MIAMI, FL--(NewMediaWire - Aug 4, 2015)
- Net Element, Inc. (NASDAQ: NETE) ("Net Element" or the "Company"), a
provider of global mobile payment technology solutions and
value-added transactional services today presented historical
financial results for PayOnline for periods prior to our
ownership.
PayOnline acquisition creates a unique platform for further
consolidation and positions the Company to lead in the fragmented
and growing emerging market payments industry.
Acquisition of PayOnline
As previously reported, on May 20, 2015, Net Element entered
into a definitive agreement with PayOnline pursuant to which Net
Element is to acquire PayOnline for up to $8.4 million in total
consideration. The closing payment is $3.6 million cash, which has
been paid into escrow and $3.6 million in Net Element stock. There
is the potential for additional consideration of up to $1.282
million in cash and stock from earn-out incentives based on
performance.
Net Element assumed operational and financial control of
PayOnline and its subsidiaries as of May 20, 2015, and will
consolidate PayOnline results in the second quarter from May 20,
2015 to June 30, 2015.
PayOnline processes online payments for over 10 million active
consumers and thousands of merchants in the Russian Federation,
Europe and Asia.
The 2014 McKinsey Global Payments Map released October 2014,
states Russia is the world's 6th largest payments market,
accounting for $50 billion in payments with a rapidly growing
online population. They state that Card issuance is growing at 30%
per year.
Net Element plans to integrate PayOnline's payments platform
into its existing global payments-as-a-service network to expand
its transaction processing offerings.
Upon integration, Net Element global merchants will have access
to a broad array of value-added services including card2card
transfer, payment split and the highest level of data security
(Validated Level 1 PCI DSS Compliance).
Recent Events:
- On July 28, 2015, PayOnline released an updated solution for
the travel industry. PayOnline's Pay-Travel product provides an
industry solution to automated payments for the travel industry
including integration with GDS;
On June 29, 2015, PayOnline announced signing of a 3-year contract
to process transactions for certain international dating networks,
including AnastasiaDate, AmoLatina and AsianDate. The contract
provides for a minimum processing commitment of $300 million in
transactions over 3 years and minimum net revenues to PayOnline in
the amount of $1.2 million over contract period;
On June 4, 2015, PayOnline launched payment processing in
Kazakhstan by integrating with Kazkommertsbank ("KAZKOM"),
Kazakhstan's largest bank and signed with Kassir.com, the country's
largest online events ticketing website and one of the largest
online merchants serving in the Kazakhstan market.
-
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NET
ELEMENT, INC. |
|
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
|
FOR
THE THREE MONTHS ENDED MARCH 31, 2015 |
|
|
|
|
|
Net
Element, Inc. |
|
|
PayOnline |
|
Pro
Forma Adj |
|
|
|
Pro Forma Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues |
|
$ |
5,540,207 |
|
|
$ |
1,202,878 |
|
$ |
- |
|
|
|
|
$ |
6,743,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues |
|
|
4,614,072 |
|
|
|
802,092 |
|
|
- |
|
|
|
|
|
5,416,164 |
|
|
General
and administrative (includes $601,371 and $52,050 of share
based compensation for the three months ended March 31, 2015
and 2014 respectively) |
|
|
2,637,469 |
|
|
|
307,675 |
|
|
- |
|
|
|
|
|
2,945,144 |
|
|
Provision for bad debts |
|
|
9,331 |
|
|
|
- |
|
|
- |
|
|
|
|
|
9,331 |
|
|
Depreciation and amortization |
|
|
438,769 |
|
|
|
18,637 |
|
|
494,331 |
|
|
(j) |
|
|
951,737 |
|
|
|
|
Total costs and
operating expenses |
|
|
7,699,641 |
|
|
|
1,128,404 |
|
|
494,331 |
|
|
|
|
|
9,322,376 |
|
Income
(loss) from operations |
|
|
(2,159,434 |
) |
|
|
74,474 |
|
|
(494,331 |
) |
|
|
|
|
(2,579,291 |
) |
|
Interest
expense, net |
|
|
(117,594 |
) |
|
|
- |
|
|
- |
|
|
|
|
|
(117,594 |
) |
|
Other
income (expense) |
|
|
29,073 |
|
|
|
- |
|
|
- |
|
|
|
|
|
29,073 |
|
|
Net
income (loss) before income taxes |
|
|
(2,247,955 |
) |
|
|
74,474 |
|
|
(494,331 |
) |
|
|
|
|
(2,667,812 |
) |
|
Income
taxes |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
Net
income (loss) |
|
|
(2,247,955 |
) |
|
|
74,474 |
|
|
(494,331 |
) |
|
|
|
|
(2,667,812 |
) |
Net loss
attributable to the noncontrolling interest |
|
|
8,747 |
|
|
|
- |
|
|
- |
|
|
|
|
|
8,747 |
|
Net
income (loss) attributable to Net Element, Inc. shareholders |
|
|
(2,239,208 |
) |
|
|
74,474 |
|
|
(494,331 |
) |
|
|
|
|
(2,659,065 |
) |
Foreign
currency translation |
|
|
(108,167 |
) |
|
|
|
|
|
- |
|
|
|
|
|
(108,167 |
) |
Comprehensive income (loss) |
|
$ |
(2,347,375 |
) |
|
$ |
74,474 |
|
$ |
(494,331 |
) |
|
|
|
$ |
(2,767,232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share - basic and diluted |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and
diluted |
|
|
46,057,972 |
|
|
|
|
|
|
2,503,781 |
(i)(k) |
|
48,561,754 |
|
|
Description |
|
|
(i) |
Represents $3.6
million in common shares priced as if issued January 1,
2014. |
(j) |
Represents
amortization of capitalized intangible assets from PayOnline
acquisition. |
(k) |
Represents the
2014 conversion of preferred shares (sold to purchase PayOnline) to
common shares. |
|
|
|
|
|
|
|
|
NET
ELEMENT, INC. |
|
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
|
FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 2014 |
|
|
|
|
|
Net
Element, Inc. |
|
|
PayOnline |
|
Pro
Forma Adj |
|
|
|
|
Pro
Forma Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues |
|
$ |
21,194,461 |
|
|
$ |
6,729,228 |
|
$ |
- |
|
|
|
|
$ |
27,923,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues |
|
|
15,883,681 |
|
|
|
4,595,623 |
|
|
- |
|
|
|
|
|
20,479,304 |
|
|
General
and administrative (includes $4,267,334 of share based compensation
for the twelve months ended December 31, 2014) |
|
|
11,353,244 |
|
|
|
1,619,259 |
|
|
359,480 |
|
|
(e) |
|
|
13,331,983 |
|
|
Recovery
of provision for loan losses |
|
|
(1,153,147 |
) |
|
|
- |
|
|
- |
|
|
|
|
|
(1,153,147 |
) |
|
Depreciation and amortization |
|
|
2,358,136 |
|
|
|
85,826 |
|
|
1,977,325 |
|
|
(g) |
|
|
4,421,287 |
|
|
|
Total costs and
operating expenses |
|
|
28,441,914 |
|
|
|
6,300,708 |
|
|
2,336,805 |
|
|
|
|
|
37,079,427 |
|
Income
(Loss) from operations |
|
|
(7,247,453 |
) |
|
|
428,520 |
|
|
(2,336,805 |
) |
|
|
|
|
(9,155,738 |
) |
|
Interest
expense, net |
|
|
(3,705,694 |
) |
|
|
- |
|
|
- |
|
|
|
|
|
(3,705,694 |
) |
|
Gain on
change in fair value and settlement of beneficial conversion
derivative |
|
|
5,569,158 |
|
|
|
- |
|
|
478,261 |
|
|
(d) |
|
|
6,047,419 |
|
|
Loss on
debt extinguishment |
|
|
(6,184,219 |
) |
|
|
- |
|
|
- |
|
|
|
|
|
(6,184,219 |
) |
|
Gain on
debt restructure |
|
|
1,596,000 |
|
|
|
- |
|
|
- |
|
|
|
|
|
1,596,000 |
|
|
Loss
from asset disposal |
|
|
(87,151 |
) |
|
|
- |
|
|
- |
|
|
|
|
|
(87,151 |
) |
|
Other
expense |
|
|
(155,407 |
) |
|
|
- |
|
|
- |
|
|
|
|
|
(155,407 |
) |
|
Income
(Loss) from continuing operations before income taxes |
|
|
(10,214,766 |
) |
|
|
428,520 |
|
|
(1,858,544 |
) |
|
|
|
|
(11,644,790 |
) |
|
Income
taxes |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
Income
(Loss) from continuing operations |
|
|
(10,214,766 |
) |
|
|
428,520 |
|
|
(1,858,544 |
) |
|
|
|
|
(11,644,790 |
) |
Net loss
attributable to the noncontrolling interest |
|
|
29,250 |
|
|
|
- |
|
|
- |
|
|
|
|
|
29,250 |
|
Net
income (loss) from continuing operations attributable to Net
Element, Inc. |
|
|
(10,185,516 |
) |
|
|
428,520 |
|
|
(1,858,544 |
) |
|
|
|
|
(11,615,540 |
) |
Dividends for the benefit of preferred stockholders |
|
|
- |
|
|
|
- |
|
|
(1,548,068 |
) |
|
(c) |
|
|
(1,548,068 |
) |
Foreign
currency translation |
|
|
(1,080,911 |
) |
|
|
- |
|
|
- |
|
|
|
|
|
(1,080,911 |
) |
Comprehensive Income (loss) |
|
$ |
(11,266,427 |
) |
|
$ |
428,520 |
|
$ |
(3,406,612 |
) |
|
|
|
$ |
(14,244,519 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share - basic and diluted |
|
$ |
(0.27 |
) |
|
|
|
|
|
|
|
|
|
|
$ |
(0.29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and
diluted |
|
|
37,255,052 |
|
|
|
|
|
|
2,503,781 |
(f)(h) |
|
39,758,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
|
(c) |
Represents the
preferred stock dividend as issuance of preferred stock was used to
pay cash portion of PayOnline acquisition. |
(d) |
Represents gain
from the beneficial conversion feature liability of preferred stock
issued to finance the cash portion of PayOnline
acquisition |
(e) |
Represents
professional fees associated with preferred stock transaction used
to finance the cash portion of PayOnline acquisition. |
(f) |
Represents $3.6
million in common shares prices as if issued January 1,
2014. |
(g) |
Represents
amortization of capitalized intangible assets from PayOnline
acquisition. |
(h) |
Represents the
conversion of preferred shares (sold to purchase PayOnline) to
common shares. |
|
|
|
|
Additional information regarding Net Element's results of
operations can be found in Net Element's report on Form 8-K/A,
which was filed with the Securities and Exchange Commission (SEC)
on August 3, 2015 and may be obtained from the SEC's Internet
website at http://www.sec.gov.
About Net Element
Net Element, Inc. (NASDAQ: NETE) operates a payments-as-a-service platform
for small to medium enterprise ("SME") in the US, Russian
Federation and other international markets. In the US it aims to
grow transactional revenue by innovating SME productivity services
such as its cloud based, restaurant point-of-sale solution Aptito.
Internationally, Net Element's strategy is to leverage its
omni-channel platform to deliver flexible offerings to emerging
markets with diverse banking, regulatory and demographic conditions
such as UAE, Kazakhstan, India and Latin America. It maintains
offices in Miami, FL and in Russia. Further information is
available at www.netelement.com.
About PayOnline
PayOnline provides flexible high-tech payment solutions to
companies doing business on the Internet. They have wide experience
in integration and customization of payment solutions for websites
and mobile apps. They are able to arrange payments on the website
of any commercial organization that increases convenience with
highest possible level of successful transactions. Thousands of
companies in CIS, Europe and Asia use PayOnline to accept payments
online. PayOnline offices are located in Russia and in the Republic
of Cyprus. For more information, please visit: www.payonline.ru/en or www.payonline.ru.
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 pending acquisition of PayOnline
will be finalized, whether the integration of PayOnline's payments
platform into its existing global payments-as-a-service network
will occur, whether the Company will be successful in selling its
mobile payment services to PayOnline's merchants, whether the
enhanced Pay-Travel platform will have any direct or indirect
benefits to PayOnline or the Company, 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 further 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.