Key milestones (2014 - 2015 YTD):
- Improved access to credit to implement strategic initiatives;
established $10 million credit facility in the U.S. and enhanced
our Russian borrowing capacity. New financing of $10 million
triggered conversion of $11 million of debt to equity
Advanced service offering expansion by agreeing to acquire mobile
payment technology innovator PayOnline
Reorganized mobile payments business - positive operating cash flow
based on improved management of account receivables and restructure
of business operations. Positive working capital allowed
self-financing of growing mobile payments business during 2014
Migrated to proprietary billing system for mobile business
operations
In January 2015, our mobile payments business exceeded 1 million
recurring mobile subscribers
Eliminated $15.9 million of debt obligations in September 2014
through a debt-to-equity swap
General & administrative expenses reduced by $5 million
including $1 million in salaries and $2 million in professional
fees
Announced Apple Pay™ availability in Company's U.S. POS terminal
network
Enhanced board with appointment of financial services veteran
William Healy and payments technology industry veteran Drew
Freeman
-
-
-
-
-
-
2015 Initiatives:
- PayOnline closing and integration
Mobile payments expansion into Middle East and India
Expand Russia service offerings
Creation of omni-channel, payments-as-a-service platform that
can be profitably adapted to local businesses globally
-
-
-
-
-
-
"Now that we have strengthened our balance sheet by eliminating
most of our debt and created a restructured operational foundation,
we can advance our plan to grow market share, accelerate sales and
expand profitability," commented Oleg Firer, CEO.
"Our growing traditional and mobile technology base, our
strengthened balance sheet and strategic emphasis on Small to
Medium Enterprise (SME) are competitive advantages that we expect
to capitalize on during 2015."
2014 Operating Results
In an effort to present a more comparative
period on period analysis, we have adjusted net loss to remove the
effects of non-recurring expenses from discontinued operations,
non-cash share based compensation, goodwill impairment, debt
extinguishment and debt restructuring.
The adjusted loss from continuing operations for the year 2014
was $6.9 million, or a loss of $0.19 per share, as compared to an
adjusted loss from continuing operations of $19.4 million or a loss
of $0.68 per share, for the year ended December 31, 2013. The
adjusted loss from 2014 primarily related to general and
administrative expenses (primarily salaries and professional fees)
of $7.1 million, interest expense of $3.7 million and depreciation
and amortization of $2.4 million. This was offset by a recovery of
bad debts of $1.2 million (net) resulting primarily from the
recovery of Russian receivables and advances previously reserved in
2013.
Net revenues for the year 2014 were $21.2 million, as compared
to $18.7 for the year 2013. The increase in net revenues is
substantially due to an increase of $4.6 million in transaction
processing revenues offset by $2.1 million of reduced Russian
mobile payment processing revenues as we restructured our Russian
business with new management and its own proprietary billing system
starting late 2013 and concluding in April 2014. Russian mobile
payment revenues were $1.8 million for the year 2014 compared to
$3.9 million for the year 2013. The transaction processing services
business was acquired in April 2013 and the operating results for
2013 reflect 8.5 months of transaction processing services
activity.
Our gross margin for the year 2014 was $5.3 million versus $5.4
million for the year 2013. While the dollar value of gross margin
remained consistent year over year, the mix of business was
different. For 2014 our transaction processing gross margin was
$0.7 million higher than in 2013 and the mobile payments gross
margin decreased by $0.8 million between 2013 and 2014. The change
in margin mix reduced our overall gross margin from 29% of revenues
to 25% of revenues as detailed below. The mobile payments gross
margin for 2014 and 2013 was affected by penalties assessed in 2013
and successfully abated during 2014. Excluding $0.2 million in
penalties, gross margin for mobile payments was 92% in 2014 and 73%
in 2013. Mobile payment margins were higher in 2014 (as adjusted)
due to changes in our pricing and business operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
Months
Ended |
|
|
|
|
|
Months
Ended |
|
|
|
|
Increase
/ |
|
Source of
Revenues |
|
December
31, 2014 |
|
|
Mix |
|
|
December
31, 2013 |
|
Mix |
|
|
(Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
Processing Services |
|
$ |
19,373,877 |
|
|
91 |
% |
|
$ |
14,801,383 |
|
79 |
% |
|
$ |
4,572,494 |
|
|
Mobile
Payments |
|
|
1,820,584 |
|
|
9 |
% |
|
|
3,948,087 |
|
21 |
% |
|
|
(2,127,503 |
) |
|
|
Total |
|
$ |
21,194,461 |
|
|
100 |
% |
|
$ |
18,749,470 |
|
100 |
% |
|
$ |
2,444,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
Processing Services |
|
$ |
15,925,924 |
|
|
82 |
% |
|
$ |
12,094,998 |
|
82 |
% |
|
$ |
3,830,926 |
|
|
Mobile
Payments |
|
|
(42,243 |
) |
|
-2 |
% |
|
|
1,279,671 |
|
32 |
% |
|
|
(1,321,914 |
) |
|
|
Total |
|
$ |
15,883,681 |
|
|
75 |
% |
|
$ |
13,374,669 |
|
71 |
% |
|
$ |
2,509,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
Processing Services |
|
$ |
3,447,953 |
|
|
18 |
% |
|
$ |
2,706,385 |
|
18 |
% |
|
$ |
741,568 |
|
|
Mobile
Payments |
|
|
1,862,827 |
|
|
102 |
% |
|
|
2,668,416 |
|
68 |
% |
|
|
(805,589 |
) |
|
|
Total |
|
$ |
5,310,780 |
|
|
25 |
% |
|
$ |
5,374,801 |
|
29 |
% |
|
$ |
(64,021 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses, excluding non-cash
compensation expense, were $7.1 million for 2014 as compared to
$11.6 million for 2013. This was primarily due to reductions of
$1.1 million in salaries and benefits; $1.7 million in professional
fees; $0.6 million in transaction gains and losses and $0.4 in
other general and administrative expenses. The reduction in
salaries and benefits is due to net headcount reductions;
professional fees are lower due to higher legal fees from our
reorganization in 2013 after the Company's merger transaction with
Unified Payments.
Net Element's recovery from loan loss provision was $1.2 million
for 2014 as compared to an expense provision of $7.6 million of
expense for 2013, representing a decrease of $8.8 million year over
year. The Company recorded a net recovery in provision for loan
losses for 2014 which consisted of a favorable adjustment to the
bad debt allowance of $1.6 million that was associated with Russian
operations, offset by loss provision for net ACH rejects of $0.4
million in U.S. credit card processing business. We reported a $7.6
million loss provision for 2013 primarily due to receivables and
advances from Russian aggregators that were deemed
uncollectible.
Cash provided by operating activities of
continuing operations was $2.3 million for 2014 compared to
cash used in operating activities of $9.8 million
for 2013. Positive operating cash flow for 2014 was primarily due
to the $7.9 million reduction of accounts receivable and aggregator
advances offset primarily by $1.3 million of increases in accounts
payable and accrued expenses.
Cash used in investing activities for 2014 was $1.8 million
primarily due to $1.0 million used to purchase merchant portfolios
and the write off of $0.8 million in fixed assets resulting
primarily from closure of our Ukraine development office. For 2013,
$4.1 million of cash was provided by investing activities primarily
resulting from $4.9 million in collections of notes receivable
offset by approximately ($0.8) of acquisition related costs.
Total liabilities were $8.8 million at December 31, 2014
compared to $37.9 million at December 31, 2013. The Company's total
debt was $3.3 million at December 31, 2014 versus total debt and
related party payables of $31.0 million at December 31, 2013,
representing a reduction of $27.7 million. Net Element has
significantly reduced its debt and related interest expense. On
September 15, 2014, the Company completed a debt exchange program
which eliminated $15.9 million in debt obligations. Pursuant to the
terms of our convertible debt agreement, we converted $11.2 million
of debt to equity upon obtaining a new $10 million credit facility.
Additionally, Net Element's factoring lines were $0 at December 31,
2014 as compared to $8.5 million at December 31, 2013. We were able
to successfully finance our Russian mobile payment business with
operating cash flow generated internally. Our factoring facilities
allow TOT Money to assign to the bank certain (but not all) of its
accounts receivable suitable to the lender(s) under such facilities
as security for financing. Accordingly, the amounts of our
draws under such facilities from time to time will depend on the
amounts of the accounts receivable suitable for such assignment as
of the time we choose to draw under such facility. We have not
drawn any funds under such credit facilities during 2014.
Reconciliation of Non-GAAP Financial Measures and
Regulation G Disclosure
To supplement its consolidated financial statements presented in
accordance with United Stated generally accepted accounting
principles ("GAAP"), the Company provides additional measures of
its operating results by disclosing its adjusted loss on a
continuing operations basis and adjusted gross margin excluding
penalties. Adjusted loss on a continuing operations basis is
calculated as loss from continuing operations excluding
discontinued operations, non-cash share based compensation,
goodwill impairment, debt extinguishment and debt restructuring
costs. Net Element discloses this amount on an aggregate and per
share basis. Additionally, the Company is disclosing its mobile
payments gross margin adjusted for penalties charged and recovered
to analyze the trend of gross margin without penalties. These
measures meet the definition of non-GAAP financial measures. The
Company believes that application of these non-GAAP financial
measures is appropriate to enhance the understanding of its
historical performance through use of a metric that seeks to
normalize period to period earnings and gross margin.
This press release contains non-GAAP financial measures within
the meaning of Regulation G promulgated by the Securities and
Exchange Commission. Pursuant to Regulation G, a reconciliation of
these non-GAAP financial measures with the comparable financial
measures calculated in accordance with GAAP for the twelve months
ended December 31, 2014 and 2013 is presented in the following
Non-GAAP Financial Measures Table.
Non-GAAP Financial Measures
|
|
|
|
|
|
|
|
|
|
|
Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extingushment |
|
|
|
|
|
|
|
|
|
Share- |
|
|
|
Intangible |
|
and |
|
|
Adjusted |
|
|
|
|
|
|
based |
|
Goodwill |
|
Asset |
|
Debt |
|
|
Non- |
|
|
|
GAAP |
|
|
Compensation |
|
Impairment |
|
Impairment |
|
Restructure |
|
|
GAAP |
|
Twelve Months Ended December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations |
|
$ |
(10,214,766 |
) |
|
$ |
4,267,334 |
|
$ |
- |
|
$ |
- |
|
$ |
(980,939 |
) |
|
$ |
(6,928,371 |
) |
|
Basic and diluted
earnings per share from continuing operations |
|
$ |
(0.27 |
) |
|
$ |
0.11 |
|
$ |
- |
|
$ |
- |
|
$ |
(0.03 |
) |
|
$ |
(0.19 |
) |
|
Basic and diluted
shares used in computing earnings per share from continuing
operations |
|
|
37,255,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,255,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extingushment |
|
|
|
|
|
|
|
|
Share- |
|
|
|
Intangible |
|
and |
|
Adjusted |
|
|
|
|
|
|
based |
|
Goodwill |
|
Asset |
|
Debt |
|
Non- |
|
|
|
GAAP |
|
|
Compensation |
|
Impairment |
|
Impairment |
|
Restructure |
|
GAAP |
|
Twelve Months Ended December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations |
|
$ |
(48,009,020 |
) |
|
$ |
16,549,820 |
|
$ |
11,200,000 |
|
$ |
872,354 |
|
$ |
- |
|
$ |
(19,386,846 |
) |
|
Basic and diluted
earnings per share from continuing operations |
|
$ |
(1.69 |
) |
|
$ |
0.58 |
|
$ |
0.39 |
|
$ |
0.03 |
|
$ |
- |
|
$ |
(0.68 |
) |
|
Basic and diluted
shares used in computing earnings per share from continuing
operations |
|
|
28,470,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,470,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-Looking Statements
This press release contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Any statements contained in this press release that are
not statements of historical fact may be deemed forward-looking
statements. Words such as "continue," "will," "may," "could,"
"should," "expect," "expected," "plans," "intend," "anticipate,"
"believe," "estimate," "predict," "potential," and similar
expressions are intended to identify such forward-looking
statements. These forward-looking statements include, without
limitation, whether the Company's access to credit will result in
the ability to implement its strategic initiatives, whether the
PayOnline transaction will be consummated and if so, will result in
an advanced service offering, whether the Company's Board has in
fact been improved by the appointment of the 2 new Directors,
whether any of the referenced 2015 initiatives will materialize,
whether the Company's plan to grow market share, accelerate sales
and expand profitability will materialize, whether the growth in
user base and the strategic emphasis on Small to Medium Enterprise
(SME) result in competitive advantages for the Company that can be
capitalized on, whether the financial reporting and adjustments
calculated to present a more comparative period on period analysis
achieve the stated objective, whether the application by the
Company of non-GAAP financial measures is appropriate to enhance
the understanding of its historical performance, whether Net
Element can secure any additional financing, and if such additional
financing will be adequate to meet the Company's objectives. All
forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied in the forward-looking statements,
many of which are generally outside the control of Net Element and
are difficult to predict. Examples of such risks and uncertainties
include, but are not limited to: (i) Net Element 's ability (or
inability) to obtain additional financing in sufficient amounts or
on acceptable terms when needed; (ii) Net Element 's ability to
maintain existing, and secure additional, contracts with users of
its payment processing services; (iii) Net Element 's ability to
successfully expand in existing markets and enter new markets; (iv)
Net Element 's ability to successfully manage and integrate any
acquisitions of businesses, solutions or technologies; (v)
unanticipated operating costs, transaction costs and actual or
contingent liabilities; (vi) the ability to attract and retain
qualified employees and key personnel; (vii) adverse effects of
increased competition on Net Element 's business; (viii) changes in
government licensing and regulation that may adversely affect Net
Element 's business; (ix) the risk that changes in consumer
behavior could adversely affect Net Element 's business; (x) Net
Element 's ability to protect its intellectual property; (xi)
local, industry and general business and economic conditions; (xii)
adverse effects of potentially deteriorating U.S.-Russia relations,
including, without limitation, over a conflict related to Ukraine,
including a risk of U.S. government sanctions or other legal
restrictions on U.S. businesses doing business in Russia.
Additional factors that could cause actual results to differ
materially from those expressed or implied in the forward-looking
statements can be found in the most recent annual report on Form
10-K and the subsequently filed quarterly reports on Form 10-Q and
current reports on Form 8-K filed by Net Element with the
Securities and Exchange Commission. Net Element anticipates that
subsequent events and developments may cause its plans, intentions
and expectations to change. Net Element assumes no obligation, and
it specifically disclaims any intention or obligation, to update
any forward-looking statements, whether as a result of new
information, future events or otherwise, except as expressly
required by law.
NET ELEMENT, INC.
CONSOLIDATED BALANCE SHEETS
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
ASSETS |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
503,343 |
|
|
$ |
126,319 |
|
|
Accounts
receivable, net |
|
|
3,417,173 |
|
|
|
10,619,289 |
|
|
Advances to
aggregators, net |
|
|
18,455 |
|
|
|
1,109,538 |
|
|
Prepaid
expenses and other assets |
|
|
944,243 |
|
|
|
834,025 |
|
|
|
Total
current assets |
|
|
4,883,214 |
|
|
|
12,689,171 |
|
Fixed
assets, net |
|
|
70,918 |
|
|
|
137,267 |
|
Intangible
assets, net |
|
|
2,492,050 |
|
|
|
2,964,424 |
|
Goodwill |
|
|
6,671,750 |
|
|
|
6,671,750 |
|
Other long
term assets |
|
|
204,737 |
|
|
|
- |
|
Investment
in affiliate |
|
|
- |
|
|
|
46,113 |
|
|
|
Total
assets |
|
$ |
14,322,669 |
|
|
$ |
22,508,725 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
2,698,257 |
|
|
$ |
3,190,215 |
|
|
Deferred
revenue |
|
|
472,482 |
|
|
|
239,398 |
|
|
Accrued
expenses |
|
|
2,351,885 |
|
|
|
3,484,963 |
|
|
Short term
loans |
|
|
- |
|
|
|
8,478,810 |
|
|
Notes
payable (current portion) |
|
|
98,493 |
|
|
|
3,816,093 |
|
|
Due to
related parties |
|
|
- |
|
|
|
1,451,357 |
|
|
|
Total
current liabilities |
|
|
5,621,117 |
|
|
|
20,660,836 |
|
|
Note
payable (non-current portion) |
|
|
3,216,507 |
|
|
|
17,255,531 |
|
|
|
Total
liabilities |
|
|
8,837,624 |
|
|
|
37,916,367 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
Preferred
stock ($.01 par value, 1,000,000 shares |
|
|
|
|
|
|
|
|
|
authorized
and no shares issued and outstanding) |
|
|
- |
|
|
|
- |
|
|
Common
stock ($.0001 par value, 200,000,000 shares |
|
|
|
|
|
|
|
|
|
authorized
and 45,881,523 and 32,273,298 shares issued and outstanding at
December 31, 2014 and 2013, respectively) |
|
|
4,589 |
|
|
|
3,229 |
|
|
Paid in
capital |
|
|
136,689,629 |
|
|
|
103,486,144 |
|
|
Stock
subscription receivable |
|
|
(1,111,130 |
) |
|
|
329,406 |
|
|
Accumulated
other comprehensive loss |
|
|
(1,251,461 |
) |
|
|
(170,550 |
) |
|
Accumulated
deficit |
|
|
(129,116,344 |
) |
|
|
(118,930,828 |
) |
|
Noncontrolling interest |
|
|
269,762 |
|
|
|
(125,043 |
) |
|
|
Total
stockholders' equity (deficit) |
|
|
5,485,045 |
|
|
|
(15,407,642 |
) |
|
|
|
Total liabilities and
stockholders' equity (deficit) |
|
$ |
14,322,669 |
|
|
$ |
22,508,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ELEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
|
|
Twelve months ended December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues |
|
$ |
21,194,461 |
|
|
$ |
18,749,470 |
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
Cost of
revenues |
|
|
15,883,681 |
|
|
|
13,374,669 |
|
|
|
General and
administrative (includes $4,267,334 and $16,549,820 of share
basedcompensation for the twelve months ended December 31, 2014 and
2013 respectively) |
|
|
|
|
|
|
|
|
|
11,353,244 |
|
|
|
28,166,387 |
|
|
(Recovery
of) provision for loan losses |
|
|
(1,153,147 |
) |
|
|
7,640,008 |
|
|
Goodwill
impairment charge |
|
|
- |
|
|
|
11,200,000 |
|
|
Intangible
assets impairment charge |
|
|
- |
|
|
|
872,354 |
|
|
Depreciation and amortization |
|
|
2,358,136 |
|
|
|
2,242,504 |
|
|
|
Total costs and
operating expenses |
|
|
28,441,914 |
|
|
|
63,495,922 |
|
Loss from
operations |
|
|
(7,247,453 |
) |
|
|
(44,746,452 |
) |
|
Interest
expense, net |
|
|
(3,705,694 |
) |
|
|
(2,979,102 |
) |
|
Gain on
change in fair value and settlement of beneficial conversion
derivative |
|
|
5,569,158 |
|
|
|
- |
|
|
Loss on
debt extinguishment |
|
|
(6,184,219 |
) |
|
|
- |
|
|
Gain on
debt restructure |
|
|
1,596,000 |
|
|
|
- |
|
|
Loss from
asset disposal |
|
|
(87,151 |
) |
|
|
- |
|
|
Other
expense |
|
|
(155,407 |
) |
|
|
(160,182 |
) |
|
Loss from
continuing operations before income taxes |
|
|
(10,214,766 |
) |
|
|
(47,885,736 |
) |
|
Income
taxes |
|
|
- |
|
|
|
(213,284 |
) |
Loss from
continuing operations |
|
|
(10,214,766 |
) |
|
|
(48,099,020 |
) |
Net loss
attributable to the noncontrolling interest |
|
|
29,250 |
|
|
|
1,129,319 |
|
Net loss
from continuing operations attributable to Net Element, Inc. |
|
|
(10,185,516 |
) |
|
|
(46,969,701 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
|
|
Loss from
operations of discontinued entities |
|
|
- |
|
|
|
(1,018,003 |
) |
|
Loss on
disposition of assets pertaining to discontinued operations |
|
|
- |
|
|
|
(321,643 |
) |
Net
loss |
|
|
(10,185,516 |
) |
|
|
(48,309,347 |
) |
Foreign
currency translation |
|
|
(1,080,911 |
) |
|
|
(449,115 |
) |
Comprehensive loss |
|
$ |
(11,266,427 |
) |
|
$ |
(48,758,462 |
) |
|
|
|
|
|
|
|
|
|
Loss per
share - basic and diluted |
|
$ |
(0.27 |
) |
|
$ |
(1.65 |
) |
Loss per
share - basic and diluted discontinued operations |
|
|
- |
|
|
|
(0.05 |
) |
Total loss
per share |
|
$ |
(0.27 |
) |
|
$ |
(1.70 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and
diluted |
|
|
37,255,052 |
|
|
|
28,470,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ELEMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
Common Stock |
|
|
Paid in |
|
|
Stock |
|
|
Comprehensive |
|
|
Non-controlling |
|
|
Accumulated |
|
|
Equity (Deficiency) |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Subscription |
|
|
Income |
|
|
interest |
|
|
Deficit |
|
|
in
Assets |
|
Balance
December 31, 2012 (Restated) |
|
28,303,659 |
|
|
$ |
2,830 |
|
|
$ |
87,452,060 |
|
|
$ |
- |
|
|
$ |
278,565 |
|
|
$ |
(103,437 |
) |
|
$ |
(70,621,481 |
) |
|
$ |
17,008,537 |
|
Non cash
compensation related to TOT Group stock exchange |
|
2,812,771 |
|
|
|
281 |
|
|
|
12,197,823 |
|
|
|
- |
|
|
|
- |
|
|
|
1,107,713 |
|
|
|
- |
|
|
|
13,305,817 |
|
Non cash
compensation- other |
|
1,265,109 |
|
|
|
129 |
|
|
|
3,243,874 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,244,003 |
|
Cash paid
for repurchase of common shares |
|
(175,953 |
) |
|
|
(17 |
) |
|
|
(482,400 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(482,417 |
) |
Note
Payable and other assumed by T1T Lab, net of contributions
payable |
|
- |
|
|
|
- |
|
|
|
685,449 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
685,449 |
|
Shares
issued pursuant to purchase agreement |
|
67,712 |
|
|
|
6 |
|
|
|
389,338 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
389,344 |
|
Unissued
shares pursuant to purchase agreement |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
329,406 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
329,406 |
|
Foreign
currency exchange |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(449,115 |
) |
|
|
- |
|
|
|
- |
|
|
|
(449,115 |
) |
|
Net loss |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,129,319 |
) |
|
|
(48,309,347 |
) |
|
|
(49,438,666 |
) |
|
Balance Dec 31,
2013 |
|
32,273,298 |
|
|
$ |
3,229 |
|
|
$ |
103,486,144 |
|
|
$ |
329,406 |
|
|
$ |
(170,550 |
) |
|
$ |
(125,043 |
) |
|
$ |
(118,930,828 |
) |
|
$ |
(15,407,642 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based
compensation |
|
1,755,749 |
|
|
|
176 |
|
|
|
3,677,937 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,678,113 |
|
Shares
issued and issuable for acquisitions |
|
57,288 |
|
|
|
6 |
|
|
|
329,400 |
|
|
|
(329,406 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Shares
issued to acquire non-controlling interest |
|
323,085 |
|
|
|
32 |
|
|
|
617,060 |
|
|
|
- |
|
|
|
- |
|
|
|
424,055 |
|
|
|
- |
|
|
|
1,041,147 |
|
Shares
issued in connection with debt conversion |
|
5,569,158 |
|
|
|
556 |
|
|
|
10,636,537 |
|
|
|
(1,111,130 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,525,963 |
|
Shares
issued in connection with debt restructuring |
|
100,000 |
|
|
|
10 |
|
|
|
203,990 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
204,000 |
|
Shares
issued in connection with note conversion |
|
5,802,945 |
|
|
|
580 |
|
|
|
16,711,901 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,712,481 |
|
Extinguishment of T1T obligation |
|
- |
|
|
|
- |
|
|
|
1,086,968 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,086,968 |
|
NASDAQ
share registration fees |
|
- |
|
|
|
- |
|
|
|
(60,308 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(60,308 |
) |
|
Net loss |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(29,250 |
) |
|
|
(10,185,516 |
) |
|
|
(10,214,766 |
) |
|
Comprehensive loss -
foreign currency translation |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,080,911 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,080,911 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Dec
31, 2014 |
|
45,881,523 |
|
|
$ |
4,589 |
|
|
$ |
136,689,629 |
|
|
$ |
(1,111,130 |
) |
|
$ |
(1,251,461 |
) |
|
$ |
269,762 |
|
|
$ |
(129,116,344 |
) |
|
$ |
5,485,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ELEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Twelve Months Ended December 31, |
|
|
|
2014 |
|
|
2013 |
|
Cash flows
from operating activities: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(10,185,516 |
) |
|
$ |
(48,309,347 |
) |
Loss from
discontinued operations |
|
|
- |
|
|
|
321,643 |
|
Adjustments
to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
|
Non
controlling interest |
|
|
394,286 |
|
|
|
(1,129,319 |
) |
|
Non cash
compensation |
|
|
4,267,334 |
|
|
|
16,549,820 |
|
|
Deferred
revenue |
|
|
233,084 |
|
|
|
- |
|
|
Note
receivable (current portion) |
|
|
- |
|
|
|
- |
|
|
Depreciation and amortization |
|
|
2,358,136 |
|
|
|
2,242,504 |
|
|
Impairment
of Goodwill |
|
|
- |
|
|
|
11,200,000 |
|
|
Intangible
assets impairment |
|
|
- |
|
|
|
872,354 |
|
|
Amortization of debt discount |
|
|
1,644,626 |
|
|
|
- |
|
|
(Recovery
of ) provision for loan losses |
|
|
(1,649,858 |
) |
|
|
7,640,008 |
|
|
Loss on
disposal of fixed assets |
|
|
16,137 |
|
|
|
- |
|
|
Gain on
disposal of derivative |
|
|
(5,569,158 |
) |
|
|
- |
|
|
Loss on
debt extinguishment |
|
|
6,184,219 |
|
|
|
- |
|
|
Gain on MBF
debt restructure |
|
|
(1,596,000 |
) |
|
|
- |
|
Changes in assets and
liabilities, net of acquisitions and the effect ofconsolidation of
equity affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Account
receivable |
|
|
6,974,701 |
|
|
|
(562,294 |
) |
|
Advances to
aggregators |
|
|
934,816 |
|
|
|
(3,267,679 |
) |
|
Prepaid
expenses and other assets |
|
|
(445,555 |
) |
|
|
1,952,570 |
|
|
Accounts
payable |
|
|
(338,618 |
) |
|
|
2,268,233 |
|
|
Accrued
expenses |
|
|
(968,609 |
) |
|
|
429,556 |
|
Adjustments
for operating activities of continuing operations |
|
|
12,439,541 |
|
|
|
38,195,753 |
|
Adjustments
for operating activities of discontinued operations |
|
|
- |
|
|
|
(1,018,003 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash
provided by (used in) operating activities |
|
|
2,254,025 |
|
|
|
(10,809,954 |
) |
|
|
|
|
|
|
|
|
|
Cash flows
from investing activities- net of acquisitions: |
|
|
|
|
|
|
|
|
|
Purchase of
portfolio and client acquisition costs |
|
|
(1,039,752 |
) |
|
|
- |
|
|
Note
receivable |
|
|
(2,650 |
) |
|
|
4,920,510 |
|
|
Acquisition
of intangible assets |
|
|
- |
|
|
|
(380,025 |
) |
|
Acquisition
of Aptito |
|
|
- |
|
|
|
(458,747 |
) |
|
Investment
in subsidiary |
|
|
- |
|
|
|
(46,113 |
) |
|
(Purchase)
disposal of fixed and other assets |
|
|
(750,936 |
) |
|
|
67,266 |
|
|
|
Net cash (used in)
provided by investing activities |
|
|
(1,793,338 |
) |
|
|
4,102,891 |
|
|
|
|
|
|
|
|
|
|
Cash flows
from financing activities- net of acquisitions: |
|
|
|
|
|
|
|
|
|
Proceeds
from indebtedness |
|
|
10,088,870 |
|
|
|
2,000,000 |
|
|
Repayment
of indebtedness |
|
|
(10,433,367 |
) |
|
|
(272,103 |
) |
|
Change in
restricted cash |
|
|
- |
|
|
|
1,978,527 |
|
|
Cash paid
for shares and warrants |
|
|
- |
|
|
|
(482,417 |
) |
|
Related
party advances (payments) |
|
|
418,099 |
|
|
|
(75,000 |
) |
|
Net cash
provided by financing activities |
|
|
73,602 |
|
|
|
3,149,007 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
|
(157,265 |
) |
|
|
137,588 |
|
|
Net
increase (decrease) in cash |
|
|
377,024 |
|
|
|
(3,420,468 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash at
beginning of period |
|
|
126,319 |
|
|
|
3,546,787 |
|
|
Cash at end
of period |
|
$ |
503,343 |
|
|
$ |
126,319 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
|
Cash paid
during the period for: |
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
1,109,731 |
|
|
$ |
1,635,360 |
|
Taxes |
|
$ |
38,993 |
|
|
$ |
196,425 |
|
|
|
|
|
|
|
|
|
|
Issuance of
stock upon conversion of indebtedness |
|
$ |
25,233,473 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Issued and
outstanding common stock (10% of TOT Group's common stock) |
|
$ |
- |
|
|
$ |
609,000 |
|
Assumed
debt |
|
|
- |
|
|
|
20,631,000 |
|
Total value
of consideration for Unified Payments acquisition |
|
$ |
- |
|
|
$ |
21,240,000 |
|
|
|
|
|
|
|
|
|
|
Stock
subscription in connection with acquisition of Aptito |
|
$ |
- |
|
|
$ |
718,750 |
|
Transfer of
K1 note liability to T1T Lab, LLC in connection with divesture of
OOO Music 1 |
|
$ |
- |
|
|
$ |
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source: Net Element, Inc.