MoneyOnMobile, Inc. - FORM 10-Q

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EX-31.2 - EX-31.2 - MoneyOnMobile, Inc.	clpi-20140930ex3123f34bb.htm
EX-32.2 - EX-32.2 - MoneyOnMobile, Inc.	clpi-20140930ex3226dabf0.htm
EX-32.1 - EX-32.1 - MoneyOnMobile, Inc.	clpi-20140930ex32152dfd3.htm
EX-31.1 - EX-31.1 - MoneyOnMobile, Inc.	clpi-20140930ex3118ac7b9.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

Commission File No. 000-53997

CALPIAN, INC.

(Exact name of registrant as specified in its charter)


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

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 number of shares outstanding of the registrant’s common stock as of November 13, 2014 was 40,332,615.

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TABLE OF CONTENTS



Introductory Comment		- 3 -
Forward-Looking Statements		- 3 -
PART I – FINANCIAL INFORMATION
Item 1	Financial Statements	- 4 -
Item 2	Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	- 26 -
Item 3	Quantitative And Qualitative Disclosures About Market Risk	- 28 -
Item 4	Controls And Procedures	- 28 -
PART II – OTHER INFORMATION
Item 1	Legal Proceedings	- 28 -
Item 1A	Risk Factors	- 28 -
Item 3	Defaults Upon Senior Securities	- 29 -
Item 4	Mine Safety Disclosures	- 29 -
Item 5	Other Information	- 29 -
Item 6	Exhibits	- 29 -
SIGNATURES		- 30 -
Exhibit Index		- 31 -

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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



CALPIAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	Unaudited		Audited
	September 30, 2014		March 31, 2014

ASSETS
Current Assets
Cash and equivalents	$	1,985,441	$	8,078,505
Accounts receivable		1,451,684		1,194,117
Restricted cash		51,607		52,994
Inventory		3,024,815		2,997,872
Other current assets		1,265,274		1,758,270
Total current assets		7,778,821		14,081,758
Property and equipment		4,055,158		398,958
Residual portfolios		9,470,827		9,095,133
Equity investments		465,953		301,680
Deferred financing costs		216,084		324,126
Goodwill		21,619,870		21,619,870
Other intangible assets, at cost		1,326,248		1,351,965
Other non-current assets		1,161,772		958,196
Total assets	$	46,094,733	$	48,131,686

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	765,065	$	985,616
Accrued liabilities		1,198,024		1,553,247
Related party payables		623,092		766,782
Current portion of long-term debt		4,136,461		7,260,800
Deferred revenues		431,504		595,929
Total current liabilities		7,154,146		11,162,374
Long-term debt		15,517,145		13,374,296
Other non-current liabilities		208,859		214,836
Total liabilities		22,880,150		24,751,506

Shareholders' Equity (Note 12)
Preferred stock		-		1,000,000
Common stock		38,909		29,022
Stock subscribed		1,424		7,056
Additional paid-in capital		34,372,306		29,494,797
Accumulated deficit		(17,920,946)		(15,382,512)
Noncontrolling interest		6,022,162		7,230,120
Cumulative other comprehensive income		700,728		1,001,697
Total shareholders' equity		23,214,583		23,380,180
Total liabilities and shareholders' equity	$	46,094,733	$	48,131,686

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

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CALPIAN, INC. AND SUBSIDIARIES
CONSOLIDATED (UNAUDITED) STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Revenues
Residual portfolios	$	1,131,692	$	955,501	$	2,151,845	$	1,989,865
Processing fees		4,469,432		5,062,802		9,082,753		10,019,326
Money-on-Mobile		53,223,161		-		93,384,070		-
Other		396,414		342,909		841,305		1,004,178
Total revenues		59,220,699		6,361,212		105,459,973		13,013,369
Cost of revenues
Residual portfolio amortization		272,969		239,604		581,432		537,627
Processing and servicing		3,797,948		4,524,038		7,676,952		8,527,972
Money-on-Mobile		52,637,887		-		92,392,209		-
Other		192,778		284,671		349,232		375,427
Total cost of revenues		56,901,582		5,048,313		100,999,825		9,441,026
Gross profit		2,319,117		1,312,899		4,460,148		3,572,343
General and administrative expenses
Salaries and wages		2,151,905		960,420		3,641,588		1,969,003
Selling, general and administrative		2,456,297		1,215,297		5,275,154		2,754,655
Depreciation and amortization		159,091		30,030		303,582		56,374
Total general and administrative		4,767,293		2,205,747		9,220,324		4,780,032
Operating loss		(2,448,176)		(892,848)		(4,760,176)		(1,207,689)
Other income / (expenses)
Interest expense		(746,036)		(765,168)		(1,621,498)		(1,514,595)
Equity investment gain / (loss)		7,189		(1,286,062)		8,007		(2,363,779)
Gain/ (loss) on sale of assets		2,855,737		-		2,859,709		-
Total other income/(expenses)		2,116,890		(2,051,230)		1,246,218		(3,878,374)
Net loss before income taxes		(331,286)		(2,944,078)		(3,513,958)		(5,086,063)
Income tax (expense) benefit		13,191		-		13,191		-
Net loss		(318,095)		(2,944,078)		(3,500,767)		(5,086,063)
Less net loss attributable to noncontrolling interest		363,812		-		962,333		-
Net income / (loss) attributable to Calpian, Inc. shareholders		45,717		(2,944,078)		(2,538,434)		(5,086,063)
Other comprehensive loss:
Currency translation adjustments		(247,396)		-		(300,969)		-
Total comprehensive loss	$	(565,491)	$	(2,944,078)	$	(3,801,736)	$	(5,086,063)
Comprehensive loss attributable to:
Noncontrolling interest	$	(434,948)	$	-	$	(1,049,064)	$	-
Calpian, Inc. shareholders	$	(130,543)	$	(2,944,078)	$	(2,752,672)	$	(5,086,063)

Weighted average number of shares outstanding,
Basic		38,884,201		27,807,741		38,394,636		26,758,369
Diluted effect of warrants		544,367		-		-		-
Diluted		39,428,568		27,807,741		38,394,636		26,758,369
Earnings Per Share
Basic	$	0.00	$	(0.11)	$	(0.07)	$	(0.19)
Diluted	$	0.00	$	(0.11)	$	(0.07)	$	(0.19)

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

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CALPIAN, INC. AND SUBSIDIARIES
CONSOLIDATED (UNAUDITED) STATEMENTS OF CASH FLOWS


	Six Months Ended
	September 30,
	2014		2013
OPERATING ACTIVITIES
Net loss	$	(3,500,767)	$	(5,086,063)
Adjustments to reconcile net loss to cash (used in) provided by operating activities
Equity investment loss (income)		(8,007)		2,363,779
Deferred financing cost amortization		108,042		108,042
Residual portfolio amortization		581,432		537,627
Processing and servicing - merchant portfolio amortization		514,981		795,974
Subordinated note discount amortization		199,740		200,414
Depreciation and amortization		303,582		56,374
Gain on sale of residual portfolio		(2,175,558)		-
Management equity awards		710,014		296,818
Equity awards issued for services		96,499		-
Deferred consulting fee amortization		205,852		183,013
Changes in operating assets and liabilities:
Accounts receivable		(257,567)		293,276
Inventory		(26,939)		-
Other assets		35,301		(314,618)
Related party payables		(143,366)		-
Accounts payable		(220,552)		217,676
Accrued liabilities		(151,708)		813,132
Interest payable		(209,249)		47,213
Deferred revenue		(164,425)		-
Other liabilities		7,280		-
Net cash (used in) provided by operating activities		(4,095,415)		512,657

INVESTING ACTIVITIES
Contribution to equity method - Money-on-Mobile		-		(3,149,060)
Investment in equity method - Money-on-Mobile		(245,125)		-
Contribution to other equity method investments		(163,847)		-
Investment in residual portfolios		(3,093,400)		-
Purchases of property and equipment		(1,469,200)		(126,446)
Proceed from sale of residual portfolio		3,800,000		-
Acquisition of intangible assets		(231,570)		-
Net cash used in investing activities		(1,403,142)		(3,275,506)

FINANCING ACTIVITIES
Borrowings on senior notes		999,950		-
Borrowings on subordinated notes		-		300,000
Borrowings on notes payable		-		-
Payment on notes payable		(3,870,000)		(28,765)
Issuance of common stock and warrants		3,252,280		2,778,104
Return and cancellation of stock		(680,179)		-
Change in restricted cash		1,386		3,973
Net cash (used in) provided by financing activities		(296,563)		3,053,312

Foreign currency effect on cash flows		(297,944)		-

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Net change in cash and equivalents		(6,093,064)		290,463
Cash and equivalents at beginning of period		8,078,505		585,717
Cash and equivalents at end of period	$	1,985,441	$	876,180

SUPPLEMENTAL INFORMATION
Bank financing purchase of fixed assets		2,254,500		-
Common stock issued to acquire equity investment		-		1,504,074
Stock and warrants for services		-		480,000
Common stock issued in exchange for residual portfolios		3,150		14,880
Warrants issued as part of debt and equity financings		257,000		392
Subordinated debt converted to common stock		300,000		850,701
Notes payable for insurance premiums		-		65,600
Non cash conversion of Series C preferred to common stock		1,000,000		-
Cancellation of common stock related to sale of residual portfolio		680,179		-

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

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CALPIAN, INC. AND SUBSIDIARIES
CONSOLIDATED (UNAUDITED) STATEMENTS OF SHAREHOLDERS' EQUITY

																			Other
	Series B Preferred			Series C Preferred			Common Stock			Subscribed Stock			Paid-in		Accumulated		Noncontrolling		Comprehensive
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Interests		Income		Total
Balance, March 31, 2013	-	$	-	-	$	-	23,915,806	$	23,915	-	$	-	$	14,159,576	$	(8,790,446)	$	-	$	1,195		5,394,241
Acquisition of residual portfolios	-		-	-		-	10,941		11	-		-		14,869		-		-		-		14,880
Contribution to Money-on-Mobile	-		-	-		-	1,248,670		1,249	-		-		1,502,825		-		-		-		1,504,074
Fair value of noncontrolling interest in business combination	-		-	-		-	-		-	-		-		-		-		7,500,000		-		7,500,000
Noncontrolling interest contribution	-		-	-		-	-		-	-		-		-		-		97,108		-		97,108
Issuance of common stock	-		-	-		-	1,784,043		1,784	6,889,170		6,889		7,566,467		-		-		-		7,575,140
Warrants issued in financing transactions	-		-	-		-	-		-	-		-		3,353,506		-		-		-		3,353,506
Warrants exercised to common stock	-		-	-		-	391,920		392	-		-		(392)		-		-		-		-
Conversion of debt to common stock	-		-	-		-	633,802		633	66,667		67		1,050,003		-		-		-		1,050,703
Stock issued for services	-		-	-		-	622,835		623	100,000		100		937,401		-		-		-		938,124
Stock-based compensation	-		-	-		-	-		-	-		-		360,005		-		-		-		360,005
Issuance of Series B preferred stock	550,000		550	-		-	-		-	-		-		550,401		-		-		-		550,951
Conversion of Series B to common stock	(550,000)		(550)	-		-	414,249		414	-		-		136		-		-		-		-
Issuance of Series C preferred stock	-		-	1,000		1,000,000	-		-	-		-		-		-		-		-		1,000,000
Net loss	-		-	-		-	-		-	-		-		-		(6,592,066)		(366,988)		-		(6,959,054)
Foreign currency translation adjustment	-		-	-		-	-		-	-		-		-		-		-		1,000,502		1,000,502
Balance, March 31, 2014	-	$	-	1,000	$	1,000,000	29,022,266	$	29,021	7,055,837	$	7,056	$	29,494,797	$	(15,382,512)	$	7,230,120	$	1,001,697	$	23,380,180
Issuance of common stock	-		-	-		-	9,607,850		9,608	(6,355,570)		(6,355)		2,561,593		-		-		-		2,564,846
Warrants issued in financing transactions	-		-	-		-	-		-	-		-		944,435		-		-		-		944,435
Conversion of debt to common stock	-		-	-		-	216,667		217	(66,667)		(67)		299,850		-		-		-		300,000
Conversion of Series C to common stock	-		-	(1,000)		(1,000,000)	-		-	1,000,000		1,000		942,000		-		-		-		(57,000)
Stock issued for services	-		-	-		-	183,422		183	(100,000)		(100)		96,416		-		-		-		96,499
Acquisition of residual portfolios	-		-	-		-	2,100		2	-		-		3,148		-		-		-		3,150
Stock-based compensation	-		-	-		-	-		-	-		-		710,014		-		-		-		710,014
Canceled stock	-		-	-		-	(123,290)		(123)	(110,000)		(110)		(679,946)		-		-		-		(680,179)
Purchase of DPPL shares from noncontrolling shareholder	-		-	-		-	-		-	-		-		-		-		(265,875)		-		(265,875)
Issuance of MMPL shares to noncontrolling shareholders	-		-	-		-	-		-	-		-		-		-		20,250		-		20,250
Net loss	-		-	-		-	-		-	-		-		-		(2,538,434)		(962,333)		-		(3,500,767)
Foreign currency translation adjustment	-		-	-		-	-		-	-		-		-		-		-		(300,969)		(300,969)
Balance, September 30, 2014	-		-	-		-	38,909,015		38,909	1,423,600		1,424		34,372,306		(17,920,946)		6,022,163		700,728		23,214,583

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 September 30, 2014, the Company has acquired 72.9% 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. 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

MoneyOnMobile, Inc. - FORM 10-Q - November 19, 2014

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