Net Element Reports Files Results For PayOnline

Net Element, Inc. (NASDAQ: NETE)("Net Element" or the "Company"), a provider of global mobile paymenttechnology solutions and value-added transactional services today presentedhistorical financial results for PayOnline for periods prior to ourownership. PayOnline acquisition creates a unique platform for further consolidationand positions the Company to lead in the fragmented and growing emergingmarket payments industry. Acquisition of PayOnline As previously reported, on May 20, 2015, Net Element entered into adefinitive agreement with PayOnline pursuant to which Net Element is toacquire PayOnline for up to $8.4 million in total consideration. The closingpayment is $3.6 million cash, which has been paid into escrow and $3.6million in Net Element stock. There is the potential for additionalconsideration of up to $1.282 million in cash and stock from earn-outincentives based on performance. Net Element assumed operational and financial control of PayOnline and itssubsidiaries as of May 20, 2015, and will consolidate PayOnline results inthe second quarter from May 20, 2015 to June 30, 2015. PayOnline processes online payments for over 10 million active consumers andthousands of merchants in the Russian Federation, Europe and Asia. The 2014 McKinsey Global Payments Map released October 2014, states Russiais the world's 6th largest payments market, accounting for $50 billion inpayments with a rapidly growing online population. They state that Cardissuance is growing at 30% per year. Net Element plans to integrate PayOnline's payments platform into itsexisting global payments-as-a-service network to expand its transactionprocessing offerings. Upon integration, Net Element global merchants will have access to a broadarray of value-added services including card2card transfer, payment splitand the highest level of data security (Validated Level 1 PCI DSSCompliance). Recent Events: -- On July 28, 2015, PayOnline released an updated solution for the travel industry. PayOnline's Pay-Travel product provides an industry solutionto automated payments for the travel industry including integration with GDS; -- On June 29, 2015, PayOnline announced signing of a 3-year contract to process transactions for certain international dating networks,including AnastasiaDate, AmoLatina and AsianDate. The contract provides for a minimum processing commitment of $300 million in transactions over 3 years and minimum net revenues to PayOnline in the amount of $1.2million over contract period; -- On June 4, 2015, PayOnline launched payment processing in Kazakhstan by integrating with Kazkommertsbank ("KAZKOM"), Kazakhstan's largest bank and signed with Kassir.com, the country's largest online eventsticketing website and one of the largest online merchants serving in theKazakhstan market. NET ELEMENT, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED MARCH 31, 2015 Net Element, Pro FormaPro Forma Inc. PayOnline AdjConsolidated ----------- ---------- -------------------------Net revenues $ 5,540,207 $1,202,878 $ - $6,743,085Costs and operatingexpenses: Cost of revenues 4,614,072 802,092 -5,416,164 General and administrative (includes $601,371 and $52,050 of share based compensation for the three months ended March 31, 2015 and 2014 2,637,469 respectively) 307,675 -2,945,144 Provision for bad debts 9,331 - - 9,331 Depreciation and amortization 438,769 18,637 494,331 (j) 951,737 ---------- --------- -------------------- Total costs and operating expenses 7,699,641 1,128,404 494,3319,322,376 ---------- --------- --------- -----------Income (loss) from operations (2,159,434) 74,474 (494,331)(2,579,291) Interest expense, net (117,594) - - (117,594) Other income (expense) 29,073 - - 29,073 ---------- --------- -------------------- Net income (loss) before income taxes (2,247,955) 74,474 (494,331)(2,667,812) Income taxes - - - - ---------- --------- --------------------Net income (loss) (2,247,955) 74,474 (494,331)(2,667,812)Net loss attributable to the noncontrolling interest 8,747 - - 8,747 ---------- --------- --------------------Net income (loss) attributable to Net Element, Inc. shareholders (2,239,208) 74,474 (494,331)(2,659,065)Foreign currency translation (108,167) - (108,167) ---------- --------- --------------------Comprehensive income (loss) $(2,347,375) $ 74,474 $ (494,331) $(2,767,232) ========== ========= ====================Loss per share - basic and diluted $ (0.05) $ (0.05) =====================Weighted average number of common shares outstanding - basic and diluted 46,057,972 2,503,781 (i)(k)48,561,754 ---------- --------------------Description(i) Represents $3.6 million in common shares priced as if issued January 1, 2014.(j) Represents amortization of capitalized intangible assets from PayOnline acquisition.(k) Represents the 2014 conversion of preferred shares (sold to purchase PayOnline) to common shares. NET ELEMENT, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2014 Net Element, Pro FormaPro Forma Inc. PayOnline AdjConsolidated ------------ ---------- -----------------------Net revenues $ 21,194,461 $6,729,228 $ - $27,923,689Costs and expenses: Cost of revenues 15,883,681 4,595,623 -20,479,304 General and administrative (includes $4,267,334 of share based compensation for the twelve months ended 11,353,24413,331,983 December 31, 2014) 1,619,259 359,480 (e) Recovery of provision for loan losses (1,153,147) - -(1,153,147) Depreciation and amortization 2,358,136 85,826 1,977,325 (g)4,421,287 ----------- --------- --------------------- Total costs and operating expenses 28,441,914 6,300,708 2,336,80537,079,427 ----------- --------- ---------------------Income (Loss) from operations (7,247,453) 428,520 (2,336,805)(9,155,738) Interest expense, net (3,705,694) - -(3,705,694) Gain on change in fair value and settlement of beneficial conversion derivative 5,569,158 - 478,261 (d)6,047,419 Loss on debt extinguishment (6,184,219) - -(6,184,219) Gain on debt restructure 1,596,000 - -1,596,000 Loss from asset disposal (87,151) - - (87,151) Other expense (155,407) - - (155,407) ----------- --------- --------------------- Income (Loss) from continuing operations before income taxes (10,214,766) 428,520 (1,858,544)(11,644,790) Income taxes - - - - ----------- --------- ---------------------Income (Loss) from continuing operations (10,214,766) 428,520 (1,858,544)(11,644,790)Net loss attributable to the noncontrolling interest 29,250 - - 29,250 ----------- --------- ---------------------Net income (loss) from continuing operations attributable to Net