UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q  

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2014

 

Commission File No. 000-53997

 

 

CALPIAN, INC.

(Exact name of registrant as specified in its charter)

 

 

500 North Akard Street Suite 2850, Dallas, TX  75201

(Address of principal executive offices)

 

214-758-8600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act

None

 

Securities registered pursuant to Section 12(g) of the Exchange Act

Common Stock, Par Value $.001 Per Share

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ☐  No  ☑

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes  ☐  No  ☑

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☑  No  ☐    

 

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

 

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Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S‑K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

 

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

 

Large accelerated filer  ☐          Accelerated filer  ☐          Non-accelerated filer  ☐          Smaller reporting company  ☑    

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐  No  ☑

 

The aggregate market value of the voting and non-voting common equity held by nonaffiliates as of June 30, 2014 was $24,735,307, computed as the average bid and asked price of such common equity as of the last business day of the registrant's most recently completed second fiscal quarter.  For purposes of the foregoing calculation, we have assumed that only directors, executive officers, and holders of 10% or more of the issuer’s common capital stock are affiliates.

 

The number of shares outstanding of the registrant’s common stock as of August 19, 2014 was 40,565,905.

 

 

 

 

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TABLE OF CONTENTS 

 

 

 

 

 

 

 

 

 

 

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INTRODUCTORY COMMENT

 

In this Quarterly Report on Form 10-Q,  references to “Calpian,” “Company,” “we,” “us,” and “our” collectively refers to Calpian, Inc., its wholly-owned United States subsidiary, Calpian Commerce, Inc. (“Calpian Commerce”), and its partially-owned joint venture, Calpian Residual Acquisition, L.L.C, and partially-owned Indian Money-on-Mobile enterprise, which includes Digital Payment Processing Limited, My Mobile Payments Limited and Payblox Technologies (India) Private Limited, unless otherwise noted.  All intercompany accounts and transactions have been eliminated in the accompanying consolidated financial statements of the Company.

 

 

FORWARD-LOOKING STATEMENTS

 

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

 

 

 

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PART I – FINANCIAL INFORMATION

 

ITEM  1FINANCIAL STATEMENTS

 

 

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

 

 

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

 

 

 

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

 

 

 

 

 

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

 

 

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1 - OVERVIEW

 

Basis of Presentation

In these consolidated financial statements, references to “Calpian,” “Company,” “we,” “us,” and “our” collectively refers to Calpian, Inc., its wholly-owned United States subsidiary, Calpian Commerce, Inc. (“Calpian Commerce”), and its partially-owned joint venture, Calpian Residual Acquisition, L.L.C, and partially-owned Indian Money-on-Mobile enterprise, which includes Digital Payment Processing Limited, My Mobile Payments Limited and Payblox Technologies (India) Private Limited, unless otherwise noted.  All intercompany accounts and transactions have been eliminated in the accompanying consolidated financial statements of the Company.

 

The Company

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 (“Money-on-Mobile”).  Both companies are organized under the laws of India and headquartered in Mumbai, India.  Money-on-Mobile is a contractual variable interest entity of DPPL.  As of March 31, 2014, the Company has acquired 69.5% 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.  Additionally, Payblox Technologies (India) Private Limited (“Payblox”), a wholly owned subsidiary of Money-on-Mobile, organized in October 2010 under the laws of India and headquartered in Mumbai, India, provides certain back office and support services on behalf of Money-on-Mobile to its customer base.

 

In March 2013, the Company formed a wholly-owned subsidiary, Calpian Commerce, Inc. (“Calpian Commerce”), to own and operate 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.

 

Business Segments

Calpian includes three distinct business units: residual portfolios, merchant payment processing services and its Money-on-Mobile enterprise.

 

Residual portfolios

Small and medium-sized retail merchants typically buy 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.  ISOs then receive payments from the processor, as a commission, based on a percentage of future credit card transaction dollars that are processed on behalf of those merchants gathered by the ISO.  These future payment streams paid to the ISO by the processor are called residuals.  We purchase portfolios of residuals from ISOs at a discounted present value rate, and then we collect the future cash payments from the processors as future credit card transactions occur.

 

Merchant payment processing services

Through our acquisition of Calpian Commerce, we are 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

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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.

 

Money-on-Mobile

In March 2012, the Company began acquiring common stock of Digital Payments Processing Limited (“DPPL”), a newly-organized company based in Mumbai, India.  During 2012, DPPL entered into a services agreement with My Mobile Payments Limited (“MMPL”), an entity that shares common ownership with DPPL and is also based in Mumbai, India.  Collectively, DPPL, MMPL, and MMPL’s wholly-owned subsidiary, Payblox Technology (India) Private Limited (“Payblox”), operate the Money-on-Mobile enterprise.  In January 2014, the Calpian, Inc. acquired a majority of the common stock of DPPL, obtaining control of DPPL and, through DPPL’s services agreement, obtaining control of MMPL and Payblox.  As such, these entities are included in the Company’s consolidated financial statements (See Note 3).  Prior to obtaining control in January 2014, Money-on-Mobile was accounted for an equity method investment.

 

Money-on-Mobile offers electronic wallet services, similar to carrying a prepaid debit card, through a mobile phone.  Money-on-Mobile can be used to pay for goods and services and sending or receiving money using mobile phone text messages.

 

In India, end consumers are often required to prepay for certain utilities, such as mobile phone services.  Because bank accounts and credit cards are only used by a small portion of the Indian population, end consumers typically prepay for these utilities with cash, either directly to utility providers or through distributors.  Money-on-Mobile acts as an intermediary between a) the utility provider and distributors, b) distributors and end consumers, and c) end consumer and other parties.

 

As an intermediary between the utility provider and distributors, Money-on-Mobile purchases utility units, such as mobile phone minutes, at wholesale rates and resells these units to distributors.  Money-on-Mobile maintains an inventory of these utility units held for resell.

 

As an intermediate between distributors and end consumers, distributors use Money-on-Mobile’s electronic wallet technology to a) allow end consumers to purchase utility units from the distributor by mobile phone text message and b) allow distributors to send a text message confirmation back to the end user.   Money-on-mobile earns a transaction fee for these services, paid by the end consumer.

 

Once an end consumer has established a Money-on-Mobile electronic wallet account, end consumers can use Money-on-Mobile’s technology to facilitate non-distributor-related transactions with other parties that have Money-on-Mobile accounts, including other retailers and utilities and other Money-on-Mobile end consumers.  Money-on-mobile also earns a transaction fee for these services, paid by the end consumer.

 

 

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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 acquisitions, the valuation allowance on deferred tax assets and liabilities, estimates for certain employee benefits and time off, and estimates in the valuation of foreign pension plan liabilities. 

 

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.

 

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

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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.

 

Reclassifications

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

 

Foreign Currency Translation

The functional currency of wholly owned subsidiary DPPL, and of the variable interest entities MMPL and Payblox 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.

 

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.

 

Included in cash and equivalents are proceeds from investors for the purchase of Company securities.   These funds are designated for the purchase of future residual portfolios.  As of June 30, 2014 and March 31, 2014, the Company held cash designated for future portfolio purchases of $1,913,087 and $4,139,337, respectively. 

 

Restricted Cash

We consider funds received which are held by us as merchant reserves against future losses to be restricted cash. 

 

Accounts Receivable

Accounts receivable represents the uncollected portion of amounts recorded as revenues.  Management performs periodic analyses to evaluate all outstanding accounts receivable to estimate an allowance for doubtful accounts that may not be collectible, based on the best facts available to management.  Management considers historical collection patterns, accounts receivable aging trends and specific identification of disputed invoices in its analyses.  After all reasonable attempts to collect a receivable have failed, the receivable is directly written off.  As of June 30, 2014 and March 31, 2014, the balance of the allowance for doubtful accounts was $27,512 and $29,826, respectively.

 

 

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization, using the straight-line method based on estimated useful lives of three to five years.  Repairs and maintenance are charged to expense as incurred. Expenditures that increase the value or productive capacity of assets are capitalized. When property and equipment are retired, sold, or otherwise disposed of, the asset's carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.

 

Residual Portfolios

Residual portfolios acquired by Calpian Inc. represent investments in recurring monthly residual income streams derived from credit card processing fees paid by merchants in the United States.  Calpian Inc. acquires portfolios as long-term investments and expects 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 expected future cash flows.  The Company evaluates its cash flow estimates and adjusts future amortization prospectively each quarter. 

 

As part of the acquisition of Calpian Commerce, the Company acquired certain residual portfolio assets with a fair value of $6,379,000, which fair value was determined based on the expected future cash flows generated by the merchant base in each acquired portfolio.  The expected future cash flows were determined based upon future projected revenue and costs as determined by management, adjusted for certain factors including, among others, the historical attrition rate of the merchant base, the expected cost to service and maintain such portfolios, and applying a discount factor of 18% to calculated the sum of the present value of each years’ projected cash flows. 

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The Company estimates a 10 year life to be an appropriate measure of the period over which future revenues will be generated by the portfolios.

 

Equity Investment

Prior to obtaining control in January 2014 (See Note 3), Money-on-Mobile was accounted for as an equity method investment, as the Company had the ability to exercise significant influence, but did not control the enterprise and was not the primary beneficiary. Under the equity method of accounting, the Calpian, Inc. recorded its proportionate share of the net earnings or losses of Money-on-Mobile and a corresponding increase or decrease to the investment balances. In addition, the Company accounted for share issuances by Money-on-Mobile as if the Company had sold a proportional share of its investment and record any resulting gain or loss.  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.  No impairments were recorded during years three months ended June 30, 2014 or 2013.

 

Deferred Financing Costs

The Company capitalizes third-party costs paid to obtain its debt financing.  Capitalized costs are then amortized using a straight-line basis over the related debt term into interest expense.

 

Goodwill

Goodwill consists of the cost of our acquired businesses in excess of the fair value of the identifiable net assets acquired and is allocated to reporting units based on the relative fair value of the future benefit of the purchased operations to our existing business units as well as the acquired business unit.  As of June 30, 2014, goodwill was $19,277,942 for our Money-on-Mobile reporting unit and was $2,341,928 for our Calpian Commerce reporting unit.

 

We perform an annual impairment assessment in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit in which goodwill resides is less than its carrying value.  For reporting units in which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is not considered impaired and we are not required to perform the two-step goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit.  For its annual impairment assessment for the year ended March 31, 2014, we determined it was more likely than not that the fair value of each of the reporting units exceeded the carrying values.  As a result, we concluded that goodwill was not impaired as of June  30, 2014.

 

Intangible Assets

Intangible assets consist of software, customer lists, customer acquisition costs and trademark.  Management has not yet completed its valuation of the fair values of separately identifiable intangible assets acquired in its Money-on-Mobile business acquisition (see Note 3).  Capitalized finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives.  Indefinite-lived assets are not amortized, but reviewed at least annual for potential impairment.

 

Impairment of Long-Lived Assets

In addition to the annual goodwill impairment test, long-lived assets, including property and equipment and other intangible assets, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable.  If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value.  There were no adjustments to the carrying value of long-lived assets during the three months ended June 30, 2014 or 2013.

 

Revenue Recognition

The Company has three primary revenue streams:  residual portfolios, merchant payment processing fees, and Money-on-Mobile transactions.

 

Residual portfolios

We recognize residual portfolio revenue based on actual cash receipts.

 

Merchant payment processing fees

We derive revenues primarily 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 per transaction and may also be charged miscellaneous fees, including fees for handling chargebacks, monthly minimums, equipment rentals, sales or leasing and other miscellaneous services.  Processing fees are recorded as revenue in the period the Company receives payment for the transactions.

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Generally, revenues are reported gross of amounts paid to sponsor banks, as well as interchange and assessments paid to credit card associations (MasterCard and Visa), as Calpian Commerce bears the credit risk or the ultimate responsibility for the merchant accounts.  Included in cost of goods and services sold are the expenses covering interchange and bank processing expenses directly attributable to processing fee revenues are recognized in cost of revenues in the same period as the related revenue.

 

Revenues generated from certain portfolios are reported net of interchange, where we may not have credit risk, or the ultimate responsibility for the merchant accounts. 

 

Money-on-Mobile

As an intermediary between the utility provider and distributors, Money-on-Mobile purchases utility units, such as mobile phone minutes, at wholesale rates and resells these units to distributors.  Distributors often keep a prepaid balance with Money-on-Mobile to facilitate quick transactions.  Utility unit sales are recognized when utility units are delivered, either to the distributors or directly to the end users.  Often, distributors will maintain a prepaid balance in a Money-on-Mobile electronic wallet account to facilitate rapid transactions.  Prepaid balances are deferred until utility units are delivered.  As of June 30, 2014 and March 31, 2014, deferred revenue was $392,935 and $595,929, respectively.  Revenue from utility units is recognized on a gross basis, as the Company is the primary obligor, has latitude in establishing prices and has inventory risk.

 

The Company recognizes revenue at the time consumers use utility unites to pay for their services consumed.

 

As an intermediate between distributors and end consumers, distributors use Money-on-Mobile’s electronic wallet technology to a) allow end consumers to purchase utility units from the distributor by mobile phone text message and b) allow distributors to send a text message confirmation back to the end user.   Money-on-mobile earns a transaction fee for these services, paid by the end consumer.  Revenue from these transaction fees are recognized on a net basis, as the Company is not the primary obligor, does not establish prices and does not maintain inventory risk.  The Company recognizes revenue at the time consumers use utility units to pay for their services consumed.

 

Once an end consumer has established a Money-on-Mobile electronic wallet account, end consumers can use Money-on-Mobile’s technology to facilitate non-distributor-related transactions with other parties that have Money-on-Mobile accounts, including other retailers and utilities and other Money-on-Mobile end consumers.  Money-on-mobile also earns a transaction fee for these services, paid by the end consumer.  Revenue from these transaction fees are recognized on a net basis, as the Company is not the primary obligor, does not establish prices and does not maintain inventory risk.  The Company recognizes revenue at the time consumers use utility units to pay for their services consumed.

 

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.

 

Advertising

Advertising costs are expensed as incurred.  During the three months ended June 30, 2014 and 2013, advertising expense was $79,527 and $74,773, respectively.

 

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).  ASU 2014-09 requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to receive in exchange for goods or services.  ASU 2014-09 is effective for our fiscal year beginning April 1, 2017.  We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

 

 

3 - BUSINESS ACQUISITIONS

 

Calpian Commerce Inc.

 

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 Calpian Commerce, in exchange for a cash payment of $9.75 million.  The acquisition was financed through a $9.5 million increase to the senior credit facility (see Note 11). 

 

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:

 

 

 

The residual portfolios are being amortized over 10 years.   

 

Money-on-Mobile

 

In March 2012, the Company began acquiring common stock of DPPL.  The Company continued to acquire additional shares of DPPL common stock throughout 2012, 2013 and 2014.  On January 6, 2014, Calpian, Inc.’s share of DPPL’s outstanding common stock increased from 49.9% to 56.2%, giving Calpian the majority control of the Money-on-Mobile enterprise and triggering step acquisition accounting.  At June 30, 2014, the Company’s ownership in DPPL was 72.9% after additional DPPL common stock purchases during the period from January 7, 2014 through June 30, 2014.

 

Although the Company does not directly own common stock of MMPL or its subsidiary Payblox, these entities are included in the Money-on-Mobile acquisition accounting due to certain terms of the DPPL service agreement.  Under this agreement, DPPL has a right, at its sole discretion, to trigger a merger with MMPL, the terms of which give DPPL control of MMPL.

 

As of January 6, 2014, just prior to acquisition, the Company’s equity interest in Money-on-Mobile was $10,124,831.  As of January 6, 2014, management preliminarily estimated that the fair value of the equity investment was $15,309,520, which resulted in a gain of $5,014,565 at was recognized in the consolidated income statement.  At January 6, 2014, Management preliminarily estimated that the fair value of the non-controlling interests was $7,500,000.   Management’s estimates of the fair values of the equity investment and non-controlling interest are only preliminary and have not yet been completed.  The Company has engaged the services of a third party valuation firm to assist it with its determination of these fair values, but the valuation has not yet been completed.

 

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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:

 

 

 

 

 

In the allocation of fair value, goodwill and intangible assets of $19,702,714 were identified.  Additional identifiable intangible assets include software, customer lists, customer acquisition costs and trademark.  Management has not yet determined the separate fair values of these identifiable intangibles apart from goodwill.  The Company has engaged the services of a third party valuation firm to assist it with its determination of these fair values, but the valuation has not yet been completed.

 

Revenue of $40,160,909 and net losses of $1,094,727 for three months ended June  30, 2014 have been included in the Company’s consolidated statements of comprehensive loss.

 

 

4 - INVENTORY

 

Inventory consisted of the following utility units, merchant equipment and supplies: 

 

 

 

 

 

Money-on-Mobile utility units, such as mobile phone minutes, are purchased from Indian utility providers and held for sale to Indian distributors or end consumers.  Inventory balances function similar to a non-refundable prepaid account with the utility providers.  These prepaid balances are denominated in Indian rupees rather than a fixed number of utility units.

 

Calpian Commerce equipment consists of point-of-sales terminal equipment held for sale to merchants, resellers and distributors of our domestic operations.  Inventory is 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.

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5 - OTHER CURRENT ASSETS

 

Other current assets consisted of the following: 

 

 

 

 

 

6 - PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following: 

 

 

 

 

 

Depreciation expense for the three months ended June 30, 2014 and 2013 was $101,771 and $13,844, respectively

 

 

 

 

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7 - EQUITY INVESTMENTS

 

Money-on-Mobile

 

On January 6, 2014, Calpian, Inc. acquired control of Money-on-Mobile (See Note 3).  Prior to that acquisition, the Company accounted for its investment in Money-on-Mobile using the equity method of accounting.  At March 31, 2013, the Company owned approximately 47.4% of the outstanding common stock of DPPL, with a balance of its equity investment in Money-on-Mobile of $8,291,207.

 

The following table presents a summary results of operations for Money-on-Mobile for the three months ended June 30, 2013 under the equity method of accounting:

 

 

 

 

 

 

 

 

 

Happy Cellular Services Limited

 

As part of our acquisition of Money-on-Mobile enterprise in January 2014, we acquired a 40% equity interest in Happy Cellular Services Limited (“Happy Cellular”), based in India which is a mobile talk time reseller based in India.    As of June 30, 2014, our equity investment balance was $210,420.

 

Calpian Granite Hill, L.P.

 

In January 2014, we formed Calpian Granite Hill, L.P., a joint venture with a party related to our senior lender, for the purpose of acquiring additional residual portfolios.  As of June  30, 2014, the Company had a 20% ownership as a limited partner, and an equity investment balance of $115,818. 

 

 

8 - OTHER INTANGIBLE ASSETS

 

Intangible assets consisted of the following:

 

 

 

 

Amortization expense related to other intangible assets for the three month ended June 30, 2014 and 2013 was $42,720 and $12,500, respectively.

 

 

 

The Company determined the fair value of software acquired during the acquisition of Calpian Commerce was $150,000.  The software is used in its merchant operations and assist in the automation of boarding new merchant accounts.   Additionally, the Company determined the fair value of the software attributable to Money-on-Mobile to be $527,900, comprised of $476,370 in development costs of the MMPL propriety delivery system and $51,531 in development costs of the Payblox propriety delivery system.  Similarly, the Company determined the fair value of customer lists acquired during the acquisition of Money-on-Mobile to be $1,231,384, comprised of $86,042 of value in MMPL customer lists and $1,145,342 in DPPL customer lists.  

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9 - OTHER NON-CURRENT ASSETS

 

Other non-current assets consisted of the following:

 

 

 

 

 

 

10 - ACCRUED LIABILITIES

 

Accrued liabilities consisted of the following:

 

 

 

 

11 – DEBT 

 

Long-term debt consisted of the following:

 

 

Senior Credit Facility

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 June 30, 2014.

 

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 September 2014; thereafter, principal is payable 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. 

 

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During the three months ended June 30, 2014 and 2013, interest expense related to the senior credit facility, exclusive of accretion of debt discount and amortization of loan origination fees, was $434,620 for each period.

 

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 the Company to meet certain financial covenants.  In addition, the Company maintains a reserve deposit with the lender of $790,200 at June 30, 2014.  As of June 30, 2014, the Company was in compliance with all covenants.

 

In March 2013, the Company issued 500,000 warrants to the senior credit facility lender.  The aggregate fair value of the warrants, determined on the date of issuance using a Black Scholes valuation model was $325,000.  In March 2014, the 500,000 warrants were cancelled in conjunction with raising $3.0 million in equity financing before April 2014.  For the three months ended June 30, 2014 and 2013, amortized debt discount included in interest expense was $32,500 and $32,500, respectively.

 

Loan origination fees related to our senior credit facility are amortized through the maturity date of the facility and are included in interest expense.  For the three months ended June 30, 2014 and 2013, amortized financing costs included in interest expense were $54,021 and $54,021, respectively. 

 

As of June 30, 2014 and March 31, 2014, the balance due under the senior credit facility was $13,170,000 for each period.

 

Senior Promissory Notes - Calpian Residual Acquisition, LLC

In February 2014, Calpian Residual Acquisition, LLC issued into $3.0 million senior promissory notes to three investors.  Outstanding balances under the senior promissory notes accrue interest at an annual rate of 12%, payable monthly in arrears. Interest only is payable through February 2015; thereafter, principal is payable evenly for 48 months through maturity, February 2019.  For the three months ended June 30, 2014, interest expense related to the senior promissory notes was $103,571.

In February 2014, the Company issued 300,000 warrants to the senior promissory notes lender.  The aggregate fair value of the warrants, determined on the date of issuance using a Black Scholes valuation model, as of June 30, 2014 was $297,000.  

 

In April and May 2014, the Company issued an additional 50,000 and 25,000 warrants, respectively, to the senior promissory notes lender.  The aggregate fair value of the warrants, determined on the date of issuance using a Black Scholes valuation model was $60,000. 

 

For the three months ended June 30, 2014, debt discount accreted into interest expense was $21,669.

 

As of June 30, 2014 and March 31, 2014, the balance due under the senior promissory notes was $3,000,000 for each period.

 

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 on January 6, 2011 and August 10, 2012.  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 issuance of our subordinated notes, the lenders received warrants to acquire shares of our common stock at $2.00 to $2.50 per share.   Warrants of 452,925 were issued during 2014.  The aggregate fair value of the warrants, determined on the date of issuance using a Black Scholes valuation model, was $74,934.  For the three months ended June 30, 2014 and 2013, debt discount accreted into interest expense was $44,973 and $35,937, respectively. 

 

At June  30,  2014 and March 31, 2014, the outstanding balances on subordinated notes payable were $4,800,000 for each period.  

 

Convertible Subordinated Notes

Our convertible subordinated 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 convert.  During the three

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months ended June 30, 2014, outstanding convertible subordinated note balances of $300,000 were converted into 150,000 shares of common stock 

 

At issuance in 2013, the lenders received 900,000 warrants to acquire shares of our common stock at $2.00 to $2.30 per share.    The aggregate fair value of the warrants, determined on the date of issuance using a Black Scholes valuation model was $69,000.  For the three months ended June 30, 2014 and 2013, debt discount accreted into interest expense was $0 and $17,146, respectively. 

 

At June 30, 2014 and March 31, 2014, the outstanding balance on convertible subordinated notes payable was $0 and $300,000, respectively.

 

For the three months ended June 30, 2014 and 2013, interest expense related to the subordinated notes payable, exclusive of debt discount accretion, was $152,500 and $173,900, respectively.

 

 

Union Bank of India

In May 2014, Money-On-Mobile borrowed a $2,254,500 loan with Union Bank of India to purchase an office building to be used as its headquarters.  The loan is interest only for the first six months at the rate of 16% per annum.  Thereafter, the interest rate is 15% per annum, and principal and interest payments are to be made in 26 equal quarterly payments.  The loan matures in May 2021.

 

 

12 - 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, 8,323,280 shares common stock and warrants to acquire 2,107,196 shares of our common stock have customary “piggy back” registration rights in the event we register shares of our common stock in the future.

 

Preferred Stock

In March 2014, the Company issued 1,000 shares of newly created Series C Convertible Preferred Stock (“Series C Preferred Stock”) pursuant to a subscription agreement for the purchase of up to 5,000 shares of Series C Preferred Stock entered into with an accredited investor. The gross proceeds from the sale of 1,000 shares of Series C Preferred Stock were $1,000,000.  On June 23, 2014 the Series C holder elected to convert all 1,000 shares of Series C Preferred Stock to 1,000,000 shares of common stock.

 

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 9,421,028 shares for issuance on conversion of convertible subordinated notes, exercise of warrants, and equity incentive awards.

 

Warrants

 

A total of 7,421,028 warrants for our common stock with exercise prices ranging from $0.99 to $3.00 per share ($1.64 weighted average) have been issued in connection with our financing transactions and expire as follows: 0 in 2015; 642,501 in 2016; 522,500 in 2017; 677,925 in 2018, and 5,578,102 in 2019.  On exercise, each warrant will be settled in delivery of one unregistered share of our common stock.

 

The following tables summarize the changes in warrants for the three months ended June 30, 2014.

 

 

 

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For the three months ended June 30, 2014, the Company granted the following warrants:

 

 

 

 

The weighted average expiration period of warrants during the 3 months ending June 30, 2014 is 5 years.

 

We estimate 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 the three months ended June 30, 2014 and 2013:

 

 

 

13 - EARNINGS PER SHARE 

 

Basic earnings per share are based on the weighted average number of shares of our common stock outstanding during the period.  Outstanding equity instruments that were not included in the dilutive calculation because their effect would be anti-dilutive were:     

 

 

 

  

 

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14 - INCOME TAXES

 

Our 9.7 million federal income tax net operating loss carryover expires over the period 2026 to 2034.  Our federal and state income tax returns are no longer subject to examination for the years before 2010.  We have taken no tax position that, more likely than not, may not be realized. 

 

Significant components of our income tax provision were:

 

 

 

 

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

 

 

 

 

15 -RELATED PARTIES

 

Related party payables consisted of the following:

 

 

 

 

Art Holdings, Inc.

ART Holdings, Inc., a company in the merchant processing business founded in 1987 by our Chairman, Mr. Harold Montgomery, provides the Company with certain administrative and 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 June 30, 2014 and March 31, 2014, amounts due to ART Holdings, Inc. were $183,565 and $155,786, respectively, and are included in Related party payables on the Company’s balance sheet.

 

Cagan McAfee Capital Partners, LLC

On January 1, 2011, the Company signed a two year 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 as available cash flow permits. On December 10, 2013, the agreement was extended through December 2015 and shall continue month-to-month beyond that date and is thereafter terminable by either party with 30 days notice. Under the terms of the extension, interest is to accrue beginning January 1, 2013 on unpaid balances at the rate of 12% per annum.  The amounts due, including interest, to CMCP were $372,070 and $449,500 as of June 30, 2014 and March 31, 2014, respectively, and is accrued for in Related party payables in the Company’s balance sheet. 

 

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Additionally, in September 2013, the Company borrowed $120,000 from CMCP to help fund its investments in Money-on-Mobile.  The unsecured loan was payable on demand and did not accrue interest.  In April 2014, the loan was repaid in full.  The loan balance was $0 and $120,000 at June 30, 2014 and March 31, 2014, respectively, and is included in Related party payables in the Company’s balance sheet.

 

 

16 - LITIGATION

 

National Bankcard Systems, Inc.

On September 18, 2012, National Bankcard Systems, Inc. ("NBS") filed suit in the District Court of Dallas County, Texas against Calpian Residual Partners V, LP (“CRPV”) and Calpian alleging breach of the Residual Purchase Agreement dated November 4, 2008, between CRPV and NBS and certain other improprieties by CRPV.  Plaintiff alleged damages on the date the suit was filed of $729,000 including unpaid merchant servicing fees, compensation for residuals added after Calpian acquired the portfolio, and attorney fees.  Plaintiff further alleged that damages continue to grow, but would not specify an amount.  Craig Jessen, our President, and Harold Montgomery, our CEO, are members of our Board of Directors and substantial shareholders of Calpian, and 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 June 30, 2014, $190,000 of the settlement has been paid and the remaining $60,000 is included in Accrued liabilities on the Company's balance sheet. 

 

 

17 – BUSINESS SEGMENT INFORMATION

 

The Company operates three business segments: (1) Calpian, Inc., which generates revenue by acquiring residual cash flow streams, (2) Calpian Commerce, an independent sales organization in the U.S. with merchant servicing revenue streams, and (3) Money-on-Mobile, which offers a mobile wallet service 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.  Management measures each of our business segments 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.

 

Our segments generally align with our revenue streams on the consolidated income statements, except for certain residual portfolio revenue that occurs in Calpian Commerce rather than in Calpian, Inc.    For the three months ended June 30, 2014 and 2013, residual portfolio revenue in Calpian Commerce was $226,000 and $218,284, respectively.

 

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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 7.

 

 

 

18 - SUBSEQUENT EVENTS

 

Investment in Money-On-Mobile

On July 2, 2014, Calpian Inc. made a further investment in MMPL of $1,394,000 to finance sales initiatives in support of Money-on-Mobile’s growth initiatives.  This certification process for this investment has not been completed as of the date of this report and Calpian, Inc has not yet been issued stock certificates.

 

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ITEM  2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

 

This Item 2 should be read in the context of the information included in our 2014 Transition Report on Form 10-KT filed with the Securities and Exchange Commission and elsewhere in this Quarterly Report, including our financial statements and accompanying notes in Item 1 of this Quarterly Report.

 

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2014 COMPARED TO 2013

 

For the three months ended June 30, 2014 compared to 2013, the results for our three business segments were as follows:

 

 

 

 

Revenue for Calpian, Inc. for the quarter ending June 30, 2014 compared to 2013 was $163,621 lower due to normal portfolio attrition.  The gross profit percentage decreased to approximately 60% for 2014 compared to 64% for 2013 due to amortization costs associated with the portfolios.  The decreased in net loss from $2.2 million to $1.2 million is mainly attributable to equity investment loss from Money-on-Mobile recognized by Calpian, Inc. in the quarter ending June 30, 2013 under the equity method of accounting.  Calpian, Inc. incurred general and administrative expenses during the quarter ended June 30, 2014 of approximately $430,000 associated with financing activities, the majority of which were commissions paid for the completion of the equity raise begun in the quarter ended March 31, 2014.

 

Revenue for Calpian Commerce for the quarter ending June 30, 2014 was $550,172 lower compared to 2013 were lower due to normal portfolio attrition and due to decreases in various merchant portfolios in the revenue associated with its PCI compliancy program.  The gross profit percentage decreased to approximately 24% for 2014 compared to 30% for 2013 due to certain costs charged by its PCI compliancy vendor for the period ended 2014 that were not charged in 2013.  These additional costs charged to the Company are currently in dispute with the vendor.  Calpian Commerce net income was a loss of $263,960 for the quarter ended June 30, 2014, compared to net income of $150,087 for the quarter ended June 30, 2013 due to the aforementioned decline in the gross margin.  During the past six months, Calpian Commerce has continued to reduce its general and administrative and processing costs while redeploying the savings into sales resources.

 

The change in revenue for Money-on-Mobile for the quarter ending June 30, 2014 compared to 2013 is attributable to the consolidation of Money-on-Mobile into the Company’s financial statements beginning January 2014.  Money-on-Mobile became majority owned on January 6, 2014, at which time the Company began to consolidate the results of its operations.  Prior to the acquisition, the Company accounted for the results of operations for Money-on-Mobile using the equity method of accounting.  Money-on-Mobile revenue for the quarter ended June 30, 2014 was $40,160,909, on which the Company

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posted a gross profit of $406,587 or 1%.  Sales, general and administrative costs of $1,501,214 for the quarter ended June 30, 2014 reflect annual salary increases of less than 5% customarily granted April 1 following the end of the Indian fiscal year, as well as the Company’s aggressive sales expenditures to build top line revenue.

 

Across all business segments, Calpian Inc. has raised funds to aggressively grow the Company’s businesses with the understanding that it will sustain operating losses until those businesses reach a scale that can produce earnings.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash used by consolidated operating activities for the three months ended June 30, 2014 was $3,544,404, and cash provided by consolidating operating activities for the three months ended June 30, 2013 was $1,032,800.   

 

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. 

 

The Company plans to raise additional debt to support residual acquisitions and additional equity to support further expansion of Money-On-Mobile operations in India.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet arrangements.

 

CONTRACTUAL OBLIGATIONS

 

We did not incur any material contractual obligation during the reporting period.

 

CRITICAL ACCOUNTING POLICIES

 

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

 

There have been no changes in the critical accounting policies disclosed in our 2014 Transition Report on Form 10-K

 

ITEM  3      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required for smaller reporting companies.

 

ITEM 4      CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

The Company’s management, under the supervision of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report using the “Internal Control – Integrated Framework (2013)” created by the Committee of Sponsoring Organizations of the Treadway Commissions (“COSO”) framework.  Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures are not currently designed, and are not currently effective, to give reasonable assurance that the information required to be disclosed by the Company in reports that it files under the Securities Exchange Act of 1934 is accumulated  and communicated to management, include the CEO and CFO, to allow timely decisions regarding disclosures and that information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

 

Changes in Internal Controls

There have been no changes during the quarter in management’s assessment of internal controls and procedures as disclosed in our 2014 Transition Report on Form 10-K. 

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PART II – OTHER INFORMATION

 

 

ITEM 1LEGAL PROCEEDINGS

 

The description of the litigation in Note 17 of the Condensed Notes to Unaudited Consolidated Financial Statements in Part 1 Item 1 of this Quarterly Report is incorporated herein by reference.

 

ITEM 1ARISK FACTORS

 

This Report contains certain estimates and plans related to us and the industry in which we operate, which assume certain events, trends, and activities will occur and the projected information based on those assumptions.  We do not know all of our assumptions are accurate.  In particular, we do not know what level of acceptance our strategy will achieve, how many acquisitions we will be able to consummate or finance, or the size thereof.  If our assumptions are wrong about any events, trends, or activities, then our estimates for future growth for our business also may be wrong.  There can be no assurances any of our estimates as to our business growth will be achieved.

 

 

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

 

There have been no changes during the quarter in management’s assessment of market risks as disclosed in our 2014 Transition Report on Form 10-K.

 

ITEM 4 MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5 OTHER INFORMATION

 

On August 18, 2014, the Company received a comment letter issued by the Securities and Exchange Commission (“SEC”) related to its filings of Form 10-K and Form 10-KA for the fiscal year ended December 2013, Form 10-K Transition Report for fiscal year ended March 31, 2014, and Form 8-K filed March 7, 2014.  As of the date of the filing of this quarterly report, the company’s management is currently in the process of determining whether the comments in the letter, which are currently unresolved, will have a material impact upon the financial information or disclosures included in such filings.

 

ITEM 6 EXHIBITS

 

(a) Exhibits required by Item 601 of Regulation S-K are as follows:

 

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SIGNATURES

 

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

 

CALPIAN, INC.

(Registrant)

 

 

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

 

 

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EXHIBIT INDEX

 

 

 

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