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Net Element, Inc. (NETE) Posts FY14 Financial Results, Issues Strategic Plan for 2015

Net Element, a provider of global mobile payment technology solutions and value-added transactional services, today opened its books for the fiscal year ended December 31, 2014, reporting among other things an increase in annual revenues, a significant reduction in debt, and several corporate milestones.

The adjusted loss from continuing operations for the year 2014, including special items, was $6.9 million, or a loss of $0.19 per share, as compared to an adjusted loss from continuing operations of $19.4 million or a loss of $0.68 per share, for the year ended December 31, 2013. Fiscal year 2014 net revenues were $21.2 million, as compared to $18.7 for the year 2013. The company attributes the year-over-year increase primarily to an increase of $4.6 million in transaction processing revenues offset by $2.1 million of reduced Russian mobile payment processing revenues connected with the restructuring of the company’s Russian business.

Cash provided by operating activities of continuing operations was $2.3 million for 2014 compared to cash used in operating activities of $9.8 million for 2013. Positive operating cash flow for 2014 was primarily due to the $7.9 million reduction of accounts receivable and aggregator advances offset primarily by $1.3 million of increases in accounts payable and accrued expenses.

Total liabilities were $8.8 million at December 31, 2014, compared to $37.9 million at December 31, 2013. Net Element reduced its total debt by $27.7 million to $3.3 million at December 31, 2014. In the fall of 2014, the company completed a debt exchange program which eliminated $15.9 million in debt obligations. Per the terms of its convertible debt agreement, Net Element converted $11.2 million of debt to equity upon obtaining a new $10 million credit facility. Additionally, Net Element’s factoring lines were $0 at December 31, 2014, as compared to $8.5 million at December 31, 2013.

The company highlighted several milestones in 2014 and into 2015, including:

• Improved access to credit to implement strategic initiatives; secured new financing of $10 million, triggering conversion of $11 million of debt to equity
• Advanced service offering expansion by agreeing to acquire mobile payment technology innovator PayOnline
• Reorganized mobile payments business to achieve positive operating cash flow
• Positive working capital allowed self-financing of growing mobile payments business
• Migrated to proprietary billing system for mobile business operations
• Mobile payments business exceeded 1 million recurring mobile subscribers in the month of January 2015
• Eliminated $15.9 million of debt obligations through a debt-to-equity swap
• Reduced G&A expenses by $5 million, including $1 million in salaries and $2 million in professional fees
• Announced Apple Pay™ availability in company’s U.S. POS terminal network
• Enhanced board with appointment of financial services veteran William Healy and payments technology industry veteran Drew Freeman

Net Element anticipates continuing this momentum with several initiatives set for 2015, including:

• PayOnline closing and integration
• Mobile payments expansion into Middle East and India
• Expand Russia service offerings
• Creation of omni-channel, payments-as-a-service platform that can be profitably adapted to local businesses globally

Now that we have strengthened our balance sheet by eliminating most of our debt and created a restructured operational foundation, we can advance our plan to grow market share, accelerate sales and expand profitability,” Oleg Firer, Net Element CEO, stated in the news releae. “Our growing traditional and mobile technology base, our strengthened balance sheet and strategic emphasis on Small to Medium Enterprise (SME) are competitive advantages that we expect to capitalize on during 2015.”

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