Net Element Releases Open Letter to Shareholders

MIAMI, Oct. 18, 2013 (GLOBE NEWSWIRE) -- Net Element International (Nasdaq:NETE), a technology-driven group specializing in mobile payments and value-added transactional services, releases the following letter to Shareholders from the Company's CEO, Oleg Firer:

October marks the first anniversary of Net Element as a publicly traded company with a NASDAQ listing. This is an important milestone. We would like to take this opportunity to share several noteworthy achievements and reorganizational changes that have been made toward longevity and profitability of Net Element and to share our progress in building and strengthening key strategic partnerships that make us a more relevant and engaged enterprise.

Just last month, we undertook one of the most important decisions in the company's history by divesting our non-core business assets. While this represents a cultural shift, it allows us to focus on the segment of our business that generates the most revenues and that we believe has the greatest growth potential and facilitates the promotion of our intellectual assets and business relationships that are substantial competitive differentiators.

Throughout this past year, the entire management team has worked tirelessly to further develop the Company's technologies, establish new relationships, and identify new industry opportunities. As CEO, my primary responsibility is to deliver shareholder value and to ensure the ongoing success of our company. Our team is committed to keeping shareholders informed and involved so that you understand the dynamics of our industry and our company. Although we still have a lot of hard work ahead, we are excited about the numerous opportunities at hand that we plan on pursuing this year and over the long term. When I reflect on how far we've come over the past 12 months I couldn't be more motivated and optimistic about what we will achieve in the next year. Here are a few highlights from this year:

Business Focus

Unified Payments, a provider of transaction processing services and payment-enabling technologies that was recognized by Inc. Magazine as the fastest-growing private company in the U.S. in 2012, was acquired by the Company in April of this year. The acquisition diversified Net Element International's mobile payments business and created a new platform division "TOT Group, Inc.", with a focus on global mobile payments and transaction processing. Soon after completing the acquisition, Net Element initiated the integration and localization of products and services offered by Unified Payments in Russia and other emerging markets. According to a report by Capgemini, the global volume of non-cash payments continues to show steady growth, with the largest gain in volumes occurring in developing markets. The market for mobile payments is estimated to grow to $1.3 trillion annually by 2017 (Juniper Research). The completion of the Unified Payments acquisition positions Net Element International's TOT Group to capitalize on a significant growth market opportunity.

Last month's divestiture of non-core assets will have several benefits for Net Element, including the reduction of expenses and focusing operations in a unified business sector. Net revenues from the operations divested totaled $14,484 for the six months ended June 30, 2013, representing an insignificant percentage of the Company's revenues. The Company is well positioned for continued growth and innovation in the mobile payments and value-added transactional business arena and we are committed to focus our energy and resources on the central, strategic components of our business in order to drive further innovation.

Internet commerce changed the way the world does business, and now the rapid expansion of mobile is morphing the retail environment again. Net Element drives growth for its clients and partners by enabling commerce around the world with the focus on delivering innovative, comprehensive, secure and scalable solutions, which allow merchants to streamline their commerce resources.

Financial Performance

Net Element International reported 2013 second-quarter net revenues of $5,615,719, which represents a significant increase over net revenues of $37,818 from the same period in the prior year as a result of completion of the Unified Payments acquisition in the second-quarter of 2013. General & Administrative expenses for second-quarter 2013 were $3,807,913 as compared to General & Administrative expenses of $2,443,387 (as restated) one year previously, representing a 56 percent increase. Net loss for the quarter was $20,231,697, or $(0.72) per share, as compared to a net loss of $2,573,263 (as restated), or $(0.13) per share. The increased loss was driven primarily by non-cash impairments, which were necessary to clean up the company's financials and set a strong foundation for growth. Goodwill impairment (non-cash) for the 2013 second-quarter was $11.2 million; in addition, the company recorded a $5,792,487 provision for loan losses. Additional information regarding Net Element International's results of operations for its second-quarter ended June 30, 2013 may be found in Net Element International's quarterly report on Form 10-Q, which was filed with the Securities and Exchange Commission (SEC) on August 19, 2013 and may be obtained from the SEC's Internet website at

Product Portfolio Growth

Net Element's acquisition of Aptito in the 2013 second quarter provided the Company with a consumer-centric payments solution that filled a vacuum in the portfolio. Aptito is a next-generation, cloud-based payments platform, which creates an online consumer experience into offline commerce environments via tablet, mobile and all other cloud-connected devices. Aptito's Restaurant mPOS solution provides restaurants with tools to increase sales, productivity, and customer loyalty. The solution is a tablet-based POS that combines traditional POS functionality with mobile ordering, payments, social media, intelligent offers, mobile applications, loyalty, and transactional data all in one solution with Aptito's cloud-based payments platform at the center of it all. Restaurant staff can place orders directly from their mobile phones, which print instantaneously in the kitchen. Shortly after the acquisition of Aptito, the Company announced key integrations of Aptito's payments platform with TSYS, one of the world's largest processors of merchant acquirers and bank credit card issuers, and USAePay, a payment gateway that is integrated with major payments platforms. These integrations provide Aptito with an extensive footprint to rollout its solutions.

In addition to planned acquisitions and strategic partnerships undertaken in the past year, Net Element's long-term vision is to continue to lead in new technological developments. To that end, in the second quarter of 2013, Net Element entered into an investor accreditation agreement to develop new technology with The Skolkovo Foundation, a government funded research and development center in Moscow. This multi-year and multimillion dollar investment allocation by Net Element provides exclusive access to early stage mobile payments and transactional services technology. Pursuant to the agreement, Net Element will set aside up to $12 million (370 mln Rub) over the next three years with Skolkovo for investment in companies and technologies that meet NETE's investment criteria and strategic initiatives. The role of Net Element's interests is specifically focused on mobile payments and transactional services technology projects.

Earlier this month, Net Element announced the launch of "TOT Platform" - a value-added transactional services platform. Launched in partnership with PAY.ON, the world's leading operator of multi-channel payment infrastructure systems, TOT Platform will be the first offering of its kind in the region and will allow Net Element's subsidiary TOT Group to offer its client-base innovative solutions in mobile payments and transactional services. TOT Platform is a high-performance transaction processing platform that complies with security standards and requirements applicable to the international payments market. The launch of TOT Platform will enhance TOT Group's suite of value-added, innovative technologies and services in emerging markets. The announcement of TOT Platform further demonstrates Net Element's commitment to creating innovative and practical solutions for emerging markets that function as fully integrated operations and marketing tools for TOT Group's clients and partners.

Looking Ahead

Given our accomplishments to date, our clear growth strategy in an appealing market sector and our ongoing efforts, we are optimistic about Net Element's continued success throughout 2013 and well into the future.

The overall payments market in Russia and Commonwealth of Independent States has grown significantly in recent years, with increasing demand for improved infrastructure and value-added technologies. We believe our recently announced launch of TOT Platform coupled with our suite of value-added technologies will create more opportunities to grow our presence and introduce innovation to the market.

Additionally we believe that the Company's acquisition of Unified Payments earlier this year, will diversify our market presence to the American market and allow us to further develop value-added technologies and solutions that will make Unified Payments competitive in that marketplace.

We expect these initiatives, coupled with the successful execution of our growth strategy, will drive continued financial and operational growth, and enhance value for shareholders. On behalf of the entire Net Element family, thank you for sharing in our success to date and being a partner in our future.

Warm Regards,

Oleg Firer - Chief Executive Officer
Net Element International

About Net Element International (Nasdaq:NETE)

Net Element International (Nasdaq:NETE) is a global technology-driven group specializing in mobile payments and value-added transactional services. The company owns and operates a global mobile payments and transaction processing provider, TOT Group. TOT Group companies include Unified Payments, recognized by Inc. Magazine as the #1 Fastest Growing Private Company in America in 2012, Aptito, a next generation cloud-based point of sale payments platform, and TOT Money, which has a leading position in Russia and has been ranked as the #1 SMS content provider by Beeline, Russia's second largest telecommunications operator. Together with its subsidiaries, Net Element International enables ecommerce and adds value to mobile commerce environments. Its global development centers and high-level business relationships in the United States, Russia and Commonwealth of Independent States strategically position the company for continued growth. The company has U.S. headquarters in Miami and international headquarters in Moscow. More information is available at

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," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, the extent that Net Element International is able to build the leading mobile payments, transaction processing and/or electronic content monetization company; the extent that Net Element International's payment processing business recognizes and/or realizes upon growth opportunities in the U.S., Russia and/or emerging countries; the extent that Net Element International's content monetization business further develops and/or grows; whether Net Element International delivers positive results, strategic relationships and/or further commercialization in 2013; whether Net Element International's operations become profitable; and whether Net Element International or its business continues to grow. 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 International and are difficult to predict. Examples of such risks and uncertainties include, but are not limited to: (i) Net Element International's ability (or inability) to obtain additional financing in sufficient amounts or on acceptable terms when needed; (ii) Net Element International's ability to maintain existing, and secure additional, contracts with users of its payment processing services; (iii) Net Element International's ability to successfully expand in existing markets and enter new markets; (iv) Net Element International'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 International's business; (viii) changes in government licensing and regulation that may adversely affect Net Element International's business; (ix) the risk that changes in consumer behavior could adversely affect Net Element International's business; (x) Net Element International's ability to protect its intellectual property; and (xi) local, industry and general business and economic conditions. 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 International with the Securities and Exchange Commission. Net Element International anticipates that subsequent events and developments may cause its plans, intentions and expectations to change. Net Element International 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.

CONTACT: MEDIA CONTACT: Dan Bruck (305) 507-8808 www.netelement.comSource:Net Element International