UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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): May 21, 2013

 

Net Element International, Inc.
(Exact name of registrant as specified in its charter)

 

Delaware   001-34887   98-0668024

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

1450 S. Miami Avenue, Miami, FL   33130
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code:   (305) 507-8808

 

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 May 21, 2013, Net Element International, Inc. (the “Company”) and its subsidiary, TOT Group, Inc. (“TOT”), entered into a binding term sheet (the “Term Sheet”) to acquire substantially all of the business assets of Aptito.com, Inc., a New York corporation (“Aptito”). Aptito’s business includes the development, implementation and sales of an all-in-one, cloud-based, digital point-of-sale software and customer relations management and payments platform. Aptito’s Restaurant mPOS is a tablet-based point-of-sale solution that combines traditional point-of-sale functionality with mobile ordering, payments, social media, intelligent offers, mobile applications, loyalty and transactional data all in one solution using Aptito’s cloud-based payments platform. The parties agreed to undertake good faith efforts to close the transaction as soon as possible but not later than May 31, 2013.

 

Pursuant to the Term Sheet, Aptito will contribute (the “Contribution”) substantially all of its business assets to a newly formed subsidiary of TOT (“NewCo”). As consideration for the Contribution: (a) NewCo will assume approximately $200,000 of Aptito’s auditable debt; (b) the Company will issue to the seller 125,000 restricted shares of the Company’s common stock, which will vest quarterly over 12 months; and (c) NewCo will issue to the seller a 20% equity interest in NewCo. TOT will have an option to purchase the seller’s 20% equity interest in NewCo, with the purchase price based on the fair market value of NewCo as of the end of the calendar month immediately preceding TOT’s request for a valuation in accordance with the terms of the option, payable in cash, cancellation of indebtedness, shares of the Company’s common stock or a combination of the foregoing.

 

The consummation of the Contribution is subject to the satisfaction (or TOT’s written waiver in its sole and absolute discretion) of the following conditions: (i) the completion of definitive documentation relating to the Contribution; (ii) the completion of due diligence of Aptito and its business, operations, assets, liabilities, financial condition, legal proceedings, contracts and other matters, to the reasonable satisfaction of TOT; (iii) receipt of all necessary consents and approvals, including consents of Aptito’s lenders to the assumption of Aptito’s debt by NewCo without triggering any default or acceleration of such debt; (iv) no material adverse change to Aptito or its business; (v) the entry into a two-year consulting agreement with Genira Enterprises, Inc., a New York corporation (“Genira”), whereby Genira will provide certain services to NewCo including sales, marketing and product development relating to Aptito’s business, which consulting agreement would include customary non-competition provisions and provide for consulting fees of $125,000 per year and a potential annual bonus of $50,000 based on achieved milestones to be tied to the financial pro-forma of NewCo; and (vi) other customary closing conditions.

 

On May 22, 2013, the Company issued a press release announcing the Company’s entry into the Term Sheet to acquire Aptito. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by this reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.   Description
2.1   Term Sheet, dated May 20, 2013, among TOT Group, Inc., Net Element International, Inc. and Aptito.com, Inc.*
99.1   Press Release dated May 22, 2013

 

 

 
* Exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of any of the omitted exhibits to the Securities and Exchange Commission upon request.

 

 
 

 

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.

 

 

  NET ELEMENT INTERNATIONAL, INC.
   
   
Date: May 22, 2013 By:  /s/ Oleg Firer
  Name:
Title: 		Oleg Firer
Chief Executive Officer

 

 
 

 

EXHIBIT INDEX

 

Exhibit No.   Description
2.1   Term Sheet, dated May 20, 2013, among TOT Group, Inc., Net Element International, Inc. and Aptito.com, Inc.*
99.1   Press Release dated May 22, 2013

 

 

 
* Exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of any of the omitted exhibits to the Securities and Exchange Commission upon request.

 

 
 

 

 

STRICTLY PRIVATE AND CONFIDENTIAL Exhibit 2.1

 

 

TERM SHEET

MAY 20, 2013

 

Term Description
Buyer: TOT Group, Inc., a Delaware corporation (“ TOT ”). TOT is a wholly owned subsidiary of Net Element International, Inc. (“ NETE ”).
Seller(s): Aptito.com, Inc., a New York corporation (“APTITO”).
Proposed transaction: TOT will form a new Delaware corporation; name to be determined (“ NEWCO ”). APTITO will contribute all of its assets, technology, intellectual property and other items that constitute the Business as defined below – (collectively, the “Assets”) to NEWCO.  The contribution of the Assets to NEWCO is hereafter referred to as the “ Contribution ”. APTITO and its officers represent and warrant to TOT that (i) such assets are all of the assets currently used in the operation of the current business of APTITO which includes but is not limited to the development, implementation and sales of a an all-in-one, cloud-based, digital point-of-sale software and customer relations management and payments platform (the “ Business ”) and are sufficient to carry on such Business; and (ii) such Assets are free of liens or debt (except as disclosed) and they have not been pledged to any third party; and APTITO shall provide such other warranties typically associated with a transaction of this nature.
Consideration for the Transaction:

(a)     NEWCO will assume APTITO’s auditable debt of $200,000 (as set forth in detail on “ Exhibit A ” hereto);

 

(b)    At the shareholders meeting of NETE following the Closing of the Contribution, Seller(s) will be issued 125,000 common shares options of NETE, vested quarterly over 12 months;

 

(c)     At closing of the Contribution, NEWCO will issue to APTITO common stock of NEWCO, representing upon such issuance 20% of the total issued and outstanding common stock of NEWCO (the “Aptito Shares”);

 

(d)    Buyer shall have the sole and exclusive right, but not the obligation, at all times to purchase from Seller and Seller agrees to sell to the Buyer, the Aptito Shares (the “Option”). The aggregate Option exercise price for the total Aptito Shares is set forth below (the “Exercise Price”), and may at Buyer’s sole discretion be paid in cash, by check, cancellation of indebtedness, conversion to NETE common stock or a combination of the foregoing. The Exercise Price shall be determined based upon the fair market value of the NEWCO as of the end of the calendar month immediately preceding the date as to when a valuation is requested in accordance with the terms of this Option. A qualified third party appraiser selected by the Buyer and reasonably approved by the Seller shall determine the valuation of NEWCO. Buyer shall present Seller with the names of at least 2 third party appraisers for approval. If Seller has not advised Buyer which of the appraisers presented by Buyer that Seller would like to use within 5 business days of being notified of the names of the appraisers, then Buyer shall solely select the appraiser to perform the fair market valuation. The valuation of the appraiser shall be binding on the parties. NEWCO agrees not to exercise the Option prior to 12/31/2014, provided however that Buyer may exercise the Option at any time in the event of a change of control of NEWCO.

 

 
 
STRICTLY PRIVATE AND CONFIDENTIAL  

 

 

Term Description
Standstill/Conduct of Business:

TOT and APTITO shall take any and all actions necessary and convenient to consummate the Contribution transaction (“Transaction”) APTITO will refrain from taking any action, which would impair or delay the consummation of the Transaction.

 

APTITO shall operate its businesses in the ordinary course and refrain from any extraordinary transactions during the negotiation of the proposed Transaction.

Non-Competition: While the Seller(s) employed by NEWCO and for a period of two (2) years thereafter, the Seller(s) will not compete with the business of NEWCO. Seller’s agree to enter into a Non-compete and non solicitation agreement encompassing the above terms at the date of Closing.
Representations & Warranties: Typical for the contemplated Transaction and stock issuance.
Transaction Closing Conditions:

The consummation of the Transaction and the Contribution is subject to the satisfaction (or TOT’s written waiver in its sole and absolute discretion) of the following conditions precedent:

 

(a)             The completion of definitive documentation relating to the Contribution containing representations, warranties, covenants and indemnities customary for the contemplated transaction and dependent on the results of TOT’s due diligence of APTITO and the Business;

 

(b)            The completion of all due diligence of APTITO and the Business (including, without limitation, with respect to operations, assets, liabilities, encumbrances, obligations, financial condition, taxes, results of operation, legal proceedings, contracts and other matters) to the reasonable satisfaction of TOT;

 

(c)            Receipt of all necessary consents and approvals;

 

(d)            APTITO to obtain consent of all lenders of APTITO to the assumption of debt by NEWCO, and no default/acceleration of debt is triggered;

 

(e)             No material adverse change to the Business or APTITO, including but not limited to material pending or threatened litigation, bankruptcy or other proceeding;

 

(f)              Effective June 1, 2013, NEWCO will enter into a 2 year consulting agreement with Genira Enterprises, Inc., a New York corporation (the “Consulting Agreement” ), whereby Genira will provide services to NEWCO including but not limited to sales, marketing and product development relating to the Business. The Consulting Agreement will be subject to customary non-competition provisions for a minimum 2 -year period. and will provide for $125,000 per year consulting fees and for a potential annual bonus in an amount of $50,000 based on achieved milestones to be tied to the financial pro-forma of the NEWCO.

 

(g)            Other customary conditions to closing.

 

 

Page 2 of 5
 
 
STRICTLY PRIVATE AND CONFIDENTIAL  

 

 

Term Description
Closing Date: All parties herein will undertake their good faith efforts to close the Transaction as soon as possible but not later than May 31, 2013. Time is of the essence
Exclusivity:

(a)     This paragraph applies to any discussions or negotiations (the “ Third Party Negotiations ”) between APTITO and/or any of its affiliates (or any of their respective agents, employees, advisers or other representatives) and anyone other than TOT (or a company which is a subsidiary of TOT) or any of its officers, agents, employees, advisers or other representatives (a “Third Party”) relating to a “Corporate Activity”, being:

 

                i.              The disposal (whether by way of sale, offer, transfer, joint venture, business combination or otherwise) of the whole or any part of the issued or any new equity or an other ownership interest or any instruments convertible into such ownership interest (or any interest in such equity or any other ownership interest) of or in APTITO, or

 

                 ii.             Granting any rights or options to operate all or part of the existing and/or future business of APTITO; or

 

                iii.            The disposal (whether by way of sale, offer, transfer, joint venture, business combination or otherwise) of all or any part of the Business or the assets of APTITO.

 

(b)    Immediately on signing of this letter of intent, each of APTITO and its affiliates (and their respective agents, employees, advisers or other representatives) shall, and shall cause their respective agents, employees, advisers or other representatives to, terminate, or procure the termination of, any Third Party Negotiations currently taking place. None of APTITO or any of its affiliates nor any of their respective agents, employees, advisers or other representatives directly or indirectly:

 

               i.               Induce solicit, procure or otherwise encourage a Corporate Activity from a Third Party;

 

               ii.              Enter into, re-start, solicit, initiate or otherwise participate in any Third Party Negotiations;

 

               iii.             Enter into any letter of intent, agreement, arrangement or understanding (whether or not in writing and/or whether or not legally binding) relating to a Corporate Activity, whether pursuant to any Third Party Negotiations or otherwise; or

 

               iv.            Supply or otherwise disclose any information about the Transaction to a party that wishes, or may wish, to enter into Third Party Negotiations (unless the information is publicly available).

 

 

Page 3 of 5
 
 
STRICTLY PRIVATE AND CONFIDENTIAL  

 

 

Term Description
General:

(a)     Each party hereto is responsible for its or his own legal and other costs in connection with the transactions contemplated hereunder, whether or not they proceed (including, without limitations, the preparation and negotiation of this letter of intent);

 

(b)    This letter of intent and all disputes or claims arising out of or in connection with the transactions contemplated hereunder or their subject matter will be governed by the laws of State of Florida without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than those of the State of Florida. The parties irrevocably agree that any dispute or claim that arises out of or in connection with this letter of intent or its subject matter will be determined and settled by the parties hereby in amicable way and via good will negotiations; provided, however, that, if the parties cannot so settle, then the courts located in Miami-Dade County, Florida shall have exclusive jurisdiction to settle any such dispute or claim;

 

(c)     This letter of intent will constitute a binding agreement between the parties upon its signing by the parties. This letter of intent is for the benefit of the parties to it and is not intended to benefit, or be enforceable by, anyone else;

 

(d)    This letter of intent may be executed in multiple counterparts, each of which shall be deemed an original but all of which, together, shall constitute one instrument. For the purposes of this letter of intent, an executed facsimile or a portable document format (.PDF) counterpart copy of this letter of intent shall be deemed an original for all purposes.

 

 

[Signatures are on next page]

 

 

Page 4 of 5
 
 
STRICTLY PRIVATE AND CONFIDENTIAL  

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Indicative Term Sheet to be duly executed by their respective authorized signatories hereunto duly authorized as of the date above written.

 

 

FOR TOT GROUP, INC.        
         
         
/s/ Oleg Firer        
Name: Oleg Firer        
Date: May 21, 2013        
         
         
FOR NET ELEMENT INTERNATIONAL        
         
         
/s/ Oleg Firer        
Name: Oleg Firer        
Date: May 21, 2013        
         
         
FOR APTITO, INC.        
         
         
/s/        
Name:        
Date: 05/20/13        

 

 

Page 5 of 5
 
 

 

 

Exhibit 99.1

 

MEDIA CONTACT:

Dan Bruck

dbruck@netelement.com
(305) 507-8808

www.netelement.com

 

Net Element to Acquire Aptito, a Next Generation

Cloud-Based Point of Sale Payments Platform

 

Acquisition Expected to Add Innovative Technology and a

Differentiating Product Offering to TOT

 

MIAMI & MOSCOW – May 22, 2013 – Net Element International (NASDAQ: NETE), a technology-driven group specializing in electronic commerce and mobile payment processing is pleased to announce today that they have entered into a binding term sheet to acquire Aptito, a next generation, cloud-based point of sale platform for restaurants and operate it through TOT Group (“TOT”), its mobile payments and transaction processing holding company. This proposed acquisition is expected to add innovative technology and a differentiating product offering to TOT.

 

TOT is a multinational mobile payments and transaction processing holding company which provides a unique range of flexible online and offline payment solutions. Clients include wireless carriers, content providers and merchants. TOT delivers comprehensive, end-to-end payment solutions to enable merchants to reliably accept cashless transactions at the point of sale (POS). From processing of electronic payments at the POS to processing mobile commerce transactions to managing merchant terminals and providing information management services, TOT offers innovative solutions which allow its merchants to streamline their payments resources.

 

Aptito is a next-generation, cloud-based payments platform, which brings 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 instantaneously print in the kitchen. Accepting payments at table-side enables faster service and less wait time for consumers. Aptito’s “visual” point of sale concept is designed to speed up the learning curve and increase order input productivity. Additionally, Aptito offers a mobile commerce application that allows any restaurant to deploy mobile ordering tied to the mPOS. Aptito’s Self Ordering Apple ® iPad ® -based kiosk allows operators to increase sales by providing an automated ordering system which gives customers the speed and convenience that has been lacking in many areas of food industry including Quick Service Restaurants (“QSR”).

 

“Restaurants equipped with Aptito have experienced key benefits including increased revenue per table, higher customer service scores and now have a tool to drive acquisition and retention of new customers” said Oleg Firer, CEO of Net Element. Adding, “Patrons can instantly use the tablet or other mobile devices to communicate with their social networks to share where they are dining and include images of their favorite dishes. This acquisition will be a strategic addition to TOT Group and one that clearly differentiates us from the competition in an exciting and innovative way.”

 

“As part of Net Element, Aptito will benefit from TOT Group’s global reach and substantial customer base,” said Gene Zell, CEO of Aptito. Adding, “The addition of Aptito’s functionality to the TOT Group’s suite of services will contribute to their market share gains in key regions.”

 

On April 26, 2013, Net Element announced that TOT Group’s subsidiary TOT Money took a leadership position in Russia just six month after their debut in the region with Russia’s 2 nd largest telecom rating TOT Money as the #1 SMS content provider for two consecutive months: Click here for the press release.

 

 
 

 

The terms of the proposed acquisition are disclosed in Net Element International’s Form 8-K filed with the SEC on May 22, 2013.

 

The proposed acquisition is subject to Net Element International’s satisfactory completion of due diligence, the execution of an acquisition agreement and ancillary agreements and documents satisfactory to the parties, and other customary closing conditions.

 

 

About Net Element International (NASDAQ: NETE)

 

Net Element International (NASDAQ: NETE) is a global technology-driven group specializing in electronic commerce, mobile payments and transactional services. The company owns and operates a global mobile payments and transaction processing provider, TOT Group, as well as several popular content monetization verticals. Together with its subsidiaries, Net Element International enables ecommerce and content-management companies to monetize their assets in ecommerce and 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 www.netelement.com.

 

 

About Aptito

 

Aptito, Inc. (“Aptito”) is the new generation of smart, customer engaged, patent-pending payments platform, mobile Point of Sale (“mPOS”), mobile commerce application and self-ordering Apple ® iPad ® -based kiosk. Through its disruptive, cloud-based payments platform Aptito offers merchants an innovative, socially driven, all-in-one digital software solution that offers a complete package of features for the food-service industry. Aptito’s Restaurant mPOS solution provides restaurants with tools to increase sales, productivity, and customer loyalty. Aptito’s suite of fully linked tools enable inventory management, complete payroll, staff scheduling, patron reservations and digital menus. More capable and less costly than traditional restaurant POS systems, Aptito doesn’t have the steep learning curve associated with typical POS products.

 

 
 

 

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 “proposed,” “will,” “may,” “would,” “could,” “should,” “expect,” “expected,” “contemplated,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, Net Element International’s plans, intentions and expectations with respect to the proposed acquisition of substantially all of the business assets of Aptito.com, Inc.; Net Element International’s satisfactory completion of due diligence with respect to Aptito.com, Inc. and its business, financial condition, assets and operations; the execution of a contribution agreement and ancillary documents satisfactory to Net Element International; the satisfaction of customary closing conditions; the extent to which the proposed acquisition contributes to market share gains; the extent that Aptito provides benefits to restaurants equipped with the platform, such as increased revenue per table or higher customer service scores; 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) the failure for any reason of TOT Group to satisfactorily complete due diligence with respect to Aptito.com, Inc. and its business, financial condition, assets and operations; (ii) the failure of TOT Group to enter into a contribution agreement and ancillary documents with respect to the acquisition of substantially all of the business assets of Aptito.com, Inc.; (iii) if such contribution agreement is entered into, the failure of the proposed acquisition to close for any reason; (iv) risks relating to the consummation of the contemplated acquisition, including the risk that required consents to the acquisition might not be obtained in a timely manner or at all or that other closing conditions are not satisfied; (v) the impact of the proposed acquisition on the markets for Net Element International’s and its subsidiaries’ products and services and on the markets for the products and services of Aptito.com, Inc.; (vi) operating costs and business disruption following the proposed acquisition, including adverse effects on business relationships with third parties; (vii) the future performance of Net Element International following the closing of the proposed acquisition; and (viii) 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

 

 

Source: Net Element