SecProbe.io

CORRESP
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filename1.htm

David Schubauer, Esq.

Tel 305-350-7208

Fax 305-351-2272

dschubauer@bilzin.com

October 17, 2013

VIA EDGAR

Division of Corporation Finance

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

    Attention:
    Edwin Kim, Attorney-Advisor

    Maryse Mills-Apenteng, Special Counsel

    Re:
    Net Element International, Inc.

    Preliminary Merger Proxy Statement on Schedule 14A

    Filed September 27, 2013

    File No. 001-34887

Ladies and Gentlemen:

The following responses
address the comments of the reviewing Staff of the Securities and Exchange Commission (the "Commission") as set
forth in a comment letter dated October 10, 2013 (the "Comment Letter") relating to the above-referenced Preliminary
Merger Proxy Statement on Schedule 14A (the "Filing") of Net Element International, Inc. (the "Company").
As more specifically described below, attached hereto as Exhibit A ("Exhibit A") is a draft of the proposed revisions
to the Filing in response to such comments. Exhibit A is in redlining format to show changes compared to disclosures in the original
Filing. The revisions described in the below responses refer to the disclosures as set forth on Exhibit A.

Proposal 8, Approval of the Issuance,
Including for the Purposes of NASDAQ …, page 34

 1. Please revise to clarify the percentage ownership of MUSIC 1 LLC (a/k/a OOO Music1) that you contributed
to T1T Lab, LLC on September 25, 2013.

Response

The disclosures were revised
in the sixth paragraph under "Background of the K1 Issuance" to clarify the percentage ownership of MUSIC 1 LLC (a/k/a
OOO Music1) that the Company contributed to T1T Lab, LLC on September 25, 2013.

Division of Corporation Finance

U.S. Securities and Exchange Commission

October 17, 2013

Page 2 of 3

 2. Please revise to clarify the legal consequence to you of transferring the K1 Note to MUSIC 1 LLC,
including whether you remain liable for the principal amount of the note should MUSIC 1 LLC default. You should address that the
note, filed as Exhibit 10.7 with your Form 10-Q filed August 19, 2013, prohibits the assignability of the note.

Response

The disclosures were revised
in the first paragraph under "Background of the K1 Issuance" to clarify the legal consequence to the Company of transferring
the K1 Note to MUSIC 1 LLC, including whether the Company remains liable for the principal amount of the note should MUSIC 1 LLC
default. We believe that the fact that the note states that it is not assignable is not material since K1 Holding's consent to
the assignment would expressly include K1 Holding's agreement that the Company is no longer liable under the note and would be
construed as a waiver or amendment to the non-assignability provision of the note.

 3. You disclose on page 34 that the K1 Note and related loan were conditioned upon a business development
consulting agreement that would provide K1 Holding 10% ownership of your common stock; however, we were unable to locate any such
provision in Exhibit 10.7. Please revise to clarify whether this condition was an oral condition and, if so, discuss whether it
is binding under state law. Further, describe the consulting services that are to be provided by K1 Holding.

Response

The disclosures were revised
in the second paragraph under "Background of the K1 Issuance" to clarify that the condition was set forth in the then
current draft of the K1 Agreement. In addition, disclosures were added as the fourth paragraph under "Background of the K1
Issuance" describing the consulting services expected to be provided by K1 Holding.

 4. Please revise to clarify why you are seeking shareholder approval to issue up to 4% of your common
stock to K1 Holding as consideration for consulting services when your initial terms provided for only a 2% contribution from you.
Please provide a discussion of whether the terms may change and clarify, if true, that your contribution for the consulting agreement
may be up to 4% of your total outstanding shares of common stock.

Response

The disclosures were revised
by adding the third paragraph under "Background of the K1 Issuance" to clarify why the Company is seeking shareholder
approval to issue up to 4% of its common stock to K1 Holding when the initial terms provided for only a 2% contribution from the
Company. The disclosures in that paragraph also discuss that the terms may change and clarify that the Company's contribution is
expected to be 4% of its total outstanding shares of common stock (instead of 2% as initially contemplated).

Division of Corporation Finance

U.S. Securities and Exchange Commission

October 17, 2013

Page 3 of 3

 5. Please describe the consequences to you if your shareholders do not approve the issuance of up
to 4% of your shares to K1 Holding or if you, entities affiliated with Mr. Zio, and K1 Holding are unable to execute a consulting
agreement. In particular, please discuss any effect this may have on the K1 Note and the repayment date of May 14, 2015.

Response

The disclosures were revised
by adding the fifth paragraph under "Background of the K1 Issuance" describing the potential consequences to the Company
if the parties do not enter into the K1 Agreement and/or the consulting agreement or if the Company's shareholders do not approve
the issuance of up to 4% of the Company's shares to K1 Holding.

The Company has authorized me
to acknowledge on its behalf that:

 · the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

 · Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission
from taking any action with respect to the filing; and

 · the Company may not assert staff comments as a defense in any proceeding initiated by the Commission
or any person under the federal securities laws of the United States.

We trust that the foregoing
appropriately addresses the issues raised by the Staff’s comment letter. Thank you in advance for your prompt review and
assistance.

    Very truly yours,

    /s/ David Schubauer

    David Schubauer, Esq.

    cc:
    Oleg Firer, Chief Executive Officer (via electronic mail)

    Jonathan New, Chief Financial Officer (via electronic mail)

    Steven Wolberg, Chief Legal Officer (via electronic mail)

Exhibit A

PROPOSAL 8

APPROVAL OF THE ISSUANCE, INCLUDING FOR
PURPOSES OF NASDAQ LISTING RULE 5635, OF UP TO 4% OF THE COMPANY'S ISSUED AND OUTSTANDING COMMON STOCK AS OF THE DATE OF ISSUANCE
OF SUCH SHARES TO K 1 HOLDING LIMITED

As
described further below, the Company is negotiating a letter agreement (the "K1 Agreement") that would require the Company
to issue to K 1 Holding Limited ("K1 Holding") a number of restricted shares of Common Stock of the Company equal to
up to 4% of the total issued and outstanding shares of Common Stock of the Company at the time of issuance. The K1 Agreement is
proposed to be entered into by the Company with TGR Capital, LLC and K1 Holding. K1 Holding is an affiliate of Igor Yakovlevich
Krutoy. Mr. Krutoy, through K1 Holding, owns a 33% equity interest
in MUSIC 1 LLC (a/k/a OOO Music1,1),
a former subsidiary of the Company. TGR Capital, LLC is an affiliate of the Company's director
and majority shareholder, Mike Zoi.

Background of the K1 Issuance

On May 14, 2013, the
Company executed and delivered to K1 Holding a promissory note, dated May 13, 2013 (the "K1 Note"), in the principal
amount of $2 million, in connection with a loan in such amount made by K1 Holding to the Company. Amounts payable pursuant to the
K1 Note do not accrue interest. The outstanding principal balance of the K1 Note is required to be repaid no later than May 14,
2015 and may be prepaid in whole or in part at any time without penalty or charge.
As described further below, on September 25, 2013, T1T Lab, LLC, which is an affiliate of Mike Zoi, assumed the Company's obligations
under the K1 Note. As a result, T1T Lab is obligated to repay the entire principal amount of the K1 Note. Although K1 Holding has
verbally indicated its agreement to the assignment of the K1 Note to T1T Lab, the Company has not yet received from K1 Holding
its written consent to the assignment. Unless and until that written consent is obtained, it is likely that the Company will remain
liable to repay the principal amount of the K1 Note in the event T1T Lab defaults on its obligation to repay the K1 Note.

At the time the K1
Note was entered into by the Company and the related loan made by K1 Holding to the Company, the Company was negotiating the K1
Agreement, which at such.
The draft of the K1 Agreement at that time contemplatedprovided
that, as a condition to K1 Holding making the foregoing loan to the Company and to K1 Holding entering into an agreement to provide
certain business development consulting services to the Company, (i) the Company would issue to K1 Holding a number of restricted
shares of Common Stock of the Company equal to 2% of the total issued and outstanding shares of Common Stock of the Company at
the time of issuance and (ii) TGR Capital, LLC would transfer to K1 Holding such number of restricted shares of Common Stock of
the Company as is needed to bring K1 Holding's and Mr. Krutoy's aggregate beneficial ownership of Common Stock of the Company to
10% of the total issued and outstanding shares of Common Stock of the Company at the time of such transfer.

As
of the date of this proxy statement, the parties have agreed in principal that, pursuant to the K1 Agreement, (i) the Company would
issue to K1 Holding a number of restricted shares of Common Stock of the Company equal to 4% (instead of 2% as initially contemplated)
of the total issued and outstanding shares of Common Stock of the Company at the time of issuance and (ii) TGR Capital, LLC would
transfer to K1 Holding such number of restricted shares of Common Stock of the Company as is needed to bring K1 Holding's and Mr.
Krutoy's aggregate beneficial ownership of Common Stock of the Company to 10% of the total issued and outstanding shares of Common
Stock of the Company at the time of such transfer (decreasing the amount of shares required to be transferred by TGR Capital, LLC
to K1 Holding from 8% to 6% of the total issued and outstanding shares of Common Stock of the Company). However, since as of the
date of this proxy statement the K1 Agreement has not yet been finalized or entered into by the parties, the foregoing provisions
remain subject to continuing negotiations and subject to entering into a definitive binding agreement, and therefore such provisions
are not binding on the Company and are subject to change.

Similarly,
the consulting services agreement described above also has not been finalized or entered into by the parties as of the date of
this proxy statement. As of the date of this proxy statement, the current draft of such consulting services agreement provides
that K1 Holding would provide investor relations services for the Company and its affiliates outside the United States and that
K1 Holding would assist the Company and its affiliates with future negotiations and maintaining their relationship with Mobile
TeleSystems OJSC, MegaFon OJSC, OJSC VimpelCom (a/k/a Beeline) and their respective affiliates. The Company's subsidiary, TOT Money,
has agreements to provide mobile payment processing services for electronic payments using SMS (short message services, which is
a text messaging service) and MMS (multimedia message services) initiated by the mobile phone subscribers of each of Mobile TeleSystems
OJSC, MegaFon OJSC and OJSC VimpelCom in Russia. Since as of the date of this proxy statement such consulting services agreement
has not yet been finalized or entered into by the parties, the scope of services to be provided by K1 Holding remains subject to
continuing negotiations and subject to entering into a definitive binding agreement, and therefore the scope of services to be
provided by K1 Holding could change.

    A-1

In
the event that the parties do not agree upon and finalize and enter into the K1 Agreement and/or the consulting services agreement
described above (or if the Company's shareholders do not approve the issuance of up to 4% of the total issued and outstanding shares
of Common Stock of the Company pursuant to this Proposal 8), then the Company will not issue to K1 Holding the shares of Common
Stock that are the subject of this Proposal 8. If the K1 Agreement is not finalized and entered into (or if the Company's shareholders
do not approve the issuance of up to 4% of the total issued and outstanding shares of Common Stock of the Company pursuant to this
Proposal 8), then it is unlikely that K1 Holding would enter into the consulting services agreement, which could result in material
negative effects on the Company's and TOT Money's relationships and agreements with one or more of Mobile TeleSystems OJSC, MegaFon
OJSC and OJSC VimpelCom, which could materially adversely affect TOT Money's revenues. The failure of the parties to finalize and
enter into either the K1 Agreement or the consulting services agreement or the failure of the Company's shareholders to approve
the issuance of up to 4% of the total issued and outstanding shares of Common Stock of the Company pursuant to this Proposal 8
will not have any effect on the Company's or T1T Lab's obligations under the K1 Note or the repayment date of May 14, 2015.

On
September 25, 2013, the Company contributed all of its participation interest in MUSIC 1 LLC (aka
OOO Music1constituting a 67% equity interest in MUSIC
1 LLC) and all of its membership interests in its other online media subsidiaries (referred to herein collectively as
the Company's "entertainment assets") to T1T Lab, LLC in order to focus the Company's business operations on mobile payments,
transactional services and related technologies and to reduce the significant expenses associated with developing and maintaining
the entertainment assets. In exchange for transferring its entertainment assets to T1T Lab and agreeing to make an initial capital
contribution to T1T Lab in the amount of $1,259,000, the Company was issued a 10% membership interest in T1T Lab and T1T Lab assumed
$2,162,158 in liabilities (including $2,000,000 owed by the Company to K1 Holding pursuant to the K1 Note) related to the disposed
subsidiaries. In addition, all intercompany loans payable by the disposed subsidiaries to the Company, on the one hand, and by
the Company to the disposed subsidiaries, on the other hand, were forgiven by the Company and T1T Lab (as applicable). Total intercompany
loans forgiven by the Company, net of the total intercompany loans forgiven by the disposed subsidiaries, was approximately $9,864,602.
The remaining 90% membership interest in T1T Lab is owned by T1T Group, LLC, which is wholly-owned
by Enerfund, LLC (which is wholly-owned by Mike Zoi).

As of
the date of this proxy statement, the K1 Agreement has not yet been finalized or entered into by the parties. Howeverdescribed
above, the Company expects that the K1 Agreement, when finalized and entered into, will require the Company to issue
to K1 Holding a number of restricted shares of Common Stock of the Company equal to up to 4% of the total issued and outstanding
shares of Common Stock of the Company at the time of issuance. SinceHowever,
since as of the date of this proxy statement the K1 Agreement is being negotiated and
has not yet been finalized,and the related consulting
services agreement described above are subject to continuing negotiations and subject to entering into definitive binding agreements,
the specific terms and provisions of those agreements could change and there is no assurance that the Company ultimately
will issue such shares of Common Stock to K1 Holding.

Reason for Seeking Shareholder Approval

Because our Common
Stock is listed on The NASDAQ Capital Market, we are subject to NASDAQ's