Item 2.01 Completion of Acquisition or Disposition of Assets.

On October 2, 2012, Cazador Acquisition Corporation Ltd., a Cayman Islands exempted company (“Cazador”), completed its merger (the “Merger”) with Net Element, Inc. (“Net Element”), and the various transactions contemplated by the Agreement and Plan of Merger, dated as of June 12, 2012 (the “Merger Agreement”), between Cazador and Net Element were consummated. Immediately prior to the effectiveness of the Merger, Cazador changed its jurisdiction of incorporation by discontinuing as an exempted company in the Cayman Islands and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware. Effective upon consummation of the Merger (the “Closing”), (i) Net Element was merged with and into Cazador, resulting in Net Element ceasing to exist and Cazador continuing as the surviving company, and (ii) Cazador changed its name to “Net Element International, Inc.” (the “Company”). The Merger, the Merger Agreement and the transactions effected in connection therewith are more fully disclosed under the headings “Summary – The Proposed Business Combination,” “The Business Combination” and “The Merger Agreement” in the Definitive Joint Proxy Statement and Prospectus, dated September 4, 2012 (the “Final Prospectus”), filed by the Company with the Securities and Exchange Commission (“SEC”), which disclosures are incorporated herein by reference. Capitalized terms used herein but not defined have the meanings ascribed to them in the Final Prospectus.

Upon consummation of the Merger, the common stock, par value $0.0001 per share, of the Company (the “Company’s Common Stock”) was listed on The NASDAQ Capital Market under the symbol “NETE.” Additionally, upon consummation of the Merger, the warrants of Cazador are now quoted on the OTCBB under the symbol “NETEW.” Further, in connection with Cazador’s changing its jurisdiction of incorporation from the Cayman Islands to Delaware, the outstanding units of Cazador automatically separated into the underlying ordinary shares and warrants of Cazador. As a result, the Cazador units are no longer listed on The NASDAQ Capital Market.

The description of the terms of the Merger Agreement is qualified in its entirety by reference to the complete text of the Merger Agreement, which is filed as Exhibit 2.1 to this Form 8-K which is incorporated herein by reference.

Pursuant to the terms of the Merger Agreement, upon completion of the Merger, each share of then-issued and outstanding common stock of Net Element was automatically cancelled and converted into the right to receive one-fortieth (1/40) of a share of the Company’s Common Stock.

On October 2, 2012, the Company issued a press release announcing that it had completed the Merger and that the Company’s Common Stock began trading under new ticker symbol “NETE.” A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

Prior to the Merger, the Company was a blank check company with no operations, formed as a vehicle for an acquisition of an operating business. The following information, which is required by Item 2.01(f) of Form 8-K, reflects the post-merger Company on a consolidated basis.

Business

The business of the Company is described in the Final Prospectus in the sections entitled “Information About Net Element – Business Description,” “Information About Net Element – Development of Business,” “Information About Net Element – Proprietary Technologies,” “Information About Net Element – Other Technology Advancements,” “Information About Net Element – Development Team,” “Information About Net Element – Product Development,” “Information About Net Element – Regulation,” “Information About Net Element – Competition,” “Information About Net Element – Employees,” “The Business Combination,” and “Where you Can Find More Information,” each of which is incorporated herein by reference.

Risk Factors

The risks associated with the Company’s business are described in the Final Prospectus in the sections entitled “Risk Factors – Risk Factors Relating to Net Element” and “Risk Factors – Risk Factors Relating to the Business Combination,” each of which is incorporated herein by reference.

Management Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read and evaluated in conjunction with the unaudited condensed consolidated financial statements and notes thereto of Net Element included in this Amendment beginning on page F-1, the audited consolidated financial statements and notes thereto of Net Element incorporated by reference into this Amendment under the heading “Financial Statements” below, and with the discussion under “Forward-Looking Statements” on page 1 of this Amendment and the Risk Factors incorporated by reference into this Amendment under the heading “Risk Factors” above.

Overview; Recent Developments

As of September 30, 2012, Net Element had two reportable business segments, consisting of (i) Net Element’s mobile commerce payment processing services, and (ii) Net Element’s online businesses in music, film, motorsport and professional marketing services.

In June 2012, Net Element formed its indirect wholly-owned subsidiary OOO TOT Money (a Russian limited liability company) to adapt the existing revenue sharing platform used in Openfilm.com to a mobile commerce payment platform. TOT Money launched operations in Russia during the third quarter of 2012. TOT Money has entered into contracts with the three largest mobile phone operators in Russia, Mobile TeleSystems OJSC, MegaFon OJSC and OJSC VimpelCom, to facilitate payments using SMS (short message services, which is a text messaging service) and MMS (multimedia message services) for their mobile phone subscribers in Russia. Net Element plans to increasingly generate most of its revenues from TOT Money’s mobile commerce payment platform.

Net Element continues to pursue a strategy to develop and/or acquire technology and applications for use in the online media industry. In furtherance of this strategy, Net Element acquired Openfilm, LLC on December 14, 2010 and Motorsport, LLC and Music1, LLC on February 1, 2011. Music1, LLC has a 97%-owned subsidiary, A&R Music Live, LLC. Net Element developed and launched in the fourth quarter of 2011 a beta test version of the Yapik mobile application on Android and iOS platforms and Net Element launched a beta test version of the website legalguru.com in the second quarter of 2012.

Net Element believes that its technology platforms and development expertise are able to enhance the digital distribution of content in a variety of industries. Accordingly, Net Element is exploring the possibility of acquiring other Internet portal properties and companies with similar goals of connecting people in various vertical markets, such as the medical, educational and sports markets.

Since Net Element’s inception, it has not generated significant revenues, and it has incurred significant operating losses (for additional information, see “Liquidity and Capital Resources” below). Net Element’s failure to maintain its relationships with mobile phone providers in Russia and with content providers, lenders and other business partners, or failure to expand its base of advertisers or generate and maintain high quality content on its websites, could harm Net Element’s revenue prospects. Net Element faces all of the risks inherent in a new business, including management’s potential underestimation of initial and ongoing costs, and potential delays and other problems in connection with developing its technologies, Internet websites and operations.

On November 11, 2010, Net Element changed its fiscal year end from March 31 to December 31. Accordingly, Net Element’s first full 12-month fiscal year ending on December 31 ran from January 1, 2011 through December 31, 2011. The nine-month period from April 1, 2010 through December 31, 2010 is presented as comparative information in Net Element’s audited financial statements for the periods ended December 31, 2011 and 2010. Accordingly, in the below discussion under “Results of Operations for the Twelve Months Ended December 31, 2011 Compared to the Nine Months Ended December 31, 2010,” fiscal 2011 reflects twelve months of operations as an online media company and fiscal 2010 reflects the nine-month transition period from April 1 through December 31, 2010 when Net Element had no significant operations until it acquired Openfilm, LLC on December 14, 2010.

Merger into Cazador

On June 12, 2012, Net Element entered into an Agreement and Plan of Merger with Cazador Acquisition Corporation Ltd., a Cayman Islands limited corporation. On October 2, 2012, Net Element completed its Merger with Cazador and consummated the various transactions contemplated by the Merger Agreement. Immediately prior to the effectiveness of the Merger, Cazador changed its jurisdiction of incorporation by discontinuing as an exempted company in the Cayman Islands and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware. Effective upon consummation of the Merger, (i) Net Element was merged with and into Cazador, resulting in Net Element ceasing to exist and Cazador continuing as the Surviving Company in the Merger, and (ii) Cazador changed its name to Net Element International, Inc. Pursuant to the terms of the Merger Agreement, upon completion of the Merger, each share of then-issued and outstanding common stock of Net Element was automatically cancelled and converted into the right to receive one-fortieth (1/40) of a share of the common stock of the Surviving Company. The Merger is intended to qualify as a tax-free reorganization. Upon consummation of the Merger, the common stock of the Surviving Company was listed on The NASDAQ Capital Market under the symbol “NETE.” For additional information, see Note 16 to Net Element’s accompanying unaudited financial statements for the period ended September 30, 2012.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

In applying estimates, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on Net Element’s historical experience, terms of existing contracts, its observance of trends in its industries, information provided by outside sources, trade journals and other sources, as appropriate.

Deferred Taxes. Estimates of deferred income taxes and items giving rise to deferred tax assets and liabilities reflect management’s assessment of actual future taxes to be paid on items reflected in the financial statements, giving consideration to both timing and the probability of the realization. Actual income taxes could vary from these estimates for a variety of reasons including changes in tax law, operating results that vary from budget or the review of Net Element’s tax returns by the IRS.

Valuation of Stock Based Compensation. Stock based compensation has been provided by Net Element in order to preserve the cash flow necessary to grow its business. Net Element believes the estimate of stock based compensation is a “critical accounting estimate” that significantly affects its results of operations. Management of Net Element has discussed the development and selection of this critical accounting estimate with its board of directors and the board of directors has reviewed Net Element’s disclosure relating to it in this report.

Capitalized Website Costs. Net Element capitalizes certain software development costs. Generally, costs for developing website application and infrastructure, creating the initial graphics of the website, and adding upgrades and enhancements are capitalized whereas costs for planning, adding content, and operating the website are expensed as incurred. Net capitalized website costs are recorded at cost less accumulated amortization. Amortization is provided for on a straight-line basis over the expected useful life of the website. Net Element evaluates the recoverability of intangible assets periodically and takes into account events or circumstances that warrant revised estimates of useful lives or that indicate impairment exists.

Revenue. Net Element recognizes revenue when the persuasive evidence of an arrangement exists, no significant company obligations remain, collection of the related receivable is reasonably assured, and fees or interest are fixed or determinable. Net Element recognizes fee revenue from transactions on Net Element’s affiliate marketing networks on a net basis where Net Element acts as an agent in these transactions and the payments to publishers are the contractual obligation of the advertiser customers. Net Element’s subsidiary, TOT Money, recognizes interest income and service fees in connection with its mobile payment processing business in Russia.

Results of Operations for the Three-Month Periods Ended September 30, 2012 and 2011

Net Element reported a net loss of $1,814,304, or $(0.00) per share, for the three months ended September 30, 2012, as compared with a net loss of $1,491,824, or $(0.00) per share, for the three months ended September 30, 2011. Basic and diluted weighted average shares outstanding were 772,575,167 and 740,397,800 for the quarters ended September 30, 2012 and 2011, respectively.

Net revenues consist of service fees, advertising fees, membership fees and license fees. Net revenues for the three months ended September 30, 2012 and 2011 were $191,400 and $39,784, respectively. The following table provides a breakdown of revenue by entity or property for the three months ended September 30, 2012 and 2011.

Revenues generated by TOT Money from service fees represent revenues received from the spread between money collected from mobile operators and money paid to merchants. The three months ended September 30, 2012 is the first quarter in which TOT Money generated these service fees. A&R Music Live / Music1 revenues for the three months ended September 30, 2012 decreased $5,748, or 28%, compared to revenues for the three months ended September 30, 2011 as a result of management time spent making updates to the website during the three months ended September 30, 2012. As such, we were not marketing and delivering service at the same level. Motorsport.com revenues increased from $3,064 for the three months ended September 30, 2011 to $14,386 for the three months ended September 30, 2012 due to increased advertising on the site. Additionally, Motorsport.com cancelled the majority of its low value advertising contracts in an effort to obtain higher value advertising for the site, which management believes helped contribute to the increase in advertising revenues from Motorsport.com. Openfilm.com revenues decreased $8,755, or 58%, for the three months ended September 30, 2012 compared to the three months ended September 30, 2011 due to decreased subscription fees, video income and license fees (from Launchpad) generated for the 2012 period.

Operating expenses totaled $2,510,033 for the three months ended September 30, 2012, as compared to total operating expenses of $1,594,100 for the three months ended September 30, 2011. Most of total operating expenses in each of such periods consisted of general and administrative expenses. For the three months ended September 30, 2012, general and administrative expenses were $2,136,808, or 85% of total operating expenses during that period. For the three months ended September 30, 2011, general and administrative expenses were $1,194,357, or 75% of total operating expenses during that period. The components of Net Element’s general and administrative expenses are discussed below.

Cost of revenues represents direct costs of generating revenues, including commissions, hosting, content acquired and created and certain payroll and consulting expenses that are directly related to revenue creation. Cost of revenues for the three months ended September 30, 2012 were $90,860 as compared to $109,135 for the three months ended September 30, 2011, which represents a decrease of $18,275, or 17%, primarily due to a decrease in commissions and hosting expenses of $12,015 for Openfilm / Launchpad and a decrease of $4,623 in Motorsport expenses for reduced travel and contract services expenses. This was offset by an increase of $10,390 that related primarily to increased hosting and streaming expenses in A&R Music / Music1.

Business development expenses consist of direct costs associated with developing Net Element’s brand and developing revenue opportunities. Business development expenses decreased by $56,228, or 81%, to $13,508 for the three months ended September 30, 2012 as compared with $69,736 for the three months ended September 30, 2011. For the quarter ended September 30, 2012, business development expenses were primarily attributable to corporate activities ($5,057), LegalGuru ($5,498) and Motorsport ($2,129). Business development expenses for the three months ended September 30, 2011 were primarily attributable to corporate activities ($52,416), Yapik ($12,153) and Motorsport ($4,533). Business development expenses attributable to corporate activities related primarily to business development of new company-wide website and services opportunities. LegalGuru business development expenses related primarily to marketing efforts. For the three months ended September 30, 2011, Motorsport business development expenses related primarily to branding through the use of paid marketing professionals at race events and the purchase of promotional items. Motorsport did not have either of these expenses in the three months ended September 30, 2012. Yapik business development expenses relate to on campus marketing efforts. The primary reasons for the decrease in business development expense for the three months ended September 30, 2012 was $46,625 of expense related to promotion at Ferrari North American Challenge during the three months ended September 30, 2011 that we did not incur during the three months ended September 30, 2012.

General and administrative expenses were $2,136,808 for the three months ended September 30, 2012 as compared to $1,194,357 for the three months ended September 30, 2011. General and administrative expenses for the three months ended September 30, 2012 and 2011 consisted of operating expenses not otherwise delineated in Net Element’s Unaudited Condensed Consolidated Statements of Operations, including certain salaries, benefits, professional fees, travel, rent, Internet expenses and other expenses required to run Net Element’s business. General and administrative expenses for the three months ended September 30, 2012 and 2011 were attributable to the properties or subsidiaries of Net Element as follows. The 2011 presentation has been reclassified to be consistent with 2012.

General and administrative expenses for Net Element Corporate were $1,131,744 for the three months ended September 30, 2012 as compared to $665,607 for the three months ended September 30, 2011, representing an increase of $466,137, or 70%. The primary reasons for this increase were a $213,881 increase in professional fees incurred in connection with Net Element’s merger with Cazador and a $171,150 increase in non-cash compensation expense incurred primarily as a result of stock options issued to employees as a retention bonus in connection with Net Element’s merger with Cazador.

General and administrative expenses of Openfilm / Launchpad decreased $22,158, or 35%, to $40,774 for the three months ended September 30, 2012 as compared to $62,932 for the three months ended September 30, 2011. Payroll expenses explain the majority of the decrease ($24,583) as Openfilm had fewer people at lower salaries for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011. This decrease was offset by an increase in telephone expense of $3,031 as Openfilm incurred roaming expenses for employees working in Russia to develop business.

General and administrative expenses for LegalGuru increased $49,006 to $68,428 for the three months ended September 30, 2012 as compared to $19,422 in general and administrative expenses for the three months ended September 30, 2011. During the three months ended September 30, 2011, LegalGuru was just beginning operations and general and administrative expenses consisted primarily of payroll expenses of $12,442 and consulting fees of $6,873. For the three months ended September 30, 2012, payroll expenses were $50,285 and consulting fees were $11,246.

Motorsport general and administrative expenses increased $11,432, to $68,506 for the three months ended September 30, 2012 as compared to $57,074 for the three months ended September 30, 2011. The primary reason for this increase was an increase in legal expenses of $8,285 for acquisition related matters and an increase in travel expenses of $1,851 for travel to races during the three months ended September 30, 2012.

A&R Music Live / Music1 expenses increased to $83,457 for the three months ended September 30, 2012 from $65,366 for the three months ended September 30, 2011, resulting in an increase of $18,091. This increase is primarily attributable to an increase in payroll expenses of $10,963 as we had additional headcount added during 2012 to develop the business and an increase in rent expense of $5,800 due to the settlement of a dispute related to a lease agreement that we cancelled in 2012.

General and administrative expenses attributable to OOO Net Element Russia, which is the 100% owner of TOT Money, were $325,966 for the three months ended September 30, 2012 as compared to $0 for the three months ended September 30, 2011. OOO Net Element Russia began operations in mid-2012.

General and administrative expenses attributable to Netlab Systems / Splinex increased by $92,367 primarily due to higher payroll ($70,561) and higher travel expenses ($7,783) resulting from higher headcount, increased salaries and increased travel relating to the development and showcasing of new technologies.

Product development expense was $136,924 for the three months ended September 30, 2012 as compared to $44,121 for the three months ended September 30, 2011 when Net Element had more limited product development efforts. Product development expense consists of research and development on new ideas for existing and to be formed websites and services as well as work that may result in Net Element seeking patents for particular technology or business processes.

Depreciation and amortization expense consists of depreciation expense on fixed assets used by Net Element and the amortization of capitalized website development, intellectual property and deferred compensation expenses. Depreciation and amortization expense was $131,933 for the three months ended September 30, 2012 as compared with $176,751 for the three months ended September 30, 2011, resulting in a decrease of $44,818, or 25%. This decrease was due to an adjustment in 2011 depreciation expense for the quarter ended September 30, 2011 to adjust year to date depreciation expense incurred in 2011.

Capitalized costs related to website development and intangible assets were $632,508, net at September 30, 2012 as compared with $608,823 at September 30, 2011. Capitalized website development and intangible assets of $632,508 at September 30, 2012 includes $402,586 of capitalized web development, $26,377 for the direct costs of acquiring patents and trademarks and $203,545 related to website content, customer lists and domain names (Motorsport, LLC ($114,375) and Music1, LLC ($86,925)).

Interest income was $388,407 for the three months ended September 30, 2012 as compared with interest expense of $48,456 for the three months ended September 30, 2011. Interest income for the three months ended September 30, 2012 includes interest income generated by TOT Money of $630,914 on short term loans made to RM-Invest (a mobile payment processing company located in Russia), offset by $242,507 in interest expense primarily due to convertible loans and working capital advances from Enerfund to Net Element ($54,102 in interest expense at 5% per annum) with principal balances totaling $4,760,234, a loan from Enerfund to Openfilm with a principal balance of $1,667,762 ($21,247 in interest expense at 5% per annum), a loan from SAT-Moscow (a company owned by a director and shareholder of Net Element, Kenges Rakishev) in the amount of $4,632,890 ($88,037 in interest expense at 8.15% per annum), a loan from Green Venture Group, LLC (owned by a director and shareholder of Net Element, Mike Zoi) in the amount of $4,537,589 ($76,508 in interest expense at 8.15% per annum). The General Director of TOT Money owns a 20% equity interest in RM-Invest. The interest expense for the three months ended September 30, 2011 was primarily attributable to a loan from Enerfund to Openfilm, LLC ($21,018 in interest expense) with a principal balance of $1,667,762 and an interest rate of 5% per annum and a loan from Enerfund to Net Element with a principal balance of $2,710,138 ($27,634 in interest expense at 5% per annum).

Other income for the three months ended September 30, 2012 was $17,524 as compared to $0 for the three months ended September 30, 2011. Other income for the three months ended September 30, 2012 was related to the value of a minority interest in OOO Music1 (Russia) which was issued to Igor Yakovlevich Krutoy. The opening minority interest balance was calculated as 33% of the equity balance in OOO Music1 as of the date of issuance (September 6, 2012).

The net loss attributable to non-controlling interests relating to Yapik, LLC, LegalGuru LLC, A&R Music Live, LLC, OOO Music1 (2012 only) and Splinex, LLC was $135,446 for the three months ended September 30, 2012 as compared with $110,948 for the three months ended September 30, 2011. Non-controlling interest for the three months ended September 30, 2012 were primarily attributable to LegalGuru ($73,902) and Yapik ($41,429). The non-controlling interest reflects the results of operations of subsidiaries that are allocable to equity owners other than Net Element.

Results of Operations for the Nine-Month Periods Ended September 30, 2012 and 2011

Net Element reported a net loss of $6,346,014, or $(0.01) per share, for the nine months ended September 30, 2012, as compared with a net loss of $23,535,134, or $(0.03) per share, for the nine months ended September 30, 2011. Basic and diluted weighted average shares outstanding were 763,330,793 and 737,682,541 for the nine months ended September 30, 2012 and 2011, respectively.

Net revenues consist of service fees, advertising fees, membership fees and license fees. Net revenues for the nine months ended September 30, 2012 and 2011 were $304,028 and $143,988, respectively. The following table provides a breakdown of revenue by entity or property for the nine months ended September 30, 2012 and 2011.

Revenues generated by TOT Money from service fees represent revenues received from the spread between money collected from mobile operators and money paid to merchants. TOT Money first began generating revenues during the three months ended September 30, 2012. A&R Music Live / Music1 revenues increased $3,037 due to the longer period of ownership in 2012 (Net Element bought A&R Music Live / Music1 in February, 2011). Motorsport.com revenues increased $48,993 due to the longer period of ownership in 2012 (Net Element bought Motorsport.com in February, 2011) and due to re-establishment of revenues from advertising that were significantly reduced subsequent to its purchase in February, 2011. Openfilm / Launchpad revenues decreased $44,698 primarily due to a decrease in license fee revenue of $43,600 for the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011. License revenues vary from period to period based on contracts entered into during a particular period to use Launchpad or other software and/or services.

Operating expenses totaled $6,794,699 for the nine months ended September 30, 2012, as compared to total operating expenses of $23,808,622 for the nine months ended September 30, 2011. Most of total operating expenses in each of such periods consisted of general and administrative expenses. For the nine months ended September 30, 2012, general and administrative expenses were $5,527,898, or 81% of total operating expenses during that period. For the nine months ended September 30, 2011, general and administrative expenses were $22,820,211, or 96% of total operating expenses during that period. The components of Net Element’s general and administrative expenses are discussed below.

Cost of revenues represents direct costs of generating revenues, including commissions, hosting, content acquired and created and certain payroll and consulting expenses that are directly related to revenue creation. Cost of revenues for the nine months ended September 30, 2012 were $291,599 as compared to $481,325 for the nine months ended September 30, 2011, which represents a decrease of $189,726, or 39%.

Cost of revenues for A&R Live / Music1 decreased to $61,616 for the nine months ended September 30, 2012 as compared to $75,069 for the nine months ended September 30, 2011. The decrease of $13,453, or 18%, was primarily due to lower web development expenses of $36,319 offset by higher costs of hosting and streaming of $16,374 for the nine months ended September 30, 2012.

Motorsport.com cost of revenues were $165,074 for the nine months ended September 30, 2012 as compared to $148,894 for the nine months ended September 30, 2011. The increase of $16,180, or 11%, was primarily due to an increase in content purchased of $13,517, increases in hosting and streaming expenses of $18,247, increases in ad revenue commissions paid of $9,000 and increases in web development expenses of $3,466, partially offset by a decrease in travel expenses of $32,679.

Openfilm.com / Launchpad cost of revenues decreased $76,233 in the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 primarily due to reductions in direct marketing expenses of $49,350 and a reduction in commissions paid of $14,566 due to lower revenues.

LegalGuru cost of revenues were $1,520 for the nine months ended September 30, 2012 as compared to $54,610 for the nine months ended September 30, 2011. This decrease was due to consulting expenses to develop the website of $54,610 that were incurred during 2011, which do not recur in the nine months ended September 30, 2012.

Other cost of revenues decreased $63,130 for the nine months ended September 30, 2012 when compared to the nine months ended September 30, 2011 primarily due to a reduction in web development costs incurred.

Business development expenses consist of direct costs associated with developing Net Element’s brand and developing revenue opportunities. Business development expenses increased by $302,703, or 173%, to $477,453 for the nine months ended September 30, 2012 as compared with $174,750 for the nine months ended September 30, 2011. For the nine months ended September 30, 2012, business development expenses were primarily attributable to corporate activities ($451,409) and LegalGuru ($21,633). Business development expenses for the nine months ended September 30, 2011 were primarily attributable to corporate activities ($117,552) and Motorsport ($41,040). Business development expenses attributable to corporate activities related primarily to business development of new company-wide website and services opportunities. LegalGuru business development expenses related primarily to marketing efforts. Motorsport business development expenses related primarily to branding through the use of paid marketing professionals at race events and the purchase of promotional items. The primary reasons for the increase in business development expense for the nine months ended September 30, 2012 were $217,934 of increased expense related to promotion at the Ferrari North American Challenge and $122,821 increase in travel expenses relating to business development, partially offset by decreases in Motorsport’s business development expenses of $38,561 as Motorsport did not have paid marketing professionals or promotional items at race events during 2012.

General and administrative expenses were $5,527,898 for the nine months ended September 30, 2012 as compared to $22,820,211 for the nine months ended September 30, 2011. General and administrative expenses for the nine months ended September 30, 2012 and 2011 consisted of operating expenses not otherwise delineated in Net Element’s Unaudited Condensed Consolidated Statements of Operations, including certain salaries, benefits, professional fees, travel, rent, Internet expenses and other expenses required to run Net Element’s business. General and administrative expenses for the nine months ended September 30, 2012 and 2011 were attributable to the properties or subsidiaries of Net Element as follows:

General and administrative expenses for Net Element Corporate were $3,154,383 for the nine months ended September 30, 2012 as compared to $21,200,527 for the nine months ended September 30, 2011. For the nine months ended September 30, 2012, general and administrative expenses for Net Element Corporate consisted primarily of $1,254,655 in non-cash compensation expense relating to the issuance of stock, options and warrants, $722,609 of payroll expenses, $654,803 of professional fees, $46,821 of recruiting expense and $71,405 of travel expense. Of the $21,200,527 in general and administrative expenses for Net Element Corporate for the nine months ended September 30, 2011, $19,444,124 is attributable to non-cash compensation expense relating primarily to the issuance of stock and options pursuant to a subscription agreement with Enerfund during the period. Of the $1,756,403 remaining in corporate general and administrative expenses for the nine months ended September 30, 2011, $1,163,607 consisted of payroll expense, $129,928 was for recruiting expenses, $272,193 in professional fees, $170,332 in travel and $20,343 of other general and administrative expenses. Payroll expense decreased due to a reduction in headcount and salaries. Professional fees increased due to the increase in legal and accounting expenses associated with Net Element’s merger with Cazador. Travel expenses decreased as a result of the reduced headcount and reduced traveling during the nine months ended September 30, 2012. Recruiting expenses are paid on a percentage of salary and bonuses for the position recruited. Recruiting expenses decreased during the nine months ended September 30, 2012 because we recruited a Chief Operating Officer, a Chief Revenue Officer and Administrative Assistant in 2011. During 2012, we recruited two business unit heads but recruiting expenses were lower because salaries for each business unit head were lower than the compensation for the Chief Operating Officer and Chief Revenue Officer.

Yapik and LegalGuru both started accumulating expenses in March of 2011 as start-up businesses and OOO Net Element Russia (which is the 100% owner of TOT Money) was formed during the second quarter of 2012, which explains the variance between general and administrative expenses of those entities for the nine months ended September 30, 2012 versus the nine months ended September 30, 2011.

Openfilm / Launchpad general and administrative expense decreased $203,809, or 63%, for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 primarily due to reductions in payroll expenses ($114,601), travel ($28,220), consulting fees ($18,147) and professional services ($8,020). Expenses were lower in 2012 due to lower headcount and a reduced budget for Openfilm during 2012 as compared to 2011.

Motorsport and A&R Music Live / Music1 were both purchased on February 1, 2011 so the nine months ended September 30, 2011 only includes eight months of operating expenses for each of those subsidiaries. Additionally, subsequent to acquisition, Net Element increased its development efforts for both of those entities, which contributed to higher general and administrative expenses in the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011.

General and administrative expenses for Netlab / Splinex were $947,079 for the nine months ended September 30, 2012 as compared to general and administrative expenses of $773,225 for the nine months ended September 30, 2011, resulting in an increase of $173,854, or 22%. Payroll expenses increased $149,193 for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 primarily due to higher headcount in the Ukrainian development office and higher salaries of United States based employees. Rent increased $11,888 as office space was renewed at higher rates and travel increased $11,159 due to increased travel to demonstrate newly developed products in 2012.

Product development expense was $174,130 for the nine months ended September 30, 2012 as compared to $90,706 for the nine months ended September 30, 2011 when Net Element had more limited product development efforts. Product development expense consists of research and development on new ideas for existing and to be formed websites and services as well as work that may result in Net Element seeking patents for particular technology or business processes.

Depreciation and amortization expense consists of depreciation expense on fixed assets used by Net Element and the amortization of capitalized website development, intellectual property and deferred compensation expenses. Depreciation and amortization expense was $323,619 for the nine months ended September 30, 2012 as compared with $241,630 for the nine months ended September 30, 2011. The increase was due to higher levels of fixed assets and web development amortization in 2012 versus 2011.

Capitalized costs related to website development and intangible assets were $632,508, net at September 30, 2012 as compared with $608,823 at September 30, 2011. Capitalized website development and intangible assets of $632,508 at September 30, 2012 includes $402,586 of capitalized web development, $26,377 for the direct costs of acquiring patents and $203,545 related primarily to website content, customer lists and domain names (Motorsport, LLC ($114,375) and Music1, LLC ($86,925)).

Interest income was $244,006 for the nine months ended September 30, 2012 as compared with interest expense of $105,749 for the nine months ended September 30, 2011. Interest income for the nine months ended September 30, 2012 includes interest income generated by TOT Money of $630,914 on short term loans made to RM-Invest (a mobile payment processing company located in Russia), offset by $151,486 in interest expense primarily due to convertible loans and working capital advances from Enerfund to Net Element with principal balances totaling $4,760,234, a loan from Enerfund to Openfilm with a principal balance of $1,667,762 ($62,827 in interest expense at 5% per annum), a loan from SAT-Moscow (a company owned by a director and shareholder of Net Element, Kenges Rakishev) in the amount of $4,632,890 ($88,037 in interest expense at 8.15% per annum), a loan from Green Venture Group, LLC (owned by a director and shareholder of Net Element, Mike Zoi) in the amount of $4,573,589 ($76,508 in interest expense at 8.15% per annum). The General Director of TOT Money owns a 20% equity interest in RM-Invest. The interest expense for the nine months ended September 30, 2011 was primarily attributable to a loan from Enerfund to Openfilm, LLC ($59,622 in interest expense) with a principal balance of $1,667,762 and an interest rate of 5% per annum and a loan from Enerfund to Net Element with a principal balance of $2,710,138 ($29,554 in interest expense at 5% per annum).

Other expenses totaled $393,701 for the nine months ended September 30, 2012 compared to other expenses of $45,942 for the nine months ended September 30, 2011. Other expenses for the nine months ended September 30, 2012 related primarily to the amendment of amounts payable to former Motorsport.com owners and other expense for the nine months ended September 30, 2011 related primarily to adjusting Net Element’s carrying value of Korlea-TOT to fair value on January 1, 2011. For additional information, see Notes 5 and 6 of Net Element’s accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

The net loss attributable to non-controlling interests relating to Yapik, LLC, LegalGuru LLC, A&R Music Live, LLC, OOO Music1 (2012 only) and Splinex, LLC was $331,400 for the nine months ended September 30, 2012 as compared with $281,191 for the nine months ended September 30, 2011. Non-controlling interest for the nine months ended September 30, 2012 were primarily attributable to LegalGuru ($187,325) and Yapik ($106,429). Non-controlling interest for the nine months ended September 30, 2011 were primarily attributable to Motorsport.com ($135,747), LegalGuru ($65,888) and Yapik ($51,156). The non-controlling interest reflects the results of operations of subsidiaries that are allocable to equity owners other than Net Element.

Results of Operations for the Twelve Months Ended December 31, 2011 Compared to the Nine Months Ended December 31, 2010

Net Element reported a net loss of $24,853,100, or $(0.03) per share, for the twelve months ended December 31, 2011 as compared with a net loss of $3,101,146, or $(0.01) per share, for the nine months ended December 31, 2010.

Net revenues consist of license fees, advertising fees, membership fees and other service fees. Net revenues were $183,179 for the twelve months ended December 31, 2011 as compared to $242 for the nine months ended December 31, 2010. Revenues for the twelve months ended December 31, 2011 were primarily from Music ($76,393), Openfilm ($73,426) and Motorsport ($28,152). Net revenues generated during the nine months ended December 31, 2010 reflect net revenues received from Openfilm from the acquisition date of December 14, 2010 through December 31, 2010. Music revenues consist primarily of premium service fees earned by providing feedback on music submitted by users for review by music executives. Openfilm’s net revenues during that period were primarily licensing fees from Launchpad and advertising revenues. Motorsport revenues were primarily advertising revenues.

Operating expenses totaled $25,238,951 for the twelve months ended December 31, 2011, as compared to total operating expenses of $3,104,423 for the nine months ended December 31, 2010. Most of total operating expenses in each of such periods consisted of general administrative expenses. For the twelve months ended December 31, 2011, general and administrative expenses were $23,831,750, or 94.4% of total operating expenses during that period. For the nine months ended December 31, 2010, general and administrative expenses were $3,066,261, or 98.8% of total operating expenses during that period. The components of Net Element’s general and administrative expenses are discussed below.

Cost of revenues represents direct costs of generating revenues, including commissions, content acquired and created and certain payroll expense that is directly related to revenue creation. Cost of revenues for the twelve months ended December 31, 2011 was $596,389 as compared to $38,162 for the nine months ended December 31, 2010 as a result of there being limited operations during the nine months ended December 31, 2010.

Business development expenses consist of direct costs associated with developing Net Element’s brand and developing revenue opportunities. Business development expenses were $385,714 for the twelve months ended December 31, 2011 as compared with $0 for the nine months ended December 31, 2010 as Net Element had limited operations during the 2010 period. For the twelve months ended December 31, 2011, business development expenses were primarily attributable to corporate activities ($317,197), Yapik ($12,380) and Motorsport ($41,916). Business development expenses attributable to corporate activities related primarily to Net Element’s sponsorship and participation in the Ferrari Challenge (whereby Net Element contracted to pay $50,000 per year in cash and provide $200,000 per year in advertising value on its websites in exchange for a Platinum Sponsorship for the Ferrari Challenge over two race seasons). Yapik business development expenses related primarily to on campus marketing efforts. Motorsport business development expenses related primarily to branding through the use of paid marketing professionals at race events and the purchase of promotional items.

General and administrative expenses were $23,831,750 for the twelve months ended December 31, 2011 as compared to $3,066,261 for the nine months ended December 31, 2010. General and administrative expenses for the twelve months ended December 31, 2011 and the nine months ended December 31, 2010 consisted of operating expenses not otherwise delineated in Net Element’s Consolidated Statements of Operations, including non-cash compensation expense, salaries and benefits, professional fees, rent, filing fees and other expenses required to run its business, as follows:

Non-cash compensation expense from subscription agreements and share based compensation was $19,350,902 for the twelve months ended December 31, 2011 compared to $2,262,224 for the nine months ended December 31, 2010. The non-cash compensation expenses were higher for the twelve months ended December 31, 2011 as compared with the nine months ended December 31, 2010 primarily due to the intrinsic value charges from the stock issued pursuant to the Enerfund Subscription Agreement (as described below), the increased use of stock options as compensation for contractors, advisors and employees in 2011 and the acquisition of Openfilm late in the year (December 14, 2010).

On December 31, 2010, Net Element entered into a Subscription Agreement with Enerfund (the “Enerfund Subscription Agreement”) pursuant to which it received an aggregate of $2,000,000 in exchange for the issuance of 200,000,000 shares of Net Element Common Stock and warrants to purchase 100,000,000 shares of Net Element Common Stock at an exercise price of $0.05 per share for a period of five years from the date of issuance. However, Net Element did not have a sufficient number of authorized shares of Net Element Common Stock to fully issue these securities to Enerfund at December 31, 2010. Accordingly, this transaction was accounted for as a purchase by Enerfund as of December 31, 2010 of 112,000,000 shares of Net Element Common Stock and fully vested warrants to purchase 56,000,000 shares of Net Element Common Stock for $0.05 per share in exchange for $1,120,000. A compensation charge of $560,000 was recorded for the nine months ended December 31, 2010 as one of Net Element’s officers is also a principal of Enerfund. This amount is calculated as the Black-Scholes valuation of the warrants issued as of December 31, 2010. The balance of the proceeds of $880,000 was accounted for as an advance until March 7, 2011, when Net Element issued the balance of the shares and warrants. Since Enerfund is owned by an officer/director, Net Element recorded a compensation charge of $18,920,000 during the twelve months ended December 31, 2011, which is comprised of the Black-Scholes value of the warrants ($6,600,000) and the intrinsic market value of the Net Element Common Stock issued ($12,320,000). For the nine months ending December 31, 2010, compensation charges included the $560,000 (discussed above) for the Enerfund Subscription Agreement (2010 portion), $1,620,787 for Net Element’s first subscription agreement (as amended) with TGR Capital, LLC, $25,464 for vesting options during the year and $10,140 for shares for services.

Salaries and benefits expenses were $3,104,261 for the twelve months ended December 31, 2011 compared to $465,127 for the nine months ended December 31, 2010. Salaries and benefits for the twelve months ended December 31, 2011 were higher than for the nine months ended December 31, 2010 due to an increase in Net Element, Inc. (Corporate) headcount mostly in November and December 2010, the shortened fiscal year period in 2010, the acquisition of Openfilm late in the year (December 14, 2010) and the addition of several new web properties during 2011 (including LegalGuru, Yapik, Music and Motorsport). Salaries and benefits attributable to Net Element, Inc. (Corporate) and the properties or subsidiaries of Net Element for the twelve months ended December 31, 2011 versus the nine months ended December 31, 2010 were as follows:

Professional fees were $671,936 for the twelve months ended December 31, 2011 compared to $226,285 for the nine months ended December 31, 2010, as follows:

General legal expenses increased in 2011 primarily due to business development work in China and Russia, which totaled approximately $100,000. For 2011, Net Element also spent $20,941 to establish Cayman operations and $11,729 to defend Net Element in a California employment matter. Tax compliance and planning expenses increased $66,029 due to increased tax compliance efforts in 2011 and an increased number of tax returns/information returns required to be prepared.

Consulting fees increased $235,604 in 2011 primarily due to consulting fees for Motorsport ($91,303), Music ($64,259), Yapik ($25,895), LegalGuru ($25,623) and $27,500 paid for consulting related to the development of additional advertising revenues.

Rent expenses were $247,953 for the twelve months ended December 31, 2011 compared to $37,970 for the nine months ended December 31, 2010. The increase in rent expenses was primarily due to Net Element’s move to new corporate headquarters in mid-November 2010 at a higher monthly rent ($15,648 per month under the new lease versus $1,000 per month under Net Element’s prior lease).

Filing fees consist of printing costs associated with SEC filings and registration fees paid to various states. Filing fees were $32,708 for the twelve months ended December 31, 2011 compared to $35,604 for the nine months ended December 31, 2010.

Interest expense for the twelve months ended December 31, 2011 was $171,319 as compared to $0 for the nine months ended December 31, 2010. For 2011, Net Element had interest expense primarily related to several loans made by Enerfund to Net Element or its subsidiaries to fund operations at the end of 2010 and during 2011, as described under “Liquidity and Capital Resources” below.

Other expenses totaled $45,942 for the twelve months ended December 31, 2011 compared to other income of $2,946 for the nine months ended December 31, 2010. Other expenses for the twelve months ended December 31, 2011 related primarily to the write-down of Net Element’s investment in Korlea-TOT. For the nine months ended December 31, 2010, other income was primarily attributed to contest fees from Openfilm.

Going Concern

Net Element had a net loss of $6,346,014 for the nine months ended September 30, 2012, a net loss of $24,853,100 for the twelve months ended December 31, 2011 and a net loss of $3,101,146 for the nine months ended December 31, 2010. Net Element had negative cash flow from operations of $4,069,472 and $3,768,569 for the nine months ended September 30, 2012 and 2011, respectively, and had an accumulated deficit of $57,620,045 and shareholders’ deficiency of $6,019,678 at September 30, 2012. Net Element’s ability to continue operating is limited without continued availability of financing, of which there can be no assurance. These matters have raised substantial doubt about Net Element’s ability to continue as a going concern. Further, Net Element’s independent registered public accounting firm, in its report for the fiscal years ended December 31, 2011 and 2010, included an emphasis of matter paragraph regarding the substantial doubt about Net Element’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if Net Element is unable to continue as a going concern. As a result of Net Element’s merger with Cazador on October 2, 2012, Net Element’s business received a cash infusion of approximately $12 million after repaying certain related party debt totaling approximately $13 million. The Company’s management anticipates that the Company’s available cash resources following the merger and its cash flows from operations will be sufficient to meet its presently anticipated working capital and capital expenditure requirements through at least the next 12 months. See also “Liquidity and Capital Resources” below.

Liquidity and Capital Resources

At September 30, 2012, Net Element had an accumulated deficit of $57,620,045, negative working capital of $3,733,300 and unrestricted cash of $2,703,572. Net Element had a net loss of $6,346,014 for the nine months ended September 30, 2012 and a net loss of $23,535,134 for the nine months ended September 30, 2011. Net Element had negative cash flows from operations of $4,069,472 for the nine months ended September 30, 2012 and negative cash flows from operations of $3,768,569 for the nine months ended September 30, 2011.

Net Element had a net loss of $24,853,100 for the twelve months ended December 31, 2011 and a net loss of $3,101,146 for the nine months ended December 31, 2010. Net Element had negative cash flows from operations of $4,979,221 for the twelve months ended December 31, 2011 and negative cash flows from operations of $1,519,972 for the nine months ended December 31, 2010.

Net Element has historically been primarily dependent upon TGR Capital, LLC, Enerfund, LLC or Mike Zoi (as a result of his controlling interest in TGR Capital and Enerfund) to fund its operations. Pursuant to a Subscription Agreement entered into with TGR Capital dated August 7, 2008, as amended on January 12, 2010, TGR Capital was obligated to invest up to $4,000,000 to fund Net Element’s working capital requirements in exchange for up to 200,000,000 shares of Net Element Common Stock and warrants to purchase up to 100,000,000 shares of Net Element Common Stock with an exercise price of $0.05 per share. The shares and warrants were issued quarterly and Net Element recorded an appropriate compensation expense as necessary based on the fair value of the securities on the last day of each fiscal quarter (the date of issuance). At December 31, 2010, TGR Capital had fulfilled its investment obligations under that Subscription Agreement, as amended.

On December 14, 2010, Net Element assumed a $1,667,762 loan to Openfilm from Enerfund when Net Element purchased Openfilm on that date. The loan agreement is dated December 10, 2010 and was scheduled to mature two years from that date. The annual interest rate was 5% payable annually on December 31. The loan was repaid with interest on October 3, 2012 for an aggregate amount of $1,846,173.

On December 31, 2010, Net Element entered into a Subscription Agreement with Enerfund pursuant to which Net Element received an aggregate of $2,000,000 in exchange for the issuance of 200,000,000 shares of Net Element Common Stock and warrants to purchase 100,000,000 shares of Net Element Common Stock at an exercise price of $0.05 per share for a period of five years from the date of issuance. However, Net Element did not have a sufficient number of authorized shares of Net Element Common Stock to fully issue these securities to Enerfund at December 31, 2010. Accordingly, this transaction was accounted for as a purchase by Enerfund as of December 31, 2010 of 112,000,000 shares of Net Element Common Stock and fully vested warrants to purchase 56,000,000 shares of Net Element Common Stock for $0.05 per share in exchange for $1,120,000. The balance of the proceeds of $880,000 was accounted for as an advance until March 7, 2011, when Net Element issued the balance of the shares and warrants.

On February 1, 2011, Net Element purchased all of the equity interests in Motorsport, LLC from Enerfund. As consideration for that acquisition, Net Element paid to Enerfund $130,000 and agreed to take over responsibility for the obligations of Motorsport, LLC under a Stock Purchase Agreement dated December 17, 2010 pursuant to which Motorsport, LLC would acquire all of the equity interests in Motorsport.com, Inc. At the time of Net Element’s acquisition of Motorsport, LLC, pursuant to the December 17, 2010 Stock Purchase Agreement, Motorsport, LLC had already acquired 80% of the outstanding common stock of Motorsport.com, Inc., although Motorsport, LLC remained obligated under the Stock Purchase Agreement to pay an aggregate of $450,000 to the sellers in four quarterly installments beginning on December 1, 2013. Pursuant to an amendment to the Stock Purchase Agreement dated January 10, 2012, that payment obligation was amended to provide that: (i) Motorsport, LLC must pay to the sellers $300,000 in cash in four equal annual installments of $75,000 each beginning on January 10, 2012, with each subsequent installment payable on each annual anniversary thereafter until such $300,000 is paid in full; and (ii) Net Element must issue to the sellers an aggregate of 1,333,333 shares of Net Element Common Stock. The initial $75,000 installment was paid by Net Element and Net Element issued such 1,333,333 shares of Net Element Common Stock to the sellers. The sellers have a security interest in the Internet domain names of Motorsport.com, Inc. as collateral for Net Element’s and Motorsport’s remaining payment obligations.

The December 17, 2010 Stock Purchase Agreement provided Motorsport, LLC an option until December 16, 2018 to purchase the remaining 20% of the outstanding common stock of Motorsport.com, Inc. for a price per share of between $0.1075 and $0.1435 (or an aggregate of between $400,330 and $534,394) depending upon when the option was exercised, payable in either cash or shares of preferred stock of Motorsport.com, Inc. having an equivalent value. If the option was exercised before December 17, 2015, then the purchase price for the remaining 20% interests would have been $0.1075 per share, or an aggregate of $400,330. Pursuant to the January 10, 2012 amendment to the Stock Purchase Agreement, Motorsport, LLC exercised its option to acquire the remaining 20% interests for a purchase price consisting solely of the Net Element’s issuance to the sellers of an aggregate of 3,333,333 shares of Net Element Common Stock.

On January 31, 2011, Motorsport, LLC entered into a loan agreement with Enerfund, LLC in the principal amount of $184,592. The annual interest rate was 5% payable annually on December 31. The loan was scheduled to mature on the third anniversary of each funding under the loan agreement, which fundings occurred from October 2010 through January 2011, with accrued interest due at that time. This loan was repaid in full on February 24, 2011 for an aggregate of $186,808.

On February 1, 2011, Net Element purchased all of the equity interests in Music1, LLC from Enerfund for an aggregate purchase price of $15,000. Net Element was required to invest at least $500,000 in Music1 by December 31, 2012, which requirement was met during the fourth quarter of 2011.

On January 31, 2011, Music1, LLC entered into a loan agreement with Enerfund in the principal amount of $128,890. The annual interest rate was 5% payable annually on December 31. The loan was scheduled to mature on the third anniversary of each funding under the loan agreement, which fundings occurred from October 2010 through January 2011, with accrued and unpaid interest due at that time. This loan was repaid in full on February 24, 2011 for an aggregate of $131,827.

On April 24, 2012, Net Element entered into an amended and restated joint venture agreement with an effective date of December 31, 2011, which amends and restates the joint venture agreement originally entered into with Curtis Wolfe as of March 29, 2011 in connection with the formation of LegalGuru LLC. Net Element owns a 70% interest in LegalGuru LLC and Mr. Wolfe, who is a director and Secretary of the Company and Chief Executive Officer and Chairman of LegalGuru LLC, through Lobos Advisors, LLC (a company of which Mr. Wolfe is the President and managing member), owns a 30% interest in LegalGuru LLC. The amended and restated joint venture agreement required Net Element and Mr. Wolfe to invest up to an aggregate of $900,000 in LegalGuru LLC, with Mr. Wolfe investing up to an aggregate of $100,000 and Net Element investing up to an aggregate of $800,000. Net Element satisfied its funding obligations to LegalGuru LLC during the first quarter of 2012 and Mr. Wolfe satisfied his funding obligations to LegalGuru LLC during the second quarter of 2012.

On April 4, 2011, Net Element entered into a public relations contract with Roar Media, LLC to provide press related services and assist with community outreach and strategic alliances. The term of this agreement was for six months and provided for monthly remuneration of $14,000 and 5,000 shares of Net Element Common Stock with an option by Net Element to renew for successive six-month periods. This agreement was modified in July 2011 to provide for monthly remuneration of $7,000 and 5,000 shares. August and September 2011 were revised to $6,500 per month plus 5,000 shares per month. Beginning in October 2011, Net Element agreed to the same terms, as revised, on a month to month basis.

On April 15, 2011, Net Element entered into a two-year cross advertising transaction with Ferrari North America, Inc. whereby Net Element contracted to pay $50,000 per year in cash and provide $200,000 per year in advertising value on its websites in exchange for a Platinum Sponsorship for the Ferrari Challenge over two race seasons. This arrangement provides Net Element with marketing outreach and exposure to potential investors. The agreement stipulates that the Ferrari Challenge must advertise on any Net Element website within one year from date of execution. Accordingly, Net Element will recognize $200,000 in advertising revenue as Ferrari utilizes the advertisements. Of the total cash expense of the sponsorship ($100,000 over two years), $50,000 was recognized as a charge to operations over the five month period May to September 2011 during the Ferrari Challenge. Additionally, Net Element recorded a $200,000 expense during 2011 for the value of website services provided in exchange for the sponsorship.

On May 16, 2011 Net Element entered into a three-year, unsecured convertible promissory note and loan agreement with Enerfund in the principal amount of $2,000,000. The annual interest rate was 5.0% and principal and interest was due on or before April 27, 2014. Outstanding principal may be converted by Enerfund at any time into shares of Net Element Common Stock at a conversion price of $0.11 per share. Enerfund has funded the full amount of this note and the balance at September 30, 2012 was $2,000,000. On October 2, 2012, Enerfund exercised its conversion right and received 18,181,819 shares of common stock. In addition, the Company paid Enerfund $92,070 of accrued interest under this note on October 3, 2012.

On June 16, 2011, Net Element entered into a Subscription Agreement pursuant to which it sold a 15% ownership interest in its subsidiary Yapik LLC in exchange for a $100,000 investment in Yapik LLC, which was received on June 20, 2011. The related party investor, who is employed by Yapik, has an option, which is exercisable for 36 months, to convert the 15% ownership interest in Yapik LLC into 1,500,000 shares of Net Element Common Stock. This conversion right was exercised on October 2, 2012.

On August 9, 2011, Net Element entered into a Stock Purchase Agreement pursuant to which it was to acquire 100% of the outstanding equity interests in Stratuscore, Inc., a State of Washington corporation (Stratuscore), from its selling shareholder, Denise Muyco (who is the spouse of the Company’s Executive Vice President and Chief Strategy Officer, Richard Lappenbusch), in exchange for the issuance of 10 million shares of Net Element Common Stock. On November 10, 2011, Net Element and the selling shareholder mutually agreed to terminate and unwind that transaction. The 10 million shares of Net Element Common Stock issuable pursuant to that transaction were not delivered to the selling shareholder. Amounts advanced and costs incurred by Net Element through September 30, 2012 ($201,557), are reflected as advances in Net Element’s consolidated balance sheets. As consideration for amounts advanced to Stratuscore, Stratuscore agreed to issue Net Element a convertible promissory note convertible into equity in Stratuscore at the same rate as Ms. Muyco agrees to accept investment from a bona fide third party in the next investment round or lender terms. In the event that there is no further investment in Stratuscore, then the amount invested in Stratuscore by Net Element would be based on Net Element’s original valuation of Stratuscore.

On October 24, 2011, Net Element entered into a three-year, unsecured convertible promissory note and loan agreement with Enerfund in the principal amount of $1.6 million. The annual interest rate under the note was 5% and principal and interest was due on or before October 24, 2014. Outstanding principal under the note may be converted by Enerfund at any time into shares of Net Element Common Stock at a conversion price of $0.11 per share. Upon conversion of the note, Net Element is required to issue to Enerfund a five-year warrant to purchase a number of shares of Net Element Common Stock equal to the number of shares issued upon such conversion with an exercise price of $0.11 per share. This loan was fully funded at December 31, 2012, and the balance at September 30, 2012 was $1,600,000. On October 2, 2012, Enerfund exercised its conversion right and received 14,545,455 shares of common stock plus a five-year warrant to purchase 14,545,455 shares of common stock of the Company with an exercise price of $0.11. Upon issuance, this warrant was immediately exercised in a cashless transaction resulting in the Company issuing Enerfund 8,145,455 shares of common stock. In addition, the Company paid Enerfund $73,656 of accrued interest under this note on October 3, 2012.

On February 2, 2012, Net Element entered into a Subscription Agreement with one of its directors, Felix Vulis, pursuant to which Mr. Vulis purchased from Net Element for $100,000: (i) 666,667 shares of Net Element Common Stock; (ii) a three-year warrant to purchase up to an additional 666,667 shares of Net Element Common Stock with an exercise price of $0.25 per share; (iii) a three-year warrant to purchase up to an additional 666,667 shares of Net Element Common Stock with an exercise price of $0.50 per share; and (iv) a three-year warrant to purchase up to an additional 666,666 shares of Net Element Common Stock with an exercise price of $1.00 per share. These warrants were cancelled on October 2, 2012 pursuant to the Merger Agreement with Cazador.

On February 23, 2012, Net Element entered into a Subscription Agreement pursuant to which it sold 13,333,334 newly issued shares of Net Element Common Stock to Kenges Rakishev for an aggregate purchase price of $2,000,000.10, or $0.15 per share. On February 24, 2012, Net Element entered into a Shareholder Rights Agreement (the “Shareholder Rights Agreement”) with Mark Global Corporation, Kenges Rakishev, Mike Zoi, TGR Capital, LLC, MZ Capital, LLC (Delaware), MZ Capital, LLC (Florida) and Enerfund. The companies TGR Capital, LLC, MZ Capital, LLC (Delaware), MZ Capital, LLC (Florida) and Enerfund are directly or indirectly owned and controlled by Mike Zoi. Pursuant to the Shareholder Rights Agreement, the parties agreed to certain corporate governance matters pertaining to Net Element and Net Element granted registration rights to each of Mark Global Corporation, Kenges Rakishev, TGR Capital, LLC, Mike Zoi and certain of their assignees. The parties terminated the Shareholder Rights Agreement effective as of October 2, 2012.

On April 6, 2012, Net Element entered into a Joint Venture Agreement with Igor Yakovlevich Krutoy. Pursuant to the Joint Venture Agreement, the parties agreed to form a limited liability company under the laws of the Russian Federation named Music1 (“Music1 Russia”), which would be owned 67% by Net Element’s newly formed subsidiary Net Element Russia and 33% by a newly formed company controlled by Mr. Krutoy which is to be named K1 Holdings. Net Element agreed to contribute to Music1 Russia (i) exclusive, non-assignable, royalty-free, perpetual, world-wide rights to use and operate the Internet domain www.music1.com (the “Website”); (ii) non-exclusive, non-assignable, limited, royalty-free, perpetual, world-wide rights to use Net Element’s Launchpad computer system technology for the operation of Internet based contests; (iii) non-exclusive, non-assignable, limited, royalty-free, perpetual, world-wide rights to integrate Net Element’s Music Brain technology into the Website and (iv) not less than $2 million in the form of an interest-free loan to maintain the operations of Music1 Russia. Mr. Krutoy also agreed to (i) provide monetization opportunities, propositions and other business development introductions identified by Music1 Russia as having significant business potential and (ii) act as an advisor and Chairman of the Board of Directors of Music1 Russia for a period of two years. As consideration for such advisory services and services as Chairman of the Board of Directors of Music1 Russia, Net Element agreed to issue Mr. Krutoy 5 million shares of restricted stock of the Company, with half of such shares issued to Mr. Krutoy within one month after he becomes Chairman of Music1 Russia and the other half of such shares issued to Mr. Krutoy within one month after the start of the second calendar year of his term as Chairman of Music1 Russia. In accordance with the Joint Venture Agreement, on June 6, 2012 Mr. Krutoy entered into a Subscription Agreement to purchase 13,333,333 shares of Net Element Common Stock for an aggregate purchase price of $2 million, which amount was funded on June 6, 2012.

On May 14, 2012, Net Element entered into a $500,000 principal amount Promissory Note and Loan Agreement with Enerfund maturing November 1, 2012. The interest rate was 5% per annum. The Company repaid this note with accrued interest of $23,017 on October 3, 2012.

On June 26, 2012, Net Element’s subsidiary OOO Net Element Russia entered into a Loan Agreement with Green Venture Group, LLC, pursuant to which Net Element Russia was loaned 150 million Russian rubles (or approximately US$4,557,885 based on the currency exchange rate as of the close of business on June 26, 2012). The loan was intended to be used by Net Element Russia for working capital and the development of the business of TOT Money. The interest rate under the Loan Agreement was 8.15% per annum and outstanding principal and interest was due on or before November 1, 2012. Green Venture Group, LLC is owned and controlled by Mike Zoi. The funding under this loan agreement was received July 20, 2012. On October 2, 2012, the loan with Green Venture Group, LLC was assigned to the Company and simultaneously repaid in full.

On July 3, 2012, OOO Net Element Russia entered into a Loan Agreement with OOO Sat-Moscow, pursuant to which Net Element Russia was loaned 150 million Russian rubles (or approximately US$4,636,928 based on the currency exchange rate as of the close of business on June 4, 2012). The loan was intended to be used by Net Element Russia for working capital and the development of the business of TOT Money. The interest rate under the Loan Agreement was 8.15% per annum and outstanding principal and interest was due on or before November 1, 2012. Sat-Moscow is indirectly controlled by Kenges Rakishev, Chairman of the Board of Directors of the Company. On October 2, 2012, the loan with Sat-Moscow was assigned to the Company and simultaneously repaid in full.

On August 17, 2012, TOT Money entered into a Credit Agreement with Alfa-Bank. Pursuant to the Credit Agreement, Alfa-Bank agreed to provide a line of credit to TOT Money with the credit line limit set at 300 million Russian rubles (or approximately US$9,348,707 based on the currency exchange rate as of the close of business on August 17, 2012). The interest rate on the initial amount borrowed under the Credit Agreement is 3.55% per annum. Alfa-Bank has the unilateral right to change the interest rate on amounts borrowed under the Credit Agreement from time to time in the event of changes in certain market rates or in Alfa-Bank’s reasonable discretion, provided that the interest rate may not exceed 14% per annum. Interest must be repaid on a monthly basis on the 25th of each month. Amounts borrowed under the Credit Agreement must be repaid within six months of the date borrowed. The duration of the line of credit is set from August 17, 2012 through May 21, 2014. TOT Money’s obligations under the Credit Agreement are secured by a pledge of TOT Money’s deposits in its deposit account with Alfa-Bank and by a guarantee given by AO SAT & Company. AO SAT & Company is an affiliate of Kenges Rakishev. As of September 30, 2012, Net Element had restricted cash pursuant the Credit Agreement of $1,763,386.

On September 28, 2012, TOT Money entered into a factoring agreement with Alfa-Bank. Pursuant to the agreement, TOT Money will assign to Alfa-Bank its accounts receivable as security for financing in an aggregate amount of up to 300 million Russian rubles (or approximately US$9,615,385 based on the currency exchange rate as of the close of business on September 28, 2012) provided by Alfa-Bank to TOT Money. The amount loaned by Alfa-Bank pursuant to the agreement with respect to any particular account receivable is limited to 80% of the amount of the account receivable assigned to Alfa-Bank. Pursuant to the agreement, Alfa-Bank is required to track the status of TOT Money’s accounts receivable, monitor timeliness of payment of such accounts receivable and provide related services. The term of the agreement is from September 28, 2012 until December 5, 2013. Alfa-Bank’s compensation pursuant to the agreement for providing services for the administrative management of accounts receivable ranges from 10 Russian rubles to 100 Russian rubles per account receivable, depending upon whether financing was provided related to the particular account receivable and the form of the documentation related to the particular account receivable. Alfa-Bank’s compensation pursuant to the agreement for providing financing to TOT Money is calculated as a financing rate that ranges from 9.70% to 11.95% of the amounts borrowed, depending upon the amount borrowed and the number of days in the period from the date financing is provided until the date the applicable account receivable is paid; however, Alfa-Bank has the unilateral right to change such financing rates in the event of changes in certain market rates or in Alfa-Bank’s reasonable discretion. TOT Money’s obligations under the Agreement also are secured by a guarantee given by AO SAT & Company. AO SAT & Company is an affiliate of Kenges Rakishev.

As a result of Net Element’s history of recurring losses and its accumulated deficit and shareholders’ deficiency, the audit report of its independent registered public accounting firm as of December 31, 2011 contains a statement expressing substantial doubt as to Net Element’s ability to continue as a going concern. As a result of Net Element’s merger with Cazador on October 2, 2012, Net Element’s business received a cash infusion of approximately $12 million after repaying certain related party debt totaling approximately $13 million. The Company’s management anticipates that the Company’s available cash resources following the merger and its cash flows from operations will be sufficient to meet its presently anticipated working capital and capital expenditure requirements through at least the next 12 months. However, in the event that the Company’s business requires additional funds, such additional funds may be raised through debt financing and/or the issuance of equity securities, there being no assurance that any type of financing on terms satisfactory to the Company will be available or otherwise occur. Debt financing must be repaid regardless of whether the Company generates revenues or cash flows from operations and may be secured by substantially all of its assets. Any equity financing or debt financing that requires the issuance of equity securities or warrants to the lender would cause the percentage ownership by the Company’s current shareholders to be diluted, which dilution may be substantial. Also, any additional equity securities issued may have rights, preferences or privileges senior to those of existing shareholders. If such financings are not available when required or are not available on acceptable terms, the Company may be unable to implement its business plans or take advantage of business opportunities, any of which could have a material adverse effect on its business prospects, financial condition and results of operations.

Off-balance sheet arrangements

At September 30, 2012, Net Element did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update 2011-04, “Fair Value Measurement” (“ASU 2011-04”). The primary focus of ASU 2011-04 is the convergence of accounting requirements for fair value measurements and related financial statement disclosures under United States generally accepted accounting principals, or GAAP, and International Financial Reporting Standards, or IFRS. While ASU 2011-04 does not significantly change existing guidance for measuring fair value, it does require additional disclosures about fair value measurements and changes the wording of certain requirements in the guidance to achieve consistency with IFRS. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011, and is required to be applied prospectively. There was no material impact to the consolidated financial statements upon adoption in 2012.

In June 2011, the FASB issued Accounting Standards Update 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”). This guidance requires companies to present the components of comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under either method, amounts reclassified from Other Comprehensive Income, or OCI, to net income for each reporting period must be displayed as components of both net income and OCI on the face of the financial statements. The guidance does not change the items that are reported in OCI. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011. Other than presentational changes, there was not a significant impact to the consolidated financial statements upon adoption in 2012.

In September 2011, the FASB issued amendments to its accounting guidance on testing goodwill for impairment. The amendments allow entities to use a qualitative approach to test goodwill for impairment. This permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. This guidance is effective for annual and interim goodwill impairment test performed for fiscal years beginning after December 15, 2011 and early adoption is permitted. Net Element did not early adopt this guidance and there was not a material impact to the consolidated financial statements upon adoption in 2012.

Properties

The sections of the Final Prospectus entitled “Information about Net Element- Properties” and “Information about Cazador - Property, Plant and Equipment” are incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of the Closing by (i) each director and each executive officer of the Company; (ii) all directors and executive officers of the Company as a group; and (iii) each person (including any “group” as that term is used in Section l3(d)(3) of the Exchange Act) who is known by the Company to beneficially own more than five percent of the Company’s Common Stock. Shares of the Company’s Common Stock subject to options or warrants exercisable within 60 days from October 2, 2012 are deemed to be outstanding and beneficially owned for purposes of computing the percentage ownership of the holder of such options or warrants but are not treated as outstanding for purposes of computing the percentage ownership of other persons. The following table does not reflect record or beneficial ownership of the Company’s warrants or underlying shares of the Company’s Common Stock, as these warrants are not exercisable within 60 days of the Closing.

Unless otherwise indicated, the Company believes that all persons named in the table below have sole voting and investment power with respect to all securities that they beneficially own (within the meaning of Rule 13d-3 under the Exchange Act).

* Represents less than 0.1%

(1) Directors and executive officers.

(2) Each of Kenges Rakishev and Mark Global Corporation may be deemed to share the power to vote or direct the vote, and to dispose or direct the disposition of, the 7,320,751 shares of the Company’s Common Stock held by Mark Global Corporation.

(3) Cazador Sub Holdings, Ltd. is wholly owned by Arco Group LLC. The voting and dispositive power of Arco Group LLC is shared by Francesco Piovanetti (majority, controlling interest) and Juan Carlos Bou (minority, non-controlling interest).

(4) Each of Francesco Piovanetti and Cazador Sub Holdings, Ltd. may be deemed to share the power to vote or direct the vote, and to dispose or direct the disposition of, the 1,150,000 shares of the Company’s Common Stock held by Cazador Sub Holdings, Ltd.

Directors and Executive Officers

The board of directors of the Company consists of seven members, each of whom will hold office until the next annual meeting or until his successor is duly elected and qualified. Mike Zoi’s niece is married to Dmitry Kozko. Except for the relationship between Messrs. Zoi and Kozko, there are no family relationships among any of the directors or executive officers.

The executive officers and directors of the Company immediately after the consummation of the Merger are as follows:

The biographical information of each of the directors and executive officers is as set forth in the section of the Final Prospectus entitled “Post-Merger NEI Executive Officers and Directors” and is incorporated herein by reference.

Executive Compensation

The information in the sections of the Final Prospectus entitled “Post-Merger NEI Executive Officers and Directors —Compensation of the NEI Board and Executive Officers,” “Information about Cazador – Executive Compensation,” “Information about Net Element – Executive Compensation,” “Information about Net Element – Director Compensation” and “Post-Merger NEI Executive Officers and Directors – Committees of NEI Board – Compensation Committee Interlocks and Insider Participation,” are incorporated herein by reference.

Certain Relationships and Related Transactions, and Director Independence

The information in the section of the Final Prospectus entitled “Post-Merger NEI Executive Officers and Directors - Director Independence” is incorporated herein by reference.

Certain of Net Element’s and Cazador’s executive officers and directors had financial interests in the Merger that are different from, or in addition to, the interests of Cazador’s shareholders and Net Element’s shareholders, other than the insider shareholders. In the case of Net Element, immediately prior to the effectiveness of the Merger, the principal amounts of all outstanding convertible debt of Net Element owned by Enerfund, LLC, a Florida limited liability company (“Enerfund, LLC”) (which is owned and controlled by Mike Zoi and totals $3.6 million) was converted into 32,727,274 shares of Net Element Common Stock, and subsequently converted into 818,182 shares of the Company’s Common Stock in the Merger and, immediately following the Closing, the Company paid to Enerfund an amount, in cash, representing payment in full of all non-convertible notes and payables of Net Element owed to Mike Zoi or any of his affiliates which were then outstanding (which totaled approximately $7.9 million (including accrued interest). In the case of Cazador, Mike Zoi, through Enerfund, previously paid, on behalf of Cazador, $150,000 of Cazador’s legal fees in connection with the Merger Agreement.

Following consummation of the Merger, Francesco Piovanetti and David P. Kelley II own 3,609,631 and 14,000 warrants, respectively, to purchase an aggregate of 3,623,631 shares of the Company’s Common Stock (the “Director’s Warrants”). The Director’s Warrants are identical to the other outstanding warrants to purchase the Company’s Common Stock, except that the Director’s Warrants (i) are non-redeemable, so long as they are held by either Messrs. Piovanetti or Kelley or their permitted transferees; (ii) are exercisable on a cashless basis at the election of the holder, so long as they are held by either Messrs. Piovanetti or Kelley, or their permitted transferees, rather than at the Company’s sole discretion; and (iii) are not transferable or saleable by the either Messrs. Piovanetti or Kelley (except to permitted transferees) until six months after the Closing. The Director’s Warrants are not exercisable and are held in an escrow account maintained by Continental Stock Transfer & Trust Company, acting as escrow agent, while they are subject to the foregoing transfer restrictions.

The information in the sections of the Final Prospectus entitled “The Business Combination — Interests of Officers and Directors in the Business Combination,” “Information About Net Element – Certain Relationships, Related Transactions and Director Independence,” and “Information About Cazador - Certain Relationships, Related Transactions and Director Independence” is incorporated herein by reference.

On September 28, 2012, Net Element’s subsidiary OOO TOT Money entered into a factoring agreement with Alfa-Bank. Pursuant to the agreement, TOT Money will assign to Alfa-Bank its accounts receivable as security for financing in an aggregate amount of up to 300 million Russian rubles (or approximately US$9,615,385 based on the currency exchange rate as of the close of business on September 28, 2012) provided by Alfa-Bank to TOT Money. The amount loaned by Alfa-Bank pursuant to the agreement with respect to any particular account receivable is limited to 80% of the amount of the account receivable assigned to Alfa-Bank. Pursuant to the agreement, Alfa-Bank is required to track the status of TOT Money’s accounts receivable, monitor timeliness of payment of such accounts receivable and provide related services. The term of the agreement is from September 28, 2012 until December 5, 2013. Alfa-Bank’s compensation pursuant to the agreement for providing services for the administrative management of accounts receivable ranges from 10 Russian rubles to 100 Russian rubles per account receivable, depending upon whether financing was provided related to the particular account receivable and the form of the documentation related to the particular account receivable. Alfa-Bank’s compensation pursuant to the agreement for providing financing to TOT Money is calculated as a financing rate that ranges from 9.70% to 11.95% of the amounts borrowed, depending upon the amount borrowed and the number of days in the period from the date financing is provided until the date the applicable account receivable is paid; however, Alfa-Bank has the unilateral right to change such financing rates in the event of changes in certain market rates or in Alfa-Bank’s reasonable discretion. TOT Money’s obligations under the Agreement also are secured by a guarantee given by AO SAT & Company. AO SAT & Company is an affiliate of Kenges Rakishev, Chairman of the Board of Directors of the Company.

Legal Proceedings

The information in the sections of the Final Prospectus entitled “Information About Cazador—Legal Proceedings” and “Information About Net Element—Legal Proceedings” is incorporated herein by reference.

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

The information in the section of the Final Prospectus entitled “Market Price and Dividend Information” is incorporated herein by reference. On October 3, 2012, the Company’s Common Stock began trading on The NASDAQ Capital Market under the symbol “NETE.”

As of the Closing, there were approximately 284 holders of record of the Company’s Common Stock.

Recent Sales of Unregistered Securities

None.

Description of Registrant’s Securities to be Registered

The information in the sections of the Final Prospectus entitled “Description of NEI Securities” and “Securities Act Restrictions on Resale of NEI Common Stock” is incorporated herein by reference.

Indemnification of Directors and Officers

The Net Element International, Inc. Amended and Rested Certificate of Incorporation (the “Company Charter”) provides that each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the Company or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the Company to the fullest extent permitted by the Delaware General Corporation (the “DGCL”). The right to indemnification conferred shall also include the right to be paid by the Company the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by the DGCL.

Section 145 of the DGCL concerning indemnification of officers, directors, employees and agents is set forth below.

Section 145. Indemnification of officers, directors, employees and agents; insurance.

(a) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.

(b) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

(c) To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer of the corporation at the time of such determination:

(1) By a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum; or

(2) By a committee of such directors designated by majority vote of such directors, even though less than a quorum; or

(3) If there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion; or

(4) By the stockholders.

(e) Expenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.

(f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to the certificate of incorporation or the bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.

(g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.

(h) For purposes of this section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

(i) For purposes of this section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section.

(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees).

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the Company’s securities, we will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Paragraph I of Article VIII of the Company Charter provides:

A director of the Company shall not be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.

Financial Statements and Supplementary Data

The information set forth in Item 9.01 hereof is incorporated herein by reference.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Financial Statements

The following unaudited financial statements of Net Element included herewith beginning on page F-1 of this Amendment are incorporated herein by reference:

Net Element, Inc. Unaudited Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011

Net Element, Inc. Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011

Net Element, Inc. Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011