Zacks Small-Cap Research

August 18, 2020

Lisa Thompson

Sponsored Impartial - Comprehensive

312-265-9154 lthompson@zacks.com

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10 S. Riverside Plaza, Chicago, IL 60606

Net Element Inc.

(NASDAQ: NETE)

Net Element Now Trades Based on a

OUTLOOK

Valuation of Mullen Technologies

Using the electric vehicle peer valuation of 10x EV/sales, and owning 15-21.7% of the post merger company the company could be worth $30.00 per share once the deal closes and twice that by 2023.

Net Element signed an agreement to merge with Mullen Technologies, an electric vehicle assembler and manufacturer, and plans to divest its payment processing business before year-end. We expect the Mullen merger to close in Q4 of 2020.

Current Price (08/17/20)

Valuation

SUMMARY DATA

52-Week High

52-Week Low

One-Year Return (%)

Beta

Average Daily Volume (sh)

Shares Outstanding (mil)

Market Capitalization ($mil)

Short Interest Ratio (days)

Institutional Ownership (%)

Insider Ownership (%)

Annual Cash Dividend

Dividend Yield (%)

5-Yr. Historical Growth Rates

Sales (%)

Earnings Per Share (%)

Dividend (%)

P/E using TTM EPS

P/E using 2020 Estimate P/E using 2021 Estimate

$9.42

$30.00

$16.67

Risk Level

High

$1.56

Type of Stock

Small Growth

201

Industry

Internet Commerce

2.0

607,141

ZACKS ESTIMATES

4.6

$43

Revenue

(in millions of $)

0.1

Q1

Q2

Q3

Q4

Year

6

(Mar)

(Jun)

(Sep)

(Dec)

(Dec)

16

2018

16.0 A

16.5 A

17.2 A

16.1 A

65.8 A

$0.00

2019

15.0 A

16.5 A

16.8 A

16.6 A

65.0 A

0.00

2020

15.8 A

13.7 A

14.8 E

16.0 E

60.4 E

2021

68.0 E

11.2 Earnings Per Share

N/A

(Non-GAAP EPS before non-recurring items)

Q1

Q2

Q3

Q4

Year

N/A

(Mar)

(Jun)

(Sep)

(Dec)

(Dec)

N/M

2018

-$0.40 A

-$0.23 A

-$0.23 A

-$0.22

A

-$1.07 A

2019

-$0.28 A

$0.11 A

-$0.24 A

-$0.35

A

-$0.76 A

N/M

2020

-$0.32 A

-$0.08 A

-$0.09 E

$0.14

E

-$0.35 E

N/M

2021

-$0.06 E

Zacks Projected EPS Growth Rate - Next 5 Years %

5.0

© Copyright 2020, Zacks Investment Research. All Rights Reserved.

WHAT S NEW

Net Element Now Has a Definitive Deal for a Reverse Merger with Mullen Technologies, Future Provider of Electric Vehicles

On August 5, 2020 the company announced it had a definitive deal for a triangular reverse merger with Mullen Technologies, a private company based in California. The closing of the transaction is conditional on the satisfactory completion of due diligence, shareholder and NASDAQ approval and the completion of a capital raise of $10 million. We expect the deal to close Q4 of 2020. While we await the merger document, which will contain financials on Mullen, we can glean some bits of information from last week s presentation by Mullen at JP Morgan s Virtual Auto Conference.

Mullen believes it has saved time and money by buying Coda s assets, other energy assets for sophisticated battery technology, and by partnering with Qiantu Motors. Mullen Technologies initially plans to sell Qiantu Motors electric vehicles. Qiantu is a Chinese manufacturer that is a subsidiary of CH Auto based in Beijing. It already sells EVs in China. Mullen has an agreement to sell Qiantu s Dragonfly K50 in the US and plans to assemble it here; it already has preorders for this car, which was introduced to the US market last year. It needs capital to pay for an assembly plant. Mullen is expected to deliver its first Dragonfly K50, in Q2 2021.

Management has a letter of intent with the City of Spokane to build a 1.5 million sq-ft facility to manufacture and assemble vehicles, as well as to start the development of advanced battery solutions for various applications. The project is currently in the design phase and Mullen hopes to break ground in the next two months. The company believes it can get to production with as little as $400 million invested over five years rather than the de novo $1 billion requirement because of this plant and its current vehicle IP that has already been two years in the making. This has also cut the future development time needed to 2- 1/2 years rather than five.

The company plans to introduce its own SUV, the Mullen MX-5, which it believes will be a game changer. They hope for it to begin production in the second quarter of 2022. It will get vehicle components from existing suppliers, ship them to the assembly plant, and add them to a battery pack that will also be assembled there. It hopes to commercialize this battery for non-automotive uses in the next 24 months. Mullen s own auto dealerships will sell and service the cars it sells. The plan is to build 5,000 vehicles in year one, then 10,000, then and 17,000, to an end production rate of 35,000 per year. At a price of $55,000, that would be revenue of $275 million for 5,000 cars up to $1.9 billion for 35,000 cars.

Figure 1. Mullen MX-05

Source: Mullen Auto

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The Mullen MX-5 was designed in California and is expected to ultimately have a range of 500 miles achieved through a 150 KWH battery pack. It will have a solid-state battery. Mullen believes that the mid- sized SUV has the most potential. It believes its competitive advantages will be range, 0-60 speed, and styling. Its co-developed polymer sold state battery is very safe, lasts 10xs longer than lithium batteries, and does not lose range in cold weather. $55,000 is the entry-level price for the first model year and that model will have a range over 300 mile and use a lithium ion battery. The following model year will use the solid-state battery. This car plans to compete with the Audi e-Tron (MSRP $78,395), the Telsa X (MSRP $81.190) and the 2021 Jaguar I-Pace (MSRP estimated at $71,000.)

Management believes a key to success is having its own dealerships to sell and service its cars and control its own destiny. In the last 24 months it has opened up eight locations with one being outside California in Phoenix. It is about to add another store in Huntington Beach, California.

Mullen also owns CarHub, a platform that leverages AI for a solution for buying, selling, and owning a car. Early in 2020, the company launched Mullen Funding Corp. to provide direct auto financing and lease options for new and pre-owned Mullen vehicles. In April, Mullen Technologies began making portable ventilators out of its battery R&D center in Monrovia, CA. These units are expected to be available for delivery shortly to fulfill contracts already won.

Battery Technology

On August 10th Mullen announced results from the independent testing of its licensed solid-state polymer battery technology by independent lab EV Grid, Inc. The lab confirmed that this battery could be capable of enabling an electric vehicle to travel 640 miles at a cruising speed of 55 mph on a flat surface, and 550 miles at a cruising speed of 75 mph. This would be a much greater range than offered by today s lithium batteries. The company has licensed this technology from Beijing based BOAO Navigator Battery Holding, Ltd. It has the exclusive rights to this battery in North America. The battery pack is also lighter than a typical lithium battery pack, and does not require a cooling system. It also does not contain combustible materials, making it safer than lithium batteries.

Q2 2020 Results Were Not as Bad as Feared

Surprisingly revenues in Q2 2020 were only down 17% to $13.7 million from $16.5 million a year ago and $15.8 million in Q1 2020. North American sales decreased 17.5% year over year to $13 million, while international was down 1.1% to $741,000 but up from $683,000 in Q1 2020.

Margins for North America increased to 15.1% versus 14.6% a year ago. International sales margins decreased to 29.7% versus 39.0% a year ago.

The operating loss was $16,620 as the company went on austerity versus a loss of $2.6 million last year caused mostly by the $2 million in stock-based compensation in the quarter. EBITDA for Q2 was $763,000 compared with $144,000 last year.

The GAAP loss was $325,000 versus last year s $1.5 million. The non-GAAP loss was $317,000 versus non-GAAP earnings of $468,000 in Q2 2019.

The non-GAAP loss per share was $0.08 per share compared with earnings of $0.11 per share last year.

This quarter there were 4.2 million average primary shares outstanding, flat with last year. On August 13, 2020, the share count was 4.6 million shares.

On June 30, Net Element had $866,000 in cash, negative working capital of $1.6 million and $10.0 million in debt up from $9.3 million last quarter. In the quarter Net Element received cash from the government: a

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  1. loan of $491,492, and an EIDL loan of $160,000, which provides a 30-year loan with a 3.5% interest
    rate.

In Q2 2020, Net Element had positive cash flow of $827,000, and positive free cash flow of $853,000.

VALUATION

Net Element shareholders are expected to own between 15% and 21.7% of the surviving company. If Mullen can reach revenues of $100 million in the next 24 months, it is entitled to another 5% of the shares leaving Net Element shareholders with 10%. If revenue is less than $80 million, then the Net Element shareholders will get another 5% leaving Mullen shareholders with 80% of the fully diluted common shares of the company. NETE shareholders can end up with an additional 6.7% of the depending on the financing NETE brings to the closing.

At Net Element s current enterprise value of $52.4 million (using a $9.42 stock price) this puts the entire valuation of Mullen Technologies at between $241 million and $349 million, far less than we expect it is currently valued in the private market. We will get financial information on the privately held Mullen once the S-4 is filed.

Until then, we can look at the valuations of other EV companies and see that the more established ones trade at approximately 10 times sales. If Mullen can produce and sell 5,000 MX-05 SUVs at $55,000 per car that is revenue of $275 million add to that used car sales of maybe $40 million, and 200 Dragonflys at $150,000 or another $30 million. This adds to a conservative $345 million. Ten times that is an enterprise value of $3.45 billion by 2023. Keep in mind the company should need at least another $400 million to get there and we expect much of that should be loans.

If Net Element ends up post merger with 50 million shares outstanding, EV per share could be $70 per share by 2023 with no further equity dilution. Discounting that for risk and dilution and time, we could easily see a current share price over $30 per share once the deal closes.

Electric Vehicle Makers

Ticker

Gross

Revenue

Revenue

Revenue

EBIDTA

EV/21E

EV/20E

EV/LTM

Included

Enterprise

Company

EBITDA Margin

%

2021E

2020E

LTM

Margin

Sales

Sales

Sales

EV/GM EV/EBITDA

in Average?

Value

Kandi Technologies

KNDI

6

25

21%

NA

NA

119

5%

NA

NA

4.9

23.0

96.2

y

584

Li Auto

LI

NA

10

6%

NA

NA

160

NA

NA

NA

80.4

1343.8

NA

y

12,900

NIO

NIO

NA

NA

NA

3,390

2,070

1,352

NA

4.8

7.8

12.0

NA

NA

y

16,200

Nikola

NKLA

(0)

0

48%

72

0

0

-19%

218.4

NM

35909.1

74881.5

-186761.2

y

15,800

Tesla

TSLA

3,440

4,070

16%

40,800

29,640

25,710

13%

8.6

11.8

13.6

85.7

101.5

y

349,000

Workhorse Group

WKHS

(18)

(5)

-2989%

149

22

0

-9694%

11.1

74.9

9016.4

-301.6

-93.0

y

1,650

Average

8.1

9.8

10.1

95,663

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INVESTMENT THESIS

Net Element is in the process of a reverse merger and has plans to sell off its payment processing business. If the deal goes according to plan, Net Element shareholders will own between 15% and 21.7% of the survivor company.

Mullen Technologies is an electric car vendor that is raising money to build an assembly plant in the US for cars that are already being produced and sold in China. Its first model is expected to be delivered in the US in the first half of 2021. This transaction should make the required capital raising process faster, less costly, and require less regulatory approval.

The S-4 will provide more information allowing investors to see the inherent value of Mullen and could compel the stock price higher.

RISKS

The proposed transaction may not occur as neither company has yet done due diligence. Nor have shareholders approved the deal.

The survivor company may not be valued very highly by investors due to the high risk in the venture. It will have to raise a large amount of capital to achieve its goals.

If the deal does not go through, the stock may fall to pre-deal levels and given the affect of the pandemic on Net Elements business, the stock may even decline from those levels.

US relations with China could impede the success of Mullen Technologies given its reliance on a China based company. Tariffs with China have changed and could change again.

OWNERSHIP

Oleg Firer

Kenges Rakishev

The Vanguard Group

Steve Wolberg

BMO Nesbitt Burns

Other

Source: Zacks Investment Research, SEC filings

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INCOME STATEMENT

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020E

Q4 2020E

31-Mar

30-Jun

30-Sep

31-Dec

31-Mar

30-Jun

30-Sep

31-Dec

2018

2019

2020E

2021E

North America Transaction

$14.4

$15.7

$15.9

$15.8

$15.2

$13.0

$14.0

$15.0

$59.1

$61.8

$57.14

$63.00

Yr-over-yr Growth

2.8%

9.1%

2.1%

3.9%

5.5%

-17.5%

-12.1%

-4.8%

15.6%

4.5%

-7.5%

10.3%

Cost of service

11.8

13.4

13.4

13.8

12.8

11.0

11.8

11.8

50.5

52.4

47.4

52.9

Gross margin

2.6

2.3

2.5

2.0

2.3

2.0

2.2

2.3

8.6

9.4

9.7

10.1

Gross margin %

18.1%

14.6%

15.8%

12.6%

15.4%

15.1%

15.7%

15.0%

14.5%

15.2%

17.0%

16.0%

International

0.684

0.7

0.9

0.9

0.7

0.7

0.8

1.0

6.6

3.2

3.2

5.0

Yr-over-yr Growth

-66.1%

-63.4%

-45.8%

-4.5%

0.0%

-1.1%

-10.7%

12.0%

-25.5%

-51.5%

0.1%

55.1%

International Cost of Service

0.5

0.5

0.7

0.7

0.5

0.5

0.6

0.7

5.1

2.3

2.3

3.4

Gross Margin

0.2

0.3

0.2

0.2

0.2

0.2

0.2

0.3

1.6

0.9

1.0

1.7

Gross margin %

28.1%

39.0%

25.8%

20.2%

30.3%

29.7%

30.0%

30.0%

23.7%

27.8%

30.0%

33.0%

Total revenues

15.0

16.5

16.8

16.6

15.8

13.7

14.8

16.0

65.8

65.0

60.4

68.0

Yr-to-yr Growth

-5.9%

0.1%

-2.5%

3.4%

5.3%

-16.8%

-12.0%

-3.9%

9.5%

-1.2%

-7.1%

12.7%

Costs and expenses:

Cost of revenues

12.3

13.9

14.1

14.5

13.3

11.5

12.4

12.5

55.6

54.7

49.7

56.3

Gross Margin

2.8

2.6

2.7

2.2

2.5

2.2

2.4

3.5

10.2

10.3

10.7

11.7

% of Sales

18.5%

15.7%

16.3%

13.0%

16.0%

15.9%

16.5%

21.9%

15.5%

15.8%

17.7%

17.3%

SG&A

2.4

2.3

2.4

2.3

2.3

1.4

1.4

1.4

9.8

9.3

6.5

6.5

Stock-based compensation

0.0

2.0

0.0

0.0

0.0

0.0

0.0

0.0

0.1

2.1

0.1

-

Provision for loan losses

0.3

0.1

0.4

0.4

0.4

0.0

0.4

0.4

2.1

1.4

1.3

1.2

Depreciation and amortization

0.9

0.7

0.8

0.8

0.8

0.8

0.8

0.7

2.5

3.1

3.1

3.0

Total operating expenses

3.6

5.2

3.6

3.5

3.6

2.2

2.6

2.5

14.5

15.9

10.9

10.7

Loss from operations

(0.8)

(2.6)

(0.9)

(1.3)

(1.0)

(0.0)

(0.1)

1.0

(4.3)

(5.6)

(0.2)

1.1

Loss from operations ex-one time

(0.8)

(0.6)

(0.9)

(1.3)

(1.0)

(0.0)

(0.1)

1.0

(4.3)

(5.6)

(0.2)

1.1

Interest expense, net

(0.2)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

(0.8)

(1.1)

(1.4)

(1.4)

Other expense

(0.1)

1.3

0.1

0.2

0.0

0.0

0.0

0.0

0.8

1.5

0.0

0.0

One-time charges

0.0

0.0

0.0

(1.3)

0.0

0.0

0.0

0.0

(0.6)

(1.3)

0.0

0.0

Total non-operating expenses

(0.3)

1.0

(0.2)

(1.5)

(0.3)

(0.3)

(0.3)

(0.3)

(0.7)

(1.0)

(1.4)

(1.4)

Pretax operating income (loss)

(1.1)

(1.6)

(1.0)

(2.8)

(1.4)

(0.3)

(0.5)

0.6

(5.0)

(6.6)

(1.6)

(0.3)

Income tax provision

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Tax rate

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

Operating Loss

(1.1)

(1.6)

(1.0)

(2.8)

(1.4)

(0.3)

(0.5)

0.6

(5.0)

(6.6)

(1.6)

(0.3)

Minority interest

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.1

0.1

0.1

0.1

Net loss to common stock

(1.1)

(1.5)

(1.0)

(2.8)

(1.4)

(0.325)

(0.4)

0.6

(4.9)

(6.5)

(1.6)

(0.3)

Foreign currency translation gain (loss)

(0.0)

(0.0)

0.0

(0.0)

0.1

(0.1)

0.0

0.0

0.3

(0.0)

0.1

0.0

Comprehensive loss

(1.1)

(1.5)

(1.0)

(2.8)

(1.2)

(0.4)

(0.4)

0.6

(4.6)

(6.5)

(1.6)

(0.3)

Earnings ex-one time charge

(1.1)

(1.5)

(1.0)

(1.5)

(1.4)

(0.3)

(0.4)

0.6

(4.3)

(5.1)

(1.6)

(0.3)

Stock-based compensation

0.0

2.0

0.0

0.0

0.0

0.0

0.0

0.0

0.1

2.1

0.1

0.0

Adjusted Non-GAAP Earnings

(1.1)

0.468

(1.0)

(1.4)

(1.3)

(0.317)

(0.4)

0.6

(4.2)

(3.1)

(1.5)

(0.3)

Yr-to-yr Growth

-27.7%

-153.2%

12.1%

68.3%

20.1%

-167.7%

-58.1%

-144.7%

-40%

-26%

-50.5%

-80.7%

GAAP EPS

($0.29)

($0.37)

($0.24)

($0.68)

($0.33)

($0.08)

($0.09)

$0.14

($1.28)

($1.60)

($0.36)

($0.06)

Non-GAAP EPS

($0.28)

$0.11

($0.24)

($0.35)

($0.32)

($0.08)

($0.09)

$0.14

($1.07)

($0.76)

($0.35)

($0.06)

Yr-to-yr Growth

-29%

-149%

5%

58%

13.5%

-168.1%

-62.1%

-140.0%

-69.7%

-29.1%

-54.2%

-81.7%

Share outstanding

3.9

4.2

4.2

4.1

4.1

4.2

4.6

4.6

3.9

4.0

4.4

4.6

Yr-to-yr Growth

1%

9%

6%

6%

5.8%

-0.6%

10.7%

11.8%

96.6%

4.5%

8.3%

5.0%

Fully diluted shares

3.9

4.2

4.2

4.1

4.1

4.1

4.1

4.1

4.8

4.0

4.1

4.1

Yr-to-yr Growth

-19%

-13%

-15%

-16%

0.0%

0.0%

0.0%

0.0%

120.1%

-16.7%

0.0%

17.5%

Adjusted EBITDA

0.063

0.144

(0.082)

(0.539)

(0.221)

0.763

0.655

1.700

(1.734)

(0.414)

2.897

4.030

Source: Zacks Investment Research and SEC Filings

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BALANCE SHEET

June 30, 2020

Mar 31, 2020

Qtr-Qtr %

Change

Current assets:

$865,812

$606,672

Cash

43%

Accounts receivable, net

5,855,538

4,021,585

46%

Prepaid expenses and other assets

1,530,625

1,300,316

18%

Total current assets

8,251,975

5,928,573

39%

Equipment, net

0

0

0%

Intangible assets, net

4,703,406

5,348,652

-12%

Goodwill

7,681,186

7,681,186

0%

Operating lease right-of-use asset

316,118

349,036

-9%

Other long term

730,185

654,897

11%

Total assets

21,682,870

19,962,344

9%

Current liabilities:

Accounts payable

$5,360,103

$4,509,311

19%

Deferred revenue

1,291,703

2,001,091

-35%

Accrued expenses

2,121,161

930,912

128%

Notes payable (current portion)

936,391

909,086

3%

Operating lease liability (current portion)

68,859

101,777

-32%

Due to related parties

81,591

75,355

8%

Total current liabilities

9,859,808

8,527,532

16%

Operating lease liability (net of current)

247,259

247,259

0%

Notes payable (non-current portion)

8,986,881

8,352,627

8%

Total liabilities

19,093,948

17,127,418

11%

STOCKHOLDERS'DEFICIT

Common stock

419

412

2%

Paid in capital

185,496,940

185,337,965

0%

Accumulated other comp income (loss)

(2,209,363)

(2,143,374)

3%

Accumulated deficit

(180,442,122)

(180,116,849)

0%

Noncontrolling interest

(256,952)

(243,227)

6%

Total stockholders'deficit

2,588,922

2,834,927

-9%

Total liabilities and stockholders'deficit

21,682,870

19,962,345

9%

Net Cash

(152,170)

606,672

-125%

Current and Quick Ratio

0.8

0.7

20%

Working Capital

(1,607,833)

(2,598,959)

-38%

Total Debt

10,004,863

9,337,068

7%

Debt/TA

46%

47%

-1%

DSO

38.9

23.2

68%

Source: SEC Filings

Yr- Yr %

June 30, 2019

Change

$840,17027%

5,073,168 -22%

978,737 -9%

6,892,075 -16%

16,205 -100%

6,237,789 -16%

9,007,752 -15%

442,094 -26%

655,1800%

23,251,095 -15%

$5,274,782 -15%

449,451 106%

1,700,003 -66%

224,364 175%

61,108 13%

200,694-72%

7,910,402 -12%

380,986 -35%

7,074,97840%

15,366,3667%

4107%

185,267,0541%

(2,252,261) -5%

(174,950,546)4%

(179,928) 74%

7,884,729 -62%

23,251,095 -15%

415,11227%

0.9-4%

(1,018,327)-3%

7,500,036

42%

32%

68%

28.1

-25%

Zacks Investment Research

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CASH FLOWS

YR 2018

Mar. 31, 2019

June 30, 2019

Sept 30, 2019

Dec. 31, 2019

YR 2019

Mar. 31, 2020

June 30, 2020

3 month

3 month

3 month

3 month

3 month

3 month

Cash flows from operating activities

Net loss

$ (4,936,182)

$ (1,120,847)

$ (1,537,445)

$ (1,010,629)

$ (2,789,461)

$ (6,458,382)

$ (1,366,216)

$ (325,272)

Adjustments to reconcile net loss to net

cash provided by (used in) operating

activities:

Non controlling interest

(86,551)

(13,966)

(40,225)

(28,783)

(23,287)

(106,261)

(11,228)

(13,725)

Share based compensation

142,017

15,006

2,005,841

15,008

15,007

2,050,862

38,400

7,499

Deferred revenues

(216,742)

(523,199)

(523,199)

494,832

456,834

(94,732)

(470,205)

360,791

Net non cash items in other income

(1,202,201)

-

-

-

-

-

-

-

Impairment for goodwill

636,000

-

-

-

1,326,566

1,326,566

-

-

Depreciation and amortization

2,454,637

851,220

747,347

755,985

765,691

3,120,243

779,443

772,401

Non cash interest

73,442

14,314

7,397

14,972

20,192

56,875

12,294

34,258

(Recovery of ) provision for loan losses

16,238

10,013

(18,940)

8,927

(9,226)

(9,226)

485

(9,153)

Changes in assets and liabilities, net of

acquisitions and the effect of consolidation

of equity affiliates

Account receivable

(1,503,755)

1,151,285

13,976

(423,880)

(1,005,139)

(263,758)

2,520,395

(1,819,889)

Prepaid expenses and other assets

384,403

253,634

415,012

(442,293)

(358,571)

(132,218)

364,019

(651,405)

Accounts payable and accrued expenses

971,202

(875,266)

(1,429,936)

(182,855)

3,058,618

(1,642,618)

(1,419,019)

880,841

Net cash (used in) provided by operating

(3,267,492)

(237,806)

(360,172)

(798,716)

(755,955)

(2,152,649)

448,368

(763,654)

activities

Cash flows from investing activities

Purchase of portfolio and client acquisition

(5,413,264)

(651,365)

(558,913)

(412,204)

(691,180)

(2,313,662)

(427,031)

67,681

costsPurchase of fixed and other assets

(114,931)

(413,132)

(55,155)

4,659

325,628

(138,000)

6,049

(41,715)

Net cash used in investing activities

(5,528,195)

(1,064,497)

(614,068)

(407,545)

(365,552)

(2,451,662)

(420,982)

25,966

Cash flows from financing activities

Proceeds from SBA loans

-

-

-

-

-

-

-

651,392

Proceeds from indebtedness

2,131,500

-

1,116,500

920,184

997,816

3,034,500

155,206

19,108

Repayment of indebtedness

(2,785,134)

(102,700)

(106,384)

(110,204)

156,841

(162,447)

(145,040)

145,040

Lease liability

-

471,307

(29,213)

(30,098)

-

380,986

(31,950)

(32,918)

Related party advances (payments)

-

(171,615)

338,176

85,942

(50,032)

202,471

133,743

25,689

Net cash provided by (used in) financing

(653,634)

196,992

1,319,079

865,824

1,073,615

3,455,510

111,959

808,311

activities

Effect of exchange rate changes on cash

(34,399)

(12,497)

18,768

(6,555)

15,789

15,505

5,969

8,620

Net increase in cash

(9,483,720)

(1,117,808)

363,607

(346,992)

(32,103)

(1,133,296)

145,314

79,243

Cash at beginning of period

11,733,271

2,249,551

1,131,743

1,495,350

1,148,358

2,249,551

1,116,255

1,261,569

Cash at end of period

2,249,551

1,131,743

1,495,350

1,148,358

1,116,255

1,116,255

1,261,569

1,340,812

Cash paid during the period for:

Interest

773,737

230,789

245,135

255,069

-

730,993

336,120

-

Taxes

61,871

46,932

56,909

16,703

-

120,544

-

-

Operating cash flow

(3,119,342)

(767,459)

640,776

250,312

(237,684)

(114,055)

(1,017,027)

826,799

Free cash flow

(8,647,537)

(1,831,956)

26,708

(157,233)

(603,236)

(2,565,717)

(1,438,009)

852,765

Source: SEC Filings

Zacks Investment Research

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HISTORICAL STOCK PRICE

Source: Zacks Investment Research

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DISCLOSURES

The following disclosures relate to relationships between Zacks Small-Cap Research (Zacks SCR), a division of Zacks Investment Research (ZIR), and the issuers covered by the Zacks SCR Analysts in the Small-Cap Universe.

ANALYST DISCLOSURES

Zacks SCR Analysts hereby certify that the view expressed in this research report or blog article accurately reflect the personal views of the analyst about the subject securities and issuers. Zacks SCR also certifies that no part of any analysts compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report or blog article. Zacks SCR believes the information used for the creation of this report or blog article has been obtained from sources considered reliable, but we can neither guarantee nor represent the completeness or accuracy of the information herewith. Such information and the opinions expressed are subject to change without notice. The Zacks SCR Twitter is covered herein by this disclosure.

INVESTMENT BANKING AND FEES FOR SERVICE

Zacks SCR does not provide investment banking services nor has it received compensation for investment banking services from the issuers of the securities covered in this report or article.

Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm engaged by the issuer for providing non-investment banking services to this issuer and expects to receive additional compensation for such non- investment banking services provided to this issuer.

The non-investment banking services provided to the issuer include the preparation of this report, investor relations services, investment software, financial database analysis, organization of non-deal road shows, and attendance fees for conferences sponsored or co-sponsored by Zacks SCR.

Each issuer has entered into an agreement with Zacks to provide continuous independent research for a period of no less than one year in consideration of quarterly payments totaling a maximum fee of $40,000 annually.

POLICY DISCLOSURES

This report provides an objective valuation of the issuer today and expected valuations of the issuer at various future dates based on applying standard investment valuation methodologies to the revenue and EPS forecasts made by the SCR Analyst of the issuer s business.

SCR Analysts are restricted from holding or trading securities in the issuers that they cover. ZIR and Zacks SCR do not make a market in any security followed by SCR nor do they act as dealers in these securities. Each Zacks SCR Analyst has full discretion over the Valuation of the issuer included in this report based on his or her own due diligence. SCR Analysts are paid based on the number of companies they cover.

SCR Analyst compensation is not, was not, nor will be, directly or indirectly, related to the specific valuations or views expressed in any report or article.

ADDITIONAL INFORMATION

Additional information is available upon request. Zacks SCR reports and articles are based on data obtained from sources that it believes to be reliable, but are not guaranteed to be accurate nor do they purport to be complete. Because of individual financial or investment objectives and/or financial circumstances, this report or article should not be construed as advice designed to meet the particular investment needs of any investor. Investing involves risk. Any opinions expressed by Zacks SCR Analysts are subject to change without notice. Reports or articles or Tweets are not to be construed as an offer or solicitation of an offer to buy or sell the securities herein mentioned.

CANADIAN COVERAGE

This research report is a product of Zacks SCR and prepared by a research analyst who is employed by or is a consultant to Zacks SCR. The research analyst preparing the research report is resident outside of Canada, and is not an associated person of any Canadian registered adviser and/or dealer. Therefore, the analyst is not subject to supervision by a Canadian registered adviser and/or dealer, and is not required to satisfy the regulatory licensing requirements of any Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and is not required to otherwise comply with Canadian rules or regulations.

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Net Element Inc. published this content on 18 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 August 2020 21:34:02 UTC