UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported) April 12, 2016

 

 

 

Net Element, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Delaware

 

001-34887

 

90-1025599

(State or Other Jurisdiction
of Incorporation) 		  (Commission File
Number) 		 

(IRS Employer
Identification No.)

 

  3363 NE 163rd Street, Suite 705, North Miami Beach, FL 33160  
  (Address of Principal Executive Offices) (Zip Code)  

 

  (305) 507-8808  
  (Registrant’s telephone number, including area code)  
     
 

Not Applicable

 
  (Former Name or Former Address, if Changed Since Last Report)  

 

  Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:  
       
  ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)  
       
  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)  
       
  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))  
       
  ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))  

 

     

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On April 14, 2016, Net Element, Inc. (the “ Company ”) entered into an Amendment No. 1 (the “ Amendment No. 1 ”) to the Second Additional Letter Agreement (the “ Second Additional Agreement ”) with Kenges Rakishev, an accredited investor (the “ Investor ”). Mr. Rakishev is a director of the Company.

 

The Amendment No. 1 extended the deadline from 120 days to 180 days from the date of Second Additional Agreement for the Company to obtain the Company’s stockholders approval (the “ Stockholders Approval ”) of the issuance of Restricted Shares and the Restricted Options (each as defined in the Second Additional Agreement).

 

Pursuant to the Second Additional Letter Agreement, as amended by the Amendment No. 1, in the event that the Stockholders Approval is not obtained within 180 days from the original date Second Additional Agreement, the Investor and the Company agreed that at the Investor’s election, (i) the purchase price for the Restricted Shares and the Restricted Options shall be automatically amended to be equal to the product of (x) 4,664,275 and (y) the sum of $0.1951 and $0.125, in which case the Investor will have paid to the Company the difference between such price and the previously paid purchase price for the Restricted Shares and the Restricted Options, (ii) the number of Restricted Shares and the Restricted Options issuable to the Investor will be adjusted to be equal to the quotient determined by dividing (I) $910,000 by (II) $0.3201, or (iii) the Restricted Options will not be issued and the Investor will be issued the number of Restricted Shares calculated on the basis of $0.1951 per share purchase price.

 

The foregoing is only a brief description of the terms of the Amendment No. 1, does not purport to be a complete description of the rights and obligations of the parties thereunder, and is qualified in its entirety by reference to the Amendment No. 1 which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by reference herein.

 

Item 3.02 Unregistered Sales of Equity Securities

 

The disclosures in Item 1.01 of this Current Report are incorporated herein by reference.

 

Item 3.03 Material Modification to Rights of Security Holders

 

The information set forth in Item 1.01 of this Current Report is incorporated herein by reference.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On April 12, 2016, the compensation committee of the Board of Directors of the Company rescinded 391,667 incentive stock options to purchase shares of Company common stock previously awarded to Jonathan New, the Chief Financial Officer of the Company, and 1,200,000 incentive stock options to purchase shares of Company common stock previously awarded to Steven Wolberg, the Chief Legal Officer of the Company, because such options were inadvertently granted in excess of the limitation on individual grants of stock options during any 12-month period set forth in Section 13.5 of the Plan.

 

Item 9.01 Financial Statements and Exhibits

 

(d)  Exhibits

 

  Exhibit No. Description
     
  10.1 Amendment No. 1, dated as of April 14, 2016, to Second Additional Letter Agreement, dated as of January 21, 2016, between the Company and Kenges Rakishev

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: April 15, 2016

 

  NET ELEMENT, INC.
       
  By: /s/  Jonathan New
  Name: Jonathan New
  Title: Chief Financial Officer

 

 

 

 

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EXHIBIT INDEX

 

Exhibit No.   Description
     
10.1   Amendment No. 1, dated as of April 14, 2016, to Second Additional Letter Agreement, dated as of January 21, 2016, between the Company and Kenges Rakishev

 

 

 

 

 

 

Exhibit 10.1

 

AMENDMENT NO. 1

TO
second additional letter agreement

 

THIS AMENDMENT NO. 1, effective as of April 14, 2016 (this “ Amendment ”), to the Second Additional Letter Agreement, dated January 21, 2016 (the “ Agreement ”), between Kenges Rakishev and Net Element, Inc., a Delaware corporation (the “ Company ”). Kenges Rakishev and the Company are collectively referred herein as the “ Parties .” Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Agreement.

 

WHEREAS, pursuant to the Agreement, in consideration for Kenges Rakishev’s funding $910,000 to the Company in order to meet the Company’s working capital requirements, the Company agreed to issue to Kenges Rakishev, upon and subject to obtaining the Company’s shareholders approval for such issuance for purposes of the Nasdaq Listing Rules (the “ Stockholders Approval ”) within 120 days from the date of the Agreement (the “ Original Deadline ”) the Consideration Shares and the Options.

 

WHEREAS, if the Stockholders Approval is not obtain before the Original Deadline, it may be difficult for the Company to arrange financing from Kenges Rakishev and others in the future to the extent it becomes necessary again for the Company to secure urgent financing to meet the Company’s working capital requirements.

 

WHEREAS, in consideration of Kenges Rakishev’s continued support of the Company the Parties desire to amend the Agreement in order to extend the Original Deadline for the Stockholders Approval for additional 60 days.

 

WHEREAS, Section 4 of the Agreement permits the Agreement to be amended by the written agreement of the Parties.

 

NOW THEREFORE, in consideration of the mutual covenants contained herein, the Parties hereby agree that the Agreement shall be amended as follows:

 

1.            Amendment .

 

(a)           The reference to “120 days” in the second sentence of Section 1 is hereby amended and replaced with “180 days”.

 

(b)           Section 2 of the Agreement is hereby amended and restated in its entirety to be and read as follows:

 

“2 In the event that the Stockholders Approval is not obtained within 180 days from the date hereof, then at Kenges Rakishev’s election, either (i) the purchase price for the Consideration Shares and the Options shall be hereby automatically amended to be equal to the product of (x) the number of Consideration Shares calculated pursuant to paragraph (1)(i) above and (y) the sum of (A) $0.1951 and (B) $0.125, in which case Kenges Rakishev shall have paid to the Company the difference between the previously paid purchase price for the Consideration Shares and Options and the purchase price for the Consideration Shares and Options calculated as set forth in this clause (i) of this paragraph 2, (ii) the number of Consideration Shares and Options issuable to Kenges Rakishev shall be adjusted to be equal to, in each case, the quotient determined by dividing (I) $910,000 by (II) $0.3201, or (iii) the Options shall not be issued and Kenges Rakishev shall be issued the number of Consideration Shares calculated in accordance with paragraph (1)(i) above.”

 

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2.            Limited Effect . Except as expressly amended and modified by this Amendment, the Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.

 

3.            Governing Law . This Amendment and the rights and obligations of the parties hereto shall be construed in accordance with and governed by the laws of the State of Florida, without giving effect to the conflicts of law provisions thereof (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than those of the State of Florida.

 

4.            Counterparts . This Agreement may be executed in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement in Portable Document Format (PDF) or by facsimile transmission shall be as effective as delivery of a manually executed original counterpart of this Agreement.

 

IN WITNESS WHEREOF, the parties to this Amendment have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first set forth above.

 

 

NET ELEMENT, INC.

 

By:   /s/  Oleg Firer                                                
Name: Oleg Firer
Title: Chief Executive Officer

 

  

/s/ Kenges Rakishev                                          

KENGES RAKISHEV

 

 

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