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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

Commission File No. 000-53997

 

LOGO

 

 

CALPIAN, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Texas   20-8592825

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

500 North Akard Street, Suite 2850

Dallas, TX 75201

(Address of principal executive offices)

Registrant’s telephone number, including area code:

(214) 758-8600

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of the Issuer’s Common Stock, par value $.001 per share, as of November 13, 2012 was 23,551,806.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

PART 1

   FINANCIAL INFORMATION   

Item 1

   Financial Statements   
  

Unaudited Balance Sheets as of September 30, 2012 and December 31, 2011

     2   
  

Unaudited Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011

     3   
  

Unaudited Statement of Shareholders’ Equity for the period December 31, 2011 through September 30, 2012

     4   
  

Unaudited Statements of Cash Flows for the nine months ended September 30, 2012 and 2011

     5   
  

Notes to Unaudited Financial Statements

     6-13   

Item 2

   Management’s Discussion And Analysis Of Financial Condition And Results Of Operations      13-15   

Item 3

   Quantitative And Qualitative Disclosures About Market Risk      15   

Item 4

   Controls And Procedures      16   

PART II

   OTHER INFORMATION   

Item 1

   Legal Proceedings      17   

Item 1A

   Risk Factors      17   

Item 2

   Unregistered Sales Of Equity Securities And Use Of Proceeds      17   

Item 3

   Defaults Upon Senior Securities      17   

Item 4

   Mine Safety Disclosures      17   

Item 5

   Other Information      17   

Item 6

   Exhibits      17   

SIGNATURES

     18   

EXHIBIT INDEX

     19   

 

1


Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CALPIAN, INC.

UNAUDITED BALANCE SHEETS

 

     September 30,
2012
    December 31,
2011
 

ASSETS

    

Current Assets

    

Cash and equivalents

   $ 432,305      $ 367,661   

Other current assets

     130,922        48,851   
  

 

 

   

 

 

 

Total current assets

     563,227        416,512   
  

 

 

   

 

 

 

Cash restricted to acquisition of residuals

     28,000        425,000   

Residual portfolios acquired, net

     5,537,167        5,824,481   

Equity investment

     6,588,894        —     

Deferred financing costs

     716,515        1,480,918   

Intangible assets acquired, at cost

     10,000        10,000   
  

 

 

   

 

 

 

Total assets

   $ 13,443,803      $ 8,156,911   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current Liabilities

    

Current portion of long-term debt, net

   $ 2,700,000      $ 1,201,312   

Deferred compensation of officers, directors, and executives

     125,000        360,000   

Accrued expenses payable to officers, directors, and affiliates

     325,042        202,350   

Accounts payable

     75,560        23,415   

Accrued expenses

     17,709        35,710   

Interest payable

     69,000        25,500   

Note payable

     18,762        7,536   
  

 

 

   

 

 

 

Total current liabilities

     3,331,073        1,855,823   
  

 

 

   

 

 

 

Senior notes payable

     —          2,700,000   

Subordinated notes payable

     3,300,000        1,000,000   

Discount on subordinated notes payable

     (340,767     (415,751
  

 

 

   

 

 

 

Long-term debt

     2,959,233        3,284,249   
  

 

 

   

 

 

 

Commitments and contingencies

    

Shareholders’ Equity

    

Common stock, par value $0.001, 200,000,000 shares authorized, 23,551,806 and 19,303,800 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively

     23,552        19,304   

Additional paid-in capital

     13,088,652        6,680,238   

Accumulated deficit

     (5,991,874     (3,682,703

Other comprehensive income

     33,167        —     
  

 

 

   

 

 

 

Total shareholders’ equity

     7,153,497        3,016,839   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 13,443,803      $ 8,156,911   
  

 

 

   

 

 

 

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

 

2


Table of Contents

CALPIAN, INC.

UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2012     2011     2012     2011  

Revenues

        

Residual portfolio revenues

   $ 859,678      $ 1,015,538      $ 2,622,827      $ 1,860,457   

Cost of revenues

        

Amortization of residual portfolios acquired

     268,229        319,860        850,312        576,604   

Portfolio servicing costs

     22,500        16,350        66,450        46,050   

Other

     3,827        36,277        16,338        157,838   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs of revenues

     294,556        372,487        933,100        780,492   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     565,122        643,051        1,689,727        1,079,965   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

General and administrative expenses

     564,784        496,744        1,846,160        1,617,546   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     564,784        496,744        1,846,160        1,617,546   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     338        146,307        (156,433     (537,581

Amortization of deferred financing costs

     288,298        291,851        855,869        583,702   

Amortization of discount on subordinated notes payable

     81,564        171,054        423,672        374,580   

Interest expense, net

     208,100        115,095        588,909        206,602   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expenses

     577,962        578,000        1,868,450        1,164,884   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before items below

     (577,624     (431,693     (2,024,883     (1,702,465

Provision for income taxes (over provision)

     —          4,734        (16,139     6,914   

Equity investment loss

     151,212        —          300,427        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (728,836     (436,427     (2,309,171     (1,709,379

Other comprehensive income:

        

Currency translation adjustments

     52,412        —          33,167        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

   $ (676,424   $ (436,427   $ (2,276,004   $ (1,709,379
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, basic and diluted

   $ (0.03   $ (0.02   $ (0.11   $ (0.10

Weighted average number of shares outstanding, basic and diluted

     22,817,111        19,284,134        20,782,475        17,972,701   

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

 

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Table of Contents

CALPIAN, INC.

UNAUDITED STATEMENT OF SHAREHOLDERS’ EQUITY

For The Period December 31, 2011 Through September 30, 2012

 

     Common Stock      Additional
Paid-In

Capital
     Accumulated
Deficit
    Other
Comprehensive

Income
     Total  
     Shares      Amount             

Balance, December 31, 2011

     19,303,800       $ 19,304       $ 6,680,238       $ (3,682,703   $ —         $ 3,016,839   

Acquisition of residual portfolios

     27,230         27         70,970         —          —           70,997   

Equity investment

     2,430,770         2,431         3,643,724         —          —           3,646,155   

Common stock issuance

     1,720,006         1,720         2,578,280         —          —           2,580,000   

Common stock issued for services

     70,000         70         104,930         —          —           105,000   

Equity awards to management

     —           —           10,510         —          —           10,510   

Net loss

     —           —           —           (2,309,171     —           (2,309,171

Currency translation adjustments

     —           —           —           —          33,167         33,167   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balance, September 30, 2012

     23,551,806       $ 23,552       $ 13,088,652       $ (5,991,874   $ 33,167       $ 7,153,497   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

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

 

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Table of Contents

CALPIAN, INC.

UNAUDITED STATEMENTS OF CASH FLOWS

 

     Nine Months Ended
September 30,
 
     2012     2011  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net loss

   $ (2,309,171   $ (1,709,379

Adjustments to reconcile net loss to cash provided by operating activities:

    

Equity investment loss

     300,427        —     

Amortization of deferred financing costs

     855,869        583,702   

Amortization of residual portfolios acquired

     850,312        576,604   

Amortization of discount on subordinated notes payable

     423,672        374,580   

Amortization of deferred consulting fees

     13,125        —     

Equity awards to management

     10,510        60,066   

Changes in operating assets and liabilities:

    

Other current assets

     (9,313     28,196   

Deferred compensation of officers, directors, and executives

     (235,000     —     

Accrued expenses payable to officers, directors, and affiliates

     122,692        80,877   

Accrued expenses

     (18,001     209,095   

Accounts payable

     52,145        82,357   

Interest payable

     43,500        28,306   
  

 

 

   

 

 

 

Net cash provided by operating activities

     100,767        314,404   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

    

Residual portfolios acquired

     (492,000     (3,967,499

Equity investment

     (3,210,000     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,702,000     (3,967,499
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Proceeds from issuance of senior notes payable

     —          2,700,000   

Proceeds from issuance of subordinated notes payable

     150,000        1,000,000   

Proceeds from issuance of subordinated notes payable, restricted

     600,000        —     

Proceeds from issuance of common stock

     2,580,000        —     

Change in restricted cash

     397,000        (705,000

Payments on note payable

     (22,157     (25,173

Deferred financing costs

     (38,966     (323,639
  

 

 

   

 

 

 

Net cash provided by financing activities

     3,665,877        2,646,188   
  

 

 

   

 

 

 

Increase (decrease) in cash and equivalents

     64,644        (1,006,907

Cash and equivalents, beginning of year

     367,661        1,735,521   
  

 

 

   

 

 

 

Cash and equivalents, end of period

   $ 432,305      $ 728,614   
  

 

 

   

 

 

 
SUPPLEMENTAL DISCLOSURE INFORMATION     

Interest paid

   $ 545,409      $ 186,395   
  

 

 

   

 

 

 

Noncash transactions:

    

Common stock issued for equity investment

   $ 3,646,155      $ —     

Warrants issued to lenders

     —          2,565,495   

Common stock issued for services

     105,000        —     

Common stock issued for acquisition of residual portfolios

     70,997        706,834   

Insurance premium financed with note payable

     33,383        33,234   

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

 

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Table of Contents

CALPIAN, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

In this Quarterly Report on Form 10-Q, we refer to Calpian Inc. as “Calpian” “Company,” “we,” “us” and “our.” Calpian was incorporated in 2006. The Company’s common stock (“Common Stock”) trades on the OTC® under the symbol “CLPI.”

Headquartered in Dallas, Texas, we are 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”). Small and medium-sized retail merchants typically buy their credit card processing and acquiring services from Independent Sales Organizations (“ISOs”). ISOs are sales agents authorized by contract with one or more credit card processors to sell processing and acquiring services on their behalf. ISOs shepherd the merchant’s application for processing and acquiring services through the labyrinth of approvals, credit checks, guarantees, etc. that are required before the merchant can be approved to accept consumer credit cards for payment. We act not as a credit card processor, but simply as a purchaser of revenue streams resulting from the relationships between processors and ISOs and other ISOs. In addition, we may also seek to acquire servicing rights with respect to residual portfolios acquired from ISOs and invest in payments-industry related opportunities.

(1) BASIS OF PRESENTATION AND DISCLOSURE

The unaudited interim financial statements and related notes of Calpian 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 the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments and information (consisting only of normal recurring accruals and retrospective adjustments for an increased equity investment ownership percentage) considered necessary for a fair statement of the results for the interim periods presented.

The year-end balance sheet data was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP. The accompanying unaudited interim financial statements and related notes should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2011. The results of operations for the periods reflected herein are not necessarily indicative of the results to be expected for the full fiscal year.

The functional currency of our equity investment is the Indian rupee (denoted as “INR” or “Rs.”). 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 income as a separate component of shareholders’ equity. Revenue and expenses are translated at monthly average exchange rates.

Going Concern Uncertainty

The accompanying financial statements have been prepared in accordance with U.S. GAAP which contemplates continuation of the Company as a going concern and is dependent upon the Company’s ability to establish itself as a profitable business. The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.

The Company has generated positive monthly cash since September 2011. Using that cash flow, along with funds available under the acquisition credit facility, the Company expects to acquire additional residual portfolios we anticipate will generate sufficient cash flow to meet our operating needs for the foreseeable future.

In August 2012, the maturity dates of all outstanding subordinated debt were modified to mature on December 31, 2014. As such, we believe the primary factor giving rise to a “going concern” opinion issued by our independent accountants included in our Form 10-K for the year ended December 31, 2011, has been eliminated. There can be no assurance other factors will not arise resulting in a similar opinion in the future.

 

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Table of Contents

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

For the nine months ended September 30, 2012, there were no new accounting pronouncements issued that have had, or are expected to have, a material impact on our results of operations or financial condition.

Cash and Equivalents

The Company considers cash deposits and all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains deposits in financial institutions that may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses related to amounts in excess of FDIC limits.

Residual Portfolios Acquired

Residual portfolios acquired represent our investment in recurring monthly residual income streams derived from credit card processing fees paid by retail merchants in the United States. Such residual portfolios are acquired for long-term investment and are expected to be held-to-maturity defined as a point where cash flows generated by the portfolio are nominal. Although history within the industry indicates the cash flows from such residual income streams are reasonably predictable, at the point of acquisition, the Company’s right to receive cash flows is predicated upon future purchases by consumers at merchants included in the portfolio we acquired.

The Company amortizes its investment in residual portfolios based upon the future expected cash flows derived on each individual portfolio acquired as each portfolio is underwritten separately and may reflect unique cash flow patterns. The future expected cash flow is re-evaluated periodically by the Company and the future amortization is adjusted prospectively in accordance with ASC 350, “Determination of the Useful Life of Intangible Assets.” The expected amortization period of residual portfolios is between 10 and 12 years, and no residual value is likely.

Equity Investment

Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise control, are accounted for using the equity method. 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 periodically for other than temporary impairment. Prior to obtaining significant influence, such investments are accounted for using the cost method. Upon obtaining significant influence, our prior period financial statements are retrospectively adjusted as if equity method accounting had been in effect based on the ownership percentages during those periods.

Intangible Assets Acquired

The intangible assets acquired consist of the “Calpian” name and related trademark and domain name acquired from ART Holdings, Inc. (“ART”). The assets have indefinite lives, are carried at cost, and are tested for impairment annually, or more frequently if events or changes in circumstances indicate it is more likely than not that the asset is impaired.

Fair Value of Assets and Liabilities

The Company does not engage in hedging activities and does not have any derivative instruments in place. The Company has no non-financial assets measured on a recurring or nonrecurring basis.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability (exit price), in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We believe the current assets and current liabilities approximate their estimated fair values at the balance sheet dates, due to their short maturities. We believe the carrying value of our non-current liabilities approximate their estimated fair value at the balance sheet dates for debt with similar terms, interest rates, and remaining maturities currently available to companies with similar credit ratings.

 

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Revenue Recognition

The Company recognizes revenue from its residual portfolios based upon actual cash receipts from residual portfolios acquired.

Earnings per Share

In calculating earnings per share (“EPS”) for the three and nine months ended September 30, 2012, no recognition was given to warrants and options exercisable for 2,687,393 shares, respectively, of our Common Stock. In calculating EPS for the three and nine months ended September 30, 2011, no recognition was given to 23,836 potentially dilutive convertible preferred shares (outstanding only until May 27, 2011, when they automatically converted into 2,383,600 shares of Common Stock), and no recognition was given to warrants exercisable for 2,146,968 shares of our Common Stock. Due to the net loss applicable to common shareholders in each period, such securities would have been anti-dilutive.

Income Taxes

Income taxes are provided for the tax effect of transactions reported in the financial statements and consist of taxes currently payable and deferred taxes primarily related to net operating losses available to offset future federal income taxes. Deferred 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 purposes using enacted tax laws and rates.

The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if available evidence indicates it is more likely than not the position will be sustained on audit. The second step requires the Company to estimate the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company reevaluates its uncertain tax positions on a periodic basis based on factors such as changes in facts and circumstances, changes in tax law, effectively settled issues under audit, and new audit activity.

Use of Estimates

The Company’s financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to contingencies, on an ongoing basis. 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 making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Warrants and Options

The Company’s warrants are settled in physical delivery of unregistered shares. As such, the warrants are recorded upon issuance as permanent equity at fair value based upon a valuation using the Black-Scholes option pricing model and subsequent changes in fair value are not recognized. Option pricing models require the input of highly subjective assumptions. Because our warrants and stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect fair value estimates, in our opinion, the existing models may not necessarily provide a reliable single measure of the fair value of our warrants and stock options.

Transaction World Magazine

Due to its strategic value in marketing Calpian to the ISO community, we intend to maintain an administrative support, marketing, and advertising relationship with Transaction World Magazine and, since March 2011, we have funded all of its operations. Transaction World Magazine, Inc. is a wholly-owned subsidiary of ART. Harold Montgomery and Craig Jessen, both directors, executive officers, and controlling shareholders of Calpian, are founders, controlling shareholders, directors, and executive officers of ART; consequently, Transaction World Magazine is a non-owned but wholly-controlled entity and our financial statements include all of its expenses, net of advertising revenue, approximating $28,000 per quarter.

 

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Effective January 1, 2012, the Company no longer considers Transaction World Magazine to be a separate profit center. As such, its distribution costs, net of advertising revenues, are included within the statements of comprehensive income as general and administrative expenses. Net expenses totaling $22,051 and $78,095 in the three and nine months, respectively, ended September 30, 2011, have been reclassified accordingly to conform to the current presentation.

(3) RESIDUAL PORTFOLIOS ACQUIRED

During the nine months ended September 30, 2012, the Company acquired residual portfolios in a series of transactions. In exchange for the right to receive cash in the form of residuals, the Company paid an aggregate of $492,000 in cash and issued an aggregate of 27,230 shares of Common Stock valued at $70,997. Each of the transactions include customary terms including representations and warranties, covenants, confidentiality terms, indemnification provisions, and performance metrics ranging from 24 to 42 months. If the terms are not satisfied or the performance metrics are not achieved, the Company has the right to re-acquire all or a portion of the shares.

(4) EQUITY INVESTMENT

In 2012, the Company entered into an agreement to acquire equity interests in Digital Payments Processing Limited (“DPPL”), a newly-organized company under the laws of India and headquartered in Mumbai, India. DPPL has entered into a services agreement with My Mobile Payments Limited (“MMPL”), a company organized under the laws of India and headquartered in Mumbai, India, which owns a payment processing service known as Money on Mobile (“MoM”) that allows individuals to use their cellular phones to make routine payments and to move money using simple text messaging (SMS technology). DPPL shareholders other than Calpian own a majority of MMPL’s equity shares.

Calpian has structured its investment in DPPL as an initial and second funding totaling $2.5 million, then quarterly tranches of approximately $1.2 million each occurring over the following 6 quarters and resulting in a total expected investment of $9.7 million, and a total of 6,123,077 shares of its Common Stock issued ratably over the 6 quarters. A total of 4,863,077 of the shares are subject to being reclaimed by Calpian if certain financial performance metrics are not achieved. To date, Calpian has raised approximately $3.2 million through issuing a combination of Common Stock and subordinated debt to meet its funding requirements, and expects to raise the remaining funds through additional private placements of its Common Stock. At the end of the investment series, Calpian expects to own approximately 74% of DPPL with the remainder held by its management team.

On March 28, 2012, the Company invested $1.3 million and has agreed in principle to issue, contingent upon DPPL’s lead founder delivering certain assurances from existing shareholders, 1,845,385 shares of its Common Stock in exchange for an approximate 15% equity interest in DPPL. As of September 30, 2012, the Company has invested $3.2 million and issued 2,430,770 shares of its Common Stock valued at $3.6 million for a 37.3% equity interest in DPPL, which resulted in the Company’s acquisition of a “significant subsidiary,” as that term is defined in Rule 102(w) of Regulation S-X and applied pursuant to Rule 11.01(b) of Regulation S-X. As a result, the Company has changed its method of accounting for its investment in DPPL from the “cost method” to the “equity method” of accounting and will recognize its proportionate share of DPPL’s operating results.

The Company’s current investment in DPPL is summarized as follows:

 

Proportionate share of shareholders’ equity

   $ 990,732   

Excess of investment over proportionate share of shareholders’ equity

     5,598,163   
  

 

 

 

Carrying value of investment

   $ 6,588,894   
  

 

 

 

The foregoing is a preliminary allocation based on the carrying value of DPPL’s net assets in its financial statements pending the obtaining of detail information about DPPL’s assets and liabilities and establishing their fair values.

 

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The combined balance sheets and results of operations of DPPL and MMPL as of September 30, 2012 and for the nine months then ended are summarized as follows:

 

Current assets

   $ 1,424,582   

Long-term assets

     2,259,202   

Current liabilities

     (602,286

Noncontrolling interests

     (673,260

Preferred shares

     (25,320
  

 

 

 

Net assets attributable to shareholders

   $ 2,382,918   
  

 

 

 

Revenue

   $ 66,910,000   

Gross profit

     637,827   

Expenses

     891,517   

Net loss

     (208,299

Calpian’s financial statements for the three months ended June 30, 2012 have been retrospectively adjusted by a comprehensive income loss of $168,460 to account for the investment in DPPL as if the equity method of accounting had been applied using the 19.9% ownership as of that date and the 15.8% weighted average ownership during that quarter. The adjustment decreased the carrying amount of our equity investment and increased our accumulated deficit and net loss with no effect on cash flows. No adjustment has been made to the three months ended March 31, 2012, as the effect would not be material.

(5) NOTE PAYABLE

On June 4, 2012, the Company entered into a promissory note with a non-affiliated third party in the amount of $33,383 to finance premiums for its directors and officers insurance. The note bears an interest rate of 7.0% per annum, and provides for payments of $3,818 per month through March 2013.

(6) DEBT

Subordinated Debt

The Company has issued $3,150,000 in restricted and $150,000 in unrestricted subordinated notes payable pursuant to a $3 Million Subordinated Debt Offering and a $2 Million Subordinated Debt Offering, each exempt from registration under Rule 506 of Regulation D, as described in detail in a Current Report on Form 8-K filed with the SEC on January 6, 2011 and incorporated herein by reference. The unrestricted note was purchased by a company whose shareholders include Calpian’s Chairman and Chief Executive Officer and members of his family.

The subordinated notes are secured by a first-priority lien on substantially all of the Company’s assets, but are subordinated to any thereafter-created senior debt. The notes bear interest at a rate of 12% annually, paid monthly in arrears, and all principal is due December 31, 2014. At issuance, holders of the notes received warrants to acquire up to 1,165,000 shares of our Common Stock. An additional 252,925 warrants were issued in August 2012 in consideration for extending the original November 2012 to June 2014 principal due dates to December 31, 2014. The aggregate $1,310,073 value of the warrants using the Black-Scholes option pricing model was amortized over the period from the date of issuance to the subordinated debt modification date. The modification-date fair value discount is being amortized over the remaining term of the debt.

Acquisition Credit Facility

On April 28, 2011, the Company secured an $8.0 million senior secured credit facility from an unrelated lender to acquire residual portfolios and borrowed $2.7 million on August 26, 2011. No additional draws may be made after August 2012. The promissory notes carry an interest rate of 16%. Interest only is paid monthly in arrears and all principal, classified as current portion of long-term debt on the balance sheet at September 30, 2012, is due on April 28, 2013. The credit facility is secured by a first lien on all current and after acquired assets of the Company. The Company paid to the lender origination and commitment fees totaling $280,000, paid the lender and third parties administrative fees and expenses totaling $43,639, and issued the lender warrants to acquire up to 804,467 shares of its Common Stock at $1.00 per share. The warrants, valued at $2,011,168 using the Black-Scholes option pricing model, were recorded as deferred financing costs on the balance sheet, and are being amortized over the 24-month life of the underlying credit facility.

 

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In November 2012, we entered into the $5.0 million term loan facility described in Note (11) Subsequent Events and repaid amounts outstanding under the foregoing $8.0 million facility.

(7) CAPITAL STOCK, WARRANTS, AND OPTIONS

We have not agreed to register any of our Preferred Stock, Common Stock, or warrants for resale under the Securities Act of 1933, as amended, although warrants to acquire up to 804,467 shares of the Company’s Common Stock have customary “piggy back” registration rights in the event that we register shares of our Common Stock in the future.

Preferred Stock

At the balance sheet dates, the Company had 1,000,000 shares of preferred stock, par value $.001 per share, authorized, but no shares outstanding.

Common Stock

During the nine months ended September 30, 2012, we issued 27,230 shares of our Common Stock valued at $70,997 in exchange for the right to receive cash from a residual portfolio and we sold in private placements 1,720,006 shares for $2,580,000 (16,667 of the shares valued at $25,000 were sold to the Company’s Chief Financial Officer). In April 2012 and as consideration for international acquisition advisory services, we issued 35,000 shares of Common Stock valued at $52,500. Such value is being expensed ratably over the 12-month service period. In June 2012, as consideration for financial advisory services, we issued 35,000 shares of Common Stock valued at $52,500. Such value was recorded as a deferred financing fee to be expensed upon the earlier of closing a qualified financing transaction or termination of the advisory agreement.

Warrants

The Company has issued warrants exercisable for an aggregate of up to 2,287,393 shares of Common Stock in connection with the issuances of subordinated notes payable, extension of the debt’s principal payment due dates, obtaining an acquisition credit facility, and consulting and other financing. The exercise prices of the warrants range from $1.00 to $2.00 (weighted average of $1.18) and expire 5 and 7 years from the dates of grant.

Options

On April 13, 2011, the Company adopted the 2011 Equity Incentive Plan (the “Plan”). 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. The Plan was subsequently approved by shareholders at the Annual Meeting of Shareholders on June 7, 2011. The value of options vested is recognized at each vesting period using Black-Scholes option pricing model and included in general and administrative expenses in the statements of comprehensive income.

Our Chief Financial Officer has been granted nonqualified stock options to purchase our Common Stock pursuant to the Plan (200,000 shares at $2.50 per share in April 2011 and 200,000 shares in August 2012 at $1.50 per share). The options under both grants expire ten years after the grant date or, in the case of the August 2012 grant, the earlier of ten years or the termination of services. The April 2011 options originally vested in 48 equal monthly installments; however, the unvested balance fully vested in August 2012 pursuant to a modification agreement. The August 2012 options fully vested on the grant date and $2,680 of expense was recognized.

(8) INCOME TAXES

The Company is a taxable corporation but, due to net losses, had no federal tax provision or liability in 2012 or 2011. State income tax provisions based on revenues net of compensation costs were reversed in 2012 when it was determined the taxable threshold for previous periods had not been attained.

At the most recent balance sheet date, the Company had an estimated $5,668,000 in net operating tax loss carry-forwards (“NOLs”) to offset future federal taxable income. Such NOLs expire beginning in 2030. Due to the Company’s continuing losses and uncertainty surrounding the Company’s ultimate ability to use the NOLs to offset future taxable income, the Company has provided a $2,353,000 valuation allowance reflecting 100% of all such NOLs and $426,000 of deferred tax items reversing in future years.

 

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(9) RELATED PARTIES

Amounts Payable to Officers, Directors, and Affiliates

A tentative payout schedule has been developed for the amounts owed to officers, directors, executives, and affiliates that would extend the payout period of the following amounts through 2012.

Deferred Compensation of Officers, Directors, and Executives

During 2010, salaries, wages, and bonuses for our officers, directors, and executives were deferred. At the most recent balance sheet date, such amounts yet to be paid totaled $125,000.

Accrued Expenses Payable to Officers, Directors, and Affiliates

Expenses

ART, of which Messrs. Montgomery and Jessen are controlling shareholders, directors, and officers, has provided the Company since its startup period with certain support services. The Company and ART have verbally agreed that these amounts would accrue and be due and owing by the Company to ART, interest-free, to be paid at a future date to be agreed upon by the parties. At the most recent balance sheet date, such unpaid expenses totaled $128,893.

At the most recent balance sheet date, $51,149 was payable to officers, directors and their affiliates (collectively, “affiliates”) in the form of accumulated expense reports seeking reimbursement for service fees, travel and entertainment, and similar expenses incurred on behalf of the Company.

Management Advisory Agreement

On January 1, 2011, the Company entered into a management advisory agreement with Cagan McAfee Capital Partners, LLC (“CMCP”), a merchant bank owned and controlled by Mr. Laird Cagan, a member of the Company’s Board of Directors and a significant shareholder of the Company. The non-exclusive agreement provides that CMCP will advise the Company on an array of financial and strategic matters and provide for the services of Laird Cagan, as a member of the Company’s Board of Directors. Pursuant to the agreement, CMCP will be paid $14,500 plus expenses each month in arrears beginning January 2011 and continuing through December 2013. The agreement continues month-to-month beyond December 2013 and is thereafter terminable by either party upon 30 days notice. At the most recent balance sheet date, amounts owed to CMCP under the agreement totaled $145,000, and such amounts are expected to be paid as available cash flow permits.

Securities Purchased by Insiders

A company whose shareholders include the Company’s Chairman and Chief Executive Officer and members of his family, purchased all $150,000 of the subordinated debt described in Note (6) Debt. In addition, the Company’s Chief Financial Officer purchased 16,667 shares of the Common Stock for $25,000 as described in Note (7) Capital Stock, Warrants, And Options.

(10) LITIGATION

On June 27, 2012, Calpian Residual Partners V, LP (“CRPVLP”), Calpian Residual GP V, LLC (together “CRPV”), Craig A. Jessen (“Jessen”), and Calpian were notified of certain complaints by National Bankcard Systems, Inc. (“NBS”) alleging breach of the Residual Purchase Agreement dated November 4, 2008, between CRPV and NBS and certain other improprieties by CRPV. Jessen, who is our President, a member of our Board of Directors, and is a substantial shareholder of Calpian, is an executive officer of CRPV, but CRPV is not otherwise an affiliate of Calpian. Each of the Residual Purchase Agreement and the related alleged improprieties of CRPV occurred prior to Calpian’s acquisition of the underlying residual portfolio on December 31, 2010. On September 18, 2012, NBS filed suit in the District Court of Dallas County, Texas against CRPVLP and Calpian (but not Jessen) alleging damages totaling approximately $729,000 including unpaid merchant servicing fees, compensation for residuals added after Calpian acquired the portfolio, and attorney fees. Calpian has retained legal counsel who has filed a response asserting affirmative defenses.

 

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(11) SUBSEQUENT EVENTS

In November 2012, the Company entered into a $5.0 million 43-month term loan facility with an unrelated lender to repay amounts outstanding under the existing $8.0 million credit facility and acquire additional credit card residuals in the U.S. The loan is interest only for the first 18 months and provides for repayment of principal at a level rate necessary to fully amortize the loan during the last 25 months. The loan has an interest rate of 13.2% per year and a prepayment penalty beginning at 4% and declining to 0% after the first year. A first lien on all the Company’s assets has been pledged as collateral for the loan.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The following discussion and analysis provides information which management of the Company believes to be relevant to an assessment and understanding of the Company’s results of operations and financial condition. This discussion should be read together with the Company’s financial statements and the notes to the financial statements, which are included in this Report. This information should also be read in conjunction with the information contained in our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2012, including the audited financial statements and notes included therein. The reported results will not necessarily reflect future results of operations or financial condition.

Cautionary Notice Regarding Forward-Looking Statements

This Report contains a number of forward-looking statements that reflect management’s current views and expectations with respect to our business, strategies, products, future results and events and financial performance. All statements made in this Report other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates will or may occur in the future, statement related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results and non-historical information, are forward-looking statements. Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below) and apply only as of the date of this Report. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward looking. These forward-looking statements are subject to certain risks and uncertainties, including, but are not limited to, those discussed in “Risk Factors” discussed in our previous and future filings with the SEC and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors that may affect our business.

Our actual results, performance, or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

Business Overview

Headquartered in Dallas, Texas, we are 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”). Small and medium-sized retail merchants typically buy their credit card processing and acquiring services from Independent Sales Organizations (“ISOs”). ISOs are sales agents authorized by contract with one or more credit card processors to sell processing and acquiring services on their behalf. ISOs shepherd the merchant’s application for processing and acquiring services through the labyrinth of approvals, credit checks, guarantees, etc. that are required before the merchant can be approved to accept consumer credit cards for payment. We act not as a credit card processor, but simply as a purchaser of revenue streams resulting from the relationships between processors and ISOs and other ISOs. In addition, we may also seek to acquire servicing rights with respect to residual portfolios acquired from ISOs and invest in payments-industry related opportunities.

 

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Our purchases of residual portfolios are expected to range in size and complexity from one-time events involving a single portfolio to multiple events over an extended period covering the entire current and possibly future portfolios of an ISO. Our aim is to acquire merchant residual portfolios by acquiring them directly from the ISOs that originated the contracts with the merchants. In a residual portfolio purchase, we buy the rights to the residual revenue streams owned by the ISO for a negotiated amount. Prior to acquisition of the residual portfolio from the ISO, our Company and the ISO notify the processor that we plan to acquire the rights to the residual portfolio and that all future residual payments should be paid to us. Processors are required to approve all such acquisitions as a condition of closing.

The Company advertises in industry trade journals to inform the ISO industry of its acquisition capabilities, including Transaction World Magazine (a wholly-owned subsidiary of ART but controlled by Calpian), and underwrites each potential deal using its own internal processes.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow from Operations

Cash inflows from existing residual portfolios acquired in 2012 and prior total approximately $300,000 per month. At the most recent balance sheet date, ongoing monthly cash expenses totaled approximately $260,000 per month (excluding time-discretionary payments to officers, directors, and executives of previously deferred amounts) thus causing the Company to be cash flow positive on an operating basis.

Sales of Unregistered Securities

The Company continues to sell shares of its Common Stock and issue subordinated debt to fund its investments in Digital Payments Processing Limited (“DPPL”) in India and acquire residual portfolios. For the year-to-date period through September 30, 2012, Calpian has raised approximately $3.2 million to fund its investment in DPPL, pay related expenses, and acquire residual portfolios, and the Company expects to raise additional funds through additional private placements of its Common Stock and subordinated debt.

Acquisition of Additional Residual Portfolios

In November 2012, the Company entered into the $5.0 million term loan facility described in Note (11) Subsequent Events of the Notes To Financial Statements contained in Part I of this Report, incorporated herein by reference, and repaid the outstanding balance of $2.7 million on the $8.0 million facility. Additional amounts available under the new $5.0 million credit facility will be used to pay expenses of the new facility (approximately $300,000) and acquire additional residual portfolios.

MATERIAL CHANGES IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Material Changes in Financial Condition

Cash Restricted to Acquisition of Residuals

During the nine months ended September 30, 2012, the Company used $397,000 of the proceeds from the issuance of subordinated notes to acquire additional residuals costing $492,000.

Equity Investment

During the nine months ended September 30, 2012, the Company raised approximately $2.6 million in equity and $750,000 in subordinated debt to fund $3.2 million of its $6.9 million equity investment in DPPL and pay related expenses of $136,690. In September 2012, we funded approximately $3.6 million of our equity investment by issuing approximately 2.4 million shares of our Common Stock. As a result of the additional funding, our equity interest increased to 37.5% of DPPL’s net assets at the most recent balance sheet date and our accounting for the investment was changed from the cost to the equity method by recognizing comprehensive income losses ($168,460 retrospectively in the second quarter; $267,260 year-to-date).

 

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Other Changes

There have been no other material changes in the Company’s financial condition since December 31, 2011 other than amortization of assets reflected in the statement of cash flows, classification of senior notes payable due April 28, 2013, to current liabilities, and classification from current liabilities to long-term debt of subordinated notes payable as a result of maturity dates being extended to December 31, 2014.

Comparison of Three Months Ended September 30, 2012 and 2011

Revenues during the three months ended September 30, 2012, reflect cash collections on residual portfolios previously acquired by the Company. The decrease from the comparable period in 2011 reflects normal attrition within our residual that also resulted in lower portfolio amortization.

Operating expenses during the three months ended September 30, 2012 and 2011 were composed entirely of general and administrative expenses. General and administrative expenses of $564,784 for the three months ended September 30, 2012, were slightly more than the $496,744 incurred in same period in 2011 due to modest changes across a range of expense types offset by $26,600 less expense recorded for equity awards to management.

Amortization of discount on subordinated debt reflects multiple issuances of notes. Amounts were lower in the three months ended September 30, 2012 compared to 2011 as the original November 2012 to June 2014 principal due dates were extended to December 31, 2014.

Interest expense for the three months ended September 30, 2012, reflects the costs of funds for the $8.0 million acquisition credit facility of $108,000 and the subordinated notes of $99,000, and other. Interest expense for the comparable period in 2011 included $41,806 for subordinated notes.

Comparison of Nine Months Ended September 30, 2012 and 2011

Revenues during the nine months ended September 30, 2012, reflect cash collections on residual portfolios previously acquired by the Company. The increase in the comparable period in 2011 and the increases in portfolio amortization and servicing costs reflect additional portfolio acquisitions since that period. Other costs of revenues decreased significantly from the comparable period in 2011 as 2011 included $74,982 in a residual lead-generation program, later terminated, and $39,018 higher acquisition costs.

Operating expenses during the nine months ended September 30, 2012 and 2011 were composed entirely of general and administrative expenses. General and administrative expenses of $1,846,160 for the nine months ended September 30, 2012, were larger than the $1,617,546 incurred in comparable period in 2011 due to $166,302 in expenses related to the equity investment in DPPL, $47,500 in consulting fees, and modest changes across a range of expense types offset by $42,730 less in legal fees and $49,556 less in equity awards to management.

Amortization of discount on subordinated debt reflects multiple issuances of notes. Amounts were higher in the nine months ended September 30, 2012 compared to 2011 due an additional $1,750,000 of subordinated notes which have been outstanding for various periods since August 2011, offset by the effect of the original November 2012 to June 2014 principal due dates being extended to December 31, 2014.

Interest expense for the nine months ended September 30, 2012, reflects the costs of funds for the $8.0 million acquisition credit facility of $324,000 and the subordinated notes of $263,550, and other. Interest expense for the comparable period in 2011 included $165,833 for subordinated notes and $41,806 for the credit facility offset by a minor amount of net interest income.

Off-Balance Sheet Arrangements

None.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no changes during the quarter in management’s assessment of the market risk we face in our operations.

 

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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

Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act) as of the end of the period covered by this quarterly report. Based on such evaluation, our management concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in our reports filed under the Exchange Act are recorded, processed, summarized and reported, as and when required. Disclosures stemming from the Company’s investment in Digital Payments Processing Limited will, for the first time, be included in our Annual Report of Form 10-K for the year ended December 31, 2012. As such, the Company is just now instituting disclosure controls and routines in India necessary to meet our ongoing reporting obligations in the future.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended September 30, 2012, that materially affected, either positively or negatively, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

The Company’s disclosure controls and procedures provide the Company’s Chief Executive Officer and Chief Financial Officer with reasonable assurances that the Company’s disclosure controls and procedures will achieve their objectives. However, 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. 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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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Litigation

On June 27, 2012, Calpian Residual Partners V, LP (“CRPVLP”), Calpian Residual GP V, LLC (together “CRPV”), Craig A. Jessen (“Jessen”), and Calpian were notified of certain complaints by National Bankcard Systems, Inc. (“NBS”) alleging breach of the Residual Purchase Agreement dated November 4, 2008, between CRPV and NBS and certain other improprieties by CRPV. Jessen, who is our President, a member of our Board of Directors, and is a substantial shareholder of Calpian, is an executive officer of CRPV, but CRPV is not otherwise an affiliate of Calpian. Each of the Residual Purchase Agreement and the related alleged improprieties of CRPV occurred prior to Calpian’s acquisition of the underlying residual portfolio on December 31, 2010. On September 18, 2012, NBS filed suit in the District Court of Dallas County, Texas against CRPVLP and Calpian (but not Jessen) alleging damages totaling approximately $729,000 including unpaid merchant servicing fees, compensation for residuals added after Calpian acquired the portfolio, and attorney fees. Calpian has retained legal counsel who has filed a response asserting affirmative defenses.

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 1, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2011, which could materially and adversely affect our business, financial condition, and results of operations. There have been no significant changes in those risk factors.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the period covered by this report, the Company completed additional closings of its ongoing private placement of equity pursuant to which it sold 866,669 shares of its Common Stock at a price of $1.50 per share resulting in gross proceeds to the Company of $1,300,000. All such amount was invested in DPPL.

The Company’s issuance of Common Stock and warrants, and any Common Stock issuable upon 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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOUSRES

Not applicable.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

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

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATE: November 13, 2012

 

CALPIAN, INC.

By:

 

/s/ David N. Pilotte

    David N. Pilotte
    Chief Financial 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
(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)    Material Contracts         
   10.31    Form of Note Modification Agreement, dated July 25, 2012 and effective August 7, 2012    8-K    August 10, 2012    10.1
(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.

 

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