Net Element, Inc. (NASDAQ:NETE) (“Net Element” or
the “Company”), a global technology and value-added solutions group
that supports electronic payments acceptance in a multi-channel
environment including point-of-sale (“POS”), e-commerce and mobile
devices, today reported financial results for the fiscal year ended
December 31, 2017, and provided an update on recent strategic and
operational initiatives.
Conference Call:On April 3,
2018, at 8:30 a.m. EST the Company will host a conference call to
discuss 2017 financial results and business highlights. The
conference call can be accessed live over the phone by dialing +1
(877) 303-9858, or for international callers +1 (408) 337-0139, and
referencing conference code 6266947. It is recommended that
participants dial in approximately 10 minutes prior to the start of
the call.
The call will also be webcast live from
https://edge.media-server.com/m6/p/hmbnnrhw. Following completion
of the call, a recorded replay of the webcast will be available on
the www.netelement.com/en/ir website.
2017 Full Year Results:
- Total transactions dollars processed globally in 2017 exceeded
$2.8 billion, an increase of 14% compared to $2.45 billion in
2016
- Total transactions dollars processed geographically in North
America in 2017 were $2.3 billion, an increase of 18% compared to
$1.9 billion in 2016
- Total transactions dollars processed in international markets
in 2017 were $530 million, no change as compared to $530 million in
2016
- Total transactions processed for 2017 exceeded 154 million
compared to 187 million in 2016, a decline of 21% during 2017 due
to reorganization and consolidation of the mobile solutions
business, as well as an increased average transaction size at the
point of sale in the United States during 2017
- Revenues increased to $60.1 million, an increase of 11%
compared to $54.3 million in 2016
United States accounted for 85% of our total
revenues, while international revenues were 15% in 2017. Growth
across all categories was organic:
- North American Transaction Solutions segment:
Continued organic growth of small and medium-sized business (“SMB”)
merchants with emphasis on value-added offerings. Revenues for this
segment were $51.1 million, an increase of 21% over the prior
year
- International Transaction Solutions segment:
As a result of the consolidation of Online Solutions and Mobile
Solutions segments during 2017, revenues for the International
Transaction Solutions segment were $8.9 million, a decrease of 27%
over the prior year
“We are very pleased with our 2017 progress and
the strong balance sheet position as of December 31, 2017, which we
believe positions the company for future growth and opportunities,”
commented Oleg Firer, CEO of Net Element.
2017 Significant
Achievements:
- Received a $7.55 million institutional investment to support
continued organic growth and blockchain-focused developments
- Ensured continued compliance with NASDAQ listing
requirements
- Ranked as one of the fastest growing companies in North America
on Deloitte’s 2017 Technology Fast 500™
- Supported Florida SMB merchants affected by Hurricane Irma with
free mobile point-of-sale credit card readers
Recent Partnerships:
- Joined the Enterprise Ethereum Alliance ("EEA"), the
world's largest open-source blockchain initiative with over
250-member companies. Membership to the alliance is complementary
to the Company's recently announced decentralized blockchain
technology solution, Netevia, that will enable a vast number of
value-added services ("VAS") and support the adoption of Ethereum
in the enterprise
- Partnered with Elo to provide a modern best-in-class point of
sale solution. Combined Aptito POS software with Elo’s all-in-one
touchscreen device delivering stylish and reliable POS
solution
- Partnered with Payvision in Europe, extended access to
global currencies. Expanded payment acceptance to 120+ currencies
globally
- Partnered with Planet Payment for multi-currency pricing
solution in the United States. Introduced multi-currency
payment acceptance to online merchants in the United States
Recent Product Launches and
Updates:
- Launched multi-channel payments platform, Netevia. Connecting
and simplifying payments across sales channels through a single
integration point, Netevia delivers end-to-end payment processing
through easy-to-use APIs. This model complements Net Element's
ability to perform in a multi-channel environment, including POS,
e-commerce, mobile devices and will enable the company to perform
in blockchain technology solutions when fully developed
- Launched web-based, integrated same-day ACH and eCheck payment
processing solution in the United States
- Launched Zero-Fee processing program for SMB merchants
in the United States
- Launched loyalty program for international online merchants
utilizing a PayOnline platform
- Launched PayOnline's support for electronic commerce
in the United States
- Launched Apple Pay support in Russia
- Launched payment acceptance module for Telegram, Viber,
Facebook and VK instant messenger apps
- Expanded payments module to include Prominent InSales platform.
InSales platform provides access to over 4,000 merchants
- Launched comprehensive point-of-sale program during Unified
Payments' "2017 Launch Series" at Northeast Acquirers
Association event
- Launched ISO incubator program for certified resellers of
Unified Payments to help them grow their business, compete and
achieve success in today's evolving marketplace
- Launched fully integrated payment acceptance for V-Tell,
international mobile network operator
- Launched fully integrated payment acceptance for Azimuth
Airlines
- Added support for iDEAL payment system, the most popular
payment system in Netherlands
Outlook
Our strategy is to ensure that our business
remains successful in a rapidly changing market, creating
sustainable value for all our stakeholders, including our clients,
distribution partners and shareholders. We aim to achieve
superior results for our clients by having a deep understanding of
their payment acceptance needs, extensive market reach, strong
product development and technology enablement.
Planned for 2018:
We will continue to focus on understanding our
clients and addressing their payment acceptance needs in core
market segments.
- Continue growth in all key segments
- Drive client retention
- Expand our client base in selected markets
- Deliver value-added products to our clients to increase
efficiencies and payment acceptance
- Continue to develop Netvia, our next generation payments
platform, enabling intelligent routing of payments for the
application development community
- Launch new tools to reach our clients, such as digital
channels, and deepening partner relations
The global payments industry continued to
deliver healthy growth during 2017, with underlying transaction
volumes demonstrating even greater strength. We believe that
new and disruptive technologies will provide us the opportunity to
differentiate ourselves from our competition and continue
developing and delivering innovative payment solutions in 2018 and
beyond.
- Continue to scale and enhance new product launches that will
add value to our clients
- Extend our capabilities in next-generation POS hardware and
software, and deepening our partner proposition
- Commence trials of advanced technologies around business
intelligence and mobile based payments acceptance
- Target further developments in blockchain technologies,
payments enablement for Internet of Things and biometrics payment
acceptance
- Continue investment in future emerging payment
technologies
Realize the full potential of our business
model
- Deliver stronger organic growth
- Develop additional payment network relationships to integrate
with our technologies
- Seek acquisition or investment opportunities to deepen our
technological and distribution capabilities
Results of Operations for the Year Ended
December 31, 2017, compared to the Year Ended December 31,
2016
We reported a net loss attributable to Net
Element, Inc. stockholders of $9,913,485 or ($5.04) per share for
the year ended December 31, 2017 as compared to a net loss of
$13,487,537 or ($10.33) per share for the year ended December 31,
2016. This resulted in a decrease in net loss attributable to Net
Element, Inc. stockholders of $3,574,052 primarily due to an
increase in revenues, decreases in depreciation, amortization and
interest expenses, partially offset by an increase in general and
administrative expenses. Net loss attributable to Net Element, Inc.
stockholders for the year ended December 31, 2016 was also
negatively affected by an expense for loss from stock value
guarantee related to the PayOnline acquisition.
Eliminating the effects of non-cash compensation
and the 2016 PayOnline stock value guarantee payment, we reported
an adjusted non-GAAP, net loss attributable to Net Element, Inc.
stockholders of $6,973,061 or ($3.54) loss per share for the year
ended December 31, 2017 as compared to an adjusted non-GAAP, net
loss attributable to Net Element, Inc. stockholders of $7,861,241
or ($6..02) loss per share for the year ended December 31,
2016.
The following table sets forth our sources of
revenues, cost of revenues and gross margins for the years ended
December 31, 2017 and 2016.
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Gross Margin Analysis |
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Twelve |
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Twelve |
|
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Months Ended |
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Months Ended |
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Increase / |
|
Source of Revenues |
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|
December 31, 2017 |
|
|
Mix |
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|
|
December 31, 2016 |
|
|
Mix |
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|
|
(Decrease) |
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North
AmericanTransaction Solutions |
|
$ |
51,138,327 |
|
|
85.1 |
% |
|
$ |
42,130,902 |
|
|
77.6 |
% |
|
$ |
9,007,425 |
|
InternationalTransaction Solutions |
|
|
8,926,497 |
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|
14.9 |
% |
|
|
12,155,957 |
|
|
22.4 |
% |
|
|
(3,229,460 |
) |
Total |
|
$ |
60,064,824 |
|
|
100.0 |
% |
|
$ |
54,286,859 |
|
|
100.0 |
% |
|
$ |
5,777,965 |
|
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|
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Twelve |
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Twelve |
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|
Months Ended |
|
|
% of |
|
Months Ended |
|
|
% of |
|
Increase |
|
Cost of Revenues |
|
December 31, 2017 |
|
|
revenues |
|
December 31, 2016 |
|
|
revenues |
|
(Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
American Transaction Solutions |
|
$ |
44,265,264 |
|
|
86.6 |
% |
|
$ |
36,342,465 |
|
|
86.3 |
% |
|
$ |
7,922,799 |
|
International Transaction Solutions |
|
|
6,971,948 |
|
|
78.1 |
% |
|
|
9,365,776 |
|
|
77.0 |
% |
|
|
(2,393,828 |
) |
Total |
|
$ |
51,237,212 |
|
|
85.3 |
% |
|
$ |
45,708,241 |
|
|
84.2 |
% |
|
$ |
5,528,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
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|
Twelve |
|
|
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|
|
|
Months Ended |
|
|
% of |
|
Months Ended |
|
|
% of |
|
Increase |
|
Gross Margin |
|
December 31, 2017 |
|
|
revenues |
|
December 31, 2016 |
|
|
revenues |
|
(Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
American Transaction Solutions |
|
$ |
6,873,063 |
|
|
13.4 |
% |
|
$ |
5,788,437 |
|
|
13.7 |
% |
|
$ |
1,084,626 |
|
International Transaction Solutions |
|
|
1,954,549 |
|
|
21.9 |
% |
|
|
2,790,181 |
|
|
23.0 |
% |
|
|
(835,632 |
) |
Total |
|
$ |
8,827,612 |
|
|
14.7 |
% |
|
$ |
8,578,618 |
|
|
15.8 |
% |
|
$ |
248,994 |
|
|
|
|
|
|
|
|
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|
|
|
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|
|
Net revenues consist primarily of service fees
from transaction processing. Net revenues were $60,064,824 for the
year ended December 31, 2017 as compared to $54,286,859 for the
year ended December 31, 2016. The increase in net revenues is
primarily due to continued organic growth of North American
merchants with emphasis on value-added offerings partially offset
by a $3,229,460 decrease in net revenues from our International
Transaction Solutions segment as we experience increased
competition, decreased margins and reorganizing assignments from
our International Transaction Solutions segment.
Cost of revenues represents direct costs of
generating revenues, including commissions, mobile operator fees,
purchases of short numbers, interchange expense and processing
fees. Cost of revenues for the year ended December 31, 2017 were $
51,237,212 as compared to $45,708,241 for the year ended December
31, 2016. The year over year increase in cost of revenues of
$5,528,971 was driven by a $7,922,799 increase due to increased
North American Transaction Solutions sales for the year ended
December 31, 2017. This was partially offset by a $2,393,828
decrease in the International Transaction Solutions segment cost of
revenues due to the decrease in International Transaction Solutions
revenues from Digital Provider.
Gross Margin for the year ended December 31,
2017 was $8,827,613, or 14.7% of net revenue, as compared to
$8,578,618, or 15.8% of net revenue, for the year ended December
31, 2016. The primary reason gross margin percentages decreased was
due to increased (lower margin) business mix from North American
Transaction Solutions and a decrease in Digital Provider business
that had higher margins.
Total operating expenses were $17,425,030 for
the year ended December 31, 2017, as compared to total operating
expenses of $17,416,066 for the year ended December 31, 2016. Total
operating expenses for the year ended December 31, 2017 consisted
of general and administrative expenses of $10,629,773, non-cash
compensation of $2,940,424, a bad debt provision of $1,320,848 and
depreciation and amortization of $2,533,985. For the year ended
December 31, 2016, operating expenses consisted of general and
administrative expenses of $8,797,883, non-cash compensation of
$3,463,435, a bad debt provision of $1,688,237, and depreciation
and amortization of $3,466,511.
General and administrative expenses for the
years ended December 31, 2017 and 2016 consisted of operating
expenses not otherwise delineated in our Consolidated Statements of
Operations and Comprehensive Loss and include salaries and
benefits, professional fees, rent, business development, travel
expense, filing fees, transaction gains or losses, office expenses,
communication expenses, insurance expenses, and other expenses
required to run our business, as follows:
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|
Twelve months ended December 31,
2017 |
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|
Category |
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|
North
AmericanTransactionSolutions |
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|
|
InternationalTransactionSolutions |
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|
|
CorporateExpenses &Eliminations |
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|
|
Total |
|
Salaries, benefits,
taxes and contractor payments |
|
$ |
1,970,860 |
|
|
$ |
1,696,245 |
|
|
$ |
2,082,294 |
|
|
$ |
5,749,399 |
|
Professional fees |
|
|
505,383 |
|
|
|
819,184 |
|
|
|
1,312,271 |
|
|
|
2,636,838 |
|
Rent |
|
|
- |
|
|
|
245,539 |
|
|
|
245,186 |
|
|
|
490,725 |
|
Business
development |
|
|
53,011 |
|
|
|
32,072 |
|
|
|
3,569 |
|
|
|
88,652 |
|
Travel expense |
|
|
331,299 |
|
|
|
32,397 |
|
|
|
130,198 |
|
|
|
493,894 |
|
Filing fees |
|
|
- |
|
|
|
- |
|
|
|
72,035 |
|
|
|
72,035 |
|
Transaction (gains)
losses |
|
|
742 |
|
|
|
(41,200 |
) |
|
|
1,642 |
|
|
|
(38,816 |
) |
Office expenses |
|
|
303,586 |
|
|
|
98,961 |
|
|
|
120,103 |
|
|
|
522,650 |
|
Communications
expenses |
|
|
47,878 |
|
|
|
130,046 |
|
|
|
79,288 |
|
|
|
257,212 |
|
Insurance expense |
|
|
- |
|
|
|
5,401 |
|
|
|
135,386 |
|
|
|
140,787 |
|
Other expenses |
|
|
38,788 |
|
|
|
14,716 |
|
|
|
162,893 |
|
|
|
216,397 |
|
Total |
|
$ |
3,251,547 |
|
|
$ |
3,033,361 |
|
|
$ |
4,344,865 |
|
|
$ |
10,629,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended December 31,
2016 |
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
Category |
|
|
North AmericanTransactionSolutions |
|
|
|
InternationalTransactionSolutions |
|
|
|
CorporateExpenses &Eliminations |
|
|
|
Total |
|
Salaries, benefits,
taxes and contractor payments |
|
$ |
1,650,043 |
|
|
$ |
1,593,390 |
|
|
$ |
1,506,752 |
|
|
$ |
4,750,185 |
|
Professional fees |
|
|
422,681 |
|
|
|
901,861 |
|
|
|
1,390,297 |
|
|
|
2,714,839 |
|
Rent |
|
|
- |
|
|
|
282,099 |
|
|
|
284,234 |
|
|
|
566,333 |
|
Business
development |
|
|
36,923 |
|
|
|
129,525 |
|
|
|
11,841 |
|
|
|
178,289 |
|
Travel expense |
|
|
191,848 |
|
|
|
43,436 |
|
|
|
111,510 |
|
|
|
346,794 |
|
Filing fees |
|
|
- |
|
|
|
- |
|
|
|
82,560 |
|
|
|
82,560 |
|
Transaction (gains)
losses |
|
|
49 |
|
|
|
(327,122 |
) |
|
|
(413,470 |
) |
|
|
(740,543 |
) |
Office expenses |
|
|
103,616 |
|
|
|
110,897 |
|
|
|
107,237 |
|
|
|
321,750 |
|
Communications
expenses |
|
|
77,897 |
|
|
|
93,152 |
|
|
|
73,104 |
|
|
|
244,153 |
|
Insurance expense |
|
|
- |
|
|
|
9,855 |
|
|
|
163,506 |
|
|
|
173,361 |
|
Other expenses |
|
|
270 |
|
|
|
(68,976 |
) |
|
|
228,868 |
|
|
|
160,162 |
|
Total |
|
$ |
2,483,327 |
|
|
$ |
2,768,117 |
|
|
$ |
3,546,439 |
|
|
$ |
8,797,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Category |
|
|
North AmericanTransactionSolutions |
|
|
|
InternationalTransactionSolutions |
|
|
|
CorporateExpenses &Eliminations |
|
|
|
Total |
|
Salaries, benefits,
taxes and contractor payments |
|
$ |
320,817 |
|
|
$ |
102,855 |
|
|
$ |
575,542 |
|
|
$ |
999,214 |
|
Professional fees |
|
|
82,702 |
|
|
|
(82,677 |
) |
|
|
(78,026 |
) |
|
|
(78,001 |
) |
Rent |
|
|
- |
|
|
|
(36,560 |
) |
|
|
(39,048 |
) |
|
|
(75,608 |
) |
Business
development |
|
|
16,088 |
|
|
|
(97,453 |
) |
|
|
(8,272 |
) |
|
|
(89,637 |
) |
Travel expense |
|
|
139,451 |
|
|
|
(11,039 |
) |
|
|
18,688 |
|
|
|
147,100 |
|
Filing fees |
|
|
- |
|
|
|
- |
|
|
|
(10,525 |
) |
|
|
(10,525 |
) |
Transaction (gains)
losses |
|
|
693 |
|
|
|
285,922 |
|
|
|
415,112 |
|
|
|
701,727 |
|
Office expenses |
|
|
199,970 |
|
|
|
(11,936 |
) |
|
|
12,866 |
|
|
|
200,900 |
|
Communications
expenses |
|
|
(30,019 |
) |
|
|
36,894 |
|
|
|
6,184 |
|
|
|
13,059 |
|
Insurance expense |
|
|
- |
|
|
|
(4,454 |
) |
|
|
(28,120 |
) |
|
|
(32,574 |
) |
Other
expenses |
|
|
38,518 |
|
|
|
83,692 |
|
|
|
(65,975 |
) |
|
|
56,235 |
|
Total |
|
$ |
768,220 |
|
|
$ |
265,244 |
|
|
$ |
798,426 |
|
|
$ |
1,831,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, benefits, taxes and contractor
payments were $5,749,399 for the year ended December 31, 2017 as
compared to $4,750,185 for the year ended December 31, 2016,
representing an increase of $999,214. The increase in salaries of
$999,214 was due primarily to the increase of corporate salaries of
$575,542, resulting primarily from a $300,000 increase in
discretionary bonus granted to our CEO by the Board of Directors
and to a lesser extent increases in executive salaries. The
$320,817 increase in the North American Transaction Solutions
segment was primarily due to increases in headcount and sales
incentives for key employees as the business grew. The $102,855
increase in the International Transaction Solutions segment was
primarily due to fluctuations in the Ruble exchange rate.
Professional fees were $2,636,838 for the year
ended December 31, 2017 as compared to $2,714,839 for the year
ended December 31, 2016, representing a decrease of $78,001 as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months endedDecember 31,
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional Fees |
|
|
North AmericanTransactionSolutions |
|
|
|
InternationalTransactionSolutions |
|
|
|
CorporateExpenses &Eliminations |
|
|
|
Total |
|
General
Legal |
|
$ |
33,480 |
|
|
$ |
38,386 |
|
|
$ |
80,724 |
|
|
$ |
152,590 |
|
SEC Compliance
Legal Fees |
|
|
- |
|
|
|
- |
|
|
|
275,112 |
|
|
|
275,112 |
|
Accounting and
Auditing |
|
|
- |
|
|
|
15,433 |
|
|
|
412,943 |
|
|
|
428,376 |
|
Tax Compliance
and Planning |
|
|
- |
|
|
|
- |
|
|
|
55,400 |
|
|
|
55,400 |
|
Consulting |
|
|
471,903 |
|
|
|
765,365 |
|
|
|
488,092 |
|
|
|
1,725,360 |
|
Total |
|
$ |
505,383 |
|
|
$ |
819,184 |
|
|
$ |
1,312,271 |
|
|
$ |
2,636,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months endedDecember 31,
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional Fees |
|
|
North AmericanTransactionSolutions |
|
|
|
InternationalTransactionSolutions |
|
|
|
CorporateExpenses &Eliminations |
|
|
|
Total |
|
General
Legal |
|
$ |
43,257 |
|
|
$ |
5,539 |
|
|
$ |
193,952 |
|
|
$ |
242,748 |
|
SEC Compliance
Legal Fees |
|
|
- |
|
|
|
- |
|
|
|
175,000 |
|
|
|
175,000 |
|
Accounting and
Auditing |
|
|
- |
|
|
|
578 |
|
|
|
420,686 |
|
|
|
421,264 |
|
Tax Compliance
and Planning |
|
|
- |
|
|
|
- |
|
|
|
44,200 |
|
|
|
44,200 |
|
Consulting |
|
|
379,424 |
|
|
|
895,744 |
|
|
|
556,459 |
|
|
|
1,831,627 |
|
Total |
|
$ |
422,681 |
|
|
$ |
901,861 |
|
|
$ |
1,390,297 |
|
|
$ |
2,714,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional Fees |
|
|
North AmericanTransactionSolutions |
|
|
|
InternationalTransactionSolutions |
|
|
|
CorporateExpenses &Eliminations |
|
|
|
Total |
|
General
Legal |
|
$ |
(9,777 |
) |
|
$ |
32,847 |
|
|
$ |
(113,228 |
) |
|
$ |
(90,158 |
) |
SEC Compliance
Legal Fees |
|
|
- |
|
|
|
- |
|
|
|
100,112 |
|
|
|
100,112 |
|
Accounting and
Auditing |
|
|
- |
|
|
|
14,855 |
|
|
|
(7,743 |
) |
|
|
7,112 |
|
Tax Compliance
and Planning |
|
|
- |
|
|
|
- |
|
|
|
11,200 |
|
|
|
11,200 |
|
Consulting |
|
|
92,479 |
|
|
|
(130,379 |
) |
|
|
(68,367 |
) |
|
|
(106,267 |
) |
Total |
|
$ |
82,702 |
|
|
$ |
(82,677 |
) |
|
$ |
(78,026 |
) |
|
$ |
(78,001 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees decreased by $78,001 primarily
due to a decrease in general legal fees because of decreases in
litigation and consulting fees partially offset by an increase in
SEC compliance due to increased public market transactions.
Transaction gains and losses represent changes
in exchange rates between our functional currency and the foreign
currency in which the transaction is denominated. During the years
ended December 31, 2017 and 2016, respectively, we incurred $38,816
and $740,543 of foreign currency transaction losses.
Other general and administrative expenses were
$216,397 for the year ended December 31, 2017 as compared to
$160,162 for the year ended December 31, 2016, representing an
increase of $56,235. The increase was caused primarily by a $43,272
increase in taxes due to a 2016 tax refund in the International
Transaction Solutions segment that was not present in 2017.
Non-cash compensation expense was $2,940,424 for
the year ended December 31, 2017 as compared to $3,463,435 for the
year ended December 31, 2016. A summary of 2017 and 2016 non-cash
compensation activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Non-Cash Compensation Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ Amount |
|
|
|
# of Shares Issued |
|
|
|
# of Options Issued |
|
Board of Directors
& Employee stock and Options |
|
$ |
2,827,200 |
|
|
|
242,324 |
|
|
|
45,106 |
|
Stock issued for
consulting |
|
|
7,258 |
|
|
|
896 |
|
|
|
- |
|
Stock issued for
acquisitions |
|
|
105,966 |
|
|
|
13,082 |
|
|
|
- |
|
Total for
2017 |
|
$ |
2,940,424 |
|
|
|
256,302 |
|
|
|
45,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Non-Cash Compensation Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ Amount |
|
|
|
# of Shares Issued |
|
|
|
# of Options Issued |
|
Board of Directors
& Employee stock and Options |
|
$ |
3,184,608 |
|
|
|
1,166,610 |
|
|
|
182,408 |
|
Stock issued for
consulting |
|
|
78,827 |
|
|
|
- |
|
|
|
466,428 |
|
Stock issued for
acquisitions |
|
|
200,000 |
|
|
|
95,694 |
|
|
|
- |
|
Total for
2017 |
|
$ |
3,463,435 |
|
|
|
1,262,304 |
|
|
|
648,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded a provision for bad debt in the
amount of $1,320,848 for the year ended December 31, 2017, compared
to provision for bad debts of $1,688,237 for the year ended
December 31, 2016. For the year ended December 31, 2017 we recorded
a loss which was primarily comprised of $1,408,908 ACH rejects and
an $89,545 reduction in provision from our International
Transaction Solutions operations. Of the $1,408,908 of net ACH
rejects, $603,257 were passed through to independent sales
organizations via a reduction in commissions. For the year ended
December 31, 2016 we recorded a loss provision which was primarily
comprised of $1,173,815 in ACH rejects, attributable to the normal
course of our North American Transaction Solutions segment, in
addition, there was a $511,772 bad debt recovery from our mobile
payments business in Russia. During the year ended December 31,
2016, of the $1,173,815 of net ACH rejects, $394,134 were passed
through to independent sales organizations via a reduction in
commissions.
During the years ended December 31, 2017 and
2016, we did not recognize any goodwill impairment.
Depreciation and amortization expense consists
primarily of the amortization of merchant portfolios plus
depreciation expense on fixed assets, client acquisition costs,
capitalized software expenses, trademarks, domain names and
employee non-compete agreements. Depreciation and amortization
expense was $2,533,985 for the year ended December 31, 2017 as
compared to $3,466,511 for the year ended December 31, 2016. The
decrease was due to the full amortization of certain software and
merchant portfolio assets during 2017.
Interest expense was $1,189,622 for the year
ended December 31, 2017 as compared to $1,463,833 for the year
ended December 31, 2016, representing a decrease of $ 274,211 due
to lower RBL notes payable balance as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Funding Source |
|
|
TwelveMonths
EndedDecember 31, 2017 |
|
|
|
TwelveMonths
EndedDecember 31, 2016 |
|
|
|
Increase /(Decrease) |
|
MBF Notes |
|
$ |
76,591 |
|
|
|
61,325 |
|
|
|
15,266 |
|
RBL Notes |
|
|
772,777 |
|
|
|
1,282,439 |
|
|
|
(509,662 |
) |
Priority Payments
Notes |
|
|
168,233 |
|
|
|
- |
|
|
|
168,233 |
|
Other |
|
|
172,021 |
|
|
|
120,069 |
|
|
|
51,952 |
|
Total |
|
$ |
1,189,622 |
|
|
|
1,463,833 |
|
|
|
(274,211 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other interest expense for the year ended
December 31, 2017 consisted of $80,291 resulting from the
promissory note entered into on March 1, 2017 with Star Capital
Management, LLC. (See Note 12 to our Consolidated Financial
Statements) and $85,578 related to the PayOnline acquisition.
During the year ended December 31, 2016, other interest expense
primarily consisted of $120,069 related to the PayOnline
acquisition.
Other expenses for the year ended December 31,
2017 consisted primarily of $117,013 of foreign taxes and other
expenses attributed to our International Transaction Solutions
segment, as well as, approximately $48,000 in miscellaneous other
expenses in the North American Transaction Solutions segment.
The net income attributable to non-controlling
interests amounted to $109,564 and $128,539 for 2017 and 2016,
respectively. The income was attributed to our North American
Transaction Solutions segment represents 10% non-controlling
interest in Aptito. The non-controlling interest reflects the
results of operations of subsidiaries that are allocable to
minority equity owners.
Reconciliation of Non-GAAP Financial
Measures and Regulation G Disclosure
To supplement its consolidated financial
statements presented in accordance with United States generally
accepted accounting principles ("GAAP"), the Company provides
additional measures of its operating results by disclosing its
adjusted net loss attributable to Net Element, Inc. stockholders.
Adjusted net loss attributable to Net Element, Inc. stockholders is
calculated as net loss attributable to Net Element, Inc.
stockholders excluding non-cash share-based compensation and other
non-operating, non-recurring items. Net Element discloses this
amount on an aggregate and per share basis. 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 by the Company’s investors
of its historical performance through use of a metric that seeks to
normalize period-to-period earnings.
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, 2017 and 2016 is presented
in the following Non-GAAP Financial Measures Table.
|
|
|
|
|
|
GAAP |
Share-basedCompensation |
Loss from StockValue
Guarantee |
Adjusted Non-GAAP |
Twelve Months
Ended December 31, 2017 |
|
|
|
|
Net
(loss) income attributable to Net Element, Inc. stockholders |
$ |
(9,913,485 |
) |
$ |
2,940,424 |
$ |
- |
$ |
(6,973,061 |
) |
Basic and
diluted earnings per share |
$ |
(5.04 |
) |
$ |
1.49 |
$ |
- |
$ |
(3.54 |
) |
Basic and
diluted shares used in computing earnings per share |
|
1,967,676 |
|
|
|
|
1,967,676 |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
Share-basedCompensation |
Loss from StockValue
Guarantee |
AdjustedNon-GAAP |
Twelve Months
Ended December 31, 2016 |
|
|
|
|
Net
(loss) income attributable to Net Element, Inc. stockholders |
$ |
(13,487,537 |
) |
$ |
3,463,435 |
$ |
2,162,861 |
$ |
(7,861,241 |
) |
Basic and
diluted earnings per share |
$ |
(10.33 |
) |
$ |
2.65 |
$ |
1.66 |
$ |
(6.02 |
) |
Basic and
diluted shares used in computing earnings per share |
|
1,305,801 |
|
|
|
|
1,305,801 |
|
|
|
|
|
|
|
|
|
|
Additional information regarding Net Element’s
results for its year ended December 31, 2017 may be found in Net
Element’s annual report on Form 10-K, which was filed with the
Security and Exchange Commission (SEC) on April 2, 2018 and may be
obtained from the SEC’s Internet website at http://www.sec.gov.
About Net ElementNet Element,
Inc. (NASDAQ:NETE) operates a payments-as-a-service transactional
and value-added services platform for small to medium enterprise
("SME") in the U.S. and selected emerging markets. In the U.S. it
aims to grow transactional revenue by innovating SME productivity
services using blockchain technology solutions and Aptito, our
cloud-based, restaurant and retail point-of-sale solution.
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. Net Element was ranked as one of the fastest growing
companies in North America on Deloitte's 2017 Technology Fast
500™. In 2017 we were recognized by South Florida Business
Journal's as one of 2016's fastest growing technology companies.
Further information is available at www.NetElement.com.
Forward-Looking
StatementsSecurities 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. 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 whether blockchain technologies will in fact
play a key role in future commerce in the payments industry; and
whether the blockchain technologies will result in the
creation of value-added services for merchants and their
customers; whether the Company will be successful in the
development of a decentralized crypto-based ecosystem to act as a
framework for a number of value-added services that can connect
merchants and consumers directly utilizing blockchain technology
whether through its platform called Netevia or otherwise.
Additional 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; and (xii)
geopolitical instability and other conditions that may adversely
affect trends in consumer business and government spending.
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 in any other of the Company’s subsequent filings,
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, 2017 |
|
|
December 31, 2016 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
11,285,669 |
|
|
$ |
621,635 |
|
Accounts
receivable, net |
|
|
5,472,856 |
|
|
|
7,126,429 |
|
Prepaid
expenses and other assets |
|
|
2,282,614 |
|
|
|
1,467,897 |
|
Total
current assets, net |
|
|
19,041,139 |
|
|
|
9,215,961 |
|
Fixed assets, net |
|
|
58,268 |
|
|
|
117,295 |
|
Intangible assets,
net |
|
|
3,127,760 |
|
|
|
3,589,850 |
|
Goodwill |
|
|
9,643,752 |
|
|
|
9,643,752 |
|
Other long term
assets |
|
|
460,511 |
|
|
|
603,209 |
|
Total
assets |
|
$ |
32,331,430 |
|
|
$ |
23,170,067 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
6,785,459 |
|
|
$ |
7,510,113 |
|
Accrued
expenses |
|
|
3,674,430 |
|
|
|
5,518,823 |
|
Deferred
revenue |
|
|
1,712,591 |
|
|
|
1,355,972 |
|
Notes
payable (current portion) |
|
|
2,493,973 |
|
|
|
808,976 |
|
Due to
related parties |
|
|
- |
|
|
|
299,004 |
|
Total
current liabilities |
|
|
14,666,453 |
|
|
|
15,492,888 |
|
Notes
payable (net of current portion) |
|
|
4,521,449 |
|
|
|
3,615,782 |
|
Total
liabilities |
|
|
19,187,902 |
|
|
|
19,108,670 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY |
|
|
|
|
|
|
|
|
Series A
Convertible Preferred stock ($.0001 par value, 1,000,000 shares
authorized, no shares issued and outstanding at December 31, 2017
and December 31, 2016) |
|
|
- |
|
|
|
- |
|
Common
stock ($.0001 par value, 100,000,000 shares authorized and
3,853,100 and 1,535,350 shares issued and outstanding at December
31, 2017 and December 31, 2016 |
|
|
385 |
|
|
|
154 |
|
Additional paid in capital |
|
|
183,119,222 |
|
|
|
163,920,066 |
|
Accumulated other comprehensive loss |
|
|
(2,530,238 |
) |
|
|
(2,486,616 |
) |
Accumulated deficit |
|
|
(167,356,070 |
) |
|
|
(157,442,585 |
) |
Stock
subscriptions receivable |
|
|
(50,585 |
) |
|
|
- |
|
Noncontrolling interest |
|
|
(39,186 |
) |
|
|
70,378 |
|
Total
stockholders' equity |
|
|
13,143,528 |
|
|
|
4,061,397 |
|
Total liabilities and stockholders' equity |
|
$ |
32,331,430 |
|
|
$ |
23,170,067 |
|
|
NET
ELEMENT, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS |
|
|
|
Twelve Months Ended December 31 |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
Net revenues |
|
|
|
|
|
|
|
|
Service
fees |
|
$ |
58,723,928 |
|
|
$ |
48,784,855 |
|
Branded
content |
|
|
1,340,896 |
|
|
|
5,502,004 |
|
Total Revenues |
|
|
60,064,824 |
|
|
|
54,286,859 |
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Cost of
service fees |
|
|
49,934,371 |
|
|
|
40,521,236 |
|
Cost of
branded content |
|
|
1,302,841 |
|
|
|
5,187,005 |
|
General
and administrative |
|
|
10,629,773 |
|
|
|
8,797,883 |
|
Non-cash
compensation |
|
|
2,940,424 |
|
|
|
3,463,435 |
|
Bad debt
expense |
|
|
1,320,848 |
|
|
|
1,688,237 |
|
Depreciation and amortization |
|
|
2,533,985 |
|
|
|
3,466,511 |
|
Total costs and
operating expenses |
|
|
68,662,242 |
|
|
|
63,124,307 |
|
Loss from
operations |
|
|
(8,597,418 |
) |
|
|
(8,837,448 |
) |
Interest
expense, net |
|
|
(1,189,622 |
) |
|
|
(1,463,833 |
) |
Loss from
stock value guarantee |
|
|
- |
|
|
|
(3,722,142 |
) |
Other
income (expense) |
|
|
(236,009 |
) |
|
|
407,347 |
|
Net loss before income
taxes |
|
|
(10,023,049 |
) |
|
|
(13,616,076 |
) |
Income
taxes |
|
|
- |
|
|
|
- |
|
Net loss |
|
|
(10,023,049 |
) |
|
|
(13,616,076 |
) |
Net loss
attributable to the noncontrolling interest |
|
|
109,564 |
|
|
|
128,539 |
|
Net loss attributable
to Net Element, Inc. stockholders |
|
|
(9,913,485 |
) |
|
|
(13,487,537 |
) |
Foreign
currency translation |
|
|
(43,623 |
) |
|
|
(920,794 |
) |
Comprehensive loss
attributable to common stockholders |
|
$ |
(9,957,108 |
) |
|
$ |
(14,408,331 |
) |
|
|
|
|
|
|
|
|
|
Loss per share - basic
and diluted |
|
$ |
(5.04 |
) |
|
$ |
(10.33 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number
of common shares outstanding - basic and diluted |
|
|
1,967,676 |
|
|
|
1,305,801 |
|
|
NET ELEMENT, INC.CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY |
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid in |
|
|
Stock |
|
|
Comprehensive |
|
|
Non-controlling |
|
|
Accumulated |
|
|
Equity (Deficiency) |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Subscription |
|
|
Income |
|
|
interest |
|
|
Deficit |
|
|
in Assets |
|
Balance December 31,
2015 |
|
|
- |
|
|
|
- |
|
|
|
1,126,376 |
|
|
$ |
113 |
|
|
$ |
154,362,707 |
|
|
|
|
|
|
$ |
(1,565,822 |
) |
|
$ |
198,917 |
|
|
$ |
(143,955,048 |
) |
|
$ |
9,040,867 |
|
Share based
compensation |
|
|
- |
|
|
|
- |
|
|
|
121,442 |
|
|
|
12 |
|
|
|
4,427,105 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,427,117 |
|
Shares issued and
issuable for acquisitions |
|
|
- |
|
|
|
- |
|
|
|
6,543 |
|
|
|
1 |
|
|
|
134,094 |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
134,095 |
|
Shares issued for
insider financing |
|
|
- |
|
|
|
- |
|
|
|
46,643 |
|
|
|
5 |
|
|
|
988,823 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
988,828 |
|
Shares issued in
connection with debt restructuring |
|
|
- |
|
|
|
- |
|
|
|
166,340 |
|
|
|
16 |
|
|
|
3,288,820 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,288,836 |
|
Shares issued under
ESOUSA agreement |
|
|
- |
|
|
|
- |
|
|
|
68,006 |
|
|
|
7 |
|
|
|
718,517 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
718,524 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(128,539 |
) |
|
|
(13,487,537 |
) |
|
|
(13,616,076 |
) |
Comprehensive loss -
foreign currency translation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(920,794 |
) |
|
|
- |
|
|
|
- |
|
|
|
(920,794 |
) |
Balance
December 31, 2016 |
|
|
- |
|
|
|
- |
|
|
|
1,535,350 |
|
|
$ |
154 |
|
|
$ |
163,920,066 |
|
|
$ |
- |
|
|
$ |
(2,486,616 |
) |
|
$ |
70,378 |
|
|
$ |
(157,442,585 |
) |
|
$ |
4,061,397 |
|
Shares issued in
connection with reverse stock split |
|
|
- |
|
|
|
- |
|
|
|
3,117 |
|
|
|
0 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
Share based
compensation |
|
|
- |
|
|
|
- |
|
|
|
242,324 |
|
|
|
24 |
|
|
|
2,850,155 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,850,179 |
|
Shares issued for
acquisitions |
|
|
- |
|
|
|
- |
|
|
|
13,082 |
|
|
|
1 |
|
|
|
105,965 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
105,966 |
|
Shares issued to settle
merchant liabilities |
|
|
- |
|
|
|
- |
|
|
|
30,759 |
|
|
|
3 |
|
|
|
252,220 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
252,223 |
|
Shares issued for
consulting services |
|
|
- |
|
|
|
- |
|
|
|
19,896 |
|
|
|
2 |
|
|
|
228,416 |
|
|
|
(50,585 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
177,833 |
|
Shares issued in
connection with debt restructuring |
|
|
- |
|
|
|
- |
|
|
|
127,406 |
|
|
|
13 |
|
|
|
758,181 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
758,194 |
|
Shares issued under
ESOUSA/Cobblestone agreements |
|
|
- |
|
|
|
- |
|
|
|
1,881,165 |
|
|
|
188 |
|
|
|
15,004,217 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,004,405 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(109,564 |
) |
|
|
(9,913,485 |
) |
|
|
(10,023,049 |
) |
Comprehensive loss -
foreign currency translation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(43,622 |
) |
|
|
- |
|
|
|
- |
|
|
|
(43,622 |
) |
Balance
December 31, 2017 |
|
|
- |
|
|
|
- |
|
|
|
3,853,100 |
|
|
$ |
385 |
|
|
$ |
183,119,222 |
|
|
$ |
(50,585 |
) |
|
$ |
(2,530,238 |
) |
|
$ |
(39,186 |
) |
|
$ |
(167,356,070 |
) |
|
$ |
13,143,528 |
|
|
NET ELEMENT, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
Twelve Months Ended December 31, |
|
|
|
2017 |
|
|
2016 |
|
Cash flows from
operating activities |
|
|
|
|
|
|
|
|
Net loss attributable
to Net Element, Inc. stockholders |
|
$ |
(9,913,485 |
) |
|
$ |
(13,487,537 |
) |
Adjustments to
reconcile net loss to net cash (used in) provided by operating
activities |
|
|
|
|
|
|
- |
|
Non
controlling interest |
|
|
(109,564 |
) |
|
|
(128,539 |
) |
Share
based compensation |
|
|
2,940,424 |
|
|
|
3,463,435 |
|
Provision
for bad debts |
|
|
- |
|
|
|
500,000 |
|
Amortization of prepaid costs |
|
|
|
|
|
|
967,313 |
|
Depreciation and amortization |
|
|
2,533,985 |
|
|
|
3,466,510 |
|
Non cash
interest |
|
|
114,802 |
|
|
|
852,408 |
|
Changes in assets and
liabilities |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
3,002,425 |
|
|
|
(2,751,144 |
) |
Deferred
revenue |
|
|
356,619 |
|
|
|
612,062 |
|
Prepaid
expenses and other assets |
|
|
(1,022,985 |
) |
|
|
(570,582 |
) |
Accounts
payable and accrued expenses |
|
|
(2,943,154 |
) |
|
|
3,797,753 |
|
Net cash
used in operating activities |
|
|
(5,040,933 |
) |
|
|
(3,278,321 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client
acquisition costs |
|
|
(1,885,098 |
) |
|
|
(1,319,820 |
) |
Receipt
of excess deposits |
|
|
149,826 |
|
|
|
|
|
Purchase
of fixed and other assets |
|
|
(103,341 |
) |
|
|
(187,089 |
) |
Net cash
used in investing activities |
|
|
(1,838,613 |
) |
|
|
(1,506,909 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
|
|
|
|
Proceeds
from common stock |
|
|
14,884,435 |
|
|
|
- |
|
Proceeds
from indebtedness |
|
|
3,678,824 |
|
|
|
3,170,540 |
|
Cash
received for issuance of warrants |
|
|
|
|
|
|
300,000 |
|
Repayment
of indebtedness |
|
|
(998,780 |
) |
|
|
(71,700 |
) |
Related
party advances |
|
|
- |
|
|
|
1,027,874 |
|
Net cash
provided by financing activities |
|
|
17,564,479 |
|
|
|
4,426,714 |
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
|
(20,899 |
) |
|
|
(45,596 |
) |
Net
increase (decrease) in cash |
|
|
10,664,034 |
|
|
|
(404,112 |
) |
|
|
|
|
|
|
|
|
|
Cash at
beginning of period |
|
|
621,635 |
|
|
|
1,025,747 |
|
Cash at
end of period |
|
$ |
11,285,669 |
|
|
$ |
621,635 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information |
|
|
|
|
|
|
|
|
Cash paid
during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
1,074,820 |
|
|
$ |
611,625 |
|
Taxes |
|
$ |
86,942 |
|
|
$ |
94,718 |
|
Share
issuance for settlement of unpaid compensation |
|
$ |
- |
|
|
$ |
1,042,509 |
|
Shares
issued for redemption of indebtedness |
|
$ |
379,874 |
|
|
$ |
2,499,481 |
|
Shares
issued in settlement of advances from board member |
|
$ |
- |
|
|
$ |
909,285 |
|
|
|
|
|
|
|
|
|
|
Shares
issued in settlement of related party debt |
|
$ |
378,253 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Contact:Net Element, Inc.Media@NetElement.com+1
(786) 923-0502
Corporate Communications Contact:
NetworkNewsWire (NNW) New York, New York
www.NetworkNewsWire.comEditor@NetworkNewsWire.com +1 (212)
418-1217
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