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CALPIAN, INC. - 10-Q - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

August 28, 2014



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

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



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

Three Months Ended June 30, 2014 2013 Revenues: Calpian, Inc. $ 654,153$ 817,774 Calpian Commerce 5,284,212 5,834,383 Money-on-Mobile 40,160,909 - Other 140,000 - $ 46,239,274$ 6,652,157 Gross profit Calpian, Inc. $ 391,302$ 519,750 Calpian Commerce 1,248,754 1,739,694 Money-on-Mobile 406,587 - Other 94,388 -



Total gross profit 2,141,031 2,259,444

Net income (loss): Calpian, Inc. $ (1,751,883)$ (2,292,071) Calpian Commerce (263,961) 150,086 Money-on-Mobile (1,094,727) - Other (72,101) - $ (3,182,672)$ (2,141,985)



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

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

Our primary sources of liquidity are cash flows from operating activities, sales of our common stock in private placements, and subordinated debt borrowings not restricted to specific investing activities. We anticipate these funds and acquisition of additional residual portfolios funded by the senior credit facility and restricted subordinated debt borrowings will be sufficient to meet our operating needs for the foreseeable future. However, there are no assurances we can sell more common stock, issue additional subordinated debt, or acquire additional portfolios on acceptable terms.

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

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

CONTRACTUAL OBLIGATIONS



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

CRITICAL ACCOUNTING POLICIES

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

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


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Source: Edgar Glimpses


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