MoneyOnMobile (MOMT) S-1 2013 FY IPO registration

As filed with the Securities and Exchange Commission on June 20, 2014.

SEC File No. 333-______

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

______________________

CALPIAN, INC.
(Exact name of registrant as specified in its charter)
Texas	7389	20-8592825
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)
500 North Akard Street, Suite 2850 Dallas, TX 75201 (214) 758-8600
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Harold H. Montgomery Chief Executive Officer 500 North Akard Street, Suite 2850 Dallas, TX 75201 (214) 758-8600
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of all communications, including communications sent to agent for service, should be sent to:
Darrin Ocasio, Esq. Jay Yamamoto, Esq. Timothy O’Brien, Esq. Sichenzia Ross Friedman Ference LLP 61 Broadway, 32nd Floor New York, New York 10006 Telephone: (212) 930-9700 Fax: (212) 930-9725

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

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.

(Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

Securities to be Registered	Amount to be Registered (1)		Proposed Maximum Aggregate Offering Price per share			Proposed Maximum Aggregate Offering Price			Amount of Registration fee
Common Stock, $0.001 par value per share		8,323,280	$	1.17	(2)	$	9,738,237.60	(1,2)	$	1,254.29
Common Stock, $0.001 par value per share, issuable upon the exercise of outstanding warrants		2,007,196	$		(3)	$	2,508,995		$	323.16
Total				-		$	12,247,232.60		$	1,577.45

(1)           We are registering 10,330,476 shares of our common stock, including (i) 8,323,280 shares of common stock issued to certain selling stockholders pursuant to stock purchase agreements (the “Purchase Shares”), (ii) 1,664,656 shares underlying the Warrants issued to certain selling stockholders, and (iii) 342,540 shares underlying the Warrants issued to the placement agent and its designees  (the “Warrant Shares”, and together with the Purchase Shares, the “Shares”).

 In the event of stock splits, stock dividends, or similar transactions involving the common stock, the number of common shares registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the “Securities Act”).  In the event that adjustment provisions of the Equity Purchase Agreement require the Company to issue more shares than are being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act, the Company will file a new registration statement to register those additional shares.

(2)           This offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(c) of the Securities Act on the basis of the average of the low and high bid price of common stock of the Company as reported on the Over-the-Counter Market (the “OTC Market”) on June 18, 2014.

(3)           This offering price per share of $1.25 is calculated based upon the price at which the warrants or rights may be exercised pursuant to Rule 457(g)(1) of the Securities Act of 1933, as amended.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 20, 2014

PRELIMINARY PROSPECTUS

10,330,476 Shares of Common Stock

CALPIAN, INC.

Common Stock

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This prospectus relates to the sale by the selling stockholders identified in this prospectus of up to 10,330,476 shares of our common stock, par value $0.001 per share (the “Common Stock”), which includes 2,007,196shares of Common Stock issuable upon exercise of the Warrants.

The prices at which the selling stockholders may sell shares will be determined by the prevailing market price for the shares or in privately negotiated transactions. We will not receive any proceeds from the sale of these shares by the selling stockholders.  All expenses of registration incurred in connection with this offering are being borne by us, but all selling and other expenses incurred by the selling stockholders will be borne by the selling stockholders.

Our Common Stock is currently approved for quotation on the OTC Markets maintained by the Financial Industry Regulatory Authority, Inc. (FINRA) under the symbol “CLPI”.  On June 18, 2014, the last reported sale price of our Common Stock as reported on the OTC Markets was $1.15 per share.

Investing in our Common Stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties in the section entitled “Risk Factors” beginning on page 9 of this prospectus before making a decision to purchase our stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                          , 2014

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TABLE OF CONTENTS

	Page
Prospectus Summary	6
Risk Factors	9
Special Note Regarding Forward Looking Statements	19
Use of Proceeds	19
Market for Our Common Stock and Related Stockholder Matters	19
Management’s Discussion and Analysis of Financial Condition and Results of Operation	21
Business	25
Management	30
Executive Compensation	33
Certain Relationships and Related Transactions	34
Security Ownership of Certain Beneficial Owners and Management	35
Selling Stockholders	36
Description of Securities	52
Plan of Distribution	53
Legal Matters	54
Experts	54
Where You Can Find Additional Information	55
Index to Financial Statements	F-1

You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The selling stockholders are offering to sell and seeking offers to buy shares of our Common Stock, including shares they acquire upon exercise of their derivative securities, only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Common Stock. The prospectus will be updated and updated prospectuses made available for delivery to the extent required by the federal securities laws.

No person is authorized in connection with this prospectus to give any information or to make any representations about us, the selling stockholders, the securities or any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us or any selling stockholder. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy the securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus. The prospectus will be updated and updated prospectuses made available for delivery to the extent required by the federal securities laws.

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Prospectus Summary

This summary highlights information contained elsewhere in this prospectus. It does not contain all of the information that you should consider before investing in our securities. You should read the entire prospectus carefully, including the section entitled “Risk Factors” and our consolidated financial statements and the related notes. Some of the statements contained in this prospectus, including statements under “Prospectus Summary” and “Risk Factors” as well as those noted in the documents incorporated herein by reference, are forward-looking statements and may involve a number of risks and uncertainties.  We note that our actual results and future events may differ significantly based upon a number of factors.  The reader should not put undue reliance on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus.

Corporate Information

Calpian, Inc., a Texas corporation headquartered in Dallas, Texas, was incorporated on May 30, 2006, as Toyzap.com, Inc., and became a public company on May 7, 2008, through a self-underwritten registered public offering of 4,000,000 shares of $.001 par value common stock.  The offering raised $150,000 that was used to pursue a business strategy that never commenced operations.  The “shell company”, Toyzap.com, Inc., was acquired by members of the Company’s current management team, affiliates thereof, and certain other purchasers, on April 23, 2010, pursuant to purchase agreements whereby approximately 99% of the Company’s then issued and outstanding common stock was acquired.  At such time, the former management and Board of Directors resigned and a new management team and Board of Directors were appointed, who then redirected the business focus of the Company to the business plan described below.  On September 3, 2010, the Company changed its name to “Calpian, Inc.” pursuant to approval obtained at a meeting of our shareholders.  The Company’s common stock began trading in the over the counter (“OTC”)market on March 4, 2009, and it currently trades there under the symbol “CLPI.”

In March 2012, the Company began to acquire equity interests in Digital Payments Processing Limited (“DPPL”), a newly-organized company.  DPPL maintains an exclusive services agreement with My Mobile Payments Limited (“MMPL”).  Both companies are organized under the laws of India and headquartered in Mumbai, India.  MMPL is a contractual variable interest entity of DPPL.  In the first calendar quarter of 2014, the Company acquired additional common stock of DPPL, giving the Company an aggregate 69% ownership of DPPL.  The Company and DPPL have entered into an agreement by which the Company intends to acquire additional shares of common stock of DPPL to increase its equity percentage to 74% for an additional investment amount to be negotiated as future investments are made.  The acquisition of additional shares is subject to approval by the Indian government and regulations for foreign investment.

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.  The acquisition was financed by expanding the Company's senior credit facility from $5 million to $14.5 million.

On April 25, 2014, our Board of Directors (the “Board”) unanimously authorized a change in the Company’s fiscal year end from December 31st to March 31st, beginning on March 31, 2014.  The Company’s majority-owned subsidiary, Digital Payments Processing Limited, and My Mobile Payments Limited, DPPL’s contractual variable interest entity, are required to submit to the Indian government audited financial statements as of March 31st of each year.  In order to align the Company’s audit resources and reduce duplication of efforts, the Board, believing it to be appropriate and in the best interest of the Company, changed the Company’s fiscal year end.

Our executive offices are located at 500 North Akard St., Suite 2850, Dallas, TX 75201, and our telephone number is 214-758-8600

About This Offering

This prospectus includes 10,330,476 shares of Common Stock offered by the Selling Stockholders, consisting of (i) 8,323,280 shares of Common Stock, and (ii) 2,007,196 shares of Common Stock issuable upon exercise of the Warrants acquired by the Selling Stockholders pursuant to the following transactions:

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Private Placement

On May 20, 2014 (the “Final Closing Date”), the Company conducted a final closing of a series of three closings pursuant to Subscription Agreements dated as of March 31, 2014, April 30, 2014 and May 20, 2014 (the “Subscription Agreements”) with certain accredited investors (the “Purchasers”) for the private sale (the “Private Placement”) of an aggregate of 8,323,280 units (each, a “Unit”), at $1.00 per Unit.  Each Unit consisted of (i) one share of the Company’s common stock, par value $.001 per share (the “Common Stock”); and (ii) one 5 year warrant to purchase one fifth (1/5) of one share of Common Stock (each, a “Warrant” and collectively, the “Warrants”). The Company sold a total of 8,323,280 shares of Common Stock and 1,664,656 Warrants.  The Warrants are exercisable at any time within five years from their issuance at an initial exercise price of $1.25 per share.  The aggregate gross proceeds received by the Company was $8,323,280.

The Company engaged a registered broker dealer to serve as placement agent for the Private Placement (the “Placement Agent”).  The Placement Agent received (a) a placement fee equal to ten percent (10%) of the gross proceeds received by the Company from the investors that were introduced to the Company by the Placement Agent; (b) 5-year warrants, such warrants having an initial exercise price of $1.25 per share, equal to five percent (5%) of the of the aggregate number of shares of Common Stock that were purchased in the Private Placement, excluding the shares of Common Stock purchased in connection with the Company’s sales efforts; and (c) all of the expenses the Placement Agent incurred in connection with the Private Placement.  The total placement fee paid by the Company to the Placement Agent was $685,080.  The Company issued to the Placement Agent and its designees warrants to purchase an aggregate of 342,540 shares of Common Stock on the same terms as the Warrants issued to the Purchasers.

In connection with the Private Placement, we entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the investors in the Private Placement whereby the Company agreed to register the shares underlying the Units and issuable upon exercise of warrants for resale on a Registration Statement, to be filed with the SEC within 45 days of the final closing of the Private Placement and to cause such Registration Statement to be declared effective within 120 days of the filing date.  

The Company intends to use the net proceeds from the Private Placement for general corporate and working capital purposes. The Company will not use the proceeds to make a loan or any other payment to the Company’s officers, directors, managers or affiliates, except in the ordinary course of business for services to be performed after the Closing Date or as reimbursement of business expenses in accordance with the Company’s policies and procedures. Nor will the Company use any of the proceeds to pay any personal expenses of the Company’s officers, directors, managers or affiliates.

Estimated use of proceeds

This prospectus relates to shares of our Common Stock that may be offered and sold from time to time by the selling stockholders. We will not receive any of the proceeds resulting from the sale of Common Stock by the selling stockholders, however, we may receive proceeds from the exercise of Warrants.

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As used in this prospectus, unless otherwise specified, references to the “Company,” “Calpian,” “CLPI,” “we,” “our” and “us” refer to Calpian, Inc. and, unless otherwise specified, its direct and indirect subsidiaries.
The Offering
Common Stock offered by the selling stockholders:	A total offering of 10,330,476 shares from two private placements (the “Private Placements”), consisting of 8,323,280shares of Common Stock, 1,664,656 shares of Common Stock issuable upon the exercise of outstanding Warrants sold to investors in the Private Placements, and 342,540 shares of Common Stock issuable upon the exercise of outstanding Warrants issued to the Placement Agent and its designees.  The Company granted certain registration rights to the investors in the Private Placements. The registration of the shares of the selling stockholders pursuant to a registration statement, of which this prospectus is a part, will satisfy the Company’s obligations to the investors in the Private Placements.
Common Stock outstanding before and after this offering:	30,281,925 (1) and 40,612,401 (2)
Use of proceeds:	We will not receive any proceeds from the sale of shares in this offering by the selling stockholders.
OTC Bulletin Board symbol:	CLPI
Risk factors:	You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 9 of this prospectus before deciding whether or not to invest in shares of our Common Stock.

(1) The number of outstanding shares before the offering is based upon 38,605,205 shares outstanding as of June 18, 2014 less the 8,323,280 shares of Common Stock already issued to the Purchasers in the Private Placement and excludes 1,664,656 shares of Common Stock issuable upon the exercise of outstanding Warrants issued to the Purchasers in the Private Placement and 342,540 shares of Common Stock issuable upon exercise of outstanding Warrants issued to the Placement Agent and its designees in the Private Placement.

(2) The number of outstanding shares after the offering assumes the sale of the shares of the Common Stock and the shares underlying the Warrants issued to the Purchasers and the Placement Agent and its designees in the Private Placement, which are being offered pursuant to this prospectus.

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RISK FACTORS

Investing in our Common Stock involves a high degree of risk. Before investing in our Common Stock you should carefully consider the following risks, together with the financial and other information contained in this prospectus. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be adversely affected. In that case, the trading price of our Common Stock would likely decline and you may lose all or a part of your investment.

Risks Relating To Our Business

We have limited operating history in the merchant residual and acquisition business and are operating at a loss.  There is no guarantee we will become profitable which makes it difficult to predict future results and raises questions as to our ability to successfully develop profitable business operations.

We revised our business model in 2010 to operate in the merchant acquisition industry and anticipate we will operate at a loss for some time.  We have two years of financial results on which our potential may be judged.  There can be no guarantee we will ever become profitable.

Our success will be dependent on our management team for the foreseeable future.

We believe our success depends on the continued service of our key executives.  Although we currently intend to retain our existing management, we cannot assure such individuals will remain with us.  We have no employment agreements with any individuals.  The unexpected loss of the services of one or more of our key executives, directors, or advisors, or our inability to find suitable replacements within a reasonable period of time following any such loss, could have a material adverse effect on our ability to execute our business plan and, therefore, have a material adverse effect on our financial condition and results of operations.

We may not be able to raise the additional capital necessary to execute our business strategy which could result in curtailment of our operations.

Our ability to raise additional capital is uncertain and dependent on numerous factors beyond our control including, but not limited to, economic conditions and availability or lack of availability of credit.  If we are unable to obtain additional financing, or if the terms thereof are too costly, we may be forced to curtail operations until such time as alternative financing is arranged which would have a material adverse impact on our planned operations.

Any new or changes made to laws, regulations, card network rules or other industry standards affecting our business may have an adverse impact on our financial results.

We are subject to numerous regulations that affect the electronic payments industry.  Regulation and proposed regulation of the payments industry has increased significantly in recent years.  Failure to comply with regulations may have an adverse effect on our business, including the limitation, suspension, or termination of services provided to, or by, third parties, and the imposition of penalties, including fines.  We are also subject to U.S. financial services regulations, numerous consumer protection laws, escheat regulations, and privacy and information security regulations, among others.  Changes to legal rules and regulations, or the interpretation or enforcement thereof, could have a negative financial effect on the Company.  We are also subject to the rules of Visa, MasterCard, and various other credit and debit networks.  Furthermore, we are subject to the Housing Assistance Tax Act of 2008, which requires information returns to be filed by merchant acquiring entities for each calendar year starting in 2011.

Interchange fees, which are typically paid by the acquirer to the issuer in connection with transactions, are subject to increasingly intense legal, regulatory, and legislative scrutiny.  In particular, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law in July 2010, significantly changes the U.S. financial regulatory system, including by regulating and limiting debit card fees charged by certain issuer banks and allowing merchants to offer discounts for different payment methods, as well as other measures.  The impact of the Dodd-Frank Act on the Company is difficult to estimate, as it will take time for the market to react and adjust to regulations that have been implemented and because certain additional regulations have yet to be developed.

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Regulatory actions such as these, even if not directed at us, may require us to make significant efforts to change our products and services and may require that we change how we price our services to customers.  Furthermore, regulatory actions may cause changes in business practices by us and other industry participants which could affect how we market, price and distribute our products and services. These regulations may materially and adversely affect the Company’s business or operations, either directly or indirectly.

We have faced, and may face in the future, significant chargeback liability and liability for merchant or customer fraud, which we may not be able to accurately anticipate.

We have potential liability for chargebacks associated with the transactions we process.  If a billing dispute between a merchant and a cardholder is not ultimately resolved in favor of the merchant, the disputed transaction is “charged back” to the merchant’s bank and credited to the account of the cardholder.  If we or our sponsoring banks are unable to collect the chargeback from the merchant’s account, or, if the merchant refuses or is financially unable (due to bankruptcy or other reasons) to reimburse the merchant’s bank for the chargeback, we bear the loss for the amount of the refund paid to the cardholder’s bank.

We also have potential liability for losses caused by fraudulent card-based payment transactions.  Card fraud occurs when a merchant’s customer uses a stolen card (or a stolen card number in a card-not-present transaction) to purchase merchandise or services.  In a traditional card-present transaction, if the merchant swipes the card, receives authorization for the transaction from the card issuing bank and verifies the signature on the back of the card against the paper receipt signed by the customer, the card issuing bank remains liable for any loss.  In a fraudulent card-not-present transaction, even if the merchant receives authorization for the transaction, the merchant is liable for any loss arising from the transaction.  Many of the small merchants that we serve are small businesses that transact a substantial percentage of their sales in card-not-present transactions over the Internet or in response to telephone or mail orders, which makes these merchants more vulnerable to customer fraud than larger merchants.  Because substantially all of the merchants we serve are small merchants, we experience chargebacks arising from cardholder fraud more frequently than providers of payment processing services that service larger merchants.

Merchant fraud occurs when a merchant, rather than a customer, knowingly uses a stolen or counterfeit card or card number to record a false sales transaction, or intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction.  Anytime a merchant is unable to satisfy a chargeback, we are responsible for that chargeback.  We have established systems and procedures to detect and reduce the impact of merchant fraud, but we cannot be sure that these measures are or will be effective.  It is possible that incidents of fraud could increase in the future.  Failure to effectively manage risk and prevent fraud could increase our chargeback liability.

We rely on bank sponsors, which have substantial discretion with respect to certain elements of our business practices, in order to process bankcard transactions.  If these sponsorships are terminated and we are not able to secure or successfully migrate merchant portfolios to new bank sponsors, we will not be able to conduct our business.

Because we are not a bank, we are unable to belong to and directly access the Visa and MasterCard bankcard associations.  Visa and MasterCard operating regulations require us to be sponsored by a bank in order to process bankcard transactions.  We are currently registered with Visa and MasterCard through the sponsorship of banks that are members of the card associations.

Our sponsoring banks may terminate their agreements with us if we materially breach the agreements and do not cure the breach within an established cure period, if our membership with Visa or MasterCard terminates, if we enter bankruptcy or file for bankruptcy, or if applicable laws or regulations, including Visa and MasterCard regulations, change to prevent either the applicable bank or us from performing services under the agreement.  If these sponsorships are terminated and we are unable to secure a bank sponsor, we will not be able to process bankcard transactions.  Furthermore, our agreements with our sponsoring banks provide the sponsoring banks with substantial discretion in approving certain elements of our business practices, including our solicitation, application and qualification procedures for merchants, the terms of our agreements with merchants, the processing fees that we charge, our customer service levels, and our use of sales agents.  We cannot guarantee that our sponsoring banks’ actions under these agreements will not be detrimental to us, nor can we provide assurance that any of our sponsoring banks will not terminate their sponsorship of us in the future.

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If we or our bank sponsors fail to adhere to the standards of the Visa and MasterCard payment card associations, our registrations with these associations could be terminated, and we could be required to stop providing payment processing services for Visa and MasterCard.

Substantially all of the transactions we process involve Visa or MasterCard.  If we or our bank sponsors fail to comply with the applicable requirements of the Visa or MasterCard payment card associations, Visa or MasterCard could suspend or terminate our registration. The termination of our registration or any changes in the Visa or MasterCard rules that would impair our registration could prevent us from providing payment processing services.

We rely on third-party processors and service providers; if they fail or no longer agree to provide their services, our merchant relationships could be adversely affected and we could lose business.

We rely on agreements with several large payment processing organizations to enable us to provide card authorization, data capture, settlement and merchant accounting services and access to various reporting tools for the merchants we serve.  We also outsource to third parties other services, such as reorganizing and accumulating daily transaction data on a merchant-by-merchant and card issuer-by-card issuer basis and forwarding the accumulated data to the relevant bankcard associations.  Many of these organizations and service providers are our competitors, and we do not have long-term contracts with most of them.  Typically, our contracts with these third parties are for one-year and are subject to cancellation upon limited notice by either party.  The termination by our service providers of their arrangements with us or their failure to perform their services efficiently and effectively may adversely affect our relationships with the merchants whose accounts we serve and may cause those merchants to terminate their processing agreements with us.

Changes in credit card association or other network rules or standards could adversely affect the Company’s business.

 The Company and many of its customers are subject to card association and network rules that could subject the Company or its customers to a variety of fines or penalties that may be levied by the card associations or networks for certain acts or omissions by the Company, acquirer customers, processing customers and merchants. Visa, MasterCard and other networks, some of which are the Company’s competitors, set the standards with respect to which the Company must comply. The Company’s status as a certified service provider, or any changes in card association or other network rules or standards, including interpretation and implementation of the rules or standards, that increase the cost of doing business or limit the Company’s ability to provide services to or through the Company’s customers, could have an adverse effect on the Company’s business, results of operations and financial condition.

Unauthorized disclosure of merchant and cardholder data, whether through breach of our computer systems or otherwise, could negatively impact our operations and expose us to protracted and costly litigation.

As part of our business, we operate a proprietary payment gateway that collects and stores certain cardholder data related to transactions processed through the gateway, including credit card and debit card numbers and cardholder addresses. We also maintain a database of similar cardholder data relating to specific transactions not processed through our proprietary gateway for purposes of processing such transactions and for fraud prevention and other internal processes.  In addition, we collect and store on our servers data about merchants and their principal owners, including names, addresses, social security numbers, driver’s license numbers, checking and savings account numbers, and payment history records.  Although plans and procedures are in place to protect this sensitive data, we cannot be certain that our measures will be successful and will be sufficient to counter all current and emerging technology threats designed to breach our systems in order to gain access to confidential information. A security breach or other misuse of this data could harm our reputation and deter existing and prospective customers from using our products and services, increase our operating expenses in order to contain and remediate the breach, expose us to unbudgeted or uninsured liability, disrupt our operations (including potential service interruptions), increase our risk of regulatory scrutiny, result in the imposition of penalties and fines under state, federal and foreign laws or by the card networks, and adversely affect our continued card network registration and financial institution sponsorship.

Although we generally require that our agreements with our sales agent and other service providers who may have access to merchant and customer data include confidentiality obligations that restrict these parties from using or disclosing any customer or merchant data except as necessary to perform their services under the applicable agreements, we cannot assure you that these contractual measures will prevent the unauthorized disclosure of merchant or customer data by the sales agent or service providers. In addition, our agreements with financial institutions (as well as card association requirements) require us to take certain protective measures to ensure the confidentiality of merchant and consumer data.  The costs of systems and procedures associated with such protective measures may increase and could adversely affect our ability to compete

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effectively. Any failure to adequately comply with these protective measures could result in fees, penalties, and/or protracted and costly litigation.

Our reputation could be damaged as a result of negative publicity.

We depend upon our reputation to compete for agents, merchants, and employees.  Unfavorable publicity can damage our reputation and negatively impact our economic performance.

We have been the subject of legal proceedings which could have had a material adverse effect on our business, financial condition or operating results.

We are not party to any unsettled legal proceedings other than routine claims and lawsuits arising in the ordinary course of our business. We do not believe such claims and lawsuits, individually or in the aggregate, will have a material adverse effect on our business. For more information about the Company’s legal proceedings, see “Legal Proceedings.”

Risks Relating to Industry

If we fail to comply with the applicable requirements of the processing agreements, some or all of the card brands with which we do business could seek to fine us, suspend us, or terminate our registrations.  Fines could have an adverse effect on our operating results and financial condition, and, if these registrations are terminated, we would not be able to conduct our business.

If we are unable to comply with processing agreement requirements, the card brands with which we do business could seek to fine us, suspend our processors from processing transactions.  The termination of registration or any changes in the card brands’ rules that would impair our registration could make it impossible for us to conduct our business.

The payments industry is highly competitive and we expect to compete with larger firms having greater financial resources.  Such competition could increase and adversely influence our prices to merchants and our operating margins.

We compete in a highly competitive market with a wide variety of processing service providers including, but not limited to, First Data Merchant Services, Elavon, Inc., a U.S. Bancorp subsidiary, JP Morgan Chase & Co. and its subsidiaries, Vantiv, Bank of America, Wells Fargo, Worldpay, iPayment, Heartland Payment Systems, Global Payments, TSYS Merchant Solutions, Innovative Merchant Services, an Intuit company, local and regional banks, and other ISOs.  These and other providers have established a sizable market share in the small- and medium-size merchant processing sector.  Developing and maintaining our growth will depend on a combination of the continued growth in electronic payment transactions and our ability to increase our market share.  If competition causes us to reduce the prices we charge, we will have to aggressively control our costs in order to maintain acceptable results of operations. 

The primary competitive factors in our industry are the price of services rendered and the contractual terms between the merchant and the processor.  Our competitors that are financial institutions or subsidiaries of financial institutions do not incur the costs associated with being sponsored by a bank for registration with the card.  These competitors have substantially greater financial, technological, management, and marketing resources than we have.  This may allow them to offer more attractive fees to our current and prospective merchants, or offer other products or services that we do not.  This could result in a loss of customers, greater difficulty attracting new customers, and a reduction in the price we can charge for our services.

The market for credit and debit card processing services is highly competitive and has relatively low barriers to entry.  The level of competition has increased in recent years as other providers of processing services have established a sizable market share in the small merchant processing sector. Some of our competitors are financial institutions, subsidiaries of financial institutions or well-established payment processing companies that have substantially greater capital, technological, management and marketing resources than we have.  There are also a large number of small providers of processing services that provide various ranges of services to small and medium sized merchants.  This competition may effectively limit the prices we can charge and requires us to control costs aggressively in order to maintain acceptable profit margins.  Further, if the use of cards other than Visa or MasterCard, such as American Express, grows, or if there is increased use of certain debit cards, our average profit per transaction could be reduced.  In addition, our competitors in recent years have consolidated as large banks merged and combined their networks.  This consolidation may also require that we increase the consideration we pay for future acquisitions and could adversely affect the number of attractive acquisition opportunities presented to us.  Our

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future competitors may develop or offer services that have price or other advantages over the services we provide.  If they do so and we are unable to respond adequately, our business, financial condition, and results of operations could be materially adversely affected.

Risks Relating To Acquisitions

Revenues and profits generated by acquired businesses or account portfolios may be less than anticipated, resulting in losses or a decline in profits, as well as potential impairment charges.

In evaluating and determining the purchase price for a prospective acquisition, we estimate the future revenues and profits from that acquisition based on the historical revenue of the acquired provider of payment processing services or portfolio of merchant accounts.  Following an acquisition, it is customary to experience some attrition in the number of merchants serviced by an acquired provider of payment processing services or included in an acquired portfolio of merchant accounts.  Should the rate of post-acquisition merchant attrition exceed the rate we forecasted, the revenues and profits generated by the acquired providers of payment processing services or portfolio of accounts may be less than we estimated, which could result in losses or a decline in profits, as well as potential impairment charges.

We may fail to uncover all liabilities of acquisition targets through the due diligence process prior to an acquisition, exposing us to potentially significant, unanticipated costs.

Prior to the consummation of any acquisition, we perform a due diligence review of the business or portfolio of merchant accounts that we propose to acquire.  Our due diligence review, however, may not adequately uncover all of the contingent or undisclosed liabilities we may incur as a consequence of the proposed acquisition.  For example, in the past we may have been obligated to fund certain credits and charge-backs after discovering that a merchant account from an acquired merchant processing portfolio was in substantial violation of the Visa and MasterCard card association rules. In the future we may make acquisitions that may obligate us to make similar payments resulting in potentially significant, unanticipated costs.

We may not be able to integrate recently acquired companies or potential future acquisitions into our company, and resources available to assist our acquired companies may be insufficient. 

We have made strategic acquisitions and we intend to continue to make such acquisitions in accordance with our business plan.  Each acquisition involves a number of risks, including:

1.	the diversion of our management’s attention to the assimilation and ongoing assistance with the operations and personnel of the acquired business, which could strain management’s resources;
2.	the potential for our affiliated companies to grow rapidly and adversely affect our ability to assist our affiliated companies as intended;

3.	possible adverse effects on our results of operations and cash flows;
4.	possible inability by us to achieve our intended objective or goals of the acquisition;

5.	possible inability by acquisition to retain and maintain strategic vendors or contacts; and
6.	our inability to assist our affiliated companies as intended or to acquire and integrate businesses under our business plan could negatively impact our operations, financial results and cash flows.

Risks Relating To Government Regulation

We may find our business operations are regulated by current privacy laws, such as the Gramm-Leach Bliley Act, and that we are not in compliance with such laws and regulations as it applies to consumer information we may process and collect.

The laws governing privacy generally remain unsettled; however, even in areas where there has been some legislative action such as the Gramm-Leach-Bliley Act (the “Act”) and other consumer statutes, it is difficult to determine whether and how existing privacy laws apply to our business.  For example, the Act requires nonaffiliated third-party service providers to financial institutions to take certain steps to ensure the privacy and security of financial information; however, the law is new and there have been few rulings interpreting its provisions.  We may be mistaken in our belief that our activities fall under exceptions to the consumer notice and opt-out requirements contained in the Act and find that we are not in compliance with these laws, or that we may not be able to become compliant, if at all, without significant time and

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expense.  The cost of compliance or limitation on our business operations if we must restrict our access to and use of consumer information could adversely affect our ability to provide the services we intend to offer to our merchants or could impair the value of these services.

New and potential governmental regulations designed to reduce, regulate, or change interchange costs, network access fees or any other fee charged to a merchant or the terms of merchant contracts, or to require specified data security levels on transactions, or the enactment of any other additional regulations or modifications of existing regulations could adversely affect our results of operations.

Due to changing regulations at various levels of government, we are unable to determine the potential outcomes of the regulations.  For example, the “Durbin Amendment” legislation was enacted to regulate the basis on which interchange rates for debit card transactions are made so as to ensure that interchange rates are “reasonable and proportionate to costs.”  The amendment could limit the debit card interchange fees paid by retailers to ISOs and potentially limit the revenue we could derive from interchange fee markups.  The likelihood of future similar legislation is uncertain.  In addition, federal or state legislation could be enacted requiring ISOs like our Company to be responsible for data security with respect to transactions in which it is involved despite never having access to, or being in possession of, any consumer data.  Such regulations would have an adverse impact on our economic results due to both reduction in revenues and increases in operating expenses.

Governments experiencing budget deficits may impose taxes on us or our service providers we cannot pass on to or merchants which would increase our operating costs.

We and our service providers may become subject to additional U.S., state, or local taxes that, by regulation, cannot be passed through to our merchants which would increase our operating costs.

New and potential governmental regulations designed to protect or limit access to consumer information could adversely affect our ability to provide, or the value of, the services we currently provide to our merchants.

Due to the increasing public concern over consumer privacy rights, governmental bodies in the United States and abroad have adopted, and are considering adopting, additional laws and regulations restricting the purchase, sale and sharing of personal information about customers.  For example, the Gramm-Leach-Bliley Act requires non-affiliated third-party service providers to financial institutions to take certain steps to ensure the privacy and security of consumer financial information.  We believe our present activities fall under exceptions to the consumer notice and opt-out requirements contained in this law for third-party service providers to financial institutions.  However, the laws governing privacy generally remain unsettled.  Even in areas where there has been some legislative action, such as the Gramm-Leach-Bliley Act and other consumer statutes, it is difficult to determine whether and how existing and proposed privacy laws or changes to existing privacy laws will apply to our business.  Limitations on our ability to access and use customer information could adversely affect our ability to provide the services we currently offer to our merchants or impair the value of these services.

Several states have proposed legislation that would limit the use of personal information gathered using the Internet.  Some proposals would require proprietary online service providers and website owners to establish privacy policies.  Congress has also considered privacy legislation that could further regulate the use of consumer information obtained over the Internet or in other ways.  Our compliance with these privacy laws and related regulations could materially affect our operations.

Changes to existing laws or the passage of new laws could:

1. create uncertainty in the marketplace that could reduce demand for our services; 

2. restrict or limit our ability to sell certain products and services to certain customers; 

3. limit our ability to collect and to use merchant and cardholder data; 

4. increase the cost of doing business as a result of litigation costs or increased operating costs; or

5. in some other manner have a material adverse effect on our business, results of operations and financial condition.

Any change in the regulatory environment could have a material adverse effect on our business, financial condition and results of operations.

We are subject to federal and state laws regarding anti-money laundering, including the Patriot Act, and if we break any of these laws we could be subject to significant fines and/or penalties, and our ability to conduct business could be limited.

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 We are subject to U.S. federal anti-money laundering laws and the requirements of the Office of Foreign Assets Control (OFAC), which prohibit us from transmitting money to specified countries or on behalf of prohibited individuals.  The money transfer business has been subject to increased scrutiny following the events of September 11, 2001.  The Patriot Act, enacted following those events, mandates several new anti-money laundering requirements.  The federal government or the states may elect to impose additional anti-money laundering requirements.  Changes in laws or regulations that impose additional regulatory requirements, including the Patriot Act, could increase our compliance and other costs of doing business, and therefore have an adverse effect on our results of operation.

Failure to comply with the laws and regulatory requirements of federal and state regulatory authorities could result in, among other things, revocation of required registrations, loss of approved status, termination of contracts with banks, administrative enforcement actions and fines, class action lawsuits, cease and desist orders and civil and criminal liability.  The occurrence of one or more of these events could materially adversely affect our business, financial condition and results of operations.

If we were to inadvertently transmit money on behalf of, or unknowingly conduct business with, a prohibited individual, we could be required to pay significant damages, including fines and penalties.  Likewise, any intentional or negligent violation of anti-money laundering laws by our employees could lead to significant fines and/or penalties, and could limit our ability to conduct business in some jurisdictions.

Risks Relating To Our Common Stock

Our issuance of preferred stock could adversely affect the value of our common stock.

Our Certificate of Formation provides for the issuance of up to 1.0 million shares of what is commonly referred to as “blank check” preferred stock.  Such stock may be issued by our Board of Directors from time to time, without shareholder approval, as one or more separate series of shares as designated by resolution of our Board setting forth the relative rights, privileges, and preferences of the series, including, if any, the: (i) dividend rate; (ii) price, terms, and conditions of redemption; (iii) voluntary and involuntary liquidation preferences; (iv) provisions of a sinking fund for redemption or repurchase; (v) terms of conversion to common stock, including conversion price; and (vi) voting rights. The issuance of such shares, with superior rights and preferences, could adversely affect the interests of holders of our common stock and potentially the value of our common stock.  Our ability to issue such preferred stock also could give our Board of Directors the ability to hinder or discourage any attempt to gain control of us by a merger, tender offer at a control premium price, proxy contest, or otherwise.

Our common stock is deemed “penny stock” and, therefore, subject to special requirements making the trading of our common stock more difficult than for stock of a company that is not deemed “penny stock.”

A “penny stock” as defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934 is a stock: (i) trading at a price of less than five dollars ($5.00) per share; (ii) not traded on a “recognized” national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of an issuer having net tangible assets of less than $2.0 million (if the issuer has been in continuous operation for at least three years) or $5.0 million (if in continuous operation for less than three years), or with average revenues of less than $6.0 million for the last three years.

Section 15(g) of the Exchange Act, and Rule 15g-2 promulgated thereunder, require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account.  Moreover, Rule 15g-9 promulgated under the Exchange Act requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor.  This procedure requires the broker-dealer to: (i) obtain information concerning the investor’s financial situation, investment experience, and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience, and investment objectives.

Compliance with the foregoing requirements may make it more difficult for investors in our common stock to resell their shares to third parties or to otherwise dispose of them.

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We do not have any independent directors.

We have no “independent directors” as defined in Rule 5605(a)(2) of the Listing Rules of the NASDAQ Stock Market and our Board of Directors may never have a majority of independent directors.  In the absence of a majority of independent directors, our existing directors, who also are significant shareholders, could establish policies and enter into transactions without independent review and approval.

Our executive officers, directors, and major shareholders hold a majority of our common stock and may be able to prevent other shareholders from influencing significant corporate decisions.

Our directors and executive officers beneficially own a significant portion of our outstanding common stock.  As a result, acting together they would be able to influence many matters requiring shareholder approval, including the election of directors and approval of mergers and other significant corporate transactions.  This concentration of ownership may have the effect of delaying, preventing, or deterring a change in control, and could deprive our shareholders of an opportunity to receive a premium for their shares of common stock as part of a sale of our company and may affect the market price of our stock.

The price of our common stock may be volatile, which could cause our investors to incur trading losses and fail to resell their shares at or above the price they paid for them.  Our securities are currently quoted on the OTC and, thus, your ability to sell your shares in the secondary market may be limited.

 We cannot predict the extent to which investor interest will lead to the development of an active and liquid trading market in our common stock.  The failure to achieve and maintain an active and liquid market for our common stock means that you may not be able to dispose of your common stock in a desirable manner and the price for our shares may fluctuate greatly.

Moreover, some companies that have had volatile market prices for their securities have been subject to securities class action suits filed against them.  If a suit were to be filed against us, regardless of the outcome, it could result in substantial costs and a diversion of our management’s attention and resources.  This could have a material adverse effect on our business, results of operations and financial condition.

Risks Relating To Our Equity Investment In India

We lack overseas investing experience.

DPPL is our first investment outside of the U.S. and our management team has limited international investing experience.  We could misunderstand regulatory, cultural, or other pervasive aspects of doing business in India that could negatively impact our investment or our results of operations.

We will need to raise additional capital in order to complete our investment in DPPL, and failure to do so will limit the benefits we seek to attain from a significant equity interest.

Although we plan to raise additional capital through the sale of equity or debt securities, or a combination thereof, there is no assurance we will be able to raise such funds on terms acceptable to us in a timely manner, or at all.  If we are unable to raise the capital when needed to secure the maximum ownership of DPPL, the benefits we seek through a larger percentage ownership may not be attained.

DPPL’s services agreement with MMPL is its sole source of revenue and many risks associated with one are equally applicable to the other.

DPPL’s sole source of revenues is from providing services to MMPL; consequently, matters impacting MMPL will also impact DPPL, and general business and economic risks identified with one apply equally to the other.

We anticipate the industry in which MMPL operates will be subject to intense competition.

There are several direct competitors to MMPL currently conducting business in India, and some have access to large markets of existing phone subscribers.  Once these companies fully implement their strategies, the competition in India for the services being provided by MMPL may intensify significantly.

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The payments industry in India is subject to extensive regulation.

Payment system operators like MMPL are subject to the Indian Payments and Settlement Systems Act 2007 and operate under the authority and board oversight of the Reserve Bank of India (“RBI”).  Although the RBI has reviewed the operations, systems, and processes of MMPL, and has licensed it to operate a payments system in India through October 24, 2018, the RBI has the authority to revoke this license at any time should MMPL's operations not continue to meet standards primarily relating to the custody of, and accountability for, consumer funds.  Such revocation would seriously and negatively affect the value of our investment in DPPL.  In addition, increased regulatory focus could result in additional obligations or restrictions with respect to the services MMPL provides.

MMPL is subject to the risks faced by new businesses.

MMPL is an early-stage company with a limited operating history and is, therefore, subject to many of the risks and uncertainties faced by new enterprises.  There is no assurance MMPL will be able to manage its business effectively, identify, employ, and retain any needed management or technical personnel, further develop and implement its services, obtain third-party contracts or financing, or achieve the other components of its business plan.

MMPL's services may not gain wide acceptance in the market.

Because the majority of personal payments in India have historically been made in person, in cash, and in advance, there is no assurance the services provided by MMPL will be generally accepted by the Indian consumer.

Evolving products and technological changes could make MMPL's services obsolete.

We anticipate the services being offered by MMPL will continue to evolve and be subject to technological change.  Accordingly, MMPL's ability to maintain a competitive advantage and build its business requires it to continually invest in research and development.  Many of the companies we expect to compete with MMPL have greater capital resources, research and development staffs, and facilities than MMPL.  MMPL's services could be rendered obsolete by the introduction and market acceptance of competing services, technological advances by current or potential competitors, or other approaches.

MMPL's technology platform will require upgrades.

MMPL's processing technology platform will require upgrades to meet the company's business plan, and new problems or delays could develop and limit MMPL’s ability to grow.

Political, economic, social, and other factors in India may adversely affect businesses.

The ability for businesses to grow may be adversely affected by political, economic, and social factors or changes in Indian law or regulations or the status of India’s relations with other countries.  In addition, there may be significant differences between the Indian and U.S. economies such as the rate of gross domestic product growth, the rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments positions.

Government actions in the future could have a significant effect on the Indian economy and have a material adverse effect on the ability of DPPL and MMPL to achieve their business objectives.

Terrorist attacks and other acts of violence or war within India or involving India and other countries could adversely affect the financial markets and businesses.

Terrorist attacks and other acts of violence could have the direct effect of destroying property causing a loss and interruption of business.  For example, India has, from time to time, experienced civil unrest and hostilities with neighboring countries such as Pakistan.  The longstanding dispute with Pakistan over the border Indian states of Jammu and Kashmir remains unresolved.  If the Indian government is unable to control the violence and disruption associated with these tensions, the results could destabilize the economy and, consequently, adversely affect businesses.

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Since early 2003, there also have been military hostilities and civil unrest in the Mideast and other Asian countries.  Also, India has seen an increase in politically motivated insurgencies and a fairly active communist following.  Any hostilities or civil unrest could adversely influence the Indian economy and, as a result, negatively affect businesses.

Changes in the exchange rate of the Indian rupee versus the U.S. dollar result in earnings volatility and could negatively impact our reported earnings and the ultimate return on our investment.

DPPL's functional currency is the Indian rupee, and its financial statements must be converted to U.S. dollars when preparing our financial statements.  Changes in the exchange rate between the two currencies can cause reported financial results to fluctuate and a weakening rupee relative to the U.S. dollar would negatively impact our earnings.  Additionally, the return on our investment in DPPL, if any, may be less than expected if the exchange rates are less favorable at the time of realization.

Exchange controls in India may limit DPPL’s ability to utilize its cash flow effectively.

We expect to be subject to India’s rules and regulations on currency conversion with respect to our investments in DPPL.  In India, the Foreign Exchange Management Act ("FEMA") regulates the conversion of the Indian rupee into foreign currencies.  Today, companies in many industries are permitted to operate in India without any special restrictions, effectively placing them on par with wholly, Indian-owned companies.  Foreign exchange controls also have been substantially relaxed.  However, the Indian foreign exchange market is not yet fully developed, and there is no assurance the Indian authorities will not revert to regulating companies and imposing new restrictions on the convertibility of the Indian rupee.  Any future restrictions on currency exchanges may limit our ability to repatriate DPPL’s earnings or receive distributions on our investment.

We may have difficulty effecting service of process or enforcing judgments obtained in the U.S. against MMPL.

MMPL is organized in India and all of its assets are located in India.  As a result, in the event of a dispute between MMPL and us, we may be unable to effect service of process upon MMPL outside of India.  In addition, we may be unable to enforce against MMPL judgments obtained in U.S. courts.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Such statements include statements regarding our expectations, hopes, beliefs or intentions regarding the future, including but not limited to statements regarding our market, strategy, competition, development plans (including acquisitions and expansion), financing, revenues, operations, and compliance with applicable laws. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks described in greater detail in the following paragraphs. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement. Market data used throughout this prospectus is based on published third party reports or the good faith estimates of management, which estimates are based upon their review of internal surveys, independent industry publications and other publicly available information.

You should review carefully the section entitled “Risk Factors” beginning on page 10 of this prospectus for a discussion of these and other risks that relate to our business and investing in shares of our Common Stock.

USE OF PROCEEDS

The selling stockholders will receive all of the proceeds from the sale of the Shares and Warrant offered by them under this prospectus. We will not receive any proceeds from the sale of the Shares or Warrants by the selling stockholders covered by this prospectus.  However, we will generate proceeds from any cash exercise of the Warrants by the selling stockholders, if any. There can be no assurance that any of the selling stockholders will exercise all or any of their Warrants.  We intend to use any proceeds received for general corporate purposes.

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Market Information

Calpian common stock is traded in the over the counter (“OTC”)market under the symbol “CLPI.”  Our stock is thinly traded, and a robust, active trading market may never develop.  The market for the Company’s common stock has been limited, volatile, and sporadic and could be subject to a number of risk factors (see “Risks Relating To Our Common Stock”).

The transfer agent for our common stock is Securities Transfer Corporation, 2591 Dallas Parkway Suite102, Frisco, Texas 75034 Telephone: 469-633-0101 Website: www.stctransfer.com. 

The following table sets forth the high and low bid prices of our common stock as reported by Nasdaq.com.  They reflect inter‑dealer prices without retail mark‑up, mark‑down, or commissions, and may not necessarily reflect actual transactions.

	High	Low
2014
First Quarter	$1.75	$1.14
2013
First Quarter	$2.58	$1.02
Second Quarter	$2.12	$1.10
Third Quarter	$2.01	$0.88
Fourth Quarter	$2.01	$1.10
2012
First Quarter	$3.25	$3.25
Second Quarter	$3.25	$3.25
Third Quarter	$3.25	$2.00
Fourth Quarter	$2.65	$1.01

The last price of our common stock as reported by otcmarkets.com on June 18, 2014, was $1.15.

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Common Shareholders

On June 18, 2014, we had approximately 500 shareholders of record.

Dividends

We have not paid any dividends on our common stock since our inception and we do not anticipate paying dividends in the foreseeable future as earnings we realize, if any, will be retained in the business for further development and expansion.  Provisions of our term loan facility preclude paying dividends and preferred stock issued in the future, if any, might prohibit us from paying common stock dividends unless certain conditions are met.

Shares Authorized For Issuance Under Equity Compensation Plans

The following table provides information about the number of shares of our common stock that may be issued on exercise of outstanding stock options or purchased under our 2011 Equity Incentive Plan as of March 31, 2014.

	(A)	(B)	(C)
	Number Of Securities		Number Of Securities Remaining
	To Be Issued Upon	Weighted-Average	Available For Future Issuance
	Exercise Of	Exercise Price Of	Under Equity Compensation
	Outstanding Options,	Outstanding Options,	Plans (Excluding Securities
Equity Compensation Plan Category	Warrants And Rights	Warrants And Rights	Reflected In Column (A))
Plans Approved By Security Holders	900,000	$1.38	1,100,000
Plans Not Approved By Security Holders	-	-	-
Total	900,000	$1.38	1,100,000

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis should be read together with our financial statements and the related notes appearing elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview

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.

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 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.

In addition to the Company’s residual portfolio related businesses, our majority-owned subsidiary, Digital Payments Processing Limited, and My Mobile Payments Limited work together to deliver a payment processing service in India known as “Money-on-Mobile” (“MoM”).  MoM allows individuals to use their cellular phones to make routine payments and to move money using simple text messaging (SMS technology).  The distributor, retailer, customer contracts, and the license to operate issued by the Reserve Bank of India are the property of MMPL which maintains custody of customers’ funds in accordance with India’s regulations.  DPPL owns and operates the customer support call center and sales support functions holding licenses from MMPL for all the intellectual property necessary to process transactions.

Results of Operations

The Year ended December 31, 2013 compared to the Year ended December 31, 2012

The significant increases in 2013 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 2013 was $2.6 million.  We recognized $3.9 million in losses from our equity investment in 2013, while $0.7 million was recognized in 2012 following our March 2012 initial investment.  We had net losses of $9.0 million, or $0.34 per share in 2013 compared to $4.3 million, or $0.20 per share in 2012.  The results for our two business segments were as follows:

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		Year Ended
		December 31,
	2013		2012
Revenues:
Calpian, Inc.	$	3,064,033	$	3,438,898
Calpian Commerce, Inc.		17,971,854		—
	$	21,035,885	$	3,438,898
Gross profit:
Calpian, Inc.		1,855,997		2,226,955
Calpian Commerce, Inc.		3,951,326		—
		5,807,323		2,226,955
General and administrative expenses:
Calpian, Inc.	$	4,734,885	$	2,966,358
Calpian Commerce, Inc.		3,485,169		—
	$	8,220,054	$	2,966,358

CLPI’s revenues in 2013 were lower than in 2012 due to normal portfolio attrition.  Gross profits were 61% of CLPI’s revenues in the 2013 and 65% in 2012.  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.

As of December 31, 2013, CLPI reached a final settlement agreement of $250 thousand to settle in mediation litigation referred to in Note 8 of the notes to our financial statements in Part I, Item 8 of this Report.  This $250 thousand accrual is the major cause of the increase in its general and administrative expenses (“G&A”) in 2013 over 2012.  Other CLPI 2013 G&A increases included (in thousands): $262 and $272, respectively, in management equity awards, independent contractor compensation due to greater utilization of consultants as the complexity of our operations has increased; $333 of consulting fees; $240 of costs incurred seeking additional equity and debt financing; $145 for additional legal services largely associated with the previously referred to litigation; $81 is related to additional advertising expense; and $381k is related to amortization of consulting fees. 

CCI’s most significant G&A expenses in 2013 were $1.8 million in employee compensation and $365 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 4 of the notes to our financial statements in Part II, Item 8 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 the year 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.

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LIQUIDITY AND CAPITAL RESOURCES

Cash used by consolidated operating activities in the year ended December 31, 2013, amounted to $1,159, of which $438 thousand being contributed by CCI since it commenced operations on March 15, 2013, and $1,597 thousand being used by CLPI in 2013.  CLPI’s increased general and administrative expenses accounted for most of the cash used in its operations. 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 December 31, 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 $6.6 million, of which $5.5 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.

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.

We believe the critical accounting policies described below involve the more significant judgments and estimates used in the preparation of our consolidated financial statements:

	Valuation of warrants and options
	Amortization of residual portfolios

 Goodwill impairment

As our operations expand, we may identify additional critical accounting policies in the future.

Valuation of Warrants and Options

Warrants and options are accounted for in accordance with Accounting Standards Codification (“ASC”) 505-10 “Costs of an Equity Transaction” or 505-50 "Equity-Based Payments to Non-Employees", depending upon the nature of the transaction and the relationship with the recipient.  The Company’s warrants and options are settled in physical delivery of unregistered shares.  As such, the warrants and options are recorded upon issuance as permanent equity at fair value based upon a valuation using the Black-Scholes option pricing model on grand date and subsequent changes in fair value are not recognized.

Amortization of Residual Portfolios Acquired

The Company amortizes its investment in residual portfolios based upon the future expected cash flows derived from 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 and the future amortization is adjusted prospectively in accordance with ASC 350, “Determination of the Useful Life of Intangible Assets.”  During 2013 and 2012, the Company recognized $2,022,665 and $1,103,734 in amortization of residual portfolios, respectively.

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Goodwill impairment

As a result of our acquisitions on March 15, 2013, which is described in Note 3 of the notes to our financial statements in Part II, Item 8 of this Report, a significant portion of our total assets consist of goodwill. The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital.

At December 31, 2013, our goodwill totaled $2,341,928. We assess the impairment of goodwill of our reporting units annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable.  Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. As of December 31, 2013, we determined that no events or circumstances from March 15, 2013 through December 31, 2013 indicated that a further assessment was necessary.

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BUSINESS

As used in this prospectus, all references to the “Company,” “Calpian,” “CLPI,” “we,” “our” and “us” refer to Calpian, Inc. and, unless otherwise specified, its direct and indirect subsidiaries.

Overview

Corporate History

Calpian, Inc., a Texas corporation headquartered in Dallas, Texas, was incorporated on May 30, 2006, as Toyzap.com, Inc., and became a public company on May 7, 2008, through a self-underwritten registered public offering of 4,000,000 shares of $.001 par value common stock.  The offering raised $150,000 that was used to pursue a business strategy that never commenced operations.  The “shell company”, Toyzap.com, Inc., was acquired by members of the Company’s current management team, affiliates thereof, and certain other purchasers, on April 23, 2010, pursuant to purchase agreements whereby approximately 99% of the Company’s then issued and outstanding common stock was acquired.  At such time, the former management and Board of Directors resigned and a new management team and Board of Directors were appointed, who then redirected the business focus of the Company to the business plan described below.  On September 3, 2010, the Company changed its name to “Calpian, Inc.” pursuant to approval obtained at a meeting of our shareholders.  The Company’s common stock began trading in the over the counter (“OTC”)market on March 4, 2009, and it currently trades there under the symbol “CLPI.”

In March 2012, the Company began to acquire equity interests in Digital Payments Processing Limited, a newly-organized company.  DPPL maintains an exclusive services agreement with My Mobile Payments Limited.  Both companies are organized under the laws of India and headquartered in Mumbai, India.  MMPL is a contractual variable interest entity of DPPL.  As of December 31, 2013, the Company has acquired 49.9% of the outstanding common stock of DPPL.  The Company and DPPL have entered into an agreement by which the Company intends to acquire additional shares of common stock of DPPL to increase its equity percentage to 74% for an additional investment amount to be negotiated as future investments are made.  The acquisition of additional shares is subject to approval by the Indian government and regulations for foreign investment.

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.  The acquisition was financed by expanding the Company's senior credit facility from $5 million to $14.5 million.

Recent Developments

On April 25, 2014, our Board of Directors unanimously authorized a change in the Company’s fiscal year end from December 31st to March 31st, beginning on March 31, 2014.  The Company’s majority-owned subsidiary, Digital Payments Processing Limited, and DPPL’s contractual variable interest entity, My Mobile Payments Limited, are required to submit to the Indian government audited financial statements as of March 31st of each year.  In order to align the Company’s audit resources and reduce duplication of efforts, the Board, believing it to be appropriate and in the best interest of the Company, changed the Company’s fiscal year end.

Our Business

The Company operates into two business segments: acquisitions of residual cash flows through Calpian, Inc. and an independent sales organization with merchant servicing revenue streams through our recent acquisition of CCI.   Once the Company attains a majority ownership of our equity method investee, DPPL, Calpian will add a third business segments, electronic payment processing in India.

CALPIAN – RESIDUAL PORTFOLIO ACQUISITIONS

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”).  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.

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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 directly from the ISOs that originated the processing 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 the acquisition, we and the ISO notify the processors of the plan to acquire the rights to the residual portfolio and direct that all future residual payments should be paid to us.  Processors are required to approve the acquisition as a condition of closing.

Electronic Payment Processing Industry

We receive substantially all of our revenue from processing contracts with small- and medium-sized merchants for electronic payment (e.g., credit and debit card) processing services that have been sold by ISOs.  The merchants within the electronic payment processing industry are segmented into three groups: (i) large merchants, (ii) medium-sized merchants, and (iii) small merchants who typically generate less than $1.0 million in annual processing volume.

Payment processors focusing on large merchants including Elavon, Inc., Chase Paymentech Solutions, LLC, First Data Merchant Services Corporation, RBS Lynk, and National Processing Company (NPC/ Retriever Payment Systems, leverage their capital investment in processing infrastructure over the largest number of transactions to lower their marginal cost of processing a transaction.  This scale allows these large processors to sell services at low per-transaction cost to the largest merchants with high processing volumes.

The payment processors with a medium-sized merchant focus compete based on a similar ability to leverage their infrastructure, but typically focus on regional and smaller national merchants.  The small merchant segment is traditionally best served by the ISO sales channel. 

Independent Sales Organizations

ISOs are independent sales agents, or a group of agents, contractually authorized to sell credit card processing related services on behalf of one or more credit card processors that are typically too small for a large processor to effectively sell, service, or reach with its centralized, national sales force.  ISOs shepherd the merchant’s application for processing services through the labyrinth of approvals, credit checks, guarantees, etc. that are required before the merchant is approved to accept consumer credit cards for payment. 

ISOs have two primary sources of revenues and profitability:



Sales of credit card processing terminals to merchants represent a one-time profit opportunity.  Historically, terminal markups were the most important source of immediate cash flow for ISOs but, due to market saturation and the lack of replacement technology, this source has diminished significantly in recent years.



Credit card residual portfolios revenues provide an ongoing cash flow stream.  For every merchant an ISO signs up on behalf of a processor, the ISO receives revenues based on the fees the merchant subsequently pays to the processor.  The ISO sells credit card processing services at a retail price to the merchant and retains the difference between the retail price and the wholesale price paid to the processor.  That difference provides the ISO with monthly residual revenues (“residuals”) that are a contractual obligation of the processor.  The residuals vary month-to-month based on the merchant’s sales volume and remain in effect for as long as that merchant is a customer of the processor, but the right to receive them may terminated for a variety of reasons.

Processors

In addition to other tasks, processors handle credit card transactions originated by merchants and bill and collect the service fees from the merchant monthly.  During the subsequent month, processors send the ISO a report detailing merchant activity and residuals due the ISO along with a remittance of the funds thereby eliminating the need for the ISO to collect directly from the merchant.

Contracts for credit card processing services between the merchant and processor can be year-to-year with automatic renewals, but may have up to a three-year initial term.  Merchant processing, however, is a competitive business and merchants do change processors, usually for a lower rate or promise of better service.

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Attrition occurs when a merchant leaves its processor, typically due to either moving to another provider of processing services or going out of business.  In exchange for the residual payment, the ISO is responsible for providing first-line customer service to the merchant on behalf of the processor.  Common support issues include, but are not limited to, addressing malfunctioning point of sale (“POS”) terminals, answering questions about billing statements, and providing training.  Most of these issues are successfully addressed by telephone and replacement terminals are commonly provided to merchants through overnight shipping services.  ISOs are sales-focused organizations almost exclusively devoted to selling POS terminals and processing services.

Calpian’s Residual Portfolio Business Model

The Company is in the business of acquiring ISO debit and credit processing residual revenue streams paid by transaction processors to ISOs.  We expect the acquisition process, from the incoming inquiry by an ISO to closing, may take 60 to 90 days.  We focus on, and take legal possession of, the residual stream.  When a residual stream is acquired, we take steps to ensure the processor pays future residuals directly to us instead of to the ISO.

The ISO market is segmented into two categories, each with defined financial needs:

	Small ISOs with less than 2,000 merchants and financial requirements typically arising from the personal needs of the ISO’s owner (e.g., medical or educational); and
	Larger ISOs with financial needs driven by business issues such as expansion funding, partnership splits, and exit plans.

Calpian’s target market encompasses ISOs selling processing services to small- and medium-sized businesses with less than $1.0 million in annual processing volume.  We do not expect to compete for larger volume accounts or plan to buy portfolios made up of very large merchants for several reasons, including the hypercompetitive pricing experienced in the large merchant segment and differing customer service needs.  In addition, we believe large merchants generally represent an unacceptable concentration of revenue risk.

Our strategy is to concentrate acquisition activity on ISOs contracting with a select group of our preferred processors.  In this way, we plan to build a merchant base of reliable, credit-worthy processors.  Our preferred processors include, but are not limited to: Elavon, Chase Paymentech, First Data Merchant Services, RBS Lynk, and National Processing Company (NPC)/ Retriever Payment Systems.  We currently have contracts with Elavon and Chase Paymentech, but there is no assurance we will succeed in focusing our acquisition activities among ISOs that utilize these major processors.

To inform the ISO community of our acquisition capabilities, we advertise in industry trade journals, including Transaction World Magazine having a March 2014 issue distribution of more than 16,000 copies.

Residual Portfolio Competition

We, and the ISOs from whom we intend to acquire portfolios, compete with a wide variety of processing service providers including, but not limited to, First Data Merchant Services, Elavon, Inc., a U.S. Bancorp subsidiary, JP Morgan Chase & Co. and its subsidiaries, NPC, Bank of America, Wells Fargo, RBS Lynk, iPayment, Innovative Merchant Services, an Intuit company, local and regional banks, and other ISOs.  In addition, we may face merchant processing service competition from other entrants such as Google, Yahoo, Paypal, and eBay. We also expect to face competition at the ISO level for proposed acquisitions from other industry players such as Blue Pay, Frontstream Payments, Century Bankcard, Cutter Financial, and Stream Cash, as well as several individuals active in the business of acquiring residual portfolios.  Because most of these competitors are larger than us and have significantly greater resources, we may not be able to successfully compete against them.

In operating our business, we expect to face competition on two levels: the small merchant level and the ISO level:

 The small merchant segment of the market is generally reached by ISOs and processors via telephone room sales and banks via walk-in branch sales.  We compete in this highly competitive environment primarily by aggregating the need for processing services across ISOs and securing processing contracts on terms more favorable to the ISOs than they can obtain on their own, and by securing more favorable contract terms between the merchant and the processor.

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 On the ISO level, we compete with other ISOs and payment processors active in the highly competitive payment processing service industry by offering competitive processing rates to our ISO partners through our processing service providers to enable them to resell those services to merchants at competitive rates.  In addition, ISOs considering a transaction with us may decide to seek financing instead from providers of loans to ISOs including RBL Capital, SuperG funding, or commercial banks.

While we may find ourselves competing on the small merchant or ISO level with payment processors with which we may contract as our payment processing service provider, we believe many of them may be unable to cost-effectively contract with small merchants unless they utilize an intermediary such as an ISO.  We also believe we have the opportunity to compete with processors for ISO resources as processors generally focus on specific markets or industries and, therefore, ISOs typically offer services from several different processors.

We compete for the acquisition of residual portfolios based on price, our ability to offer publicly traded stock, and the terms of our acquisition agreements which do not require merchants to change processors.  Most buyers of portfolios require merchants to change their existing processors to the buyer’s favored processors.

DIGITAL PAYMENTS PROCESSING LIMITED –ELECTRONIC PAYMENTS IN INDIA

Our majority-owned subsidiary, Digital Payments Processing Limited, and DPPL’s contractual variable interest entity, My Mobile Payments Limited, work together to deliver a payment processing service, owned by MMPL, known as “Money-on-Mobile”.  MoM allows individuals to use their cellular phones to make routine payments and to move money using simple text messaging (SMS technology).  The distributor, retailer, customer contracts, and the license to operate issued by the Reserve Bank of India are the property of MMPL which maintains custody of customers’ funds in accordance with India’s regulations.  DPPL owns and operates the customer support call center and sales support functions holding licenses from MMPL for all the intellectual property necessary to process transactions.

Calpian representatives Messrs. Montgomery and Arey are two of the four members of DPPL’s board of directors.  Mr. Montgomery is Chairman of the DPPL board with a tie-breaking vote.  Mr. Montgomery also is one of 6 members of MMPL’s board.  Mr. Shashank M. Joshi, a Calpian director, is a founder and managing director of both DPPL and MMPL. 

Indian Payment Processing Market

In India, the majority of personal payments are made in person with cash, and most routine services are paid in advance.  Effecting the simplest transactions (e.g., buying cell-phone minutes, paying for cable or satellite television time, and paying electric or water bills) can be both time consuming and inconvenient.  Typically each service has its own payment location meaning travel can be significant and waiting lines can be long.  In addition, workers moving from the country to the city find the process of sending money home in cash or by courier can be risky, uncertain, and expensive.  It is difficult to confirm receipt, and the recipient can experience significant delays in receiving the money.

India is the second largest mobile market in the world with about 400,000 telecom towers according to the “2011-12 Annual Report” of the Telecom Regulatory Authority of India.  According to the reports, as of March 31, 2012, India had 919.2 million cellular phone subscribers (64.8% urban – 35.2% rural), a year-over-year increase of 13.3%.

Currently in India, there are 15 cell and 6 “Direct to Home” (“DTH”) satellite television providers, and no one player is dominant in either market. Minutes of talk and viewing time are sold through company-owned or large retail stores.  The proliferation of vendors presents a problem for small retailers who would like to sell minutes for a profit.  In order to make sure they have minutes in inventory from the right provider, the retailer must have a relationship with each provider.  Stores face a major capital expense in establishing this relationship and maintaining multiple inventories.

Money-on-Mobile Business Model

MMPL launched its MoM service in April 2011 and currently has more than 85 million unique phone number users in a network of more than 180,000 retailers spanning almost every consumer market sector, and it processed over $156 million in transactions in 2013.

MoM is a mobile wallet (“M-wallet”) similar to carrying a prepaid debit card on a mobile phone.  It can be used to pay for goods and services from the mobile phone as well as making other financial transactions such as sending or receiving money

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anytime and anywhere.  The user can have a single personal account or link to multiple family and friend accounts for gifting purposes or transferring funds.  All transactions are completed in real time.

For businesses, MoM acts as an intermediary, a single vendor providing minutes inventory from most cell and DTH providers, allowing a small retailer to sell minutes from any provider.  MoM provides faster payment processing, financial transaction security, and services such as customer loyalty programs, discount schemes, and special promotions.  MoM can compile up-to-date intelligence about its merchants’ prospective customers from the ever-growing volume of daily transactions it process allowing merchants to stay in touch with market trends and quickly make decisions about their promotion activities including mobile-based advertising.

MoM service uses cell telephone numbers to identify both the sender and the recipient.  The user loads virtual currency into the MoM system paying cash at any one of thousands of independent retailer stores.  To move funds from the user’s account to another account, a text message to MoM tells who and what amount to pay.  The amount is instantly deducted from the user’s account and credited to the recipient’s account, and both parties receive a confirmation within a few seconds. 

CALPIAN COMMERCE, INC. – INDEPENDENT SALES ORGANIZATION

Our wholly owned subsidiary, Calpian Commerce, Inc. (“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.

Employees

At June 18, 2014, Calpian and CCI employed 57 people.  During the year, we utilized independent consultants to assist with accounting, financial reporting, and administrative matters.  Our majority-owned subsidiary, DPPL, employed 391 full and part-time people. 

Calpian and our affiliates have no employment or collective bargaining agreements and we believe our employee and independent contractor relationships are satisfactory.

Intellectual Property

Among the assets acquired and comprising CCI are proprietary software products, trademarks, trade names, and other intellectual property together with the related patent and copyright filings and documents protecting such property.

Governmental Regulations

The industries in which we operate are subject to extensive governmental laws and regulations in the U.S.  There are numerous laws and regulations restricting the purchase, sale, and sharing of personal information about consumers, many of which are new and continue to evolve; accordingly, it is difficult to determine whether and how existing and proposed privacy laws may apply to our businesses in the future.  Also, there are numerous consumer statutes and regulations, including the Gramm-Leach-Bliley Act, regarding the possession of both consumer- and merchant-level data with which we must comply.

Payment system operators in India are subject to the Indian Payments and Settlement Systems Act 2007 and operate under the authority and board oversight of the Reserve Bank of India (“RBI”).  In the licensing process, the RBI reviews the licensee’s operations, systems, and processes and has the authority to revoke a license at any time should operations not continue to meet RBI standards, primarily those relating to the custody of, and accountability for, consumer funds.

LEGAL PROCEEDINGS

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 has alleged damages on the

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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 alleges that damages continue to grow, but will 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 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.  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).  As of March 31, 2014, $100,000 of the settlement has been paid and the remaining $150,000 is accrued in 'Accrued expenses' on the Company's balance sheet.    

DESCRIPTION OF PROPERTY

Our leased office facilities are listed in the following table.  We believe our current facilities have the capacity to meet our needs for the foreseeable future and alternate or additional space is readily available near our current locations should we need to move or acquire additional space.

	Approximate
Location	Square Feet
Calpian, Inc.
Dallas, Texas	6,000
Calpian Commerce, Inc.
Alpharetta, Georgia	3,320
Digital Payments Processing Limited
Mumbai, India	3,500

MANAGEMENT

The following table lists our directors and executive officers, their respective positions and offices, and the respective dates they were first elected or appointed.

		Elected Or
Name	Position And Office	Appointed
Harold H. Montgomery	Director, Chairman of the Board,	April 23, 2010
	Chief Executive Officer, and Secretary
Craig A. Jessen	Director and President	April 23, 2010
Laird Q. Cagan	Director	April 23, 2010
Shashank M. Joshi	Director	December 5, 2012
Scott Arey	Chief Financial Officer	October 1, 2013

There is no arrangement or understanding between any director or executive officer and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan, or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current board of directors.  There also are no arrangements, agreements, or understandings to our knowledge between non-management shareholders that may directly or indirectly participate in or influence the management of our affairs.

Harold H. Montgomery, Chairman of the Board, Chief Executive Officer, and Secretary

Mr. Montgomery, age 54, has been our Chairman of the Board, Chief Executive Officer, and Secretary since April 2010.  Since March 2012, Mr. Montgomery has been Chairman of the Board of Digital Payments Processing Limited, a Calpian majority-owned subsidiary, and a member of the board of directors of My Mobile Payments Limited, a DPPL affiliate.  A co-founder of the Company in 1987, Mr. Montgomery started ART Holdings, Inc. (“ART”), a merchant payment processing company.  While a full-time employee of ART, Mr. Montgomery led a team doing business under the name “Calpian,” which acquired over 200 ISO merchant processing portfolios between 2003 and 2009.  Mr. Montgomery continues to serve ART as a director and executive officer.  From 1985 to 1987, Mr. Montgomery was employed by

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Wellington Associates, a Dallas-based investment bank focused on mergers and acquisitions and corporate finance.  In 1983, Mr. Montgomery managed the Dallas Area Rapid Transit Authorization election campaign.

Mr. Montgomery is a Trustee of the Communities Foundation of Texas, a community chest foundation.  He also is a Trustee of the Caruth Foundation and St. Mark’s School of Texas.  He has served as a board member and president of the Dallas Committee on Foreign Relations and Big Thought, a community education agency.  He is a member of the Council on Foreign Relations located in New York.  Mr. Montgomery was a member of the Young Presidents’ Organization (“YPO”) from 1991 to 2009, and chaired the Florence, Italy YPO University.

Mr. Montgomery has served as an industry expert for the Federal Reserve Bank of Philadelphia Payment Card Center and the U.S. Congress as an expert witness for credit card reform legislation.  He is a frequent speaker at industry events and trade shows, and a regular contributor to industry trade publications, including Transaction World Magazine.

Mr. Montgomery attended St. Mark’s School of Texas and Stanford University where he received a BA (International Relations) in 1982 and an MBA in 1985.

Mr. Montgomery brings to the Board of Directors extensive experience in the payment processing industry as well as extensive experience acquiring residual portfolios.

Craig A. Jessen, Director and President

Mr. Jessen, age 55, has been a Director and President of the Company since April 2010.  From 2001 to 2009, he served as President and Chief Operating Officer of ART.  While an employee of ART, Mr. Jessen was the executive responsible for the acquisitions and integrations of Checktronic (1993) and Cash Lane (1999).  Mr. Jessen was involved in the launch and conduct of ART’s merchant credit card processing business.  At ART, Mr. Jessen analyzed, underwrote, and closed over 200 residual portfolio acquisitions totaling $60.0 million in value resulting in a combined portfolio of nearly 37,000 merchants, $16.0 million of net annual revenue, and $11.0 million in cash flow.  In addition, while at ART, he provided advice to ISOs and agents in multiple business areas including risk management, customer service, sales channel profitability, sales efficiency, processing contracts, pricing, attrition, work flow, and staffing level.  Mr. Jessen continues to serve ART as a director and executive officer.  Mr. Jessen’s earlier employment included: from 1987 to 1990, Transport Insurance Company, an insurance company with offices in Dallas, Texas; from 1984 to 1986, InterFirst Corporation, a multibank holding company headquartered in Dallas, Texas; from 1978 to 1984, United Parcel Service, a worldwide shipping, freight, logistics, and supply chain management company out of its Dallas, Texas office.

Mr. Jessen earned his BBA from the University of Texas at Arlington in 1984 and his MBA from Southern Methodist University in 1987.

Mr. Jessen brings to the Board of Directors extensive experience in the payment processing industry as well as extensive experience acquiring residual portfolios.

Laird Q. Cagan, Director

Mr. Cagan, age 55, has been a Director of the Company since April 2010.  Mr. Cagan is a co-founder and Managing Director of Cagan McAfee Capital Partners, LLC ("CMCP"), an investment company based in Cupertino, California he formed in 2001.  From 2004 until 2008, Mr. Cagan was Managing Director of Chadbourn Securities, Inc.  In 2008, Chadbourn was absorbed by Colorado Financial Services Corporation (“CFSC”) at which time Mr. Cagan became a registered representative and principal of CFSC serving in that capacity until 2012.  He holds Series 7, 63, and 24 licenses, but is not currently registered with any broker-dealer.  He also continues to serve as President of Cagan Capital, LLC (“CCLLC”), an investment company he formed in 1990, the operation of which transitioned into CMCP.  Mr. Cagan serves on the boards of directors of Evolution Petroleum, Inc. and Blue Earth, Inc.  Previously, he served on the boards of directors of Aemetis (formerly AE BioFuels), Camac Energy (formerly Pacific Asia Petroleum), Fortes Financial Corporation, TWL Corporation,  Tombstone Exploration Corporation, World Sage, Inc., and Global Carbon Group LLC.

Mr. Cagan was a director of Fortes Financial Corporation when the company and its officers and directors entered into a Consent Order with the State Banking Department of New Hampshire for not funding one mortgage loan that had a conditional commitment.  The officers of the company, but not Mr. Cagan nor any director, collectively paid a fine of $2,500 and, as the company had ceased operations and had requested a cancellation of its state license, all parties agreed to a permanent observance of a cease and desist order and revocation of Fortes Financial's license to broker mortgages in the

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state. Mr. Cagan was a registered representative of Colorado Financial Services Corporation when he was served an administrative suspension from December 15-29, 2008 for violation of a FINRA rule, failure to provide copies of personal brokerage statements to his broker-dealer. 

Mr. Cagan attended the Massachusetts Institute of Technology.  He received his B.S. and M.S. degrees in engineering and his MBA, all from Stanford University. 

Mr. Cagan’s extensive investment banking experience, expertise in securing seed capital, operating high-risk startups, education, and board of director service to public and private companies qualify him to serve on our Board.

Shashank M. Joshi, Director

Mr. Joshi, age 41, was appointed to our Board of Directors in December 2012.  He is a Founder and Managing Director of Digital Payments Processing Limited, our majority-owned subsidiary, and its affiliate, My Mobile Payments Limited.  Mr. Shashank has over 18 years of professional experience in the areas of IT and ITES, outsourcing, and transition and management consulting.  During the last 10 years, he has been an entrepreneur and pioneer in the successful execution of merchant cash advance and merchant processing businesses in the U.S. through an offshore operation in India.  Mr. Shashank has cross-border global experience of more than six years in simplifying payments.   He also specializes in motivational and leadership training.  Mr. Shashank holds a degree in Mechanical Engineering from Maharashtra Institute of Technology.

Scott Arey, Chief Financial Officer

Mr. Scott S. Arey, age 51, was appointed as our Chief Financial Officer (Principal Financial and Principal Accounting Officer) in October 2013.  From 2009 to 2013, Mr. Arey was Chief Financial Officer and Corporate Secretary of Alsbridge, Inc., a provider of IT sourcing advisory and benchmarking services to C-level executives.  From 2007 to 2009, Mr. Arey was CFO of Journey Education Marketing, a multi-channel software marketer to the K-12 and post secondary academic markets.  Mr. Arey started his career with KPMG Peat Marwick. 

Mr. Arey holds a Bachelor of Arts in economics and a Bachelor of Arts (with honors) in public policy from Stanford University.  There are no family relationships between Mr. Arey and any officer or director of the Company.

In connection with Mr. Arey’s appointment as the Company’s Chief Financial Officer, on October 1, 2013, David N. Pilotte’s resignation as the Company’s Chief Financial Officer became effective, as previously announced on the Company’s Form 8-K filed August 16, 2013.  

Significant Employees

Other than the executive officers named herein, the Company does not have any “significant employees.”

Family Relationships

There are no family relationships between any of our directors and executive officers.

Affiliations

Other than ART, CCLLC, CMCP, DPPL, and MMPL, none of the entities that have employed any of our directors or executive officers over the past five years are affiliated with Calpian.

Involvement in Legal Proceedings

To the best of our knowledge, during the past five years none of our directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offenses; (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending, or otherwise limiting involvement in any type of business, securities, or banking activities; and (4) being found by a court of competent jurisdiction in a civil action, the SEC,

32

or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.  As described under Business Experience, Mr. Cagan was subject to an administrative suspension by a self-regulatory organization.

Indemnification

Our Bylaws provide that we must indemnify and hold harmless our directors, officers, and other persons referenced in our Certificate of Formation as and to the extent permitted by the Texas Business Corporation Act.  The indemnification is intended to be to the fullest extent permitted by the laws of the State of Texas.

Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Texas law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

Section 16(a) Beneficial Ownership Reporting Compliance 

Section 16(a) of the Exchange Act requires directors, certain officers of the Company, and persons who own more than 10% of a registered class of the Company’s equity securities to file reports with the SEC.

Based on a review of filings with the SEC and written representations from our directors, officers, and other persons who own more than 10% or more of a registered class of the our shares that no other reports were required, we believe all parties complied with the reporting requirements of Section 16(a) of the Exchange Act except as follows:.

	Number Of
Director, Officer, Or Beneficial Owner	Late Reports	Transactions
Scott S. Arey	1	2
Mangesh Moghe	1	1

Corporate Governance

Compensation Committee Interlocks and Insider Participation

 In matters involving our directors and their separate interests, only disinterested directors vote.

Board Independence

Because our common stock currently is not traded on any national securities exchange or other major trading system, we are not subject to any standards regarding the “independence” of our directors.  None of the members of our Board of Directors is “independent” as defined in Rule 5605(a)(2) of the Listing Rules of the NASDAQ Stock Market.

EXECUTIVE COMPENSATION

Summary Compensation Table

The table below shows certain compensation information for services rendered by our current management in all capacities for the years ended December 31, 2013 and 2012.  Other than as set forth herein, no executive officer’s total compensation exceeded $100,000 in any of the applicable years.  The following information includes the dollar value of base salaries, whether paid or deferred.  No separate compensation was paid to executive officers for their services as members of the Board of Directors.

33

			Option
Name and Principal Position	Year	Salary	Awards(1)	Total
Harold H. Montgomery	2013	$300,000		$300,000
Chairman of the Board and Chief Executive Officer	2012	300,000		300,000
Scott S. Arey (from 10/1/13) (2)	2013	$56,250	$33,197	$226,510
Chief Financial Officer	2012
David Pilotte (through 9/30/13)	2013	$250,000	$96,000	$346,000
Chief Financial Officer	2012	223,000	10,510	233,510
Craig A. Jessen	2013	$300,000		$300,000
Director and President	2012	300,000		300,000

(1) The expense recognized by the Company in accordance with the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.

(2) Scott S. Arey joined the Company on October 1, 2013.   The Salary represented the amount of his compensation for 2013.  The Total column has his annualized salary and his Option Awards.

Employment Agreements with Executive Management

As of the date hereof, we have not entered into employment contracts with our officers, but may do so in the future.

Outstanding Equity Awards 

The following table shows certain information concerning outstanding stock options as of December 31, 2013, for our named executive officers.

	Number Of
	Securities
	Underlying	Option
	Options (#)	Exercise	Option
Name	Exercisable	Price ($)	Expiration Date
Scott S. Arey	400,000	$1.35	September 18, 2023(1)
Tom Tesmer	300,000	$1.35	October 3, 2023 (1)

(1) – Become void if services are earlier terminated.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as set forth below, during our last completed fiscal year, there have been no transactions, whether directly or indirectly, between the Company and any of its officers, directors or their family members.

Transactions with Related Persons

Support Services and Advances

ART Holdings, Inc. (“ART”) whose two founders, controlling shareholders, directors, and executive officers are directors, executive officers, and significant shareholders of Calpian 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 payments by ART on our behalf in 2012 totaled $193,114.    

Management Advisory Agreement

In 2011, we entered into a management advisory agreement with Cagan McAfee Capital Partners, LLC (“CMCP”), an investment company owned and controlled by Laird Cagan.  The nonexclusive agreement provides for CMCP advising the

34

Company on an array of financial and strategic matters and provides for the services of Laird Cagan as a member of our Board of Directors.  Pursuant to the agreement, CMCP is 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.  Entry into the agreement was approved by the disinterested Board members as being in the best interest of, and fair and reasonable to, the Company and its shareholders.  Amounts expensed in 2012 and 2011 under the agreement totaled $174,000 in each year.

Financing and Equity Transactions

In 2011, Cagan Capital, LLC (“CCLLC”), an entity owned and controlled by Mr. Cagan, purchased $1.0 million of our subordinated notes payable and warrants to purchase up to 500,000 shares of our common stock at $1.00 per share on a cashless basis.  The transaction was approved by the disinterested Board members as being in the best interest of, and fair and reasonable to, the Company and its shareholders.  In connection with the extension of the maturity date of the subordinated notes in 2012, CCLLC was issued an additional 71,233 warrants to purchase shares of our common stock at $2.00 per share.  There were no subordinated debt principal payments in 2012 or 2011 and interest paid at 12% per annum totaled $120,000 in 2012 and $46,333 in 2011.

In 2012, a company whose shareholders include our Chairman and Chief Executive Officer and members of his family purchased $150,000 of our subordinated notes payable.  In 2012, there were no principal payments and interest paid at 12% per annum totaled $13,050.

In 2012 for public relations services, 180,000 shares of our common stock were issued to Financial Communications, Inc., a public relations firm, having a $270,000 fair value.  As of April 4, 2013, John Liviakis, the sole shareholder, President, and Chief Executive Officer of Financial Communications, Inc. beneficially owned more than 5% of our outstanding common stock.  The transaction was approved by the disinterested Board members as being in the best interest of, and fair and reasonable to, the Company and its shareholders.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Beneficial Ownership

Shares are deemed to be "beneficially owned" by a person if such person, directly or indirectly, has or shares (a) voting power with respect to such shares, including the power to vote or to direct the voting of such shares; or (b) investment power with respect to such shares, including the power to dispose or to direct the disposition of such shares.  In addition, a person is deemed to be the beneficial owner of shares if such person has the right to acquire beneficial ownership of such shares within 60 days.  In the following tables, the “Percent Of Class” is based on 38,605,205 issued and outstanding shares of our common stock as of June 18, 2014.

Security Ownership of Certain Beneficial Owners

Unless otherwise indicated, the following table sets forth information as of June 18, 2014, with respect to the shares of our common stock beneficially owned by each person known to us to be the beneficial owner of more than 5% of our common stock. 

	Number Of
	Shares Beneficially	Percent
Name And Address Of Beneficial Owner	Owned	Of Class
Mangesh Moghe (1)	3,661,540	9.5%
18 Clark Avenue West Unit 149, Thornhill, Ontario Canada L4J 8H
John Liviakis (2)	1,280,000	3.3%
c/o Calpian, Inc., 500 North Akard Street, Suite 2850, Dallas, Texas 75201

(1) – Based on Schedule 13G filed on April 30, 2013.  Shares held by SVR Global Limited, a Hong Kong company of which Mr. Moghe is the sole shareholder.

35

(2) – Comprised of: (i) 694,760 shares directly held by Mr. Liviakis; (ii) 485,240 shares held in an IRA for the benefit of Mr. Liviakis; and (iii) 100,000 shares held by Liviakis Financial Communications, Inc. of which Mr. Liviakis is the sole shareholder, President and Chief Executive Officer

Security Ownership of Management

The following table sets forth information with respect to the beneficial ownership of our Company by (a) each of our directors and executive officers, and (b) all of our directors and executive officers as a group.

	Number Of
	Shares Beneficially	Percent
Name Of Beneficial Owner	Owned	Of Class
Harold H. Montgomery (1)	5,244,484	13.6%
Craig A. Jessen (2)	3,300,000	8.5%
Laird Q. Cagan (3)	3,427,859	8.9%
Shashank M. Joshi	-	-
Scott Arey	33,334	*
All directors and executive officers as a group (5 persons)	12,409,010	32.1%

 * less than 1%

 (1) – Comprised of: (i) 1,090,000 shares directly by Harold Montgomery; (ii) 3,810,000 shares held in an IRA for the benefit of Mr. Montgomery; (iii) 47,242 shares owned by the Molly Ann Montgomery 1995 Trust and 47,242 shares owned by the Philip Graham Montgomery 1997 Trust, trusts for the benefit of Mr. Montgomery’s children for which Mr. Montgomery is trustee; (iv) 150,000 shares owned by Montgomery Investments, L.P. (the “LP”); and (v) 100,000 shares owned by the Montgomery Non-Exempt Marital Trust, under trust dated January 1, 2007, (the “Trust”).  Mr. Montgomery is a limited partner in the LP.  The general partner of LP is a member of Mr. Montgomery’s immediate family.  Mr. Montgomery may be deemed a remainderman of the Trust and may be deemed to share investment control over the shares held by the Trust.  Mr. Montgomery disclaims beneficial ownership of all of the foregoing securities except to the extent of his pecuniary interest therein.

(2) – Shares held in an IRA for the benefit of Mr. Jessen.

(3) – Comprised of: (i) 1,640,000 shares held in an IRA for the benefit of Mr. Cagan; and (ii) 1,184,000 shares held in an IRA for the benefit of Mr. Cagan’s spouse; (iii) 16,000 shares held by The Cagan-Wolfenbarger Family Trust; and (iv) 587,859 shares issuable on exercise of immediately exercisable warrants beneficially owned by Mr. Cagan.

SELLING STOCKHOLDERS

Up to 10,330,476 shares of Common Stock are being offered by this prospectus, all of which are being registered for sale for the account of the selling stockholders and include the following:

	8,323,280 shares of Common Stock issued to the investors in the Private Placements in May of 2014;
	2,007,196 shares of Common Stock issuable upon the exercise of outstanding Warrants issued to the investors and the Placement Agent and its designees in the Private Placements.

Each of the transactions by which the selling stockholders acquired their securities from us was exempt under the registration provisions of the Securities Act.

The 10,330,476 shares of Common Stock referred to above are being registered to permit public sales of the shares, and the selling stockholders may offer the shares for resale from time to time pursuant to this prospectus.  The selling stockholders may also sell, transfer or otherwise dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act or pursuant to another effective registration statement covering those shares. We may from time to time include additional selling stockholders in supplements or amendments to this prospectus.

The table below sets forth certain information regarding the selling stockholders and the shares of our Common Stock offered by them in this prospectus. The selling stockholders have not had a material relationship with us within the past three

36

years other than as described in the footnotes to the table below or as a result of acquisition of our shares or other securities.  To the best of our knowledge, none of the selling stockholders is a broker dealer or an affiliate of a broker dealer other than as described in the footnotes to the table below.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. The selling stockholders’ percentage of ownership of our outstanding shares in the table below is based upon 38,605,205 shares of Common Stock outstanding as of June 18, 2014. 

37

	Ownership Before Offering				Ownership After Offering (1)
Selling Stockholder	Number of shares of Common Stock beneficially owned		Number of shares offered		Number of shares of Common Stock beneficially owned		Percentage of Common Stock beneficially owned
2525 Investment, LP (2)(3)		186,000		186,000		0	-
3MD Partnership Ltd. - Don Whaley (4)(5)		30,000		30,000		0	-
Aaron Lubowitz (6)		28,800		28,800		0	-
Ackerman Partners LP Stewart Ackerman (7)(8)		30,000		30,000		0	-
Alvin Spearman Sr. and Sharon Spearman (9)		30,000		30,000		0	-
Andrew Gallion (10)(266)		1,170		1,170		0	-
Andrew J. Alltizer (11)		30,000		30,000		0	-
Annette Cassella (12)(266)		1,325		1,325		0	-
Anthony Washington (13)		30,000		30,000		0	-
Applebaum Family Ltd. Partnership (14)(15)		24,000		24,000		0	-
Baiju Gohil (16)		18,000		18,000		0	-
Barry Fay (17)		291,000		36,000		255,000	*
Bobby Purcell (18)		18,000		18,000		0	-
Brett Griffin (19)		36,000		36,000		0	-
Brian Skillern(20)		30,000		30,000		0	-
Brian Stewart and Kelly Stewart Co-trustees of the Stewart Family Trust DtD 10-30-04 (21)(22)(265)		59,000		24,000		35,000	*
Bruce V. Bush (23)		30,000		30,000		0	-
Carlos M. Bermudez (24)		18,000		18,000		0	-
Carol H. Price and Duane Mathiowetz (25)		110,400		110,400		0	-
Charles and Sharon Goldman JTWROS (26)		30,000		30,000		0	-
Chicago Investments, Inc. (27)(28)		90,000		90,000		0	-
Chip Unsworth (29)(266)		4,643		4,643		0	-
Christopher H. Paskach Living Trust Dated 6-16-03 (30)(31)		30,000		30,000		0	-
Clinton McDonnough (32)		36,000		36,000		0	-
Craig Child (33)		42,000		42,000		0	-
Craig Wilson (34)		30,000		30,000		0	-
D. Michael Wallen (35)		34,714		24,000		10,714	*
Dale A. LeMasters (36)		48,000		48,000		0	-
Dan Xu (37)		165,000		120,000		45,000	*
Daniel M. Coombs Mary Ellen Coombs (38)		60,000		60,000		0	-
Daniel R. Monks (39)		30,000		30,000		0	-
Daniel Rasmussen (40)		24,000		24,000		0	-
Darcy S. Martin (41)		90,000		90,000		0	-
David & Carolyn Schmitz (42)		30,000		30,000		0	-
David & Linda Porter (43)		30,000		30,000		0	-
David A. Sabo and Marcella M. Sabo (44)		180,000		180,000		0	-
David B. O'Neil (45)		36,000		36,000		0	-
David Ernst (46)		30,000		30,000		0	-
David J. Greenblat (47)		18,000		18,000		0	-
David Scott (48)		60,000		60,000		0	-
David W. Maehling (49)		18,000		18,000		0	-
Dean Gardner (50)		34,000		24,000		10,000	*
Declan McQuade (51)(266)		3,897		3,897		0	-
Dennis D. and Pamela J. Howarter (52)		30,000		30,000		0	-
Dennis M. Scullin (53)		30,000		30,000		0	-
Derek Boon and Heather Poh (54)		18,000		18,000		0	-
Donald Cameron (55)		30,000		30,000		0	-

38

Donald P. Favre (56)	30,000	30,000	0	-
Donald R. Gauthier Jr. (57)	30,000	30,000	0	-
Donald R. Kendall, Jr. (58)	90,000	90,000	0	-
Douglas Brody (59)	24,000	24,000	0	-
Dr. Peter Beck Revocable Trust (60)(61)	90,000	90,000	0	-
Dr. Thomas Jamieson (62)	180,000	180,000	0	-
Dyke Rogers (63)	60,000	60,000	0	-
Edmond Allen Morrison (64)	30,000	30,000	0	-
Edward D. Manzo (65)	60,000	60,000	0	-
Edward William Sean Ballington & Estelle Georgette J. Ballington (66)	36,000	36,000	0	-
Eric James (67)	3,532	3,532	0	-
Eric Timar (68)	18,000	18,000	0	-
Firas J. Husein (69)	18,000	18,000	0	-
Garry Higdem Living Trust (70)(71)	60,000	60,000	0	-
Gary Grenley (72)	30,000	30,000	0	-
Gerald A. Tomsic, Trustee Gerald A Tomsic 1995 Trust (73)(74)	60,000	60,000	0	-
Gordon Clements (75)	74,976	59,976	15,000	*
Grady S. Hurley (76)	33,600	33,600	0	-
GranCorp Holdings, LLC (77)(78)	24,000	24,000	0	-
Gregory Hurley (79)	66,000	66,000	0	-
H. Clark Johnson (80)	21,000	21,000	0	-
Hany Awadalla (81)(266)	27,063	27,063	0	-
HFIC-2, LLC (82)(83)(265)	172,500	60,000	112,500	*
Howard Altshuler (84)	18,000	18,000	0	-
Howard Wengrow  (85)	36,000	36,000	0	-
Ian Milne (86)	120,000	120,000	0	-
Irwin L. Zalcberg, PSP UAD 1/1/91 (87)(88)	18,000	18,000	0	-
Jack Bruscianelli (89)	15,139	15,139		-
James Buck (90)	30,000	30,000	0	-
James E. Harris  (91)	60,000	60,000	0	-
James J. Waskiewicz (92)	18,000	18,000	0	-
James M. Hasemann (93)	60,000	60,000	0	-
James Magowan (94)	12,000	12,000	0	-
James Sherman & Bonnie Sherman (95)	43,200	43,200	0	-
James Somers (96)	36,000	36,000	0	-
Jan G. Petterson & Gunnel Petterson (97)	39,000	24,000	15,000	*
Jeanna Nelis (98)	24,000	24,000	0	-
Jeffrey & Kimberly Brehm (99)	30,000	30,000	0	-
Jeffrey A. Levenstam  (100)	30,000	30,000	0	-
Jeffrey Allen Sherman and Jennifer M. Sherman (101)	60,000	60,000	0	-
Jeffrey Pickron (102)	30,000	30,000	0	-
Jeffrey R. Pilkington (103)	60,000	60,000	0	-
Jeffrey S. Hartmann (104)	18,000	18,000	0	-
Jerry Fish (105)	30,000	30,000	0	-
Jill B Hotvet trustee of the James L Hotvet & Jill B Hotvet rev Survivor's trust (106)(265)	36,000	36,000	0	-
Jim Bowers (107)	30,000	30,000	0	-
Joe Glodek (108)	16,652	16,652	0	-
John Butt (109)	18,000	18,000	0	-
John C. Swenson (110)	30,000	30,000	0	-
John Charles D. Lewis and Susan E. Kenney (111)	48,000	48,000	0	-
John Ewell (112)	78,000	78,000	0	-
John Geddes (113)	36,000	36,000	0	-
John I. Griffin (114)	120,000	120,000	0	-
John Jaecker (115)	30,000	30,000	0	-

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John Liviakis (116)	1,146,720	120,000	1,026,720	2.66	%
John Trent (117)	18,000	18,000	0	-
Jonathan Gralnick (118)	36,000	36,000	0	-
Jorge Morazzani (119)	18,000	18,000	0	-
Joseph M Diangelo (120)	30,000	30,000	0	-
Josh Barg (121)(266)	3,450	3,450	0	-
JR Sandell Wedbush Securities Inc.  CTDN IRA Contributory 09/14/12 (122)(123)	113,571	60,000	53,571	*
Judy W. Bossuat-Gallic (124)	18,000	18,000	0	-
Jules DeVigne (125)	300,000	300,000	0	-
Keith Guenther (126)	180,000	180,000	0	-
Keith Jackson (127)	60,000	60,000	0	-
Keith O. Newton (128)	36,000	36,000	0	-
Keith Young & Mary Young (129)	240,000	240,000	0	-
Ken Spear (130)	90,000	90,000	0	-
Kevin Gabrik (131)	36,000	36,000	0	-
Kurt Mars (132)	30,000	30,000	0	-
Larry Hansen (133)	36,000	36,000	0	-
Larry Rasmussen (134)	30,000	30,000	0	-
Lars Linden (135)	60,000	60,000	0	-
Latisha Rushing (136)	90,000	90,000	0	-
Lowell Pearson (137)	60,000	60,000	0	-
LPD Investments Ltd. (138)(139)	240,000	240,000	0	-
Marcella M. Sabo(140)	120,000	120,000	0	-
Mark Ginsburg (141)	30,000	30,000	0	-
Mark J. Abrams & Carol A. Abrams (142)	18,000	18,000	0	-
Mark Zawadzki (143)	18,000	18,000	0	-
Marlice Gardner Wedbush Securities Inc. CTON IRA Contributory 01/23/13 (144)(145)	89,571	36,000	53,571	*
Marv Rietema (146)	60,000	60,000	0	-
Matthew E. Sabatini (147)	18,000	18,000	0	-
Michael & Ida Robson (148)	24,000	24,000	0	-
Michael Ching (149)	18,000	18,000	0	-
Michael Dillon (150)	30,000	30,000	0	-
Michael Ebedes (151)	18,000	18,000	0	-
Michael F. Soloman (152)	73,200	73,200	0	-
Michael Fahey (153)	60,000	60,000	0	-
Michael L. Desautels (154)	24,000	24,000	0	-
Michael Mullen (155)	4,526	4,526	0	-
Michael Siegel (156)	18,000	18,000	0	-
Michael W. Middleton (157)	24,000	24,000	0	-
Mike Sanner (158)	36,000	36,000	0	-
Mitchell Parker (159)	28,200	28,200	0	-
Mohamed A. Mohamed (160)	18,000	18,000	0	-
National Securities Corporation (161)(267)	130,524	130,524	0	-
NFS FMTC SEP IRA FBO William Miller (162)(163)	60,000	60,000	0	-
NFS/FMTC IRA FBO Arthur W. Chick (164)(165)	24,000	24,000	0	-
NFS/FMTC IRA FBO Billy B. Fouch (166)(167)	30,000	30,000	0	-
NFS/FMTC IRA FBO Bruce A. Rawls (168)(169)	34,800	34,800	0	-
NFS/FMTC IRA FBO Chandler Beach (170)(171)	30,000	30,000	0	-
NFS/FMTC IRA FBO David Peterson (172)(173)	54,720	54,720	0	-
NFS/FMTC IRA FBO John W. Baxter (174)(175)	28,800	28,800	0	-
NFS/FMTC IRA FBO Paul J. Serbiak (176)(177)	60,000	60,000	0	-
NFS/FMTC IRA FBO Robert Montgomery (178)(179)	30,000	30,000	0	-
NFS/FMTC IRA FBO: Hulette K Ash (180)(181)	26,400	26,400	0	-
NFS/FMTC IRA Rollover FBO Craig Locke (182)(183)	14,400	14,400	0	-
NFS/FMTC Rollover IRA FBO Gary Kostelec (184)(185)	46,200	46,200	0	-

40

NFS/FMTC Rollover IRA FBO John M. Alessandro (186)(187)	11,400	11,400	0	-
NFS/FMTC Rollover IRA FBO Martin Rosenwasser (188)(189)	25,800	25,800	0	-
NFS/FMTC Rollover IRA FBO Steven E. Maul (190)(191)	30,000	30,000	0	-
NFS/FMTC Rollover IRA FBO Sydelle Rosenwasser (192)(193)	20,400	20,400	0	-
NFS/FMTC Rollover IRA FBO: Duane H. Mathiowetz (194)(195)	300,000	300,000	0	-
NFS/FMTC Rollover IRA FBO: Kenneth Halverson (196)(197)	30,000	30,000	0	-
NFS/FMTC Roth IRA FBO  Randall Dunham (198)(199)	24,000	24,000	0	-
NFS/FMTC Roth IRA FBO John Alessandro (200)(201)	27,080	27,080	0	-
NFS/FMTC Roth IRA FBO Lee Ann Waltzing (202)(203)	60,000	60,000	0	-
NFS/FMTC SEP IRA FBO George W. Naylor (204)(205)	45,600	45,600	0	-
Nicholas J LoPresti (206)	18,000	18,000	0	-
Nils Welin (207)	18,000	18,000	0	-
Niraj Shah (208)	36,000	36,000	0	-
Patrick C. Sargent (209)	112,800	112,800	0	-
Peter Claude and Laura Claude  (210)	30,000	30,000	0	-
Peter D. Raymond (211)	18,000	18,000	0	-
Rahul Auradkar and Umarani Bangaiore (212)	30,000	30,000	0	-
Raj Sutaria (213)	60,000	60,000	0	-
Ray Garcia (214)	24,000	24,000	0	-
Regis Doucette (215)	18,000	18,000	0	-
Renald J. Anelle (216)	18,000	18,000	0	-
Rhoda Ann Miller Declaration of Trust (217)(218)	120,000	120,000	0	-
Rich Libretti (219)(266)	16,651	16,651	0	-
Richard Fleissner (220)	30,000	30,000	0	-
Richard Goldstein (221)(266)	5,529	5,529		-
Richard Jeanneret (222)(265)	60,000	60,000	0	-
Robert Niecestro (223)	30,000	30,000	0	-
Robert W. Teeter (224)	60,000	60,000		-
Roger C. Buchta (225)	30,000	30,000	0	-
Roger Monteforte (226)	80,000	80,000		-
Ronald J. Ciasulli (227)	36,000	36,000	0	-
Russ Zalatimo (228)(266)	23,307	23,307		-
Ryan Kennelly (229)	19,680	19,680	0	-
Scott C Thompson (230)	18,000	18,000	0	-
Scott Guasta (231)	36,000	36,000	0	-
Shaun P. Grady (232)	183,334	120,000	63,334	-
Simon and Enas Muzio (233)	30,000	30,000	0	-
Smith Living Trust dtd 9/25/2003 (234)(235)	590,000	240,000	350,000	*
Stefan Nowina (236)	60,000	60,000	0	-
Steven J. Vuyovich & Mary E. Vuyovich  (237)	36,000	36,000	0	-
Steven Stallman (238)	180,000	180,000	0	-
Stewart & Nancy Ackerman JTWROS (239)	30,000	30,000	0	-
Sunil P. Lekhi and Sangeeta S. Lekhi (240)	60,000	60,000	0	-
Sunstone Partners LLC (241)(242)	120,000	120,000	0	-
Tanvir Ali, Master (243)	36,000	36,000	0	-
Terry N. and Martha J. Barr (244)	30,000	30,000	0	-
The Roberts Fund (245)(246)	24,000	24,000	0	-
Thomas Glenndahl (247)	56,785	30,000	26,785	*
Thomas R. Sullivan (248)	18,000	18,000	0	-
Thomas W. Genrich (249)	60,000	60,000	0	-
Todd C. Hart (250)	95,000	45,000	50,000	*

41

Todd G. Bari (251)	18,000	18,000	0	-
Todd J. Anderson (252)	24,000	24,000	0	-
Tom Giftos (253)	60,000	60,000	0	-
Tony G. Puckett (254)	33,600	33,600	0	-
Vernon Simpson (255)	30,000	30,000	0	-
Vincent D'Albora (256)(266)	883	883	0	-
Virgil and Claramae Boatright, JTWROS (257)	85,200	85,200	0	-
Virgil Boatright (258)	7,680	7,680	0	-
William C. Purdon and Debra B. Purdon (259)	18,000	18,000	0	-
William Huff (260)	30,000	30,000	0	-
William S. Daugherty (261)	30,000	30,000	0	-
Wuethrich Investments LLC/Dallas Wuethrich (262)(263)	48,000	48,000	0	-
Yogesh Gupta (264)	18,000	18,000	0	-

(1) Beneficial ownership is determined based on 38,605,205 shares outstanding as of June 18, 2014.

(2) Timothy Wallace, as General Partner of 2525 Investment, LP, has voting and dispositive power over shares held by 2525 Investment, LP.

(3) Includes 155,000 shares of Common Stock and 31,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(4) Don Whaley, as Manager of 3MD Partnership Ltd., has voting and dispositive power over shares held by 3MD Partnership Ltd.

(5) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(6) Includes 24,000 shares of Common Stock and 4,800 shares of Common Stock issuable upon the exercise of outstanding warrants.

(7) Stewart Ackerman as President of Ackerman Partners LP., has voting and dispositive power over shares held by Ackerman Partners LP.

(8) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(9) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(10) Includes 1,170 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(11) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(12) Includes 1,325 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(13) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(14) Irving Applebaum, as Chief Investment Officer of Applebaum Family Ltd. Partnership, has voting and dispositive power over shares held by Applebaum Family Ltd. Partnership.

(15) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(16) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(17) Includes (i) 255,000 shares of Common Stock; (ii) 30,000 shares of Common Stock issued in the Private Placement; and (iii) 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement.

(18) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(19) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

42

(20) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(21) Brian Stewart and Kelly Stewart, as Trustees of  Brian Stewart and Kelly Stewart Co-trustees of the Stewart Family Trust DtD 10-30-04, has voting and dispositive power over shares held by Brian Stewart and Kelly Stewart Co-trustees of the Stewart Family Trust DtD 10-30-04.

(22) Includes (i) 17,500 shares of Common Stock; (ii) 20,000 shares of Common Stock issued in the Private Placement; (iii) 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement; and (iv) 17,500 shares of Common Stock issuable upon the exercise of outstanding warrants.

(23) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(24) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(25) Includes 92,000 shares of Common Stock and 18,400 shares of Common Stock issuable upon the exercise of outstanding warrants.

(26) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(27) Joshua Kanter, as President of Chicago Investments, Inc., has voting and dispositive power over shares held by Chicago Investments, Inc.

(28) Includes 75,000 shares of Common Stock and 15,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(29) Includes 4,643 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(30) Christoher H. Paskach, as Trustee of Christopher H. Paskach Living Trust Dated 6-16-03, has voting and dispositive power over shares held by Christopher H. Paskach Living Trust Dated 6-16-03.

(31) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(32) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(33) Includes 35,000 shares of Common Stock and 7,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(34) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(35) Includes (i) 10,714 shares of Common Stock; (ii) 20,000 shares of Common Stock issued in the Private Placement; and (iii) 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement.

(36) Includes 40,000 shares of Common Stock and 8,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(37) Includes (i) 30,000 shares of Common Stock; (ii) 100,000 shares of Common Stock issued in the Private Placement; (iii) 20,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement; and (iv) 15,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(38) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(39) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(40) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(41) Includes 75,000 shares of Common Stock and 15,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(42) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(43) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(44) Includes 150,000 shares of Common Stock and 30,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(45) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(46) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

43

(47) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(48) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(49) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(50) Includes (i) 10,000 shares of Common Stock (ii) 20,000 shares of Common Stock issued in the Private Placement; and (iii) 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement.

(51) Includes 3,897 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(52) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(53) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(54) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(55) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(56) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(57) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(58) Includes 75,000 shares of Common Stock and 15,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(59) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(60) Dr. Peter Beck, as Trustee of Dr. Peter Beck Revocable Trust, has voting and dispositive power over shares held by Dr. Peter Beck Revocable Trust.

(61) Includes 75,000 shares of Common Stock and 15,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(62) Includes 150,000 shares of Common Stock and 30,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(63) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(64) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(65) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(66) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(67) Includes 3,532 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(68) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(69) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(70) Gary Higdem, as Trustee of The Garry Higdem Living Trust, has voting and dispositive power over shares held by The Garry Higdem Living Trust.

(71) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(72) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(73) Gerald A. Tomsic, as Trustee of Gerald A. Tomsic 1995 Trust, has voting and dispositive power over shares held by Gerald A. Tomsic 1995 Trust.

(74) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

44

(75) Includes (i) 10,000 shares of Common Stock; (ii) 49,980 shares of Common Stock issued in the Private Placement; (iii) 9,996 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement; and (iv) 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(76) Includes 28,000 shares of Common Stock and 5,600 shares of Common Stock issuable upon the exercise of outstanding warrants.

(77) Michael Heijer, as Managing Member of  GranCorp Holdings, LLC.,  has voting and dispositive power over shares held by GranCorp Holdings, LLC.

(78) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(79) Includes 55,000 shares of Common Stock and 11,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(80) Includes 17,500 shares of Common Stock and 3,500 shares of Common Stock issuable upon the exercise of outstanding warrants.

(81) Includes 27,063 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(82) Jack C. Holland, as President of HFIC-2, LLC, has voting and dispositive power over shares held by HFIC-2, LLC

(83) Includes (i) 75,000 shares of Common Stock; (ii) 50,000 shares of Common Stock issued in the Private Placement; (iii) 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement; and (iv) 37,500 shares of Common Stock issuable upon the exercise of outstanding warrants.

(84) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(85) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(86) Includes 100,000 shares of Common Stock and 20,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(87) Irwin L. Zalcberg, as Trustee of Irwin L. Zalcberg, PSP UAD 1/1/91, has voting and dispositive power over shares held by Irwin L. Zalcberg, PSP UAD 1/1/91.

(88) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(89) Includes 15,139 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(90) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(91) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(92) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(93) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(94) Includes 10,000 shares of Common Stock and 2,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(95) Includes 36,000 shares of Common Stock and 7,200 shares of Common Stock issuable upon the exercise of outstanding warrants.

(96) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(97) Includes (i) 10,000 shares of Common Stock; (ii) 20,000 shares of Common Stock issued in the Private Placement; (iii) 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement; and (iv) 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(98) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(99) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(100) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(101) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(102) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

45

(103) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(104) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(105) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(106) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(107) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(108) Includes 16,652 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(109) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(110) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(111) Includes 40,000 shares of Common Stock and 8,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(112) Includes 65,000 shares of Common Stock and 13,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(113) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(114) Includes 100,000 shares of Common Stock and 50,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(115) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(116) Includes (i) 1,026,720 shares of Common Stock; (ii) 100,000 shares of Common Stock issued in the Private Placement; and (iii) 20,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement.

(117) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(118) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(119) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(120) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(121) Includes 3,450 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(122) J.R. Sandell, as the owner of JR Sandell Wedbush Securities Inc.  CTDN IRA Contributory 09/14/12, has voting and dispositive power over shares held by JR Sandell Wedbush Securities Inc.  CTDN IRA Contributory 09/14/12.

(123) Includes (i) 25,714 shares of Common Stock; (ii) 50,000 shares of Common Stock issued in the Private Placement; (iii) 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement; and (iv) 27,857 shares of Common Stock issuable upon the exercise of outstanding warrants.

(124) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(125) Includes 250,000 shares of Common Stock and 50,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(126) Includes 150,000 shares of Common Stock and 30,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(127) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(128) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(129) Includes 200,000 shares of Common Stock and 40,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(130) Includes 75,000 shares of Common Stock and 15,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

46

(131) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(132) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(133) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(134) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(135) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(136) Includes 75,000 shares of Common Stock and 15,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(137) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(138) Peter L. Dalrymple, as General Partner of LPD Investments Ltd., has voting and dispositive power over shares held by LPD Investments Ltd.

(139) Includes 200,000 shares of Common Stock and 40,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(140) Includes 100,000 shares of Common Stock and 20,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(141) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(142) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(143) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(144) Marlice Gardner, as the owner of Marlice Gardner Wedbush Securities Inc. CTON IRA Contributory 01/23/13, has voting and dispositive power over shares held by Marlice Gardner Wedbush Securities Inc. CTON IRA Contributory 01/23/13.

(145) Includes (i) 35,714 shares of Common Stock; (ii) 30,000 shares of Common Stock issued in the Private Placement; (iii) 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement; and (iv) 17,857 shares of Common Stock issuable upon the exercise of outstanding warrants.

(146) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(147) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(148) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(149) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(150) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(151) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(152) Includes 61,000 shares of Common Stock and 12,200 shares of Common Stock issuable upon the exercise of outstanding warrants.

(153) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(154) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(155) Includes 4,526 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(156) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(157) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(158) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

47

(159) Includes 23,500 shares of Common Stock and 4,700 shares of Common Stock issuable upon the exercise of outstanding warrants.

(160) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(161) Includes 130,524 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(162) Williams Miller, as the owner of NFS FMTC SEP IRA FBO William Miller, has voting and dispositive power over shares held by NFS FMTC SEP IRA FBO William Miller.

(163) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(164) Arthur W. Chick, as the owner of NFS/FMTC IRA FBO Arthur W. Chick, has voting and dispositive power over shares held by NFS/FMTC IRA FBO Arthur W. Chick.

(165) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(166) Billy B. Fouch as the owner of NFS/FMTC IRA FBO Billy B. Fouch, has voting and dispositive power over shares held by NFS/FMTC IRA FBO Billy B. Fouch.

(167) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(168) Bruce A. Rawls, as the owner of NFS/FMTC IRA FBO Bruce A. Rawls, has voting and dispositive power over shares held by NFS/FMTC IRA FBO Bruce A. Rawls.

(169) Includes 29,000 shares of Common Stock and 5,800 shares of Common Stock issuable upon the exercise of outstanding warrants.

(170) Chandler Beach, as the owner of NFS/FMTC IRA FBO Chandler Beach, has voting and dispositive power over shares held by NFS/FMTC IRA FBO Chandler Beach, has voting and dispositive power over shares held by NFS/FMTC IRA FBO Chandler Beach.

(171) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(172) David Peterson, as the owner of NFS/FMTC IRA FBO David Peterson, has voting and dispositive power over shares held by NFS/FMTC IRA FBO David Peterson.

(173) Includes 45,600 shares of Common Stock and 9,120 shares of Common Stock issuable upon the exercise of outstanding warrants.

(174) John W. Baxter, as the owner of NFS/FMTC IRA FBO John W. Baxter, has voting and dispositive power over shares held by NFS/FMTC IRA FBO John W. Baxter.

(175) Includes 24,000 shares of Common Stock and 4,800 shares of Common Stock issuable upon the exercise of outstanding warrants.

(176) Paul J. Serbiak, as the owner of NFS/FMTC IRA FBO Paul J. Serbiak, has voting and dispositive power over shares held by NFS/FMTC IRA FBO Paul J. Serbiak.

(177) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(178) Robert Montgomery, as the owner of NFS/FMTC IRA FBO Robert Montgomery, has voting and dispositive power over shares held by NFS/FMTC IRA FBO Robert Montgomery.

(179) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(180) Hulette K Ash, as the owner of NFS/FMTC IRA FBO: Hulette K Ash, has voting and dispositive power over shares held by NFS/FMTC IRA FBO: Hulette K Ash.

(181) Includes 22,000 shares of Common Stock and 4,400 shares of Common Stock issuable upon the exercise of outstanding warrants.

(182) Craig Locke, as the owner of NFS/FMTC IRA Rollover FBO Craig Locke,  has voting and dispositive power over shares held by NFS/FMTC IRA Rollover FBO Craig Locke.

(183) Includes 12,000 shares of Common Stock and 2,400 shares of Common Stock issuable upon the exercise of outstanding warrants.

(184) Gary Kostelec as the owner of NFS/FMTC Rollover IRA FBO Gary Kostelec, has voting and dispositive power over shares held by NFS/FMTC Rollover IRA FBO Gary Kostelec.

(185) Includes 38,500 shares of Common Stock and 7,700 shares of Common Stock issuable upon the exercise of outstanding warrants.

(186) John M. Alessandro, as the owner of NFS/FMTC Rollover IRA FBO John M. Alessandro, has voting and dispositive power over shares held by NFS/FMTC Rollover IRA FBO John M. Alessandro.

48

(187) Includes 22,000 shares of Common Stock and 4,400 shares of Common Stock issuable upon the exercise of outstanding warrants.

(188) Martin Rosenwasser, as the owner of NFS/FMTC Rollover IRA FBO Martin Rosenwasser, has voting and dispositive power over shares held by NFS/FMTC Rollover IRA FBO Martin Rosenwasser.

(189) Includes 21,500 shares of Common Stock and 4,300 shares of Common Stock issuable upon the exercise of outstanding warrants.

(190) Steven E. Maul, as the owner of NFS/FMTC Rollover IRA FBO Steven E. Maul, has voting and dispositive power over shares held by NFS/FMTC Rollover IRA FBO Steven E. Maul.

(191) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(192) Sydelle Rosenwasser as the owner of NFS/FMTC Rollover IRA FBO Sydelle Rosenwasser, has voting and dispositive power over shares held by NFS/FMTC Rollover IRA FBO Sydelle Rosenwasser.

(193) Includes 17,000 shares of Common Stock and 3,400 shares of Common Stock issuable upon the exercise of outstanding warrants.

(194) Duane H. Mathiowetz, as the owner of NFS/FMTC Rollover IRA FBO: Duane H. Mathiowetz, has voting and dispositive power over shares held by NFS/FMTC Rollover IRA FBO: Duane H. Mathiowetz.

(195) Includes 250,000 shares of Common Stock and 50,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(196) Kenneth Halverson, as the owner of NFS/FMTC Rollover IRA FBO: Kenneth Halverson, has voting and dispositive power over shares held by NFS/FMTC Rollover IRA FBO: Kenneth Halverson.

(197) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(198) Randall Dunham, as the owner of NFS/FMTC Roth IRA FBO  Randall Dunham, has voting and dispositive power over shares held by NFS/FMTC Roth IRA FBO  Randall Dunham.

(199) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(200) John Alessandro, as the owner of NFS/FMTC Roth IRA FBO John Alessandro,  has voting and dispositive power over shares held by NFS/FMTC Roth IRA FBO John Alessandro.

(201) Includes 30,900 shares of Common Stock and 6,180 shares of Common Stock issuable upon the exercise of outstanding warrants.

(202) Lee Ann Waltzing, as the owner of NFS/FMTC Roth IRA FBO Lee Ann Waltzing,  has voting and dispositive power over shares held by NFS/FMTC Roth IRA FBO Lee Ann Waltzing.

(203) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(204) George W. Naylor, as the owner of NFS/FMTC SEP IRA FBO George W. Naylor,  has voting and dispositive power over shares held by NFS/FMTC SEP IRA FBO George W. Naylor.

(205) Includes 38,000 shares of Common Stock and 7,600 shares of Common Stock issuable upon the exercise of outstanding warrants.

(206) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(207) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(208) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(209) Includes 94,000 shares of Common Stock and 18,800 shares of Common Stock issuable upon the exercise of outstanding warrants.

(210) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(211) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(212) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(213) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(214) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(215) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

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(216) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(217) Rhoda Ann Miller, as Trustee of Rhoda Ann Miller Declaration of Trust, has voting and dispositive power over shares held by Rhoda Ann Miller Declaration of Trust.

(218) Includes 100,000 shares of Common Stock and 20,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(219) Includes 16,651 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(220) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(221) Includes 5,529 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(222) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(223) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(224) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(225) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(226) Includes 80,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(227) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(228) Includes 23,307 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(229) Includes 16,400 shares of Common Stock and 3,280 shares of Common Stock issuable upon the exercise of outstanding warrants.

(230) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(231) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(232) Includes 100,000 shares of Common Stock, 20,000 shares of Common Stock issuable upon the exercise of outstanding warrants and 63,334 shares of Common Stock registered in shareholder’s name or account over which shareholder has voting and dispositive control.

(233) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(234) Charles R. Smith, as Trustee of Smith Living Trust dtd 9/25/2003, has voting and dispositive power over shares held by Smith Living Trust dtd 9/25/2003.

(235) Includes (i) 200,000 shares of Common Stock; (ii) 200,000 shares of Common Stock issued in the Private Placement; (iii) 40,000 shares of Common Stock issuable upon the exercise of outstanding warrants issued in the Private Placement; and (iv)150,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(236) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(237) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(238) Includes 150,000 shares of Common Stock and 30,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(239) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(240) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(241) John Maddux, as President of Sunstone Partners LLC,  has voting and dispositive power over shares held by Sunstone Partners LLC.

(242) Includes 100,000 shares of Common Stock and 20,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(243) Includes 30,000 shares of Common Stock and 6,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

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(244) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(245) Robert Ciasulli, as President of The Roberts Fund,  has voting and dispositive power over shares held by The Roberts Fund.

(246) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(247) Includes 42,857 shares of Common Stock and 13,928 shares of Common Stock issuable upon the exercise of outstanding warrants.

(248) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(249) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(250) Includes 37,500 shares of Common Stock, 7,500 shares of Common Stock issuable upon the exercise of outstanding warrants and 50,000 shares of Common Stock issuable upon conversion of 500 Class A Preferred Shares.

(251) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(252) Includes 20,000 shares of Common Stock and 4,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(253) Includes 50,000 shares of Common Stock and 10,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(254) Includes 28,000 shares of Common Stock and 5,600 shares of Common Stock issuable upon the exercise of outstanding warrants.

(255) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(256) Includes 883 shares of Common Stock issuable upon the exercise of outstanding warrants issued as Placement Agent compensation.

(257) Includes 71,000 shares of Common Stock and 14,200 shares of Common Stock issuable upon the exercise of outstanding warrants.

(258) Includes 6,400 shares of Common Stock and 1,280 shares of Common Stock issuable upon the exercise of outstanding warrants.

(259) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(260) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(261) Includes 25,000 shares of Common Stock and 5,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(262) Dallas Wuethrich, as Member of Wuethrich Investments LLC,  has voting and dispositive power over shares held by Wuethrich Investments LLC.

(263) Includes 40,000 shares of Common Stock and 8,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(264) Includes 15,000 shares of Common Stock and 3,000 shares of Common Stock issuable upon the exercise of outstanding warrants.

(265) The selling stockholder or the individual deemed to hold voting and dispositive power over the selling stockholder is an affiliate of a broker-dealer. The selling stockholder acquired the securities in the ordinary course of business and at the time of such acquisition, did not have any agreements, plans or understandings, directly or indirectly, with any person to distribute the securities.

(266) The selling stockholder is an affiliate of a broker-dealer and acted as the Placement Agent for the Private Placement.  The selling stockholder acquired the securities as Placement Agent compensation in the ordinary course of business and at the time of such acquisition, did not have any agreements, plans or understandings, directly or indirectly, with any person to distribute the securities. 

(267) The selling stockholder is a registered broker-dealer and acted as the Placement Agent for the Private Placement. The selling stockholder acquired the securities as Placement Agent compensation in the ordinary course of business and at the time of such acquisition, did not have any agreements, plans or understandings, directly or indirectly, with any person to distribute the securities. 

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DESCRIPTION OF SECURITIES

Authorized Capital Stock

We have authorized 201,000,000 shares of capital stock, of which 200,000,000 are shares of Common Stock, par value $0.001 per share, and 1,000,000 are shares of preferred stock, par value $0.001.

Capital Stock Issued and Outstanding

We have issued and outstanding securities on a fully diluted basis:

· 38,605,205 shares of Common Stock;

· Warrants to purchase 6,940,904  shares of Common Stock; and

· Options to purchase 1,300,000 shares of Common Stock.

Common Stock

The holders of our Common Stock are entitled to one vote per share. In addition, the holders of our Common Stock will be entitled to receive ratably such dividends, if any, as may be declared by our Board of Directors out of legally available funds; however, the current policy of our Board of Directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of our Common Stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of our Common Stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of our board of directors and issued in the future.

Preferred Stock

Our Board of Directors is authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by our Board of Directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

Options and Warrants

Options under the Plan

We adopted our 2011 Equity Incentive Plan pursuant to which 2,000,000 shares of the Common Stock are reserved for issuance to employees, directors, consultants, and other service providers. To date, options to purchase 900,000 shares have been granted under the 2011 Equity Incentive Plan.

Warrants

In connection with the Private Placements, we issued five year warrants to purchase an aggregate of 2,007,196 shares of our Common Stock at an initial exercise price of $1.25 per share, subject to certain adjustments, which includes 1,664,656 Warrants sold to certain selling stockholders and 342,540 issued to the Placement Agent and its designees.  The Warrants contain limitations on exercise, including the limitation that the holders may not convert their warrants to the extent that upon exercise the holder, together with its affiliates, would own in excess of 4.99% of our outstanding shares of Common Stock.  For as long as the Warrant remains outstanding, the Warrant contains standard anti-dilution protection in the event we issue Common Stock at a lower per share price

Indemnification of Directors and Officers

Our Bylaws provide that we must indemnify and hold harmless our directors, officers, and other persons referenced in our Certificate of Formation as and to the extent permitted by the Texas Business Corporation Act.  The indemnification is intended to be to the fullest extent permitted by the laws of the State of Texas.

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Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Texas law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

On December 5, 2013, Whitley Penn LLP (“Whitley”) resigned as our independent registered public accounting firm, which resignation was accepted and ratified by the Company’s Board of Directors on December 12, 2013.

During the fiscal years ended December 31, 2012 and 2011, Whitley’s reports on the Company’s financial statements did not contain, except for a “going concern” qualification applicable only to the fiscal year end December 31, 2011, an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.

During the fiscal years ended December 31, 2012 and 2011 and the subsequent interim periods through December 12, 2013, (i) there were no disagreements between the Company and Whitley on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of Whitley, would have caused Whitley to make reference to the subject matter of the disagreement in connection with its report on the Company’s financial statements; and (ii) there were no reportable events as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K.

On December 12, 2013, the Company’s Board of Directors authorized the engagement of Montgomery Coscia Greilich LLP (“Montgomery”) as its independent registered public accounting firm for the Company’s fiscal year ending December 31, 2013.

During the years ended December 31, 2012 and 2011 and the subsequent interim periods through December 12, 2013, the date of engagement of Montgomery, the Company did not consult with Montgomery regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K). 

PLAN OF DISTRIBUTION

The selling stockholders, which, as used herein, includes donees, pledgees, transferees or other successors-in-interest selling shares of Common Stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of Common Stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. We have not been advised of any arrangements by the selling stockholders for the sale of any of the Common Stock owned by them.

The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:

• ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

• block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

• crosses, where the same broker acts as an agent on both sides of the trade;

• purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

• an exchange distribution in accordance with the rules of the applicable exchange;

• privately negotiated transactions;

• short sales;

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• through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

• broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

• a combination of any such methods of sale; and

• any other method permitted pursuant to applicable law.

The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of Common Stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of Common Stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus; provided, however, that prior to any such transfer the following information (or such other information as may be required by the federal securities laws from time to time) with respect to each such selling beneficial owner must be added to the prospectus by way of a prospectus supplement or post-effective amendment, as appropriate: (1) the name of the selling beneficial owner; (2) any material relationship the selling beneficial owner has had within the past three years with us or any of our predecessors or affiliates; (3) the amount of securities of the class owned by such security beneficial owner before the transfer; (4) the amount to be offered for the security beneficial owner’s account; and (5) the amount and (if one percent or more) the percentage of the class to be owned by such security beneficial owner after the transfer is complete.

Any selling stockholder and any other person participating in a distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations under that statute, including, without limitation, possibly Regulation M. This may limit the timing of purchases and sales of any of the securities by a selling stockholder and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the securities to engage in market-making activities with respect to the securities. All of the foregoing may affect the marketability of the securities and the ability of any person or entity to engage in market-making activities with respect to the securities.

We are required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling stockholder, but excluding brokerage commissions or underwriter discounts.

The selling stockholders, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. No selling stockholder has entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into.

A selling stockholder may pledge its shares to their brokers under the margin provisions of customer agreements. If a selling stockholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares.

If the selling stockholder notifies us that it has a material arrangement with a broker-dealer for the resale of the Common Stock, then we would be required to amend the registration statement of which this prospectus is a part, and file a prospectus supplement to describe the agreements between the selling stockholder and the broker-dealer.

LEGAL MATTERS

Sichenzia Ross Friedman Ference LLP, New York, New York, will pass upon the validity of the shares of Common Stock offered by the selling stockholders under this prospectus.  

EXPERTS

The consolidated financial statements of Calpian, Inc. as at end of the fiscal year ended December 31, 2013  have been audited by Montgomery Coscia Greilich LLP and the financial statements of Calpian, Inc. for the fiscal year ended December 31, 2012 have been audited by Whitley Penn LLP, independent registered public accounting firms as set forth in

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their respective reports, and are included in reliance upon such reports given on the authority of such firms as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities Act, with respect to our shares of Common Stock offered by this prospectus. The registration statement contains additional information about us and our shares of Common Stock that the selling stockholders are offering in this prospectus.

We file annual, quarterly and current reports and other information with the Securities and Exchange Commission under the Securities Exchange Act. Our Securities and Exchange Commission filings are available to the public over the Internet at the Securities and Exchange Commission’s website at http://www.sec.gov.  Access to these electronic filings is available as soon as practicable after filing with the Securities and Exchange Commission. You may also read and copy any document we file at the Securities and Exchange Commission’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges.

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ITEM 8     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
CONSOLIDATED BALANCE SHEETS	F-4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS	F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-6
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY	F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Calpian, Inc.

We have audited the accompanying consolidated balance sheets of Calpian, Inc. and subsidiary as of December 31, 2013 and the related consolidated statements of comprehensive income, cash flows and shareholders’ equity for the year ended December 31, 2013. Calpian, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Calpian, Inc. and subsidiary as of December 31, 2013 and the results of their operations and their cash flows for the year ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

The financial statements of the Calpian, Inc. as of December 31, 2012 and for the year ended December 31, 2012, were audited by other auditors whose report dated April 8, 2013, expressed an unmodified opinion on those statements.

/s/ Montgomery Coscia Greilich LLP

Plano, Texas

March 31, 2014

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Calpian, Inc.

We have audited the accompanying balance sheet of Calpian, Inc. (the “Company”), as of December 31, 2012, and the related statements of comprehensive loss, cash flows, and shareholders’ equity for the year then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Whitley Penn LLP

Dallas, Texas

April 8, 2013

F-3

CALPIAN, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	December 31,		December 31,
	2013		2012
				Adjusted -
ASSETS				Note 1
Current Assets
Cash and equivalents	$	438,367	$	314,309
Accounts receivable		42,082		35,461
Restricted cash		302,994		270,000
Other current assets		1,006,052		70,298
Total current assets		1,789,495		690,068
Property and Equipment		418,602		-
Other Assets
Residual portfolios		9,609,659		5,253,592
Equity investment		10,124,831		6,854,004
Deferred financing costs		954,231		244,902
Goodwill		2,341,928		-
Other intangible assets		39,115		10,000
Total other assets		23,069,764		12,362,498
Total assets	$	25,277,861	$	13,052,566
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	362,595	$	51,225
Accrued expenses		599,355		60,565
Interest payable		122,000		39,617
Current portion of long term debt		5,780,400		-
Notes payable		20,864		7,570
Deferred compensation of officers, directors, and executives		106,000		125,000
Accrued expenses payable to officers, directors, and affiliates		720,273		395,001
Total current liabilities		7,711,487		678,978
Other Liabilities
Senior credit facility, net of current portion		11,589,600		3,000,000
Subordinated notes payable, net of current portion		1,000,000		3,300,000
Convertible subordinated notes, net of current portion		-		850,000
Discount on subordinated notes		(199,260)		(368,262)
Total other liabilities		12,390,340		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 December 31, 2013 and 2012, respectively		29,589		23,898
Additional paid-in capital		22,073,606		13,703,153
Accumulated deficit		(16,957,037)		(7,980,212)
Accumulated other comprehensive loss		29,876		(154,989)
Total shareholders' equity	$	5,176,034	$	5,591,850
Total liabilities and shareholders' equity	$	25,277,861	$	13,052,566

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

F-4

CALPIAN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

	Year Ended
	December 31,
	2013		2012
				Adjusted -
Revenues				Note 1
Residual portfolios	$	16,419,309	$	3,438,898
Processing fees		3,056,280		—
Other		1,560,296		—
		21,035,885		3,438,898
Cost of revenues
Residual portfolio amortization		2,022,665		1,103,734
Interchange fees		8,212,788		—
Processing and servicing		4,547,246		88,950
Other		445,864		19,259
Total cost of revenues		15,228,563		1,211,943
Gross profit		5,807,322		2,226,955
General and administrative expenses		8,220,054		2,966,358
Operating loss		(2,412,732)		(739,403)
Other expenses
Interest		2,636,922		2,858,135
Total other expenses		2,636,922		2,858,135
Loss before items below		(5,049,654)		(3,597,538)
Income tax expense (benefit)		—		(18,190)
Equity investment loss		3,927,172		718,161
Net loss		(8,976,826)		(4,297,509)
Other comprehensive loss:
Currency translation adjustments		184,865		(154,989)
Total comprehensive loss	$	(8,791,961)	$	(4,452,498)
Net loss per share, basic and diluted	$	(0.34)	$	(0.20)
Weighted average number of shares outstanding, basic and diluted		26,582,735		21,517,015

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

F-5

CALPIAN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
		December 31,
	2013		2012
				Adjusted -
OPERATING ACTIVITIES				Note 1
Net loss	$	(8,976,826)	$	(4,297,509)
Adjustments to reconcile net loss to cash used in operating activities:
Equity investment loss		3,927,173		718,161
Deferred financing cost amortization		185,671		1,591,016
Residual portfolio amortization		2,022,665		1,103,734
Subordinated note discount amortization		316,136		465,177
Deferred consulting fee amortization		378,220		390,375
Depreciation		98,408		—
Management equity awards		147,815		10,510
Equity awards issued for services		120,425		—
Deferred income taxes		11,659		—
Changes in operating assets and liabilities:
Accounts receivable		100,846		—
Other assets		(544,209)		(10,400)
Deferred compensation of officers, directors, and executives		(19,000)		(235,000)
Accrued expenses payable to officers, directors, and affiliates		325,273		192,651
Accounts payable		310,937		27,810
Accrued expenses		470,392		24,855
Interest payable		82,383		14,117
Net cash used in operating activities		(1,042,032)		(4,503)
INVESTING ACTIVITIES
Business acquisition, net of cash acquired		(9,500,000)		—
Contribution to equity method investment		(5,524,000)		(4,081,000)
Purchase of residual portfolios		—		(492,000)
Purchases of property and equipment		(182,641)		—
Proceeds from sale of fixed assets		21,306		—
Net cash used in investing activities		(15,185,335)		(4,573,000)
FINANCING ACTIVITIES
Borrowings on senior notes		10,170,000		3,000,000
Senior note repayment		—		(2,700,000)
Borrowings on subordinated notes		1,950,000		1,600,000
Issuance of common stock and warrants		4,638,447		2,805,000
Restricted cash		273,973		155,000
Payments on note payable		(110,994)		(33,349)
Payments on deferred financing costs		(570,000)		(302,500)
Net cash provided by financing activities		16,351,426		4,524,151
Increase (decrease) in cash and equivalents		124,058		(53,352)
Cash and equivalents, beginning of year		314,309		367,661
Cash and equivalents, end of period	$	438,367	$	314,309
SUPPLEMENTAL INFORMATION
Interest paid	$	2,052,732	$	787,825
Noncash investing and financing  transactions:
Common stock issued to acquire equity investment		1,476,924		3,646,155
Common stock issued as stock-based compensation for  equity awards and services		605,521		456,000
Common stock issued in exchange for residual portfolios		—		40,845
Warrants issued as part of debt and equity financings		421,021		69,000
Subordinated debt converted to common stock		950,699		—
Notes payable for insurance premiums		124,287		33,383

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

F-6

CALPIAN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

								Accumulated
				Additional				Other
	Common Stock			Paid-In		Accumulated		Comprehensive
	Shares	Amount		Capital		Deficit		Loss		Total
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		40,818		—		—		40,845
Common stock issued as contribution to equity method investee	2,430,770		2,431		3,643,724		—		—		3,646,155
Common stock issued	1,832,506		1,832		2,746,917		—		—		2,748,749
Common stock issued for services	304,000		304		455,696		—		—		456,000
Financing transaction warrants	—		—		125,250		-		—		125,250
Equity awards to management	—		—		10,510		—		—		10,510
Net loss	—		—		—		(4,341,303)		—		(4,341,303)
Currency translation adjustments	—		—		—		—		(9,272)		(9,272)
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
Common stock issued as contribution to equity method investee	1,230,770		1,231		1,475,693		—		—		1,476,924
Common stock issued to purchase residual portfolios	10,941		11		14,869		—		—		14,880
Common stock issued	2,560,142		2,560		1,949,098		—		—		1,951,658
Common stock issued in exchange for conversion of subordinated debt	633,800		634		950,065		—		—		950,699
Warrants issued as part of financing	—		—		2,741,693		—		—		2,741,693
Warrants exercised	391,920		392		(392)		—		—		—
Stock based compensation	18,100		18		174,947		—		—		174,965
Common stock issued for services	431,250		431		513,944		—		—		514,375
Common stock issued to convert Series B Preferred shares	414,249		414		550,537		—		—		550,951
Net loss	—		—		—		(8,976,826)		—		(8,976,826)
Currency translation adjustments	—		—		—		—		184,865		184,865
Balance, December 31, 2013	29,589,478	$	29,589	$	22,073,607	$	(16,957,038)	$	29,876	$	5,176,034

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

F-7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 - OVERVIEW

The Company

In these consolidated 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.

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 one or more credit card processors to sell processing and acquiring services on their behalf. ISOs facilitate the merchant’s application for processing and acquiring services through approvals, credit checks, guarantees, etc. that are required before the merchant can be approved to accept consumer credit card payments. We act as a purchaser of revenue streams resulting from the relationships between processors and ISOs.

The acquisition of CCI (Note 3) allowed us to expand into an integrated provider of merchant payment processing services and related software products throughout the United States. The Company delivers credit and debit card-based payment processing solutions primarily to small and medium-sized merchants who operate either in physical business environment, over the Internet, or in mobile or wireless settings via cellular-based wireless devices that the Company sells.

Basis of Presentation

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. 

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 the year 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. 

Use of Estimates

The preparation of our consolidated 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.  Significant estimates include future cash flows used in our calculation of residual portfolio amortization, fair values of warrants and equity awards granted, fair value of asset and liabilities acquired in our business acquisition, and the valuation allowance on deferred tax assets and liabilities. 

Reclassifications

Certain previously reported amounts have been reclassified to conform to the current presentation.

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, revenues and expenses are translated at quarterly average exchange rates and resulting translation gains or losses are accumulated in other comprehensive loss as a separate component of shareholders’ equity.

F-8

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.

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. Residual portfolios are recorded at cost and amortized into cost of revenues based on cash received.  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

The Company holds investments in equity method investees. Investments in equity method investees are those for which the Company has the ability to exercise significant influence but does not control and is not the primary beneficiary. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the venture unless predominant evidence to the contrary exists. Under this method of accounting, the Company records its proportionate share of the net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Cash payments to equity method investees such as additional investments, loans and advances and expenses incurred on behalf of investees, as well as payments from equity method investees such as dividends, distributions and repayments of loans and advances are recorded as adjustments to investment balances. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.

Revenue Recognition

We recognize residual portfolio revenue based on actual cash receipts.

Generally, we report revenues at the time of sale on a gross basis where we are the primary obligor in the arrangement, have latitude in establishing the price of the services, change the product and perform part of the service, have discretion in supplier selection, have latitude in determining the product and service specifications to meet our clients’ needs and assume credit. Revenues generated by certain portfolios are reported net of interchange, where we may not have credit risk, or the ultimate responsibility for the merchant accounts.

We also derive revenues from the electronic processing of credit, charge and debit card transactions that are authorized and captured through third-party networks. Typically merchants are charged for these processing services based on a percentage of the dollar amount of each transaction and in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee transaction and may also be charged miscellaneous fees, including fees for handling chargebacks, monthly minimums, equipment rentals, sales or leasing and other miscellaneous services. Revenues are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations under revenue sharing agreements pursuant to which such parties received payments based primarily on processing volume for particular groups of merchants. Included in cost of goods and services sold are the expenses covering interchange and bank processing directly attributable to the furnishing of transaction processing and other services to our merchant customers and are recognized simultaneously with the recognition of revenue.

The Company recognizes residual portfolio revenue based on actual cash receipts.  For the year ended December 31, 2013, approximately 76% of consolidated revenues were attributable to merchant customer transactions processed by three third-party vendors.

F-9

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 on the date of issuance issued in connection with debt financing transactions or for services are deferred and expensed over the term of the debt or as services are performed.

Inventories

Inventories consist of point-of-sales terminal equipment held for sale to merchants, resellers and distributors. Inventories are valued at the lower of cost or market price. Cost is arrived at using the first-in, first-out method. Market price is estimated based on current sales of equipment.

Advertising

Advertising costs are expensed as incurred.

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:  

Borrowings on senior credit facility	$	9,750,000
Issuance of common stock		—
Issuance of warrants		—
Total purchase price	$	9,750,000

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

Cash	$	250,000
Restricted cash		306,967
Current assets		37,287
Fixed assets		355,636
Residual portfolios		6,379,000
Intangibles		29,115
Goodwill		2,341,928
Accrued Revenue Receivable		107,467
Liabilities		(57,400)
Net assets	$	9,750,000

F-10

The residual portfolios are being amortized over 10 years.   

4 - RESIDUAL PORTFOLIOS

As of December 31, 2013, we expect annual amortization in each of the next five years to be as shown below with the remainder ranging over the succeeding 8 years.  No residual value is likely.

2014		2015		2016		2017		2018		Thereafter		Total
$	1,894,233	$	1,605,856	$	1,340,561	$	1,117,821	$	933,004	$	2,718,184	$	9,609,659

5 - EQUITY INVESTMENT

In March 2012, the Company began acquiring common stock of Digital Payments Processing Limited (“DPPL”), a newly-organized company based in Mumbai, India, in cash and issuance of Company stock.  As of December 31, 2013 and 2012, the Company owned 49.9% and 26.5% respectively, of the outstanding common stock of DPPL. 

In 2012, DPPL entered into a services agreement with My Mobile Payments Limited (“MMPL”), also based in Mumbai, India.  The Company does not hold a direct equity interest in MMPL.  Together, DPPL and MMPL operate the Money-on-Mobile enterprise, which offers a mobile wallet service, similar to carrying a prepaid debit card, on a mobile phone, which can be used to pay for goods and services from the mobile phone as well as making other financial transactions such as sending or receiving money.

Under the services agreement, DPPL has a right to trigger an acquisition of MMPL, upon approval by the Indian government.  This approval was obtained in December 2014, but a merger has not be triggered as of this report date.  DPPL has a contractual variable interest in MMPL and is the primary beneficiary of the arrangement.  As such, the following accounts of DPPL and MMPL are presented on a combined basis.

The combined balance sheets and results of operations of DPPL and MMPL as of December 31, 2013 and for the year then ended are summarized as follows:

	December 31,
	2013		2012
Current Assets	$	7,119,174	$	1,896,749
Long Term Investments		367,041		2,119,105
Total Assets		7,486,215		4,015,854
Current Liabilities		2,921,909		1,305,808
Long Term Liabilities		205,249		61,576
Total Liabilities		3,127,158		1,367,384
Capital		4,359,057		2,648,470
Total Liabilities and Capital	$	7,486,215	$	4,015,854

	Year Ended
	December 31,
	2013		2012
Total Revenues	$	33,119,945	$	30,073,746
Gross Profit		322,116		427,159
Total Expenses		1,119,342		1,283,041
Net Income		(1,022,449)		(1,023,727)

Due to limitations of the Indian government, the Company is prohibited from acquiring additional common stock of the DPPL until its investment contribution meets certain thresholds prescribed the Indian government.   The Company has made additional cumulative investments of $8,377,419 in DPPL beyond its common stock received, as subscribed stock.  Subscribed stock does not participate in voting or distributions of earnings.

F-11

	December 31,
	2013		2012
Carrying value of investment	$	10,124,831	$	6,854,004

The Company DPPL agreement provides for acquiring an equity interest of approximately 74% for $9.7 million to be paid in quarterly tranches through January 2014 and the issuance of 6.1 million shares of our common stock. 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. 

There have been several prior period corrections for the first three quarters of 2013.  The change was due to improved information from DPPL as well as a better methodology of calculating ownership and currency translation adjustments.   The Company determined that the adjustments would have an immaterial effect to the Company’s consolidated financial statements for the quarterly periods in the year ended December 31, 2013, based on management’s qualitative and quantitative analysis relative to its materiality consistent with the applicable accounting guidance.   The adjustments are shown in the table below:

(in thousands of dollars)
Balances as of the date indicated	12/31		9/30		6/30		3/31
Equity Investment Balance
Previous reported	$	10,125	$	8,942	$	9,014	$	7,857
Revised balance		10,125		10,256		11,063		8,291
Difference		-		(1,314)		(2,049)		(434)
Accumulated Other Comprehensive Income balance
Previous reported		(30)		2,688		1,775		90
Revised balance		(30)		(30)		(23)		(1)
Difference	$	—	$	2,718	$	1,798	$	91

6 - DEBT

Senior Credit Facility

As of December 31, 2013 and 2012, the outstanding balance under the senior credit facility was as follows:

	2013		2012
Borrowings on senior credity facility	$	13,170,000	$	3,000,000
Less: debt discount		—		—
Net senior credit facility	$	13,170,000	$	3,000,000

In April 2011, the Company secured an $8.0 million credit facility, bearing interest of 16% per year.  The Company paid origination, commitment and administration fees, and expenses totaling $323,639 and issued the lender warrants to acquire up to 804,467 shares of our common stock at $1.00 per share.  Unamortized deferred financing costs of $525,936 were charged to interest expense when the facility was repaid and closed in November 2012.  There are no related warrants outstanding as of December 31, 2013.

In November 2012, the Company entered into a $5.0 million senior credit facility, amended in March 2013 to $14.5 million.  Outstanding balances under the senior credit facility accrue interest at an annual rate of 13.2%, payable monthly in arrears. Interest only is payable through August 2014; thereafter, principal is payable at a monthly through maturity, September 2016.  A prepayment penalty of 4% is in effect through March 16, 2014.  In addition, the facility is subject to a facility growth fees of 4% of new borrowings arranged by the lender and 2% if arranged by others.  During the years ended December 31, 2013 and 2012, interest expense related to the senior credit facility, exclusive of accretion of debt discount and amortization of loan origination fees, was $396,000 and $428,000, respectively.

Additional borrowings under the senior credit facility are limited to the acquisition of credit card residuals in the United States.  Qualifying borrowing amounts are also limited by 16 times the expected monthly gross cash flow of the residuals, as measured immediately following the acquisition.  The senior credit facility is secured by substantially all of the Company’s assets.  The facility requires maintaining a minimum of $200,000 in cash and equivalents and meeting certain financial covenants.  As of December 31, 2013, the Company was in compliance with all covenants.

F-12

In March 2013, the Company issued 500,000 warrants to the senior credit facility.  The aggregate fair value of the warrants, determined on the date of issuance using a Black Scholes valuation model, as of December 31, 2013 was $325,000

As of December 31, 2013 and 2012, the Company has paid $815,000 and $255,000, respectively, in loan origination fees related to the senior credit facility that are being amortized in to interest expense through the facility maturity.  For the years ended December 31, 2013 and 2012, amortized loan origination fees included in interest expense were $185,671 and $1,568,516, respectively. 

Subordinated Debt

The Company’s subordinated debt has been issued pursuant to a $3 Million Subordinated Debt Offering, a $2 Million Subordinated Debt Offering,  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.  The notes bear interest at a rate of 12% annually paid monthly in arrears.

Subordinated Notes Payable

At December 31, 2013 and 2012, the outstanding balances on subordinated notes payable were as follows:

	2013		2012
Borrowings on subordinated notes payable	$	4,800,000	$	3,300,000
Less: debt discount		(198,510)		(302,904)
Net subordinated notes payable	$	4,601,490	$	2,997,096

For the years ended December 31, 2013 and 2012, interest expense related to the subordinated notes payable, exclusive of debt discount accretion, was $554,167 and $362,550, respectively.

At issuance, the lenders received warrants to acquire shares of our common stock at $2.00 to $2.50 per share.   140,000 and 335,425 warrants were issued during the years ended December 31, 2013 and 2012, respectively.  The aggregate fair value of the warrants, determined on the date of issuance using a Black Scholes valuation model, as of December 31, 2013 and 2012 was $96,434 and $-0-, respectively.  The debt discount accreted into interest expense during the years ended December 31, 2013 and 2012 were $176,828 and $461,535, respectively.  At December 31, 2013, future accretion of related debt discounts is expected to be $179,892 for 2014, $18,618 for 2015 and 2016, respectively.

Convertible Subordinated Notes

At December 31, 2013 and 2012, the outstanding balances on convertible subordinated notes payable were as follows:

	2013		2012
Borrowings on convertible subordinated notes	$	1,300,000	$	850,000
Less: debt discount		(750)		(65,358)
Less: notes converted		(900,000)		—
Net convertible subordinated notes	$	399,250	$	784,642

For the years ended December 31, 2013 and 2012, interest expense related to the subordinated notes payable, exclusive of debt discount accretion, was $554,167 and $362,550, respectively.

The notes can be converted shares of the Company’s common stock at a conversion rate of $1.50 per share at the option of the note holders.  In July 2014, any outstanding balances automatically will automatically convert.  During the year ended December 31, 2013, outstanding convertible subordinated note balances of $900,000 were converted into 600,001 shares of common stock.  No amounts were converted for the year ended December 31, 2012.

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. 

At issuance, the lenders received warrants to acquire shares of our common stock at $2.00 to $2.30 per share.   40,000 and 50,000 warrants were issued during the years ended December 31, 2013 and 2012, respectively.  The aggregate fair value of the warrants, determined on the date of issuance using a Black Scholes valuation model, as of December 31, 2013 and 2012 was $93,000 and $69,000, respectively.  The debt discount accreted into interest expense during the years ended December 31, 2013 and 2012 were $139,308 and $3,642, respectively.  At December 31, 2013, future accretion of related debt discounts is expected to be $750 for 2014.

F-13

Note 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.  As of December 31, 2013 and 2012, outstanding balances on notes payable were $20,864 and $7,570, respectively. 

	2014		2015		2016		Total
Senior notes payable	$	2,195,000	$	6,585,000	$	4,390,000	$	13,170,000
Subordinated notes payable		3,800,000		—		1,000,000		4,800,000
Convertible subordinated notes		400,000		—		—		400,000
Note payable		20,864		—		—		20,864
	$	6,415,864	$	6,585,000	$	5,390,000	$	18,390,864

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 216,664 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

On October 3, 2013, the Company issued 550,000 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 entered into with an accredited investor. The gross proceeds from the sale of 550,000 Series B Preferred Stock were $550,000.   At December 31, 2013, all of the Series B shares had converted to common stock.

In November and December 2013, all 550,000 shares of Series B Preferred Stock converted into 414,249 shares of common stock and the rights and preferences of the Series B Preferred were of no further effect.

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 6,874,160 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, international acquisition advisory, and public relations services. In 2013, 2,560,142 shares were sold in private placements for $4,089,000, including the $1,261,036 fair value of 2,078,737 warrants as part of unit subscriptions, 391,920 shares were issued in the cashless exercise of 804,467 warrants, equity awards totaling 431,250 shares for consulting and other services having a total fair value of $514,375, and equity awards totaling 18,100 shares to certain DPPL employees having a $27,150 fair value. 

Warrants

A total of 4,657,496 warrants for our common stock with exercise prices ranging from $1.00 to $3.00 per share ($1.82 weighted average) have been issued in connection with our financing transactions and expire as follows: 2015 – 617,501; 2016 – 500,000; 2017 – 527,925 and 2018 – 3,012,070.  On exercise, the warrants will be settled in delivery of unregistered shares of our common stock. Warrants for 253,333 shares having a total fair value of $199,361 were issued in 2013 for financial consulting services.

The following table summarizes the changes in Warrants for the years ended December 31, 2013 and 2012.

F-14

	Shares
Outstanding  at December 31, 2011	1,946,968
Granted	502,925
Exercised	—
Expired/canceled	—
Outstanding  at December 31, 2012	2,449,893
Granted	3,012,070
Exercised	(391,920)
Expired/canceled	(412,547)
Outstanding  at December 31, 2013	4,657,496

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.  As of this report date, management estimates that one or more of these conditions will be achieved and these warrants will not be exercisable.  As such, no amounts have been recorded related to these contingent warrants.

During 2013, we estimates the fair value of warrant granted using the Black-Scholes option valuation model .The expected life of warrant represents the term of warrant. The expected stock volatility is based on the average of historical volatility of the Company’s common stock and other subjective factors. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time awards are granted, and the expected dividend rate takes into account the absence of any historical payments and management’s intention to retain all earnings for future operations and expansion.

The fair value of each warrant granted was estimated on the date of grant using the Black-Scholes valuation model with the following weighted average assumptions for grants during fiscal 2013:

Warrants	2013
Risk-free interest rates	0.0123
Expected volatility	0.9138
Dividend yields	0
Expected lives	5 years

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 900,000 shares of our common stock ($582,920 grant date fair value) were awarded in 2013 and options for 200,000 were granted in 2012.    Exercisable options with a weighted-average exercise price of $2.00 per share for 400,000 shares and $1.38 for 900,000 shares were outstanding at December 31, 2012 and December 31, 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 more than the exercise price at December 31, 2013, the options had $100,000 intrinsic value. At December 31, 2013, all outstanding options are fully vested and the weighted-average remaining contractual term was 9.2 years; however, if services are earlier terminated, 700,000 options become void 90 days after termination.

We estimates the fair value of stock options granted using the Black-Scholes option valuation model .The expected life of options represents the period of time the options are expected to be outstanding and other subjective factors. The expected stock volatility is based on the average of historical volatility of the Company’s common stock and other subjective factors. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time awards are granted, and the expected dividend rate takes into account the

F-15

absence of any historical payments and management’s intention to retain all earnings for future operations and expansion. No forfeiture is expected when stock option granted.

The fair value of each option granted was estimated on the date of grant using the Black-Scholes valuation model with the following weighted average assumptions for grants during fiscal 2013 and 2012:

Option plan	2013	2012
Risk-free interest rates	0.0202	0.003
Expected volatility	0.992	0.00001
Dividend yields	0	0
Expected lives	6 years	3 years

The following table summarizes the changes in Stock option for the years ended December 31, 2013 and 2012.

	Shares
Outstanding  at December 31, 2011	200,000
Granted	200,000
Exercised	—
Expired	—
Outstanding  at December 31, 2012	400,000
Granted	900,000
Exercised	—
Expired	(400,000)
Forfeited	—
Outstanding  at December 31, 2013	900,000

8 - LITIGATION

We may become involved in litigation from time to time in the ordinary course of business. At December 31, 2013, to the best of our knowledge, no such litigation exists or is threatened.

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 merchants.  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.

F-16

	Year Ended
	December 31,
	2013		2012
Revenues:
Calpian, Inc.	$	3,064,033	$	3,438,898
Calpian Commerce, Inc.		17,971,853		—
	$	21,035,885	$	3,438,898
Operating profit (loss):
Calpian, Inc.	$	(2,878,888)	$	(739,403)
Calpian Commerce, Inc.		466,156		—
		(2,412,732)		(739,403)
Financing costs		(2,636,922)		(2,858,135)
Loss before income taxes and equity investment loss	$	(5,049,654)	$	(3,597,538)

	December 31,		December 31,
	2013		2012
Total assets:
Calpian, Inc.	$	16,075,505	$	13,052,566
Calpian Commerce, Inc.		9,202,356		—
	$	25,277,861	$	13,052,566

Additional detail follows:

	Year Months Ended
	December 31,
	2013		2012
Depreciation and amortization:
Calpian, Inc.	$	1,613,897	$	3,159,927
Calpian Commerce, Inc.		910,575		—
	$	1,613,897	$	3,159,927
Operating profit (loss):
Calpian, Inc.	$	(2,878,888)	$	(739,403)
Calpian Commerce, Inc.		466,156		—
	$	2,412,732	$	739,403
Interest expense:
Calpian, Inc.	$	1,064,537	$	801,942
Calpian Commerce, Inc.		1,070,578		—
	$	2,135,115	$	801,942
Net loss:
Calpian, Inc.	$	(8,348,291)	$	(4,297,509)
Calpian Commerce, Inc.		(628,534)		—
	$	8,976,826	$	4,297,509
Purchases of property and equipment:
Calpian, Inc.	$	9,533	$	—
Calpian Commerce, Inc.		173,108		—
	$	182,641	$	—

F-17

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 2008.  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.

Significant components of our deferred tax assets and liabilities were:

	2013		2012
Warrants	$	330,041	$	1,112,946
Net operating loss carryovers		3,652,023		928,022
Development stage losses		401,136		399,243
Equity investment		497,321		262,217
Equity to Third Party Service Providers		59,507		—
Residual portfolio amortization		153,681		54,565
Management equity awards		133,192		23,610
Total deferred tax assets		5,226,901		2,780,603
Deferred tax liabilities:
Debt discount		(134,091)		102,987
Fixed Assets		22,744		—
Intangibles		(1,590)		453
Total deferred tax liabilities		(112,937)		103,440
Net deferred tax assets				2,677,163
Valuation allowance		(5,115,556)		(2,677,616)
Deferred tax liability	$	(1,590)	$	(453)

Significant components of our income tax provisions were:

	Year Months Ended
	December 31,
	2013		2012
Current state (over provision)	$	—	$	(18,643)
Deferred federal		—		(1,196,268)
Deferred tax asset write off		—		—
Valuation allowance		—		1,196,721
	$	—	$	(18,190)

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

	Year Months Ended
	December 31,
	2013		2012
Loss before income taxes	$	(1,626,363)	$	(1,223,163)
Deferred tax asset write off		—		—
Deferred tax valuation allowance		2,437,940		1,196,721
Permanent items		24,005		20,556
State tax net of federal tax benefit		—		(12,304)
Equity Investment Adjustment		(129,579)		—
Other		(355,650)		—
Prior Period Adjustments		(350,353)		—
	$	—	$	(18,190)

F-18

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 December 31, 2013 and 2012, outstanding equity instruments that were not included in the dilutive calculation because their effect would be anti-dilutive were:  

	2013	2012
Warrants	4,657,496	2,449,893
Stock options	900,000	400,000
Convertible subordinated notes	216,664	566,665
Total	5,774,160	3,416,558

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 that payment for these services would accrue interest-free and be paid at a future date to be agreed on by the parties.  At December 31, 2013 and 2012, accrued amounts due to ART were $181,825 and $193,114 , respectively.

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 December 31, 2013 and 2012,, officers’, directors’, and other affiliates’ compensation deferred in 2010 remaining unpaid totaled $100,000.

13 – SUBSEQUENT EVENTS

None

F-19

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.   Other Expenses of Issuance and Distribution.

We are paying all of the selling stockholders’ expenses related to this offering, except that the selling stockholders will pay any applicable underwriting discounts and commissions. The fees and expenses payable by us in connection with this Registration Statement are estimated as follows: 

1
Securities and Exchange Commission Registration Fee	$	1,577
Accounting Fees and Expenses	$	10,000
Legal Fees and Expenses	$	180,504
Miscellaneous Fees and Expenses	$	685,080
Total	$	877,161

Item 14.   Indemnification of Directors and Officers.

Our Bylaws provide that we must indemnify and hold harmless our directors, officers, and other persons referenced in our Certificate of Formation as and to the extent permitted by the Texas Business Corporation Act.  The indemnification is intended to be to the fullest extent permitted by the laws of the State of Texas.

Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Texas law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

Item 15.   Recent Sales of Unregistered Securities.

On May 20, 2014, the Company conducted a final closing of a series of three closings pursuant to Subscription Agreements dated as of March 31, 2014, April 30, 2014 and May 20, 2014 with certain accredited investors for the private sale of an aggregate of 8,323,280 Units, at $1.00 per Unit.  Each Unit consisted of (i) one share of the Company’s common stock, par value $.001 per share (the “Common Stock”); and (ii) one 5 year warrant to purchase one fifth (1/5) of one share of Common Stock (each, a “Warrant” and collectively, the “Warrants”). The Company sold a total of 8,323,280 shares of Common Stock and 1,664,656 Warrants and issued 342,540 Warrants to the Placement Agent and its designees.  The Warrants are exercisable at any time within five years from their issuance at an initial exercise price of $1.25 per share.  The aggregate gross proceeds received by the Company was $8,323,280.  The sales of the Units were made solely to “accredited investors,” as that term is defined in Regulation D under the Securities Act.  The shares were not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering.

Item 16.   Exhibits and Financial Statement Schedules.

			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
(5)	Opinion of Counsel
	5.1	Opinion of Sichenzia Ross Friedman Ference LLP**
(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
(21)	List of Subsidiaries
	21.1	List of Subsidiaries *

(23)	Consents
	23.1	Consent of Montgomery Coscia Greilich LLP *
	23.2	Consent of Whitley Penn LLP *
	23.3	Consent of Sichenzia Ross Friedman Ference LLP (included in Exhibit 5.1)
(24)	Power of Attorney
	24.1	Power of Attorney (included in the Registration Statement under “Signatures”)
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.
**	To be filed by Amendment

Item 17.   Undertakings.

(a)           The undersigned registrant hereby undertakes to:

(1) File, during any period in which it offers or sells securities, a post-effective amendment to this Registration Statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement.

(iii) Include any additional or changed material information on the plan of distribution.

(2)         For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(3)         File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(b)             Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the registrant pursuant to foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.   In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(c)           Each prospectus filed pursuant to Rule 424(b)(Sec.230.424(b) of this chapter) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (Sec.230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(d)          For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) or under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(e)           For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, on June 20, 2014.

r
		Calpian, Inc.
June 20, 2014	By:	/s/ Harold H. Montgomery
		Harold H. Montgomery
		Chief Executive Officer and Secretary
		(Principal Executive Officer)
June 20, 2014	By:	/s/ Scott S. Arey
		Scott S. Arey
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned officers and directors of  Calpian, Inc., a Texas corporation, do hereby constitute and appoint Harold H. Montgomery his or her true and lawful attorney-in-fact and agent with full power and authority to do any and all acts and things and to execute any and all instruments which said attorney and agent, determine may be necessary or advisable or required to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules or regulations or requirements of the Securities and Exchange Commission in connection with this Registration Statement. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Registration Statement, and to any and all instruments or documents filed as part of or in conjunction with this Registration Statement or amendments or supplements thereof, including post-effective amendments, to this Registration Statement or any registration statement relating to this offering to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, and each of the undersigned hereby ratifies and confirms that said attorney and agent, shall do or cause to be done by virtue thereof. This Power of Attorney may be signed in several counterparts.

IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney. In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement was signed by the following persons in the capacities and on the dates stated:

Signature	Title	Date
	Director, Chairman of the Board,
/s/ Harold H. Montgomery	Chief Executive Officer, and
Harold H. Montgomery	Secretary	June 20, 2014
	(principal executive officer)
	Chief Executive Officer, and
/s/ Harold H. Montgomery	Secretary	June 20, 2014
Harold H. Montgomery	(principal executive officer)
	Chief Financial Officer
/s/ Scott S. Arey	(principal financial	June 20, 2014
Scott S. Arey	and accounting officer)
/s/ Craig A. Jessen	Director and President	June 20, 2014
Craig A. Jessen
/s/ Laird Q. Cagan	Director	June 20, 2014
Laird Q. Cagan
/s/ Shashank M. Joshi	Director	June 20, 2014
Shashank M. Joshi

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	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
(5)	Opinion of Counsel
	5.1	Opinion of Sichenzia Ross Friedman Ference LLP**
(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

(21)	List of Subsidiaries
	21.1	List of Subsidiaries *
(23)	Consents
	23.1	Consent of Montgomery Coscia Greilich LLP *
	23.2	Consent of Whitley Penn LLP *
	23.3	Consent of Sichenzia Ross Friedman Ference LLP (included in Exhibit 5.1)
(24)	Power of Attorney
	24.1	Power of Attorney (included in the Registration Statement under “Signatures”)

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.
**	To be filed by Amendment.