Net Element Reports First Quarter 2017 Results M

MIAMI, FL--(Marketwired - May 15, 2017) - Net Element, Inc. ( NASDAQ : NETE ) ("Net Element" or the "Company"), a global financial technology and value-added solutions group that supports companies in accepting electronic payments in an omni-channel environment that spans across point-of-sale (POS), e-commerce and mobile devices, today reported financial results for the first quarter ended March 31, 2017 and provided an update on recent strategic and operational initiatives.

For three months ended March 31, 2017, net revenues increased 20% to $13,561,941 as compared to $11,261,059 in the prior year. The $2,300,882 increase in net revenues is primarily due to organic growth in our North America Transaction Solutions segment, which demonstrated net revenues increase of 40% as compared to the prior year:

• North America Transaction Solutions segment: Continued organic growth of SMB merchants in this segment with emphasis on value-added offerings. Revenues for this segment continue to lead the growth for three months ended March 31, 2017 were $10,964,919, a 40% increase over the prior year.
• Online Solutions segment: Continued organic growth in global online payment acceptance services with emphasis on value-added offerings. Revenues for this segment for three months ended March 31, 2017 were $1,740,029, a 23% increase over the prior year.
• Mobile Solutions segment: Revenues for this segment were $856,993, a 57% decrease over the prior year. We continue to explore financing options for this business as well as expansion to markets that do not require us to advance capital to content providers prior to getting paid from mobile network operators.

Recent Highlights:

• Unified Payments launched Multi Currency Processing (MCP) to allow online merchants to price their goods and services in over 90 local currencies and expand their global reach
• Digital Provider expanded its Direct Carrier Billing (DCB) services to Poland and Turkey integrating its proprietary Trinity Platform with all major operators in the region such as T-Mobile and Orange, allowing access to 113.5 million mobile users in these markets
• Unified Payments announced comprehensive Point-of-Sale (POS) program during its 2017 launch series at the annual Northeast Acquirers Association (NEAA) conference in Boston, Massachusetts
• PayOnline launched Apple Pay support in Russia
• Unified Payments launched payment acceptance for ReservHotel, a leading provider of travel distribution and booking solutions for hotels worldwide
• Digital Provider announced partnership programs targeting content providers, mobile network operators and mobile application developers at GSMA Mobile World Congress 2017 in Barcelona, Spain
• PayOnline launched Instant Credit, an innovative microcredit solution available to online consumers that can help increase conversion rates and merchants' revenues
• PayOnline launched payment acceptance for Sutochno.ru, the leading C2C short-term accommodation booking service in Russia

"The first quarter of the year is one of the slowest quarters of the year for processing and we remain focused on continued growth and innovation to differentiate our product offerings and provide superior products and services to our expanding customer base," commented Oleg Firer, CEO of Net Element. "We are undertaking several strategic changes in the mobile solutions segment, which should yield results in the third-quarter of this year."

Conference Call: The Company will host a conference call to discuss First Quarter 2017 financial results and business highlights on May 16, 2017 at 8:30 AM ET. 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 24392966. It is recommended that participants dial in approximately 10 minutes prior to the start of the 8:30AM Eastern call.

The call will also be webcast live from http://edge.media-server.com/m/p/26rnmtr5 . Following completion of the call, a recorded replay of the webcast will be available on the http://www.netelement.com/en/ir website.

Results of Operations for the Three Months Ended March 31, 2017 Compared to the Three Months Ended March 31, 2016

We reported a net loss attributable to stockholders of $2,487,498, or $0.15 per share, for the three months ended March 31, 2017 as compared to a net loss attributable to stockholders of $1,847,719, or $0.16 per share, for the three months ended March 31, 2016. This resulted in an increase in net loss attributable to stockholders of $639,779 primarily as a result of higher general and administrative expenses and non-cash compensation expense offset by an improved gross margin.

Eliminating the effects of non-cash compensation, we reported an adjusted non-GAAP, Net loss attributable to Net Element, Inc. stockholders of $1,891,094 or $0.11 per share for the three months ended March 31, 2017 as compared to an adjusted non-GAAP, Net loss attributable to Net Element, Inc. stockholders of $1,486,735 or $0.13 per share for the three months ended March 31, 2016.

Net revenues consist primarily of payment processing fees. Net revenues were $13,561,941 for the three months ended March 31, 2017 as compared to $11,261,059 for the three months ended March 31, 2016. The increase in net revenue is primarily due to organic growth of merchants in our North American Transaction Solutions segment which resulted in an increase to North American Transaction Solutions segment revenue of $3,112,271, or 40% increase for the three months ended March 31, 2017 versus the three months ended March 31, 2016. Increases in our North American Transaction Solutions segment revenue were primarily due to a continued growth of SMB merchants with emphasis on value-added offerings. This was partially offset by a $1,136,511, or 57% decrease in our Mobile Solutions segment, as we continue to seek capital needed to prepay for content delivered through our platform as well as diversify to post-paid markets. Our Online Solutions segment revenue increased $325,122 (or 23%), from $1,414,907 for the three months ended March 31, 2016 to $1,740,029 for the three months ended March 31, 2017, primarily due to changes in foreign currency exchange rates.

Cost of revenues represents direct costs of generating revenues, including commissions, mobile operator fees, purchases of short numbers, interchange expense and processing fees. Cost of revenues for the three months ended March 31, 2017 were $11,459,992 as compared to $9,385,241 for the three months ended March 31, 2016. The $2,074,751 increase in cost of revenues was primarily due to a $2,808,416 increase in our North American Transaction Solutions segment due to increased volume. There was also a $263,960 increase in cost of revenues resulting from our Online Solutions segment operations also due to increased volume. This was offset by a $997,625 decrease in our Mobile Solutions segment cost of revenues, which resulted from the decrease in sales for our Mobile Solutions segment for the three months ended March 31, 2017 versus the three months ended March 31, 2016.

Gross Margin for the three months ended March 31, 2017 was $2,101,949, or 15% of net revenue, as compared to $1,875,818, or 17% of net revenue, for the three months ended March 31, 2016. The $226,131 increase in gross margin was due to the increased volume of processing in our North American Transaction Solutions offset by a decrease of $138,886 in our Mobile Solutions margin caused from a decrease in business.

The following table sets forth our sources of revenues, cost of revenues and gross margins for the three months ended March 31, 2017 and 2016:

Gross Margin Analysis
Source of Revenues			Three Months Ended March 31, 2017			Mix			Three Months Ended March 31, 2016			Mix			Increase / (Decrease)
North American Transaction Solutions			$	10,964,919		81	%		$	7,852,648		70	%		$	3,112,271
Mobile Solutions				856,993		6	%			1,993,504		18	%			(1,136,511	)
Online Solutions				1,740,029		13	%			1,414,907		12	%			325,122
	Total		$	13,561,941		100	%		$	11,261,059		100	%		$	2,300,882
Cost of Revenues			Three Months Ended March 31, 2017			% of revenues			Three Months Ended March 31, 2016			% of revenues				Increase / (Decrease)
North American Transaction Solutions			$	9,461,449		86	%		$	6,653,033		85	%		$	2,808,416
Mobile Solutions				816,963		95	%			1,814,588		91	%			(997,625	)
Online Solutions				1,181,580		68	%			917,620		65	%			263,960
	Total		$	11,459,992		85	%		$	9,385,241		83	%		$	2,074,751
Gross Margin			Three Months Ended March 31, 2017			% of revenues			Three Months Ended March 31, 2016			% of revenues				Increase / (Decrease)
North American Transaction Solutions			$	1,503,470		14	%		$	1,199,615		15	%		$	303,855
Mobile Solutions				40,030		5	%			178,916		9	%			(138,886	)
Online Solutions				558,449		32	%			497,287		35	%			61,162
	Total		$	2,101,949		15	%		$	1,875,818		17	%		$	226,131

Total operating expenses were $4,364,687 for the three months ended March 31, 2017. Total operating expenses for the three months ended March 31, 2017 consisted of general and administrative expenses of $2,831,161, non-cash compensation expenses of $596,404, provision for bad debts of $279,759, and depreciation and amortization of $657,363. Total operating expenses were $3,589,156 for the three months ended March 31, 2016, which consisted of general and administrative expenses of $2,088,313, non-cash compensation expenses of $360,984, provision for bad debts of $251,741, and depreciation and amortization of $888,118. 

General and administrative expenses for the three months ended March 31, 2017 and 2016 consisted of operating expenses not otherwise delineated in our Consolidated Statements of Operations and Comprehensive Loss and include salaries and benefits, professional fees, rent, travel expense, filing fees, transaction gains, office expenses, communication expense, insurance expense, and other expenses required to run our business, as follows:

Three Months Ended March 31, 2017
Category			North America Transaction Solutions			Mobile Solutions			Online Solutions			Corporate Expenses & Eliminations			Total
Salaries, benefits, taxes and contractor payments			$	480,617		$	123,818		$	221,755		$	841,520		$	1,667,710
Professional fees				168,076			25,071			225,342			255,201			673,690
Rent				-			15,169			39,468			98,428			153,065
Business development				1,824			962			9,020			1,581			13,387
Travel expense				32,804			5,096			1,171			56,225			95,296
Filing fees				-			-			-			6,426			6,426
Transaction (gains) losses				-			(49,324	)		3,316			1,731			(44,277	)
Office expenses				52,645			2,712			17,297			75,443			148,097
Communications expenses				13,319			700			30,087			20,624			64,730
Insurance expense				-			-			-			44,107			44,107
Other expenses				1,949			-			2,152			4,829			8,930
	Total		$	751,234		$	124,204		$	549,608		$	1,406,115		$	2,831,161
Three Months Ended March 31, 2016
Category			North America Transaction Solutions			Mobile Solutions			Online Solutions			Corporate Expenses & Eliminations			Total
Salaries, benefits, taxes and contractor payments			$	393,446		$	107,925		$	112,773		$	564,803		$	1,178,947
Professional fees				163,239			1,108			83,743			276,297			524,387
Rent				-			11,086			32,092			93,066			136,244
Business development				8,770			-			24,673			-			33,443
Travel expense				41,312			3,875			2,938			8,884			57,009
Filing fees				-			-			-			16,499			16,499
Transaction (gains) losses				-			(55,533	)		62,763			7,736			14,966
Office expense				19,599			2,054			11,311			29,510			62,474
Communications expense				30,160			274			4,091			23,432			57,957
Insurance expense				-			-			-			3,125			3,125
Other expenses				-			289			75			2,898			3,262
	Total		$	656,526		$	71,078		$	334,459		$	1,026,250		$	2,088,313
Variance
Category			North America Transaction Solutions			Mobile Solutions			Online Solutions			Corporate Expenses & Eliminations			Total
Salaries, benefits, taxes and contractor payments			$	87,171		$	15,893		$	108,982		$	276,717		$	488,763
Professional fees				4,837			23,963			141,599			(21,096	)		149,303
Rent				-			4,083			7,376			5,362			16,821
Business development				(6,946	)		962			(15,653	)		1,581			(20,056	)
Travel expense				(8,508	)		1,221			(1,767	)		47,341			38,287
Filing fees				-			-			-			(10,073	)		(10,073	)
Transaction (gains) losses				-			6,209			(59,447	)		(6,005	)		(59,243	)
Office expense				33,046			658			5,986			45,933			85,623
Communications expense				(16,841	)		426			25,996			(2,808	)		6,773
Insurance expense				-			-			-			40,982			40,982
Other expenses				1,949			(289	)		2,077			1,931			5,668
	Total		$	94,708		$	53,126		$	215,149		$	379,865		$	742,848

Salaries, benefits, taxes and contractor payments were $1,367,710 for the three months ended March 31, 2017 as compared to $1,178,947 for the three months ended March 31, 2016.

Segment		Salaries and benefits for the three months ended March 31, 2017			Salaries and benefits for the three months ended March 31, 2016			Increase / (Decrease)
North American Transaction Solutions		$	480,617		$	393,446		$	87,171
Mobile Solutions			123,818			107,925			15,893
Online Solutions			221,755			112,773			108,982
Corporate Expenses & Eliminations			841,520			564,803			276,717
Total		$	1,667,710		$	1,178,947		$	488,763

The increase in salaries of $488,763 was due primarily to the increase of Corporate expenses for a $300,000 discretionary bonus payable to our CEO and approved by the Board of directors. The bonus is payable when cash flow of the business can support the payment. Additionally, North American Transaction Solutions segment salaries increased $87,171 due to an increase in headcount and sales incentives for key employees. We also saw an increase of $108,982 and $15,893, respectively, in our Online Solutions and Mobile Solutions segments which were primarily due to the Ruble exchange rate and to a lesser extent, salary increases.

Professional fees were $673,690 for the three months ended March 31, 2017 as compared to $524,387 for the three months ended March 31, 2016.

Three Months Ended March 31, 2017
Professional Fees		North American Transaction Solutions			Mobile Solutions				Online Solutions			Corporate Expenses & Eliminations				Total
General Legal		$	42,599		$	-			$	713		$	33,526			$	76,838
SEC Compliance Legal Fees			-			-				-			23,750				23,750
Accounting and Auditing			-			-				9,219			112,782				122,001
Tax Compliance and Planning			-			-				-			14,900				14,900
Consulting			125,477			25,071				215,410			70,243				436,201
Total		$	168,076		$	25,071			$	225,342		$	255,201			$	673,690
Three Months Ended March 31, 2016
Professional Fees		North American Transaction Solutions			Mobile Solutions				Online Solutions			Corporate Expenses & Eliminations				Total
General Legal		$	28,171		$	200			$	513		$	24,911			$	53,795
SEC Compliance Legal Fees			-			-				-			43,750				43,750
Accounting and Auditing			-			-				578			121,344				121,922
Tax Compliance and Planning			-			-				-			-				-
Consulting			105,068			908				82,652			116,292				304,920
Total		$	133,239		$	1,108			$	83,743		$	306,297			$	524,387
Variance
Professional Fees		North American Transaction Solutions			Mobile Solutions				Online Solutions			Corporate Expenses & Eliminations				Increase / (Decrease)
General Legal		$	14,428		$	(200	)		$	200		$	8,615			$	23,043
SEC Compliance Legal Fees			-			-				-			(20,000	)			(20,000	)
Accounting and Auditing			-			-				8,641			(8,562	)			79
Tax Compliance and Planning			-			-				-			14,900				14,900
Consulting			20,409			24,163				132,758			(46,049	)			131,281
Total		$	34,837		$	23,963			$	141,599		$	(51,096	)		$	149,303

Professional fees increased by $149,303 mainly due to Online Solutions segments' consulting fees which increased by $132,758 mainly due to an increase in portfolio management consulting.

Non-cash compensation expense from share-based compensation was $596,404 for the three months ended March 31, 2017, compared to $360,984 for the three months ended March 31, 2016. The majority of these expenses were for employee and consultant incentives in both periods.

We recorded bad debt expense of $279,759 for the three months ended March 31, 2017 as compared to $251,741 for the three months ended March 31, 2016. For the three months ended March 31, 2017, we recorded a loss which was primarily comprised of $286,943 in ACH rejects offset by a $7,184 recovery from our Russian operations. For the three months ended March 31, 2016, we recorded a loss which was primarily comprised of $263,789 in ACH rejects offset by a $12,048 recovery from our Russian operations.

Depreciation and amortization expense consists primarily of the amortization of merchant portfolios plus depreciation expense on fixed assets, client acquisition costs, capitalized software expenses, trademarks, domain names and employee non-compete agreements. Depreciation and amortization expense was $657,363 for the three months ended March 31, 2017 as compared to $888,118 for the three months ended March 31, 2016.

Interest expense was $269,688 for the three months ended March 31, 2017 as compared to $150,438 for three months ended March 31, 2016, representing an increase of $119,250 as follows:

Funding Source			Three months ended March 31, 2017			Three months ended March 31, 2016			Increase / (Decrease)
MBF Notes				18,813			-			18,813
RBL Notes				143,058			147,784			(4,726	)
Other				107,817			2,654			105,163
	Total		$	269,688		$	150,438		$	119,250

The net loss attributable to non-controlling interests amounted to $50,701 for three months ended March 31, 2017 as compared to $37,876 for the three months ended March 31, 2016.

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. Adjusted net loss is calculated as net loss excluding non-cash share based compensation and other one-time, non-recurring items not present in this year or last year results. 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 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 March 31, 2017 and 2016 is presented in the following Non-GAAP Financial Measures Table.

		GAAP				Share-based Compensation			Adjusted Non-GAAP
Three Months Ended March 31, 2017
	Net (loss) income attributable to Net Element Inc stockholders	$	(2,487,498	)		$	596,404		$	(1,891,094	)
	Basic and diluted earnings per share	$	(0.15	)		$	0.04		$	(0.11	)
	Basic and diluted shares used in computing earnings per share		16,476,061							16,476,061
		GAAP				Share-based Compensation			Adjusted Non-GAAP
Three Months Ended March 31, 2016
	Net (loss) income attributable to Net Element Inc stockholders	$	(1,847,719	)		$	360,984		$	(1,486,735	)
	Basic and diluted earnings per share	$	(0.16	)		$	0.04		$	(0.13	)
	Basic and diluted shares used in computing earnings per share		11,293,434							11,293,434

Additional information regarding Net Element's results for its first quarter ended March 2017 may be found in Net Element's quarterly report on Form 10-Q, which was filed with the Security and Exchange Commission (SEC) on May 15, 2017 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 US and selected emerging markets. In the US it aims to grow transactional revenue by innovating SME productivity services such as its cloud based, restaurant point-of-sale solution Aptito. 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 such as UAE, Kazakhstan, Kyrgyzstan and Azerbaijan where initiatives have been recently launched. Further information is available at www.netelement.com .

Forward-Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the 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. These forward-looking statements include, without limitation, whether the Company will experience growth on a go forward basis, whether Net Element can secure any additional financing and if such additional financing will be adequate to meet the Company's objectives. 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: (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; (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 and the subsequently filed 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
					March 31, 2017				December 31, 2016
ASSETS
Current assets:
		Cash			$	813,081			$	621,635
		Accounts receivable, net				6,724,985				7,126,429
	Prepaid expenses and other assets					1,686,126				1,467,897
				Total current assets, net		9,224,192				9,215,961
Fixed assets, net						113,908				117,295
Intangible assets, net						3,466,408				3,589,850
Goodwill						9,643,752				9,643,752
Other long term assets						536,512				742,810
			Total assets			22,984,772				23,309,668
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
		Accounts payable				8,337,673				7,510,113
		Accrued expenses				5,366,887				5,518,823
		Deferred revenue				910,019				1,355,972
		Notes payable (current portion)				719,564				808,976
	Due to related parties					356,200				299,004
				Total current liabilities		15,690,343				15,492,888
	Notes payable (net of current portion)					3,844,115				3,755,383
			Total liabilities			19,534,548				19,248,271
STOCKHOLDERS' EQUITY
	Series A Convertible Preferred stock ($.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding at March 31, 2017 and December 31, 2016)					-				-
	Common stock ($.0001 par value, 400,000,000 shares authorized and 17,527,466 and 15,353,494 shares issued and outstanding at March 31, 2017 and December 31, 2016)					1,753				1,535
		Paid in capital				165,833,480				163,918,685
		Accumulated other comprehensive loss				(2,474,513	)			(2,486,616	)
		Accumulated deficit				(159,930,083	)			(157,442,585	)
	Noncontrolling interest					19,677				70,378
			Total stockholders' equity			3,450,314				4,061,397
				Total liabilities and stockholders' equity	$	22,984,772			$	23,309,668

NET ELEMENT, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
			Three months ended March 31,
			2017				2016
	Net revenues
		Service fees	$	12,729,663			$	9,363,820
		Branded content		832,278				1,897,239
	Total revenues			13,561,941				11,261,059
	Costs and expenses:
		Cost of service fees		10,650,748				7,598,184
		Cost of branded content		809,244				1,787,057
		General and administrative		2,831,161				2,088,313
		Non-cash compensation		596,404				360,984
		Bad debt expense		279,759				251,741
		Depreciation and amortization		657,363				888,118
Total costs and operating expenses				15,824,679				12,974,397
	Loss from operations			(2,262,738	)			(1,713,338	)
		Interest expense, net		(269,688	)			(150,438	)
		Other expense, net		(5,773	)			(21,819	)
	Net loss before income taxes			(2,538,199	)			(1,885,595	)
		Income taxes		-				-
	Net loss			(2,538,199	)			(1,885,595	)
		Net loss attributable to the noncontrolling interest		50,701				37,876
	Net loss attributable to Net Element, Inc. stockholders			(2,487,498	)			(1,847,719	)
		Foreign currency translation		12,103				(29,741	)
Comprehensive loss attributable to Net Element, Inc. stockholders			$	(2,475,395	)		$	(1,877,460	)
Loss per share - basic and diluted			$	(0.15	)		$	(0.16	)
Weighted average number of common shares outstanding - basic and diluted				16,476,061				11,293,434

NET ELEMENT, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
				Three Months Ended March 31,
				2017				2016
	Cash flows from operating activities
	Net loss attributable to Net Element, Inc. stockholders			$	(2,487,498	)		$	(1,847,719	)
	Adjustments to reconcile net loss to net cash (used in) provided by operating activities
			Non controlling interest		(50,701	)			(37,876	)
			Share based compensation		596,404				360,984
			Deferred revenue		(445,953	)			(171,908	)
			Depreciation and amortization		657,363				888,118
			Non cash interest		46,135				-
	Changes in assets and liabilities
			Accounts receivable		510,498				436,453
			Prepaid expenses and other assets		(231,755	)			334,291
		Accounts payable and accrued expenses			449,284				(909,344	)
		Net cash used in operating activities			(956,223	)			(947,001	)
	Cash flows from investing activities
			Purchase of portfolio and client acquisition costs		(403,585	)			(396,819	)
		Purchase of fixed, intangible and other assets			355				-
			Net cash used in investing activities		(403,230	)			(396,819	)
	Cash flows from financing activities
		Proceeds from common stock			1,437,132
		Proceeds from indebtedness			92,000				75,000
		Repayment of indebtedness			(92,680	)			-
	Related party advances				57,159				910,045
	Net cash provided by financing activities				1,493,611				985,045
	Effect of exchange rate changes on cash				57,288				57,537
		Net increase (decrease) in cash			191,446				(301,238	)
	Cash at beginning of period				621,635				503,343
	Cash at end of period			$	813,081			$	202,105
	Supplemental disclosure of cash flow information
		Cash paid during the period for:
			Interest	$	166,394			$	150,438
			Taxes	$	64,314			$	86,770