NOTE 14. WARRANTS, STOCK OPTIONS AND STOCK BASED COMPENSATION

Warrants

On January 22, 2013, the Company filed a post-effective amendment on Form S-3 to its registration statement on Form S-4 (File No. 333-182076), as subsequently amended on February 12, 2013 and April 26, 2013, in order to register the issuance and sale by the Company of up to 4,600,000 shares of common stock upon the exercise of warrants that were originally issued by the Company (then known as Cazador Acquisition Corporation Ltd.) in connection with its initial public offering, which warrants became exercisable upon the consummation of the transactions contemplated by the Merger Agreement between the Company and Net Element dated as of June 12, 2012. Each warrant entitles the holder thereof to purchase one share of common stock upon payment of the exercise price of $7.50 per share. As of May 14, 2013, that post-effective amendment has not been declared effective by the Securities and Exchange Commission.

On February 12, 2013, the Company filed a registration statement on Form S-3 (File No. 333-186621), as subsequently amended on April 26, 2013, in order to register (i) the resale from time to time by the selling security holders identified therein of up to 4,340,000 warrants that were originally issued by the Company (then known as Cazador Acquisition Corporation Ltd.) to Cazador Sub Holdings Ltd. in connection with a private placement prior to the Company's initial public offering and that became exercisable beginning on April 2, 2013, and (ii) the issuance and sale by the Company of up to 4,340,000 shares of common stock upon exercise of such warrants. Each warrant entitles the holder thereof to purchase one share of common stock upon payment of the exercise price of $7.50 per share. As of May 14, 2013, that registration statement has not been declared effective by the Securities and Exchange Commission. Of the 4,340,000 warrants issued, Francesco Piovanetti (the former Chief Executive Officer and a former director of the Company) and David P. Kelley II (a current director of the Company) own 3,609,631 and 14,000 warrants, respectively, to purchase an aggregate of 3,623,631 shares of the Company's common stock.

At March 31, 2013, the Company had 8,938,900 warrants outstanding (as a result of 1,100 warrants exercised during 2012) with a weighted average exercise price of $7.50 and a weighted average contract term of 4.51 years.

The table below summarizes the Company's outstanding warrants at March 31, 2012. On October 2, 2012, the Enerfund and TGR Capital warrants were exercised in connection with the Company's merger with Net Element (see Note 4). Felix Vulis' warrants were cancelled on October 2, 2012 pursuant to the Company's merger agreement with Net Element.

	# Warrants Granted		Wtd. Avge Exercise Price		Wtd. Avge Contract Term
Enerfund, LLC and TGR Capital, LLC		5,000,000	$	2.00	3.31 years
Felix Vulis		16,667	$	10.00	2.92 years
Felix Vulis		16,667	$	20.00	2.92 years
Felix Vulis		16,667	$	40.00	2.92 years

Stock Options

At March 31, 2012, Net Element had two incentive plans, as described below:

2004 Stock Option Plan

2011 Equity Compensation Plan

At March 31, 2013, the Company had no incentive plans.

On February 10, 2012, the Board of Directors of Net Element approved the issuance of five-year stock options to purchase 40,000 shares of common stock with an exercise price of $6.40 per share to certain employees. These options were immediately vested upon issuance. Accordingly, the Company recorded a compensation charge of $256,000, using a Black-Scholes model for the issuance of fully vested options.

On March 31, 2012, Net Element issued five-year stock options to purchase shares of common stock of Net Element to employees taking salary reductions for the first quarter of 2012. These options were immediately vested upon issuance. Accordingly, the Company recorded a compensation charge for $95,899, using a Black-Scholes model for the issuance of 550,340 fully vested options.

At March 31, 2012, Net Element had options to purchase 228,106 shares of common stock outstanding under its stock option plans, of which options to purchase 181,422 shares of common stock are vested, with a weighted average exercise price of $6.00 per share and with a remaining weighted average contractual term of 5.82 years. We also had warrants to purchase 5,000,000 shares of common stock outstanding at March 31, 2012 with a strike price of $2.00 per share and a remaining contractual term of 3.31 years and warrants to purchase an addition 1,181,818 shares upon conversion of notes pursuant to Subscription Agreements with TGR Energy and Enerfund, LLC.

At March 31, 2012, Net Element had outstanding options to purchase 130,929 shares of common stock under its 2011 Equity Incentive Plan, of which options to purchase 130,929 shares of common stock are vested, with a weighted average exercise price of $6.40 per share and with a remaining weighted average contractual term of 4.70 years.

Additionally, at March 31, 2012, Net Element had outstanding options to purchase 97,178 shares of common stock under its 2004 Stock Option Plan, of which options to purchase 50,494 shares of common stock are vested, with a weighted average exercise price of $5.60 per share and with a remaining weighted average contractual term of 7.33 years.

The Company has no outstanding stock options as of March 31, 2013. On October 2, 2012, the vesting of all Net Element options accelerated due to the merger (see Note 4) and all options were converted to common stock.

Stock Based Compensation

On January 26, 2012, Net Element entered into an Advisory Board Agreement with Michael Waltrip for a term of two years. Mr. Waltrip will help develop the Company's motorsport business by participating in Motorsport Advisory Board meetings and attending industry functions to help promote Motorsport.com. For his service, Mr. Waltrip was granted 11,500 shares of common stock and the Company recorded a charge of $7,667 in non-cash compensation expense under the agreement for the quarter ended March 31, 2012. The total charge for this grant ($92,000) was to be amortized over three years based on the fair value of the stock provided on the date of grant but the amortization was accelerated and the full charge was taken in October 2012 in connection with the Company's merger with Net Element.

Motorsport.com appointed Pietro Da Cruz, a junior Nascar race car driver and grandson of the Chairman of Motorsport.com, to its Advisory Board. On March 26, 2012, Net Element's Board of Directors approved the issuance of stock options to purchase 12,500 shares of common stock as part of an Advisory Agreement. Additionally, Motorsport.com entered into a Consulting Agreement with Dan Goodstadt, an advisor to Emerson Fittipaldi, Motorsport.com's Chairman, pursuant to which the Board of Directors of Net Element approved the issuance of stock options to purchase 25,000 shares of common stock. The Company's compensation charge for these grants was $375,000 for the quarter ended March 31, 2012.