NETE
$3.91
Net Element
($.13)
(3.22%)
Earnings Details
2nd Quarter June 2018
Tuesday, August 14, 2018 4:30:00 PM
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Summary

Net Element (NETE) Recent Earnings

Net Element (NETE) reported a 2nd Quarter June 2018 loss of $0.23 per share on revenue of $16.5 million. The consensus estimate was a loss of $0.33 per share on revenue of $17.1 million. Revenue grew 2.0% on a year-over-year basis.

Net Element Inc is a financial technology-driven group specializing in mobile payments and value-added transactional services in emerging countries and in the United States.

Results
Reported Earnings
($0.23)
Earnings Whisper
-
Consensus Estimate
($0.33)
Reported Revenue
$16.5 Mil
Revenue Estimate
$17.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Net Element Reports Second Quarter and First Half 2018 Financial Results and Provides Business Update

MIAMI, Aug. 14, 2018 (GLOBE NEWSWIRE) -- 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 second quarter ended June 30, 2018, and provides an update on recent strategic and operational initiatives.

Conference Call:

On August 15, 2018, at 8:30 a.m. EST the Company will host a conference call to discuss 2018 second-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 5058929. 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/i8w792tk. Following completion of the call, a recorded replay of the webcast will be available on the www.netelement.com/en/ir website.

Second Quarter and First Half 2018 Financial Performance:

For the three months ended June 30, 2018, net revenues increased to $16.46 million, an increase of 2% compared to $16.14 million in the second quarter ended June 30, 2017. The increase is primarily due to organic growth in the North American Transaction Solutions segment, which experienced growth of 6% over the prior year. International Transaction Solutions segment experienced a decline of 19% due to elimination of branded content business, which accounted for $684,000 of net revenues in 2017. Normalizing elimination of branded content business resulted in 11% growth in the International Transaction Solutions segment and 6.5% across all segments over the same period of the prior year.

For the six months ended June 30, 2018, net revenues increased to $32.45 million, an increase of 9% compared to $29.7 million in the prior year. The increase is primarily due to organic growth in the North American Transactions Solutions segment, which experienced growth of 15% over the prior year. The Company’s International Transaction Solutions segment experienced a decline of 21% due to elimination of branded content business, which accounted for $1.34 million of net revenues in 2017. Normalizing elimination of branded content business resulted in growth of 7.3% in the International Transaction Solutions segment and 14.4% across all segments over the same period of the prior year.

United States accounted for 88% of total revenues for the second quarter and 87% for six months ended June 30, 2018, while international revenues were 12% for the second quarter and 14% for six months.

  • Total dollars processed for the first half of 2018 increased 37% to $1.62 billion from $1.18 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 40% to $1.4 billion from $1 billion. International Transaction Solutions increased 20% to $211 million from $176 million.
     
  • Total transactions processed during the first half of 2018 increased 41% to 50.2 million compared to 35.7 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 41% to 28.1 million from 20 million. International Transaction Solutions segment processed 21 million versus 15 million, which represents an increase of 40%. 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 on track to deliver another year of growth and financial improvement,” commented Oleg Firer, CEO of Net Element. “We continue to focus on long-term growth plans and are confident that our strategic initiatives and continued investment in commerce-enabled technologies are creating significant value for our shareholders.”

Second Quarter 2018 Business Highlights:

  • Launched Netevia Smart Vendor Payment Solutions to enter the $7.7 trillion global B2B payments market.
  • Launched intelligent payment solutions for the $330 billion meetings and events industry.
  • Participated in Midwest Acquirers Association (MWAA) conference in Chicago, featuring the latest in payments and value added products and services.

Results of Operations for the Three Months Ended June 30, 2018, compared to the Three Months Ended June 30, 2017

We reported a net loss attributable to common stockholders of $903,731, or $0.23 per share, for the three months ended June 30, 2018, as compared to a net loss of $1,640,340, or $0.93 per share, for the three months ended June 30, 2017. This resulted in a decrease in net loss attributable to stockholders of $736,609 primarily due to an increase in revenues and other income, as well as decreases in general and administrative and non-cash compensation expenses, which were offset by increases in depreciation and amortization expenses.

Adjusting for non-cash compensation, we have a non-GAAP adjusted net loss attributable to common stockholders of $881,231, or $0.22 loss per share, for the quarter ended June 30, 2018, as compared to a non-GAAP adjusted net loss attributable to common stockholders of $1,511,803, or $0.84 loss per share, for the quarter ended June 30, 2017.

           
Source of Revenues Three
Months
Ended June
30, 2018
 Mix Three
Months
Ended June
30, 2017
 Mix Increase /
(Decrease)
           
North American Transaction Solutions $14,419,129   87.6% $13,612,782   84.3% $806,347 
International Transaction Solutions  2,045,588   12.4%  2,528,259   15.7%  (482,671)
Total $16,464,717   100.0% $16,141,041   100.0% $323,676 
                     

Net revenues consist primarily of service fees from transaction processing. Net revenues were $16,464,717 for the three months ended June 30, 2018, as compared to $16,141,041 for the three months ended June 30, 2017. The increase was driven by an increase of $806,347 (or 6%) in net revenues from our North American Transaction Solutions segment due to organic growth, which was partially offset by a decrease of $482,671 (or -19%) in net revenues from our International Transaction Solutions segment as we reorganized our international business and consolidated our mobile payments operations with PayOnline. For the three months ended June 30, 2018, there was no branded content revenue from our mobile payment operations as compared to $684,731 of branded content revenue in the three months ended June 30, 2017. We continue to explore partnership opportunities that can monetize our relationships and contracts with mobile operators but we have not yet identified an acceptable joint-venture partner or other arrangement.

           
Gross Margin Three
Months
Ended June
30, 2018
 % of revenues Three
Months
Ended June
30, 2017
 % of revenues Increase /
(Decrease)
           
North American Transaction Solutions $2,192,070   15.2% $2,140,274   15.7% $51,796 
International Transaction Solutions  458,639   22.4%  682,375   27.0%  (223,736)
Total $2,650,709   16.1% $2,822,649   17.5% $(171,940)
                     

Gross Margin for the three months ended June 30, 2018, was $2,650,709, or 16.1% of net revenue, as compared to $2,822,649, or 17.5% of net revenue, for the three months ended June 30, 2017. The primary reason the gross margin percentage decreased was because of increases in North American Transaction Solutions segment’s fixed costs as we began processing transactions utilizing our self-designated BIN/ICA. We estimate that this margin will normalize as we meet volume and transaction requirements on this new structure. Gross margin was lower also due to a decrease in our mobile payments business in our International Transaction Solutions segment that have had typically higher margins than our North American Transaction Solutions Segment.

General and administrative expenses for the three months ended June 30, 2018, were $2,499,496 as compared to $2,599,178 for the three months ended June 30, 2017. The reduction of $99,682 in general and administrative expenses was primarily due to decreases in salaries and benefits ($76,347), professional fees ($51,954) and rent ($66,033) offset by increases in offices expenses ($32,961) and communications expenses ($39,549).

General and administrative variances increase / (decrease) for the three months ended June 30, 2018, compared to the three months ended June 30, 2017, were as follows:

             
Category North
American
Transaction
Solutions
  International
Transaction
Solutions
  Corporate
Expenses &
Eliminations
  Total 
Salaries, benefits, taxes and contractor payments $(86,592) $(67,208) $77,453  $(76,347)
Professional fees  (7,590)  (183,881)  139,517   (51,954)
Rent     (46,470)  (19,563)  (66,033)
Business development  31,392   (7,991)  462   23,863 
Travel expense  (31,864)  (1,800)  2,919   (30,745)
Filing fees        4,000   4,000 
Transaction (gains) losses  (742)  14,222   (944)  12,536 
Office expenses  57,785   (20,477)  (4,347)  32,961 
Communications expenses  24,063   9,939   5,547   39,549 
Insurance expense     (2,640)  4,653   2,013 
Other expenses  (1,740)  3,335   8,880   10,475 
Total $(15,288) $(302,971) $218,577  $(99,682)
                 

Salaries, benefits, taxes and contractor payments were $1,296,472 for the three months ended June 30, 2018, as compared to $1,372,819 for the three months ended June 30, 2017. Salaries decreased by $76,347 due to a decrease of $67,208 in International Transaction Solutions segment as mobile payment operations are reduced while we continue to seek other arrangements, and by $86,592 in North America because of a switch from salaried commission to third-party commission payments for the three months ended June 30, 2018. This was offset by an increase of $77,453 in corporate payroll. 

Professional fees decreased by $51,954 primarily due to a decrease in consulting fees in the International Transaction Solutions segment partially offset by an increase in corporate general legal fees. Corporate general legal fees increased due to increased litigation fees and legal fees due increased activity in the Zell, and Aptito.com cases and legal fees relating to certain financing transactions.

Rent expense was $70,045 for the three months ended June 30, 2018, as compared to $136,078 for the three months ended June 30, 2017. The decrease of $66,033 was primarily due to a reduction of $46,470 in rent in our International Transaction Solutions segment as we substantially reorganized this business and reduced office space.

Results of Operations for the Six Months Ended June 30, 2018, Compared to the Six Months Ended June 30, 2017

We reported a net loss attributable to stockholders of $2,514,577, or $0.65 per share, for the six months ended June 30, 2018, as compared to a net loss attributable to stockholders of $4,127,837, or $2.41 per share, for the six months ended June 30, 2017. This resulted in a decrease in net loss attributable to stockholders of $1,613,260 primarily due to an increase in revenues and other income, as well as decreases in general and administrative expenses, and non-cash compensation which were offset by increases in depreciation and amortization.

Adjusting for non-cash compensation, we have a non-GAAP adjusted net loss attributable to common stockholders of $2,410,066, or $0.62 loss per share, for the six months ended June 30, 2018, as compared to a non-GAAP adjusted net loss attributable to common stockholders of $3,402,896, or $1.99 loss per share, for the six months ended June 30, 2017.

                
Source of Revenues Six
Months
Ended June
30, 2018
  Mix  Six
Months
Ended June
30, 2017
  Mix  Increase /
(Decrease)
 
                
North American Transaction Solutions $28,385,746   87.5% $24,577,701   82.7% $3,808,045 
International Transaction Solutions  4,061,365   12.5%  5,125,281   17.3%  (1,063,916)
Total $32,447,111   100.0% $29,702,982   100.0% $2,744,129 
                     

Net revenues consist primarily of payment processing fees. Net revenues were $32,447,111 for the six months ended June 30, 2018, as compared to $29,702,982 for the six months ended June 30, 2017. 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 $3,808,045 for the six months ended June 30, 2018, which was partially offset by a decrease of $1,063,916 in net revenues from our International Transaction Solutions segment as we reorganized our international business and consolidated our mobile payments operations with PayOnline. For the six months ended June 30, 2018, there was no branded content revenue from our mobile payment operations as compared to $1,340,896 of branded content revenue in the six months ended June 30, 2017. We continue to explore partnership opportunities that can monetize our relationships and contracts with mobile operators but have not yet identified an acceptable joint-venture partner or other arrangement.

                
Gross Margin Six
Months
Ended June
30, 2018
  % of
revenues
  Six
Months
Ended June
30, 2017
  % of
revenues
  Increase /
(Decrease)
 
                
North American Transaction Solutions $4,094,615   14.4% $3,643,743   14.8% $450,872 
International Transaction Solutions  920,154   22.7%  1,280,855   25.0%  (360,701)
Total $5,014,769   15.5% $4,924,598   16.6% $90,171 
                     

Gross Margin for the six months ended June 30, 2018, was $5,014,769, or 15.5% of net revenue, as compared to $4,924,598, or 16.6% of net revenue, for the six months ended June 30, 2017. The primary reason the gross margin percentage decreased was because of increases in North American Transaction Solutions segment’s fixed costs as we began processing transactions utilizing our self-designated BIN/ICA. We estimate that this margin will normalize as we meet volume and transaction requirements on this new structure. Gross margin was lower also due to a decrease in our mobile payments business in our International Transaction Solutions segment that have had typically higher margins than our North American Transaction Solutions Segment.

General and administrative expenses for the six months ended June 30, 2018, were $4,945,977 as compared to $5,430,338 for the three months ended June 30, 2017. The $484,361 reduction in general and administrative expenses was primarily due to decreases in salaries and benefits ($415,134), professional fees ($158,537) and rent ($138,045) offset by increases in transaction (gains) losses ($72,429) and other general and administrative expenses ($95,262).

General and administrative variances increase / (decrease) for the six months ended June 30, 2018, compared to the six months ended June 30, 2017, were as follows:

             
Category North
American
Transaction
Solutions
  International
Transaction
Solutions
  Corporate
Expenses &
Eliminations
  Total 
Salaries, benefits, taxes and contractor payments $(189,669) $(139,350) $(86,115) $(415,134)
Professional fees  (41,829)  (340,544)  223,836   (158,537)
Rent     (102,508)  (35,537)  (138,045)
Business development  83,382   (17,263)  (583)  65,536 
Travel expense  (22,062)  (10,598)  (14,312)  (46,972)
Filing fees        9,009   9,009 
Transaction (gains) losses  (742)  74,813   (1,642)  72,429 
Office expenses  87,638   (31,673)  (65,926)  (9,961)
Communications expenses  25,071   17,591   11,921   54,583 
Insurance expense     (5,177)  (7,354)  (12,531)
Other expenses  (3,062)  5,038   93,286   95,262 
Total $(61,273) $(549,671) $126,583  $(484,361)
                 

Salaries, benefits, taxes and contractor payments were $2,625,395 for the six months ended June 30, 2018, as compared to $3,040,529 for the six months ended June 30, 2017. The decrease in salaries of $415,134 was primarily because of a $300,000 reduction in discretionary bonus and increase in sales incentives charged to the cost of sales through commissions, versus salaries. International Transaction Solutions segment salaries decreased by $139,350 primarily due to our mobile payment operations being reduced while we continue to seek other arrangements.

Professional fees were $1,175,880 for the six months ended June 30, 2018, as compared to $1,334,417 for the six months ended June 30, 2017. Professional fees decreased by $158,537 primarily due to a decrease in consulting fees in the International Transaction Solutions segment partially offset by an increase in corporate general legal fees. Corporate general legal fees increased due to increased litigation fees and legal fees due to increased activity in the Zell and Aptito.com cases and legal fees relating to certain financing transactions.

Rent expense was $151,098 for the six months ended June 30, 2018, as compared to $289,143 for the six months ended June 30, 2017. The decrease of $138,045 was primarily due to reduction of $102,508 in rent in our International Transaction Solutions segment as we substantially reorganized this business and reduced office space.

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 six months ended June 30, 2018, and 2017, respectively, we incurred $52,917 and ($19,512) of foreign currency transaction losses (gains).

Other general and administrative expenses include taxes, utilities and business licenses. For the six months ended June 30, 2018, these expenses were $187,494 as compared to $92,232 for the six months ended June 30, 2017. The increase was caused primarily by an increase of $83,155 driven by State of Delaware franchise taxes in 2018 due to a higher assessment and a credit taken in 2017.

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 and six months ended June 30, 2018, and 2017 is presented in the following Non-GAAP Financial Measures Table.

          
  GAAP  Share-based
Compensation
  Adjusted
Non-GAAP
 
Three Months Ended June 30, 2018            
Net loss attributable to Net Element Inc. stockholders $(903,731) $22,500  $(881,231)
Basic and diluted loss per share $(0.23) $0.01  $(0.22)
Basic and diluted shares used in computing loss per share  3,855,866       3,855,866 
             


  GAAP  Share-based
Compensation
  Adjusted
Non-GAAP
 
Three Months Ended June 30, 2017            
Net loss attributable to Net Element Inc. stockholders $(1,640,340) $128,537  $(1,511,803)
Basic and diluted loss per share $(0.93) $0.07  $(0.84)
Basic and diluted shares used in computing loss per share  1,771,538       1,771,538 
             


  GAAP  Share-based
Compensation
  Adjusted
Non-GAAP
 
Six Months Ended June 30, 2018            
Net loss attributable to Net Element Inc. stockholders $(2,514,577) $104,511  $(2,410,066)
Basic and diluted loss per share $(0.65) $0.03  $(0.62)
Basic and diluted shares used in computing loss per share  3,854,506       3,854,506 
             


  GAAP  Share-based
Compensation
  Adjusted
Non-GAAP
 
Six Months Ended June 30, 2017            
Net loss attributable to Net Element Inc. stockholders $(4,127,837) $724,941  $(3,402,896)
Basic and diluted loss per share $(2.41) $0.42  $(1.99)
Basic and diluted shares used in computing loss per share  1,709,915       1,709,915 
             

Additional information regarding Net Element’s results for its three months ended June 30, 2018, may be found in Net Element’s quarterly report on Form 10-Q, which was filed with the Securities and Exchange Commission (SEC) on August 14, 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., 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™.  In 2017 we were 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 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 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

  June 30,
2018
  December 31,
2017
 
ASSETS        
Current assets:        
Cash $6,541,652  $11,285,669 
Accounts receivable, net  6,061,808   5,472,856 
Prepaid expenses and other assets  1,273,303   2,282,614 
Total current assets, net  13,876,763   19,041,139 
Fixed assets, net  43,233   58,268 
Intangible assets, net  2,741,486   3,127,760 
Goodwill  9,643,752   9,643,752 
Other long term assets  461,045   460,511 
Total assets  26,766,279   32,331,430 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable  5,044,603   6,785,459 
Accrued expenses  2,666,447   3,212,438 
Deferred revenue  1,770,910   1,712,591 
Notes payable (current portion)  924,597   2,493,973 
Due to related parties  496,920   461,992 
Total current liabilities  10,903,477   14,666,453 
Notes payable (net of current portion)  5,051,708   4,521,449 
Total liabilities  15,955,185   19,187,902 
         
STOCKHOLDERS’ EQUITY        
Series A Convertible Preferred stock ($.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding at June 30, 2018 and December 31, 2017)      
Common stock ($.0001 par value, 100,000,000 shares authorized and 3,853,813 and 3,853,100 shares issued and outstanding at June 30, 2018 and December 31, 2017  385   385 
Paid in capital  183,223,732   183,119,222 
Accumulated other comprehensive loss  (2,461,261)  (2,530,238)
Accumulated deficit  (169,870,648)  (167,356,070)
Stock Subscriptions Receivable     (50,585)
Non-Controlling interest  (81,114)  (39,186)
Total stockholders’ equity  10,811,094   13,143,528 
Total liabilities and stockholders’ equity $26,766,279  $32,331,430 
         

NET ELEMENT, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

             
  Three Months Ended
June 30
  Six Months Ended
June 30
 
  2018  2017  2018  2017 
Net revenues                
Service fees $16,464,717  $15,456,310  $32,447,111  $28,362,086 
Branded content     684,731      1,340,896 
Total Revenues  16,464,717   16,141,041   32,447,111   29,702,982 
Costs and expenses:                
Cost of service fees  13,814,008   12,653,556   27,432,342   23,475,543 
Cost of branded content     664,836      1,302,841 
 General and administrative  2,499,496   2,599,178   4,945,977   5,430,338 
Non-cash compensation  22,500   128,537   104,511   724,941 
Bad debt expense  877,898   865,863   999,171   1,145,621 
Depreciation and amortization  662,525   573,018   1,366,063   1,230,381 
Total costs and operating expenses  17,876,427   17,484,988   34,848,064   33,309,665 
Loss from operations  (1,411,710)  (1,343,947)  (2,400,953)  (3,606,683)
Interest expense, net  (235,738)  (322,052)  (478,976)  (591,740)
Other income (expense)  674,236   (49,422)  323,423   (55,196)
Net (loss) income before income taxes  (973,212)  (1,715,421)  (2,556,506)  (4,253,619)
Income taxes            
Net loss  (973,212)  (1,715,421)  (2,556,506)  (4,253,619)
Net loss attributable to the non-controlling interest  69,481   75,081   41,929   125,782 
Net loss attributable to Net Element, Inc. stockholders  (903,731)  (1,640,340)  (2,514,577)  (4,127,837)
Foreign currency translation  29,662   (146,102)  68,977   (133,999)
Comprehensive loss attributable to common stockholders $(874,069) $(1,786,442) $(2,445,600) $(4,261,836)
                 
Loss per share - basic and diluted $(0.23) $(0.93) $(0.65) $(2.41)
                 
Weighted average number of common shares outstanding - basic and diluted  3,855,866   1,771,538   3,854,506   1,709,915 
                 

NET ELEMENT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS

  Six Months Ended
June 30,
 
    
  2018  2017 
Cash flows from operating activities        
Net loss attributable to Net Element, Inc. stockholders $(2,514,577) $(4,127,837)
Adjustments to reconcile net loss to net cash used in by operating activities        
Non-Controlling interest  (41,929)  (125,782)
Share based compensation  104,511   596,404 
Deferred revenue  58,319   (916,898)
Provision for bad debts     192,895 
Depreciation and amortization  1,366,063   1,230,381 
Non cash interest  35,196   94,248 
Changes in assets and liabilities        
Accounts receivable  571,405   1,913,135 
Prepaid expenses and other assets  (356,585)  284,661 
Accounts payable and accrued expenses  (2,111,768)  (1,845,161)
Net cash used in operating activities  (2,889,365)  (2,703,954)
         
Cash flows from investing activities        
         
Purchase of portfolio and client acquisition costs  (878,446)  (966,147)
Purchase of fixed assets and changes in other assets  9,898   180,423 
Net cash used in investing activities  (868,548)  (785,724)
         
Cash flows from financing activities        
Proceeds from Common stock     1,437,132 
Proceeds from indebtedness     3,298,792 
Repayment of indebtedness  (1,038,665)  (624,918)
Related party advances  34,927    
Net cash (used in) provided by financing activities  (1,003,738)  4,111,006 
         
Effect of exchange rate changes on cash  17,633    31,316 
Net (decrease) increase in cash  (4,744,018)  652,644 
         
Cash at beginning of period  11,285,669   621,635 
Cash at end of period $6,541,651  $1,274,279 
         
Supplemental disclosure of cash flow information        
Cash paid during the period for:        
Interest $444,232  $397,548 
Taxes $4,140  $61,314 
         

Contact:
Net Element, Inc.
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www.netelement.com
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Source: Net Element, Inc.