Net Element(MULN) - 2020 Q4 - Annual Report

Financial Performance - The company incurred a net loss of approximately $5.9 million for the year ended December 31, 2020, with an accumulated deficit of approximately $184.7 million[163]. - Current assets included approximately $4.5 million in cash and $7.1 million in accounts receivable, while current liabilities totaled approximately $11.8 million in accounts payable and accrued expenses[163]. - Management expects cash flows from operations will not be sufficient to fund current operations through 2021, necessitating additional capital[164]. - Seasonal fluctuations in revenues are expected, with historically weaker performance in the first quarter and stronger results in subsequent quarters[191]. - Increased costs associated with being a public company may adversely affect operating results and financial condition[222]. Impact of COVID-19 - The COVID-19 pandemic has not yet had a material impact on the company's revenues compared to the previous year, but future impacts remain uncertain[164]. - The outbreak of COVID-19 has led to significant sales declines for many restaurant merchants, impacting overall business operations[168]. Competition and Market Risks - The company faces substantial competition in the financial services and payments industries, which could adversely affect growth and profitability[179]. - The market for electronic commerce services is evolving, and failure to grow transaction volumes could negatively impact profitability[181]. - The company is subject to foreign laws and regulations that may change unpredictably, impacting its ability to conduct business internationally[195]. Operational Risks - The company is re-evaluating its operating plans to maintain payment processing functions and customer service amid ongoing losses and negative working capital[165]. - The reliance on third-party processors and service providers poses a risk, as their failure could adversely affect merchant relationships and business continuity[184]. - The company relies on bank sponsors, primarily Esquire Bank, N.A., for processing the majority of its bankcard transactions, and any termination of these sponsorships could severely impact operations[185]. - The company processes substantially all transactions through Visa and MasterCard, and failure to comply with their standards could lead to termination of registrations, preventing transaction processing services[186]. - The company’s financial results could be adversely affected if it fails to maintain key partnerships with banks and financial institutions, particularly in emerging markets like Kazakhstan[187]. - The company depends on independent non-bank sales groups for acquiring and retaining merchant accounts, and failure to maintain these relationships could negatively impact revenues[189]. - The company faces potential liabilities and reputational damage from unauthorized data disclosures, which could result in significant fines and operational disruptions[190]. - The company is vulnerable to natural disasters and man-made disruptions, which could negatively impact business operations[207]. Regulatory and Legal Risks - New governmental regulations regarding consumer privacy could impair the company's ability to provide services and access customer information, affecting operations[192]. - Legal proceedings and regulatory inquiries could have a material adverse effect on the company's financial condition and operating results[223]. Foreign Operations and Currency Risks - Approximately 5% of total net revenues were derived from operations outside the United States, specifically in Russia and CIS[204]. - The foreign exchange rate for the Russian ruble increased by approximately 19.9% compared to the daily rate at December 31, 2019[204]. - The company faces risks from fluctuations in foreign currency exchange rates, particularly between the U.S. dollar and the Russian ruble[204]. Mergers and Acquisitions - The merger agreement's outside date was extended to April 30, 2021, due to potential delays in the merger completion[212]. - The company may incur significant costs related to the merger, including legal and financial advisory fees, even if the merger is not completed[218]. - Acquisition activities may lead to operational difficulties and dilution of stockholder value, with risks associated with integrating acquired businesses[199]. Fraud Risks - The company is subject to risks related to potential fraud by merchants, which could adversely affect financial results[210].