1b436d3d1b4f48d

INTRODUCTORY COMMENT

References in this Quarterly Report on Form 10-Q, to “Calpian,” “Company,” “we,” “us,” and “our” refer to Calpian, Inc. and its subsidiary, unless the context requires otherwise.

FORWARD-LOOKING STATEMENTS

When used in this Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding events, conditions and financial trends which may affect the Company’s future plans of operations, business strategy, operating results, and financial position. Such statements are not guarantees of future performance and are subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements for various reasons, including those identified under Risk Factors included in our 2012 Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required under federal securities laws and the rules and regulations of the United States Securities and Exchange Commission, the Company does not undertake, and specifically declines, any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions, or otherwise.

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PART I

ITEM 1 - FINANCIAL STATEMENTS


CALPIAN, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED BALANCE SHEETS

	September 30,	December 31,
	2013	2012
		Adjusted -
ASSETS		Note 1

Current Assets
Cash and equivalents	$ 862,397	$ 314,309
Accounts receivable	56,667	35,461
Restricted cash	302,994	270,000
Other current assets	1,250,004	70,298
Total current assets	2,472,062	690,068

Fixed Assets	409,440	-

Other Assets
Residual portfolios	12,424,827	5,253,592
Equity investment	8,942,260	6,854,004
Deferred financing costs	973,252	244,902
Intangible assets, at cost	39,115	10,000
Total other assets	22,379,454	12,362,498
Total assets	$ 25,260,956	$ 13,052,566

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable	$ 334,441	$ 51,225
Accrued expenses	855,773	60,565
Interest payable	198,120	39,617
Notes payable	60,688	7,570
Deferred compensation of officers, directors, and executives	100,000	125,000
Accrued expenses payable to officers, directors, and affiliates	636,613	395,001
Total current liabilities	2,185,635	678,978

Other Liabilities
Senior notes payable	13,170,000	3,000,000
Subordinated notes payable	4,800,000	3,300,000
Convertible subordinated notes	500,000	850,000
Discount on subordinated notes	(261,099)	(368,262)
Total other liabilities	18,208,901	6,781,738

Commitments And Contingencies

Shareholders' Equity
Preferred stock, par value $0.001, 1,000,000 shares authorized, none issued	-	-
Common stock, par value $0.001, 200,000,000 shares authorized,	-	-
28,213,835 and 23,898,306 shares issued and outstanding
at September 30, 2013 and December 31, 2012, respectively	28,214	23,898
Additional paid-in capital	20,718,999	13,703,153
Accumulated deficit	(13,192,436)	(7,980,212)
Other comprehensive loss	(2,688,357)	(154,989)
Total shareholders' equity	4,866,420	5,591,850
Total liabilities and shareholders' equity	$ 25,260,956	$ 13,052,566

The accompanying notes are an integral part of these financial statements.

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CALPIAN, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
		Adjusted -		Adjusted -
Revenues		Note 1		Note 1
Residual portfolios	$ 4,967,497	$ 859,678	$ 11,714,601	$ 2,622,827
Processing fees	1,061,023	-	2,042,499	-
Other	232,387	-	905,878	-
	6,260,907	859,678	14,662,978	2,622,827
Cost of revenues
Residual portfolio amortization	673,668	268,229	1,657,160	850,312
Interchange fees	2,707,118	-	5,717,298	-
Processing and servicing	1,520,755	22,500	3,142,948	66,450
Other	55,793	3,827	118,008	16,338
Total cost of revenues	4,957,334	294,556	10,635,414	933,100
Gross profit	1,303,573	565,122	4,027,564	1,689,727

General and administrative expenses	2,075,533	564,784	5,536,421	1,846,160
Operating (loss) income	(771,960)	338	(1,508,857)	(156,433)

Other expenses
Interest	596,317	208,100	1,516,313	588,909
Amortization of discount on subordinated notes	114,831	81,564	269,663	423,672
Amortization of deferred financing costs	54,021	288,298	131,650	855,869
Total other expenses	765,169	577,962	1,917,626	1,868,450
Loss before items below	(1,537,129)	(577,624)	(3,426,483)	(2,024,883)
Income taxes (over provision)	-	-	-	(16,139)
Equity investment loss	722,310	164,957	1,785,741	319,137
Net loss	(2,259,439)	(742,581)	(5,212,224)	(2,327,881)
Other comprehensive loss:
Currency translation adjustments	(913,848)	651,328	(2,533,368)	331,355
Total comprehensive loss	$ (3,173,287)	$ (91,253)	$ (7,745,592)	$ (1,996,526)

Net loss per share, basic and diluted	$ (0.08)	$ (0.03)	$ (0.20)	$ (0.11)
Weighted average number of shares
outstanding, basic and diluted	27,807,741	22,817,111	25,818,568	20,782,475

The accompanying notes are an integral part of these financial statements.

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CALPIAN, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	September 30,
	2013	2012
OPERATING ACTIVITIES
Net loss	$ (5,212,224)	$ (2,327,881)

Adjustments to reconcile net loss to cash provided by operating activities:
Equity investment loss	1,785,741	319,137
Deferred financing cost amortization	131,650	855,869
Residual portfolio amortization	1,657,160	850,312
Subordinated note discount amortization	269,663	423,672
Deferred consulting fee amortization	246,149	13,125
Depreciation	64,633	-
Management equity awards	121,650	10,510
Equity awards issued for services	3,080	-
Changes in operating assets and liabilities:
Accounts receivable	(21,206)	(26,263)
Restricted cash	273,973	397,000
Other assets	(374,715)	16,950
Deferred compensation of officers, directors, and executives	(25,000)	(235,000)
Accrued expenses payable to officers, directors, and affiliates	241,613	122,692
Accounts payable	282,783	52,145
Accrued expenses	738,240	(18,001)
Interest payable	158,503	43,500
Net cash provided by operating activities	341,693	497,767

INVESTING ACTIVITIES
Business acquisition, net of cash acquired	(9,500,000)	-
Equity investment	(4,549,000)	(3,210,000)
Residual portfolios	-	(492,000)
Purchases of fixed assets	(139,743)	-
Proceeds from sale of fixed assets	21,306	-
Net cash used in investing activities	(14,167,437)	(3,702,000)

FINANCING ACTIVITIES
Senior note proceeds	10,170,000	-
Subordinated notes	1,950,000	750,000
Common stock and warrants	2,860,001	2,580,000
Payments on note payable	(71,169)	(22,157)
Deferred financing costs	(535,000)	(38,966)
Net cash provided by financing activities	14,373,832	3,268,877

Increase in cash and equivalents	548,088	64,644
Cash and equivalents, beginning of year	314,309	367,661
Cash and equivalents, end of period	$ 862,397	$ 432,305

SUPPLEMENTAL INFORMATION
Interest paid	$ 1,357,810	$ 545,409
Income taxes paid	-	-
Noncash transactions:
Common stock for equity investment	1,846,155	3,646,155
Common stock for equity awards and services	832,775	105,000
Common stock for residual portfolios	-	70,997
Financing transaction warrants	540,541	-
Subordinated debt conversion to common stock	850,700	-
Notes payable for insurance premiums	124,287	33,383

The accompanying notes are an integral part of these financial statements.

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CALPIAN, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

				Additional
	Common Stock			Paid-In	Accumulated
	Shares		Amount	Capital	Deficit	Other	Total

Balance, December 31, 2012
Previously reported	23,898,306		$ 23,898	$ 13,703,153	$ (8,024,006)	$ (9,272)	$ 5,693,773
Equity investment retrospective
adjustment - Note 1	-		-	-	43,794	(145,717)	(101,923)
As adjusted	23,898,306		23,898	13,703,153	(7,980,212)	(154,989)	5,591,850

Equity investment	1,230,770		1,231	1,844,924	-	-	1,846,155
Acquisition of residual portfolios	10,941		11	14,869	-	-	14,880
Common stock issued	1,696,664		1,697	1,361,754	-	-	1,363,451
Subordinated debt conversion	567,134		567	850,133	-	-	850,700
Financing transaction warrants	-	-	-	2,091,116	-	-	2,091,116
Warrants exercised	391,920		392	(392)	-	-	-
Equity awards	18,100		18	133,842	-	-	133,860
Common stock issued for services	400,000		400	719,600	-	-	720,000
Net loss	-	-	-	-	(5,212,224)	-	(5,212,224)
Currency translation adjustments	-	-	-	-	-	(2,533,368)	(2,533,368)

Balance, September 30, 2013	28,213,835		$ 28,214	$ 20,718,999	$ (13,192,436)	$ (2,688,357)	$ 4,866,420

The accompanying notes are an integral part of these financial statements.

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CALPIAN, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1 - OVERVIEW

Basis Of Presentation

In these financial statements, references to “Calpian,” “Company,” “we,” “us,” and “our” refer to Calpian, Inc. (“CLPI”) and its subsidiary, Calpian Commerce, Inc. (“CCI”), unless the context requires otherwise.

The unaudited consolidated financial statements and related condensed notes have been prepared pursuant to Article 8-03 of the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments and information (consisting only of normal recurring accruals and retrospective adjustments as the result of obtaining detail information about the fair values of the assets and liabilities of our equity investee) considered necessary for a fair presentation have been included.

The preparation of our financial statements in accordance with U.S. generally accepted accounting principles requires us, on an ongoing basis, to make significant estimates and judgments that affect the reported values of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions we believe are reasonable under the circumstances, the results of which form the basis for our conclusions. Actual results may differ from these estimates under different assumptions or conditions. Such differences could have a material impact on our future financial position, results of operations, and cash flows.

The year-end balance sheet was derived from the Company’s audited financial statements. The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s audited financial statements included in its 2012 Annual Report on Form 10-K. The results of operations for the periods reflected herein are not necessarily indicative of the results to be expected for the full year.

Our financial statements include the accounts of the Company and its wholly-owned subsidiary, which acquired a business on March 15, 2013, (Note 3), and the operations of Transaction World Magazine, Inc. (“TWM”), a non-owned but wholly-controlled entity. TWM is a wholly-owned subsidiary of ART Holdings, Inc. (“ART”) whose two founders, controlling shareholders, directors, and executive officers are directors, executive officers, and significant shareholders of Calpian. Intercompany accounts and transactions have been eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the current presentation.

As a result of completing the fair value appraisal of the assets and liabilities of our equity investee, Digital Payments Processing Limited (“DPPL”), in March 2013, we have retrospectively adjusted our financial statements for each of the three quarters ended December 31, 2012, to account for the differences between appraised fair values and our preliminary estimates. The retrospective adjustments reduced our 2012 net loss by $43,794 with increases in our 2012 second and third quarter net losses of $4,965 and $13,745, respectively. Comprehensive income for 2012 has been retrospectively decreased by $145,717 with the second quarter being decreased by $300,728 and the third quarter being increased by $598,916. The adjustments decreased the carrying amount of our equity investment, accumulated deficit, and 2012 net loss with no effect on our net loss per share or cash flows.

In the third quarter of 2012, our DPPL ownership percentage increased from the initial 15% to 37% and retrospective adjustments increasing the second quarter net loss by $149,215 and comprehensive loss by $19,245 were made as a result of changing from the cost method to the equity method of accounting for the investment.

Foreign Currency Translation

The functional currency of our equity investee is the Indian rupee. Its assets and liabilities are translated into U.S. dollars at the exchange rates in effect at each balance sheet date, and resulting translation gains or losses are accumulated in other comprehensive loss as a separate component of shareholders’ equity. Revenue and expenses are translated at monthly average exchange rates.

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2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

There have been no new accounting pronouncements issued that have had, or are expected to have, a material impact on our results of operations or financial condition.

Fair Values

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. We believe the carrying values of cash and equivalents, accounts receivable, other current assets, accounts payable, accrued expenses, and interest payable approximate their fair values. We believe the carrying value of our senior notes, subordinated notes, and note payable approximate the estimated fair value for debt with similar terms, interest rates, and remaining maturities currently available to companies with similar credit ratings.

We do not engage in hedging activities, and the Company has no derivative instruments in place. We do not have any nonfinancial assets measured on a recurring basis.

Cash And Equivalents

We consider cash, deposits, and short-term investments with original maturities of three months or less as cash and equivalents. Amounts designated by management for specific purposes, including withholdings from merchants to collateralize their contingent liabilities and processing reserves, and by contractual terms of debt agreements are considered restricted cash. Our deposits at financial institutions at times exceed amounts covered by U.S. Federal Deposit Insurance Corporation insurance.

Residual Portfolios

Residual portfolios represent investments in recurring monthly residual income streams derived from credit card processing fees paid by merchants in the United States. We acquire portfolios as long-term investments and expect to hold them to the point in time when a portfolio’s cash flows become nominal. Although history within the industry indicates the cash flows from such income streams are reasonably predictable, the future cash flows are predicated on consumers continued use of credit and debit cards to purchase goods and services from merchants having our service to accept electronic payments. Each residual portfolio is amortized based on the future cash flows expected to be derived. Quarterly, we reevaluate our cash flow estimates and prospectively adjust future amortization.

Equity Investment

We use the equity method of accounting for investments in entities in which the Company can exercise significant influence but does not own a majority equity interest or otherwise control. To the extent the amount invested exceeds the Company’s proportionate share of the investee’s net assets, the excess is allocated to its net assets based on their fair values and goodwill using the acquisition method of accounting. The carrying value of our investment in the net assets, but not any related goodwill, is tested for other than temporary impairment when events or changes in circumstances indicate its carrying amount may not be recoverable.

Revenue Recognition

The Company recognizes residual portfolio revenue based on actual cash receipts. In the first nine months of 2013, approximately 74% of consolidated revenues were attributable to merchant customer transactions processed by three third-party vendors.

Income Taxes

Deferred income taxes are recognized for the future income tax effects of differences in the carrying amounts of assets and liabilities for financial reporting and income tax return purposes, including undistributed foreign earnings and losses, using enacted tax laws and rates. A valuation allowance is recognized if it is more likely than not that some or all of a deferred tax asset may not be realized. Tax liabilities, together with interest and applicable penalties included in the income tax provision, are recognized for the benefits, if any, of uncertain tax positions in the financial statements which, more likely than not, may not be realized.

Equity Transaction Fair Values

The estimated fair value of our common stock issued in share-based payments is measured by the more relevant of: (i) the prices received in private placement sales of our stock or; (ii) its publically-quoted market price. We estimate the fair value of warrants, other than those included in common stock unit purchases, and stock options when issued or vested using the Black-Scholes option-pricing model which requires the input of highly subjective assumptions. Recognition in shareholders’ equity and expense of the fair value of stock options awarded to employees is on the straight-line basis over the requisite service period and, for grants to nonemployees, when the options vest. The fair value of exercisable warrants

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issued in connection with financing transactions or for services are deferred and expensed over the term of the debt or as services are performed. Subsequent changes in fair value are not recognized.

3 - BUSINESS ACQUISITION

On March 15, 2013, the Company acquired certain assets and liabilities of Pipeline Data, Inc. and its subsidiaries, all of which were contributed to and are operated by CCI, in exchange for a cash payment of $9.75 million. The acquisition was financed by expanding the Company's senior credit facility from $5.0 million to $14.5 million and borrowing $10.2 million.

The acquisition is expected to build value for our shareholders with a goal of achieving a higher EBITDA multiple in the U.S. equity markets by participating in this segment of the payments industry. As a result of the acquisition, CCI is providing the general merchant community access to an integrated suite of third-party merchant payment processing services and its own propriety related software and hardware enabling products delivering credit and debit card-based payments processing solutions to small- and mid-sized merchants operating in physical “brick and mortar” business environments, over the internet, and in settings requiring wired as well as wireless mobile payment solutions. The acquisition also provides us with a sales organization generating individual merchant processing contracts in exchange for future residual payments.

The following presents the preliminary estimated fair values of the net assets acquired pending obtaining an appraisal of certain assets based on assumptions we believe unrelated market participants would use based on observable and unobservable marketplace factors:


Cash and restricted cash	$ 556,967
Current assets	37,287
Fixed assets	355,636
Residual portfolios	8,828,395
Intangibles	29,115
Liabilities	(57,400)
Net assets	$ 9,750,000

The residual portfolios are being amortized over 10 years. The indefinite-lived intangible assets are not subject to amortization.

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The revenues and earnings of the acquired net assets included in our financial statements and the pro forma amounts as if their acquisition had been included as of January 1, 2012, are as follows:


		Earnings
	Revenue	(Loss)
Included in financial statements from
July 1, 2013 through September 30, 2013	$ 5,534,962	$ (639,480)
March 15, 2013 through September 30, 2013	12,301,268	(578,369)

Pro forma for the three months ended:
September 30, 2013 - Loss per share $0.08	6,261,000	(2,259,000)
September 30, 2012 - Loss per share $0.01	7,822,000	(257,000)
Pro forma for the nine months ended:
September 30, 2013 - Loss per share $0.20	19,565,000	(5,133,000)
September 30, 2012 - Loss per share $0.03	24,640,000	(658,000)

The pro forma losses include adjustments to reflect: (i) exclusion of the seller’s reorganization costs and operating expenses not related to CCI’s future business; (ii) depreciation and amortization assuming the fair value adjustments to fixed assets and the residual portfolios had been applied on January 1, 2012; (iii) the interest and deferred financing cost amortization related to the senior debt borrowing for the acquisition in both years; (iv) the lender expenses and acquisition related legal fees in 2012 rather than in 2013 general and administrative expenses; and, (v) the consequential tax effects.

4 - EQUITY INVESTMENT

In March 2012, the Company acquired an equity interest in Digital Payments Processing Limited (“DPPL”), a newly-organized company, and DPPL entered into a services agreement with My Mobile Payments Limited (“MMPL”). Both companies are organized under the laws of India and headquartered in Mumbai, India. MMPL is controlled by Indian residents and shareholders of DPPL other than Calpian.

The investment agreement provides for acquiring an equity interest of approximately 74% (subject to temporary dilution as described below) of DPPL for $9.7 million to be paid in tranches through January 2014 together with the issuance of a cumulative 6.1 million shares of our common stock.

DPPL, working through an exclusive arrangement with MMPL, offers the Money-on-Mobile service in India. This bifurcated structure initially arose because MMPL, due to its custody and management of consumer funds, is licensed and regulated by the Reserve Bank of India ("RBI"), and it was unclear as to whether Calpian would be permitted under the then-existing regulations to invest directly in MMPL. The Company continues to have the contractual right to acquire a 74% equity ownership of both DPPL and MMPL (either separately or as a merged entity) subject to approval by the Indian authorities. Without approval of India’s regulatory bodies, the Company may be unable to ultimately acquire a majority interest in MMPL or merge the two companies. MMPL has made a formal application to India’s Foreign Investment Promotions Board ("FIPB") to approve a direct investment by Calpian in MMPL. In the meantime, and in an effort to limit the Company’s investment in DPPL to a level certain not to require an accounting consolidation with Calpian of both DPPL and MMPL, the Company has accepted a temporary dilution of its ownership stake in DPPL. On July 24, 2013, the Board of Directors of DPPL ratified a July 1 grant of an executive bonus to Shashank Joshi, DPPL's Managing Director and a member of Calpian’s Board of Directors, in the amount of approximately $34,000 with the understanding that he would use the funds to purchase additional shares of DPPL sufficient to dilute our ownership below 50% in order to eliminate the potential consolidation of DPPL and MMPL in Calpian's future financial statements. As a consequence of this dilution, a consolidation of DPPL and MMPL in Calpian's financial statements is neither required nor presented herein. Even after taking this reduction in our equity ownership while we wait for a formal response from the FIPB, we can offer no assurances that we will obtain the necessary approval of the FIPB or that DPPL or MMPL will not have to restructure their operations in order to alleviate any concerns which may be raised by the FIPB, and any restructuring of operations may not be in the best interests of the Company or its shareholders.

As of September 30, 2013, we owned 45% of DPPL and had invested $8.7 million, issued 3.7 million shares of our stock valued at $5.5 million, recognized cumulative equity investment and currency translation losses of $5.2 million for a net carrying value of our 65% economic interest in DPPL as summarized below. The difference between the 45% and 65% interests represents advances made by the Company that have not yet been certificated by DPPL. The presentation of DPPL and MMPL financial information in accordance with U.S. generally accepted accounting principles does not necessarily reflect the legal ownership of the two entities.

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Proportionate share of shareholders' equity					$ 17,865,599
Excess of proportionate share of shareholders'
equity over investment					(8,923,339)
Carrying value of investment					$ 8,942,260

The combined balance sheets of DPPL and MMPL and their results of operations based on the March 2012 fair values of their assets and liabilities using assumptions about observable and unobservable marketplace factors we believe unrelated market participants would use are summarized as follows:


					September 30,
					2013
Current assets					$ 3,146,720
Long-term assets					2,244,857
Goodwill					26,617,433
Current liabilities					(1,179,319)
Long-term liabilities					(46,236)
Preferred shares					(4,171,015)
Noncontrolling interests					(25,320)
Net assets attributable to shareholders					$ 26,587,120


	Nine Months Ended
	September 30,
	2013	2012
Revenue	$ 79,739,325	$ 50,582,854
Gross profit	440,673	429,551
Expenses	2,389,366	1,280,710
Net loss	(1,926,080)	(851,159)

5 - RESIDUAL PORTFOLIOS

The transactions in which we acquired our residual portfolios include customary terms including representations and warranties, covenants, confidentiality terms, indemnification provisions and, in some instances, include performance metrics. If the terms are not satisfied or the performance metrics are not achieved, we have the right to reacquire all or a portion of the shares of our common stock included in the consideration paid for some portfolios.

6 - DEBT

Senior Credit Facility

In November 2012, the Company entered into a $5.0 million senior credit facility and borrowed $3.0 million to pay the $2.7 million, 16% annual interest, balance outstanding under a 2011 credit facility and $255,000 in loan origination fees and expenses.

In March 2013, the facility was expanded to $14.5 million and we borrowed $10.2 million to finance a business acquisition (Note 3). Fees and expenses paid for the amendment and additional borrowing totaled $560,000 and we issued a warrant to the lender for up to 500,000 shares of our common stock having a value of $325,000.

The $1.3 million balance available at September 30, 2013, under the facility is restricted to the acquisition of additional credit card residuals in the U.S.; provided, the outstanding loan balance after the acquisition will not exceed 16 times the expected monthly gross cash flow as measured immediately following the acquisition. Interest only is payable through August 2014. Thereafter, principal is payable at a monthly level rate to fully amortize the loan by its September 2016 maturity date. The loan has an interest rate of 13.2% per year payable monthly in arrears, a prepayment penalty beginning at 4% and declining to 0% in February 2014, and facility growth fees of 4% of new borrowings arranged by the lender and 2% if arranged by others. Deferred loan costs include the warrant’s fair value that will be expensed when, and if, it becomes exercisable (Note 7). Other loan fees are being amortized over the loan term.

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A first lien on all the Company’s assets has been pledged as collateral for the senior credit facility. The facility requires maintaining a minimum of $200,000 in cash and equivalents, contains customary representations and warranties, and we have agreed to certain affirmative covenants. The facility also limits our ability to engage in certain actions including: making loans or advances; extending credit; guaranteeing or incurring certain debt; engaging in certain asset acquisitions; making certain investments in other entities; making property transfers; changing our business or financial structure; and, paying dividends.

Subordinated Debt

The Company’s subordinated debt has been issued pursuant to a $3 Million Subordinated Debt Offering, a $2 Million Subordinated Debt Offering, a 2012 $3 Million Notes Offering, and a 2012 Convertible Notes Offering, each exempt from registration under Rule 506 of Regulation D of the Securities and Exchange Commission (“SEC”), as described in the Current Reports on Form 8-K filed with the SEC on January 6, 2011, and August 10, 2012, and incorporated herein by reference. The notes are secured by a first lien on substantially all of the Company’s assets, but are subordinated to the senior credit facility which precludes subordinated debt principal payments without the lender’s concurrence. The notes bear interest at a rate of 12% annually paid monthly in arrears.

Subordinated Notes Payable

Principal payment of $3.8 million at a 16.3% annual effective interest rate, including discount amortization, is due December 31, 2014, and $1.0 million at a 13.7% annual effective interest rate is due December 31, 2016.

The aggregate $1,310,073 fair value of warrants to acquire up to 1,165,000 shares of our common stock was being amortized over the period from the dates of issuance to the original principal due dates ranging from November 2012 to June 2014. In August 2012, all maturity dates were extended to December 31, 2014, in consideration for issuance of an additional 252,925 warrants that, due to low interest rates and volatility in our shares, were determined using the Black-Scholes option-pricing model to have no current value. The $366,000 modification-date debt fair value discount to a 16.6% annual effective rate was substantially equal to the unamortized balance of the original warrants and is being amortized over the remaining term of the debt.

In 2013, notes for $1.5 million were issued with warrants for up to 140,000 shares of stock having a fair value of $87,800. In the first nine months of 2013 and 2012, interest expense was $410,167 and $263,550, respectively, and amortization totaled $131,855 and $423,672, respectively.

Convertible Subordinated Notes

Unless prepaid, the convertible notes automatically convert at $1.50 per share into 283,332 shares of our common stock between December 2013 and July 2014. In 2013, notes for $450,000 were issued, with warrants for up to 40,000 shares of stock having a fair value of $24,000, and notes for $800,000 were converted into 533,334 shares of common stock. In connection with the conversion, we issued an additional 33,800 shares of stock having a $50,700 fair value based on publicly-quoted market prices and expensed $42,408 of the fair value of warrants previously deferred. The remaining $24,000 fair value of warrants for up to 40,000 shares of our common stock granted in connection with certain of the notes is being amortized to the conversion dates resulting in an overall effective annual interest rate of 13.2%. In 2013, interest expense was $73,433 and amortization totaled $44,700, respectively.

Notes Payable

We have financed insurance premiums with promissory notes bearing interest at rates between 6.0% and 7.0% per annum payable in monthly installments over periods of less than one year.

7 - CAPITAL STOCK

We have not agreed to register any of our common stock or warrants for resale under the Securities Act of 1933, as amended; however, warrants to acquire 100,000 shares of our common stock and 283,332 shares of our common stock issuable on conversion of our convertible subordinated notes have customary “piggy back” registration rights in the event we register shares of our common stock in the future.

Preferred Stock

Our Board of Directors may designate shares of preferred stock to be issued in one or more series and with such designations, rights, preferences, and restrictions as specified in the requisite resolution(s) without shareholder approval. If preferred stock is issued and the Company is subsequently liquidated or dissolved, the preferred stock holders may have preferential rights to a liquidating distribution. As further described in Note 13 – Subsequent Events, on October 3, 2013, the Company issued 500,000 shares of newly created Series B Convertible Preferred Stock (“Series B Preferred Stock”)

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pursuant to a subscription agreement for the purchase of up to 650,000 Series B Preferred Stock entered into with an accredited investor. The gross proceeds from the sale of 500,000 Series B Preferred Stock were $500,000.

Common Stock

Our common stock trades on the OTC® under the symbol “CLPI.” Holders of our common stock are entitled to one vote per share and receive dividends or other distributions when, and if, declared by our Board of Directors. We have reserved 6,352,757 shares for issuance on conversion of convertible subordinated notes, exercise of warrants, and equity incentive awards.

We have issued common stock for the acquisition of residual portfolios and our equity investment in DPPL (Note 4). In 2012, we sold 1,832,506 shares in private placements for $2,805,000, including the $56,250 fair value of 112,500 warrants as part of unit subscriptions. Also in 2012, a total of 304,000 shares with a fair value of $456,000 based on common stock private placements were issued for consulting, financial advisory, international acquisition advisory, and public relations services. In 2013, 1,696,665 shares were sold in private placements for $2,860,000, including the $1,496,549 fair value of 1,596,666 warrants as part of unit subscriptions, 391,920 shares were issued in the cashless exercise of 804,467 warrants, equity awards totaling 400,000 shares for consulting and other services having a total fair value of $720,000, and equity awards totaling 18,100 shares to certain DPPL employees having a $27,150 fair value.

Warrants

Outstanding warrants for 4,069,425 shares of our common stock with exercise prices ranging from $1.00 to $3.00 per share ($1.83 weighted average) expire as follows: 2015 – 617,501; 2016 – 500,000; 2017 – 527,925; 2018 – 2,423,999. On exercise, the warrants will be settled in delivery of unregistered shares of our common stock. Warrants for 147,333 shares having a total fair value of $157,767 were issued in 2013 for financial consulting services.

One of the warrants for 500,000 shares is exercisable only if the Company: (i) does not raise at least $3.0 million in equity financing before April 2014; or, (ii) does not extend the maturity dates of subordinated notes payable to December 31, 2016 and raise equity financing before April 2014 of $1.0 million, or $1.5 million if the attrition rate of CCI’s residual portfolios exceeds an average of 1.4% during the three-month periods ending June and September 2014.

2011 Equity Incentive Plan

The 2011 Equity Incentive Plan (“Plan”) provides for issuing equity awards for an aggregate of 2.0 million shares of our common stock in the form of grants of restricted shares, incentive stock options (employees only), nonqualified stock options, share appreciation rights, performance shares, and performance units. The purposes of the Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors, and consultants, and to promote the long-term growth and profitability of the Company. Stock option awards have a maximum contractual life of ten years and specific vesting terms and performance goals are addressed in each equity award grant. Shares issued to satisfy awards may be from authorized but unissued or reacquired common stock.

Stock Options

Immediately exercisable stock options for 500,000 shares of our common stock ($408,916 fair value) were awarded in 2013. Exercisable options with a weighted-average exercise price of $2.00 per share for 400,000 shares and $1.78 for 900,000 shares were outstanding at December 31, 2012 and September 30, 2013, respectively. Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of an option. Because the fair value of the underlying stock was less than the exercise price at September 30, 2013, the options had no intrinsic value. At September 30, 2013, the weighted-average remaining contractual term was 9.1 years; however, if services are earlier terminated, 700,000 options become void 90 days after termination.

8 - LITIGATION

On September 18, 2012, National Bankcard Systems, Inc. ("NBS") filed suit in the District Court of Dallas County, Texas against Calpian Residual Partners V, LP (“CRPV”) and Calpian alleging breach of the Residual Purchase Agreement dated November 4, 2008, between CRPV and NBS and certain other improprieties by CRPV. Plaintiff alleged damages on the date the suit was filed of $729,000 including unpaid merchant servicing fees, compensation for residuals added after Calpian acquired the portfolio, and attorney fees. Plaintiff further alleged that damages continued to grow, but would not specify an amount. Craig Jessen, our President, and Harold Montgomery, our CEO, are members of our Board of Directors, and substantial shareholders of Calpian, and both are executive officers of CRPV, but CRPV is not otherwise an affiliate of Calpian. Each of the Residual Purchase Agreement and the related alleged improprieties of CRPV arose prior to Calpian's acquisition of the underlying residual portfolio on December 31, 2010.

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On October 23, 2013, a final settlement agreement was reached in the amount of $250,000 ($100,000 payable within ten business days of date of final settlement agreement and $30,000 per month thereafter). This final settlement agreement amount has been accrued for as of September 30, 2013.

9 - BUSINESS SEGMENT INFORMATION

Each of our legal entities is a business segment measured by management based on pretax results of operations using accounting policies consistent in all material respects with those described in Note 2. No inter-segment revenue is recorded.

Calpian, Inc. is in the business of acquiring recurring monthly residual income streams derived from credit card processing fees paid by retail merchants in the United States (“residual portfolios”). We act not as a credit card processor, but simply as a purchaser of revenue streams resulting from the relationships between processors and independent sales organizations (“ISOs”). In addition, we invest in payments-industry related opportunities.

Calpian Commerce, Inc., which commenced operations on March 15, 2013, provides the general merchant community access to an integrated suite of third-party merchant payment processing services and its own related proprietary software enabling products delivering credit and debit card-based internet payments processing solutions to small- and mid-sized merchants operating in physical “brick and mortar” business environments, and in settings requiring wired as well as wireless mobile payment solutions. CCI also operates as an ISO selling individual third-party merchant processing contracts in exchange for future residual payments.

The following presents operating information by segment, reconciled to our consolidated loss before income taxes and equity investment loss, and segment assets. Information about our equity investee is included in Note 4.


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Revenues:
Calpian, Inc.	$ 725,945	$ 859,678	$ 2,361,710	$ 2,622,827
Calpian Commerce, Inc.	5,534,962	-	12,301,268	-
	$ 6,260,907	$ 859,678	$ 14,662,978	$ 2,622,827
Operating profit (loss):
Calpian, Inc.	$ (469,136)	$ 338	$ (1,664,955)	$ (156,433)
Calpian Commerce, Inc.	(302,824)	-	156,098	-
	(771,960)	338	(1,508,857)	(156,433)
Financing costs	(765,169)	(577,962)	(1,917,626)	(1,868,450)
Loss before income taxes and equity investment loss	$ (1,537,129)	$ (577,624)	$ (3,426,483)	$ (2,024,883)


	September 30,	December 31,
	2013	2012
Total assets:
Calpian, Inc.	$ 15,441,433	$ 13,052,566
Calpian Commerce, Inc.	9,819,523	-
	$ 25,260,956	$ 13,052,566

10 - INCOME TAXES

Our $8.3 million federal income tax net operating loss carryover expires over the period from 2026 through 2033. Our federal and state income tax returns are no longer subject to examination for years before 2009. We have taken no tax positions that, more likely than not, may not be realized. In 2013, we wrote off the $385,388 deferred tax asset, and related valuation allowance, which exceeded the tax benefit from the exercise of a warrant.

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Significant components of our income tax provisions were:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Current state (over provision)	-	-	-	(16,139)
Deferred federal	(1,127,828)	(191,763)	(1,759,048)	(667,553)
Deferred tax asset write off	-	-	385,388	-
Valuation allowance	1,127,828	191,763	1,373,660	667,553
	$ -	$ -	$ -	$ (16,139)

The losses before income taxes and equity investment loss at the 34% federal statutory tax rate reconciles to our tax provisions as follows:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Loss before income taxes	$ (1,129,967)	$ (196,390)	$ (1,772,347)	$ (688,460)
Deferred tax asset write off	-	-	385,388	-
Deferred tax valuation allowance	1,127,828	191,763	1,373,660	667,553
Permanent items	17,694	4,627	17,694	15,417
State tax net of federal tax benefit	(15,555)	-	(4,395)	(10,649)
	$ -	$ -	$ -	$ (16,139)

11 - Earnings Per Share

Basic earnings per share are based on the weighted average number of shares of our common stock outstanding during the period. At September 30, 2013 and 2012, potentially dilutive securities that would have had an antidilutive effect on our basic net losses per share were:


	2013	2012
Warrants (weighted-average purchase price per share: 2013 - $1.83; 2012 - $1.18)	4,069,425	2,287,393
Stock options (weighted-average exercise price per share: 2013 - $1.78; 2012 - $2.00)	900,000	400,000
Convertible subordinated notes	283,332	-

12 - RELATED PARTIES

Support Services And Advances

ART has provided the Company, since its startup period, with certain support services. It has been verbally agreed payment for these services would accrue interest-free and be paid at a future date to be agreed on by the parties. At the most recent balance sheet date, unpaid expenses of $85,699 incurred in 2010 and reimbursement for subsequent payments by ART on our behalf totaled $159,623.

Management Advisory Agreement

We have a management advisory agreement with Cagan McAfee Capital Partners, LLC (“CMCP”), an investment company owned and controlled by Laird Q. Cagan, a member of our Board of Directors and a significant shareholder. The nonexclusive agreement provides for CMCP advising the Company on an array of financial and strategic matters and provides for the services of Mr. Cagan as a member of our Board. Pursuant to the agreement, CMCP is to be paid $14,500 plus expenses each month through December 2013. The agreement continues month-to-month beyond that date and is thereafter terminable by either party with 30 days notice. At the most recent balance sheet date, amounts payable to CMCP totaled $319,000 which is expected to be paid as available cash flow permits.

Affiliates’ Deferred Compensation

At the most recent balance sheet date, officers’, directors’, and other affiliates’ compensation deferred in 2010 remaining unpaid totaled $100,000.

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13 – SUBSEQUENT EVENTS

On October 3, 2013, the Company issued 500,000 shares of newly created Series B Convertible Preferred Stock (“Series B Preferred Stock”) pursuant to a subscription agreement for the purchase of up to 650,000 Series B Preferred Stock (the “Subscription Agreement”) entered into with an accredited investor (the “Investor”). The gross proceeds from the sale of 500,000 Series B Preferred Stock were $500,000.

The Certificate of Designation for the Series B Preferred Stock (the “Certificate of Designation”) was filed with the Secretary of State of the State of Texas on October 3, 2013. Each share of Series B Preferred Stock has a stated value of $1.00 (“Stated Value”) and is entitled to receive a dividend of 18% per annum of its Stated Value, calculated on a simple interest basis and which dividend is payable in shares of Series B Preferred Stock (“Dividend Shares”). At the option of its holder, each share of Series B Preferred Stock and any accrued Dividend Shares are convertible, within 30 days after the closing of any private or public offering of equity or debt securities of the Company (a “Financing Event”), into the securities offered in and at a 5% discount to the offering price of such Financing Event. In addition, in the event the Company completes a sale of equity securities in aggregate gross proceeds of $3,000,000, the holders of Series B Preferred Stock must either (i) request the Company to redeem for cash all shares of Series B Preferred Stock plus accrued Dividend Shares in an amount equal to the Stated Value of all such Series B Preferred Stock and Dividend Shares; or (ii) convert all outstanding shares of Series B Preferred Stock plus accrued Dividend Shares into securities offered in the most recent Financing Event determined by dividing the Stated Value by a conversion price equal to 95% of the offering price in such Financing Event.

On December 31, 2016 (the “Mandatory Conversion/Redemption Date”), unless otherwise converted or redeemed, the holders of all outstanding shares of Series B Preferred Stock plus accrued Dividend Shares must either (i) request the Company to redeem for cash all shares of Series B Preferred Stock plus accrued Dividend Shares in an amount equal to the Stated Value of all such Series B Preferred Stock and Dividend Shares; or (ii) accept the automatic conversion of all shares of Series B Preferred Stock plus accrued Dividend Shares into such number of shares of Common Stock determined by dividing the Stated Value of such shares by $1.50 (the “Mandatory Conversion Price”).

The holders of the Series B Preferred Stock are entitled to vote on all matters on which the holders of the Common Stock have a right to vote. Each holder of Series B Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which their shares of Series B Preferred Stock could be converted at the Mandatory Conversion Price.

The Series B Preferred Stock were sold pursuant to the Subscription Agreement entered into between the Company and the Investor. The Subscription Agreement contains customary terms and conditions including, among other things, representations and warranties by the Company and the Investor, closing deliveries and indemnification.

In connection with the private placement, the Company issued 500,000 shares of Series B Preferred Stock for aggregate gross consideration of $500,000. In the event the Investor holds the 500,000 shares of Series B Preferred Stock until the Mandatory Conversion/Redemption Date, a total of 333,334 shares of Common Stock are issuable upon the conversion of such shares at the Mandatory Conversion Price, excluding Common Stock issuable upon the conversion of any accrued Dividend Shares.

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ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This Item 2 should be read in the context of the information included in our 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission and elsewhere in this Quarterly Report, including our financial statements and accompanying notes in Item 1 of this Quarterly Report.

BUSINESS

Calpian, Inc. (“CLPI”) is in the business of acquiring recurring monthly residual income streams derived from credit card processing fees paid by retail merchants in the United States (“residual portfolios”). We act not as a credit card processor, but simply as a purchaser of revenue streams resulting from the relationships between processors and independent sales organizations (“ISOs”). In addition, we invest in payments-industry related opportunities.

In March 2013, the Company formed a wholly-owned subsidiary, Calpian Commerce, Inc. (“CCI”), to own and operate the certain assets and liabilities of Pipeline Data, Inc. and its subsidiaries acquired in exchange for a cash payment of $9.75 million. CCI provides the general merchant community access to an integrated suite of third-party merchant payment processing services and its own related proprietary software enabling products delivering credit and debit card-based internet payments processing solutions to small- and mid-sized merchants operating in physical “brick and mortar” business environments, and in settings requiring wired as well as wireless mobile payment solutions. It also operates as an ISO generating individual merchant processing contracts in exchange for future residual payments.

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED TO 2012

The significant increases in 2013 third quarter revenues, gross profit, and general and administrative expenses are largely attributable to CCI’s operations which commenced on March 15, 2013. Interest and financing costs for the third quarter and first nine months of 2013 were $0.8 and $1.9 million, respectively. We recognized $0.7 and $1.8 million in losses from our equity investment in the three- and nine-month periods of 2013, respectively, while $0.2 million was recognized in 2012 following our March 2012 initial investment. We had net losses of $2.3 million, $0.08 per share, in the third quarter of 2013 compared to $0.7 million, or $0.03 per share, in the same 2012 period. For the nine months ended September 30, 2013, our net loss was $5.2 million, or $0.20 per share, and for the nine months ended September 30, 2012, our net loss was $2.3 million, or $0.11 per share. The results for our two business segments were as follows:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Revenues:
Calpian, Inc.	$ 725,945	$ 859,678	$ 2,361,710	$ 2,622,827
Calpian Commerce, Inc.	5,534,962	-	12,301,268	-
	$ 6,260,907	$ 859,678	$ 14,662,978	$ 2,622,827


Gross profit:
Calpian, Inc.	$ 451,341	$ 565,122	$ 1,498,921	$ 1,689,727
Calpian Commerce, Inc.	852,232	-	2,528,643	-
	$ 1,303,573	$ 565,122	$ 4,027,564	$ 1,689,727


General and administrative expenses:
Calpian, Inc.	$ 920,477	$ 564,784	$ 3,163,876	$ 1,846,160
Calpian Commerce, Inc.	1,155,056	-	2,372,545	-
	$ 2,075,533	$ 564,784	$ 5,536,421	$ 1,846,160

CLPI’s revenues in 2013 were lower than in 2012 due to normal portfolio attrition. Gross profits were 62% of CLPI’s revenues in the 2013 quarter and 64% in the 2013 and 2012 nine-month periods. CCI’s profit margins are lower compared to CLPI’s as CCI incurs interchange fees and processing and servicing costs not associated with the portfolios purchased by CLPI.

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During the second quarter of 2013, CLPI accrued $386 thousand offer to settle in mediation litigation referred to in Note 8 of the notes to our financial statements in Part I, Item 1 of this Report. The Company reached a final settlement agreement of a lesser amount ($250 thousand) and adjusted its accrual as of September 30, 2013. This $250 thousand accrual is the major cause of the increase in its general and administrative expenses (“G&A”) in the first nine months over the same periods in 2012. Other CLPI third quarter and first nine month G&A increases included (in thousands): $160 and $284, respectively, in management equity awards, independent contractor compensation due to greater utilization of consultants as the complexity of our operations has increased, and employee compensation; $312 and $444, respectively, of costs incurred seeking additional equity and debt financing; $30 and $124, respectively, for additional legal services largely associated with the previously referred to litigation; and, $26 and $99, respectively, related to additional advertising expense. Expenses in connection with our equity investment were $166 thousand more in the first nine months of 2012 when we were negotiating the investment agreement.

CCI’s most significant G&A expenses in the three months ended September 30, 2013, were $666 thousand in employee compensation and $31 thousand in connection with an interim services agreement with an affiliate of the predecessor company which expired in July 2013, but is being extended month-to-month on a limited basis.

Deferred financing cost amortization declined significantly when we refinanced our senior debt facility in November 2012 and expensed the remaining $526 thousand associated with the old facility. Also, the financing costs incurred in connection with the new facility are being amortized over 43 months compared to 24 months under the old facility. In mid-2012 the maturity dates of the subordinated notes payable were extended resulting in a longer time period and lower monthly amortization. More interest expense was incurred in 2013 due to additional senior note and subordinated debt borrowings.

We have been increasing our March 2012 initial equity investment interest in DPPL in a step acquisition of its share capital, and we are recognizing its losses and the effects of foreign currency exchange rate changes in our financial statements in proportion to our increasing ownership percentages. However, we have accepted a temporary dilution of our ownership stake in DPPL for the reasons and as described in Note 13 of the notes to our financial statements in Part I, Item 1 of this Report. As a result of completing the fair value appraisal of the assets and liabilities of DPPL and MMPL in March 2013, we have retrospectively adjusted our financial statements for each of the three quarters ended December 31, 2012, as described in Note 1 of the notes to our financial statements to account for the differences between their appraised fair values and our preliminary estimates.

Due to net losses, we had no current federal tax provision in either 2013 or 2012 and deferred tax benefits of cumulative net operating losses and other temporary tax differences have been offset by valuation allowances. State income taxes are assessments not offset by operating losses. In the second quarter of 2013, we wrote off the $385 thousand deferred tax asset, and related valuation allowance, which exceeded the tax benefit from the exercise of a warrant.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by consolidated operating activities in the nine months ended September 30, 2013, amounted to $342 thousand with $696 thousand being contributed by CCI since it commenced operations on March 15, 2013, and $256 thousand being used by CLPI in the six-month period. The $10.2 million borrowing under the senior credit facility in 2013 financed loan costs and our $9.75 million business acquisition which included $250 thousand in unrestricted cash that was included in the assets transferred to CCI. The $1.3 million balance remaining at September 30, 2013, under the $14.5 million facility is restricted to the acquisition of additional credit card residuals in the U.S. Proceeds from sales of our common stock and warrants in private placements and subordinated debt borrowings in 2013 totaled $4.8 million, of which $4.6 million was used to increase our equity investment in DPPL with the balance used in operations.

Our primary sources of liquidity are cash flows from operating activities, sales of our common stock in private placements, and subordinated debt borrowings not restricted to specific investing activities. We anticipate these funds and acquisition of additional residual portfolios funded by the senior credit facility and restricted subordinated debt borrowings will be sufficient to meet our operating needs for the foreseeable future. However, there are no assurances we can sell more common stock, issue additional subordinated debt, or acquire additional portfolios on acceptable terms.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

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CRITICAL ACCOUNTING POLICIES

We use estimates throughout our statements and changes in estimates could have a material impact on our operations and financial position. We consider an accounting estimate to be critical if: (1) the estimate requires us to make assumptions about matters that are highly uncertain at the time the estimate is made or (2) changes in the estimate are reasonably likely to occur from period to period, or use of different estimates we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

There have been no changes in the critical accounting policies disclosed in our 2012 Annual Report on Form 10-K.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk is to residual portfolio post-acquisition attrition. There have been no changes during the quarter in management’s assessment of that risk as disclosed in our 2012 Annual Report on Form 10-K.

ITEM 4 CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized, and reported within the time period specified in the SEC's rules and forms and is accumulated and communicated to the Company's management, as appropriate, in order to allow timely decisions in connection with required disclosure.

Evaluation of Disclosure Controls and Procedures

The Company's principal executive officer and its principal financial officer carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2013, pursuant to Exchange Act Rule 13a-15. Since the identification of the ineffective disclosure controls and procedures, as previously reported on the Company’s Form 10-Q for the quarterly period ended June 30, 2013, the Company put in place various internal procedures, systems, controls and checks and balances in order to avoid the recurrence of any events or circumstances that led to the conclusion that the Company’s disclosure controls and procedures were ineffective as of June 30, 2013. Although the Company’s management believes that the corrective measures already put in place has improved, and those it continues to implement will improve, the design of the Company’s internal controls over financial reporting, the Company’s Chief Executive Officer and Chief Financial Officer believes it is necessary to evaluate the efficacy of the corrective measure at a date subsequent to September 30, 2013 before it can determine whether the improvements resulted in effective disclosure controls and procedures. Accordingly, based upon an evaluation as of September 30, 2013, the Company's Chief Executive Officer and Chief Financial Officer concluded the Company's disclosure controls and procedures were ineffective.

Changes In Internal Controls Over Financial Reporting

Other than as discussed above, there were no changes in our internal controls over financial reporting during the three months ended September 30, 2013, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

With the March 2013 business acquisition, our subsidiary, CCI, employed a staff of seven accounting professionals and support staff. We have transitioned certain corporate accounting functions to the CCI staff in an effort to improve corporate-wide internal controls.

Limitations on the Effectiveness of Controls

The Company’s management does not expect that the Company’s disclosure controls and procedures or the Company’s internal control over financial reporting can or will prevent all human error or fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within the Company’s company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.

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We are a smaller reporting company and are required to comply with the internal control reporting and disclosure requirements of Section 404 of the Sarbanes-Oxley Act. Although we are working to comply with these requirements, we have limited financial personnel making compliance with Section 404 - especially with segregation of duty control requirements – very difficult, if not impossible, and cost prohibitive. While the SEC has indicated it expects to issue supplementary regulations easing the burden of Section 404 requirements for small entities like us, such regulations have not yet been issued.

PART II

ITEM 1 LEGAL PROCEEDINGS

The description of the litigation in Note 8 of the Condensed Notes to Unaudited Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report is incorporated herein by reference.

ITEM 1A RISK FACTORS

In addition to the information in this Quarterly Report on Form 10-Q, consideration should be given to the risk factors in Part I, Item 1A, Risk Factors in our 2012 Annual Report on Form 10-K which could materially and adversely affect our business, financial condition, and results of operations. There have been no significant changes in those risk factors except for the following additional factors.

Disclosure controls are no longer effective.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarterly period covered by this report, the Company completed additional closings of its private placement of equity pursuant to which it sold 1,066,665 shares of its common stock at a price of $1.50 per share and 12,500 at a price of $2.00 resulting in gross proceeds to the Company of $1,625,000, all of which was invested in DPPL. During the same period, the Company:

·	Sold in connection with the sale of common stock five-year warrants to purchase up to 666,666 shares of its common stock at an exercise price of $1.50 per share, 300,000 shares at an exercise price of $2.00 per share, and 12,500 shares at an exercise price of $3.00;

·	Issued 358,334 shares of its common stock in connection with the conversion of $500,000 of subordinated debt;

·	Issued in connection with a financial consulting services agreement 400,000 shares of its common stock and five-year warrants to purchase up to 83,333 shares of its common stock at $1.50 per share;

·	Issued in connection with a consulting services agreement five-year warrants to purchase up to 4,000 shares of its common stock at $1.50 per share; and

·	Issued in connection with a residual purchase agreement 10,941 shares of its common stock.

No underwriters were involved in the transactions described above. The Company’s issuance of common stock, subordinated debt, and warrants, and any common stock issuable upon conversion or exercise thereof, was, or will be, exempt from registration under the Securities Act of 1933 pursuant to exemptions from registration provided by Rule 506 of Regulation D and Sections 4(2) of the Securities Act of 1933, insofar as such securities were issued only to “accredited investors” within the meaning of Rule 501 of Regulation D. The recipients of these securities took such securities for investment purposes without a view to distribution. Furthermore, they each had access to information concerning the Company and its business prospects. There was no general solicitation or advertising for the purchase of the securities and the securities are restricted pursuant to Rule 144.

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ITEM 6 EXHIBITS

The Exhibit Index immediately preceding the exhibits required to be filed with this report is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	CALPIAN, INC.
	(Registrant)


December 3, 2013	/s/ Scott S. Arey
	Scott S. Arey
	Chief Financial Officer (Principal Financial and Principal Accounting Officer)

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EXHIBIT INDEX


			Incorporated By Reference
			(if applicable)
Exhibit Number and Description			Form	Filed	Exhibit

(3)	Articles of Incorporation and Bylaws
	3.1	Certificate of Formation – For-Profit Corporation of Toyzap.com, Inc.	SB-2	October 18, 2007	3.1
	3.2	Bylaws	SB-2	October 18, 2007	3.2
	3.3	Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock	8-K	June 7, 2010	3.1
	3.4	Certificate of Amendment to Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock	8-K	August 9, 2010	3.1
	3.5	Certificate of Amendment to Certificate of Formation – For-Profit Corporation of Toyzap.com, Inc.	8-K	September 8, 2010	3.1
	3.6	Certificate of Designation of Series B Convertible Preferred Stock	8-K	October 9, 2013	3.1
(4)	Instruments Defining the Rights of Security Holders, Including Indentures
	4.1	Specimen Common Stock Certificate	SB-2	October 18, 2007	4.1
	4.2	Common Stock Warrant, form of	8-K	August 9, 2010	4.1
	4.3	Company 2011 Equity Incentive Plan	8-K	April 15, 2011	10.1
	4.4	Registration Rights Agreement, dated as of April 28, 2011, between the Company and HD Special-Situations II, LP.	8-K	May 4, 2011	4.1
	4.5	Form of Warrant Agreement, dated August 7, 2012	8-K	August 10, 2012	4.1
	4.6	Form of 2012 $3.0 Million Note	8-K	August 10, 2012	4.2
	4.7	Loan and Security Agreement between the Company and Granite Hill Capital Ventures, LLC entered into in November 2012	10-Q	November 13, 2012	4.7
	4.8	First Amendment To Loan and Security Agreement dated as of February 27, 2013, by and among the Company and Granite Hill Capital Ventures, LLC	10-K	April 8, 2013	4.8
	4.9	Second Amendment To Loan and Security Agreement dated March 15, 2013, by and among the Company and Granite Hill Capital Ventures, LLC and listed new lenders	10-K	April 8, 2013	4.9
	4.10	Form of Term Note pursuant to the Second Amendment To Loan and Security Agreement dated March 15, 2013, by and among the Company and Granite Hill Capital Ventures, LLC, et al	10-K	April 8, 2013	4.10
	4.11	Letter agreement dated March 12, 2013,by and among the Company and Granite Hill Capital Ventures, LLC	10-Q	May 24, 2013	4.11
	4.12	Form of Subscription Agreement, Series B Convertible Preferred Stock	8-K	October 9, 2013	10.1
(10)	Material Contracts
	10.1	Addendum to Service Agreement dated March 28, 2012, between Digital Payment Processing Limited and My Mobile Payments Limited	10-K	April 8, 2013	10.24
	10.2	Asset Purchase Agreement dated February 27, 2013 among the Company and Pipeline Data Inc. and The Other Sellers	10-K	April 8, 2013	10.26
	10.3	Amendment #2 to Independent Contractor’s Agreement by and between the Company and DNP Financial Strategies effective February 1, 2013	10-K	April 8, 2013	10.29

(31)	Rule 13a-14(a)/15d-14(a) Certifications
	31.1	Certification Pursuant to Rule13a-14(a)/15d-14(a) (Chief Executive Officer) *
	31.2	Certification Pursuant to Rule13a-14(a)/15d-14(a) (Chef Financial Officer) *
(32)	Section 1350 Certifications
	32.1	Section 1350 Certification (Chief Executive Officer) *
	32.2	Section 1350 Certification (Chief Financial Officer) *
101	Interactive Data File
	101.INS	XBRL Instance **
	101.SCH	XBRL Taxonomy Extension Schema **
	101.CAL	XBRL Taxonomy Extension Calculation **
	101.DEF	XBRL Taxonomy Extension Definition **
	101.LAB	XBRL Taxonomy Extension Labels **
	101.PRE	XBRL Taxonomy Extension Presentation **

*	Filed herewith.
**	XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Table of Contents


Texas		20-8592825
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


Introductory Comment		3
Forward-Looking Statements		3
PART I – FINANCIAL INFORMATION
Item 1	Financial Statements	4
Item 2	Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	18
Item 3	Quantitative And Qualitative Disclosures About Market Risk	20
Item 4	Controls And Procedures	20
PART II – OTHER INFORMATION
Item 1	Legal Proceedings	21
Item 1A	Risk Factors	21
Item 2	Unregistered Sales Of Equity Securities And Use Of Proceeds	21
Item 6	Exhibits	22
SIGNATURES		23
Exhibit Index		24