Net revenues increased 19% for the quarter as compared to the prior year, loss per share narrows significantly over the same period last year
MIAMI, Nov. 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 third quarter ended September 30, 2018, and provides an update on recent strategic and operational initiatives.
Conference Call:
On November 15, 2018, at 8:30 a.m. EST the Company will host a conference call to discuss 2018 third-quarter financial results and business highlights. The conference call can be accessed live over the phone by dialing +1 (877) 303-9858, or for international callers +1 (408) 337-0139, and referencing conference code 73855497. It is recommended that participants dial in approximately 10 minutes prior to the start of the call.
The call will also be webcast live from https://edge.media-server.com/m6/p/bnctmpfp. Following completion of the call, a recorded replay of the webcast will be available on the www.netelement.com/en/ir website.
Financial Performance:
Net revenues were approximately $17.2 million for the three months ended September 30, 2018, compared to approximately $14.9 million for the prior year. The increase was primarily driven by an increase of approximately $2.5 million (or 19 %) in net revenues from our North American Transaction Solutions segment due to organic growth and the acquisition of a transactional services portfolio.
Net revenues were approximately $49.7 million for the nine months ended September 30, 2018, compared to approximately $44.6 million for the prior year. The increase of approximately $5.1 million (or 11.5%) in total net revenues for the nine months ended September 30, 2018 is primarily due to organic growth of merchants in our North American Transaction Solutions segment, which was partially offset by an approximately $1.2 million (or 17.2%) decrease in net revenues from our International Transaction Solutions segment as we continued reorganizing and combining our mobile payments operations with PayOnline. We have eliminated mobile payment operations staff and assigned current responsibilities to team members at PayOnline and TOT Group Russia and continue to explore partnership opportunities that can monetize our experience and relationships with mobile operators and local institutions.
United States accounted for 90.4% of total revenues for the third quarter and 88.5% for nine months ended September 30, 2018, while international revenues were 9.6% for the third quarter and 11.5% for the nine months ended September 30, 2018.
- Total dollars processed for the nine months ended September 30, 2018 increased 35% to $2.45 billion from $1.81 billion in transaction volume during the same period in 2017. Led by robust growth from our subsidiary Unified Payments, the North American Transaction Solutions segment saw the largest increase of 39% to $2.17 billion from $1.56 billion. International Transaction Solutions increased 10% to $283 million from $257 million.
- Total transactions processed during the nine months ended September 30, 2018 increased 34% to 73.0 million compared to 54.6 million for the same period in 2017. The increase in transactions processed came primarily from North American Transaction Solutions segment, which saw an increase of 40% to 43.7 million from 31.1 million. International Transaction Solutions segment processed 29.3 million versus 23.1 million, which represents an increase of 25%. Growth in all segments was organic. The above results include the reorganization of the mobile payments segment into the International Transactions Solutions segment.
“We are pleased with our performance in the third quarter and the nine months period as we continue to deliver double digit net revenue growth with improved gross margin performance, underscoring the ongoing execution of our technology enabled, value-added strategy,” commented Oleg Firer, CEO of Net Element. “We continue to take steps that will enhance our long-term performance as we remain focused on growth and building value for our shareholders.”
Third Quarter 2018 Business Highlights:
- Acquired recurring cash flow assets for a total of $2.7 million, which are expected to generate in excess of $5 million in gross profits over the next four years.
- Launched subscription-based payment processing offering aimed at small businesses in the United States. The new offering targets the multi-billion dollar subscription economy and gains traction through a partnership agreement with Payment Club, projected to add over $1.5 million in gross profits over the next four years.
Results of Operations for the Three Months Ended September 30, 2018 Compared to the Three Months Ended September 30, 2017
We reported a net loss attributable to common stockholders of approximately $0.9 million or $0.23 per share loss for the three months ended September 30, 2018 as compared to a net loss of approximately $1.7 million or $0.90 per share loss for the prior year. The decrease in net loss attributable to stockholders of $0.8 million was primarily due to an increase in revenues.
Adjusting for non-cash compensation, we have a non-GAAP adjusted net loss attributable to common stockholders of approximately $0.9 million, or $0.22 loss per share, for the quarter ended September 30, 2018, as compared to a non-GAAP adjusted net loss attributable to common stockholders of approximately $1.6 million, or $0.82 loss per share, for the prior year.
| Source of Revenues | Three Months Ended September 30, 2018 | Mix | Three Months Ended September 30, 2017 | Mix | Increase / (Decrease) | |||||||||||||||
| North American Transaction Solution | $ | 15,590,832 | 90.4 | % | $ | 13,123,204 | 88.1 | % | $ | 2,467,628 | ||||||||||
| International Transaction Solutions | 1,651,926 | 9.6 | % | 1,777,927 | 11.9 | % | (126,001 | ) | ||||||||||||
| Total | $ | 17,242,758 | 100.0 | % | $ | 14,901,131 | 100.0 | % | $ | 2,341,627 | ||||||||||
| Gross Margin | Three Months Ended September 30, 2018 | % of revenues | Three Months Ended September 30, 2017 | % of revenues | Increase / (Decrease) | |||||||||||||||
| North American Transaction Solution | $ | 2,304,622 | 14.8 | % | $ | 1,844,106 | 14.1 | % | $ | 460,516 | ||||||||||
| International Transaction Solutions | 378,328 | 22.9 | % | 300,398 | 16.9 | % | (77,930 | ) | ||||||||||||
| Total | $ | 2,682,950 | 15.6 | % | $ | 2,144,504 | 14.4 | % | $ | 538.446 | ||||||||||
The gross margin for the three months ended September 30, 2018 was approximately $2.7 million, or 15.6% of net revenue, as compared to approximately $2.1 million, or 14.4% of net revenue, for prior year. The primary reason for the increase in the gross margin percentage was the result of North American Transaction Solutions negotiating favorable on-boarding contract terms and the processing of transactions utilizing our self-designated BIN/ICA.
Selling, general and administrative expenses remained flat at $2.4 million for the three months ended September 30, 2018 as compared to the prior year. The reduction of approximately $11,000 in selling, general and administrative expenses was primarily due to decreases in professional fees ($64,335), rent ($29,092) and office expenses ($29,561), offset by increases in salaries and benefits ($22,456), transaction losses ($31,297), and communications expenses ($52,959).
Selling, general and administrative expenses for the three months ended September 30, 2018 and 2017 consisted of operating expenses not otherwise delineated in our Condensed Consolidated Statements of Operations and Comprehensive Loss, as follows:
| Category | North American Transaction Solutions | International Transaction Solutions | Corporate Expenses & Eliminations | Total | ||||||||||||
| Salaries, benefits, taxes and contractor payments | $ | (89,678 | ) | $ | 5,595 | $ | 106,539 | $ | 22,456 | |||||||
| Professional fees | (71,146 | ) | (153,926 | ) | 160,737 | (64,335 | ) | |||||||||
| Rent | — | (21,640 | ) | (7,452 | ) | (29,092 | ) | |||||||||
| Business development | 23,377 | (7,830 | ) | 3,394 | 18,941 | |||||||||||
| Travel expense | 6,983 | (1,670 | ) | 12,198 | 17,511 | |||||||||||
| Filing fees | — | — | (6,448 | ) | (6,448 | ) | ||||||||||
| Transaction (gains) losses | — | 31,297 | — | 31,297 | ||||||||||||
| Office expenses | (12,216 | ) | (15,507 | ) | (1,838 | ) | (29,561 | ) | ||||||||
| Communications expenses | 27,566 | 12,406 | 12,987 | 52,959 | ||||||||||||
| Insurance expense | — | (225 | ) | 3,959 | 3,734 | |||||||||||
| Other expenses | 1,005 | (2,420 | ) | (26,967 | ) | (28,382 | ) | |||||||||
| Total | $ | (114,109 | ) | $ | (153,920 | ) | $ | 257,109 | $ | (10,920 | ) | |||||
Salaries, benefits, taxes and contractor payments remained steady for the three months ended September 30, 2018 as compared to the prior year. This was primarily due to the Company’s continued monitoring of operations and the labor costs necessary to maintain or increase revenues.
Professional fees were approximately $0.6 million for the three months ended September 30, 2018 as compared to approximately $0.7 million for the prior year. The decrease was primarily due to the reorganization of mobile operations into PayOnline, which was offset by an increase in consulting fees relating to compliance training for the board of directors and internal control evaluation procedures.
Communications expenses for the three months ended September 30, 2018 were approximately $109,000 as compared to approximately $56,000 for the three months ended September 30, 2018. The difference was primarily due to increased web-hosting charges from our International Transaction Solutions segment.
All other operating expenses were relatively in line with the previous comparable quarter.
Results of Operations for the Nine Months Ended September 30, 2018 Compared to the Nine Months Ended September 30, 2017
We reported a net loss attributable to stockholders of approximately $3.4 million, or $0.88 per share loss, for the nine months ended September 30, 2018, as compared to a net loss attributable to stockholders of approximately $5.8 million, or $3.29 per share loss, for the prior year. The decrease in net loss attributable to stockholders of approximately $2.4 million was primarily due to an increase in revenues and other income, as well as, decreases in non-cash compensation.
Adjusting for non-cash compensation, we have a non-GAAP adjusted net loss attributable to common stockholders of approximately $3.3 million, or $0.84 loss per share, for the nine months ended September 30, 2018, as compared to a non-GAAP adjusted net loss attributable to common stockholders of approximately $5.1 million, or $2.88 loss per share, for the prior year.
| Source of Revenues | Nine Months Ended September 30, 2018 | Mix | Nine Months Ended September 30, 2017 | Mix | Increase / (Decrease) | |||||||||||||||
| North American Transaction Solution | $ | 43,976,578 | 88.5 | % | $ | 37,701,136 | 84.5 | % | $ | 6,275,442 | ||||||||||
| International Transaction Solutions | 5,713,292 | 11.5 | % | 6,902,977 | 15.5 | % | (1,189,685 | ) | ||||||||||||
| Total | $ | 49,689,870 | 100.0 | % | $ | 44,604,113 | 100.0 | % | $ | 5,085,757 | ||||||||||
| Gross Margin | Nine Months Ended September 30, 2018 | % of revenues | Nine Months Ended September 30, 2017 | % of revenues | Increase / (Decrease) | |||||||||||||||
| North American Transaction Solution | $ | 6,482,502 | 14.7 | % | $ | 5,488,080 | 14.6 | % | $ | 994,422 | ||||||||||
| International Transaction Solutions | 1,298,483 | 22.7 | % | 1,581,022 | 22.9 | % | (282,539 | ) | ||||||||||||
| Total | $ | 7,780,985 | 15.7 | % | $ | 7,069,102 | 15.8 | % | $ | 711,883 | ||||||||||
Gross margin for the nine months ended September 30, 2018 was approximately $7.7 million, or 15.5% of net revenue, as compared to approximately $7.1 million, or 15.8% of net revenue, for prior year. The gross margin was slighter lower due to a decrease in our mobile payments operations in our International Transaction Solutions segment that had typically higher margins than our North America Transaction Solutions segment.
Selling, general and administrative expenses for the nine months ended September 30, 2018, were approximately $7.3 million as compared to approximately $7.8 million for the prior year. The approximately $500,000 reduction in general and administrative expenses was primarily due to decreases in salaries and benefits ($395,676), professional fees ($222,873) and rent ($167,138) offset by increases in transaction (gains) losses ($103,726), business development ($84,478) and communications expenses ($107,545).
Selling, general and administrative variances increase / (decrease) for the nine months ended September 30, 2018, compared to the nine months ended September 30, 2017, were as follows:
| Category | North American Transaction Solutions | International Transaction Solutions | Corporate Expenses & Eliminations | Total | ||||||||||||
| Salaries, benefits, taxes and contractor payments | $ | (279,346 | ) | $ | (133,755 | ) | $ | 20,425 | $ | (392,676 | ) | |||||
| Professional fees | (112,975 | ) | (494,471 | ) | 384,573 | (222,873 | ) | |||||||||
| Rent | — | (124,147 | ) | (42,991 | ) | (167,138 | ) | |||||||||
| Business development | 106,759 | (25,092 | ) | 2,881 | 84,478 | |||||||||||
| Travel expense | (15,079 | ) | (12,269 | ) | (2,115 | ) | (29,463 | ) | ||||||||
| Filing fees | — | — | 2,562 | 2,562 | ||||||||||||
| Transaction (gains) losses | (742 | ) | 106,110 | (1,642 | ) | 103,726 | ||||||||||
| Office expenses | 75,422 | (47,181 | ) | (67,764 | ) | (29,523 | ) | |||||||||
| Communications expenses | 52,638 | 29,998 | 24,909 | 107,545 | ||||||||||||
| Insurance expense | — | (5,402 | ) | (3,396 | ) | (8,798 | ) | |||||||||
| Other expenses | (2,059 | ) | 2,619 | 66,317 | 66,877 | |||||||||||
| Total | $ | (175,382 | ) | $ | (703,590 | ) | $ | 383,689 | $ | (495,283 | ) | |||||
Salaries, benefits, taxes and contractor payments were approximately $3.9 million for the nine months ended September 30, 2018 as compared to approximately $4.3 for the prior year. The decrease in salaries and benefits of approximately $0.4 million was primarily the result of the Company’s continued monitoring of labor costs in relation to processing revenues and also our mobile payment operations being combined with PayOnline.
Professional fees were approximately $1.8 million for the nine months ended September 30, 2018 as compared to approximately $2 million for the prior year. The decrease was primarily the result of combining the mobile payment operations into PayOnline, which was offset by an increase in general legal fees in connection with certain litigation matters.
The decrease in rent for the nine months ending September 30, 2018 was the result of the office space lease for our mobile payment operations in Russia not being renewed as these operations were combined into PayOnline.
Communications expenses for the nine months ended September 30, 2018 increased by approximately $0.1 million, which was primarily due to due web-hosting and internet charges.
Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure
To supplement its consolidated financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), the Company provides additional measures of its operating results by disclosing its adjusted net loss attributable to Net Element, Inc. stockholders. Adjusted net loss attributable to Net Element stockholders is calculated as net loss attributable to Net Element stockholders excluding non-cash share-based compensation. Net Element discloses this amount on an aggregate and per share basis. These measures meet the definition of non-GAAP financial measures. The Company believes that application of these non-GAAP financial measures is appropriate to enhance the understanding by the Company’s investors of its historical performance through use of a metric that seeks to normalize period-to-period earnings.
This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Pursuant to Regulation G, a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP for the three months ended September 30, 2018, and 2017 is presented in the following Non-GAAP Financial Measures Table.
| GAAP | Share-based Compensation | Adjusted Non- GAAP | ||||||||||
| Three Months Ended September 30, 2018 | ||||||||||||
| Net (loss) income attributable to Net Element Inc stockholders | $ | (910,414 | ) | $ | 22,500 | $ | (887,914 | ) | ||||
| Basic and diluted earnings per share | $ | (0.23 | ) | $ | 0.01 | $ | (0.22 | ) | ||||
| Basic and diluted shares used in computing earnings per share | 3,901,218 | 3,901,218 | ||||||||||
| GAAP | Share-based Compensation | Adjusted Non- GAAP | ||||||||||
| Three Months Ended September 30, 2017 | ||||||||||||
| Net (loss) income attributable to Net Element Inc stockholders | $ | (1,702,536 | ) | $ | 128,537 | $ | (1,573,999 | ) | ||||
| Basic and diluted earnings per share | $ | (0.90 | ) | $ | 0.07 | $ | (0.82 | ) | ||||
| Basic and diluted shares used in computing earnings per share | 1,891,023 | 1,891,023 | ||||||||||
| GAAP | Share-based Compensation | Adjusted Non- GAAP | ||||||||||
| Nine Months Ended September 30, 2018 | ||||||||||||
| Net (loss) income attributable to Net Element Inc stockholders | $ | (3,424,989 | ) | $ | 127,011 | $ | (3,297,978 | ) | ||||
| Basic and diluted earnings per share | $ | (0.88 | ) | $ | 0.03 | $ | (0.84 | ) | ||||
| Basic and diluted shares used in computing earnings per share | 3,870,134 | 3,870,134 | ||||||||||
| GAAP | Share-based Compensation | Adjusted Non- GAAP | ||||||||||
| Nine Months Ended September 30, 2017 | ||||||||||||
| Net (loss) income attributable to Net Element Inc stockholders | $ | (5,830,373 | ) | $ | 724,941 | $ | (5,105,432 | ) | ||||
| Basic and diluted earnings per share | $ | (3.29 | ) | $ | 0.41 | $ | (2.88 | ) | ||||
| Basic and diluted shares used in computing earnings per share | 1,770,947 | 1,770,947 | ||||||||||
Additional information regarding Net Element’s results for its three months ended September 30, 2018, may be found in Net Element’s quarterly report on Form 10-Q, which was filed with the Security and Exchange Commission (SEC) on November 14, 2018, and may be obtained from the SEC’s Internet website at http://www.sec.gov.
About Net 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™ and recognized by South Florida Business Journal as one of 2016's fastest-growing technology companies. Further information is available at www.NetElement.com.
Forward-Looking 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 (UNAUDITED) | |||||||||
| September 30, 2018 | December 31, 2017 | ||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash | $ | 2,563,104 | $ | 11,285,669 | |||||
| Accounts receivable, net | 4,970,697 | 5,472,856 | |||||||
| Prepaid expenses and other assets | 1,679,092 | 2,282,614 | |||||||
| Total current assets, net | 9,212,893 | 19,041,139 | |||||||
| Equipment, net | 34,267 | 58,268 | |||||||
| Intangible assets, net | 5,354,237 | 3,127,760 | |||||||
| Goodwill | 9,643,752 | 9,643,752 | |||||||
| Other long term assets | 603,110 | 460,511 | |||||||
| Total assets | 24,848,259 | 32,331,430 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | 5,407,971 | 6,785,459 | |||||||
| Accrued expenses | 2,247,101 | 3,674,430 | |||||||
| Deferred revenue | 1,173,802 | 1,712,591 | |||||||
| Notes payable (current portion) | 484,490 | 2,493,973 | |||||||
| Due to related parties | 441,606 | 461,992 | |||||||
| Total current liabilities | 9,754,970 | 14,666,453 | |||||||
| Notes payable (net of current portion) | 5,072,396 | 4,521,449 | |||||||
| Total liabilities | 14,827,366 | 19,187,902 | |||||||
| STOCKHOLDERS’ EQUITY | |||||||||
| Series A convertible preferred stock ($.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding at September 30, 2018 and December 31, 2017) | — | — | |||||||
| Common stock ($.0001 par value, 100,000,000 shares authorized and 3,858,813 and 3,853,100 shares issued and outstanding at September 30, 2018 and December 31, 2017 | 385 | 385 | |||||||
| Paid in capital | 183,223,732 | 183,119,222 | |||||||
| Accumulated other comprehensive loss | (2,315,394 | ) | (2,530,238 | ) | |||||
| Accumulated deficit | (170,781,062 | ) | (167,356,070 | ) | |||||
| Stock subscriptions receivable | — | (50,585 | ) | ||||||
| Noncontrolling interest | (106,768 | ) | (39,186 | ) | |||||
| Total stockholders’ equity | 10,020,893 | 13,143,528 | |||||||
| Total liabilities and stockholders’ equity | $ | 24,848,259 | $ | 32,331,430 | |||||
| NET ELEMENT, INC. | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) | ||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net revenues | ||||||||||||||||
| Service fees | $ | 17,242,758 | $ | 14,901,131 | $ | 49,689,870 | $ | 43,263,217 | ||||||||
| Branded content | - | - | - | 1,340,896 | ||||||||||||
| Total Revenues | 17,242,758 | 14,901,131 | 49,689,870 | 44,604,113 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of service fees | 14,559,808 | 12,756,627 | 41,992,150 | 36,232,170 | ||||||||||||
| Cost of branded content | - | - | - | 1,302,841 | ||||||||||||
| Selling, general and administrative | 2,346,809 | 2,357,729 | 7,292,785 | 7,788,068 | ||||||||||||
| Non-cash compensation | 22,500 | 111,277 | 127,011 | 836,218 | ||||||||||||
| Bad debt expense | 611,897 | 319,690 | 1,611,068 | 1,465,311 | ||||||||||||
| Depreciation and amortization | 463,384 | 630,020 | 1,829,447 | 1,860,401 | ||||||||||||
| Total costs and operating expenses | 18,004,398 | 16,175,343 | 52,852,461 | 49,485,009 | ||||||||||||
| Loss from operations | (761,640 | ) | (1,274,212 | ) | (3,162,591 | ) | (4,880,896 | ) | ||||||||
| Interest expense, net | (215,935 | ) | (302,813 | ) | (694,910 | ) | (894,553 | ) | ||||||||
| Other income (expense) | 41,507 | (92,904 | ) | 364,930 | (148,099 | ) | ||||||||||
| Net (loss) income before income taxes | (936,068 | ) | (1,669,929 | ) | (3,492,571 | ) | (5,923,548 | ) | ||||||||
| Income taxes | - | - | - | - | ||||||||||||
| Net loss | (936,068 | ) | (1,669,929 | ) | (3,492,571 | ) | (5,923,548 | ) | ||||||||
| Net (income) loss attributable to the non-controlling interest | 25,654 | (32,607 | ) | 67,582 | 93,175 | |||||||||||
| Net loss attributable to Net Element, Inc. stockholders | (910,414 | ) | (1,702,536 | ) | (3,424,989 | ) | (5,830,373 | ) | ||||||||
| Foreign currency translation | 145,867 | 92,191 | 214,845 | (41,809 | ) | |||||||||||
| Comprehensive loss attributable to common stockholders | $ | (764,547 | ) | $ | (1,610,345 | ) | $ | (3,210,144 | ) | $ | (5,872,182 | ) | ||||
| Loss per share - basic and diluted | $ | (0.23 | ) | $ | (0.90 | ) | $ | (0.88 | ) | $ | (3.29 | ) | ||||
| Weighted average number of common shares outstanding - basic and diluted | 3,901,218 | 1,891,023 | 3,870,134 | 1,770,947 | ||||||||||||
| NET ELEMENT, INC. | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | |||||||
| Nine Months Ended September 30, | |||||||
| 2018 | 2017 | ||||||
| Cash flows from operating activities | |||||||
| Net loss attributable to Net Element, Inc. stockholders | $ | (3,424,989 | ) | $ | (5,830,373 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities | |||||||
| Non-controlling interest | (67,582 | ) | (93,175 | ) | |||
| Share based compensation | 127,011 | 836,218 | |||||
| Deferred revenue | (536,041 | ) | (159,228 | ) | |||
| Depreciation and amortization | 1,829,447 | 1,860,401 | |||||
| Non cash interest | 49,000 | 98,774 | |||||
| Changes in assets and liabilities | - | ||||||
| Accounts receivable | 379,601 | 3,421,265 | |||||
| Prepaid expenses and other assets | 457,806 | (352,551 | ) | ||||
| Accounts payable and accrued expenses | (2,087,416 | ) | (2,390,495 | ) | |||
| Net cash used in operating activities | (3,273,163 | ) | (2,609,164 | ) | |||
| Cash flows from investing activities | |||||||
| Purchase of portfolios and client acquisition costs | (3,851,596 | ) | (1,380,661 | ) | |||
| Purchase of equipment and changes in other assets | (115,041 | ) | 77,430 | ||||
| Net cash used in investing activities | (3,966,637 | ) | (1,303,231 | ) | |||
| Cash flows from financing activities | |||||||
| Proceeds from sale of common stock | - | 1,150,098 | |||||
| Proceeds from indebtedness | - | 3,239,033 | |||||
| Repayment of indebtedness | (1,458,536 | ) | (273,360 | ) | |||
| Related party advances | (39,265 | ) | 77,587 | ||||
| Net cash (used in) provided by financing activities | (1,497,801 | ) | 4,193,358 | ||||
| Effect of exchange rate changes on cash | 15,036 | 19,504 | |||||
| Net (decrease) increase in cash | (8,722,565 | ) | 300,467 | ||||
| Cash at beginning of period | 11,285,669 | 621,635 | |||||
| Cash at end of period | $ | 2,563,104 | $ | 922,102 | |||
| Supplemental disclosure of cash flow information | |||||||
| Cash paid during the period for: | |||||||
| Interest | $ | 645,910 | $ | 795,779 | |||
| Taxes | $ | 44,932 | $ | 86,942 | |||
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