May 15, 2017

Net Element Reports First Quarter 2017 Results

Revenues grow 20% year over year, strategic integrations and value-added services yield expansion into new markets

Current Investor Presentation

MIAMI, FL -- (Marketwired) -- 05/15/17 -- Net Element, Inc. (NASDAQ: NETE) ("Net Element" or the "Company"), a global financial technology and value-added solutions group that supports companies in accepting electronic payments in an omni-channel environment that spans across point-of-sale (POS), e-commerce and mobile devices, today reported financial results for the first quarter ended March 31, 2017 and provided an update on recent strategic and operational initiatives.

For three months ended March 31, 2017, net revenues increased 20% to $13,561,941 as compared to $11,261,059 in the prior year. The $2,300,882 increase in net revenues is primarily due to organic growth in our North America Transaction Solutions segment, which demonstrated net revenues increase of 40% as compared to the prior year:

  • North America Transaction Solutions segment: Continued organic growth of SMB merchants in this segment with emphasis on value-added offerings. Revenues for this segment continue to lead the growth for three months ended March 31, 2017 were $10,964,919, a 40% increase over the prior year.
  • Online Solutions segment: Continued organic growth in global online payment acceptance services with emphasis on value-added offerings. Revenues for this segment for three months ended March 31, 2017 were $1,740,029, a 23% increase over the prior year.
  • Mobile Solutions segment: Revenues for this segment were $856,993, a 57% decrease over the prior year. We continue to explore financing options for this business as well as expansion to markets that do not require us to advance capital to content providers prior to getting paid from mobile network operators.

Recent Highlights:

  • Unified Payments launched Multi Currency Processing (MCP) to allow online merchants to price their goods and services in over 90 local currencies and expand their global reach
  • Digital Provider expanded its Direct Carrier Billing (DCB) services to Poland and Turkey integrating its proprietary Trinity Platform with all major operators in the region such as T-Mobile and Orange, allowing access to 113.5 million mobile users in these markets
  • Unified Payments announced comprehensive Point-of-Sale (POS) program during its 2017 launch series at the annual Northeast Acquirers Association (NEAA) conference in Boston, Massachusetts
  • PayOnline launched Apple Pay support in Russia
  • Unified Payments launched payment acceptance for ReservHotel, a leading provider of travel distribution and booking solutions for hotels worldwide
  • Digital Provider announced partnership programs targeting content providers, mobile network operators and mobile application developers at GSMA Mobile World Congress 2017 in Barcelona, Spain
  • PayOnline launched Instant Credit, an innovative microcredit solution available to online consumers that can help increase conversion rates and merchants' revenues
  • PayOnline launched payment acceptance for Sutochno.ru, the leading C2C short-term accommodation booking service in Russia

"The first quarter of the year is one of the slowest quarters of the year for processing and we remain focused on continued growth and innovation to differentiate our product offerings and provide superior products and services to our expanding customer base," commented Oleg Firer, CEO of Net Element. "We are undertaking several strategic changes in the mobile solutions segment, which should yield results in the third-quarter of this year."

Conference Call:
The Company will host a conference call to discuss First Quarter 2017 financial results and business highlights on May 16, 2017 at 8:30 AM ET. 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 24392966. It is recommended that participants dial in approximately 10 minutes prior to the start of the 8:30AM Eastern call.

The call will also be webcast live from http://edge.media-server.com/m/p/26rnmtr5. Following completion of the call, a recorded replay of the webcast will be available on the http://www.netelement.com/en/ir website.

Results of Operations for the Three Months Ended March 31, 2017 Compared to the Three Months Ended March 31, 2016

We reported a net loss attributable to stockholders of $2,487,498, or $0.15 per share, for the three months ended March 31, 2017 as compared to a net loss attributable to stockholders of $1,847,719, or $0.16 per share, for the three months ended March 31, 2016. This resulted in an increase in net loss attributable to stockholders of $639,779 primarily as a result of higher general and administrative expenses and non-cash compensation expense offset by an improved gross margin.

Eliminating the effects of non-cash compensation, we reported an adjusted non-GAAP, Net loss attributable to Net Element, Inc. stockholders of $1,891,094 or $0.11 per share for the three months ended March 31, 2017 as compared to an adjusted non-GAAP, Net loss attributable to Net Element, Inc. stockholders of $1,486,735 or $0.13 per share for the three months ended March 31, 2016.

Net revenues consist primarily of payment processing fees. Net revenues were $13,561,941 for the three months ended March 31, 2017 as compared to $11,261,059 for the three months ended March 31, 2016. The increase in net revenue is primarily due to organic growth of merchants in our North American Transaction Solutions segment which resulted in an increase to North American Transaction Solutions segment revenue of $3,112,271, or 40% increase for the three months ended March 31, 2017 versus the three months ended March 31, 2016. Increases in our North American Transaction Solutions segment revenue were primarily due to a continued growth of SMB merchants with emphasis on value-added offerings. This was partially offset by a $1,136,511, or 57% decrease in our Mobile Solutions segment, as we continue to seek capital needed to prepay for content delivered through our platform as well as diversify to post-paid markets. Our Online Solutions segment revenue increased $325,122 (or 23%), from $1,414,907 for the three months ended March 31, 2016 to $1,740,029 for the three months ended March 31, 2017, primarily due to changes in foreign currency exchange rates.

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 three months ended March 31, 2017 were $11,459,992 as compared to $9,385,241 for the three months ended March 31, 2016. The $2,074,751 increase in cost of revenues was primarily due to a $2,808,416 increase in our North American Transaction Solutions segment due to increased volume. There was also a $263,960 increase in cost of revenues resulting from our Online Solutions segment operations also due to increased volume. This was offset by a $997,625 decrease in our Mobile Solutions segment cost of revenues, which resulted from the decrease in sales for our Mobile Solutions segment for the three months ended March 31, 2017 versus the three months ended March 31, 2016.

Gross Margin for the three months ended March 31, 2017 was $2,101,949, or 15% of net revenue, as compared to $1,875,818, or 17% of net revenue, for the three months ended March 31, 2016. The $226,131 increase in gross margin was due to the increased volume of processing in our North American Transaction Solutions offset by a decrease of $138,886 in our Mobile Solutions margin caused from a decrease in business.

The following table sets forth our sources of revenues, cost of revenues and gross margins for the three months ended March 31, 2017 and 2016:

Gross Margin Analysis


Source of Revenues


Three
Months Ended
March 31, 2017




Mix




Three
Months Ended
March 31, 2016




Mix





Increase /
(Decrease)


North American Transaction Solutions $ 10,964,919 81 % $ 7,852,648 70 % $ 3,112,271
Mobile Solutions 856,993 6 % 1,993,504 18 % (1,136,511 )
Online Solutions 1,740,029 13 % 1,414,907 12 % 325,122
Total $ 13,561,941 100 % $ 11,261,059 100 % $ 2,300,882


Cost of Revenues


Three
Months Ended
March 31, 2017



% of
revenues




Three
Months Ended
March 31, 2016



% of
revenues







Increase /
(Decrease)


North American Transaction Solutions $ 9,461,449 86 % $ 6,653,033 85 % $ 2,808,416
Mobile Solutions 816,963 95 % 1,814,588 91 % (997,625 )
Online Solutions 1,181,580 68 % 917,620 65 % 263,960
Total $ 11,459,992 85 % $ 9,385,241 83 % $ 2,074,751


Gross Margin


Three
Months Ended
March 31, 2017



% of
revenues




Three
Months Ended
March 31, 2016



% of
revenues







Increase /
(Decrease)


North American Transaction Solutions $ 1,503,470 14 % $ 1,199,615 15 % $ 303,855
Mobile Solutions 40,030 5 % 178,916 9 % (138,886 )
Online Solutions 558,449 32 % 497,287 35 % 61,162
Total $ 2,101,949 15 % $ 1,875,818 17 % $ 226,131

Total operating expenses were $4,364,687 for the three months ended March 31, 2017. Total operating expenses for the three months ended March 31, 2017 consisted of general and administrative expenses of $2,831,161, non-cash compensation expenses of $596,404, provision for bad debts of $279,759, and depreciation and amortization of $657,363. Total operating expenses were $3,589,156 for the three months ended March 31, 2016, which consisted of general and administrative expenses of $2,088,313, non-cash compensation expenses of $360,984, provision for bad debts of $251,741, and depreciation and amortization of $888,118.

General and administrative expenses for the three months ended March 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, travel expense, filing fees, transaction gains, office expenses, communication expense, insurance expense, and other expenses required to run our business, as follows:

Three Months Ended March 31, 2017
Category North America
Transaction
Solutions
Mobile
Solutions
Online
Solutions
Corporate
Expenses &
Eliminations
Total
Salaries, benefits, taxes and contractor payments $ 480,617 $ 123,818 $ 221,755 $ 841,520 $ 1,667,710
Professional fees 168,076 25,071 225,342 255,201 673,690
Rent - 15,169 39,468 98,428 153,065
Business development 1,824 962 9,020 1,581 13,387
Travel expense 32,804 5,096 1,171 56,225 95,296
Filing fees - - - 6,426 6,426
Transaction (gains) losses - (49,324 ) 3,316 1,731 (44,277 )
Office expenses 52,645 2,712 17,297 75,443 148,097
Communications expenses 13,319 700 30,087 20,624 64,730
Insurance expense - - - 44,107 44,107
Other expenses 1,949 - 2,152 4,829 8,930
Total $ 751,234 $ 124,204 $ 549,608 $ 1,406,115 $ 2,831,161
Three Months Ended March 31, 2016
Category North America
Transaction
Solutions
Mobile
Solutions
Online
Solutions
Corporate
Expenses &
Eliminations
Total
Salaries, benefits, taxes and contractor payments $ 393,446 $ 107,925 $ 112,773 $ 564,803 $ 1,178,947
Professional fees 163,239 1,108 83,743 276,297 524,387
Rent - 11,086 32,092 93,066 136,244
Business development 8,770 - 24,673 - 33,443
Travel expense 41,312 3,875 2,938 8,884 57,009
Filing fees - - - 16,499 16,499
Transaction (gains) losses - (55,533 ) 62,763 7,736 14,966
Office expense 19,599 2,054 11,311 29,510 62,474
Communications expense 30,160 274 4,091 23,432 57,957
Insurance expense - - - 3,125 3,125
Other expenses - 289 75 2,898 3,262
Total $ 656,526 $ 71,078 $ 334,459 $ 1,026,250 $ 2,088,313
Variance
Category North America
Transaction
Solutions
Mobile
Solutions
Online
Solutions
Corporate
Expenses &
Eliminations
Total
Salaries, benefits, taxes and contractor payments $ 87,171 $ 15,893 $ 108,982 $ 276,717 $ 488,763
Professional fees 4,837 23,963 141,599 (21,096 ) 149,303
Rent - 4,083 7,376 5,362 16,821
Business development (6,946 ) 962 (15,653 ) 1,581 (20,056 )
Travel expense (8,508 ) 1,221 (1,767 ) 47,341 38,287
Filing fees - - - (10,073 ) (10,073 )
Transaction (gains) losses - 6,209 (59,447 ) (6,005 ) (59,243 )
Office expense 33,046 658 5,986 45,933 85,623
Communications expense (16,841 ) 426 25,996 (2,808 ) 6,773
Insurance expense - - - 40,982 40,982
Other expenses 1,949 (289 ) 2,077 1,931 5,668
Total $ 94,708 $ 53,126 $ 215,149 $ 379,865 $ 742,848

Salaries, benefits, taxes and contractor payments were $1,367,710 for the three months ended March 31, 2017 as compared to $1,178,947 for the three months ended March 31, 2016.

Segment Salaries and
benefits for the
three months
ended
March 31, 2017
Salaries and
benefits for the
three months
ended
March 31, 2016
Increase /
(Decrease)
North American Transaction Solutions $ 480,617 $ 393,446 $ 87,171
Mobile Solutions 123,818 107,925 15,893
Online Solutions 221,755 112,773 108,982
Corporate Expenses & Eliminations 841,520 564,803 276,717
Total $ 1,667,710 $ 1,178,947 $ 488,763

The increase in salaries of $488,763 was due primarily to the increase of Corporate expenses for a $300,000 discretionary bonus payable to our CEO and approved by the Board of directors. The bonus is payable when cash flow of the business can support the payment. Additionally, North American Transaction Solutions segment salaries increased $87,171 due to an increase in headcount and sales incentives for key employees. We also saw an increase of $108,982 and $15,893, respectively, in our Online Solutions and Mobile Solutions segments which were primarily due to the Ruble exchange rate and to a lesser extent, salary increases.

Professional fees were $673,690 for the three months ended March 31, 2017 as compared to $524,387 for the three months ended March 31, 2016.

Three Months Ended March 31, 2017
Professional Fees North American
Transaction
Solutions
Mobile
Solutions
Online
Solutions
Corporate
Expenses &
Eliminations
Total
General Legal $ 42,599 $ - $ 713 $ 33,526 $ 76,838
SEC Compliance Legal Fees - - - 23,750 23,750
Accounting and Auditing - - 9,219 112,782 122,001
Tax Compliance and Planning - - - 14,900 14,900
Consulting 125,477 25,071 215,410 70,243 436,201
Total $ 168,076 $ 25,071 $ 225,342 $ 255,201 $ 673,690
Three Months Ended March 31, 2016
Professional Fees North American
Transaction
Solutions
Mobile
Solutions
Online
Solutions
Corporate
Expenses &
Eliminations
Total
General Legal $ 28,171 $ 200 $ 513 $ 24,911 $ 53,795
SEC Compliance Legal Fees - - - 43,750 43,750
Accounting and Auditing - - 578 121,344 121,922
Tax Compliance and Planning - - - - -
Consulting 105,068 908 82,652 116,292 304,920
Total $ 133,239 $ 1,108 $ 83,743 $ 306,297 $ 524,387
Variance
Professional Fees North American
Transaction
Solutions
Mobile
Solutions
Online
Solutions
Corporate
Expenses &
Eliminations
Increase /
(Decrease)
General Legal $ 14,428 $ (200 ) $ 200 $ 8,615 $ 23,043
SEC Compliance Legal Fees - - - (20,000 ) (20,000 )
Accounting and Auditing - - 8,641 (8,562 ) 79
Tax Compliance and Planning - - - 14,900 14,900
Consulting 20,409 24,163 132,758 (46,049 ) 131,281
Total $ 34,837 $ 23,963 $ 141,599 $ (51,096 ) $ 149,303

Professional fees increased by $149,303 mainly due to Online Solutions segments' consulting fees which increased by $132,758 mainly due to an increase in portfolio management consulting.

Non-cash compensation expense from share-based compensation was $596,404 for the three months ended March 31, 2017, compared to $360,984 for the three months ended March 31, 2016. The majority of these expenses were for employee and consultant incentives in both periods.

We recorded bad debt expense of $279,759 for the three months ended March 31, 2017 as compared to $251,741 for the three months ended March 31, 2016. For the three months ended March 31, 2017, we recorded a loss which was primarily comprised of $286,943 in ACH rejects offset by a $7,184 recovery from our Russian operations. For the three months ended March 31, 2016, we recorded a loss which was primarily comprised of $263,789 in ACH rejects offset by a $12,048 recovery from our Russian operations.

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 $657,363 for the three months ended March 31, 2017 as compared to $888,118 for the three months ended March 31, 2016.

Interest expense was $269,688 for the three months ended March 31, 2017 as compared to $150,438 for three months ended March 31, 2016, representing an increase of $119,250 as follows:

Funding Source Three months ended
March 31, 2017
Three months ended
March 31, 2016
Increase /
(Decrease)
MBF Notes 18,813 - 18,813
RBL Notes 143,058 147,784 (4,726 )
Other 107,817 2,654 105,163
Total $ 269,688 $ 150,438 $ 119,250

The net loss attributable to non-controlling interests amounted to $50,701 for three months ended March 31, 2017 as compared to $37,876 for the three months ended March 31, 2016.

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. Adjusted net loss is calculated as net loss excluding non-cash share based compensation and other one-time, non-recurring items not present in this year or last year results. 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 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 March 31, 2017 and 2016 is presented in the following Non-GAAP Financial Measures Table.

GAAP Share-based
Compensation
Adjusted
Non-GAAP
Three Months Ended March 31, 2017
Net (loss) income attributable to Net Element Inc stockholders $ (2,487,498 ) $ 596,404 $ (1,891,094 )
Basic and diluted earnings per share $ (0.15 ) $ 0.04 $ (0.11 )
Basic and diluted shares used in computing earnings per share 16,476,061 16,476,061
GAAP Share-based
Compensation
Adjusted
Non-GAAP
Three Months Ended March 31, 2016
Net (loss) income attributable to Net Element Inc stockholders $ (1,847,719 ) $ 360,984 $ (1,486,735 )
Basic and diluted earnings per share $ (0.16 ) $ 0.04 $ (0.13 )
Basic and diluted shares used in computing earnings per share 11,293,434 11,293,434

Additional information regarding Net Element's results for its first quarter ended March 2017 may be found in Net Element's quarterly report on Form 10-Q, which was filed with the Security and Exchange Commission (SEC) on May 15, 2017 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 US and selected emerging markets. In the US it aims to grow transactional revenue by innovating SME productivity services such as its cloud based, restaurant point-of-sale solution Aptito. Internationally, Net Element's strategy is to leverage its omni-channel platform to deliver flexible offerings to emerging markets with diverse banking, regulatory and demographic conditions such as UAE, Kazakhstan, Kyrgyzstan and Azerbaijan where initiatives have been recently launched. Further information is available at www.netelement.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained in this press release that are not statements of historical fact may be deemed forward-looking statements. Words such as "continue," "will," "may," "could," "should," "expect," "expected," "plans," "intend," "anticipate," "believe," "estimate," "predict," "potential," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, whether the Company will experience growth on a go forward basis, whether Net Element can secure any additional financing and if such additional financing will be adequate to meet the Company's objectives. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, many of which are generally outside the control of Net Element and are difficult to predict. Examples of such risks and uncertainties include, but are not limited to: (i) Net Element's ability (or inability) to obtain additional financing in sufficient amounts or on acceptable terms when needed; (ii) Net Element's ability to maintain existing, and secure additional, contracts with users of its payment processing services; (iii) Net Element's ability to successfully expand in existing markets and enter new markets; (iv) Net Element's ability to successfully manage and integrate any acquisitions of businesses, solutions or technologies; (v) unanticipated operating costs, transaction costs and actual or contingent liabilities; (vi) the ability to attract and retain qualified employees and key personnel; (vii) adverse effects of increased competition on Net Element's business; (viii) changes in government licensing and regulation that may adversely affect Net Element's business; (ix) the risk that changes in consumer behavior could adversely affect Net Element's business; (x) Net Element's ability to protect its intellectual property; (xi) local, industry and general business and economic conditions; (xii) adverse effects of potentially deteriorating U.S.-Russia relations, including, without limitation, over a conflict related to Ukraine, including a risk of further U.S. government sanctions or other legal restrictions on U.S. businesses doing business in Russia. Additional factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements can be found in the most recent annual report on Form 10-K and the subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K filed by Net Element with the Securities and Exchange Commission. Net Element anticipates that subsequent events and developments may cause its plans, intentions and expectations to change. Net Element assumes no obligation, and it specifically disclaims any intention or obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.

NET ELEMENT, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
2017
December 31,
2016
ASSETS
Current assets:
Cash $ 813,081 $ 621,635
Accounts receivable, net 6,724,985 7,126,429
Prepaid expenses and other assets 1,686,126 1,467,897
Total current assets, net 9,224,192 9,215,961
Fixed assets, net 113,908 117,295
Intangible assets, net 3,466,408 3,589,850
Goodwill 9,643,752 9,643,752
Other long term assets 536,512 742,810
Total assets 22,984,772 23,309,668
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 8,337,673 7,510,113
Accrued expenses 5,366,887 5,518,823
Deferred revenue 910,019 1,355,972
Notes payable (current portion) 719,564 808,976
Due to related parties 356,200 299,004
Total current liabilities 15,690,343 15,492,888
Notes payable (net of current portion) 3,844,115 3,755,383
Total liabilities 19,534,548 19,248,271
STOCKHOLDERS' EQUITY
Series A Convertible Preferred stock ($.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding at March 31, 2017 and December 31, 2016) - -
Common stock ($.0001 par value, 400,000,000 shares authorized and 17,527,466 and 15,353,494 shares issued and outstanding at March 31, 2017 and December 31, 2016) 1,753 1,535
Paid in capital 165,833,480 163,918,685
Accumulated other comprehensive loss (2,474,513 ) (2,486,616 )
Accumulated deficit (159,930,083 ) (157,442,585 )
Noncontrolling interest 19,677 70,378
Total stockholders' equity 3,450,314 4,061,397
Total liabilities and stockholders' equity $ 22,984,772 $ 23,309,668
NET ELEMENT, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Three months ended March 31,
2017 2016
Net revenues
Service fees $ 12,729,663 $ 9,363,820
Branded content 832,278 1,897,239
Total revenues 13,561,941 11,261,059
Costs and expenses:
Cost of service fees 10,650,748 7,598,184
Cost of branded content 809,244 1,787,057
General and administrative 2,831,161 2,088,313
Non-cash compensation 596,404 360,984
Bad debt expense 279,759 251,741
Depreciation and amortization 657,363 888,118
Total costs and operating expenses 15,824,679 12,974,397
Loss from operations (2,262,738 ) (1,713,338 )
Interest expense, net (269,688 ) (150,438 )
Other expense, net (5,773 ) (21,819 )
Net loss before income taxes (2,538,199 ) (1,885,595 )
Income taxes - -
Net loss (2,538,199 ) (1,885,595 )
Net loss attributable to the noncontrolling interest 50,701 37,876
Net loss attributable to Net Element, Inc. stockholders (2,487,498 ) (1,847,719 )
Foreign currency translation 12,103 (29,741 )
Comprehensive loss attributable to Net Element, Inc. stockholders $ (2,475,395 ) $ (1,877,460 )
Loss per share - basic and diluted $ (0.15 ) $ (0.16 )
Weighted average number of common shares outstanding - basic and diluted 16,476,061 11,293,434
NET ELEMENT, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
2017 2016
Cash flows from operating activities
Net loss attributable to Net Element, Inc. stockholders $ (2,487,498 ) $ (1,847,719 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Non controlling interest (50,701 ) (37,876 )
Share based compensation 596,404 360,984
Deferred revenue (445,953 ) (171,908 )
Depreciation and amortization 657,363 888,118
Non cash interest 46,135 -
Changes in assets and liabilities
Accounts receivable 510,498 436,453
Prepaid expenses and other assets (231,755 ) 334,291
Accounts payable and accrued expenses 449,284 (909,344 )
Net cash used in operating activities (956,223 ) (947,001 )
Cash flows from investing activities
Purchase of portfolio and client acquisition costs (403,585 ) (396,819 )
Purchase of fixed, intangible and other assets 355 -
Net cash used in investing activities (403,230 ) (396,819 )
Cash flows from financing activities
Proceeds from common stock 1,437,132
Proceeds from indebtedness 92,000 75,000
Repayment of indebtedness (92,680 ) -
Related party advances 57,159 910,045
Net cash provided by financing activities 1,493,611 985,045
Effect of exchange rate changes on cash 57,288 57,537
Net increase (decrease) in cash 191,446 (301,238 )
Cash at beginning of period 621,635 503,343
Cash at end of period $ 813,081 $ 202,105
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 166,394 $ 150,438
Taxes $ 64,314 $ 86,770

Contact:
Net Element, Inc.
media@netelement.com
+1 (786) 923-0502

Source: Net Element, Inc.

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