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Accounting Policies, by Policy (Policies) | 6 Months Ended
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Jun. 30, 2022
Accounting Policies [Abstract] |
Principles of Consolidation | Principles of Consolidation - The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of intercompany balances and transactions.
Estimates | Estimates - The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Restricted Cash | Restricted Cash – The Company classifies all cash whose use is limited by contractual provisions as restricted cash. Restricted cash as of June 30, 2022 and December 31, 2021 consists primarily of cash required by our third-party banking partner to cover obligations related to loan participation. The reconciliation of cash and restricted cash is as follows:
|  | June 30, 2022 |  |  | December 31, 2021 |
Cash |  | $ | 4,988,308 |  |  | $ | 4,986,559 |
Restricted cash |  |  | 461,649 |  |  |  | 108,083 |
Total cash and restricted cash |  | $ | 5,449,957 |  |  | $ | 5,094,642 |
Revenue Recognition | Revenue Recognition - Merchandise is leased to customers pursuant to lease purchase agreements which provide for weekly lease terms with non-refundable lease payments. Generally, the customer has the right to acquire title either through a 90-day same as cash option, an early purchase option, or through completion of all required lease payments, generally 52 weeks. On any current lease, customers have the option to cancel the agreement in accordance with lease terms and return the merchandise. Customer agreements are accounted for as operating leases with lease revenues recognized in the month they are due on the accrual basis of accounting. Merchandise sales revenue is recognized when the customer exercises the purchase option and pays the purchase price. Revenue for lease payments received prior to their due date is deferred and is recognized as revenue in the period to which the payments relate. Revenues from leases and sales are reported net of sales taxes.
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts - FlexShopper seeks to collect amounts owed under its leases from each customer on a weekly or biweekly basis by charging their bank accounts or credit cards. Accounts receivable are principally comprised of lease payments currently owed to FlexShopper which are past due, as FlexShopper has been unable to successfully collect in the aforementioned manner and therefore the Company has an in-house and near-shore team to collect on the past due amounts. FlexShopper maintains an allowance for doubtful accounts, under which FlexShopper’s policy is to record an allowance for estimated uncollectible charges, primarily based on historical collection experience that considers both the aging of the lease and the origination channel. Other qualitative factors are considered in estimating the allowance, such as seasonality, underwriting changes and other business trends. We believe our allowance is adequate to absorb all expected losses. The accounts receivable balances consisted of the following as of June 30, 2022 and December 31, 2021:
|  | June 30, 2022 |  |  | December 31, 2021 |
Accounts receivable |  | $ | 47,515,013 |  |  | $ | 54,042,161 |
Allowance for doubtful accounts |  |  | (14,464,173 | ) |  |  | (27,703,278 | )
Accounts receivable, net |  | $ | 33,050,840 |  |  | $ | 26,338,883 |
The allowance is a significant percentage of the balance because FlexShopper does not charge off any customer account until it has exhausted all collection efforts with respect to each account, including attempts to repossess items. As the lease ages, the greater the allowance attributable to that account to reflect the decreased likelihood of successful collection efforts. Accounts receivable balances charged off against the allowance were $23,719,531 and $40,803,098 for the three and six months ended June 30, 2022, respectively, and $1,980,196 and $9,016,360 for the three and six months ended June 30, 2021, respectively.
|  | Six Months Ended June 30, 2022 |  |  | Year Ended December 31, 2021 |
Beginning balance |  | $ | 27,703,278 |  |  | $ | 22,138,541 |
Provision |  |  | 27,563,993 |  |  |  | 40,342,618 |
Accounts written off |  |  | (40,803,098 | ) |  |  | (34,777,881 | )
Ending balance |  | $ | 14,464,173 |  |  | $ | 27,703,278 |
Lease Merchandise, net | Lease Merchandise, net - Until all payment obligations for ownership are satisfied under the lease agreement, the Company maintains ownership of the lease merchandise. Lease merchandise consists primarily of residential furniture, consumer electronics, computers, appliances and household accessories and is recorded at cost net of accumulated depreciation. The Company depreciates leased merchandise using the straight-line method over the applicable agreement period for a consumer to acquire ownership, generally twelve months with no salvage value. Upon transfer of ownership of merchandise to customers resulting from satisfaction of their lease obligations, the related cost and accumulated depreciation are eliminated from lease merchandise. For lease merchandise returned or anticipated to be returned either voluntarily or through repossession, the Company provides an impairment reserve for the undepreciated balance of the merchandise net of any estimated salvage value with a corresponding charge to cost of lease revenue. The cost, accumulated depreciation and impairment reserve related to such merchandise are written off upon determination that no salvage value is obtainable. The net leased merchandise balances consisted of the following as of June 30, 2022 and December 31, 2021:
|  | June 30, 2022 |  |  | December 31, 2021 |
Lease merchandise at cost |  | $ | 69,525,102 |  |  | $ | 72,159,063 |
Accumulated depreciation |  |  | (30,307,129 | ) |  |  | (29,505,431 | )
Impairment reserve |  |  | (3,080,978 | ) |  |  | (1,711,520 | )
Lease merchandise, net |  | $ | 36,136,995 |  |  | $ | 40,942,112 |
Cost of lease revenue and merchandise sold represents the depreciation and impairment of lease merchandise and the undepreciated cost of rental merchandise at the time of sale.
Loans receivable at fair value | Loans receivable at fair value – The Company elected the fair value option on its entire loans receivable portfolio purchased from its bank partner. As such, loans receivable is carried at fair value in the condensed consolidated balance sheets with changes in fair value recorded in the condensed consolidated statements of operations. Accrued and unpaid interest and fees are included in loans receivable at fair value in the condensed consolidated balance sheets. Management believes the reporting of these receivables at fair value more closely approximates the true economics of the loans receivables. Interest and fees are discontinued when loans receivable become contractually 120 or more days past due. The Company charges-off loans at the earlier of when the loans are determined to be uncollectible or when the loans are 120 days contractually past due. Recoveries on loans receivables that were previously charge off are recognized when cash is received. Changes in the fair value of loans receivable include the impact of current period charge offs associated with these receivables. The Company estimates the fair value of the loans receivable using a discounted cash flow analysis at an individual loan level to more accurately predict future payments. The Company adjusts expected cash flows for estimated losses and servicing costs over the estimated duration of the underlying assets. These adjustments are determined using historical data and include appropriate consideration of recent trends and anticipated future performance. Future cash flows are discounted using a rate of return that the Company believes a market participant would require. Model results may be adjusted by management if the Company does not believe the output reflects the fair value of the instrument, as defined under U.S. GAAP. The models are updated at each measurement date to capture any changes in internal factors such as nature, term, volume, payment trends, remaining time to maturity, and portfolio mix, as well as changes in underwriting or observed trends expected to impact future performance. Further details concerning loans receivable at fair value are presented within “Fair Value Measurement” section in this Note. A third-party bank partner originates our credit product and initially provides all of the funding for the loans. The third-party retains a portion of the balance of all loans originated and sells the remaining portion for the Company to participate in. The Company services the loans and remits the corresponding portion to the third party. Loan revenues and fees is representative of the Company’s portion of participation in the loans. Net changes in the fair value of loans receivables at fair value, which is included in the consolidated statement of operation in the line “loan revenues and fees, net of changes in fair value” was a gain of $2,981,275 and gain of $2,457,851 for the three and six months ended June 30, 2022, respectively, and a loss of $41,583 and a loss of $58,575 for the three and six month ended June 30, 2021, respectively.
Lease accounting | Lease accounting The Company accounts for leases in accordance with Accounting Standards Codification (ASC) Topic 842 Leases (Topic 842). Under Topic 842, lessees are required to recognize leases at the commencement date as a lease liability, 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 asset that represents the lessee’s right to use or control the use of a specified asset for the lease term. Under the same Topic, lessors are also required to classify leases. All customer agreements are considered operating leases, and the Company currently does not have any sales-type or direct financing leases as a lessor. An operating lease results in the recognition of lease income on a straight-line basis, while the underlying leased asset remains on the lessor’s balance sheet and continues to depreciate. The breakout of lease revenues and fees, net of lessor bad debt expense, that ties to the condensed consolidated statements of operations is shown below:
|  | Three Months ended June 30, |  |  | Six Months ended June 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Lease billings and accruals |  | $ | 39,596,845 |  |  | $ | 40,607,513 |  |  | $ | 79,194,274 |  |  | $ | 82,192,193 |
Provision for doubtful accounts |  |  | (15,732,876 | ) |  |  | (9,945,043 | ) |  |  | (27,563,993 | ) |  |  | (18,778,392 | )
Gain on sale of lease receivables |  |  | 6,604,507 |  |  |  | - |  |  |  | 6,604,507 |  |  |  | - |
Lease revenues and fees |  | $ | 30,468,476 |  |  | $ | 30,662,470 |  |  | $ | 58,234,788 |  |  | $ | 63,413,801 |
Deferred Debt Issuance Costs | Deferred Debt Issuance Costs - Debt issuance costs incurred in conjunction with the Credit Agreement entered into on March 6, 2015 and subsequent amendments are offset against the outstanding balance of the loan payable and are amortized using the straight-line method over the remaining term of the related debt, which approximates the effective interest method. Amortization, which is included in interest expense, was $56,283 and $105,612 for the three and six months ended June 30, 2022, respectively, and $41,603 and $130,124 for the three and six months ended June 30, 2021, respectively. Debt issuance costs incurred in conjunction with the subordinated Promissory Notes are offset against the outstanding balance of the loan payable and are amortized using the straight-line method over the remaining term of the related debt, which approximates the effective interest method. Amortization, which is included in interest expense, was $0 and $1,274 for three and six months ended June 30, 2022, respectively, and $1,273 and $4,456 for the three and six months ended June 30, 2021, respectively.
Intangible Assets | Intangible Assets - Intangible assets consist of a patent on the Company’s LTO payment method at check-out for third party e-commerce sites. The patent is stated at cost less accumulated amortization. Patent costs are amortized by using the straight-line method over the legal life, or if shorter, the useful life of the patent, which has been estimated to be 10 years. Intangible assets amortization expense was $769 and $1,538 for the three and six months ended June 30, 2022 and June 30, 2021, respectively.
Software Costs | Software Costs - Costs related to developing or obtaining internal-use software incurred during the preliminary project and post-implementation stages of an internal use software project are expensed as incurred and certain costs incurred in the project’s application development stage are capitalized as property and equipment. The Company expenses costs related to the planning and operating stages of a website. Costs associated with minor enhancements and maintenance for the website are included in expenses as incurred. Direct costs incurred in the website’s development stage are capitalized as property and equipment. Capitalized software costs amounted to $1,285,088 and $2,270,082 for the three and six months ended June 30, 2022, respectively, and $526,723 and $1,115,715 for the three and six months ended June 30, 2021, respectively. Capitalized software amortization expense was $683,161 and $1,304,855 for the three and six months ended June 30, 2022, respectively, and $583,437 and $1,154,004 for the three and six months ended June 30, 2021, respectively.
Data Costs | Data Costs - The Company buys data from different vendors upon receipt of an application. The data costs directly used to make underwriting decisions are expensed as incurred. Certain data costs that are probable to provide future economic benefit to the Company are capitalized as property and equipment and amortized on a straight-line basis over their estimate useful lives. The probability to provide future economic benefit of the data cost assets is estimated based upon future usage of the information in different areas and products of the Company. At the beginning of the third quarter of 2021, the Company made several changes including the implementation of a more disciplined process around data procurement and storage. Those improvements triggered a change in the estimate of the probability to provide future economic benefit of some data cost. Capitalized data costs amounted to $469,650 and $762,704 for the three and six months ended June 30, 2022, respectively, and $0 for the three and six months ended June 30, 2021. Capitalized data costs amortization expense was $120,938 and $209,659 for the three and six months ended June 30, 2022, respectively, and $0 for the three and six months ended June 30, 2021.
Operating Expenses | Operating Expenses - Operating expenses include corporate overhead expenses such as salaries, stock-based compensation, insurance, occupancy, and other administrative expenses.
Marketing Costs | Marketing Costs - Marketing costs, primarily consisting of advertising, are charged to expense as incurred. Direct acquisition costs, primarily consisting of commissions earned based on lease originations, are capitalized and amortized over the life of the lease.
Per Share Data | 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 participates in dividends with the common stock and accordingly has participation rights in undistributed earnings as if all such earnings had been distributed during the period (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 net income. Loss attributable to common shareholders is computed by increasing net loss by such dividends. Where the Company has a net loss, as the participating Series 1 Convertible Preferred Stock has no contractual obligation to share in the losses of the Company, there is no loss allocation between common stock and Series 1 Convertible Preferred Stock. Basic earnings per common share is computed by dividing net income/ (loss) available to common shareholders reduced by any dividends paid or declared on common and participating Series 1 Convertible Preferred Stock by the total of the weighted average number of common shares outstanding during the period. Diluted earnings per share is based on the more dilutive of the if-converted method (which assumes conversion of the participating Series 1 Convertible Preferred Stock as of the beginning of the period) or the two-class method (which assumes that the participating Series 1 Convertible Preferred Stock is not converted) plus the potential impact of dilutive non-participating Series 2 Convertible Preferred Stock, options, performance share units and warrants. The dilutive effect of Series 2 Convertible Preferred Stock is computed using the if-converted method. The dilutive effect of options, performance share units and warrants are computed using the treasury stock method, which assumes the repurchase of common shares at the average market price during the period. Under the treasury stock method, options, performance share units and warrants will have a dilutive effect when the average price of common stock during the period exceeds the exercise price of options, performance share units or warrants. When there is a loss from continuing operations, potential common shares are not included in the computation of diluted loss per share since they have an anti-dilutive effect. The following table reflects the number of common shares issuable upon conversion or exercise.
|  | June 30, |
|  | 2022 |  |  | 2021 |
Series 1 Convertible Preferred Stock |  |  | 225,231 |  |  |  | 225,231 |
Series 2 Convertible Preferred Stock |  |  | 5,845,695 |  |  |  | 5,845,695 |
Series 2 Convertible Preferred Stock issuable upon exercise of warrants |  |  | 116,903 |  |  |  | 116,903 |
Common Stock Options |  |  | 3,936,083 |  |  |  | 3,117,310 |
Common Stock Warrants |  |  | 2,255,184 |  |  |  | 2,352,488 |
Performance Share Units |  |  | 790,327 |  |  |  | - |
|  |  | 13,169,423 |  |  |  | 11,657,627 |
The following table sets forth the computation of basic and diluted earnings per common share for the six months ended June 30, 2022 and 2021:
|  | Six Months ended |
|  | June 30, |
|  | 2022 |  |  | 2021 |
Numerator |  |  |  |  |  |
Net income |  | $ | 12,008,286 |  |  | $ | 943,431 |
Series 2 Convertible Preferred Stock dividends |  |  | (1,219,554 | ) |  |  | (1,219,545 | )
Net income/(loss) attributable to common and Series 1 Convertible Preferred Stock |  |  | 10,788,732 |  |  |  | (276,114 | )
Net income attributable to Series 1 Convertible Preferred Stock |  |  | (124,057 | ) |  |  | - |
Series 2 Convertible Preferred Stock dividends attributable to Series 1 Convertible Preferred Stock |  |  | 12,599 |  |  |  | - |
Net income/(loss) attributable to common shares- Numerator for basic EPS |  |  | 10,677,274 |  |  | $ | (276,114 | )
Effect of dilutive securities: |  |  |  |  |  |  |  |
Series 2 Convertible Preferred Stock dividends |  |  | 1,219,554 |  |  |  | - |
Net income/(loss) attributable to common shares after assumed conversions- Numerator for diluted EPS |  |  | 11,896,828 |  |  |  | (276,114 | )
Denominator |  |  |  |  |  |  |  |
Weighted average of common shares outstanding- Denominator for basic EPS |  |  | 21,576,312 |  |  |  | 21,375,096 |
Effect of dilutive securities: |  |  |  |  |  |  |  |
Series 2 Convertible Preferred Stock |  |  | 5,845,695 |  |  |  | - |
Series 1 Convertible Preferred Stock |  |  | 225,231 |  |  |  | - |
Common stock options and performance share units |  |  | 355,753 |  |  |  | - |
Common stock warrants |  |  | 190,277 |  |  |  | - |
Adjusted weighted average of common shares outstanding and assumed conversions- Denominator diluted EPS |  |  | 28,193,268 |  |  |  | 21,375,096 |
Basic EPS |  | $ | 0.49 |  |  | $ | (0.01 | )
Diluted EPS |  | $ | 0.42 |  |  | $ | (0.01 | )
The following table sets forth the computation of basic and diluted earnings per common share for the three months ended June 30, 2022 and 2021:
|  | Three Months ended |
|  | June 30, |
|  | 2022 |  |  | 2021 |
Numerator |  |  |  |  |  |
Net income |  | $ | 14,389,221 |  |  | $ | 942,194 |
Series 2 Convertible Preferred Stock dividends |  |  | (609,777 | ) |  |  | (609,773 | )
Net income attributable to common and Series 1 Convertible Preferred Stock |  |  | 13,779,444 |  |  |  | 332,421 |
Net income attributable to Series 1 Convertible Preferred Stock |  |  | (148,457 | ) |  |  | (9,822 | )
Series 2 Convertible Preferred Stock dividends attributable to Series 1 Convertible Preferred Stock |  |  | 6,291 |  |  |  | 6,357 |
Net income attributable to common shares- Numerator for basic EPS |  |  | 13,637,278 |  |  |  | 328,956 |
Effect of dilutive securities: |  |  |  |  |  |  |  |
Series 2 Convertible Preferred Stock dividends |  |  | 609,777 |  |  |  | - |
Net income attributable to common shares after assumed conversions - Numerator for diluted EPS |  | $ | 14,247,055 |  |  | $ | 328,956 |
Denominator |  |  |  |  |  |  |  |
Weighted average of common shares outstanding- Denominator for basic EPS |  |  | 21,605,234 |  |  |  | 21,605,461 |
Effect of dilutive securities |  |  |  |  |  |  |  |
Series 2 Convertible Preferred Stock |  |  | 5,845,695 |  |  |  | - |
Series 1 Convertible Preferred Stock |  |  | 225,231 |  |  |  | - |
Common stock options and performance share units |  |  | 222,664 |  |  |  | 1,156,512 |
Common stock warrants |  |  | - |  |  |  | 841,504 |
Adjusted weighted average of common shares outstanding and assumed conversions- Denominator for diluted EPS |  |  | 27,898,824 |  |  |  | 23,603,477 |
Basic EPS |  | $ | 0.63 |  |  | $ | 0.02 |
Diluted EPS |  | $ | 0.51 |  |  | $ | 0.01 |
Stock-Based Compensation | Stock-Based Compensation - The fair value of transactions in which the Company exchanges its equity instruments for employee and non-employee services (share-based payment transactions) is recognized as a compensation expense in the financial statements as services are performed. Compensation expense for stock options is determined by reference to the fair value of an award on the date of grant and is recognized on a straight-line basis over the vesting period. The Company has elected to use the Black-Scholes-Merton (BSM) pricing model to determine the fair value of all stock option awards. Compensation expense for performance share units is recognized on an accelerated basis over the vesting period based on the Company’s projected assessment of the level of performance that will be achieved and earned. The fair value of performance share units is based on the fair market value of the Company’s common stock on the date of grant (see Note 9).
Fair Value of Financial Instruments | Fair Value of Financial Instruments - The carrying value of certain financial instruments such as cash, accounts receivable, and accounts payable approximate their fair value due to their short-term nature. The carrying value of loans payable under the Credit Agreement and the carrying value of promissory notes to related parties approximates fair value based upon their interest rates, which approximate current market interest rates. The Company utilizes the fair value option on its entire loans receivable portfolio purchased from its bank partner.
Fair Value Measurements | Fair Value Measurements- The Company uses a hierarchical framework that prioritizes and ranks the market observability of inputs used in its fair value measurements. Market price observability is affected by a number of factors, including the type of asset or liability and the characteristics specific to the asset or liability being measured. Assets and liabilities with readily available, active, quoted market prices or for which fair value can be measured from actively quoted prices generally are deemed to have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The Company classifies the inputs used to measure fair value into one of three levels as follows:
● | Level 1: Quoted prices in active markets for identical assets or liabilities.
● | Level 2: Inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable.
● | Level 3: Unobservable inputs for the asset or liability measured.
Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. The Company’s financial instruments that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 is as follows:
|  |  | Fair Value Measurement Using |  |  |  |
Financial instruments – As of June 30, 2022 (1) |  |  | Level 1 |  |  |  | Level 2 |  |  |  | Level 3 |  |  | Carrying Amount |
Loans receivable at fair value |  | $ | - |  |  | $ | - |  |  | $ | 22,534,033 |  | $ | 16,487,838 |
|  |  | Fair Value Measurement Using |  |  |  |
Financial instruments – As of December 31, 2021 (1) |  |  | Level 1 |  |  |  | Level 2 |  |  |  | Level 3 |  |  | Carrying Amount |
Loans receivable at fair value |  | $ | - |  |  | $ | - |  |  | $ | 3,560,108 |  | $ | 3,151,184 |
(1) | For cash, accounts receivable, and accounts payable the carrying amount is a reasonable estimate of fair value due to their short-term nature. The carrying value of loans payable under the Credit Agreement and the carrying value of promissory notes to related parties approximates fair value based upon their interest rates, which approximate current market interest rates.
The Company primarily estimates the fair value of its loans receivables portfolio using discounted cash flow models that have been internally developed. The models use inputs, such as estimated losses, servicing costs and discount rates, that are unobservable but reflect the Company’s best estimates of the assumptions a market participant would use to calculate fair value. Certain unobservable inputs may, in isolation, have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. An increase to the net loss rate, servicing cost, or discount rate would decrease the fair value of the Company’s loans receivables. When multiple inputs are used within the valuation techniques for loans receivables, a change in one input in a certain direction may be offset by an opposite change from another input. The following describes the primary inputs to the discounted cash flow models that require significant judgement:
● | Estimated losses are estimates of the principal payments that will not be repaid over the life of the loans, net of the expected principal recoveries on charged-off receivables. FlexShopper systems monitor collections and portfolio performance data that are used to continually refine the analytical models and statistical measures used in making marketing and underwriting decisions. Leveraging the data at the core of the business, the Company utilizes the models to estimate lifetime credit losses for loans receivables. Inputs to the models include expected cash flows, historical and current performance, and behavioral information. Management may also incorporate discretionary adjustments based on the Company’s expectations of future credit performance.
● | Servicing costs – Servicing costs applied to the expected cash flows of the portfolio reflect the Company’s estimate of the amount investors would incur to service the underlying assets for the remainder of their lives. Servicing costs are derived from the Company internal analysis of our cost structure considering the characteristics of the receivables and have been benchmarked against observable information on comparable assets in the marketplace.
● | Discount rates – the discount rates utilized in the cash flow analyses reflect the Company’s estimates of the rates of return that investors would require when investing in financial instruments with similar risk and return characteristics.
For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents a reconciliation of the beginning and ending balances for the years ended June 30, 2022 and December 31, 2021:
|  | Six months Ended June 30, 2022 |  |  | Year Ended December 31, 2021 |
Beginning balance |  | $ | 3,560,108 |  |  | $ | 89,445 |
Purchases of loan participation |  |  | 15,211,553 |  |  |  | 3,309,732 |
Obligation of loan participation |  |  | 2,068,413 |  |  |  | 163,307 |
Interest and fees(1) |  |  | 4,810,748 |  |  |  | 672,272 |
Collections |  |  | (5,574,640 | ) |  |  | (907,169 | )
Net charge off (1) |  |  | (1,522,903 | ) |  |  | (146,923 | )
Net change in fair value(1) |  |  | 3,980,754 |  |  |  | 379,444 |
Ending balance |  | $ | 22,534,033 |  |  | $ | 3,560,108 |
(1) | Included in loan revenues and fees, net of changes in fair value in the condensed consolidated statements of operations
For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents quantitative information about the inputs used in the fair value measurement as of June 30, 2022 and December 31, 2021:
|  | June 30, 2022 |  |  | December 31, 2021 |
|  | Minimum |  |  | Maximum |  |  | Weighted Average (2) |  |  | Minimum |  |  | Maximum |  |  | Weighted Average |
Estimated losses (1) |  |  | 8.8 | % |  |  | 35.1 | % |  |  | 15.6 | % |  |  | 26.0 | % |  |  | 35.0 | % |  |  | 34.6 | %
Servicing costs |  |  | - |  |  |  | - |  |  |  | 4.0 | % |  |  | - |  |  |  | - |  |  |  | 4.6 | %
Discount rate |  |  | - |  |  |  | - |  |  |  | 19.2 | % |  |  | - |  |  |  | - |  |  |  | 11.1 | %
(1) | Figure disclosed as a percentage of outstanding principal balance.
(2) | Unobservable inputs were weighted by outstanding principal balance, which are grouped by origination channel.
Other relevant data as of June 30, 2022 and December 31, 2021 concerning loans receivables at fair value are as follows:
|  | June 30, 2022 |  |  | December 31, 2021 |
Aggregate fair value of loans receivables that are 90 days or more past due |  | $ | 217,398 |  |  | $ | - |
Unpaid principal balance of loans receivables that are 90 days or more past due |  |  | 661,727 |  |  |  | - |
Aggregate fair value of loans receivables in non-accrual status |  |  | - |  |  |  | - |
Income Taxes | Income Taxes – Deferred tax assets and liabilities are determined based on the estimated future tax effects of net operating loss carryforwards and temporary differences between the tax bases of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records a valuation allowance for its deferred tax assets when management concludes that it is not more likely than not that such assets will be recognized. 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 examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of June 30, 2022, and 2021, the Company had 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.

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- Definition Entity's cash and cash equivalents accounting policy with respect to restricted balances. Restrictions may include legally restricted deposits held as compensating balances against short-term borrowing arrangements, contracts entered into with others, or company statements of intention with regard to particular deposits; however, time deposits and short-term certificates of deposit are not generally included in legally restricted deposits. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.9-03(1)(a)) -URI https://asc.fasb.org/extlink&oid=126897435&loc=d3e534808-122878 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=126999549&loc=d3e4273-108586 + Details
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- Definition Disclosure of accounting policy for salaries, bonuses, incentive awards, postretirement and postemployment benefits granted to employees, including equity-based arrangements; discloses methodologies for measurement, and the bases for recognizing related assets and liabilities and recognizing and reporting compensation expense. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (b),(f(1)) -URI https://asc.fasb.org/extlink&oid=128089324&loc=d3e5070-113901 + Details
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- Definition Disclosure of accounting policy regarding (1) the principles it follows in consolidating or combining the separate financial statements, including the principles followed in determining the inclusion or exclusion of subsidiaries or other entities in the consolidated or combined financial statements and (2) its treatment of interests (for example, common stock, a partnership interest or other means of exerting influence) in other entities, for example consolidation or use of the equity or cost methods of accounting. The accounting policy may also address the accounting treatment for intercompany accounts and transactions, noncontrolling interest, and the income statement treatment in consolidation for issuances of stock by a subsidiary. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 4 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=126899994&loc=d3e18823-107790 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=109239629&loc=d3e5614-111684 + Details
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- Definition Disclosure of accounting policy related to debt. Includes, but is not limited to, debt issuance costs, the effects of refinancings, method of amortizing debt issuance costs and original issue discount, and classifications of debt. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 10 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=123465755&loc=d3e1835-112601 + Details
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- Definition Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 260 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (c) -URI https://asc.fasb.org/extlink&oid=124432515&loc=d3e3550-109257 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 260 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=124432515&loc=d3e3630-109257 + Details
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- Definition Disclosure of accounting policy for fair value measurements of financial and non-financial assets, liabilities and instruments classified in shareholders' equity. Disclosures include, but are not limited to, how an entity that manages a group of financial assets and liabilities on the basis of its net exposure measures the fair value of those assets and liabilities. + References No definition available. + Details
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- Definition Disclosure of accounting policy for determining the fair value of financial instruments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 60 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=7493716&loc=d3e21868-110260 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=123594938&loc=d3e13279-108611 + Details
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- Definition Disclosure of accounting policy for goodwill and intangible assets. This accounting policy also may address how an entity assesses and measures impairment of goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=66006027&loc=d3e16265-109275 + Details
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- Definition Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 45 -Paragraph 25 -URI https://asc.fasb.org/extlink&oid=123427490&loc=d3e32247-109318 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 20 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32847-109319 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 19 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32840-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 220 -SubTopic 10 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=124431353&loc=SL116659661-227067 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32639-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 45 -Paragraph 28 -URI https://asc.fasb.org/extlink&oid=123427490&loc=d3e32280-109318 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 + Details
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- Definition Disclosure of accounting policy for leasing arrangements entered into by lessor. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 30 -Section 50 -Paragraph 3A -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=124258985&loc=SL117410129-209981 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 30 -Section 50 -Paragraph 1 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=124258985&loc=SL77919352-209981 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 30 -Section 50 -Paragraph 3A -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=124258985&loc=SL117410129-209981 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 30 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=124258985&loc=SL119206284-209981 + Details
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- Definition Disclosure of accounting policy for policy loans receivable, including the basis for determining the amount reported for loans made to policyholders against and secured by future policy benefits. May also disclose the range of interest rates charged to policyholders on such loans. + References No definition available. + Details
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- Definition Disclosure of accounting policy for determining the allowance for doubtful accounts for trade and other accounts receivable balances, and when impairments, charge-offs or recoveries are recognized. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 9 -URI https://asc.fasb.org/extlink&oid=123577603&loc=d3e5144-111524 + Details
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- Definition Disclosure of accounting policy for revenue. Includes revenue from contract with customer and from other sources. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 4 -Subparagraph (e) -URI https://asc.fasb.org/extlink&oid=126899994&loc=d3e18823-107790 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 4 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126899994&loc=d3e18823-107790 + Details
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- Definition Disclosure of accounting policy for costs incurred to (1) establish the technological feasibility of a computer software product to be sold, leased, or otherwise marketed; and (2) produce product masters after establishing technological feasibility. This accounting policy also may apply to purchased computer software. This policy also may address the entity's amortization policy for its capitalized computer software costs and how it evaluates such capitalized costs for impairment. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 985 -SubTopic 20 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6501960&loc=d3e128462-111756 + Details
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- Definition Disclosure of accounting policy for the use of estimates in the preparation of financial statements in conformity with generally accepted accounting principles. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 12 -URI https://asc.fasb.org/extlink&oid=99393423&loc=d3e6191-108592 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 11 -URI https://asc.fasb.org/extlink&oid=99393423&loc=d3e6161-108592 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 9 -URI https://asc.fasb.org/extlink&oid=99393423&loc=d3e6143-108592 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=99393423&loc=d3e5967-108592 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 4 -URI https://asc.fasb.org/extlink&oid=99393423&loc=d3e6061-108592 Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 8 -URI https://asc.fasb.org/extlink&oid=99393423&loc=d3e6132-108592 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (c) -URI https://asc.fasb.org/extlink&oid=99393423&loc=d3e5967-108592 + Details
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