Net revenues increased 19% for the quarter
as compared to the prior year, loss per share narrows significantly
over the same period last year
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 reports its financial results
for the third quarter ended September 30, 2018, and provides an
update on recent strategic and operational initiatives.
Conference Call:
On November 15, 2018, at 8:30 a.m. EST the Company will host a
conference call to discuss 2018 third-quarter 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
73855497. 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/bnctmpfp. Following
completion of the call, a recorded replay of the webcast will be
available on
the www.netelement.com/en/ir website.
Financial Performance:
Net revenues were approximately $17.2 million for the three
months ended September 30, 2018, compared to approximately $14.9
million for the prior year. The increase was primarily driven by an
increase of approximately $2.5 million (or 19 %) in net revenues
from our North American Transaction Solutions segment due to
organic growth and the acquisition of a transactional services
portfolio.
Net revenues were approximately $49.7 million for the nine
months ended September 30, 2018, compared to approximately $44.6
million for the prior year. The increase of approximately $5.1
million (or 11.5%) in total net revenues for the nine months ended
September 30, 2018 is primarily due to organic growth of merchants
in our North American Transaction Solutions segment, which was
partially offset by an approximately $1.2 million (or 17.2%)
decrease in net revenues from our International Transaction
Solutions segment as we continued reorganizing and combining our
mobile payments operations with PayOnline. We have eliminated
mobile payment operations staff and assigned current
responsibilities to team members at PayOnline and TOT Group Russia
and continue to explore partnership opportunities that can monetize
our experience and relationships with mobile operators and local
institutions.
United States accounted for 90.4% of total revenues for the
third quarter and 88.5% for nine months ended September 30, 2018,
while international revenues were 9.6% for the third quarter and
11.5% for the nine months ended September 30, 2018.
- Total dollars processed for the nine months ended September 30,
2018 increased 35% to $2.45 billion from $1.81 billion in
transaction volume during the same period in 2017. Led by robust
growth from our subsidiary Unified Payments, the North American
Transaction Solutions segment saw the largest increase of 39% to
$2.17 billion from $1.56 billion. International Transaction
Solutions increased 10% to $283 million from $257 million.
- Total transactions processed during the nine months ended
September 30, 2018 increased 34% to 73.0 million compared to 54.6
million for the same period in 2017. The increase in transactions
processed came primarily from North American Transaction Solutions
segment, which saw an increase of 40% to 43.7 million from 31.1
million. International Transaction Solutions segment processed 29.3
million versus 23.1 million, which represents an increase of 25%.
Growth in all segments was organic. The above results include the
reorganization of the mobile payments segment into the
International Transactions Solutions segment.
“We are pleased with our performance in the third quarter and
the nine months period as we continue to deliver double digit net
revenue growth with improved gross margin performance, underscoring
the ongoing execution of our technology enabled, value-added
strategy,” commented Oleg Firer, CEO of Net Element. “We continue
to take steps that will enhance our long-term performance as we
remain focused on growth and building value for our
shareholders.”
Third Quarter 2018 Business Highlights:
- Acquired recurring cash flow assets for a total of $2.7
million, which are expected to generate in excess of $5 million in
gross profits over the next four years.
- Launched subscription-based payment processing offering aimed
at small businesses in the United States. The new offering targets
the multi-billion dollar subscription economy and gains traction
through a partnership agreement with Payment Club, projected to add
over $1.5 million in gross profits over the next four years.
Results of Operations for the Three Months Ended September 30,
2018 Compared to the Three Months Ended September 30, 2017
We reported a net loss attributable to common stockholders of
approximately $0.9 million or $0.23 per share loss for the three
months ended September 30, 2018 as compared to a net loss of
approximately $1.7 million or $0.90 per share loss for the prior
year. The decrease in net loss attributable to stockholders of $0.8
million was primarily due to an increase in revenues.
Adjusting for non-cash compensation, we have a non-GAAP adjusted
net loss attributable to common stockholders of approximately $0.9
million, or $0.22 loss per share, for the quarter ended September
30, 2018, as compared to a non-GAAP adjusted net loss attributable
to common stockholders of approximately $1.6 million, or $0.82 loss
per share, for the prior year.
|
|
|
|
|
|
|
|
|
|
|
Source of
Revenues |
|
Three Months Ended September 30, 2018 |
|
Mix |
|
Three Months Ended September 30, 2017 |
|
Mix |
|
Increase / (Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
American Transaction Solution |
|
$ |
15,590,832 |
|
|
|
90.4 |
% |
|
$ |
13,123,204 |
|
|
|
88.1 |
% |
|
$ |
2,467,628 |
|
International Transaction Solutions |
|
|
1,651,926 |
|
|
|
9.6 |
% |
|
|
1,777,927 |
|
|
|
11.9 |
% |
|
|
(126,001 |
) |
Total |
|
$ |
17,242,758 |
|
|
|
100.0 |
% |
|
$ |
14,901,131 |
|
|
|
100.0 |
% |
|
$ |
2,341,627 |
|
Gross
Margin |
|
Three Months Ended September 30, 2018 |
|
% of revenues |
|
Three Months Ended September 30, 2017 |
|
% of revenues |
|
Increase / (Decrease) |
|
|
|
|
|
|
|
|
|
|
|
North American
Transaction Solution |
|
$ |
2,304,622 |
|
|
|
14.8 |
% |
|
$ |
1,844,106 |
|
|
|
14.1 |
% |
|
$ |
460,516 |
|
International Transaction Solutions |
|
|
378,328 |
|
|
|
22.9 |
% |
|
|
300,398 |
|
|
|
16.9 |
% |
|
|
(77,930 |
) |
Total |
|
$ |
2,682,950 |
|
|
|
15.6 |
% |
|
$ |
2,144,504 |
|
|
|
14.4 |
% |
|
$ |
538.446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The gross margin for the three months ended September 30, 2018
was approximately $2.7 million, or 15.6% of net revenue, as
compared to approximately $2.1 million, or 14.4% of net revenue,
for prior year. The primary reason for the increase in the gross
margin percentage was the result of North American Transaction
Solutions negotiating favorable on-boarding contract terms and the
processing of transactions utilizing our self-designated
BIN/ICA.
Selling, general and administrative expenses remained flat at
$2.4 million for the three months ended September 30, 2018 as
compared to the prior year. The reduction of approximately $11,000
in selling, general and administrative expenses was primarily due
to decreases in professional fees ($64,335), rent ($29,092) and
office expenses ($29,561), offset by increases in salaries and
benefits ($22,456), transaction losses ($31,297), and
communications expenses ($52,959).
Selling, general and administrative expenses for the three
months ended September 30, 2018 and 2017 consisted of operating
expenses not otherwise delineated in our Condensed Consolidated
Statements of Operations and Comprehensive Loss, as follows:
Category |
|
North American Transaction Solutions |
|
|
International Transaction Solutions |
|
|
Corporate Expenses & Eliminations |
|
|
Total |
|
Salaries, benefits,
taxes and contractor payments |
|
$ |
(89,678 |
) |
|
$ |
5,595 |
|
|
$ |
106,539 |
|
|
$ |
22,456 |
|
Professional fees |
|
|
(71,146 |
) |
|
|
(153,926 |
) |
|
|
160,737 |
|
|
|
(64,335 |
) |
Rent |
|
|
— |
|
|
|
(21,640 |
) |
|
|
(7,452 |
) |
|
|
(29,092 |
) |
Business
development |
|
|
23,377 |
|
|
|
(7,830 |
) |
|
|
3,394 |
|
|
|
18,941 |
|
Travel expense |
|
|
6,983 |
|
|
|
(1,670 |
) |
|
|
12,198 |
|
|
|
17,511 |
|
Filing fees |
|
|
— |
|
|
|
— |
|
|
|
(6,448 |
) |
|
|
(6,448 |
) |
Transaction (gains)
losses |
|
|
— |
|
|
|
31,297 |
|
|
|
— |
|
|
|
31,297 |
|
Office expenses |
|
|
(12,216 |
) |
|
|
(15,507 |
) |
|
|
(1,838 |
) |
|
|
(29,561 |
) |
Communications
expenses |
|
|
27,566 |
|
|
|
12,406 |
|
|
|
12,987 |
|
|
|
52,959 |
|
Insurance expense |
|
|
— |
|
|
|
(225 |
) |
|
|
3,959 |
|
|
|
3,734 |
|
Other expenses |
|
|
1,005 |
|
|
|
(2,420 |
) |
|
|
(26,967 |
) |
|
|
(28,382 |
) |
Total |
|
$ |
(114,109 |
) |
|
$ |
(153,920 |
) |
|
$ |
257,109 |
|
|
$ |
(10,920 |
) |
Salaries, benefits, taxes and contractor payments remained
steady for the three months ended September 30, 2018 as compared to
the prior year. This was primarily due to the Company’s continued
monitoring of operations and the labor costs necessary to maintain
or increase revenues.
Professional fees were approximately $0.6 million for the three
months ended September 30, 2018 as compared to approximately $0.7
million for the prior year. The decrease was primarily due to the
reorganization of mobile operations into PayOnline, which was
offset by an increase in consulting fees relating to compliance
training for the board of directors and internal control evaluation
procedures.
Communications expenses for the three months ended September 30,
2018 were approximately $109,000 as compared to approximately
$56,000 for the three months ended September 30, 2018. The
difference was primarily due to increased web-hosting charges from
our International Transaction Solutions segment.
All other operating expenses were relatively in line with the
previous comparable quarter.
Results of Operations for the Nine Months Ended September 30,
2018 Compared to the Nine Months Ended September 30, 2017
We reported a net loss attributable to stockholders of
approximately $3.4 million, or $0.88 per share loss, for the nine
months ended September 30, 2018, as compared to a net loss
attributable to stockholders of approximately $5.8 million, or
$3.29 per share loss, for the prior year. The decrease in net loss
attributable to stockholders of approximately $2.4 million was
primarily due to an increase in revenues and other income, as well
as, decreases in non-cash compensation.
Adjusting for non-cash compensation, we have a non-GAAP adjusted
net loss attributable to common stockholders of approximately $3.3
million, or $0.84 loss per share, for the nine months ended
September 30, 2018, as compared to a non-GAAP adjusted net loss
attributable to common stockholders of approximately $5.1 million,
or $2.88 loss per share, for the prior year.
|
|
|
|
|
|
|
|
|
|
|
Source of
Revenues |
|
Nine Months Ended September 30, 2018 |
|
Mix |
|
Nine Months Ended September 30, 2017 |
|
Mix |
|
Increase / (Decrease) |
|
|
|
|
|
|
|
|
|
|
|
North American
Transaction Solution |
|
$ |
43,976,578 |
|
|
|
88.5 |
% |
|
$ |
37,701,136 |
|
|
|
84.5 |
% |
|
$ |
6,275,442 |
|
International Transaction Solutions |
|
|
5,713,292 |
|
|
|
11.5 |
% |
|
|
6,902,977 |
|
|
|
15.5 |
% |
|
|
(1,189,685 |
) |
Total |
|
$ |
49,689,870 |
|
|
|
100.0 |
% |
|
$ |
44,604,113 |
|
|
|
100.0 |
% |
|
$ |
5,085,757 |
|
Gross
Margin |
|
Nine Months Ended September 30, 2018 |
|
% of revenues |
|
Nine Months Ended September 30, 2017 |
|
% of revenues |
|
Increase / (Decrease) |
|
|
|
|
|
|
|
|
|
|
|
North American
Transaction Solution |
|
$ |
6,482,502 |
|
|
|
14.7 |
% |
|
$ |
5,488,080 |
|
|
|
14.6 |
% |
|
$ |
994,422 |
|
International Transaction Solutions |
|
|
1,298,483 |
|
|
|
22.7 |
% |
|
|
1,581,022 |
|
|
|
22.9 |
% |
|
|
(282,539 |
) |
Total |
|
$ |
7,780,985 |
|
|
|
15.7 |
% |
|
$ |
7,069,102 |
|
|
|
15.8 |
% |
|
$ |
711,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin for the nine months ended September 30, 2018 was
approximately $7.7 million, or 15.5% of net revenue, as compared to
approximately $7.1 million, or 15.8% of net revenue, for prior
year. The gross margin was slighter lower due to a decrease in our
mobile payments operations in our International Transaction
Solutions segment that had typically higher margins than our North
America Transaction Solutions segment.
Selling, general and administrative expenses for the nine months
ended September 30, 2018, were approximately $7.3 million as
compared to approximately $7.8 million for the prior year. The
approximately $500,000 reduction in general and administrative
expenses was primarily due to decreases in salaries and benefits
($395,676), professional fees ($222,873) and rent ($167,138) offset
by increases in transaction (gains) losses ($103,726), business
development ($84,478) and communications expenses
($107,545).
Selling, general and administrative variances increase /
(decrease) for the nine months ended September 30, 2018, compared
to the nine months ended September 30, 2017, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Category |
|
North American Transaction Solutions |
|
|
International Transaction Solutions |
|
|
Corporate Expenses & Eliminations |
|
|
Total |
|
Salaries, benefits,
taxes and contractor payments |
|
$ |
(279,346 |
) |
|
$ |
(133,755 |
) |
|
$ |
20,425 |
|
|
$ |
(392,676 |
) |
Professional fees |
|
|
(112,975 |
) |
|
|
(494,471 |
) |
|
|
384,573 |
|
|
|
(222,873 |
) |
Rent |
|
|
— |
|
|
|
(124,147 |
) |
|
|
(42,991 |
) |
|
|
(167,138 |
) |
Business
development |
|
|
106,759 |
|
|
|
(25,092 |
) |
|
|
2,881 |
|
|
|
84,478 |
|
Travel expense |
|
|
(15,079 |
) |
|
|
(12,269 |
) |
|
|
(2,115 |
) |
|
|
(29,463 |
) |
Filing fees |
|
|
— |
|
|
|
— |
|
|
|
2,562 |
|
|
|
2,562 |
|
Transaction (gains)
losses |
|
|
(742 |
) |
|
|
106,110 |
|
|
|
(1,642 |
) |
|
|
103,726 |
|
Office expenses |
|
|
75,422 |
|
|
|
(47,181 |
) |
|
|
(67,764 |
) |
|
|
(29,523 |
) |
Communications
expenses |
|
|
52,638 |
|
|
|
29,998 |
|
|
|
24,909 |
|
|
|
107,545 |
|
Insurance expense |
|
|
— |
|
|
|
(5,402 |
) |
|
|
(3,396 |
) |
|
|
(8,798 |
) |
Other expenses |
|
|
(2,059 |
) |
|
|
2,619 |
|
|
|
66,317 |
|
|
|
66,877 |
|
Total |
|
$ |
(175,382 |
) |
|
$ |
(703,590 |
) |
|
$ |
383,689 |
|
|
$ |
(495,283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, benefits, taxes and contractor payments were
approximately $3.9 million for the nine months ended September 30,
2018 as compared to approximately $4.3 for the prior year.
The decrease in salaries and benefits of approximately $0.4
million was primarily the result of the Company’s continued
monitoring of labor costs in relation to processing revenues and
also our mobile payment operations being combined with
PayOnline.
Professional fees were approximately $1.8 million for the nine
months ended September 30, 2018 as compared to approximately $2
million for the prior year. The decrease was primarily the result
of combining the mobile payment operations into PayOnline, which
was offset by an increase in general legal fees in connection with
certain litigation matters.
The decrease in rent for the nine months ending September 30,
2018 was the result of the office space lease for our mobile
payment operations in Russia not being renewed as these operations
were combined into PayOnline.
Communications expenses for the nine months ended September 30,
2018 increased by approximately $0.1 million, which was primarily
due to due web-hosting and internet charges.
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 stockholders is calculated as net loss
attributable to Net Element stockholders excluding non-cash
share-based compensation. 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 three months
ended September 30, 2018, and 2017 is presented in the following
Non-GAAP Financial Measures Table.
|
|
|
|
|
|
|
|
|
GAAP |
|
Share-based Compensation |
|
Adjusted Non-GAAP |
Three Months
Ended September 30, 2018 |
|
|
|
|
|
|
Net (loss) income
attributable to Net Element Inc stockholders |
|
$ |
(910,414 |
) |
|
$ |
22,500 |
|
|
$ |
(887,914 |
) |
Basic and
diluted earnings per share |
|
$ |
(0.23 |
) |
|
$ |
0.01 |
|
|
$ |
(0.22 |
) |
Basic and
diluted shares used in computing earnings per share |
|
|
3,901,218 |
|
|
|
|
|
|
|
3,901,218 |
|
|
|
GAAP |
|
Share-based Compensation |
|
Adjusted Non-GAAP |
Three Months
Ended September 30, 2017 |
|
|
|
|
|
|
Net (loss) income
attributable to Net Element Inc stockholders |
|
$ |
(1,702,536 |
) |
|
$ |
128,537 |
|
|
$ |
(1,573,999 |
) |
Basic and
diluted earnings per share |
|
$ |
(0.90 |
) |
|
$ |
0.07 |
|
|
$ |
(0.82 |
) |
Basic and
diluted shares used in computing earnings per share |
|
|
1,891,023 |
|
|
|
|
|
|
|
1,891,023 |
|
|
|
GAAP |
|
Share-based Compensation |
|
Adjusted Non-GAAP |
Nine Months
Ended September 30, 2018 |
|
|
|
|
|
|
Net (loss) income
attributable to Net Element Inc stockholders |
|
$ |
(3,424,989 |
) |
|
$ |
127,011 |
|
|
$ |
(3,297,978 |
) |
Basic and
diluted earnings per share |
|
$ |
(0.88 |
) |
|
$ |
0.03 |
|
|
$ |
(0.84 |
) |
Basic and
diluted shares used in computing earnings per share |
|
|
3,870,134 |
|
|
|
|
|
|
|
3,870,134 |
|
|
|
GAAP |
|
Share-based Compensation |
|
Adjusted Non-GAAP |
Nine Months
Ended September 30, 2017 |
|
|
|
|
|
|
Net (loss) income
attributable to Net Element Inc stockholders |
|
$ |
(5,830,373 |
) |
|
$ |
724,941 |
|
|
$ |
(5,105,432 |
) |
Basic and
diluted earnings per share |
|
$ |
(3.29 |
) |
|
$ |
0.41 |
|
|
$ |
(2.88 |
) |
Basic and
diluted shares used in computing earnings per share |
|
|
1,770,947 |
|
|
|
|
|
|
|
1,770,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional information regarding Net Element’s results for its
three months ended September 30, 2018, may be found in Net
Element’s quarterly report on Form 10-Q, which was filed with the
Security and Exchange Commission (SEC) on November 14, 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., the
Company 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™
and recognized by South Florida Business Journal 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 the Company
will be successful in achieving further growth and financial
improvement. 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) 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, 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. |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) |
|
|
September 30, 2018 |
|
|
December 31, 2017 |
|
ASSETS |
|
|
|
Current assets: |
|
|
|
|
|
|
Cash |
$ |
2,563,104 |
|
|
$ |
11,285,669 |
|
Accounts receivable,
net |
4,970,697 |
|
|
|
5,472,856 |
|
Prepaid expenses and
other assets |
1,679,092 |
|
|
|
2,282,614 |
|
Total
current assets, net |
9,212,893 |
|
|
|
19,041,139 |
|
Equipment, net |
34,267 |
|
|
|
58,268 |
|
Intangible assets,
net |
5,354,237 |
|
|
|
3,127,760 |
|
Goodwill |
9,643,752 |
|
|
|
9,643,752 |
|
Other long term
assets |
603,110 |
|
|
|
460,511 |
|
Total
assets |
24,848,259 |
|
|
|
32,331,430 |
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
5,407,971 |
|
|
|
6,785,459 |
|
Accrued
expenses |
2,247,101 |
|
|
|
3,674,430 |
|
Deferred
revenue |
1,173,802 |
|
|
|
1,712,591 |
|
Notes
payable (current portion) |
484,490 |
|
|
|
2,493,973 |
|
Due to
related parties |
441,606 |
|
|
|
461,992 |
|
Total
current liabilities |
9,754,970 |
|
|
|
14,666,453 |
|
Notes
payable (net of current portion) |
5,072,396 |
|
|
|
4,521,449 |
|
Total
liabilities |
14,827,366 |
|
|
|
19,187,902 |
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
Series A
convertible preferred stock ($.0001 par value, 1,000,000 shares
authorized, no shares issued and outstanding at September 30, 2018
and December 31, 2017) |
— |
|
|
|
— |
|
Common
stock ($.0001 par value, 100,000,000 shares authorized and
3,858,813 and 3,853,100 shares issued and outstanding at September
30, 2018 and December 31, 2017 |
385 |
|
|
|
385 |
|
Paid in
capital |
183,223,732 |
|
|
|
183,119,222 |
|
Accumulated other comprehensive loss |
(2,315,394 |
) |
|
|
(2,530,238 |
) |
Accumulated deficit |
(170,781,062 |
) |
|
|
(167,356,070 |
) |
Stock
subscriptions receivable |
— |
|
|
|
(50,585 |
) |
Noncontrolling interest |
(106,768 |
) |
|
|
(39,186 |
) |
Total
stockholders’ equity |
10,020,893 |
|
|
|
13,143,528 |
|
Total
liabilities and stockholders’ equity |
$ |
24,848,259 |
|
|
$ |
32,331,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ELEMENT, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS (UNAUDITED) |
|
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Net revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
fees |
|
$ |
17,242,758 |
|
|
$ |
14,901,131 |
|
|
$ |
49,689,870 |
|
|
$ |
43,263,217 |
|
Branded
content |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,340,896 |
|
Total Revenues |
|
|
17,242,758 |
|
|
|
14,901,131 |
|
|
|
49,689,870 |
|
|
|
44,604,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
service fees |
|
|
14,559,808 |
|
|
|
12,756,627 |
|
|
|
41,992,150 |
|
|
|
36,232,170 |
|
Cost of
branded content |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,302,841 |
|
Selling,
general and administrative |
|
|
2,346,809 |
|
|
|
2,357,729 |
|
|
|
7,292,785 |
|
|
|
7,788,068 |
|
Non-cash
compensation |
|
|
22,500 |
|
|
|
111,277 |
|
|
|
127,011 |
|
|
|
836,218 |
|
Bad debt
expense |
|
|
611,897 |
|
|
|
319,690 |
|
|
|
1,611,068 |
|
|
|
1,465,311 |
|
Depreciation and amortization |
|
|
463,384 |
|
|
|
630,020 |
|
|
|
1,829,447 |
|
|
|
1,860,401 |
|
Total costs and
operating expenses |
|
|
18,004,398 |
|
|
|
16,175,343 |
|
|
|
52,852,461 |
|
|
|
49,485,009 |
|
Loss from
operations |
|
|
(761,640 |
) |
|
|
(1,274,212 |
) |
|
|
(3,162,591 |
) |
|
|
(4,880,896 |
) |
Interest
expense, net |
|
|
(215,935 |
) |
|
|
(302,813 |
) |
|
|
(694,910 |
) |
|
|
(894,553 |
) |
Other
income (expense) |
|
|
41,507 |
|
|
|
(92,904 |
) |
|
|
364,930 |
|
|
|
(148,099 |
) |
Net (loss) income
before income taxes |
|
|
(936,068 |
) |
|
|
(1,669,929 |
) |
|
|
(3,492,571 |
) |
|
|
(5,923,548 |
) |
Income
taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net loss |
|
|
(936,068 |
) |
|
|
(1,669,929 |
) |
|
|
(3,492,571 |
) |
|
|
(5,923,548 |
) |
Net
(income) loss attributable to the non-controlling interest |
|
|
25,654 |
|
|
|
(32,607 |
) |
|
|
67,582 |
|
|
|
93,175 |
|
Net loss attributable
to Net Element, Inc. stockholders |
|
|
(910,414 |
) |
|
|
(1,702,536 |
) |
|
|
(3,424,989 |
) |
|
|
(5,830,373 |
) |
Foreign
currency translation |
|
|
145,867 |
|
|
|
92,191 |
|
|
|
214,845 |
|
|
|
(41,809 |
) |
Comprehensive loss
attributable to common stockholders |
|
$ |
(764,547 |
) |
|
$ |
(1,610,345 |
) |
|
$ |
(3,210,144 |
) |
|
$ |
(5,872,182 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic
and diluted |
|
$ |
(0.23 |
) |
|
$ |
(0.90 |
) |
|
$ |
(0.88 |
) |
|
$ |
(3.29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of common shares outstanding - basic and diluted |
|
|
3,901,218 |
|
|
|
1,891,023 |
|
|
|
3,870,134 |
|
|
|
1,770,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
ELEMENT, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) |
|
Nine Months Ended September 30, |
|
|
2018 |
|
|
2017 |
|
Cash flows from
operating activities |
|
|
|
|
|
|
|
Net loss attributable
to Net Element, Inc. stockholders |
$ |
(3,424,989 |
) |
|
$ |
(5,830,373 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
Non-controlling interest |
|
(67,582 |
) |
|
|
(93,175 |
) |
Share
based compensation |
|
127,011 |
|
|
|
836,218 |
|
Deferred
revenue |
|
(536,041 |
) |
|
|
(159,228 |
) |
Depreciation and amortization |
|
1,829,447 |
|
|
|
1,860,401 |
|
Non cash
interest |
|
49,000 |
|
|
|
98,774 |
|
Changes in assets and
liabilities |
|
|
|
|
|
- |
|
Accounts
receivable |
|
379,601 |
|
|
|
3,421,265 |
|
Prepaid
expenses and other assets |
|
457,806 |
|
|
|
(352,551 |
) |
Accounts
payable and accrued expenses |
|
(2,087,416 |
) |
|
|
(2,390,495 |
) |
Net cash
used in operating activities |
|
(3,273,163 |
) |
|
|
(2,609,164 |
) |
|
|
|
|
|
|
|
|
Cash flows from
investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of portfolios and client acquisition costs |
|
(3,851,596 |
) |
|
|
(1,380,661 |
) |
Purchase
of equipment and changes in other assets |
|
(115,041 |
) |
|
|
77,430 |
|
Net cash
used in investing activities |
|
(3,966,637 |
) |
|
|
(1,303,231 |
) |
|
|
|
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
|
|
|
Proceeds
from sale of common stock |
|
- |
|
|
|
1,150,098 |
|
Proceeds
from indebtedness |
|
- |
|
|
|
3,239,033 |
|
Repayment
of indebtedness |
|
(1,458,536 |
) |
|
|
(273,360 |
) |
Related
party advances |
|
(39,265 |
) |
|
|
77,587 |
|
Net cash
(used in) provided by financing activities |
|
(1,497,801 |
) |
|
|
4,193,358 |
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
15,036 |
|
|
|
19,504 |
|
Net
(decrease) increase in cash |
|
(8,722,565 |
) |
|
|
300,467 |
|
|
|
|
|
|
|
|
|
Cash at
beginning of period |
|
11,285,669 |
|
|
|
621,635 |
|
Cash at
end of period |
$ |
2,563,104 |
|
|
$ |
922,102 |
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information |
|
|
|
|
|
|
|
Cash paid
during the period for: |
|
|
|
|
|
|
|
Interest |
$ |
645,910 |
|
|
$ |
795,779 |
|
Taxes |
$ |
44,932 |
|
|
$ |
86,942 |
|
|
|
|
|
|
|
|
|
Contact:Net Element, Inc.+1 (786)
923-0502www.netelement.com Media@NetElement.com
Corporate Communications
Contact:NetworkNewsWire (NNW) New York, New
York +1 (212)
418-1217 www.NetworkNewsWire.com Editor@NetworkNewsWire.com
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