Net Element (NETE) Zach's Small-Cap Research Report

Zacks Investment Research Page 3 scr.zacks.com Update on Mullen Technologies Transaction Net Element is still diligently working on completing the transaction with Mullen Technologies. Mullen is still in process of an audit and the S-4 document is being drafted. We expect to see it filed by year-end. Mullen Technologies itself has been progressing on its plans to sell and produce electric vehicles in the US. It started on construction of its pilot manufacturing facility in October and started also taking pre- orders on its $55,000 MX-05 fully electric SUV then. It is repurposing its high voltage battery R&D center as a pilot facility for its line of SUVs. The construction is planned for completion by April 2021 and we have no information that that timeline has changed. There the MX-05 SUVs will be assembled to be delivered to customers by the second quarter of 2022. The facility is designed to assemble as many as a thousand SUVs annually with other models possible later. The company said it plans to hire 100 people to assemble the SUV, the battery, conduct R&D, and provide warehousing. Once completed the plant will build prototypes that will we used to get government approval and certification, a process that should take 16 months. After that, the company could begin deliveries to consumers. Customers can also pre-order the imported Dragonfly K50 super sports car from Mullen. VALUATION Overview of Reverse Merger Transaction with Mullen Technologies Net Element and Mullen have a definitive deal for a triangular reverse merger with Mullen Technologies, a private company based in California. The closing of the transaction is conditional on the satisfactory completion of due diligence, shareholder and NASDAQ approval, and the completion of a capital raise of $10 million. We are in the due diligence phase. Figure 1. Mullen MX-05 Source: Mullen Technologies Net Element shareholders are expected to own between 15% and 21.7% of the surviving company. If Mullen can reach revenues of $100 million in the next 24 months, it is entitled to another 5% of the shares leaving Net Element shareholders with 10%. If revenue is less than $80 million, then the Net Element shareholders will get another 5% leaving Mullen shareholders with 80% of the fully diluted common shares