are eliminated from lease merchandise. For leasemerchandise returned or anticipated to be returned either voluntarily or through repossession, the Company provides an impairment reserve for theundepreciated balance of the merchandise net of any estimated salvage value with a corresponding charge to cost of lease revenue. The cost, accumulateddepreciation and impairment reserve related to such merchandise are written off upon determination that no salvage value is obtainable. The impairmentcharge amounted to approximately $5,021,000 and $1,500,000 for the years ended December 31, 2016 and 2015 respectively. The net leased merchandisebalances consisted of the following as of December 31, 2016 and 2015: December 31,2016 December 31,2015 Lease merchandise at cost $33,264,810 $19,504,645 Accumulated depreciation 11,578,267 7,473,363 Impairment reserve 3,116,083 827,146 Lease merchandise, net $18,570,460 $11,204,136 F-8  Cost of lease merchandise sold represents the undepreciated cost of rental merchandise at the time of sale. Deferred Debt Issuance Costs – Debt issuance costs incurred in conjunction with the Credit Agreement entered into on March 6, 2015 (see Note 7) are offsetagainst the outstanding balance of the loan payable and are amortized using the straight line method over the remaining term of the credit facility.Amortization for the years ended December 31, 2016 and 2015 was $451,304 and $487,709 respectively. Intangible Assets – Intangible assets consist of pending patents on the Company’s LTO payment method at check-out for third party e-commerce sites.Patents are stated at cost less accumulated amortization. Patent costs are amortized by using the straight line method over the legal life, or if shorter, theuseful life of the patent which has been estimated to be 10 years. The net patent cost balances consisted of the following as of December 31, 2016 and 2015: December 31,2016 December 31,2015 Patent costs $30,760 $30,760 Accumulated amortization 10,420 7,344 Patent costs, net $20,340 $23,416 Software Costs - Costs related to developing or obtaining internal-use software incurred during the preliminary project and post-implementation stages of aninternal use software project are expensed as incurred and certain costs incurred in the project’s application development stage are capitalized as property andequipment. The Company expenses costs related to the planning and operating stages of a website. Costs associated with minor enhancements andmaintenance for the website are included in expenses as incurred. Direct costs incurred in the website’s development stage are capitalized as property andequipment. Capitalized software costs amounted to $1,773,574 and $1,142,922 for the years ended December 31, 2016 and 2015 respectively. Operating Expenses – Operating expenses include corporate overhead expenses such as, stock based compensation, insurance, occupancy, and otheradministrative expenses. Marketing costs which primarily consist of advertising are charged to expense as incurred. Per Share Data – Per share data is computed by use of the two-class method as a result of outstanding Series 1 Convertible Preferred Stock which participatesin dividends with the common stock and accordingly has participation rights in undistributed earnings as if all such earnings had been distributed during theperiod (see Note 8). Under such method income available to common shareholders is computed by deducting both dividends declared or, if not declared,accumulated on Series 2 Convertible Preferred Stock from income from continuing operations and from net income. Loss attributable to commonshareholders is computed by increasing loss from continuing operations and net loss by such dividends. Where the Company has undistributed net incomeavailable to common shareholders, basic earnings per common share is computed based on the total of any dividends paid or declared per common share plusundistributed income per common share determined by dividing net income available to common shareholders reduced by any dividends paid or declared oncommon and participating Series 1 Convertible Preferred Stock by the total of the weighted average number of common shares outstanding plus the weightedaverage number of common shares issuable upon conversion of outstanding participating Series 1 Convertible Preferred Stock during the period. Where theCompany has a net loss, basic per share data (including income from continuing operations) is computed based solely on the weighted average number ofcommon shares outstanding during the period. As the convertible participating preferred stock has no contractual obligation to share in the losses of theCompany, common shares issuable upon conversion of such preferred stock are not included in such computations. F-9  Diluted earnings per share is based on the more dilutive of the if-converted method (which assumes conversion of the participating preferred stock as of thebeginning of the period) or the two-class method (which assumes that the participating preferred stock is not converted) plus the potential impact of dilutivenon-participating Series 2 Convertible Preferred Stock, options and warrants. The dilutive effect of stock options and warrants is computed using the treasurystock method, which assumes the repurchase of common shares at the average market price during the period. Under the treasury stock method, options andwarrants will have a dilutive effect when the average price of common stock during the period exceeds the exercise price of options or warrants. When thereis a loss from continuing operations, potential common shares are not included in the computation of diluted loss per share, since they have an anti-dilutiveeffect. In computing diluted loss per share, no effect has been given to the issuance of common stock upon conversion or exercise of the following securities as theireffect is anti-dilutive: Year ended December 31, 2016 2015 Series 1 Convertible Preferred Stock 147,417 207,749 Series 2 Convertible Preferred Stock 2,711,072 - Series 2 Convertible Preferred Stock issuable upon exercise of warrants 54,217 - Options 411,600 406,700 Warrants 511,553 511,553 3,835,859 1,126,002 Stock Based Compensation - The fair value of transactions in which the Company exchanges its equity instruments for employee services (share-basedpayment transactions) is recognized as an expense in the financial statements as services are performed. Compensation expense is determined by reference to the fair value of an award on the date of grant and is amortized on a straight-line basis over the vestingperiod. We have elected to use the Black-Scholes-Merton (BSM) pricing model to determine the fair value of all stock option awards. See Note 9. Fair Value of Financial Instruments – The carrying value of loans payable under the Credit Agreement increased by unamortized issuance costs (see Note 7)approximates fair value. Income Taxes – Deferred tax assets and liabilities are determined based on the estimated future tax effects of net operating loss carryforwards and temporarydifferences between the tax bases of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. TheCompany records a valuation allowance for its deferred tax assets when management concludes that it is not more likely than not that such assets will berecognized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examinationby taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a positionare measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2016 and2015, the Company has not recorded any unrecognized tax benefits. Interest and penalties related to liabilities for uncertain tax positions will be charged to interest and operating expenses, respectively. Reclassifications - Certain amounts have been reclassified in the 2015 financial statements to conform to the 2016 presentation. F-10  Recent Accounting Pronouncements – In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, on revenue recognition. The new standard provides for a single five-step model to be applied to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users tounderstand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either aretrospective approach or cumulative effect adjustment approach to implement the standard. ASU 2014-09 is effective for annual reporting periods beginningafter December 15, 2017, including interim periods within that reporting period. Early adoption is permitted, but not before the original effective date of thestandard. The Company is currently evaluating the impact of the new guidance including method of adoption and related financial statement disclosures, butpreliminarily does not anticipate a material impact on its financial statements as a majority of the Company’s revenue generating activities are leasingarrangements which are outside the scope of the guidance. In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target CouldBe Achieved after the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after therequisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair valueof the award. ASU 2014-12 is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. The Companyadopted this guidance in 2016 which had no effect on the financial statements. In August 2014 the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 2015-40): Disclosure of Uncertainties aboutan Entity’s Ability to Continue as a Going Concern. In connection with preparing financial statements for each annual and interim reporting period, anentity’s management should evaluate whether there are any conditions or events, considered in the aggregate, that raise substantial doubt about the entity’sability to continue as a going concern within one year after the date that the financial statements are issued. Management’s evaluation should be based onrelevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. Substantial doubt about anentity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that theentity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The term probable isused consistently with its use in Topic 450, Contingencies. The amendments in this Update are effective for the annual period ending after December 15,2016, and for annual periods and interim periods thereafter. This guidance which was adopted in 2016, had no effect on the financial statements. In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs whichrequires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of thatdebt liability, consistent with debt discounts. This ASU is effective for fiscal years beginning after December 15, 2015 and for interim periods within thosefiscal years with early adoption permitted. The Company early adopted ASU 2015-03 during the quarter ended March 31, 2015. In the accompanyingbalance sheet at December 31, 2016 and 2015, the Company offset $631,488 and $832,792 respectively, of unamortized debt issuance costs related to debtissued under the Credit Agreement in March 2015 against the outstanding balance of loans payable under the Credit Agreement. In April 2015, the FASB issued ASU 2015-05, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for FeesPaid in a Cloud Computing Arrangement. The amendments in this Update provide guidance to customers about whether a cloud computing arrangementincludes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license elementof the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, thecustomer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer’s accounting for service contracts. Inaddition, the guidance in this update supersedes paragraph 350-40-25-16. Consequently, all software licenses within the scope of Subtopic 350-40 will beaccounted for consistent with other licenses of intangible assets. The amendments in this guidance which are effective for the annual periods beginning afterDecember 15, 2015, and for interim periods therein, were adopted by the Company in the quarter ended March 31, 2016 and had no effect on the financialstatements. F-11  In November 2015, the FASB issued ASU 2015-17, Income Taxes- Balance Sheet Classification of Deferred Taxes. To simplify the presentation of deferred income taxes, the amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrentin a classified statement of financial position. The amendments in this update apply to all entities that present a classified statement of financial position. Theamendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods withinthose annual periods. In February 2016, the FASB issued ASU No. 2016-02, Leases, which is effective for fiscal years, and interim periods within those years, beginning afterDecember 15, 2018 with early adoption permitted. Under ASU 2016-02, lessees will be required to recognize for all leases at the commencement date a leaseliability, which is a lessee’s obligation to make lease payments arising from a lease measured on a discounted basis, and a right-to-use asset, which is an assetthat represents the lessee’s right to use or control the use of a specified asset for the lease term. Lessor guidance is largely unchanged. The Company iscurrently evaluating the effect that the new guidance will have on its financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting. ASU 2016-09 simplifies certain aspects of the accounting for share-based payment transactions, including tax consequences, classification ofawards, the option to recognize stock compensation expense with actual forfeitures as they occur, and the classifications on the statement of cash flows. ASU2016-09 is effective for annual reporting beginning after December 15, 2016, including interim periods within that reporting period, with early adoptionpermitted. The Company is currently evaluating the effect that the new guidance will have on its financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, whichprovides guidance on the treatment of cash receipts and cash payments for certain types of cash transactions, to eliminate diversity in practice in thepresentation of the cash flow statement. The adoption of ASU 2016-15 will be required for on a retrospective basis beginning January 1, 2018, with earlyadoption permitted. The Company is currently evaluating the effect that this new guidance will have on its presentation of cash flows. 4. DISCONTINUED OPERATIONS: In June 2014, Anchor sold to a bank substantially all of its assets (the “Anchor Assets”), consisting primarily of its factoring portfolio. The purchase price forthe Anchor Assets included an amount equal to 50% of the factoring fee and interest income earned by Anchor’s factoring portfolio during the 12 monthperiod following acquisition (“Earnout Payments”). The Earnout Payments totaled $206,177 for the year ended December 31, 2015. In the year endedDecember 31, 2015, Anchor recorded a gain of $127,789 net of an income tax provision of $78,388, for the Earnout Payments received during such period,which is included in income from discontinued operations. F-12  5. PROPERTY AND EQUIPMENT: Property and equipment consist of the following: Estimated UsefulLives December 31,2016 December 31,2015 Furniture and fixtures 2-5 years $98,564 $85,513 Website and internal use software 3 years 3,933,600 2,160,025 Computers and software 3-7 years 619,477 551,015 4,651,641 2,796,553 Less: accumulated depreciation and amortization (2,111,127) (999,000) $2,540,514 $1,797,553 Depreciation and amortization expense was $1,112,127 and $582,257 for the years ended December 31, 2016 and 2015, respectively. 6. LOANS PAYABLE SHAREHOLDERS: On December 8, 2014, upon approval of the Board of Directors, FlexShopper entered into a promissory note for $1,000,000, with a shareholder and executiveof the Company. The note is payable on demand. The note was funded in increments of $500,000 on December 8th and 18th and earned interest at 15% perannum. The Promissory Note was to assist FlexShopper in purchasing merchandise for lease and was paid in full with interest amounting to $36,250 onMarch 11, 2015. See Note 7 regarding the loan entered into in 2016. 7. LOAN PAYABLE UNDER CREDIT AGREEMENT On March 6, 2015, FlexShopper entered into a credit agreement (as amended from time to time, and including the Fee Letter (as defined therein), the “CreditAgreement”) with Wells Fargo Bank, National Association as paying agent, various lenders from time to time party thereto and WE 2014-1, LLC asadministrative agent and lender (the “Lender”). FlexShopper is permitted to borrow, repay and reborrow funds under the Credit Agreement based onFlexShopper’s cash on hand and the Amortized Order Value of its Eligible Leases (as such terms are defined in the Credit Agreement) less certain deductionsdescribed in the Credit Agreement. Under the terms of the Credit Agreement, subject to the satisfaction of certain conditions, FlexShopper may borrow up to$25,000,000 from the Lender for a term of two years from the date of the Credit Agreement. The borrowing term may be extended in the sole discretion of theLender. The Credit Agreement contemplates that the Lender may provide additional debt financing to FlexShopper, up to $100 million in total, under twouncommitted accordions following satisfaction of certain covenants and other terms and conditions. The Lender receives security interests in certain leases ascollateral under the Credit Agreement. Amounts borrowed bear interest at the rate of LIBOR plus 15% per annum and a small non-usage fee is assessed on anyundrawn amount if the facility is less than 80% drawn on average in any given measurement period commencing three months after closing of the facility.Interest is payable monthly on the outstanding balance of amounts borrowed and, prior to the amendment referred to below, commencing on and after May 6,2017, principal together with interest thereon was payable periodically through May 6, 2018, the maturity date of the loan. In January 2017 the CreditAgreement was amended to extend the Commitment Termination Date from May 6, 2017 to April 1, 2018 (See Note 13). Accordingly, commencing on orafter April 1, 2018 principal together with the interest thereon is payable periodically through April 1, 2019, the amended maturity date of the loan. Theaccompanying consolidated balance sheet at December 31, 2016 has been adjusted to reflect the revised payment terms. As the Company anticipates that itwill maintain through December 31, 2017 no less than the Amortized Order Value of its Eligible Leases and cash on hand attained at December 31, 2016, andthereby not require any repayment of principal through December 31, 2017, amounts payable under the credit Agreement are classified as non-current in theaccompanying consolidated balance sheet at December 31, 2016. Interest expense incurred under the Credit Agreement for the years ended December 31,2016 and 2015 was $1,422,630 and $407,110 respectively. As of December 31, 2016, the outstanding balance under the Credit Agreement was $10,788,208.The Company repaid $4,172,174 to the Lender in 2016 resulting primarily from the repayment of the Bridge Loan Amount upon the Equity Raise asdescribed in the fourth amendment to the Credit Agreement. F-13  The Credit Agreement provides that FlexShopper may not incur additional indebtedness (other than expressly permitted indebtedness) without thepermission of the Lender and also prohibits dividends on common stock. The Credit Agreement includes customary events of default, including, amongothers, failures to make payment of principal and interest, breaches or defaults under the terms of the Credit Agreement and related agreements entered intowith the Lender, breaches of representations, warranties or certifications made by or on behalf of FlexShopper in the Credit Agreement and related documents(including certain financial and expense covenants), deficiencies in the borrowing base, certain judgments against FlexShopper and bankruptcy events. The Credit Agreement contains financial covenants requiring the Company and its subsidiaries to maintain as of the last day of each fiscal quarter during theterm of the agreement minimum amounts of Unrestricted Cash and Equity Book Value and to achieve Adjusted Operating Cash Flow of not less than certainamounts during such quarters (all such terms as defined in the Credit Agreement). As of December 31, 2015, the Company was in violation of the covenantrequiring an Equity Book Value of at least $7.0 million as of such date. Under the fourth amendment to the Credit Agreement described below, the Lenderwaived this violation. The covenant also requires the Company and its subsidiaries to maintain an Equity Book Value of at least $7 million at each of June30, September 30 and December 31, 2016 increasing to $10 million at the end of each quarter from March 31 through December 31, 2017 (see Note 13). On February 11, 2016, FlexShopper entered into a third amendment, (the “Third Amendment”) to the Credit Agreement which amended the Credit Agreementto, among other things, add a new financial covenant requiring FlexShopper to maintain at least $1,500,000 in Unrestricted Cash at all times. The Third Amendment also includes a consent by the Lender to a $1,000,000 promissory note (the “Promissory Note”) in favor of Marc Malaga,FlexShopper’s Executive Vice President of Operations. Interest on the Promissory Note accrued at the rate of 15.0% per annum and all outstanding principaland accrued interest was payable on demand by Mr. Malaga. The Promissory Note which was issued in February 2016, was secured by substantially all ofFlexShopper’s assets. The Promissory Note was paid in full with interest amounting to $51,250 on June 13, 2016. On March 29, 2016, FlexShopper entered into a fourth amendment (the “Fourth Amendment”) to the Credit Agreement whereby the Lender waived theviolation of the Equity Book Value covenant at December 31, 2015, as well as compliance with financial covenants (other than the unrestricted cashcovenant) through the earlier of April 1, 2017 or the completion of the raising of at least $10,000,000 in equity funding (the “Equity Raise”), which occurredupon the issuance of Series 2 Convertible Preferred Stock on June 10, 2016 described in Note 9. In addition, the Fourth Amendment, among other things,provided that FlexShopper maintain Unrestricted Cash of at least $500,000 on each day and $1,000,000 at the end of each calendar month. As of December31, 2016, FlexShopper was in compliance with the financial covenants of the Credit Agreement. In consideration of the Fourth Amendment, FlexShopper was required to pay to the administrative agent a bridge fee of $20,000 per week until (i) the currentamount of such bridge fee equals $400,000 or (ii) the completion of the Equity Raise, whichever event occurred sooner, provided that such bridge feeamounted to at least $250,000. Accordingly, the Company recorded $250,000 of deferred debt issuance costs with a corresponding amount of accruedexpenses. On June 10, 2016, the Company completed an equity raise in excess of $20 million providing for the issuance and sale of shares of Series 2Convertible Preferred Stock. During the year ended December 31, 2016, the total of the Bridge Fee and second amendment fee totaling $400,000 was paid bythe Company. F-14  8. CAPITAL STRUCTURE: The Company’s capital structure consists of preferred and common stock as described below: The Company is authorized to issue 10,000,000 shares of $.001 par value preferred stock. The Company’s Board of Directors determines the rights andpreferences of the Company’s preferred stock. Series 1 Convertible Preferred Stock – On January 31, 2007, the Company filed a Certificate of Designation with the Secretary of State of Delaware.Effective with this filing, 2,000,000 preferred shares became Series 1 Convertible Preferred Stock. Series 1 Convertible Preferred Stock ranks senior tocommon stock. As of December 31, 2015, each share of Series 1 Convertible Preferred Stock was convertible into 0.633 shares of the Company’s common stock, subject tocertain anti-dilution rights. As a result of the Company entering into the Subscription Agreement referred to below, each share of Series 1 ConvertiblePreferred Stock became convertible into approximately 0.606 shares of the Company’s common stock. The holders of the Series 1 Convertible PreferredStock has the option to convert the shares to common stock at any time. Upon conversion, all accumulated and unpaid dividends, if any, will be paid asadditional shares of common stock. The holders of Series 1 Convertible Preferred Stock have the same dividend rights as holders of common stock, as if theSeries 1 Convertible Preferred Stock had been converted to common stock. During the year ended December 31, 2015, 14,022 shares of Series 1 Convertible Preferred Stock were converted into 8,876 shares of common stock. Duringthe year ended December 31, 2016, 85,132 shares of Series 1 Convertible Preferred Stock were converted into 51,632 shares of common stock. As ofDecember 31, 2016, there were 243,065 shares of Series 1 Convertible Preferred Stock outstanding which are convertible into 147,417 shares of commonstock. Series 2 Convertible Preferred Stock – On June 10, 2016, the Company entered into a Subscription Agreement with B2 FIE V LLC (the “Investor”), anentity affiliated with Pacific Investment Management Company LLC, providing for the issuance and sale of 20,000 shares of Series 2 Convertible PreferredStock for gross proceeds of $20.0 million. The Company sold an additional 1,952 shares of Series 2 Convertible Preferred Stock for gross proceeds of $1.95million at a subsequent closing. Pursuant to the authority expressly granted to the Board of Directors by the provisions of the Company’s Certificate of Incorporation, the Board of Directorsof the Company created and designated 25,000 shares of Series 2 Convertible Preferred Stock, par value $.001 per share (“Series 2 Preferred Shares”), byfiling a Certificate of Designations with the Delaware Division of Corporations (the “Series 2 Certificate of Designations”). The Series 2 Preferred Shares weresold for $1,000 per share (the “Stated Value”) and accrue dividends on the Stated Value at an annual rate of 10% compounded annually. Each Series 2Preferred Share is convertible at a conversion price of $8.10 into approximately 124 shares of common stock; provided, the conversion price is subject toreduction pursuant to a weighted average anti-dilution provision contained in the Series 2 Certificate of Designations. Beginning 45 days following the dateof issuance of the Series 2 Preferred Shares (the “Initial Period”), the holders of the Series 2 Preferred Shares have the option to convert such shares into sharesof common stock and have the right to vote with holders of common stock on an as-converted basis. If, during the two year period commencing on the date ofissuance, the average closing price during any 45 consecutive trading day period equals or exceeds $17.50 per common share, or a change of controltransaction (as defined in the Series 2 Certificate of Designations) values the Company’s common stock at $17.50 per share or greater; or after this two yearperiod the average closing price during any 45 day consecutive trading day period or change of control transaction values the common stock at a price equalto or greater than $23.00 per share, then conversion shall be automatic. Upon a Liquidation Event or Deemed Liquidation Event (each as defined in the Series2 Certificate of Designations), holders of Series 2 Preferred Shares shall be entitled to receive out of the assets of the Company prior to and in preference tothe common stock and Series 1 Convertible Preferred Stock an amount equal to the greater of (1) the Stated Value, plus any accrued and unpaid dividendsthereon, and (2) the amount per share as would have been payable had all Series 2 Preferred Shares been converted to common stock immediately before theLiquidation Event or Deemed Liquidation Event. Common Stock – The Company, which was authorized to issue 65,000,000 shares of $.0001 par value common stock, after obtaining stockholder approvaland filing an amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of Delaware, increased its authorized shares to100,000,000 in September 2015. Each share of common stock entitles the holder to one vote at all stockholder meetings. F-15  In connection with entering into the Credit Agreement on March 6, 2015, the Company raised approximately $8.6 million in net proceeds through directsales of 1.7 million shares of its common stock to certain affiliates of the Lender and other accredited investors for a purchase price of $5.50 per share. As aresult of the sale to certain affiliates, the Lender is considered a beneficial shareholder of the Company. On March 17, 2016, the Company’s stockholders, acting by written consent, approved an amendment to the Certificate of Incorporation to effect a reversestock split of the Company’s common stock. On October 14, 2016, the Company filed with the Secretary of State of the State of Delaware a certificate ofamendment (the “Certificate of Amendment”) to its certificate of incorporation, which Certificate of Amendment effectuated as of October 24, 2016 at 11:59p.m. Eastern Time (the “Effective Time”) the Reverse Split by a ratio of one-for-10 (see Note 4). 9. STOCK OPTIONS On January 31, 2007, the Board of Directors adopted our 2007 Omnibus Equity Compensation Plan (the “2007 Plan”), with 210,000 common sharesauthorized for issuance under the Plan. In October 2009, the Company’s stockholders approved an increase in the number of shares covered by the Plan to420,000 shares. On March 26, 2015, the Board adopted our 2015 Omnibus Equity Compensation Plan (the “2015 Plan”), with 400,000 common sharesauthorized for issuance under the 2015 Plan, which was ratified by the Company’s stockholders on September 15, 2015. The 2007 Plan and 2015 Plan arecollectively referred to as the “Plans.” Grants under the Plans may consist of incentive stock options, non-qualified stock options, stock appreciation rights,stock awards, stock unit awards, dividend equivalents and other stock based awards. Employees, directors and consultants and other service providers areeligible to participate in the Plans. Options granted under the Plans vest over periods ranging from immediately upon grant to a three year period and expireten years from date of grant. Employees, directors and consultants and other service providers are eligible to participate in the Plan. Options granted under theplan vest over periods ranging from immediately upon grant to a three year period and expire ten years from date of grant. Activity in stock options for the year ended December 31, 2016 follows: Number ofshares Weightedaverageexercise price Weightedaveragecontractualterm (years) Aggregateintrinsic value Outstanding at January 1, 2016 406,700 $8.50 Granted 70,700 5.70 Canceled (40,800) 6.70 Exercised (25,000) 1.70 Outstanding at December 31, 2016 411,600 $8.63 3.64 $171,860 Vested and exercisable at December 31, 2016 348,101 $9.16 3.64 $146,203 Vested and exercisable at December 31, 2016 and expected to vest thereafter 406,300 $8.63 4.48 $171,860 The weighted average grant date fair value of options granted during 2015 and 2016 was $1.49 and $1.66 per share respectively. The Company measured thefair value of each option award on the date of grant using the Black Scholes option pricing model (BSM) with the following assumptions: 2015 2016 Exercise price $6.00 to $9.00 $4.90 to $6.60 Expected life 6 years 5.5 years Expected volatility 35% 38%Dividend yield 0% 0%Risk-free interest rate 1.35% to 2.70% 1.13% to 1.73% F-16  The expected dividend yield is based on the Company’s historical dividend yield. The expected volatility was based on the average of historical volatilitiesfor a period comparable to the expected life of the options of certain entities considered to be similar to the Company. The expected life is based on thesimplified expected term calculation permitted by the SEC which defines the expected life as the average of the contractual term of the options and theweighted-average vesting period for all option tranches. The risk-free interest rate is based on the annual yield on the grant date of a zero-coupon U.S.Treasury bond the maturity of which equals the option’s expected life. The value of stock options is recognized as compensation expense by the straight line method over the vesting period. Compensation expense recorded foroptions in the statements of operations was $136,308 and $78,600 for the years ended December 31, 2016 and 2015, respectively. Unrecognizedcompensation cost related to non-vested options at December 31, 2016 amounted to $90,122 which is expected to be recognized over a weighted averageperiod of 1.57 years. 10. WARRANTS: On June 24, 2016, the Company granted warrants to one of the Company’s placement agents to purchase 439 shares of the Company’s Series 2 ConvertiblePreferred Stock at an initial exercise price of $1,250 per share. The exercise price and aggregate number of shares are subject to adjustment as set forth in theagreement. The following information was input into the Black Scholes pricing model to compute a fair value of $342.71 for each warrant for a total fair value of$150,451. Exercise price $1,250 Expected life 7 years Expected volatility 38%Dividend yield 0%Risk-free interest rate 1.35% The following table summarizes information about outstanding stock warrants as of December 31, 2016, all of which are exercisable: Series 2 Preferred Weighted AverageExercise Common Stock Warrants Stock Warrants RemainingPrice Outstanding Outstanding Contractual Life $11.00 134,250 2 years$10.00 200,000 4 years$5.50 177,303 5 years$1,250 - 439 7 years 511,553 439 F-17  11. INCOME TAXES: For the year ended December 31, 2015, the income tax benefit allocated to continuing operations represents the tax benefit from utilizing the loss fromcontinuing operations to offset income from discontinued operations. A corresponding tax provision was charged to discontinued operations. Reconciliation of the benefit for income taxes from continuing operations recorded in the consolidated statement of operations with the amounts computedat the statutory federal tax rate of 34% as follows: 2016 2015 Federal tax benefit at statutory rate $(4,167,000) $(3,059,000)State tax benefit, net of federal tax (293,000) (436,000)Permanent differences 43,000 (14,000 Change in statutory rate 216,000 (133,000 Increase in valuation allowance 4,075,000 3,564,000 Other 126,000 - Benefit for income taxes $- $(78,000) Tax affected components of deferred tax assets and deferred tax liabilities at December 31, 2016 and 2015 were as follows: 2016 2015 Deferred tax assets: Equity based compensation $254,000 $266,000 Allowance for doubtful accounts 3,462,000 1,844,000 Lease merchandise 813,000 1,139,000 Fixed assets 11,000 - Lease Impairment 1,135,000 12,000 Net operating loss carry-forwards 4,668,000 3,354,000 State loss carry forward 338,000 Gross deferred tax assets 10,681,000 6,615,000 Valuation allowance (10,681,000) (6,606,000)Net deferred tax assets - 9,000 Deferred tax liabilities: Fixed assets - (9,000) $- $- Based on consideration of the available evidence including historical losses a valuation allowance has been recognized to offset deferred tax assets, asmanagement was unable to conclude that realization of deferred tax assets were more likely than not. As of December 31, 2016, the Company has federal net operating loss carryforwards of approximately $13,731,000 and state net operating loss carryforwardsof approximately $9,275,000 available to offset future taxable income which expire from 2023 to 2036. Section 382 of the Internal Revenue Code imposes a limitation on a corporation's ability to utilize net operating loss carryforwards (“NOLs”) if it experiencesan “ownership change.” In general, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of acorporation by more than 50 percentage points over a three-year period. The Company has performed a formal Section 382 study and determined anownership change has occurred. F-18  The Company files tax returns in the U.S. federal jurisdiction and various states. At December 31, 2016, federal tax returns remained open for InternalRevenue Service review for tax years after 2013, while state tax returns remain open for review by state taxing authorities for tax years after 2012. There wereno federal or state income tax audits being conducted as of December 31, 2016. 12. COMMITMENTS: Lease Commitments On August 1, 2013, FlexShopper entered into a 39 month lease of office space providing for monthly rent of approximately $6,800. This lease agreement wasamended in January 2014 to reflect a 63 month term for a larger suite in an adjoining building. Upon commencement, the monthly base rent for the first yearapproximated $9,600 with annual three percent increases throughout the lease term. On September 1, 2015, FlexShopper entered into a 48 month lease for additional office space in Fort Lauderdale, Florida to accommodate our call andcustomer service center. The monthly base rent including operating expenses is approximately $5,200 with annual three percent increases throughout thelease term. The rental expense for the years ended December 31, 2016 and 2015 was approximately $274,300 and $222,600, respectively. At December 31, 2016, thefuture minimum annual lease payments are approximately as follows: 2017 $190,200 2018 195,900 2019 122,400 $508,500 13. SUBSEQUENT EVENT: On January 27, 2017, FlexShopper, Inc. through a wholly-owned indirect subsidiary, entered into the fifth amendment (the Omnibus Amendment) to theCredit Agreement originally entered into on March 6, 2015 by and among the Borrower and WE 2014-1, LLC, an affiliate of Waterfall Asset Management,LLC, and certain other lenders thereunder from time to time. The Omnibus Amendment amended the Credit Agreement to, among other things, (1) extend theCommitment Termination Date (as defined in the Credit Agreement) from May 6, 2017 to April 1, 2018 (with a one-time right of extension by the lenders upto August 31, 2018), (2) require the Borrower to refinance the debt under the Credit Agreement upon a Permitted Change of Control (as defined in the CreditAgreement), subject to the payment of an early termination fee, and (3) modify certain permitted debt and financial covenants. These modified covenantsconsist of a reduction of Equity Book Value to not be less than the sum of $6 million and 20% of any additional equity capital invested into the Companyafter December 31, 2016; maintaining at least $1.5 million in Unrestricted cash; and to have the ratio of Consolidated Total Debt to Equity Book Value notexceed 4.75:1. F-19  Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. Item 9.A Controls and Procedures. As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our principalexecutive officer and principal financial officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of ourdisclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, our principal executive officer andprincipal financial officer have concluded that these disclosure controls and procedures were effective as of December 31, 2016 to provide reasonableassurance that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized, and reported,within the time periods specified in Securities and Exchange Commission rules and forms and that material information relating to the Company isaccumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate to allow timelydecisions regarding required disclosures. Report of Management on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) of theExchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance to the Company’s management and board ofdirectors regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the UnitedStates of America. Internal control over financial reporting includes those policies and procedures that: maintain records that in reasonable detail accuratelyand fairly reflect our transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary for preparation of ourconsolidated financial statements in accordance with generally accepted accounting principles; provide reasonable assurance that our receipts andexpenditures are made only in accordance with authorizations of management and directors of the Company; and provide reasonable assurance thatunauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detectedon a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that amisstatement of our consolidated financial statements would be prevented or detected. Therefore, even those systems determined to be effective can onlyprovide reasonable assurance with respect to financial statement preparation and presentation. Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control –Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, managementconcluded that the Company’s internal control over financial reporting was effective as of December 31, 2016. There were no changes in our internal controlover financial reporting during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internalcontrol over financial reporting. Our independent auditors have not audited and are not required to audit this assessment of our internal control over financialreporting for the fiscal year ended December 31, 2016. Item 9.B. Other Information. Reverse Stock Split Approved On March 17, 2016, our stockholders, acting by written consent, approved an amendment to our Certificate of Incorporation to effect a reverse stock split ofour common stock between a range of no less than one-for-5 and no more than one-for-10 with such ratio to be determined by the sole discretion of our Boardof Directors and with the reverse split to be effective at such time and date, if at all, as determined by the Board of Directors in its sole discretion. The consentapproving the amendment to our Certificate of Incorporation was approved by stockholders holding approximately 50.3% of our outstanding voting stock. 21  Amendment No. 4 to Credit Agreement and Waiver On March 29, 2016, the Company, through a wholly-owned subsidiary (the “Borrower”), entered into a fourth amendment and waiver (the “FourthAmendment”) to the Credit Agreement originally entered into on March 6, 2015 (the “Credit Agreement”) by and among the Borrower and WE 2014-1, LLC,an affiliate of Waterfall Asset Management, LLC, and certain other lenders thereunder from time to time. The Fourth Amendment amends the CreditAgreement to, among other things, increase the amount of the Borrowing Base (as defined in the Credit Agreement) until the earlier of (i) April 1, 2017 and(ii) the successful raising by the Company of at least $10,000,000 in equity funding (the “Equity Raise”). The Fourth Amendment also includes a waiver of (i) breaches resulting from the Borrower’s non-compliance with certain financial covenants under the CreditAgreement that occurred prior to the effectiveness of the Fourth Amendment and (ii) compliance with certain financial covenants under the Credit Agreementfor the period from the date of the Fourth Amendment through the earlier of April 1, 2017 or the completion of the Equity Raise. Additionally, the Fourth Amendment (i) reduces the amount of unrestricted cash that the Borrower must maintain from $1,500,000 to $500,000 at any timeand $1,000,000 as of the end of each calendar month, (ii) increases the rate of default interest from 2% to 4% per annum and (iii) extends the outside datewithin which the lenders are committed to make loans to the Borrower under the Credit Agreement from March 6, 2017 to May 6, 2017 with the lendershaving a unilateral right to extend further to October 6, 2017 by giving written notice to the Company of the lenders’ election to extend no later than January6, 2017. Finally, in consideration of the Fourth Amendment, the Company will pay to the administrative agent a bridge fee of $20,000 per week until (i) the accruedamount of such bridge fee equals $400,000 or (ii) the completion of the Equity Raise, whichever even occurs sooner, provided that such bridge fee shallamount to at least $250,000. A copy of the Fourth Amendment is filed with this report as Exhibit 10.19 and is hereby incorporated by reference herein. The foregoing description of theFourth Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of such document. 22  PART III Item 10. Directors, Executive Officers and Corporate Governance The information required under this item is incorporated by reference to the following sections of our proxy statement for our 2017 Annual Meeting ofStockholders: “Information Concerning Directors and Nominees for Director,” “Information Concerning Executive Officers,” “Section 16(a) BeneficialOwnership Reporting Compliance,” “Corporate Governance Principles and Board Matters,” and “The Board of Directors and Its Committees.” Item 11. Executive Compensation. The information required under this item is incorporated by reference to the following sections of our proxy statement for our 2017 Annual Meeting ofStockholders: “Compensation and Other Information Concerning Directors and Officers,” “The Board of Directors and Its Committees,” and “Report of TheCompensation Committee.” Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required under this item is incorporated by reference to the following sections of our proxy statement for our 2017 Annual Meeting ofStockholders: “Equity Compensation Plan Information” and “Securities Ownership of Certain Beneficial Owners and Management.” Item 13. Certain Relationships and Related Transactions and Director Independence. The information required under this item is incorporated by reference to the following sections of our proxy statement for our 2017 Annual Meeting ofStockholders: “Certain Relationships and Related Transactions” and “Corporate Governance Principles and Board Matters.” Item 14. Principal Accounting Fees and Services. The information required under this item is incorporated by reference to the following sections of our proxy statement for our 2017 Annual Meeting ofStockholders: “Independent Registered Public Accounting Firm” and “Pre-Approval Policies and Procedures.” 23  PART IV Item 15. Exhibits, Financial Statement Schedules (a) The following documents are filed as part of this Form 10-K: (1) Financial Statements (see “Consolidated Financial Statements and Supplementary Data” at Item 8 and incorporated herein by reference).(2) Financial Statement Schedules (Schedules to the Financial Statements have been omitted because the information required to be set forththerein is not applicable or is shown in the accompanying Financial Statements or notes thereto).(3) Exhibits (The exhibits required to be filed as a part of this Report are listed in the Exhibit Index). Item 16. Form 10-K Summary Note applicable 24  SIGNATURES Pursuant to the requirements Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this Report to be signed on its behalf bythe undersigned, thereunto duly authorized. FLEXSHOPPER, INC. Dated: March 31, 2017By:/s/ Brad Bernstein Brad BernsteinPresident and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrantand in the capacities and on the dates indicated: Signatures Title Date /s/ Brad Bernstein President, Chief Executive March 31, 2017Brad Bernstein Officer (Principal Executive Officer) and Chairman of the Board /s/ James D. Allen Director March 31, 2017James D. Allen /s/ Daniel Ballen Director March 31, 2017Daniel Ballen /s/ T. Scott King Director March 31, 2017T. Scott King /s/ Carl Pradelli Director March 31, 2017Carl Pradelli /s/ Katherine Verner Director March 31, 2017Katherine Verner /s/ Philip M. Gitler Director March 31, 2017Philip M. Gitler /s/ Russ Heiser Chief Financial Officer March 31, 2017Russ Heiser (Principal Financial Officer and Principal Accounting Officer) 25  Exhibit Index to Annual Report on Form 10-K ExhibitNumber Description3.1 Restated Certificate of Incorporation of FlexShopper, Inc. (previously filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-Kfiled on March 30, 2016 and incorporated herein by reference)3.2 Designation of Rights Preferences of Series 1 Convertible Preferred Stock (previously filed as Exhibit 3.4 to the Company’s General Form ofRegistration on Form 10-SB filed on April 30, 2007 and incorporated herein by reference)3.3 Amended and Restated Bylaws (previously filed as Exhibit 3.3 to the Company’s Annual Report on Form 10-K filed on March 30, 2016 andincorporated herein by reference)4.1 Common Stock Purchase Warrant, dated October 9, 2014, issued by FlexShopper, Inc. to Fordham Financial Management, Inc. (previouslyfiled as Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 333-201644) and incorporated herein by reference)4.2 Common Stock Purchase Warrant, dated October 9, 2014, issued by FlexShopper, Inc. to Paulson Investment Company, Inc. (previously filedas Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (File No. 333-201644) and incorporated herein by reference)4.3 Common Stock Purchase Warrant, dated October 9, 2014, issued by FlexShopper, Inc. to Spartan Capital Securities, LLC (previously filed asExhibit 4.3 to the Company’s Registration Statement on Form S-1 (File No. 333-201644) and incorporated herein by reference)10.01 Asset Purchase and Sale Agreement, dated April 30, 2014, by and between Anchor Funding Services, LLC and Transportation Alliance BankInc. (previously filed as Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 andincorporated herein by reference)10.02 Agreement of Lease between the Oakland Commerce Center, LLC and FlexShopper, LLC (previously filed as Exhibit 10.02 to the Company’sAnnual Report on Form 10-K filed on March 30, 2016 and incorporated herein by reference)10.03 First Amendment to Lease Agreement, dated January 2014, by and between Fountain Square Acquisition Company LLC and FlexShopper,LLC (previously filed as Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 andincorporated herein by reference)10.04+ Executive Employment Agreement, dated January 31, 2007, by and between BTHC XI, Inc. and Brad Bernstein (previously filed as Exhibit10.3 to the Company’s General Form of Registration om Form 10-SB filed on April 30, 2007and incorporated herein by reference)10.05 Credit Agreement, dated as of March 6, 2015, among FlexShopper 2, LLC, Wells Fargo Bank, N.A., various Lenders from time to time partythereto and WE 2014-1, LLC (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 12, 2015 andincorporated herein by reference)10.06 Investor Rights Agreement, dated as of March 6, 2015, by and among FlexShopper, Inc., the Management Stockholders and affiliates ofWaterfall (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 12, 2015 and incorporated herein byreference)10.07 Form of Investor Rights Agreement, dated as of March 6, 2015, by and among FlexShopper, Inc. and the Investors party thereto (previouslyfiled as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 12, 2015 and incorporated herein by reference)10.08+ Executive Employment Agreement, dated August 11, 2015, by and between FlexShopper, Inc. and Marc Malaga (previously filed as Exhibit10.13 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2015 and incorporated herein by reference)10.09 Amendment No. 1 to the Credit Agreement, dated November 6, 2015, among FlexShopper 2, LLC and WE 2014-1, LLC (previously filed asExhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 12, 2015 and incorporated herein by reference)10.10 Amendment No. 2 to the Credit Agreement, dated November 6, 2015, among FlexShopper 2, LLC and WE 2014-1, LLC (previously filed asExhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 12, 2015 and incorporated herein by reference)10.11+ Executive Employment Agreement, dated December 1, 2015, by and between FlexShopper, Inc. and Russ Heiser (previously filed as Exhibit10.1 to the Company’s Current Report on Form 8-K filed on December 7, 2015 and incorporated herein by reference)10.12 Amendment No. 3 to the Credit Agreement, Consent and Temporary Waiver, dated February 11, 2016, among FlexShopper 2, LLC and WE-2014-1, LLC (previously filed as Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed on March 30, 2016 and incorporatedherein by reference)10.13 Promissory Note, dated February 11, 2016, issued by FlexShopper, LLC to Marc Malaga (previously filed as Exhibit 10.13 to the Company’sAnnual Report on Form 10-K filed on March 30, 2016 and incorporated herein by reference)10.14+ 2007 Omnibus Equity Compensation Plan (previously filed as Exhibit 99.1 to the Company’s General Form of Registration on Form 10-SBfiled on April 30, 2007 and incorporated herein by reference)10.15+ Form of Non-Qualified Stock Option Grant issuable under 2007 Omnibus Equity Compensation Plan (previously filed as Exhibit 99.2 to theCompany’s General Form of Registration on Form 10-SB filed on April 30, 2007 and incorporated herein by reference) 26  ExhibitNumber Description10.16+ First Amendment to 2007 Omnibus Equity Compensation Plan (previously filed as Exhibit 99.3 to the Company’s Annual Report on Form10-K for the year ended December 31, 2011 and incorporated herein by reference)10.17+ 2015 Omnibus Equity Compensation Plan (previously filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed onSeptember 21, 2015 and incorporated herein by reference)10.18+ Form of Stock Option Agreement issuable under 2015 Omnibus Equity Compensation Plan (previously filed as Exhibit 10.18 to theCompany’s Annual Report on Form 10-K filed on March 30, 2016 and incorporated herein by reference)10.19 Amendment No. 4 to the Credit Agreement and Waiver dated March 29, 2016, among FlexShopper 2, LLC and WE-2014-1, LLC (previouslyfiled as Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed on March 30, 2016 and incorporated herein by reference)10.20 Omnibus Amendment dated January 27, 2017, among FlexShopper 2, LLC, FlexShopper, LLC and WE 2014-1, LLC (previously filed asExhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 31, 2017 and incorporated herein by reference)14.1 Code of Ethics for Senior Financial Officers (previously filed as Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the yearended December 31, 2014 and incorporated herein by reference)21.0 Subsidiaries of Registrant*23.1 Consent of EisnerAmper LLP *31.1 Rule 13a-14(a) Certification – Principal Executive Officer *31.2 Rule 13a-14(a) Certification – Principal Financial Officer *32.1 Section 1350 Certification – Principal Executive Officer *32.2 Section 1350 Certification – Principal Financial Officer *101.INS XBRL Instance Document,XBRL Taxonomy Extension Schema *101.SCH Document, XBRL Taxonomy Extension *101.CAL Calculation Linkbase, XBRL Taxonomy Extension Definition *101.DEF Linkbase,XBRL Taxonomy Extension Labels *101.LAB Linkbase, XBRL Taxonomy Extension *101.PRE Presentation Linkbase * + Indicates a management contract or any compensatory plan contract or arrangement.* Filed herewith. 27Exhibit 21.0 Subsidiaries of Registrant FlexShopper, LLC is a limited liability company formed under the laws of the State of Delaware in June 2013.Anchor Funding Services, LLC is a limited liability company formed originally in South Carolina in January 2003 and later reincorporated in North Carolinain August 2005. The operations of Anchor are shown as discontinued operations.FlexShopper 1, LLC and FlexShopper 2, LLC are wholly-owned subsidiaries formed under the laws of the State of Delaware in the first quarter of 2015. Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Registration Statements of FlexShopper Inc. on Form S-8 (No. 333-203509 and 333-210487) of our reportdated March 31, 2017, on our audits of the consolidated financial statements as of December 31, 2016 and 2015, and for each of the years then ended, whichreport is included in this Annual Report on Form 10-K. /s/ EISNERAMPER LLP New York, New YorkMarch 31, 2017Exhibit 31.1CERTIFICATION PURSUANT TORULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDI, Brad Bernstein, certify that:1. I have reviewed this annual report on Form 10-K of FlexShopper, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourthfiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors:a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 31, 2017/s/Brad Bernstein Brad Bernstein Principal Executive Officer Exhibit 31.2 CERTIFICATION PURSUANT TORULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDEDI, Russ Heiser, certify that:1.I have reviewed this annual report on Form 10-K of FlexShopper, Inc.;2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourthfiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors:a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 31, 2017/s/Russ Heiser Russ Heiser Principal Financial Officer Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350In connection with the Annual Report of FlexShopper Inc. (the “registrant”) on Form 10-K for the year ended December 31, 2016 as filed with the Securitiesand Exchange Commission on the date hereof (the “report”), I, Brad Bernstein, Chief Executive Officer of the registrant, certify, pursuant to 18 U.S.C. § 1350,as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:(1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.March 31, 2017/s/Brad Bernstein Brad Bernstein Principal Executive Officer Exhibit 32.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350In connection with the Annual Report of FlexShopper Inc. (the “registrant”) on Form 10-K for the year ended December 31, 2016 as filed with the Securitiesand Exchange Commission on the date hereof (the “report”), I, Russ Heiser, Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. § 1350, asadopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:(1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.March 31, 2017/s/Russ Heiser Russ Heiser Principal Financial Officer 

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