MoneyOnMobile, Inc. - FORM 10-Q - May 12, 2016

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EX-32.2 - SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER - MoneyOnMobile, Inc.clpi2016q210-qex322.htm
EX-31.1 - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - MoneyOnMobile, Inc.clpi2016q210-qex311.htm
EX-31.2 - SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER - MoneyOnMobile, Inc.clpi2016q210-qex312.htm
EX-32.1 - SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - MoneyOnMobile, Inc.clpi2016q210-qex321.htm

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, 2015
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  ☐  
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 May 1, 2016 was 50,648,438.


TABLE OF CONTENTS 



INTRODUCTORY COMMENT
 
In this Quarterly Report on Form 10-Q, we refer to Calpian, Inc. as “Calpian,” “Company,” “we,” “us,” and “our,” and its wholly-owned United States subsidiary, Calpian Commerce, Inc. (“Calpian Commerce”), and its partially-owned joint venture, Calpian Residual Acquisition, L.L.C, and majority-owned Indian MoneyOnMobile enterprise, which includes Digital Payment Processing Limited ("DPPL"), My Mobile Payments Limited ("MMPL") and Payblox Technologies (India) Private Limited ("Payblox").  
FORWARD-LOOKING STATEMENTS
When used in this Quarterly 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.
This Quarterly 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. 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.

3

PART I - FINANCIAL INFORMATION
ITEM 1    FINANCIAL STATEMENTS
CALPIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
September 30, 2015
 
March 31, 2015
 
(unaudited)
 
 
ASSETS
 
 
 
Current Assets
 

 
 

Cash and equivalents
$
2,762,317

 
$
1,095,827

Due from distributors
707,730

 
684,210

Advances to aggregators
3,332,659

 
3,288,850

Current assets - discontinued operations
9,073,332

 
9,386,819

Other current assets
1,280,295

 
1,122,735

Total current assets
17,156,333

 
15,578,441

Property and equipment, net
3,491,248

 
3,890,064

Equity investments
240,475

 
442,888

Goodwill
13,901,575

 
14,633,237

Other intangible assets, net
4,440,346

 
4,937,104

Other non-current assets
18,286

 
308,267

Total assets
$
39,248,263

 
$
39,790,001

LIABILITIES AND SHAREHOLDERS' EQUITY
 

 
 

Current Liabilities
 

 
 

Accounts payable and accrued liabilities
$
2,992,031

 
$
2,540,112

Related party: payables and debt
1,289,435

 
717,486

Current portion of long-term debt
2,158,901

 
332,308

Advances from distributors
973,597

 
658,346

Derivative liability
1,117,300

 
—

Current liabilities - discontinued operations
9,602,932

 
9,714,732

Total current liabilities
18,134,196

 
13,962,984

Long-term debt
4,471,848

 
7,172,481

Other non-current liabilities
98,680

 
176,270

Total liabilities
22,704,724

 
21,311,735

Commitments and contingencies


 


Shareholders' Equity
 

 
 

Common stock 200,000,000 shares authorized, 45,594,433 and 39,314,015 shares issued and outstanding as of September 30 and March 31, 2015, respectively
45,594

 
39,314

Stock subscribed 3,258,601 and 1,533,600 shares issued and outstanding as of September 30 and March 31, 2015, respectively
3,259

 
1,534

Additional paid-in capital
42,305,035

 
35,982,933

Accumulated deficit
(30,153,226
)
 
(24,136,830
)
Cumulative other comprehensive (loss)
(1,631,466
)
 
(499,383
)
Total Calpian, Inc. Shareholders’ Equity
10,569,196

 
11,387,568

 Noncontrolling interest
5,974,343

 
7,090,698

Total shareholders' equity
16,543,539

 
18,478,266

Total liabilities and shareholders' equity
$
39,248,263

 
$
39,790,001

 
See Notes to Unaudited Condensed Consolidated Financial Statements.

4

CALPIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
 
Three Months Ended
 
Six Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
 
Restated
 
 
 
Restated
Revenues, net
 

 
 
 
 
 
 
Money-on-Mobile, net
$
1,441,693

 
$
1,545,507

 
$
2,714,935


$
2,436,355

Cost of revenues
 
 
 
 
 
 
 
Money-on-Mobile
766,252

 
960,233

 
1,515,669

 
1,444,494

Gross profit
675,441

 
585,274

 
1,199,266

 
991,861

General and administrative expenses
 

 
 

 
 
 
 
Salaries and wages
621,036

 
1,293,565

 
1,424,577

 
1,939,898

Selling, general and administrative
4,739,440

 
2,048,647

 
6,415,714

 
4,459,854

Depreciation and amortization
190,622

 
115,122

 
433,898

 
215,644

Total general and administrative
5,551,098

 
3,457,334

 
8,274,189

 
6,615,396

Operating loss
(4,875,657
)
 
(2,872,060
)
 
(7,074,923
)
 
(5,623,535
)
Other income (expenses)
 

 
 

 
 
 
 
Interest expense
(325,059
)
 
(228,232
)
 
(725,327
)
 
(591,405
)
Other
(141,396
)
 
—

 
(141,396
)
 
—

Equity investment gain
—

 
7,189

 
19,667

 
8,007

Total other income (expenses)
(466,455
)
 
(221,043
)
 
(847,056
)
 
(583,398
)
Loss from continuing operations, before income taxes
(5,342,112
)
 
(3,093,103
)
 
(7,921,979
)
 
(6,206,933
)
Income tax benefit
—

 
13,191

 
—

 
13,191

Loss from continuing operations
(5,342,112
)
 
(3,079,912
)
 
(7,921,979
)
 
(6,193,742
)
Gain from discontinued operations, net of tax
161,897

 
2,761,814

 
59,153

 
2,692,972

Net loss
(5,180,215
)
 
(318,098
)
 
(7,862,826
)
 
(3,500,770
)
Net loss attributable to noncontrolling interest
(1,481,039
)
 
(598,521
)
 
(1,846,430
)
 
(1,197,042
)
Net (loss) income attributable to Calpian, Inc. shareholders
(3,699,176
)
 
280,423

 
(6,016,396
)
 
(2,303,728
)
Other comprehensive (loss):
 

 
 

 


 


Currency translation adjustments, net of tax
(918,886
)
 
(247,396
)
 
(1,388,890
)
 
(300,969
)
Total comprehensive loss
$
(6,099,101
)
 
$
(565,494
)
 
$
(9,251,716
)
 
$
(3,801,739
)
Comprehensive (loss) attributable to:
 
 
 
 

 

Noncontrolling interest
(700,560
)
 
(434,948
)
 
(1,246,667
)
 
(1,049,064
)
Calpian, Inc. shareholders
(5,231,274
)
 
(130,546
)
 
(8,005,049
)
 
(2,752,675
)
Net loss per share, from continuing operations
$
(0.12
)
 
$
(0.08
)
 
$
(0.18
)
 
$
(0.16
)
Net income per share from discontinued operations
$
0.004

 
$
0.07

 
$
0.001

 
$
0.07

Net loss per share, basic and diluted
$
(0.11
)
 
$
(0.01
)
 
$
(0.18
)
 
$
(0.09
)
Weighted average number of shares outstanding, basic and diluted
45,437,785

 
38,884,201

 
43,159,246

 
38,394,636


See Notes to Unaudited Condensed Consolidated Financial Statements.


5

CALPIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Six Months Ended September 30,
 
2015
 
2014
 
(unaudited)
 
(unaudited)
OPERATING ACTIVITIES
 
 
 
Net loss  
$
(7,862,826
)
 
$
(3,500,770
)
Adjustments to reconcile net loss to cash used in operating activities
 
 
 

Deferred financing cost amortization
108,042

 
108,042

Portfolio amortization
429,129

 
581,432

Subordinated note discount amortization
205,913

 
199,740

Depreciation and amortization
515,556

 
303,582

Equity investment income
(14,874
)
 
(8,007
)
Gain on sale of residual portfolio
(123,992
)
 
(2,175,558
)
Stock based compensation
124,375

 
710,014

Deferred consulting fee amortization
2,467,147

 
205,852

Equity awards issued for services
3,326,541

 
96,499

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
244,244

 
(257,567
)
Due from distributors
(55,002
)
 
—

Advances to aggregators
(43,809
)
 
(26,939
)
Other assets
(1,943,269
)
 
35,301

Related party payables
115,949

 
(143,366
)
Accounts payable and accrued liabilities
(73,530
)
 
(581,509
)
Advances from distributors
315,251

 
(164,425
)
Other liabilities
(77,590
)
 
7,280

Net cash (used in) operating activities  
(2,342,745
)
 
(4,610,399
)
INVESTING ACTIVITIES
 

 
 

Proceeds from (contribution to) equity method investment
52,400

 
(408,972
)
Investment in residual portfolios
—

 
(3,093,400
)
Proceeds from sale of residual portfolios
—

 
3,800,000

Purchases of property and equipment
(72,731
)
 
(3,723,703
)
Acquisition of intangible assets
(39,484
)
 
(231,570
)
Net cash (used in) investing activities  
(59,815
)
 
(3,657,645
)
FINANCING ACTIVITIES
 

 
 

Borrowings on senior and subordinate notes
2,000,000

 
999,950

Payments on notes payable and bank loan
(4,101,913
)
 
(3,870,000
)
Issuance of common stock and warrants
3,611,389

 
2,572,101

Proceeds from long-term debt
2,275,832

 
2,254,500

Proceeds from related party debt
433,200

 
—

Contributions made by noncontrolling interest
299,960

 
—

Changes in restricted cash
—

 
1,386

Net cash provided by financing activities  
4,518,468

 
1,957,937

Foreign currency effect on cash flows  
(238,914
)
 
(297,944
)
Net change in cash and cash equivalents  
1,876,994

 
(6,608,051
)
Cash and cash equivalents at beginning of year  
1,293,461

 
8,078,505

Cash and cash equivalents at end of the period
$
3,170,455

 
$
1,470,454

Cash and cash equivalents at end of the period - discontinued operations
$
408,138

 
$
197,634

Cash and cash equivalents at end of the period - continuing operations
$
2,762,317

 
$
1,272,820


See Notes to Unaudited Condensed Consolidated Financial Statements.

6

CALPIAN INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 - BASIS OF PRESENTATION
 
Certain information and footnote disclosures normally included in consolidated financial statements in accordance with U.S. GAAP have been omitted pursuant to requirements of the U.S. Securities and Exchange Commission (“SEC”). A description of our accounting policies and other financial information is included in our audited consolidated financial statements filed with the SEC on Form 10-K for the year ended March 31, 2015. The disclosures included in our accompanying interim financial statements and footnotes should be read in conjunction with our consolidated financial statements and notes thereto included in the Annual Report on Form 10-K. Operating results for the three and six months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending March 31, 2016.

Disposition of Assets
On November 30, 2015, CLPI consummated the sale of Calpian Commerce, Inc. and certain portfolio assets of CLPI and CRA. As a result of the sale, the results of operations for all periods presented and the (loss) gain on disposal have been included in “Net (loss) income from discontinued operations” in our condensed consolidated statements of operations. Additionally, these assets and liabilities have been presented as discontinued operations in our unaudited condensed consolidated balance sheet as of September 30, 2015. See note 15 - Discontinued Operations for additional information. Additionally, as the criteria for held for sale classification was meet as of June 30, 2015, no depreciation or amortization was recorded during the three months ended September 30, 2015 on any of those assets.

Going Concern
The Company’s unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company had a net loss of $(5,180,215) and $(7,862,826) for the three and six months ended September 30, 2015, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.   
The Company is continuing with its plan to further grow and expand its mobile payment processing operations in India. Management believes that its current operating strategy will provide the opportunity for the Company to continue as a going concern as long as it continues to obtain additional financing; however, there is no assurance this will occur. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Reclassifications
Certain previously reported amounts have been reclassified to conform to the current presentation.


2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fair Value Measurements
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 publicly-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 non-employees, 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.
 





7

Convertible Instruments
Certain debt instrument require us to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. This criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

Derivative Financial Instruments
We classifiy as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide a choice of net-cash settlement or settlement in our own shares providing that such contracts are indexed to Calpian's common stock. We classify as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). We assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.
 
Our free standing derivatives consist of embedded conversion options with a convertible note. The Company evaluated these derivatives to assess their proper classification in the condensed consolidated balance sheets as of September 30, 2015 using the applicable classification criteria enumerated under ASC 815-Derivatives and Hedging. The Company determined that certain embedded conversion features do not contain fixed settlement provisions. As a result, we were required to record the conversion option associated with the debt as an embedded derivative. We have recorded this liability as a derivative liability within current liabilities in our condensed consolidated balance sheet. Changes in the value of this derivative liability has been marked-to-market at the end of each reporting period and recorded as Other income (expense) in our condensed consolidated statements of operations.   

Foreign Currency Translation
The functional currency of MoneyOnMobile, consisting of DPPL and the variable interest entities MMPL and Payblox, is the Indian Rupee.  MoneyOnMobile assets and liabilities are translated into U.S. dollars at the exchange rates in effect at each consolidated 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 within the accompanying statements of shareholders’ equity. Additionally, cumulative translation adjustments recorded in other comprehensive income are reclassified to noncontrolling interest proportionally based on the weighted average percentage ownership interest held by the noncontrolling interest.

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.  
 
We perform an annual impairment assessment in the fourth quarter of each fiscal 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.  We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment under Accounting Standards Update (ASU) No. 2011-08, Goodwill and Other (Topic 350): Testing Goodwill for Impairment, issued by the Financial Accounting Standards Board (FASB). Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit.  If we determine that it is more likely than not that its fair value is less than its carrying amount, then the two-step goodwill impairment test is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value.






8

Intangible Assets
Intangible assets consist of software (excluding computer software), customer lists, trademarks, distributor contracts and domain names acquired through business combinations, or consists of software developed or obtained for internal use, as well as software intended for resale. Costs to develop internal use computer software during the application development stage are capitalized on a per project basis. Capitalized finite-lived intangible assets are amortized on a straight line basis over its useful life. Indefinite-lived assets are not amortized, but reviewed at least annually for potential impairment.
The weighted average amortization period is five years for customer lists, acquisition costs and trademarks, five years for internal use software, and domain names are not amortized.
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.  In addition to the recoverability assessment, we routinely review the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized or depreciated over the revised estimated useful life. There were no adjustments to the carrying value or useful lives of long-lived assets (other than goodwill) during the three and six months ended September 30, 2015 and 2014.
 
Revenue Recognition
The Company recognizes revenue when (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the price is fixed or determinable; and (4) collectability is reasonably assured.

A significant portion of revenue is attributable to Merchant Services, including Mobile Recharge and Direct-to-Home. In these transactions, revenue from purchased utility units is recognized on a net basis, as the Company is acting in an agent capacity. MoneyOnMobile does not change the product or perform part of the service, has minimal discretion in supplier selection, has minimal latitude in establishing prices and possesses no credit risk.


Other services offered are Consumer Services, including bill payment and money transfer. For bill payment transactions, MoneyOnMobile acts as an agent with consumers. Distributors use MoneyOnMobile’s electronic wallet technology to allow consumers to pay utility bills by mobile phone text message and smart phone. MoneyOnMobile earns a fixed transaction fee for these services.  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 or credit risk.

For our money transfer services, once a consumer has established a MoneyOnMobile electronic wallet account, consumers can use MoneyOnMobile’s technology to facilitate non-distributor-related transactions with other parties that have MoneyOnMobile accounts, including other retailers and utilities and other MoneyOnMobile consumers.  MoneyOnMobile also earns a fixed transaction fee for these services.  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 or credit risk.

Distributors often keep a prepaid balance with MoneyOnMobile to facilitate transactions.  Prepaid balances are deferred until utility units are delivered.  As of September 30 and March 31, 2015, advances from distributors was $973,597 and $658,346, respectively.  

Restatement - Gross vs. Net Revenue Presentation
During the fourth quarter of fiscal year 2015, we restated certain aspects of our Statements of Operations presentation. We changed our reporting of certain MoneyOnMobile revenue transactions from a Gross to Net basis. Historically, we reported these transactions as revenue based on the total amounts billed to consumers. This change resulted in a reduction of previously reported revenue and corresponding reductions in cost of revenue during the three and six months ended September 30, 2014. The change in Statements of Operations and Comprehensive Loss presentation had no effect on pre-tax loss or net loss for any period presented. Additionally, the Company's total assets, liabilities, stockholders equity, and cash flow from operations, investing and financing all remained unchanged for the three and six months ended September 30, 2014.



9

The determination to record revenue on a Gross vs. Net basis is a matter of significant professional judgment that is dependent upon the relevant facts and circumstances of each specific business. The presentation changes made to prior year amounts do not impact in any respect the scope or nature of the operations of MoneyOnMobile. The effects of this reclassification of MoneyOnMobile transactions are isolated to only Revenue and Cost of Sales line items within the accompanying Condensed Consolidated Statement of Operations and are disclosed as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
September 30, 2014
 
September 30, 2014
 
 
Previously Reported
 
Adjustment
 
As Adjusted
 
Previously Reported
 
Adjustment
 
As Adjusted
Revenue, net

 
$
53,223,161

 
$
(51,677,654
)
 
$
1,545,507

 
$
93,384,070

 
$
(90,947,715
)
 
$
2,436,355

Cost of revenues
 
52,637,887

 
(51,677,654
)
 
960,233

 
92,392,209

 
(90,947,715
)
 
1,444,494

Gross Profit
 
$
585,274

 
$
—

 
$
585,274

 
$
991,861

 
$
—

 
$
991,861




Commitments and Contingencies
In the normal course of business, there are various claims in process, matters in litigation, and other contingencies. Currently, there is no claims that had a material effect on the Company.

Recently Issued Accounting Standards
There are no recently issued accounting pronouncements not yet adopted or recently issued pronouncements that we expect to have a material effect on the presentation or disclosure of our future consolidated operating results, cash flows or financial condition.

10

3 - BUSINESS ACQUISITIONS
 
MoneyOnMobile

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 MoneyOnMobile enterprise and triggering step acquisition accounting.  At September 30 and March 31, 2015, the Company’s ownership in DPPL was 77.3% for both periods. During the three and six months ended September 30, 2015, the additional investment made to MoneyOnMobile totaled $2,285,240 and $3,310,240, respectively.
 

4 - OTHER CURRENT ASSETS
 
At September 30 and March, 31, 2015, other current assets consisted of the following:
 
September 30,
 
March 31,
 
2015
 
2015
Current portion of deferred financing fees
$
216,084

 
$
216,084

Deferred consulting fees
—

 
242,399

Advance payments for foreign taxes
409,445

 
451,213

Prepaid insurance and other
654,766

 
213,039

Total
$
1,280,295

 
$
1,122,735

 

5 - PROPERTY AND EQUIPMENT
 
At September 30, and March 31, 2015, property and equipment consisted of the following:
 
September 30,
 
March 31,
 
2015
 
2015
Building
$
3,615,362

 
$
3,805,644

Equipment
151,681

 
285,917

Furniture and fixtures
54,944

 
47,191

Subtotal
3,821,987

 
4,138,752

Less accumulated depreciation
(330,739
)
 
(248,688
)
Property and equipment, net
$
3,491,248

 
$
3,890,064

 


6 – GOODWILL
 
The following table is a reconciliation of the carrying amount of goodwill:
Carrying value at March 31, 2015
 
 
$
14,633,237

Net foreign exchange movement
 
 
(274,373
)
Carrying value at June 30, 2015
 
 
14,358,864

Net foreign exchange movement
 
 
(457,289
)
Carrying value at September 30, 2015
 
 
$
13,901,575










11

7 – INTANGIBLE ASSETS
 
At September 30 and March 31, 2015, intangible assets subject to amortization consisted of the following:
 
September 30,
 
March 31,
 
2015
 
2015
Customer lists
$
1,187,706

 
$
1,282,457

Software development costs
676,365

 
840,824

Trademarks
35,224

 
31,299

Contracts
304,298

 
247,568


2,203,593

 
2,402,148

Less accumulated amortization
(1,108,830
)
 
(954,184
)
Total
$
1,094,763

 
$
1,447,964

For the three and six months ended September 30, 2015 and 2014, the weighted average amortization period is approximately 5 years. For the three months ended September 30, 2015 and 2014, amortization expense related to intangible assets was $154,646 and $100,428, respectively. For the six months ended September 30, 2015 and 2014, amortization expense related to intangible assets was $154,646 and $200,526, respectively.

At September 30 and March 31, 2015, intangible assets not subject to amortization consisted of the following:

 
September 30,
 
March 31,
 
2015
 
2015
License
$
2,394,824

 
$
2,488,867

Trade name
940,759

 
990,273

Domain names
10,000

 
10,000

Total
$
3,345,583

 
$
3,489,140


The MoneyOnMobile Reserve Bank of India license noted above meets the criteria to be classified as an indefinite life intangible as there are no legal, regulatory, contractual, competitive, economic, or other factors that limit its useful life. It does requires renewal and is for a defined period, however, Management will attempt to continuously renew.




8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 
At September 30 and March 31, 2015, accounts payable and accrued liabilities consisted of the following:
 
 
September 30,
 
March 31,
 
2015
 
2015
Accounts payable
$
1,471,832

 
$
1,255,085

Interest
264,250

 
227,250

Wages and benefits
418,969

 
277,248

Foreign statutory fees
225,415

 
184,484

Vendor payments and other
611,565

 
596,045

Total
$
2,992,031

 
$
2,540,112




12

9 - DEBT
 
As of September 30 and March 31, 2015, long term debt consisted of the following:
 
September 30,
 
March 31,
 
2015
 
2015
Senior promissory notes
$
769,007

 
$
1,093,162

Subordinated notes payable
3,200,000

 
4,800,000

Convertible promissory note
2,000,000

 
—

India Office Building Mortgage
2,113,699

 
2,129,813

Less: debt discount
(1,451,957
)
 
(518,186
)

6,630,749

 
7,504,789

Less: current portion
(2,158,901
)
 
(332,308
)
Long term debt
$
4,471,848

 
$
7,172,481


Senior Credit Facility
Outstanding balances under the senior credit facility accrue interest at an annual rate of 13.2%, payable monthly in arrears. On August 8, 2014, the facility was amended to extend interest only payments through September 2015; thereafter, principal is payable in 25 equal monthly installments, plus accrued interest, until maturity in October 2017.  During the three months ended September 30, 2015 and 2014, interest expense related to the senior credit facility, exclusive of accretion of debt discount and amortization of loan origination fees, was $217,800 and $367,917, respectively. During the six months ended September 30, 2015 and 2014, interest expense related to the senior credit facility, exclusive of accretion of debt discount and amortization of loan origination fees, was $435,600 and $802,527 respectively. During the three and six months ended September 30, 2015 and 2014, amortized debt discount included in interest expense were $32,500 for both periods. During the six months ended September 30, 2015 and 2014, amortized debt discount included in interest expense was $54,167 and $65,000, 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 certain multiples of 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 and financial reporting covenants. The Company has obtained a covenant waiver for its financial reporting convent.
 
Loan origination fees related to our senior credit facility are amortized through September 2016, the maturity date of the facility before the extension dated August 8, 2014, and are included in interest expense.  For the three month periods ended September 30, 2015 and 2014, amortized financing costs included in interest expense were $54,021 for both periods. For the six month periods ended September 30, 2015 and 2014, amortized financing costs included in interest expense were $108,042 for both periods. For the six months ended September 30, 2015 and 2014, the Company made no principal payments on the senior credit facility.

Subsequent to September 30, 2015 and as part of the sale of the Company's sale of its U.S. operations, the Company repaid in full the $6,600,000 of the senior debt facility. For presentation purposes, this debt has been classified as part of Liabilities held for sale - discontinued operations in the condensed consolidated balance sheet.

Senior Promissory Notes - Calpian Residual Acquisition, LLC
Calpian Residual Acquisition, LLC entered into $3.0 million and $1.0 million senior promissory notes to three investors in February 2014 and September 2014, respectively.  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.  The notes are voluntarily convertible into common stock after December 31, 2014 at a conversion ratio of $2 per share of our common stock. In March 2015, Calpian Residual Acquisition, LLC issued $175,000 senior promissory notes with separate investors and accrue interest at an annual rate of 8%, payable monthly in arrears. Interest only is payable through March 2016; thereafter, principal is payable evenly for 48 months through maturity, March 2020.

As part of the Company's November 30, 2015 sale of its U.S. Operations, $3.0 million of principal was assumed by the buyer as part of this transaction. As such, the Company has presented $3.0 million of the outstanding promissory notes as discontinued operations at September 30 and March 31, 2015. During the three months ended September 30, 2015 and 2014, interest expense related to the senior promissory notes was $112,087 and $95,000, respectively. During the six months ended September 30, 2015 and 2014, interest expense related to the senior promissory notes was $229,478 and $198,571, respectively.

13

Warrants, valued at the time of issuance using a Black Scholes valuation model, have been issued in connection with the senior promissory notes as follows:
 
 
 
 
Aggregate Fair
 
 
Number
 
Value at the
Period of Issue
 
of Warrants
 
 Time of Issuance
Q1 2015
 
75,000

 
$
60,000

  
For the three months ended September 30, 2015 and 2014, debt discount accreted into interest expense was $30,345 and $22,524, respectively. For the six months ended September 30, 2015 and 2014, debt discount accreted into interest expense was $60,689 and $44,794 , respectively. During the six months ended September 30, 2015 and 2014, the Company made principal payments on the senior promissory notes of $324,155 and $0, respectively.

Subordinated Notes Payable
The Company’s subordinated debt has been issued pursuant to a $3 million Subordinated Debt Offering and a separate $2 million Subordinated Debt Offering.  Each offering is 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.
 
On December 30, 2014, the Company amended the subordinated notes payable to extend the maturity to December 31, 2016.    In consideration for the maturity extension, the notes were amended to add a conversion feature, which gives the note holder the option to convert the notes at a price equal to $1.00 per share of common stock.  Furthermore, the Company has the option, upon three day prior written notice, to require the note holders to convert the outstanding principal of the note into common stock if the share price equals or exceeds $2.00 in any ninety (90) day trading period. 
The Company also granted the note holders a warrant to purchase 200,000 shares of common stock for every $1,000,000 of outstanding principal at the time of the amendment.  The 960,000 warrants were determined to have a fair value at the time of issuance of $442,400 using a Black Scholes valuation model.  The modification date discount value is amortized over the remaining term of the modified debt, resulting in an effective interest rate of 16.75%.

During the three months ended September 30, 2015 and 2014, interest expense related to the senior promissory notes was $111,000 and $144,000, respectively. During the six months ended September 30, 2015 and 2014, interest expense related to the senior promissory notes was $255,000 and $288,000 for both periods. For the three months ended September 30, 2015 and 2014, debt discount accreted into interest expense was $57,048 and $44,973, respectively. For the six months ended September 30, 2015 and 2014, debt discount accreted into interest expense was $114,096 and $88,946, respectively. During the six months ended September 30, 2015 and 2014, the Company made principal payments on the senior promissory notes of $1,600,000 and $0, respectively.

Convertible Promissory Note
Effective September 17, 2015, the Company entered into a Loan and Security Agreement with Hall Phoenix/Inwood, Ltd., a Texas limited partnership (“Hall”), whereby the Company received $2,000,000, and issued a convertible promissory note (the “Hall Note”) secured by all the assets of the Company and accrues interest at an annual rate of 10% and a maturity date of September 16, 2016. Pursuant to the Agreement, Hall has the option to convert outstanding principal and unpaid accrued interest of the Note at a price per share equal to the lower of (a) $0.60 or (b) 85% of the average volume weighted price of the Company’s common stock for the ten trading days preceding the date on which Hall gives written notice of conversion to the Company. The Company obtained a waiver of default on November 30, 2015, as its senior secured debt was not paid in full. The Company sold its U.S. Operations and is no longer in default.

On September 30, 2015, the Company also entered into a Collateral Exclusion Agreement (the “Collateral Exclusion Agreement”) with Hall and Granite Hill Capital Ventures, LLC, the Company’s senior lender (the “Senior Lender”), whereby the Senior Lender agreed that its prior security interest will not attach to the Loan Proceeds and certain equity interests in the Company’s subsidiary.
Also, the Company and Hall entered into subordination agreements with the Company’s other creditors (the “Subordination Agreements”, and with the Agreement, the Note, and the Collateral Exclusion Agreement, the “Agreements”), pursuant to which the other creditors agreed to subordinate to Hall any interest in the Collateral.





14

The Company identified an embedded derivative related to a conversion option in the Hall Note. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivative as of the inception date of the Hall Note and to fair value the derivative as of each subsequent reporting date. At the inception of the Hall Note, the Company determined the aggregate fair value of the embedded derivatives to be $1,097,635. For the three and nine months ended September 30, 2015, the amortization of debt discount related to the Hall Note derivative liability was $37,650 for both periods.


India Office Building Mortgage
In May 2014, My Mobile Payments Limited obtained 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 and is collateralized by the building.

In June 2015, MMPL refinanced its debt related to its office building. MMPL re-paid its loan with the Union Bank of India, and replaced it with a $2,198,000 loan with Standard Chartered. This loan is at a variable interest of 11.10% per annum with principal and interest payments to be made in 180 equal monthly payments.





NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
 
We measure the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
 
ASC 820 describes three levels of inputs that may be used to measure fair value:
 
  Level 1 -
 quoted prices in active markets for identical assets or liabilities
 
  Level 2 -
 quoted prices for similar assets and liabilities in active markets or inputs that are observable
 
  Level 3 -
 inputs that are unobservable based on an entity’s own assumptions, as there is little, if any, related market activity (for example, cash flow modeling inputs based on assumptions)


Financial liabilities as of September 30, 2015 measured at fair value on a recurring basis are summarized below:
 
 
 
September 30,
2015
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Derivative liability
 
$
1,117,300

 
$
—

 
$
—

 
$
1,117,300


The Company determined that certain conversion option related to a convertible note did not have fixed settlement provisions and are deemed to be derivative financial instruments, since the exercise price was subject to adjustment based on certain changes in market price of the Company’s common stock. Accordingly, the Company was required to record such conversion option as a liability and mark such derivative to fair value each reporting period. Such instrument was classified within Level 3 of the valuation hierarchy.
 



15

The fair value of the conversion option was calculated using a binomial lattice formula with the following weighted average assumptions during the three months ended September 30, 2015 and at inception September 17, 2015:
 
 
 
September 30, 2015
 
September 17, 2015
Common Stock Closing Price
 
$
0.55

 
$
0.54

Conversion Price per Share
 
$
0.45

 
$
0.45

Conversion Shares
 
4,446,515

 
4,444,306

Call Option Value
 
$
0.25

 
$
0.25

Dividend Yield
 
—

 
—

Volatility
 
103.21
%
 
103.24
%
Risk-free Interest Rate
 
0.33
%
 
0.39
%
Term
 
1 year

 
1 year

 
The risk-free interest rate is the United States Treasury rate on the measurement date having a term equal to the remaining contractual life of the instrument. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate.  The dividend yield is 0% as the Company has not made any dividend payment and has no plans to pay dividends in the foreseeable future.
 
Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Financial Officer, who reports to the Chief Executive Officer, determine its valuation policies and procedures.
 
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Financial Officer and are approved by the Chief Executive Officer.
   
Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
 
Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and are classified within Level 3 of the valuation hierarchy. An increase or decrease in volatility or interest free rate, in isolation, can significantly increase or decrease the fair value of the derivative liabilities. Changes in the values of the derivative liabilities are recorded as a component of other income (expense) on the Company’s condensed consolidated statements of operations.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis using significant unobservable input for the six months ended September 30, 2015:
 
Balance - January 1, 2015
 
$
—

Aggregate amount of derivative instruments issued
 
1,097,635

Change in fair value of derivative liabilities
 
19,665

Balance - September 30, 2015
 
$
1,117,300

 











16

11 - 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, 9,565,696 shares common stock and warrants to acquire 2,144,123 shares of our common stock have customary “piggy back” registration rights in the event we register shares of our common stock in the future.

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 19,028,526 shares for issuance on conversion of convertible subordinated notes, exercise of warrants, and equity incentive awards. During the three months ended June 30, 2015, the Company committed to 2,652,084 shares of its common stock in connection with its financing activities and for services received.

During the three months ended September 30, 2015, the Company committed to 5,053,335 shares of its common stock in connection with its financing activities and for services received. In July 2015, the Company exchanged with an Investor their $1,000,000 Note, including nominal interest, and issued i) 1,683,334 shares of the Company’s common stock, $0.001 per share; ii) five-year warrants to purchase eight hundred thirty-three thousand three hundred thirty four (833,334) shares of Common Stock at $0.75 per share; and iii) a further one hundred and sixty-three thousand four hundred forty-seven (163,447) five-year warrants to purchase shares of Common Stock at $0.75 per share. This Note was then canceled.
 
Warrants
A total of 16,408,101 warrants for our common stock with exercise prices ranging from $0.01 to $3.00 per share ($0.99 weighted average) are outstanding and have been issued in connection with our financing transactions and expire as follows: 582,500 in 2016; 522,500 in 2017; 1,662,925 in 2018; 4,441,531 in 2019, and 9,198,645 in 2020.  On exercise, the warrants will be settled in delivery of unregistered shares of our common stock.
 
The following table summarizes the changes in warrants during the six months ended September 30, 2015:
 
 
Warrants
Outstanding at March 31, 2015
 
8,728,526

Granted
 
7,714,576

Exercised
 
—

Expired/canceled
 
(35,001
)
September 30, 2015
 
16,408,101


For the six months ended September 30, 2015 the Company granted the following warrants:
Issued for services
4,029,250

Issued in connection with financing transaction
3,685,326

    Total
7,714,576


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 six months ended September 30, 2015 and 2014:
Warrants
2015
 
2014
Risk-free interest rates
1.57%
 
1.51%
Expected volatility
120.45%
 
102.20%
Dividend yields
—%
 
—%
Expected lives (years)
5 years
 
5 years
 


17

2011 Equity Incentive Plan
The 2011 Equity Incentive Plan (“Plan”) provides for issuing equity awards for an aggregate of 3.5 million shares of our common stock in the form of grants of restricted shares, incentive stock options (employees only), non-qualified 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
Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of an option.  No intrinsic value existed for options outstanding at September 30 or March 31, 2015.  At September 30, 2015, outstanding options are fully vested and the weighted-average remaining contractual term was 9.2 years; however, if services are earlier terminated, 1,700,000 options become void 90 days after termination. 

We estimate 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 absence of any historical payments and management’s intention to retain all earnings for future operations and expansion. No forfeiture is expected when stock options are 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 the six months ended September 30, 2015 and 2014 :

Option plan
 
2015
 
2014
Risk-free interest rates
 
2.13%
 
1.51%
Expected volatility
 
105.390%
 
102.200%
Dividend yields
 
—%
 
—%
Expected lives (years)
 
6 years
 
6 years
 
The following table summarizes the changes in equity available for grant, comprised of stock options and restricted common stock, during the six months ended September 30, 2015:
 
 
Number of Options
 
Weighted Average Exercise Price
Outstanding at March 31, 2015
 
1,960,000

 
$
1.17

Granted
 
250,000

 
 
Exercised
 
—

 
 
Expired
 
—

 
 
Forfeited
 
(510,000
)
 
 
Outstanding at September 30, 2015
 
1,700,000

 
$
1.15


During the six months ended September 30, 2015, 250,000 options to purchase common stock with a fair value of $124,375 were issued to employees under the 2011 Equity Incentive Plan. There were no options or shares issued to employees during the three months ended September 30, 2015.

12 - EARNINGS PER SHARE 

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s common stock

18

can result in a greater dilutive effect from potentially dilutive securities.
 Our shareholder equity includes a line item for “subscribed stock", which represents shares of common stock for which we irrevocably received investors’ purchase prices but, due to administrative delays, had not issued the respective shares of common stock before the period end.  These shares have been included in the weighted average number of shares of common stock outstanding during the period for the purposes of calculating basic earnings per share.
 
The computation of basic and diluted loss per share as of September 30, 2015 and 2014, excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. Potentially dilutive securities excluded from the computation of basic and diluted net (loss) per share as of September 30, 2015 and 2014 are as follows: 
      
 
2015
 
2014
Warrants
16,408,101

 
7,421,028

Stock options
1,700,000

 
900,000

Convertible subordinated notes
7,200,000

 
150,000

Total
25,308,101

 
8,471,028

  



13 - RELATED PARTIES
 
Support Services and Advances
ART Holdings, Inc. ("ART") has provided the Company, since its startup period, with certain support services. Calpian Inc.'s Chairman is also a director and officer of ART. 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 September 30 and March 31, 2015, amounts due to ART were $175,267 and $181,856, respectively, and is 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 years 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 $593,050 and $535,630 as of September 30 and March 31, 2015, respectively, and is accrued for in Related party payables in the Company’s condensed consolidated balance sheet. 
 
Cagan Capital, LLC
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 Board of Directors.  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.  In 2014, Mr. Cagan purchased $1.0 million of Calpian Residual Acquisition, LLC ("CRA") secured promissory notes payable and warrants to purchase up to 175,000 shares of Calpian common stock at $0.01 per share. The outstanding principal amount of this loan may be converted to Calpian common stock at any time by dividing the outstanding principal and any accrued interest by $2.00 per share.

Happy Cellular Services Limited
The majority shareholder of Happy Cellular, is also a shareholder and board member of MMPL. Additionally, a certain number of Happy Cellular retailers are also agents for MoneyOnMobile.

My Mobile Payments Limited
MMPL has issued three short-term bonds with guarantees totaling approximately $456,000, including interest, to related parties. These debt instruments have an interest rate of 5% and ninety-day payment terms. At September 30, 2015, one of the bonds was

19

in default. MMPL has obtained a default waiver from the bond holder. All outstanding liabilities have been recorded as current liabilities to Related Parties: payables and debt in the accompanying unaudited balance sheets.
14 - VARIABLE INTERST ENTITIES

A VIE is an entity that is evaluated for consolidation using more than a simple analysis of voting control. We consolidate our VIEs where we determine that we have both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or receive benefits from the VIE.

My Mobile Payments Limited

We did not hold a majority ownership interest in MMPL at either September 30 or March 31, 2015. Therefore, our determination of whether to consolidate is based upon the power to direct the activities that significantly impact the economic success of these entities. We are the primary beneficiary of MMPL as we are deemed to have a controlling financial interest due to having both a) the power to direct activities that most significantly impact its financial performance and b) the obligation to absorb losses that potentially could be significant. Our analysis includes consideration of the following factors which highlights our ability to control and direct significant influence over financial performance and overall investment strategy:

i) shared Board of Directors with DPPL; and
ii) inter-dependent operations with DPPL (i.e. MMPL is not a sustainable business without DPPL); and
iii) MMPL relies exclusively on DPPL to fund its operations.

Contractual terms that may change the powers held in future periods, such as a purchase or sale options, are not considered in our analysis. Based on our analysis, we believe that we hold the power and rights to direct the most significant activities of MMPL and as a result the financial results of MMPL from the acquisition date of January 6, 2014 have been consolidated in the accompanying consolidated financial statements. As of the Mobile-on-Mobile acquisition date of January 6, 2014 through March 31, 2014, we did not have any direct ownership interest in MMPL and had not advanced any funds directly to MMPL. During the year ending March 31, 2015, the Company invested $4,906,760 to acquire 8.17% of MMPL. This investment was necessary to support local management in executing its growth plans.

At March 31, 2015 DDPL and MMPL entered into a business transfer agreement, in which DDPL acquired substantially all of MMPL. As these entities were previously accounted for as a business combination on January 6, 2014, this transaction was accounted for as an equity transaction in the consolidated financial statements due to maintaining financial control over MMPL. Net income or loss and comprehensive income or loss are attributed to controlling and noncontrolling interests. As such, we have elected to utilize a weighted average value calculation based on relative ownership interest in DPPL and MMPL.
As of September 30 and March 31, 2015, the allocation of DPPL to our controlling interest was 71.9%. As of September 30 and March 31, 2015 the allocation of MMPL to our controlling interest was 7.0%.

Calpian Residual Acquisition
Calpian, Inc. is exposed to operations and financial risk for its interest in Calpian Residual Acquisition ("CRA").  CRA is structured with six investors, including Calpian, Inc.. During fiscal year 2015, certain of these investors contributed $1.2 million. As part of this agreement, these investors received promissory notes, warrants to purchase Calpian, Inc. common stock and CRA Class A voting shares which do not participate in profits and losses. The investors can convert their outstanding promissory notes principal and accrued interest into shares of Calpian, Inc. stock.  Calpian, Inc. owns 100% of CRA's Class B shares, which participate in profits and losses of CRA.  Based on our analysis, we hold the power and rights to direct the most significant activities of Calpian Residual Acquisition and as a result the financial results have been consolidated in the accompanying consolidated financial statements as part of the Calpian, Inc. business segment. See footnote 9 - Debt for details on CRA issued senior promissory notes and warrants.













20



15 - Discontinued Operations

Effective November 30, 2015 (11:59pm), the Company divested its Calpian Commerce business segment and certain U.S. residual portfolio assets of Calpian, Inc. These actions were undertaken to allow the Company to focus entirely on executing its growth strategy for Money-on-Mobile. There is no continuing cash inflows or outflows from or to the discontinued operation, other than certain financial guarantees.

ASC 360-10-45-9 requires that a long-lived asset (disposal group) to be sold shall be classified as held for sale in the period in which a set of criteria have been met, including criteria that the sale of the asset (disposal group) is probable and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. This criteria was achieved on June 30, 2015. Beginning July 1, 2015 no amortization or depreciation expense was recorded on the component assets classified as held for sale. Additionally, the discontinued operations are comprised of the entirety of the Calpian Commerce segment and the majority of the Calpian, Inc. segment, excluding corporate services expenses. Lastly, for comparability purposes certain prior period line items relating to the assets held for sale have been reclassified and presented as discontinued operations for all periods presented in the accompanying condensed consolidated statements of net loss and comprehensive loss and the condensed consolidated balance sheets.

As the Company's senior credit facility and a portion of its senior secured promissory notes were repaid as a result of the disposal transaction, the relating interest on these debt instrument has been allocated to discontinued operations. The following unaudited information presents the major classes of line item of assets and liabilities included as part of discontinued operations in the condensed consolidated balance sheets:
 
 
September 30,
 
March 31,
 
2015
 
2015
 
(unaudited)
 
(unaudited)
Current assets - discontinued operations:
 
 
 
Cash and equivalents
$
408,138

 
$
197,634

Accounts receivable
261,109

 
473,871

Property and equipment, net
214,249

 
236,549

Residual portfolios
6,955,281

 
7,387,356

Other intangible assets, net
80,371

 
97,211

Deposits held by lenders and other
1,154,184

 
994,198

 Total current assets - discontinued operations
$
9,073,332

 
$
9,386,819

Current liabilities - discontinued operations:
 
 
 
Accounts payable, accrued expenses and interest payable
$
310,910

 
$
525,449

Debt, current and long-term
9,292,022

 
9,189,283

Total current liabilities - discontinued operations
$
9,602,932

 
$
9,714,732
















21




The following unaudited information present the major classes of line items constituting the after-tax income or loss of discontinued operations in the condensed consolidated statements of loss (income);

 
Three Months Ended
 
Six Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Revenue, net:
 

 
 
 
 

 
 

Residual portfolios
$
608,735

 
$
1,131,692

 
$
1,304,236

 
$
2,151,845

Processing fees
2,014,326

 
4,469,432

 
4,501,622

 
9,082,753

Other
736,795

 
396,414

 
1,035,721

 
841,305

Total revenues
3,359,856

 
5,997,538

 
6,841,579

 
12,075,903

Cost of revenues:
 
 
 
 
 
 
 
Residual portfolio amortization
—

 
272,969

 
263,421

 
581,432

Processing and servicing
1,895,837

 
3,797,948

 
3,984,944

 
7,676,952

Other
167,985

 
192,778

 
265,347

 
349,232

Total cost of sales
2,063,822

 
4,263,695

 
4,513,712

 
8,607,616

Gross profit:
1,296,034

 
1,733,843

 
2,327,867

 
3,468,287

General and administrative expenses
 
 
 
 
 
 
 
Salaries and wages
461,441

 
858,343

 
1,044,821

 
1,701,693

Selling, general and administrative
360,436

 
407,650

 
653,673

 
815,300

Depreciation and amortization
—

 
43,969

 
40,987

 
87,938

Total general and administrative
821,877

 
1,309,962

 
1,739,481

 
2,604,931

Other income (expense)
 
 
 
 
 
 
 
Interest expense
(347,260
)
 
(517,804
)
 
(653,225
)
 
(1,030,093
)
Other
35,000

 
2,855,737

 
123,992

 
2,859,709

Total other income (expense)
(312,260
)
 
2,337,933

 
(529,233
)
 
1,829,616

Income tax expense
—

 
—

 
—

 
—

Income (loss) from discontinued operations, net of tax
$
161,897

 
$
2,761,814

 
$
59,153

 
$
2,692,972



The following unaudited information presents the major classes of line items constituting significant operating and investing cash flow activities in the condensed consolidated statements of cash flows relating to discontinued operations. There were no significant non-cash transactions during the three and six months ended September 30, 2015 or 2014.
 
Three Months Ended
 
Six Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Cash Flow: major line items
 
 
 
 
 
 
 
Portfolio Amortization
$
—

 
$
252,515

 
$
263,421

 
$
560,978

Depreciation and amortization
—

 
44,469

 
56,785

 
88,438

Purchases of property and equipment:
7,186

 
15,453

 
14,372

 
30,906





22

16 - SUBSEQUENT EVENTS
 
Sale of Equity Securities

Subsequent to the period covered by this Quarterly Report, the Company completed a series of additional closings of its private placement of equity pursuant to which it sold 583,334 units (a "Unit"). Each Unit consisted of i) one share of Common Stock and ii) a five-year warrant to purchase one half (0.5) of one share of Common Stock at $0.75 per share. The Units were offered at a purchase price of $0.60 per Unit. Accordingly, the Company sold 583,334 shares of Common Stock and warrants to purchase 291,667 shares of Common Stock and received gross proceeds of $350,000.

During the same period, the Company issued 862,070 shares of common stock at prices ranging from $0.45 - $0.65 per share and five-year warrants to purchase up to 831,513 shares of common stock at ranging from $0.46 - $0.75 per share for advisory and consulting services.

Relating to the Company's debt refinancing and sale of its U.S. Operations, the Company issued ten-year warrants to purchase up to 3,200,000 shares of common stock at $0.01 per share, issued five-year warrants to purchase up to 190,200 shares of common stock at $0.01 per share and up to 159,090 shares of common stock at $0.65 per share.

Also, the Company issued 1,752 shares of its Series D Convertible Preferred Stock (the “Series D Preferred”), par value $0.01 per share and a stated value of $1,000 per share. In connection with the issuance of the Series D Preferred, the Company issued warrants to purchase 2,919,306 shares of Common Stock at an exercise price of $0.75 per share. The Company received gross proceeds of $$1,751,583 in consideration for the issuance of the securities. The investor shall have the right to convert the preferred shares, including accrued dividends (15% annually), into the Company's common stock at any time at $0.60 per share. At the completion of a certain level of equity funding, the investor must convert their outstanding investment, including accrued dividends to either: (i) cash; (ii) Company common stock at $0.60 per share; or (iii Company common stock at the not yet determined equity raise per share value.

Sale of U.S. Operations

Effective 11:59pm on November 30, 2015, the Company sold Calpian Commerce Inc. and Calpian Residual Acquisitions LLP, including all of its merchant residual portfolios. The buyer initially assumed $9.0 million of the Company's debt. On April 12, 2016, the Company and eVance entered into a settlement agreement and a cancellation of securities acknowledgment with one of eVance’s note holders whereby the note holder canceled their note in the amount of $720,084, which was subsequently reissued by the Company to the note holder. Additionally, the Company issued eVance a note in the amount of $675,000 in exchange for eVance waiving any claims for breach of the Purchase Agreement between eVance and the Company. The $675,000 note bears interest of 12% per annum payable monthly, matures on November 30, 2017 and is secured by 2,000,000 shares of the Company's common stock. As part of the Purchase Agreement, eVance acquired several residual portfolios including the supporting contracts (residual purchase agreements). eVance, as successor under one of these residual purchase agreements, has sued a third party for breach of contract on the residual purchase agreement between the third party and the Company and has claimed damages in excess of $1,500,000. eVance has agreed to apply any recovery from such litigation (less costs) against the principle balance of the $675,000 note issued by the Company up to a maximum of $675,000.

Share Exchange

On December 30, 2015, the Company entered into a Share Purchase Agreement with HALL MOM, LLC., a Texas limited liability company (“Hall”). Pursuant to the Purchase Agreement, and in satisfaction of a Two-Million Dollar ($2,000,000) loan made to the Company by Hall, the Company issued and sold equity shares representing ten percent (10%) of the total paid up share capital of the Company’s Indian Subsidiary, Digital Payments Processing Ltd. (“DPPL”), on a fully diluted basis (the “Sale Shares”) to Hall. In addition to the debt satisfaction, Hall agreed to return to the Company for cancellation One Million (1,000,000) shares of the Company’s common stock (the “Canceled Shares”) and warrants to purchase Two Million Five Hundred Thousand shares of the Company’s common stock (the “Canceled Warrants,” and together with the Canceled Shares, the “Canceled Securities”).

On December 30, 2015, the Company entered into a Call/Put Right and Option Agreement (the “Option Agreement”), pursuant to a covenant stipulated in the Purchase Agreement. Under the terms of the Option Agreement, in the event that the Company, DPPL, and/or My Mobile Payment Ltd. (“MMPL”), a subsidiary of the Company, raises Five Million Dollars ($5,000,000) or more from, or enters into a definitive agreement with, a third party at any time on or before March 15, 2016 to raise Five Million Dollars ($5,000,000) or more, then the Company agrees to grant Hall the option to either: (i) invest in the Company an amount up to Six Million Dollars ($6,000,000); or (ii) the right to compel the Company to purchase all the shares purchased by Hall from

23

the Company at a purchase consideration price of Three Million Dollars ($3,000,000). In the event that the Company, DDPL, or MMPL does not raise Five Million Dollars ($5,000,000) on or before March 15, 2016, the Company agreed to irrevocably grant a right to Hall to either: (i) invest an amount up to Six Million Dollars ($6,000,000) through March 15, 2016; or (ii) have the Company purchase equity of the Company owned by Hall at a purchase price of Three Million Dollars ($3,000,000).


Litigation

On December 18, 2015, Reinvention Capital Advisors Co. ("Reinvention" or “Plaintiff”) filed suit in the District Court of the Eastern District of Pennsylvania against the Company alleging breach of the financial advisory services agreement (“First Amended Agreement”) dated June 12, 2015, between the Company and Reinvention.  Plaintiff alleged damages on the date the suit was filed of $500,996, including unpaid monthly advisory fees, unpaid expenses, and a success fee for the sale of Calpian’s U.S. Operations. 


Subordinated Notes Payable Extension

In March 2016, the Company extended the maturity date on its subordinated debt from December 31, 2016 to December 31, 2017. This amendment required the Company to issue 3.2 million warrants to the debt holders.
                               
Other Equity Transactions

In March 2016, The Company executed an one year advisory agreement with a Board member and issued an one million warrants. Additionally, the Company entered into an one year financial consulting agreement with a third party and issued 1,250,000 shares of common stock.



24

ITEM 2    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EXECUTIVE OVERVIEW
Calpian, Inc. (“CLPI”) is in the business of acquiring recurring monthly residual income streams derived from credit card processing fees paid by retail merchants in the United States (“residual portfolios”).  We do not act 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 March 2013, the Company formed a wholly-owned subsidiary, Calpian Commerce, Inc. (“Calpian Commerce”), 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.  Calpian Commerce 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. Effective 11:59pm on November 30, 2015, the Company divested its Calpian Commerce business segment and certain U.S. residual portfolio assets of Calpian, Inc. These actions were undertaken to allow the Company to focus entirely on executing its growth strategy for MoneyOnMobile. The results of our U.S. Operations, excluding corporate overhead, for the three and nine months ending September 30, 2015 are presented on a discontinued basis.
MoneyOnMobile is a mobile payments service provider that allows Indian consumers, through its robust agent network, to use mobile phones to pay for goods and services, or transfer funds from one person to another using simple SMS text functionality. During the current fiscal year MoneyOnMobile’s growth strategy produced positive results in both agent retail locations and number of cumulative users that have accessed these services. 
RESULTS OF OPERATIONS
For the three and six months ended September 30, 2015 compared to the same periods in 2014, the unaudited results of the Company's continuing operations and consolidated net loss:
 
Three Months Ended
 
Six Months Ended
 
 
September 30,
 
September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
Restated
 
 
 
Restated
 
 
 
 
 
 
 
 
 
 
Revenues, net
$
1,441,693

 
$
1,545,507

(1) 
$
2,714,935

 
$
2,436,355

(1) 
Cost of revenues
766,252

 
960,233

(1) 
1,515,669

 
1,444,494

(1) 
Gross profit
675,441

 
585,274

 
1,199,266

 
991,861

 
 
 
 
 
 
 
 
 
 
Net loss
$
(5,180,215
)
 
$
(318,098
)
 
$
(7,862,826
)
 
$
(3,500,770
)
 
(1) During the 4th quarter of fiscal year 2015, the Company changed its presentation for reporting certain revenue transactions for MoneyOnMobile from a 'Gross' to 'Net' basis. For comparable purposes, prior year presentation of MoneyOnMobile's Revenues, net and Cost of Sales have been restated. For more information on this change in classification refer to Note 2: Accounting Policies in the Company's Condensed Consolidated Financial Statements.
Three months ending September 30, 2015:
Revenue for MoneyOnMobile decreased $(103,814) or (6.7)% in 2015 compared to 2014. The decrease in revenue was due to the Company's increasing its market share for direct remittance services, which requires higher working capital requirements. As a result of this strategy, gross profit percentage increased to 46.9% in 2015 compared to 37.9% in 2014.
Net loss was $(5.2) million, or $(0.12) per share in 2015 compared to $(0.3) million, or $(0.08) per share in 2014.  The increase in net losses was due to a significant gain from discontinued operations in the prior period. The impact of discontinued operations in the current period was an insignificant loss. The other factor increasing the current period loss was the a large increase in selling, general and administrative as the Company continues to expand its MoneyOnMobile presence in the market. Due to net losses, the Company had no current U.S. federal tax provision at either September 30, 2015 or March 31, 2015 and deferred tax benefits of cumulative net operating losses and other temporary tax differences have been offset by valuation allowances.  State income tax reports are assessments not offset by operating losses. 

25

Six months ending September 30, 2015:
Revenue for MoneyOnMobile increased $278,580 or 11.4% in 2015 compared to 2014 primarily due to the large growth in number and volume in transactions. Gross profit percentage for MoneyOnMobile was 44.2% in 2015 compared to 40.7% in 2014.
Net losses were $(7,862,826), or $(0.18) per share in 2015 compared to $(3,500,770), or $(0.09) per share in 2014.  The larger net loss was due to a significant gain from discontinued operations in the prior period. The impact of discontinued operations in the current period was an insignificant gain. Due to net losses, the Company had no current U.S. federal tax provision at either September 30, 2015 or March 31, 2015 and deferred tax benefits of cumulative net operating losses and other temporary tax differences have been offset by valuation allowances.  State income tax reports are assessments not offset by operating losses. 

LIQUIDITY AND CAPITAL RESOURCES 
General
Our source of liquidity is principally cash generated from operating activities supplemented as necessary on a short-term basis by various capital raising activities, including sales of our common stock in private placements and subordinated debt borrowings not restricted to specific investing activities. We continue to see significant growth potential in our MoneyOnMobile business segment and have increased our investment. To date we have successfully navigated the complexities of capital raising activities in order to fund these long-term investments. The following discussion highlights changes in our debt structure as well as our cash flow activities and the sources and uses of funds during the three and six months ended September 30, 2015 and 2014.
As of September 30, 2015, our liquidity was $2.8 million in cash and cash equivalents, and excludes $0.3 million in cash and cash equivalents relating to the Company's discontinued operations. Our primary ongoing liquidity requirements are to finance working capital, debt service and fund expansion at MoneyOnMobile. To meet the large debt repayments the Company sold its U.S. operations on November 30, 2015 and continues to contemplate numerous strategies to meet its remaining debt obligations as they come due. Additionally, in September 2015 the Company received $2.0 million in exchange for a convertible promissory note secured by all the assets of the Company. This note was subsequently exchanged on December 28, 2015 for common stock of DPPL, previously held by the Company. See note 15 - Subsequent Events for additional details of this transaction.
Sources and Uses of Cash
Net cash used in operating activities was $(2.3) million in 2015 compared to $(4.6) million in 2014. The change in net cash used in operating activities in 2015 is due to a net loss in 2015 of $(7.9) million compared to the net loss of $(3.5) million in 2014. In both periods there was non-cash expenses of depreciation, amortization and equity award expense that slightly offset the net loss position. The remaining changes are due to timing differences in cash receipts and payments relating to operating assets and liabilities.
Net cash used in investing activities was $(0.1) million in 2015 compared to net cash used in investing activities of $(3.7) million in 2014. There was minimal activity in 2015. In 2014 the Company had a cash outflow of $3.5 million for an office building in Mumbai, India by MMPL and purchased $0.9 million of residual portfolios for its U.S. operations.
Net cash provided by financing activities was $4.5 million in 2015 compared to net cash provided by financing activities of $2.0 million in 2014. During 2015, the Company refinanced the loan on its office building in India resulting in a cash outflow of $2.1 million and relating $2.3 million inflow. Also, $0.2 million of principal payments were made on the Company's debt. The Company also received $1.4 million relating to its financing activities. In 2014, the Company received $3.3 million relating to its financing activities and $2.3 million for financing its India office building, offset slightly by $0.2 million for deferred financing fees.






Going Concern

26

Our independent auditors included an explanatory paragraph in their report on the our annual audited financial statements for the year ended March 31, 2015 regarding concerns about our ability to continue as a going concern. Additionally, our unaudited condensed consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. Their assessment is a result of our recurring operating losses, significant recent sale of our domestic income producing portfolio assets, upcoming divestiture of the remaining U.S. operations (excluding corporate functions) and the continuing and immediate need for capital raising to fund operations and future growth opportunities in MoneyOnMobile. Management does believe it has created and is executing on a viable plan that has the capability of eliminating the threat to continuation of our business. This plan involved sale of the remaining U.S. operations, which has allowed us to re-pay the outstanding balance of our senior credit facility and a portion of our senior promissory notes. We will have to raise additional funds to continue our operations and, while we have been successful in doing so in the past, there can be no assurance that we will be able to do so in the future. Our continuation as a going concern is dependent upon our ability to obtain necessary additional funds to continue operations and the attainment of profitable operations.

Future financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, existing holders of our securities may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our securities.

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:
•
Revenue recognition
•
Valuation of warrants and options
•
Goodwill
•
Fair value measurements
•
Business combinations

As our operations expand, we may identify additional critical accounting policies in the future. See Summary of Significant Accounting Policies in Note 2 of our unaudited condensed consolidated financial statements.

27

ITEM 3    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Money-On-Mobile's primary market risk is availability of capital to purchase inventory as there is no functional credit system in India and all parties are operating on a pre-paid basis. Money-On-Mobile must anticipate consumer market demand during periods when banks and wholesale corporate suppliers are closed and purchase adequate inventory in advance. These periods are typically weekends and holidays and represent the periods when the Money-On-Mobile services are most in demand. A number of other market risk factors exist but are not limited to, including pricing pressure from vendors, general domestic economic conditions, and the ability of Money-On-Mobile retailers to direct customers to alternative payment systems.



ITEM 4    CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized, and reported within the time period specified in the SEC's rules and forms and is accumulated and communicated to the Company's management, as appropriate, in order to allow timely decisions in connection with required disclosure.
 
Evaluation of Disclosure Controls and Procedures
The Company's principal executive officer and its principal financial officer carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2015, pursuant to Exchange Act Rule 13a-15.  The Company disclosed ineffective disclosure controls and procedures, as previously reported on the Company’s Form 10-Q for the quarterly period ended September 30, 2015. Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2015, because of the material weaknesses in our internal control over financial reporting discussed below.
 
Changes in Internal Controls Over Financial Reporting
Other than as discussed above, no changes were made to our internal controls over financial reporting during the six months ended September 30, 2015, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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

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




28

Management’s Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting.
 
Internal control over financial reporting is defined in Rule 13a-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other associates, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2015. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, in “Internal Control — Integrated Framework (2013).” Based on the results of its evaluation, the Company’s management has concluded that the internal control over financial reporting was not effective as of September 30, 2015. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
 
Based upon our evaluation, we have determined that, as of September 30, 2015, there were material weaknesses in our internal control over financial reporting.  As defined by the Public Company Accounting Oversight Board (United States) Auditing Standard No. 5, a material weakness is a deficiency or a combination of deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected.  The material weaknesses identified during management’s assessment were (i) a lack of segregation of duties to ensure adequate review of financial transactions, (ii) a lack of written policies and procedures surrounding the accumulation and summarization of financial transactions, and (iii) a lack of documentation evidencing the controls that do exist were operating effectively.  In light of these material weaknesses, management has concluded that, as of September 30, 2015, the Company did not maintain effective internal control over financial reporting.
Attestation Report of the Independent Registered Public Accounting Firm
This report does not include an attestation report of our independent registered public accounting firm regarding our internal controls over financial reporting.  Under SEC rules, such attestation is not required for smaller reporting companies.

29

PART II

ITEM 1    LEGAL PROCEEDINGS
On December 18, 2015, Reinvention Capital Advisors Co. ("Reinvention" or “Plaintiff”) filed suit in the District Court of the Eastern District of Pennsylvania against the Company alleging breach of the financial advisory services agreement (“First Amended Agreement”) dated June 12, 2015, between the Company and Reinvention.  Plaintiff alleged damages on the date the suit was filed of $500,996, including unpaid monthly advisory fees, unpaid expenses, and a success fee for the sale of Calpian’s U.S. Operations.  


ITEM 1A    RISK FACTORS
Item not required for a small reporting company.



ITEM 4    MINE SAFETY DISCLOSURES
Not applicable.


ITEM 5 OTHER INFORMATION

On December 15, 2015, Calpian, Inc. received a letter of resignation from Craig Jessen. Mr. Jessen informed the Company that, effective as of November 29, 2015, he resigned his position as a director on the Company’s Board of Directors, as the Company’s president and any other positions he held within the Company and its subsidiaries. Mr. Jessen’s resignation was not as a result of any disagreements with the Company.





ITEM 6    EXHIBITS
 

 


30

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)
 
 
May 12, 2016
/s/ Harold H. Montgomery                 
 
Harold H. Montgomery
 
Chief Executive Officer and Secretary
 
 
 
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.
 
 
 
Signature
 
 
Title
 
Date
 
 
 
 
 
 
 
 
 
 
 
Director, Chairman of the Board,
 
 
 
/s/ Harold H. Montgomery
 
 
Chief Executive Officer, and
 
May 12, 2016
 
Harold H. Montgomery
 
 
Secretary
 
 
 
 
 
 
(principal executive officer)
 
 
 
 
 
 
 
 
 
 
 
 
 
Chief Financial Officer
 
 
 
/s/ Scott S. Arey
 
 
(principal financial
 
May 12, 2016
 
Scott S. Arey
 
 
and accounting officer)
 
 
 
 
 
 
 
 
 
 
/s/ Laird Q. Cagan
 
 
Director
 
May 12, 2016
 
Laird Q. Cagan
 
 
 
 
 
 
 
 
 
 
 
 
 
/s/ Shashank M. Joshi
 
 
Director
 
May 12, 2016
 
Shashank M. Joshi
 
 
 
 
 

31

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
 
 
3.7
 
Resolution Relating to a Series of Shares
 
8-K
 
March 11, 2014
 
3.1
 
 
3.8
 
Certificate of Designation of Series C Convertible Preferred Stock
 
8-K
 
March 11, 2014
 
3.2
(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
 
 
4.13
 
Stock Purchase Agreement
 
8-K
 
March 11, 2014
 
10.1
 
 
4.14
 
Form of Subscription Agreement
 
8-K
 
May 27, 2014
 
10.1
 
 
4.15
 
Form of Warrant Agreement
 
8-K
 
May 27, 2014
 
10.2
 
 
4.16
 
Form of Registration Rights Agreement
 
8-K
 
May 27, 2014
 
10.3
(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

32

 
 
10.3
 
Amendment #2 to Independent Contractor’s Agreement by and between the Company and DNP Financial Strategies effective February 1, 2013
 
10-K
 
April 8, 2013
 
10.29
(31)
 
Rule 13a-14(a)/15d-14(a) Certifications
 
 
 
 
 
 
 
 
31.1
 
Certification Pursuant to Rule13a-14(a)/15d-14(a) (Chief Executive Officer) *
 
 
31.2
 
Certification Pursuant to Rule13a-14(a)/15d-14(a) (Chef Financial Officer) *
(32)
 
Section 1350 Certifications
 
 
 
 
 
 
 
 
32.1
 
Section 1350 Certification (Chief Executive Officer) *
 
 
32.2
 
Section 1350 Certification (Chief Financial Officer) *
101
 
Interactive Data File
 
 
 
 
 
 
 
 
101.INS 
 
XBRL Instance *
 
 
 
 
 
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema *
 
 
 
 
 
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation *
 
 
 
 
 
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition *
 
 
 
 
 
 
 
 
101.LAB
 
XBRL Taxonomy Extension Labels *
 
 
 
 
 
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation *
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
*
 
Filed herewith.
 
 

33

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