Net Element Reports Full-Year 2017 Financial Results And Provides Business Update

The following excerpt is from the company's SEC filing.

Annual revenue increased 11% to $60.1 million for 2017 from $54.3 million in 2016

MIAMI, FL - April 2, 2018 - 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 institution 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

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, continue developing and delivering innovative payment solutions in 2018 and beyond. 

Continue to develop Netevia, our next-generation payments platform, enabling intelligent routing of payments for the application development community

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.

Gross Margin Analysis

Source of Revenues

Twelve Months Ended December 31, 2017

Twelve Months Ended December 31, 2016

Increase / (Decrease)

51,138,327

42,130,902

9,007,425

8,926,497

12,155,957

(3,229,460

60,064,824

54,286,859

5,777,965

Cost of Revenues

% of revenues

Increase (Decrease)

44,265,264

36,342,465

7,922,799

6,971,948

9,365,776

(2,393,828

51,237,212

45,708,241

5,528,971

6,873,063

5,788,437

1,084,626

1,954,549

2,790,181

(835,632

8,827,612

8,578,618

248,994

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:

Twelve months ended

Category

Corporate Expenses & Eliminations

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

245,539

245,186

490,725

Business development

53,011

32,072

88,652

Travel expense

331,299

32,397

130,198

493,894

Filing fees

72,035

Transaction (gains) losses

(41,200

(38,816

Office expenses

303,586

98,961

120,103

522,650

Communications expenses

47,878

130,046

79,288

257,212

Insurance expense

135,386

140,787

Other expenses

38,788

14,716

162,893

216,397

3,251,547

3,033,361

4,344,865

1,650,043

1,593,390

1,506,752

4,750,185

422,681

901,861

1,390,297

2,714,839

282,099

284,234

566,333

36,923

129,525

11,841

178,289

191,848

43,436

111,510

346,794

82,560

(327,122

(413,470

(740,543

103,616

110,897

107,237

321,750

77,897

93,152

73,104

244,153

163,506

173,361

(68,976

228,868

160,162

2,483,327

2,768,117

3,546,439

Variance

320,817

102,855

575,542

999,214

82,702

(82,677

(78,026

(78,001

(36,560

(39,048

(75,608

16,088

(97,453

(8,272

(89,637

139,451

(11,039

18,688

147,100

(10,525

285,922

415,112

701,727

199,970

(11,936

12,866

200,900

(30,019

36,894

13,059

(4,454

(28,120

(32,574

38,518

83,692

(65,975

56,235

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:

Professional Fees

 General Legal

33,480

38,386

80,724

152,590

 SEC Compliance Legal Fees

275,112

 Accounting and Auditing

15,433

412,943

428,376

 Tax Compliance and Planning

55,400

 Consulting

471,903

765,365

488,092

1,725,360

43,257

193,952

242,748

175,000

420,686

421,264

44,200

379,424

895,744

556,459

1,831,627

(9,777

32,847

(113,228

(90,158

100,112

14,855

(7,743

11,200

92,479

(130,379

(68,367

(106,267

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

Board of Directors & Employee stock and Options

2,827,200

242,324

45,106

Stock issued for consulting

Stock issued for acquisitions

105,966

13,082

Total for 2017

256,302

2016 Non-Cash Compensation Activity

3,184,608

1,166,610

182,408

78,827

466,428

200,000

95,694

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

Months Ended

MBF Notes

76,591

61,325

15,266

RBL Notes

772,777

1,282,439

(509,662

Priority Payments Notes

168,233

172,021

120,069

51,952

(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.

Share-based Compensation

Loss from Stock Value Guarantee

Adjusted Non-GAAP

Twelve Months Ended December 31, 2017

Net (loss) income attributable to Net Element, Inc. stockholders

(9,913,485

(6,973,061

Basic and diluted earnings per share

Basic and diluted shares used in computing earnings per share

1,967,676

Twelve Months Ended December 31, 2016

(13,487,537

2,162,861

(7,861,241

(10.33

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 Element

Net 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 Statements

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. 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

ASSETS

Current assets:

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

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

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

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

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Service fees

58,723,928

48,784,855

Branded content

1,340,896

5,502,004

Total Revenues

Costs and expenses:

Cost of service fees

49,934,371

40,521,236

Cost of branded content

1,302,841

5,187,005

Bad debt expense

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 attributable to the noncontrolling interest

Net loss attributable to Net Element, Inc. stockholders

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

Weighted average number of common shares outstanding - basic and diluted

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Preferred Stock

Common Stock

Paid in

Non-controlling

Equity (Deficiency)

Subscription

Deficit

in Assets

Balance December 31, 2015

1,126,376

154,362,707

(1,565,822

198,917

(143,955,048

9,040,867

Share based compensation

121,442

4,427,105

4,427,117

Shares issued and issuable for acquisitions

134,094

134,095

Shares issued for insider financing

46,643

988,823

988,828

Shares issued in connection with debt restructuring

166,340

3,288,820

3,288,836

Shares issued under ESOUSA agreement

68,006

718,517

718,524

(128,539

Comprehensive loss - foreign currency translation

Balance December 31, 2016

Shares issued in connection with reverse stock split

2,850,155

2,850,179

Shares issued for acquisitions

105,965

Shares issued to settle merchant liabilities

30,759

252,220

252,223

Shares issued for consulting services

19,896

228,416

177,833

127,406

758,181

758,194

Shares issued under ESOUSA/Cobblestone agreements

1,881,165

15,004,217

15,004,405

(109,564

(43,622

Balance December 31, 2017

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities

Adjustments to reconcile net loss to net cash (used in) provided by operating activities

Non controlling interest

Provision for bad debts

500,000

Amortization of prepaid costs

967,313

3,466,510

Non cash interest

114,802

852,408

Changes in assets and liabilities

3,002,425

(2,751,144

356,619

612,062

(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

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

1,025,747

Cash at end of period

Supplemental disclosure of cash flow information

Cash paid during the period for:

1,074,820

611,625

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 from board member

909,285

Shares issued in settlement of related party debt

378,253

Contact:

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+1 (786) 923-0502

Corporate Communications Contact:

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New York, New York 

www.NetworkNewsWire.com

Editor@NetworkNewsWire.com

+1 (212) 418-1217

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Net Element International director just picked up 701 shares - Oct. 30, 2018

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