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) February 28, 2017 

 

 

 

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 March 1, 2017, Net Element, Inc., a Delaware corporation (the “Company”), entered into a Promissory Note with Star Equities LLC in the principal amount of $348,083.32 (the “Note”). Pursuant to the Note, Star Equities LLC funded to the Company and funded to the Company $348,083.32. From and after the date of the Note until the earlier of (a) October 1, 2018 or (b) that date on which Maker has repaid all amounts owing hereunder (the “Maturity Date”), the principal balance of the Note outstanding from time to time shall bear interest at the rate of 12% per annum, and thereafter at the lesser of (i) the highest rate permitted by applicable law or (ii) $150 per day until paid in full. The Company will be obligated to make 18 interest payments $3,481 each, followed by one payment on the Maturity Date in the amount of all outstanding principal and interest. In the event of any capital raise by the Company not in the ordinary course of business and that results in funding to the Company in excess of $5 million (a “Liquidity Event”), the Maturity Date will be accelerated to coincide with the closing date of such Liquidity Event. Oleg Firer, a principal of Star Equities LLC, is a director and Chief Executive Officer of the Company.

 

The above description of the Note is intended as a summary only and is qualified in its entirety by the terms and conditions set forth therein. A copy of the Note is attached hereto as Exhibit 10.1 and is incorporated herein by this reference.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The disclosure provided in Item 1.01 of this Report is hereby incorporated by reference into this Item 2.03.

 

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

 

A.       Awards Under 2013 Equity Incentive Compensation Plan, as amended.

 

On February 28, 2017, the Compensation Committee (the “Committee”) of the Board of Directors of the Company approved and authorized grants of the following equity awards pursuant to the Company’s 2013 Equity Incentive Compensation Plan, as amended:

 

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(i) 120,000 qualified options to acquire shares of the Company common stock (50% of such options vesting immediately and the balance 50% of such options vesting in 4 equal proportions quarterly after the grant date) and 60,466 restricted shares of the Company common stock (50% of such shares vesting immediately and the balance 50% of such shares vesting in 4 equal proportions quarterly after the grant date) to Steven Wolberg, the Chief Legal Officer of the Company.

 

(ii) 120,000 qualified options to acquire shares of the Company common stock (50% of such options vesting immediately and the balance 50% of such options vesting in 4 equal proportions quarterly after the grant date) and 12,568 restricted shares of the Company common stock (50% of such shares vesting immediately and the balance 50% of such shares vesting in 4 equal proportions quarterly after the grant date) to Jonathan New, the Chief Financial Officer of the Company.

 

B.       Awards Outside 2013 Equity Incentive Compensation Plan, as amended.

 

On February 28, 2017, in reliance on applicable exemption from the securities laws registration requirements and subject to the Corporation shareholders’ approval for purposes of compliance with the Nasdaq Rule 5635(c), the Committee awarded to Oleg Firer, the Chief Executive Officer of the Company, 471,388 restricted shares of the Company common stock as performance bonus. Such restricted shares will be not issued and will be deemed forfeited if such shareholders’ approval is not obtained until the end of the Corporation’s fiscal year 2017. In the event that such shareholders’ approval is not obtained, the Committee approved in lieu of the contemplated 471,388 restricted shares, a $450,000 cash performance bonus to Oleg Firer that would be payable when the Company has sufficient capital to pay such cash bonus and cover the Company’s on-going monthly operations. Further, the Committee approved $300,000 cash performance bonus to Oleg Firer, payable when the Company has sufficient capital to pay such cash bonus and cover the Company’s on-going monthly operations.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

10.1 Promissory Note in the principal amount of $348,083.32, dated as of March 1, 2017 between the Company and Star Equities LLC

 

 

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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: March 3, 2017

 

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   Promissory Note in the principal amount of $348,083.32, dated as of March 1, 2017 between the Company and Star Equities LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit 10.1

 

PROMISSORY NOTE

 

U.S. $348,083.32

 

FOR VALUE RECEIVED, Net Element, Inc., a Delaware corporation with its principal place of business at 3363 NE 163 rd Street, Suite 705, North Miami Beach, FL 33160 (" Maker "), unconditionally promises to pay to Star Equities LLC (together with its successors and assigns, " Payee "), having a place of business at 3265 NE 167 th Street, North Miami Beach, FL 33160 or at such other place as the holder of this Promissory Note (" Note ") may hereafter direct in writing, the principal sum of Three Hundred Forty-eight Thousand Eighty-three and 32/100 Dollars ( $ 348,083.32 ).

 

From and after the date of this Note until the earlier of (a) October 1, 2018 or (b) that date on which Maker has repaid all amounts owing hereunder (the “ Maturity Date ”), the principal balance of this Note outstanding from time to time shall bear interest at the rate of Twelve percent ( 12 %) per annum and thereafter at the lesser of (i) the highest rate permitted by applicable law or (ii) One hundred fifty dollars ($ 150.00 ) per day until paid in full (together with all costs of collection including reasonable attorney fees and expenses). Subject to no event of default, payments on the Note shall be made by Maker as follows: From the date of this Note to and until September 30, 2018 Maker shall make eighteen ( 18 ) payments of interest only in the amount of Three Thousand Four Hundred Eighty-one and 00/100 Dollars ($ 3,481.00 ), followed by one (1) payment on the Maturity Date in the amount of all outstanding principal and interest. Payments due hereunder shall commence and be due and payable on or before April 1, 2017 , and continue thereafter on a monthly basis on the 1 st day of each month for the succeeding seventeen ( 17 ) months. Any monies received other than on the date a payment first becomes due shall, if received prior thereto, be applied on the date the next payment falls due.

 

In the event that Maker has a Liquidity Event, defined hereafter, at any time that there remains a balance due to Payee pursuant to this Note, then all outstanding principal and interest due to Maker shall form part of the Liquidity Event and the Maturity Date hereof shall be accelerated to coincide with the closing date of the Liquidity Event. A Liquidity Event shall mean a capital raise by Maker that is not in the ordinary course of Maker’s business and that results in funding to Maker in excess of $5 Million.

 

In the event any of the payments required to be made under this Note are not received by or on behalf of Payee in full within ten (10) days after the due date thereof, and the same subsequently is received and accepted by or on behalf of Payee, Maker shall pay on demand a late charge in the amount of five percent (5%) of the amount of the delinquent payment.

 

In the event that a payment required hereunder is not received by or on behalf of Payee within thirty (30) days after the due date thereof, Maker shall be in default hereunder and the entire unpaid balance of principal and interest of this Note shall become due and payable immediately, without notice or demand, at the election of the Payee, provided that the Payee shall endeavor (but is not required) to provide notice to Maker of any such acceleration. Maker waives demand, presentment for payment, protest, notice of protest and notice of nonpayment or dishonor of this Note. Maker shall have the right to prepay this note in full or in part at any time upon providing prior written notice to the Payee.

 

 

 

 

All amounts payable under this Note shall be payable with all collection costs and attorneys' fees. This Note shall be governed by, and construed in accordance with, the laws of the State of FLORIDA without regard to principles of conflicts of laws. TO THE FULLEST EXTENT PERMITTED BY LAW, DEBTOR, AFTER CONSULTING WITH COUNSEL OR HAVING HAD THE OPPORTUNITY TO DO SO, HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH THIS NOTE.

 

 

  Net Element, Inc.
     
  By: /s/  Steven Wolberg
     
  Name: Steven Wolberg
     
  Title: Chief Legal Officer
     
  Date: March 1, 2017