Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 001-34887 Net Element, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdic ...

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 001-34887 (Registrant's telephone number, including area code) Not applicable (Former n ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 001-34887 Net Element, Inc. (Exact name of registrant as specified in its charter) Delaware ...

Net Element, Inc. (NETE) Q1 2019 Earnings Conference Call May 16, 2019 8:30 AM ET Company Participants Oleg Firer – Chief Executive Officer Jeffrey Ginsberg – Chief Financial Officer Conference Call Participants Lisa Thompson – Zacks Investment Research Operator Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Net Element First Quarter 2019 Financial Results and Business Update Conference Call. [Operator Instructions] I'd like to remind listeners that during the call, management ...

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2019 financial statements show total assets decreased to $23.5 million, net revenues declined to $15.0 million, but net loss improved to $1.1 million, with operating cash flow remaining negative at ($0.2 million) [Condensed Consolidated Balance Sheet Summary (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Current Assets** | $7,037,708 | $9,685,114 | | **Total Assets** | $23,524,026 | $25,764,014 | | **Total Current Liabilities** | $9,720,581 | $11,221,502 | | **Total Liabilities** | $16,061,928 | $17,167,548 | | **Total Stockholders' Equity** | $7,462,098 | $8,596,466 | [Condensed Consolidated Statement of Operations Summary (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements) | Account | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | **Total Revenues** | $15,047,182 | $15,982,394 | | **Total Costs and Operating Expenses** | $15,850,548 | $16,971,637 | | **Loss from Operations** | ($803,366) | ($989,243) | | **Net Loss Attributable to Net Element, Inc.** | ($1,120,847) | ($1,610,847) | | **Loss Per Share (basic and diluted)** | ($0.29) | ($0.42) | [Condensed Consolidated Statement of Cash Flows Summary (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements) | Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | ($237,806) | ($1,137,757) | | **Net Cash Used in Investing Activities** | ($1,064,497) | ($401,980) | | **Net Cash Provided by (Used in) Financing Activities** | $196,992 | ($548,861) | | **Net Decrease in Cash** | ($1,117,808) | ($2,092,318) | | **Cash at End of Period** | $1,131,743 | $9,640,953 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's two segments, key accounting policies including Topic 842 adoption, $6.3 million in intangible assets and notes payable, significant revenue concentration, and ongoing legal and related-party transactions - The company operates in two reportable business segments: North American Transaction Solutions and International Transaction Solutions, specializing in payment acceptance and value-added solutions[20](index=20&type=chunk) - Effective January 1, 2019, the company adopted the new lease accounting standard (ASU 2016-02, Topic 842), resulting in the recognition of an operating lease right-of-use asset and liability of approximately **$471,000**[51](index=51&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) Intangible Assets as of March 31, 2019 | Type | Carrying Value | | :--- | :--- | | IP Software | $152,742 | | Portfolios and Client Lists | $2,868,743 | | Client Acquisition Costs | $3,309,168 | | **Total** | **$6,330,652** | - For Q1 2019, the company had significant revenue concentration, processing **52%** of total revenue with Priority Payment Systems, **32%** with its own BIN/ICA via Esquire Bank, and **7%** with First Data[99](index=99&type=chunk)[100](index=100&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Q1 2019 net loss decrease to $1.1 million, driven by North American segment gross margin improvement despite international revenue decline, and outlines future financing needs of $3 million with $10.8 million in available credit facilities - The company operates two business segments: North American Transaction Solutions (largest segment) and International Transaction Solutions (through subsidiary PayOnline)[138](index=138&type=chunk)[162](index=162&type=chunk) Segment Performance Comparison (Three Months Ended March 31) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | **Total Net Revenues** | $15,047,182 | $15,982,394 | | *North American Revenues* | $14,363,506 | $13,966,617 | | *International Revenues* | $683,676 | $2,015,777 | | **Total Gross Margin** | $2,787,034 | $2,364,060 | | **Gross Margin %** | 18.5% | 14.8% | - The decrease in net loss was primarily due to an increase in the gross margin for the North American Transaction Solutions segment and a decrease in other expenses[168](index=168&type=chunk) - The company requires an additional **$3 million** to finance operations for the next 12 months and has approximately **$10.8 million** available in credit facilities as of March 31, 2019[189](index=189&type=chunk)[190](index=190&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable for the reporting period - The company states that Quantitative and Qualitative Disclosures about Market Risk are not applicable[198](index=198&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of March 31, 2019, due to material weaknesses, with ongoing remediation efforts including an improved enterprise-wide risk management process and enhanced controls at international operations - The CEO and CFO concluded that disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[201](index=201&type=chunk) - Remediation activities are ongoing and include designing an improved enterprise-wide risk management process and enhancing controls at the international segment in Russia[202](index=202&type=chunk) [PART II — OTHER INFORMATION](index=46&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20proceedings) The company refers to Note 9 of the financial statements for details on ongoing legal proceedings, including an interpleader action, a defamation lawsuit, and a patent infringement claim - For details on legal proceedings, the report refers to Note 9, "Commitments and Contingencies" in the financial statements[205](index=205&type=chunk) [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) The company directs readers to its Annual Report on Form 10-K for the year ended December 31, 2018, for a comprehensive discussion of risk factors - The report incorporates by reference the risk factors discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2018[206](index=206&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, amendments, and required CEO and CFO certifications - The exhibits filed with this report include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1) and XBRL data files[209](index=209&type=chunk)

Financial Data and Key Metrics Changes - Net revenues for 2018 increased to $65.8 million, a 10% increase compared to 2017, primarily driven by a 16% growth in the North American Transaction Solutions segment [5][14] - The net loss attributable to common stockholders decreased to approximately $4.9 million or $1.28 per share for 2018, compared to a net loss of approximately $9.9 million or $5.04 loss per share for 2017, reflecting a 50% reduction in net loss [12][13] - Total processing volume for 2018 increased to $3.3 billion, an 18% increase from $2.8 billion in 2017, with North America accounting for $2.9 billion, a 27% increase [6] Business Line Data and Key Metrics Changes - The North American Transaction Solutions segment experienced a revenue growth of over $2 million quarter-over-quarter in Q4 2018, while the International Transaction Solutions segment declined by 26% due to the consolidation and elimination of the branded content business [5][22] - Total transactions processed during 2018 was $149 million, a decrease of 3% compared to 2017, attributed to the elimination of the branded content business [7] Market Data and Key Metrics Changes - The United States accounted for 90% of total revenues in 2018, while international revenues were only 10% [6] - International processing volume decreased by 33% to $354 million, reflecting challenges in retaining large clients [6][22] Company Strategy and Development Direction - The company launched the Netevia platform in 2018, which serves as the core of its technology stack, aimed at providing value-added payment solutions [10][32] - The focus for 2019 includes enhancing the Netevia platform with additional modules and services to improve margins and client retention [32][33] - The company aims to reach sustainable profitability without raising equity, utilizing existing credit facilities for operational cash needs [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in the international market due to the loss of legacy clients but expressed optimism about onboarding new clients requiring cross-border solutions [22][25] - The company is focused on achieving breakeven profitability through strategic initiatives and technology enhancements [35] Other Important Information - The company was recognized as one of the fastest-growing technology companies in North America by Deloitte and ranked among the top 10 retail payment service companies by Retail CIO Outlook Magazine [4] - The company has a financial capacity of approximately $10.8 million available for drawdown through credit facilities [21] Q&A Session Summary Question: Funding for the next year - Management indicated they have about $10.8 million available through credit facilities and do not anticipate raising equity to reach breakeven profitability [21] Question: Sequential decline in Q4 - Management explained that while North American business grew, the international segment struggled due to the loss of large clients, which they are in the process of replacing [22] Question: One-time charges and gains - Management clarified that non-operating gains and losses were primarily due to write-offs of uncollectible accounts and a stock price guarantee related to a past acquisition [26][27] Question: Goals for the year and product announcements - Management emphasized the focus on enhancing the Netevia platform and introducing more value-added services to improve client retention and margins [32][33] Question: Acquisition offers and breakeven challenges - Management stated they have not received tangible buyout offers and discussed their strategy to achieve breakeven profitability through onboarding clients and utilizing their technology platform [35]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 001-34887 Net Element, Inc. (Exact name of registrant as specified in its charter) Delaware 90-1025599 (State or other jurisd ...