Net Element Announces Full-Year 2013 Financial Results and Operational Update

MIAMI, April 21, 2014

Conference Call

Net Element will host a conference call on Tuesday, April 22, 2014 at 4:30pm Eastern Time to discuss the financial and business highlights. The conference call can be accessed by dialing (877) 303-9858 (domestic) or (408) 337-0139 (international). Participants will need to provide the passcode 32722487. A webcast replay will be available following the call on the investor relations site http://investor.netelement.com/events.cfm.

2013 Business Highlights

• Achieved 1,354% year-over-year growth, as a result of acquisition of Unified Payments;
• In October, TOT Platform, a value-added transactional services platform was launched in Russia;
• In September, the Company announced divestiture of its non-core assets and repositioned its focus on mobile payments and value-added transactional technologies;
• In August, the Company's subsidiary Aptito announced integration with USAePay;
• In August, Aptito announced integration with TSYS;
• In July, Net Element was added to Russell 3000 Index;
• In June, Net Element completed an acquisition of Aptito, a next generation, cloud-based point of sale payments platform;
• In May, Net Element hired former CFO of Groupon Russia for TOT Group Russia;
• In April, TOT Money ranked #1 SMS Content Provider by Russia's 2nd largest Telecom;
• In April, Net Element completed an acquisition of Unified Payments, a provider of payment services, recognized by Inc. Magazine as the fastest-growing private company in the U.S. in 2012

Oleg Firer, Chief Executive Officer of Net Element, commented, "Net Element made significant progress in 2013. From our acquisition of Unified Payments and Aptito to our launch of TOT Platform in Russia, we have grown considerably and will continue working to increase shareholder value in 2014 and beyond."

2013 Consolidated Financial and Operating Summary

• Net Element reported net revenues of $18,749,470 for the year ended December 31, 2013, which represents a significant increase above the net revenues of $1,384,852 for the year ended December 31, 2012. The increase in net revenues is primarily a result of the acquisition and partial year of operations of Unified Payments and a full year of operations of TOT Money in 2013.
• Our net loss for the year ended December 31, 2013 was $48,309,347 as compared to a net loss of $16,389,931 for the year ended December 31, 2012. Our net cash used in operating activities for the year ended December 31, 2013 was $10,809,954, which was an improvement from $25,177,746 used in operations for the year ended December 31, 2012.
• Key adjustments to reconcile the $48,309,347 net loss to $10,809,954 net cash used in operating activities for the year ended December 31, 2013 include:
  • The company recorded non-cash compensation of $16,549,820 for the year ended December 31, 2013 of which $13,305,817 related to shares issued in connection with the Unified Payments acquisition.
  • During the year ended December 31, 2013 the Company recognized $11,200,000 of non-cash, goodwill impairment losses relating to the goodwill from the Unified Payments acquisition. In connection with that acquisition, the Company recorded goodwill of approximately $17 million. As part of its financial statement closing processes, as well as the Company's review of its valuation of the Unified Payments business combination, the Company determined that the reported goodwill of its TOT Payments reporting unit was impaired at December 31, 2013.
  • We recorded a provision for bad debts and unrecoverable advances of $7,640,008 for the year ended December 31, 2013, which is primarily comprised of $4,528,759 in loss provision for advances to Russian aggregators, $1,834,302 in loss provision for Russian notes receivable and $703,768 from reserving revenue and costs related to the First Data litigation in the United States.
  • The company recognized the Intangible assets impairment in the amount of $872,354. This is due to the write off of the First Data Portfolio. The First Data portfolio was written off entirely at December 31, 2013 since the lawsuit to regain the portfolio was dismissed in early 2014.
  • Net Element recorded a net cash flow use of cash of ($696,360) from discontinued operations of our entertainment businesses. On September 25, 2013, the Company entered into a Contribution Agreement with T1T Lab, LLC, a Florida limited liability company ("T1T Lab"), and T1T Group, LLC, a Delaware limited liability company ("T1T Group"), pursuant to which, on September 25, 2013, the Company contributed to T1T Lab all of its membership and participation interests in its subsidiaries Openfilm, LLC, Motorsport, LLC, Splinex, LLC, LegalGuru, LLC and MUSIC 1 LLC (a/k/a OOO Music1) (collectively, the "Disposed Subsidiaries"). The Disposed Subsidiaries constitute all of the Company's interests in online media businesses and operations (referred to collectively as the Company's "entertainment assets").

Net Element's annual report on Form 10-K was filed with the Security and Exchange Commission (SEC) on April 15, 2014 and may be obtained from the SEC's Internet website at http://www.sec.gov.