UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~June~~December 3031, 2015

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ________ to _________

Commission File Number 000-33215

CASPIAN SERVICES, INC.

(Exact name of registrant as specified in its charter)

Nevada		87-0617371
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

2319 Foothill Drive, Suite 160
Salt Lake City, Utah		84109
(Address of principal executive offices)		(Zip Code)

(801) 746-3700

(Registrant’s telephone number, including area code)

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, as amended, (the “Exchange Act”) during the preceding 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 þ Noo~~

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, Interactive Data Files 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 þ Noo

Yes þ Noo

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 o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company þ

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

AsYes ~~of August 7, 2015, the registrant had 52,657,574 shares of common stock, par value $0.001, issued and outstanding.~~o Noþ

As of February 15, 2016, the registrant had 52,657,574 shares of common stock, par value $0.001, issued and outstanding.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements		Page
	Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2015 and September 30, 2014	3
	Condensed Consolidated Balance Sheets (Unaudited) as of December 31, 2015 and September 30, 2015	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) for the three months and nine months ended June 30, 2015 and 2014	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) for the three months ended December 31, 2015 and 2014	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the
	nine months ended June 30, 2015 and 2014	5
	three months ended December 31, 2015 and 2014	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2. Management’s Discussion and Analysis of Financial Condition
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
and Results of Operations		23
Item 3. Qualitative and Quantitative Disclosures About Market Risk		34
Item 3. Qualitative and Quantitative Disclosures About Market Risk		38
Item 4. Controls and Procedures		34
Item 4. Controls and Procedures		38
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		3935
Item 1A. Risk Factors		3935
Item 3. Defaults Upon Senior Securities		3935
Item 6. Exhibits		3935
Signatures		4137

PART I -— FINANCIAL INFORMATION

Item 1. Financial Statements

CASPIAN SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)	~~June 30,~~	~~September 30,~~
	2015	2014
	December 31,	September 30,
	2015	2015
	(Unaudited)
ASSETS
Current Assets
Cash	$ ~~196~~449	$ 1,~~957~~372
Trade accounts receivable, net of allowance of $3,885 and $3,454, respectively	6,615	10,458
Trade accounts receivable, net of allowance of $1,203 and $3,510, respectively	4,666	5,480
Trade accounts receivable from related parties, net of allowance of $430 and $440, respectively	1,117	-
Trade accounts receivable from related parties, net of allowance of $147 and $296, respectively	219	211
Short-term notes from related parties	21,~~846~~601	702,195
Other receivables, net of allowance of $713 and $730, respectively	403	558
Other receivables, net of allowance of $463 and $490, respectively	139	339
Inventories	~~1,257~~705	~~1,261~~906
Property held for sale, net of allowance of $1,049 and $1,074, respectively	43	44
Property held for sale, net of allowance of $575 and $722, respectively	24	30
Prepaid taxes	~~116~~28	~~1,228~~6
Advances paid, net of allowance of $27 and $28, respectively	286	547
Advances paid, net of allowance of $16 and $19, respectively	339	193
Deferred tax assets	~~1,028~~338	88552
Prepaid expenses and other current assets	~~244~~136	~~329~~170
Total Current Assets	148,~~151~~644	1611,~~540~~454
Vessels, equipment and property, net	3920,~~610~~669	4226,~~087~~716
Drydocking costs, net	~~259~~876	~~538~~124
Long-term deferred tax assets	31,~~132~~974	2,~~450~~478
Goodwill	~~185~~101	~~189~~127
Intangible assets, net	5929	1438
Long-term prepaid taxes	21,~~698~~227	21,~~873~~630
Long-term other receivables, net of current portion	~~767~~239	~~2,377~~525
Total Assets	$ 6033,~~861~~759	$ 6743,~~068~~092
LIABILITIES AND DEFICIT
Current Liabilities
Accounts payable	$ 2,~~218~~098	$ 2,~~319~~240
Accounts payable to related parties	8047	7659
Accrued expenses	1,~~917~~083	1,~~690~~309
Taxes payable	~~340~~221	~~527~~303
Deferred revenue	56195	-336
Accelerated put option liability	2324,~~140~~143	2123,~~649~~644
Long-term debt - current portion	8083,~~121~~832	7581,~~284~~972
Total Current Liabilities	~~107~~111,~~872~~619	~~101~~109,~~545~~863
Deficit
Common stock, $0.001 par value per share; 500,000,000 shares authorized;
52,657,574 shares issued and outstanding	53	53
Additional paid-in capital	64,832	64,832
Accumulated deficit	(78107,~~365~~876)	(6694,~~536~~501)
Accumulated other comprehensive loss	(2015,~~294~~104)	(20,~~141~~815)
Deficit attributable to Caspian Services, Inc. Shareholders	(3358,~~774~~095)	(2150,~~792~~431)
Deficit attributable to noncontrolling interests	(1319,~~237~~765)	(1216,~~685~~340)
Total Deficit	(4777,~~011~~860)	(3466,~~477~~771)
Total Liabilities and Deficit	$ 6033,~~861~~759	$ 6743,~~068~~092

See accompanying notes to the condensed consolidated financial statements.

CASPIAN SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (Dollars in thousands, except per share data)

CASPIAN SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollars in thousands, except share and per share data)


	For The Three Months Ended December 31,
	2015	2014
Revenues
Vessel revenues	$ 3,443	$ 4,762
Geophysical service revenues	-	1,002
Marine base service revenues (which includes $64 and $10, respectively, from related parties)	212	333
Total Revenues	3,655	6,097

Operating Expenses
Vessel operating costs	1,562	2,499
Cost of geophysical service revenues	241	932
Cost of marine base service (which includes $10 and $15, respectively, to related parties)	115	171
Depreciation and amortization	763	1,219
General and administrative expense	1,904	1,887
Total Costs and Operating Expenses	4,585	6,708
Loss from Operations	(930)	(611)

Other Income (Expense)
Interest expense	(2,675)	(2,238)
Foreign currency transaction loss	(13,142)	(90)
Other non-operating income (loss), net	(29)	67
Net Other Expense	(15,846)	(2,261)

Loss from Continuing Operations Before Income Tax	(16,776)	(2,872)
Benefit from (provision for) income tax	(33)	23
Net Loss from Continuing Operations	(16,809)	(2,849)
Loss from discontinued operations	-	(14)
Net Loss	(16,809)	(2,863)
Net loss attributable to noncontrolling interests	3,434	519
Net Loss Attributable to Caspian Services, Inc	$ (13,375)	$ (2,344)

Other Comprehensive Income (Loss)
Foreign currency translation adjustment	5,720	12
Comprehensive Loss	(7,655)	(2,332)
Comprehensive gain attributable to non-controlling interest	(9)	-
Comprehensive Loss Attributable to Caspian Services, Inc	$ (7,664)	$ (2,332)

Basic and Diluted Loss per Share from continuing operations	(0.25)	(0.04)
Basic and Diluted Loss per Share from discontinued operations	-	-
Basic and Diluted Loss per Share	$ (0.25)	$ (0.04)
Weighted Average Shares Outstanding	52,657,574	52,657,574

	For The Three Months Ended June 30,		For The Nine Months Ended June 30,
	2015	2014	2015	2014
Revenues
Vessel revenues	$ 2,244	$ 4,046	$ 8,134	$ 9,882
Geophysical service revenues (which includes $746 and $1,632 from related parties for the three and nine months ended June 30, 2015, and $0 from related parties for the three and nine months ended June 30, 2014)	746	3,564	2,842	10,832
Marine base service revenues (which includes $211 and $269 from related parties for the three and nine months ended June 30, 2015, and $265 and $931 from related parties for the three and nine months ended June 30, 2014, respectively)	278	564	1,054	1,780
Total Revenues	3,268	8,174	12,030	22,494
Operating Expenses
Vessel operating costs	1,498	2,159	5,322	7,011
Cost of geophysical service revenues (which includes $37 to related parties for the three and nine months ended June 30, 2015, and $0 to related parties for the three and nine months ended June 30, 2014)	783	2,017	2,616	6,088
Cost of marine base service	123	159	484	513
Gain (loss) on sale of equipment	-	(90)	-	(34)
Depreciation and amortization	1,184	1,018	3,640	3,295
General and administrative expense	1,391	2,207	5,748	6,257
Total Costs and Operating Expenses	4,979	7,470	17,810	23,130
Income (Loss) from Operations	(1,711)	704	(5,780)	(636)
Other Income (Expense)
Interest expense	(2,340)	(2,101)	(6,813)	(6,074)
Foreign currency transaction loss	(147)	(313)	(1,128)	(6,776)
Interest income	-	12	-	35
Other non-operating income, net	77	32	119	51
Net Other Expense	(2,410)	(2,370)	(7,822)	(12,764)
Loss from Continuing Operations Before Income Tax	(4,121)	(1,666)	(13,602)	(13,400)
Benefit from (provision for) income tax	638	(318)	1,127	(240)
Net loss	(3,483)	(1,984)	(12,475)	(13,640)
Net loss (income) attributable to noncontrolling interests	(3)	535	646	2,390
Net loss attributable to Caspian Services, Inc	$ (3,486)	$ (1,449)	$ (11,829)	$ (11,250)
Other Comprehensive Income (Loss)
Foreign currency translation adjustment	10	(221)	94	(4,814)
Comprehensive loss	(3,476)	(1,670)	(11,735)	(16,064)
Comprehensive income (loss) attributable to non-controlling interest	3	64	(646)	511
Comprehensive loss attributable to Caspian Services, Inc	$ (3,473)	$ (1,606)	$ (12,381)	$ (15,553)
Basic and Diluted Loss per Share	$ (0.07)	$ (0.03)	$ (0.22)	$ (0.21)
Weighted Average Shares Outstanding	52,657,574	52,657,574	52,657,574	52,657,574

See accompanying notes to the condensed consolidated financial statements.

CASPIAN SERVICES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands, except share and per share data)
	For the Nine Months
	For the Three Months
	Ended June 30,
	Ended December 31,
	2015	2014
Cash flows from operating activities:
Net loss	$ (1216,~~475~~809)	$ (132,~~640~~863)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	~~3,640~~763	31,~~295~~219
Gain (loss) on sale of equipment	-	(34)
Accrued interest on accelerated put option	499	470
Accrued interest on accelerated put option	1,491	1,614
Foreign currency transaction loss	13,142	90
Foreign currency transaction loss	1,128	6,776
Stock based compensation	-	4
Changes in current assets and liabilities:
Trade accounts receivable	~~3,647~~(301)	(12,~~126)~~095
Trade accounts receivable from related parties	~~(1,123)~~37	~~1,229~~(82)
Other receivables	~~175~~468	~~789~~279
Inventories	~~(35)~~19	(~~393~~116)
Inventories held for sale	-	126
Prepaid taxes	(27)	(224)
Prepaid taxes	1,098	(41)
Advances paid	(186)	163
Advances paid	257	158
Deferred tax assets	455	(2)
Deferred tax assets	(1,629)	(42)
Prepaid expenses and other current assets	21	80
Prepaid expenses and other current assets	80	110
Long-term prepaid taxes	163	23
Long-term prepaid taxes	116	682
Long-term other receivables, net of current portion	85	(127)
Long-term other receivables, net of current portion	(153)	28
Accounts payable	86	(163)
Accounts payable	(53)	(213)
Accounts payable to related parties	-	50
Accounts payable to related parties	-	(2,123)
Accrued expenses	1,984	1,830
Accrued expenses	6,322	8,618
Taxes payable	(23)	243
Taxes payable	(177)	(224)
Deferred revenue	(81)	-
Deferred revenue	57	950
Long-term deferred income tax liability	(13)	(21)
Long-term deferred income tax liability	(79)	(63)
Net cash provided by operating activities	$ 282	$ 2,944
Net cash provided by operating activities	$ 2,287	$ 6,480
Cash flows from investing activities:
Cash received from sale of vessels, equipment and property	-	70
Short-term notes from related parties	166	(1,103)
Short-term notes from related parties	(2,882)	-
Payments to purchase vessels, equipment and property	(885)	(15)
Payments to purchase vessels, equipment and property	(119)	(3,893)
Net cash used in investing activities	$ (719)	$ (1,118)
Net cash used in investing activities	$ (3,001)	$ (3,823)
Cash flows from financing activities:
Payments on long-term debt	(~~450~~100)	(~~700~~300)
Net cash used in financing activities	$ (~~450~~100)	$ (~~700~~300)
Effect of exchange rate changes on cash	(~~597~~386)	~~(4,768)~~19
Net change in cash	(~~1,761~~923)	(21,~~811)~~545
Cash at beginning of period	1,~~957~~372	31,~~973~~957
Cash at end of period	$ ~~196~~449	$ 13,~~162~~502
Supplemental disclosure of cash flow information:
Cash paid for interest	~~450~~100	~~700~~300
Non-cash capital expenditures	$ ~~1,728~~-	$ -1,707

See accompanying notes to the condensed consolidated financial statements.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

NOTE 1 — THE COMPANY AND BASIS OF PRESENTATION

Interim Financial Information – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they are condensed and do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. The accompanying financial statements should be read in conjunction with the Caspian Services, Inc. (the “Company” or “CSI”) most recent annual financial statements included in its annual report on Form 10-K filed with the SEC on January 13, ~~2015~~2016. Operating results for the ~~nine~~three-month period ended ~~June~~December 3031, 2015, are not necessarily indicative of the results that may be expected for the year ending September 30, ~~2015~~2016.

Principles of Consolidation – The accompanying condensed consolidated financial statements are presented in conformity with US GAAP and include operations and balances of Caspian Services, Inc. and its wholly-owned subsidiaries: Caspian Services Group Limited (“CSGL”), Caspian Services Group LLP (“Caspian LLP”), Caspian Services Group B.V. (“Caspian B.V.”), Caspian ~~Services LLC (“Caspian LLC”), Caspian~~ Geophysics, Ltd (“CGEO”), TatArka LLP (“TatArka”), Caspian Real Estate, Ltd (“CRE”) and Kyran Holdings Limited (“Kyran”), and include majority owned subsidiaries: Balykshi LLP (“Balykshi”) and Mangistau Oblast Boat Yard LLP (“MOBY”), collectively “Caspian” or the “Company.” TatArka owns a 40% non-controlling interest in Veritas-Caspian LLP (“Veritas-Caspian”). Ownership of up to 50% noncontrolling interests are accounted for by the equity method. Intercompany balances and transactions have been eliminated in consolidation.

Business Condition – The Company funded a portion of the construction of its marine base through a combination of debt and equity financing pursuant to which the European Bank for Reconstruction and Development (“EBRD”) provided $18,600 of debt financing (the “Balykshi Loan”). EBRD also made an equity investment in the marine base in the amount of $10,000 in exchange for a 22% equity interest in Balykshi.

In connection with EBRD’s 22% equity interest in Balykshi, the Company entered into a Put Option Agreement granting EBRD the right to require the Company to repurchase the 22% equity interest based on Balykshi’s fair market value. The put option is exercisable between June 2013 and June 2017. This agreement also contains an acceleration feature that, should a triggering event occur, grants EBRD the right to require the Company to repurchase the $10,000 equity investment at a 20% annual rate of return at any time following the triggering event.

In accordance with US GAAP the put option is an unconditional obligation and is measured at its fair value based on an estimate of the amount of cash that would be required to settle the liability.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

The ~~EBRD~~Balykshi ~~loan~~Loan matured in May 2015. Under the terms of the EBRD Loan Agreement, as amended, Balykshi was required to repay the loan principal and accrued interest in eight equal semi-annual installments commencing November 20, 2011 and then occurring each May 20 and November 20 thereafter until fully repaid. As of the date of this report, none of the required ~~semi-annual~~ repayment installments have been made~~. As~~ ~~the~~and ~~EBRD loan has matured,~~ the principal and accrued interest is due and payable in full. The Company has included the ~~EBRD~~Balykshi ~~loan~~Loan and all accrued interest as a current ~~liabilities~~liability at ~~June~~December 3031, 2015 and September 30, ~~2014~~2015. The failure to pay the principal or interest on the ~~EBRD~~Balykshi ~~loan~~Loan may constitute an event of default under the Put Option Agreement which could ~~potentially~~ trigger the acceleration clause contained in the Put Option Agreement. The acceleration clause would allow EBRD to put its $10,000 investment in Balykshi back to the Company. If EBRD were to accelerate its put right, the Company ~~could~~would be obligated to repay the initial investment plus a 20% annual rate of return. The balance of the accelerated put option liability was $2324,~~140~~143 and $2123,~~649~~644 as of ~~June~~December 3031, 2015 and September 30, ~~2014~~2015, respectively. This balance includes the 20% rate of return on the $10,000 investment and is classified as a current liability. As of the date of this report, to the Company’s knowledge, EBRD has not sought to exercise the put option acceleration clause. The Company continues to engage in discussions with EBRD regarding a possible restructuring of its financial obligations to EBRD.

~~The~~In 2008, the Company ~~continues~~entered into two facility agreements pursuant to ~~engage~~which inthe ~~discussions~~Company received debt funding of $30,000. In June and July 2011, Mr. Bakhytbek Baiseitov (the “Investor”) acquired the two facility agreements. In connection with ~~EBRD~~restructuring ~~regarding~~the facility agreements, in September 2011, the Company issued Investor two secured promissory notes, a ~~possible~~Secured ~~restructuring~~Non-Negotiable Promissory Note in the principal amount of ~~its~~$10,800 ~~financial~~(“Non-Negotiable ~~obligations~~Note”) toand ~~EBRD~~a Secured Convertible Consolidated Promissory Note in the principal amount of $24,446 (“Consolidated Note”).

ToPursuant ~~help~~to the ~~Company~~terms ~~meet~~of ~~its~~the ~~additional~~Non-Negotiable ~~funding~~Note, ~~obligations~~Investor tomay, ~~construct~~at ~~the~~any ~~marine base~~time, indemand ~~2008~~and receive repayment of the ~~Company~~Non-Negotiable ~~entered~~Note ~~into~~by ~~two~~the ~~facility~~issuance ~~agreements~~of ~~pursuant~~common tostock ~~which~~of the Company. ~~received~~The ~~debt~~price ~~funding~~per ofshare ~~$30,000. In~~for ~~June~~principal and ~~July~~interest ~~2011~~is Mr$0.12. ~~Bakhytbek~~The ~~Baiseitov~~Investor (has the ~~“Investor”)~~right, ~~acquired~~at any time, to demand the ~~two~~issuance ~~facility~~of ~~agreements. In~~shares ~~connection~~in ~~with~~satisfaction ~~restructuring~~of the ~~facility~~Non-Negotiable ~~agreements,~~Note. The ~~each~~maturity date of ~~which~~the ~~matured~~Non-Negotiable inNote ~~2011,~~is inJune ~~September~~30, ~~2011~~2016. If the ~~Company~~issuance ~~issued~~of ~~Investor~~common ~~two~~stock ~~secured~~has ~~promissory~~not ~~notes,~~been ademanded ~~Secured~~by ~~Non-Negotiable~~Investor ~~Promissory~~or ~~Note~~made inat the ~~principal~~election ~~amount~~ of ~~$10,800~~the ~~(“Non-Negotiable~~Company ~~Note”)~~by ~~and~~the aJune ~~Secured~~30, ~~Convertible~~2016, ~~Consolidated~~maturity ~~Promissory~~date, ~~Note~~the inCompany is required to repay the principal ~~amount~~and ofinterest ~~$24,446~~in ~~(“Consolidated Note”)~~cash.

Pursuant to the terms of the ~~Non-Negotiable~~Consolidated Note, ~~Investor~~interest ~~may,~~accrues at ~~any~~12% ~~time,~~per ~~demand~~annum and ~~receive~~shall ~~payment~~be ofpaid ~~the~~semi-annually ~~Note~~in byarrears ~~the~~on ~~issuance~~each ofsix-month ~~common~~anniversary ~~stock~~ of the ~~Company.~~Issuance ~~The~~Date ~~price~~(September ~~per~~30, ~~share for principal and interest is $0~~2011).~~12.~~ The ~~Investor~~Consolidated ~~has~~Note ~~the~~provides ~~right,~~for ata ~~any~~default ~~time,~~rate ~~to demand the issuance~~ of ~~shares~~interest ~~in satisfaction~~ of ~~the~~13% ~~Non-Negotiable~~per ~~Note. In~~annum ~~June~~upon ~~2015~~ the ~~Company~~occurrence and ~~Investor~~during ~~agreed to extend~~ the ~~maturity~~continuation ~~date~~ of ~~the~~an ~~Non-Negotiable~~event ~~Note~~of ~~from~~default, ~~June~~which ~~30,~~shall ~~2015~~be topayable ~~June~~in ~~30,~~cash ~~2016~~upon demand. IfThe ~~the~~maturity ~~issuance~~date of ~~common stock has not been demanded by Investor or made at~~ the ~~election~~Consolidated ofNote ~~the~~is ~~Company by the~~ June 30, 2016 ~~maturity date, the Company is required to repay the principal and interest in cash~~.

Pursuant to the terms of the Consolidated Note, interest accrues at 12% per annum and shall be paid semi-annually in arrears on each six-month anniversary of the Issuance Date (September 30, 2011). The Consolidated Note provides for a default rate of interest of 13% per annum upon the occurrence and during the continuation of an event of default, which shall be payable in cash upon demand. In June 2015 the Company and Investor agreed to extend the maturity date of the Consolidated Note from June 30, 2015 to June 30, 2016.

Investor has the right at any time following a five-day written notice to convert all or any portion of the principal and any accrued but unpaid interest under the Consolidated Note into common stock at $0.10 per share. Any conversion that would result in a change in control of the Company without the prior consent of EBRD could result in a breach of the EBRD financing agreements.

As of the date of this report, none of the semi-annual ~~interest~~repayments ~~payments~~required under the Consolidated Note have been made when due. The Company has, however, made partial ~~interest~~ payments to Investor totaling $2,~~750~~850 in reduction of ~~interest~~Consolidated Note balance due as of ~~June~~the ~~30,~~date ~~2015~~of this report.

7The failure to make the semi-annual repayments when due, may be deemed an event of default under the Consolidated Note. In the event of a default that remains uncured, Investor may, at any time, demand immediate repayment of the Consolidated Note. As a result, the Company has included the Consolidated Note and all accrued but unpaid interest as current liabilities at December 31, 2015 and September 30, 2015. As of the date of this report, to the Company’s knowledge, Investor has not demanded immediate repayment of the Consolidated Note.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

~~The~~In ~~failure~~August ~~to pay interest on the Consolidated Note when due~~2008, ~~may~~MOBY beentered ~~deemed~~into ana ~~event~~loan ofagreement ~~default~~with ~~under~~EBRD (the ~~Consolidated~~“MOBY ~~Note~~Loan”). In connection with the ~~event~~MOBY ofLoan, aEBRD ~~default~~required ~~that~~the ~~remains~~Company ~~uncured,~~and ~~Investor~~others ~~may~~to, among atother ~~any time~~things, ~~demand~~execute ~~immediate~~a ~~repayment~~Deed of ~~the~~Guarantee ~~Consolidated~~and ~~Note. As~~Indemnity a(“Guarantee”) ~~result,~~guaranteeing the ~~Company~~repayment ~~has~~of ~~included~~ the ~~Consolidated~~MOBY ~~Note and all accrued but unpaid interest as current liabilities at June 30, 2015 and September 30, 2014~~Loan. The Asguarantee obligation of ~~the~~each ~~date~~party ofis ~~this~~limited ~~report,~~ to ~~the~~each ~~Company~~party’s ~~knowledge,~~respective ~~Investor~~ownership ~~has~~interest ~~not~~in ~~demanded immediate repayment of the Consolidated Note~~MOBY.

InThe ~~August~~outstanding ~~2008~~balance of the MOBY ~~entered~~Loan ~~into~~was a$6,402 ~~Loan~~and ~~Agreement~~$6,314 (as of December 31, 2015 and September 30, 2015, respectively, including accrued and unpaid interest. The interest rate under the “MOBY Loan ~~Agreement”)~~is ~~with~~generally ~~EBRD~~the interbank rate plus a margin of 3.6%. InThe ~~connection~~MOBY ~~with~~Loan ~~the~~provides ~~MOBY~~that during any period when the loan, ~~EBRD~~is ~~required~~in default the ~~Company~~rate of interest shall be the interbank rate plus a margin of 3.6% plus 2% per annum. The MOBY Loan provides for 14 equal semi-annual installment payments of principal and ~~others~~interest ~~to, among~~on ~~other~~June ~~things~~15 and December 15, ~~execute~~commencing afrom ~~Deed~~August 2011. As of ~~Guarantee~~December 31, 2015 and ~~Indemnity~~September ~~(“Guarantee”)~~30, ~~guaranteeing~~2015, ~~the~~MOBY ~~repayment~~had made no semi-annual installment payments and was in violation of certain financial covenants under the MOBY ~~loan~~Loan. ~~The~~Pursuant ~~guarantee~~to ~~obligation~~the MOBY Loan, if an event of ~~each~~default ~~party~~occurs and is ~~limited~~continuing, EBRD may, at its option, by notice to ~~each~~MOBY, ~~party’s~~declare ~~respective~~all ~~ownership~~or any portion of the principal and accrued interest inof the MOBY Loan due and payable on demand, or immediately due and payable without further notice and without presentment, demand or protest.

~~The~~To ~~outstanding balance of~~ the ~~MOBY~~Company’s ~~loan was $6~~knowledge,~~232~~ ~~and~~to ~~$5,998~~date asEBRD ofhas ~~June~~taken ~~30,~~no ~~2015~~action ~~and~~to ~~September~~establish ~~30,~~a ~~2014,~~default ~~respectively,~~or ~~including~~to ~~accrued~~increase ~~and~~or ~~unpaid~~accelerate ~~interest. The interest rate under~~ the ~~MOBY~~debt ~~loan~~obligations ~~is generally the interbank rate plus a margin~~ of ~~3.6%. The~~ MOBY ~~Loan~~or ~~Agreement provides that during any period when~~ the ~~loan~~Guarantee isobligation ~~in default the rate~~ of ~~interest shall be~~ the ~~interbank rate plus a margin of 3~~Company.~~6% plus 2% per annum.~~ ~~The~~Should ~~MOBY~~EBRD ~~Loan~~determine ~~Agreement~~to ~~provides~~take ~~for 14 equal semi-annual installment payments of principal and interest on June 15 and December 15~~action, ~~commencing on or after August 2011. As of June 30, 2015 and September 30, 2014~~ MOBY ~~had~~would ~~made~~not nohave ~~semi-annual~~sufficient ~~installment~~funds ~~payments~~to ~~and~~repay ~~was in violation of certain financial covenants under~~ the MOBY Loan, ~~Agreement. Pursuant~~nor towould the ~~MOBY~~Company ~~Loan~~have ~~Agreement,~~sufficient iffunds anto ~~event~~repay ofthe ~~default occurs and is continuing, EBRD may, at its option, by notice to~~ MOBY, ~~declare~~Loan ~~all~~ or ~~any~~its portion of the ~~principal and accrued interest of the loan due and payable on demand, or immediately due and payable without further notice and without presentment, demand or protest~~Guarantee.

ToShould EBRD or Investor determine to collect or accelerate the Company’s ~~knowledge~~financial obligations to them, the Company currently has insufficient funds to ~~date~~repay its obligations to EBRD ~~has~~or ~~taken~~Investor, noindividually ~~action~~or collectively, and would be forced to ~~establish~~seek other sources of funds to satisfy these obligations. Given the ~~defaults~~Company’s current and anticipated operating results, current world oil prices, the difficult credit and equity markets and the Company’s current financial condition, the Company believes it would be extremely difficult to obtain new funding to satisfy these obligations. If the Company were unable to meet these obligations, EBRD or Investor could seek any legal remedy available to ~~increase~~them to obtain repayment, including forcing the Company into bankruptcy, or ~~accelerate~~in the ~~debt~~case ~~obligations~~of the Balykshi Loan, which is collateralized by the assets, including the marine base, and bank accounts of Balykshi, CRE and MOBY, orforeclosure ~~the~~by ~~guarantee~~EBRD ~~obligation~~on such assets and bank accounts, in addition to pursuing other Company assets. As of December 31, 2015, the book value of collateralized assets was approximately $16,569. The Company has also agreed to collateralize Investor’s Notes with non-marine base related assets. ~~Should~~The ~~EBRD~~ability ~~determine~~of the Company to ~~take~~continue ~~action~~as a going concern is dependent upon, ~~MOBY~~among ~~would~~other ~~not~~things, ~~have~~its ~~sufficient~~ability ~~funds~~to (i) successfully restructure its financial obligations to ~~repay~~EBRD ~~the~~and ~~MOBY~~Investor ~~loan,~~on ~~nor~~terms ~~would~~that will allow the Company ~~have~~to service the restructured obligations, (ii) generate sufficient ~~funds~~revenue from operations to ~~repay~~satisfy its ~~portion~~financial ofobligations, ~~the~~and/or ~~MOBY~~(iii) ~~loan~~identify ora financing source that will provide the ~~guarantee~~Company the ability to satisfy its financial obligations, and ~~would~~(iv) bea ~~forced~~return to ~~seek~~higher ~~sources~~world ofoil ~~funding~~prices. Uncertainty as to ~~satisfy~~the outcome of these factors raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company intends to continue its efforts to restructure its financial obligations to EBRD and Investor.

Should EBRD or Investor determine to seek to collect or accelerate the Company’s financial obligations to them, the Company currently has insufficient funds to repay its obligations to EBRD or Investor, individually or collectively, and would be forced to seek other sources of funds to satisfy these obligations. Given the Company’s current and anticipated operating results, the difficult credit and equity markets and the Company’s current financial condition, the Company believes it would be extremely difficult to obtain new funding to satisfy these obligations. If the Company were unable to obtain funding to meet these obligations, EBRD or Investor could seek any legal remedy available to them to obtain repayment, including forcing the Company into bankruptcy, or in the case of the EBRD loan, which is collateralized by the assets, including the marine base, and bank accounts of Balykshi, CRE and MOBY, foreclosure by EBRD on such assets and bank accounts. As of June 30, 2015 the book value of collateralized assets was approximately $30,349. The Company has also agreed to collateralize Investor’s Notes with non-marine base related assets. The ability of the Company to continue as a going concern is dependent upon, among other things, its ability to (i) successfully restructure its

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

financial obligations to EBRD and Investor on terms that will allow the Company to service the restructured obligations, (ii) generate sufficient revenue from operations to satisfy its financial obligations, and/or (iii) identify a financing source that will provide the Company the ability to satisfy its financial obligations. Uncertainty as to the outcome of these factors raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company intends to continue its efforts to restructure its financial obligations to EBRD and Investor.

Nature of Operations – The Company’s business consists of three major business segments:

Vessel Operations – Vessel operations consist of chartering a fleet of shallow draft offshore support vessels to customers performing oil and gas exploration activities in the Caspian Sea.

Geophysical Services – Geophysical services consist of providing seismic data acquisition services to oil and gas companies operating onshore in Kazakhstan.

Marine Base Services – Marine base services consist of operating a marine base with a boat repair and drydocking services yard located at the Port of Bautino on the North Caspian Sea.

~~Correction~~Discontinued toOperations ~~Previously Issued Financial Statements~~ – InDuring ~~the~~fiscal ~~current period~~2015, the Company ~~identified~~discontinued ~~mathematical~~operations ~~errors~~ in the ~~calculation~~Kazakhstan subsidiary of ~~basic~~CSI ~~and~~Inc., ~~diluted~~CSI ~~loss~~LLP ~~per~~(“CSI ~~share for the three month and nine month periods ending June 30, 2014~~KZ”). ~~This~~Upon ~~mathematical~~determining ~~error was related~~ to ~~the~~discontinue ~~use~~CSI ~~of the net loss as the numerator. To correct this mathematical error~~KZ, ~~the~~all ~~Company~~prior ~~changed~~periods ~~the~~presented ~~formula~~have tobeen ~~use~~restated ~~the net loss attributable~~ to ~~the~~separately ~~Caspian~~account ~~Services~~for as the ~~numerator.~~discontinued operations. The ~~Company~~entire has assessed the impact of the mathematical error on each period impacted under the guidance of Accounting Standards Codification Topic 250-10, Accounting Changes and Error Corrections, related to SEC Staff Accounting Bulletin (~~"SAB"~~loss) ~~No.99,~~income ~~Materiality,~~from ~~and~~discontinued ~~has~~operations ~~determined~~is ~~that~~attributable ~~the impact of the error was not material~~ to the ~~previously issued unaudited condensed consolidated financial statements. The~~ Company ~~has elected to revise its previously issued unaudited condensed consolidated financial statements to facilitate comparisons across periods~~. ~~The Company has corrected the basic and diluted loss per share for the three month and the nine month periods ending June 30, 2014, as follows:~~

	For The Three Months Ended June 30, 2014			For The Nine Months Ended June 30, 2014
	Previously reported	Revised	Difference	Previously reported	Revised	Difference
Basic and Diluted Loss per Share	$ (0.04)	$ (0.03)	$ (0.01)	$ (0.26)	$ (0.21)	$ (0.05)

Correction to Previously Issued Financial Statements – In the current period, the Company identified a mathematical rounding error in the calculation of basic and diluted loss per share for the three-month period ended December 31, 2014. The Company has assessed the impact of the mathematical rounding error on each period impacted under the guidance of Accounting Standards Codification Topic 250-10, Accounting Changes and Error Corrections, related to SEC Staff Accounting Bulletin ("SAB") No.99, Materiality, and has determined that the impact of the error was not material to the previously issued unaudited condensed consolidated financial statements. The Company has elected to revise its previously issued unaudited condensed consolidated financial statements to facilitate comparisons across periods. The Company has corrected the basic and diluted loss per share for the three-month period ended December 31, 2014, as follows:

Basic and Diluted Loss Per Share – Basic loss per common share is calculated by dividing net loss attributable to Caspian Services by the weighted-average number of common shares outstanding. Diluted loss per common share is calculated by dividing net loss attributable to Caspian Services by the weighted-average number of common shares outstanding giving effect to potentially dilutive issuable common shares.

	For The Three Months Ended December 31, 2014
	Previously reported	Revised	Difference
Basic and Diluted Loss per Share	$ (0.05)	$ (0.04)	$ (0.01)

For the three ~~and nine~~ months ended ~~June~~December 3031, 2015, the Company had ~~800~~469,710,000 ~~options outstanding and 447,383,333~~ potential shares related to convertible debt that were not included in the computation of diluted loss per common share because they would be anti-dilutive.

9For the three months ended December 31, 2014, the Company had 800,000 options outstanding and 427,056,667 potential shares related to convertible debt that were not included in the computation of diluted loss per common share because they would be anti-dilutive.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

For the three and nine months ended June 30, 2014 the Company had 800,000 options outstanding, 147,939 non-vested restricted shares outstanding and 409,111,667 potential shares related to convertible debt that were not included in the computation of diluted loss per common share because they would be anti-dilutive.

Fair Value of Financial Instruments – The carrying amounts reported in the accompanying condensed consolidated financial statements for other receivables, accounts receivable from related parties, accounts payable to related parties and accrued expenses approximate fair values because of the immediate nature or short-term maturities of these financial instruments. The carrying amount of long-term debts approximates fair value due to the stated interest rates approximating prevailing market rates.

Accelerated Put Option Liability – In connection with EBRD’s $10,000 equity investment to purchase a 22% equity interest in Balykshi, the Company entered into a Put Option Agreement granting EBRD the right to require the Company to repurchase the 22% equity interest. The put option is exercisable between June 2013 and June 2017. The put price is determined based on the fair market value of Balykshi as mutually agreed by the parties. If the parties are unable to agree upon a fair market valuation, the parties agree to hire a third party expert to determine the put price on the basis of the fair market value of Balykshi, as set forth in the Put Option Agreement. In the event there is a change in control of the Company, EBRD has the right to require the repurchase of the equity interest at its fair market value. The Put Option Agreement also contains an acceleration feature. Should Balykshi: (i) default on $1,000 or more of debt; (ii) fail to meet the obligations of any of the agreements between Balykshi, the Company and EBRD; (iii) be found to have made false representations to EBRD; or (iv) be declared insolvent, EBRD has the right to accelerate the put option. If the put option is accelerated, EBRD can require the Company to repurchase the $10,000 equity investment plus a 20% per annum rate of return, taking into account any dividend or other distribution received by EBRD, at any time following one of the events mentioned above. Due to the fact that certain events of default under the EBRD Loan Agreement may have occurred and that such could trigger EBRD’s accelerated put right, we have reflected an accelerated put option liability of $2324,~~140~~143, although, as of the date of this quarterly report on Form 10-Q, to the Company’s knowledge, EBRD has not sought to accelerate the put option.

Revenue Recognition – Vessel revenues are usually derived from time charter contracts on a rate-per-day of service basis; therefore, vessel revenues are recognized on a daily basis throughout the contract period. These time charter contracts are generally on a term basis. The base rate of hire for a contract is generally a fixed rate; however, these contracts often include clauses to recover mobilization and demobilization costs and specific additional costs which are billed on a monthly basis.

Geophysical service revenue is recognized when services are rendered, accepted by the customer and collectability is reasonably assured. Direct costs are charged to each contract as incurred along with allocated indirect costs for the specific period of service. Losses on contracts are recognized during the period in which the loss first becomes probable and reasonably estimated. Due to the nature of some of the geophysical services provided, certain customers have prepaid their contract services. These prepayments have been deferred and are recognized as revenue as the services are provided. At December 31, 2015 and September 30, 2015, the Company had $195 and $336, respectively, of deferred revenue related to these prepaid services.

Marine base service revenue is recognized when services are rendered, accepted by the customer and collectability is reasonably assured.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

Receivables – In the normal course of business the Company extends credit to its customers on a short-term basis. The principal customers for the Company’s marine vessels are major oil and natural gas exploration, development and production companies and their contractors. Credit risks associated with these customers are considered minimal. Dealings with smaller, local companies pose the greatest risks. For new geophysical services customers the Company typically requires an advance payment and the Company retains the seismic data generated from these services until payment is made in full. The Company routinely reviews accounts receivable balances and makes provisions for doubtful accounts as necessary. Accounts are reviewed on a case-by-case basis and losses are recognized in the period the Company determines it is likely that receivables will not be fully collected. The Company may also provide a general provision for accounts receivable based on existing economic conditions.

Impairment of Long-Lived Assets and Long-Lived Assets for Disposal – Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount that the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Income Taxes – Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences in assets and liabilities and their respective tax bases and attributable to operating loss carry forwards. Differences generally result from the calculation of income under ~~accounting~~US ~~principles~~GAAP ~~generally accepted in the United States of America~~ and the calculation of taxable income calculated under Kazakhstan income tax regulations.

The current regime of penalties and interest related to reported and discovered violations of Kazakhstan’s laws, decrees and related regulations can be severe. Penalties include confiscation of the amounts in question for currency law violations, as well as fines of generally 100% of the unpaid taxes. Interest is assessable at rates of generally 0.06% per day. As a result, penalties and interest can result in amounts that are multiples of any unreported taxes. At ~~June~~December 3031, 2015 and 2014, no interest or penalties have been accrued as a result of any tax positions taken. In the event interest or penalties are assessed, the Company will include these amounts related to unrecognized tax benefits in income tax expense.

A deferred tax liability is not recognized for the following types of temporary differences unless it becomes apparent that those temporary differences will reverse in the foreseeable future:

(a) An excess of the amount for financial reporting over the tax basis of an investment in a foreign subsidiary or a foreign corporate joint venture, that is essentially permanent in duration; or

(b) Undistributed earnings of a domestic subsidiary or a domestic corporate joint venture that is essentially permanent in duration.

11Drydocking Costs – The Company’s vessels must be periodically drydocked and undergo certain inspections to maintain their operating classification, as mandated by certain maritime regulations. Costs incurred to drydock the vessels for certification are capitalized and amortized over the period until the next drydocking, which is generally 24 months. Drydocking costs comprise painting the vessels’ hulls and sides, recoating cargo and fuel tanks, and performing other engine and equipment maintenance activities to bring the vessels into compliance with classification standards.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

~~Drydocking~~Foreign ~~Costs~~Currency Transactions – ~~The~~Caspian ~~Company’s~~Services, ~~vessels~~Inc., ~~must~~the beparent ~~periodically~~company ~~drydocked~~of ~~and~~the ~~undergo~~subsidiaries, ~~certain~~makes ~~inspections~~its toprincipal ~~maintain~~investing ~~their~~and ~~operating~~financing ~~classification,~~transactions asin ~~mandated~~United byStates ~~certain~~dollars ~~maritime~~(USD), ~~regulations. Costs~~which ~~incurred~~is toalso ~~drydock~~its ~~the~~functional ~~vessels~~currency. ~~for~~Transactions ~~certification are capitalized~~ and ~~amortized~~balances ~~over~~denominated ~~the~~in ~~period~~other ~~until~~currencies ~~the~~have ~~next~~been ~~drydocking,~~translated ~~which~~into isUSD ~~generally~~using 24historical ~~months~~exchange rates. ~~Drydocking~~ ~~costs~~Exchange ~~comprise~~gains ~~painting the vessels’ hulls~~ and ~~sides,~~losses ~~recoating~~from ~~cargo~~holding ~~and~~foreign ~~fuel~~currencies ~~tanks,~~ and ~~performing~~having ~~other~~liabilities ~~engine~~payable ~~and~~in ~~equipment~~foreign ~~maintenance~~currencies ~~activities~~are toincluded ~~bring~~in the ~~vessels~~results ~~into~~of ~~compliance with classification standards~~operations.

Foreign Currency Transactions – Caspian Services, Inc., the parent company of the subsidiaries, makes its principal investing and financing transactions in United States Dollars (USD), which is also its functional currency. Transactions and balances denominated in other currencies have been translated into USD using historical exchange rates. Exchange gains and losses from holding foreign currencies and having liabilities payable in foreign currencies are included in the results of operations.

USD is also the functional currency of CSGL, CGEO and CRE.

The Kazakh ~~Tenge~~tenge (KZT) is the functional currency of Caspian LLP, TatArka, Balykshi, Kyran and MOBY; the Euro is the functional currency of Caspian B.V. ~~and the Russian Ruble is the functional currency of Caspian LLC.~~ Their respective balance sheets have been translated into USD at the exchange rates prevailing at each balance sheet date. Their respective statements of ~~operations and~~ comprehensive income (loss) have been translated into USD using the average exchange rates prevailing during the periods of each statement. The corresponding translation adjustments are part of accumulated other comprehensive income ~~(loss) and are shown as part of shareholders’ equity~~.

The translation of KZT, ~~Euro and Russian Ruble~~ denominated assets and liabilities into USD for the purpose of these condensed consolidated financial statements does not necessarily mean the Company could realize or settle, in USD, the reported values of these assets and liabilities in USD. Likewise it does not mean the Company could return or distribute the reported USD value of its Kazakh subsidiaries’ capital to its shareholders.

In August 2015, the National Bank of the Republic of Kazakhstan elected to change its currency policy to make the KZT free floating, which has caused the KZT to fall sharply against the USD. As a result of this devaluation, during the first fiscal quarter 2016, the Company recorded a foreign exchange transaction loss of $13,142 mostly as a result of the remeasurement of the Balykshi Loan and MOBY Loan which are denominated in U.S. Dollars.

No such events occurred during the first fiscal quarter 2015.

Use of Estimates – The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive Loss – Total comprehensive loss consists of net loss and changes in accumulated other comprehensive loss. Accumulated other comprehensive loss is presented in the condensed consolidated statements of comprehensive income (loss) and consists of foreign currency translation adjustments.

Concentration of Revenue – During the ~~nine~~three months ended ~~June~~December 3031, 2015, vessel revenue from ~~four~~three customers represented approximately 5990% of total vessel revenue as follows, Customer A – 1740%; Customer B – 1525%; ~~Customer C – 14%;~~ and Customer DC – 1325%.

During the ~~nine~~three months ended ~~June~~December 3031, 2015, ~~geophysical~~we ~~service~~realized no revenue from ~~two customers represented approximately 97% of total~~ geophysical ~~revenue as follows, Customer A – 57% and Customer B – 40%~~services.

During the ~~nine~~three months ended ~~June~~December 3031, 2015 , marine base revenue from ~~three~~four customers represented 7082% of total marine base revenue as follows, Customer A – 3330%,; Customer B – 2518%,; ~~and~~ Customer C – 1217%; and Customer D – 17%.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

Reclassifaction – Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.

Recent Accounting Pronouncements –

In ~~April~~January 2015, ~~2014~~ the FASB issued ~~Accounting~~ASU 2015-01, ~~Standards~~Income ~~Update~~Statement — Extraordinary and Unusual Items (~~“ASU”~~Subtopic 225-20). NoThis update eliminates from GAAP the concept of extraordinary items. ~~2014~~ Subtopic 225-0820, ~~Presentation~~ ofIncome ~~Financial~~Statement—Extraordinary ~~Statements~~ and ~~Property~~Unusual Items, ~~Plant~~required that an entity separately classify, present, and ~~Equipment~~disclose extraordinary events and transactions. ~~Reporting~~Presently, ~~discontinued~~an ~~operations~~event or transaction is presumed to be an ordinary and ~~disclosures~~usual activity of ~~disposals~~the ofreporting ~~components~~entity ofunless evidence clearly supports its classification as an ~~entity~~extraordinary item. ~~The~~Paragraph ~~Company~~225-20-45-2 ~~does~~contains ~~not~~the ~~believe~~following criteria that ~~adoption~~must ofboth be met for extraordinary classification, (1) unusual nature - the ~~standard~~underlying ~~will~~event ~~have~~or transaction should possess a ~~material~~high ~~impact~~degree onof ~~its~~abnormality ~~results~~and be of ~~operations~~a type clearly unrelated to, or ~~financial~~only ~~position~~incidentally ~~upon~~related to, the ordinary and typical activities of the entity, taking into account the environment in which the entity operates; and (2) infrequency of occurrence - the underlying event or transaction should be of a type that would not reasonably be expected to recur in the foreseeable future, taking into account the environment in which the entity operates. The amendments in ASU 2015-01 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s financial statements.

In May 2014 the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers. The objective of this update is to provide a robust framework for addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance. This update is effective in annual reporting periods beginning after December 15, 2017 and the interim periods within that year. The Company is evaluating the impact of this update on its financial statements.

In June 2014 FASB issued Accounting Standards Update No. 2014-12, Compensation - Stock Compensation (Topic 718) - Accounting for Share Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period, be treated as a performance condition. ASU 2014-12 is effective for interim and annual periods beginning after December 15, 2015. The amendments can be applied prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented and to all new or modified awards thereafter. Early adoption is permitted. The adoption of this standard is not expected to have a material effect to the Company’s operating results or financial condition.

In August 2014 the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (ASU 2014-15). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management's plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. The adoption of this guidance is not expected to have a material effect on the Company’s operating results or financial condition.

In February 2015, the FASB issued Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which changes the analysis to be performed in determining whether certain types of legal entities should be consolidated. Under the revised guidance, all legal entities are subject to reevaluation under the revised consolidation model, unless a scope exception applies. Though the revised guidance mostly affects asset managers, all reporting entities involved with limited partnerships or similar entities are required to reevaluate such entities for consolidation. The guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years beginning after December 15, 2015. The Company is evaluating the impact of this update on its financial statements.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, as part of its simplification initiative to reduce the cost and complexity in accounting standards. The ASU requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related liability. The treatment is consistent with the current presentation of debt discounts or premiums. For public business entities, the guidance is effective for financial statements covering fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The amended guidance must be applied on a retrospective basis and will not materially affect the Company’s operating results or financial position.

In May 2015, the FASB issued Accounting Standards Update No. 2015- 11, Inventory (Topic 330): Simplifying the Measurement of Inventory , which requires entities who value inventory using the first-in, first-out or average cost method to measure inventory at the lower of cost and net realizable value. For public business entities, the amended guidance is effective for fiscal years beginning after December 15, 2016, and for interim periods within those years. The amended guidance must be applied on a prospective basis. The Company is evaluating the impact of this update on its financial statements.

~~The~~CASPIAN ~~Company~~SERVICES, ~~has considered all recent accounting pronouncements issued or proposed by the FASB and other standards-setting bodies since the last audit of its financial statements~~INC. ~~The~~AND ~~Company does not believe that these pronouncements will have a material effect on the Company’s financial statements.~~SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

In May 2015, the FASB issued ASU 2015-08, Business Combinations – Pushdown Accounting – Amendment to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115. This update was issued to amend various SEC paragraphs pursuant to the issuance of Staff Accounting Bulletin No. 115. This ASU is not expected to have a significant impact on the Company’s financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606). The amendments in this update defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company is evaluating the effect of adopting this new ASU.

In August 2015, the FASB issued ASU 2015-15, Interest – Imputation of Interest (Subtopic 835-30): Presentation And Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. This ASU adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015, Emerging Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. This ASU is not expected to have a significant impact on the Company’s financial statements.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805). The amendments in this update require that an acquirer recognizes adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments in this update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. This ASU is not expected to have a significant impact on the Company’s financial statements.

Subsequent Events – The Company’s management has evaluated subsequent events through the date the financial statements were issued and has found no subsequent events to report.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

NOTE 2 — ATASH MARINE BASE

Additional dredging work at the marine base is still required. Currently, Balykshi has insufficient funds to complete the work. Failure to complete the dredging could subject Balykshi to certain penalties, including the cancelation of permits and termination of operational activities at the marine base until the dredging is completed. The failure by Balykshi or the Company to provide financing for, or to complete, dredging could constitute a default under the EBRD financing agreements.

In 2008 Balykshi entered into an agreement with the Investment Committee of the Republic of Kazakhstan and agreed to a schedule of work to be performed at the marine base. As of the date of this report, Balykshi has failed to complete approximately $3,800 of the agreed upon scheduled work, including dredging, which could result in the cancellation of tax preferences granted to Balykshi by the Investment Committee.

NOTE 3 — NOTES PAYABLE

Notes payable consist of the following:

	June 30,	September 30,
	December 31,	September 30,
	2015	~~2014~~2015
Secured non-negotiable promissory note payable to Investor; interest at 0.26%	$ 10,~~906~~920	$ 10,~~885~~913
due June 30, 2016
Secured convertible consolidated promissory note payable to Investor; interest at 12%	3537,~~650~~871	3236,~~862~~777
(default interest at 13%) due June 30, 2016
Balykshi- EBRD loan and accrued interest at 7% plus the interbank rate due May 2015
(default interest at 9% plus the interbank rate ); secured by property and bank accounts	2728,~~333~~639	2527,~~539~~968
MOBY- EBRD loan and accrued interest at 3.6% plus the interbank rate due June 2018 (default interest at 5.6% plus the interbank rate )	6,232	5,998
MOBY- EBRD loan and accrued interest at 3.6% plus the interbank rate due June 2018 (default
Total Long-term Debt	80,121	75,284
interest at 5.6% plus the interbank rate )	6,402	6,314
Less: Current Portion	(80,121)	(75,284)
Total Long-term Debt	83,832	81,972
Less: Current Portion	(83,832)	(81,972)
Long-term Debt - Net of Current Portion	$ -	$ -

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

Notes Payable to Investor

Non-Negotiable Promissory Note

Pursuant to the terms of the Non-Negotiable Note, Investor may, at any time, demand and receive payment of the Non-Negotiable Note by the issuance of common stock of the Company. The price per share for principal and interest is $0.12. Investor has the right, at any time, to demand the issuance of shares in satisfaction of the Non-Negotiable Note. The Company has the right to pay the principal and interest under the Non-Negotiable Note by the issuance of Company common stock on the earlier of: (i) the date on which the Company and Investor complete renegotiation of the terms of the financing between the Company and EBRD; or (ii) the date when the Company and Investor terminate restructuring negotiations with EBRD. The Non-Negotiable Note ~~initially~~matures ~~had~~on ~~a maturity date of September 30, 2014. In September 2014 this maturity date was extended to~~ June 30, ~~2015. On June 30, 2015 the Company and Investor entered into a second amendment to this Note, which extended the maturity date to June 30,~~ 2016 (~~Extended~~the Maturity Date). If the issuance of common stock had not been demanded by Investor or made at the election of the Company by the ~~Extended~~ Maturity Date the Company is required to repay the principal and interest in cash.

The Company is required to pay interest on the principal amount of the Non-Negotiable Note in common stock at the time of payment of the principal. Interest accrues at a rate per annum equal to 0.26%, until the Extended Maturity Date.

The Company will issue the Investor 90 million shares of restricted common stock to settle the principal amount of the Non-Negotiable Note, excluding shares that will be issued to Investor in satisfaction of accrued interest.

As the Non-Negotiable Note matures in twelve months, it has been treated as a current liability in the accompanying financial statements.

Convertible Consolidated Promissory Note

Interest accrues on the Consolidated Note at 12% per annum and is required to be paid semi-annually in arrears on each six-month anniversary of the Issuance Date (September 30, 2011). The Consolidated Note provides for a default rate of interest of 13% per annum upon the occurrence and during the continuation of an event of default, as defined in the Consolidated Note, which shall be payable in cash upon demand.

The unpaid principal amount of the Consolidated Note, and any accrued but unpaid interest thereon, was initially due and payable on September 30, 2014. In September 2014 a first amendment to this Note was entered into between the Company and Investor, which extended the maturity date to June 30, 2015. On June 30, 2015 a second amendment to this note was entered into between the Company and Investor which extends the maturity date to June 30, 2016.

As of the date of this report, none of the semi-annual interest payments have been made on the date they were due. The failure to pay interest on the Consolidated Note may be deemed an event of default under the Consolidated Note. In the event of a default that remains uncured, Investor may, at any time, demand immediate repayment of the Consolidated Note. As a result, the Company has included the Consolidated Note and all accrued interest as current liabilities at June 30, 2015 and September 30, 2014.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

~~During~~The ~~fiscal 2013 the~~ Company ~~paid~~is ~~$1,600~~required to ~~Investor,~~pay ~~which~~interest ~~was~~on ~~credited~~the asprincipal aamount ~~reduction~~ of ~~principal under~~ the ~~Consolidated~~Non-Negotiable Note. Anin ~~additional~~common ~~$700~~stock ~~was~~at ~~paid~~the ~~during~~time ~~fiscal~~of ~~2014,~~payment ~~$300~~of ~~was~~the ~~paid~~principal. inInterest ~~December~~accrues ~~2014~~at ~~and~~a ~~$150~~rate ~~was~~per ~~paid~~annum inequal ~~June~~to ~~2015~~0.26%, until the Maturity Date.

As the Non-Negotiable Note matures in less than twelve months, it has been treated as a current liability in the accompanying financial statements.

Convertible Consolidated Promissory Note

As of the date of this report, none of the semi-annual payments have been made on the date they were due. The failure to make the semi-annual payments may be deemed an event of default under the Consolidated Note. In the event of a default that remains uncured, Investor may, at any time, demand immediate repayment of the Consolidated Note. As a result, the Company has included the Consolidated Note and all accrued interest as current liabilities at December 31, 2015 and September 30, 2015.

During fiscal 2013, the Company paid $1,600 to Investor, which was credited as a reduction of balance due under the Consolidated Note. During fiscal 2014, Investor was paid $700. During fiscal 2015 Investor was paid $450. During the first fiscal quarter 2016, Investor was paid $100.

The Consolidated Note is superior in rank to all future unsecured indebtedness of the Company and its subsidiaries, except for the EBRD Indebtedness.

Investor has the right at any time following a five-day written notice to convert all or any portion of the principal and any accrued but unpaid interest into common stock at $0.10 per share. However any conversion that would result in a change in control of the Company without the prior consent of EBRD could result in a breach of the EBRD financing agreements.

Registration Rights Agreement

In connection with restructuring the Facility agreements, the Company and Investor agreed to enter into a Registration Rights Agreement granting Investor the right to require the Company to register all or any part of the shares held by Investor, including but not limited to, any shares issued in satisfaction of the Notes. As of the date of this report no agreement has been finalized.

Loans Payable to EBRD

EBRD Loan to Balykshi

The EBRD loan to Balykshi matured in May 2015. Under the terms of the EBRD Loan Agreement, as amended, Balykshi was required to repay the loan principal and accrued interest in eight equal semi-annual installments commencing November 20, 2011 and then occurring each May 20 and November 20 thereafter until fully repaid. As of the date of this report, none of the semi-annual repayment installments have been made by the Company. As the EBRD loan has matured, the principal and accrued interest is due and payable. The EBRD Loan Agreement provides that if the Balykshi fails to pay when due any amount payable by it under the Loan Agreement, the overdue amount shall bear interest at a rate that is 2% higher than the non-default rate of interest.

As the EBRD loan is secured, in the event of a failure to repay the loan, EBRD could have the right to foreclose on the assets and bank accounts of Balykshi and CRE, including the marine base.

EBRD Loan to MOBY

As of June 30, 2015 the outstanding balance of the MOBY loan was $6,232, including accrued and unpaid interest. The interest rate under the MOBY loan is generally the interbank rate plus a margin of 3.6%. The MOBY Loan Agreement provides that during any period when the loan is in default, the rate of interest shall be the interbank rate plus a margin of 3.6% plus 2% per annum. The MOBY Loan Agreement provides for 14 equal semi-annual installment payments of principal and interest on June 15 and December 15, commencing after August 2011 (the third anniversary of the MOBY Loan Agreement.)

As of June 30, 2015 and September 30, 2014 MOBY had made no semi-annual installment payments and was in violation of certain financial covenants under the MOBY Loan Agreement. Pursuant to the MOBY Loan Agreement, if an event of default occurs and is continuing, EBRD may, at its option, by notice to MOBY, declare all or any portion of the principal and accrued interest of the loan due and payable on demand, or immediately due and payable without further notice and without presentment, demand or protest.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

Loans Payable to EBRD

Balykshi Loan

The Balykshi Loan matured in May 2015. As of the date of this report, none of the repayment installments have been made by the Company and the principal and accrued interest is currently due and payable in full. The Balykshi Loan Agreement provides that if the Balykshi fails to pay when due any amount payable by it under the Balykshi Loan, the overdue amount shall bear interest at a rate that is 2% higher than the non-default rate of interest.

As the Balykshi Loan is secured, in the event of a failure to repay the loan, EBRD has the right to foreclose on the assets and bank accounts of Balykshi and CRE, including the marine base, and to pursue the other assets of the Company.

MOBY Loan

As of December 31, 2015, the outstanding balance of the MOBY Loan was $6,402, including accrued and unpaid interest. The interest rate under the MOBY Loan is generally the interbank rate plus a margin of 3.6%. The MOBY Loan provides that during any period when the loan is in default, the rate of interest shall be the interbank rate plus a margin of 3.6% plus 2% per annum. The MOBY Loan provides for 14 equal semi-annual installment payments of principal and interest on June 15 and December 15, commencing after August 2011.

As of December 31, 2015 and September 30, 2015, MOBY had made no installment payments and was in violation of certain financial covenants under the MOBY Loan. Pursuant to the MOBY Loan Agreement, if an event of default occurs and is continuing, EBRD may, at its option, by notice to MOBY, declare all or any portion of the principal and accrued interest of the loan due and payable on demand, or immediately due and payable without further notice and without presentment, demand or protest.

To date, to the Company’s knowledge, EBRD has taken no action to establish the defaults or to increase or accelerate the debt obligations of MOBY or the guarantee obligations of the Company under the Guarantee. Should EBRD determine to take action, MOBY would not have sufficient funds to repay its portion of the MOBY Loan nor would the Company have sufficient funds to pay it obligations under the Guarantee.

The Company is engaged in ongoing discussions with EBRD about restructuring the terms of its financial obligations to EBRD, but there is no guarantee the Company will be successful in doing so.

NOTE 4 — COMMITMENTS AND CONTINGENCIES

Economic Environment – In recent years, Kazakhstan has undergone substantial political and economic change. As an emerging market Kazakhstan does not possess a well-developed business infrastructure, which generally exists in more mature free market economies. As a result, operations carried out in Kazakhstan can involve significant risks, which are not typically associated with those in developed markets. Instability in the market reform process could subject the Company to unpredictable changes in the basic business infrastructure in which it currently operates. Uncertainties regarding the political, legal, tax, monetary policy or regulatory environment, including the potential for adverse changes in any of these factors could affect the Company’s ability to operate commercially. Management is unable to estimate what changes may occur or the resulting effect of such changes on the Company’s financial condition or future results of operations.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

Legislation and regulations regarding taxation, foreign currency translation, and licensing of foreign currency loans in the Republic of Kazakhstan continue to evolve. Such legislation and regulations are not always clearly written and their interpretation is subject to the opinions of the local tax inspectors. Instances of inconsistent opinions between local, regional and national tax authorities are not unusual.

NOTE 5 — RELATED PARTY TRANSACTIONS

~~Geophysical~~Revenues ~~service~~and ~~revenue~~expenses ~~recognized~~ from ~~Sequa~~transactions ~~Petroleum~~with ~~(a company~~ related ~~through~~parties ~~common ownership)~~ for the three ~~and nine~~ months ended ~~June~~December 3031, 2015 ~~was $746~~ and $12014,~~632,~~ ~~respectively.~~consisted of the following:

Revenue from the agent fee for the marine base services recognized from Sayat Media (a company related through common management) for the three and nine months ended June 30, 2015 was $210 and $259, respectively.

		For the period ended December 31,
Related Party's Name	Description	2015	2014

Kazmortransflot	Marine base revenue	$ -	$ 10
Sayat Media	Revenue from agent for marine base services	64	-
Sayat Media	Equipment and vehicles lease expenses	(10)	(9)
Others	Other services	-	(6)
TOTAL		$ 54	$ (5)

Accounts receivable from related parties as of December 31, 2015 and September 30, 2015, consisted of the following:

Marine base services revenue from Kazmortransflot (a company related through participation in a joint venture) for the three and nine months ended June 30, 2015 was $1 and $10, respectively.

Related Party's Name	Description	December 31, 2015	September 30, 2015

Sequa Petroleum	Seismic services	$ -	$ 33
Demeu Energy	Advance given for vehicles delivery	147	185
Sayat Media	Receivable from agent for marine base services	92	104
Bolz LLP	Long term advances given	54	-
Caspian Geo Consulting	Advance given for equipment delivery	73	185
	Allowance for doubtful accounts	(147)	(296)
TOTAL		$ 219	$ 211

Lease revenue recognized from MOBY for the three and nine months ended June 30, 2014 was $265 and $931, respectively.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

Accounts ~~receivable~~payable ~~from~~to related parties as of ~~June~~December 3031, 2015 and September 30, ~~2014~~2015, consisted of the following:

Related Party's Name	Description	~~June~~December 3031, 2015	September 30, ~~2014~~2015
Sequa Petroleum	Seismic services	$ 631	$ -
Sayat Media	Other services	$ 7	$ 10
Demeu Energy	Advance given for vehicles delivery	269	275
Others	Others	40	49
Sayat Media	Receivable from agent for marine base services	271	-
TOTAL		$ 47	$ 59
Caspian Geo-Consulting	Advance given for equipment delivery	376	165
	Allowance for doubtful accounts	(430)	(440)
TOTAL		$ 1,117	$ -

~~Accounts~~Short-term ~~payable~~notes tofrom related parties as of ~~June~~December 3031, 2015 and September 30, ~~2014~~2015, consisted of the following:

Related Party's Name	Description	~~June~~December 3031, 2015	September 30, ~~2014~~2015
Sayat Media	Other services	$ 15	$ 13
Caspian Geo Consulting	Notes Receivable	$ 1,601	$ 2,195
Others	Other services	65	63
TOTAL		$ 1,601	$ 2,195
TOTAL		$ 80	$ 76

~~Short~~Caspian Geo-~~term~~Consulting ~~notes~~Services LLP (“Caspian Geo”) – During the period from ~~related~~November ~~parties~~2014 to September 2015, CSG LLP and Tatarka provided financial assistance to Caspian Geo. The aggregate outstanding amount of the financial assistance loans provided to Caspian Geo as of ~~June~~December 3031, 2015 and September 30, ~~2014~~2015, ~~consisted~~was $1,601 and $2,195. The loans mature one year from issuance. It is normal practice in Kazakhstan not to charge a rate of interest on financial assistance loans, therefore the ~~following:~~loans bear no interest except in the event of a default by Caspian Geo, in which case an 18% per annum default penalty may be applied. Subsequent to first fiscal quarter 2016, the Company entered into an agreement with Caspian Geo, to consolidate the financial assistance loans into a single US dollar denominated amount. The agreement provides for a minimum monthly payment and provides that the any unpaid outstanding balance shall be repaid in full by no later than December 30, 2016. For additional information, please, refer to Note 8.

Related Party's Name	Description	June 30, 2015	September 30, 2014
Caspian Geo-Consulting	Notes Receivable	$ 2,846	$ -
Sayat Media	Notes Receivable	-	70
TOTAL		$ 2,846	$ 70

Sayat Media – In September 2014 Balykshi entered into a loan agreement with Sayat Media (a company related through Balykshi’s management). Pursuant to the loan agreement Balykshi provided a loan to Sayat Media in the amount of $70. The note receivable bore interest at 5.5% per annum and was scheduled to mature in one year. This loan was fully repaid in November 2014.

Caspian Geo-Consulting Services LLP – During the period from November 2014 to March 2015 CSG LLP entered into five loan agreements with Caspian Geo-Consulting Services LLP. Pursuant to the loan agreements CSG LLP has provided loans to Caspian Geo-Consulting Services LLP in the amount of $2,846. The notes receivable bear no interest and mature one year from issuance.

NOTE 6 — FAIR VALUE MEASUREMENTS

Fair value is defined 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. To measure fair value, a hierarchy has been established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

18Level 2 – Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data.

Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

Level 2 – Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data.

The Company uses fair value to measure certain assets and liabilities on a recurring basis when fair value is the primary measure for accounting. This is done primarily for the put option liability. Fair value is used on a nonrecurring basis to measure certain assets when applying the lower of cost or market accounting or when adjusting carrying values and for acquisitions. Fair value is also used when evaluating impairment on certain assets, including goodwill, intangibles, and long-lived assets.

Recurring basis:

At ~~June~~December 3031, 2015 and September 30, 2014, the Company had two liabilities measured at fair value on a recurring basis.

The put option liability is a Level 3 measurement, which is fair valued at the put option price plus accrued interest at a rate of 20% annually. The $~~1,491~~499 change during the ~~nine~~three months ended ~~June~~December 3031, 2015, was for the 20% rate of return and it was charged to interest expense.

The value of the Property held for sale was derived based on estimated sales price of the property. The estimation of sales price is made based on the market prices of similar ~~vessels~~assets.

For Level 3 assets, the Company’s finance department, which reports to the chief financial officer, determines the fair value measurement valuation policies and procedures. At least annually, the finance department determines if the current valuation techniques used in the fair value measurements are still appropriate and evaluates and adjusts the unobservable inputs used in the fair value measurements based on current market conditions and third-party information.

There were no changes in the valuation techniques during the ~~nine~~three months ended ~~June~~December 3031, 2015.

		Fair Value Measurements at Reporting Date Using
Description	~~June~~December 3031, 2015	Level 1	Level 2	Level 3
Property held for sale	$ 4324	$ -	$ -	$ 4324
Put option liability	2324,~~140~~143	-	-	2324,~~140~~143
Total	$ 2324,~~183~~167	$ -	$ -	$ 2324,~~183~~167
		Fair Value Measurements at Reporting Date Using
Description	September 30, 2015	Level 1	Level 2	Level 3
Property held for sale	$ 30	$ -	$ -	$ 30
Put option liability	23,644	-	-	23,644
Total	$ 23,674	$ -	$ -	$ 23,674

19 20

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

		Fair Value Measurements at Reporting Date Using
Description	September 30, 2014	Level 1	Level 2	Level 3
Property held for sale	$ 44	$ -	$ -	$ 44
Put option liability	21,649	-	-	21,649
Total	$ 21,693	$ -	$ -	$ 21,693

NOTE 7 — SEGMENT INFORMATION

US GAAP requires disclosures related to components of a company for which separate financial information is available and evaluated regularly by a company’s chief operating decision makers in deciding how to allocate resources and in assessing performance. They also require segment disclosures about products and services as well as geographic area.

The Company has operations in three segments of its business, namely: Vessel Operations, Geophysical Services and Marine Base Services. All of these operations are located in the Republic of Kazakhstan. Corporate administration is located in the United States of America and the Republic of Kazakhstan.

Further information regarding the operations and assets of these reportable business segments follows:

	For the Three Months		~~For the Nine Months~~
	Ended June 30,		Ended June 30,
	Ended December 31,
	2015	2014	~~2015~~	~~2014~~
Capital Expenditures
Vessel Operations	64$ 885	$ ~~359~~124	~~$ 242~~	~~$ 816~~
Geophysical Services	~~(7)~~-	~~889~~1,707	~~1,728~~	~~3,077~~
Marine Base Services	-	-	2	-
Total segments	57885	1,~~248~~831	~~1,972~~	~~3,893~~
Corporate assets	-	~~(1)~~-	-	-
Less intersegment investments	1-	-(109)	~~(125)~~	-
Total consolidated	$ 58885	$ 1,~~247~~722	~~$ 1,847~~	~~$ 3,893~~

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

	For the Three Months		~~For the Nine Months~~
	Ended June 30,		Ended June 30,
	Ended December 31,
	2015	2014	~~2015~~	~~2014~~
Revenues
Vessel Operations	$ 23,~~620~~737	$ 45,~~495~~137	~~$ 9,128~~	~~$ 11,218~~
Geophysical Services	~~746~~-	31,~~564~~002	~~2,842~~	~~10,832~~
Marine Base Services	21,~~205~~427	~~564~~414	~~5,792~~	~~3,641~~
Total segments	5,~~571~~164	86,~~623~~553	~~17,762~~	~~25,691~~
Corporate revenue	-	-	-	-
Less intersegment revenues	(21,~~303~~509)	(~~449~~456)	~~(5,732)~~	~~(3,197)~~
Total consolidated	$ 3,~~268~~655	$ 86,~~174~~097	~~$ 12,030~~	~~$ 22,494~~
Depreciation and Amortization
Vessel Operations	$ (~~408~~270)	$ (~~400~~446)	~~$ (1,300)~~	~~$ (1,396)~~
Geophysical Services	(~~405~~249)	(~~282~~384)	~~(1,199)~~	~~(890)~~
Marine Base Services	(~~371~~244)	(~~336~~389)	~~(1,140)~~	~~(1,009)~~
Total segments	(~~1,184~~763)	(1,~~018~~219)	~~(3,639)~~	~~(3,295)~~
Corporate depreciation and amortization	-	-	~~(1)~~	-
Total consolidated	$ (~~1,184~~763)	$ (1,~~018~~219)	~~$ (3,640)~~	~~$ (3,295)~~
Interest expense
Vessel Operations	$ -	$ -	~~$ -~~	~~$ -~~
Geophysical Services	$ -	-	-	-
Marine Base Services	(12,~~723~~021)	(1,~~543~~654)	~~(5,041)~~	~~(4,447)~~
Total segments	(12,~~723~~021)	(1,~~543~~654)	~~(5,041)~~	~~(4,447)~~
Corporate interest expense	(~~617~~654)	(~~558~~584)	~~(1,772)~~	~~(1,627)~~
Total consolidated	$ (2,~~340~~675)	$ (2,~~101~~238)	~~$ (6,813)~~	~~$ (6,074)~~
Income/(Loss) Before Income Tax
Vessel Operations	$ ~~(336)~~1,134	$ ~~797~~910	~~$ (826)~~	~~$ (409)~~
Geophysical Services	(~~776~~920)	~~900~~(693)	~~(2,542)~~	~~2,633~~
Marine Base Services	(215,~~340~~943)	(2,~~664~~376)	~~(7,913)~~	~~(13,205)~~
Total segments	(315,~~452~~729)	(~~967~~2,159)	~~(11,281)~~	~~(10,981)~~
Corporate loss	(~~669~~1,047)	(~~699~~713)	~~(2,321)~~	~~(2,419)~~
Total consolidated	$ (416,~~121~~776)	$ (12,~~666~~872)	~~$ (13,602)~~	~~$ (13,400)~~

CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~June~~December 3031, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

	For the Three Months		~~For the Nine Months~~
	Ended June 30,		Ended June 30,
	Ended December 31,
	2015	2014	~~2015~~	~~2014~~
Benefit from (Provision for) Income Tax
Vessel Operations	$ ~~483~~(1)	$ (~~100~~131)	~~$ 639~~	~~$ 499~~
Geophysical Services	~~155~~(32)	~~(216)~~154	~~490~~	~~(737)~~
Marine Base Services	-	-	-	-
Total segments	~~638~~(33)	~~(316)~~23	~~1,129~~	~~(238)~~
Corporate provision for income tax	-	~~(2)~~-	~~(2)~~	~~(2)~~
Total consolidated	$ ~~638~~(33)	$ ~~(318)~~23	~~$ 1,127~~	~~$ (240)~~
Loss/(Income) attributable to Noncontrolling Interests
Loss from discontinued operations
Vessel Operations	$ -	$ -	~~$ -~~	~~$ -~~
Geophysical Services	-	-	-	-
Marine Base Services	~~(3)~~-	~~535~~-	~~646~~	~~2,390~~
Total segments	~~(3)~~-	~~535~~-	~~646~~	~~2,390~~
Corporate noncontrolling interest	-	-	-	-
Corporate	-	(14)
Total consolidated	$ ~~(3)~~-	$ ~~535~~(14)	~~$ 646~~	~~$ 2,390~~
Net (Loss)/Income attributable to Caspian Services Inc.
Loss attributable to Noncontrolling Interests
Vessel Operations	$ ~~147~~-	$ ~~697~~-	~~$ (187)~~	~~$ 90~~
Geophysical Services	~~(621)~~-	~~684~~-	~~(2,052)~~	~~1,896~~
Marine Base Services	(23,~~343)~~434	~~(2,129)~~519	~~(7,267)~~	~~(10,815)~~
Total segments	(23,~~817)~~434	~~(748)~~519	~~(9,506)~~	~~(8,829)~~
Corporate loss	(669)	(701)	(2,323)	(2,421)
Corporate noncontrolling interest	-	-
Total consolidated	$ (3,~~486)~~434	$ ~~(1,449)~~519	~~$ (11,829)~~	~~$ (11,250)~~
			June 30,	September 30,
Net (Loss)/ Income attributable to Caspian Services Inc.
Segment Assets			2015	2014
Vessel Operations	$ 1,133	$ 779
Vessel Operations			$ 17,855	$ 15,219
Geophysical Services	(952)	(539)
Geophysical Services			16,283	18,663
Marine Base Services	(12,509)	(1,857)
Marine Base Services			66,736	73,001
Total segments	(12,328)	(1,617)
Total segments			100,874	106,883
Corporate loss	(1,047)	(727)
Corporate assets			692	766
Total consolidated	$ (13,375)	$ (2,344)
Less intersegment investments			(40,705)	(40,581)
	December 31,	September 30,
Total consolidated			$ 60,861	$ 67,068
Segment Assets	2015	2015
Vessel Operations	$ 15,160	$ 16,430
Geophysical Services	7,669	10,611
Marine Base Services	50,623	55,726
Total segments	73,452	82,767
Corporate assets	663	673
Less intersegment investments	(40,356)	(40,348)
Total consolidated	$ 33,759	$ 43,092

22 CASPIAN SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015 (UNAUDITED)

(Dollars in thousands, except share and per share data)

NOTE 8 — SUBSEQUENT EVENTS

On January 11, 2016, the Company entered into a Master Financial Assistance Repayment Agreement with Caspian Geo, (the “Repayment Agreement”). Pursuant to the Repayment Agreement, the Company and Caspian Geo agreed to consolidate the previously provided financial assistance loans into a single US dollar denominated outstanding amount of $2,195. Caspian Geo will make minimum monthly payments of KZT 50,000 from January 2016 through November 2016, and by no later than December 30, 2016, will pay the remaining unpaid balance of the outstanding amount.

The financial assistance loans have been used by Caspian Geo to explore for gold ore within the Shoymibai Deposit located in the Karaganda Oblast of the Republic of Kazakhstan (the “Deposit”) and to prove the reserves of the Deposit to allow Caspian Geo and the holders of the exploration license to the Deposit to prepare the required submission to apply for a subsoil use contract for the production of gold ore from the Deposit. The application for the Subsoil Use Contract has been submitted to the competent authority of the Republic of Kazakhstan and the parties to that contract are in the process of reviewing and finalizing it. Upon successful grant of the Subsoil Use Contract, Caspian Geo plans to pursue commercial production of gold ore from the Deposit.

In addition to repayment of the previously provided financial assistance, the Company holds a participation interest right pursuant to which the Company will receive 20% of the total amount received by Caspian Geo from the sale of gold ore from the Deposit (the “Participation Interest”) from the date of the Repayment Agreement until seven years from the date of commencement of production following a commercial discovery at the Deposit. In the event the Company’s Participation Interest has not been converted or exchanged, following repayment in full of the $2,195, Caspian Geo has the right until January 9, 2018 to retire the Participation Interest in exchange for a lump sum payment of $1,825. The Company also has the right, at any time prior to retirement of the Participation Interest, to convert its Participation Interest into a 12.5% equity interest in the entity holding the Subsoil Use Contract should it become a public company or, in the event of a sale of the Subsoil Use Contract, to exchange the Participation Interest for 12.5% of the proceeds received by Caspian Geo in connection with such sale.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Throughout this report, unless otherwise indicated by the context, references herein to “we,” our,” and “us” mean Caspian Services, Inc., a Nevada corporation, and our subsidiaries and predecessors. Unless otherwise indicated by the context, all dollar amounts stated in this Part I, Item 2, other than share and per share amounts, are presented in thousands and all references to dollar amounts ($) refers to U.S. dollars.

The following discussion is intended to assist you in understanding our results of operations and our present financial condition. Our unaudited condensed consolidated financial statements and the accompanying notes included in this quarterly report on Form 10-Q contain additional information that should be referred to when reviewing this material and this document should be read in conjunction with our financial statements and the related notes contained elsewhere in this report and in our other filings with the U.S. Securities and Exchange Commission (the “Commission”), including our annual report on Form 10-K for the year ended September 30, ~~2014~~2015, and our other filings with the ~~Securities and Exchange~~ Commission ~~(the “Commission”)~~.

Forward-Looking Information and Cautionary Statements

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) that are based on management’s beliefs and assumptions and on information currently available to management. For this purpose any statement contained in this quarterly report that is not a statement of historical fact may be deemed to be forward-looking, including, but not limited to those relating to future demand for the services we offer, the commodity price environment, economic conditions in the markets where we operate, the availability to our customers of financing to pursue projects, our ability to restructure our existing debts, changes in the composition of the services we offer, future revenues, expenses, capital expenditures, results of operations, liquidity and capital resources or cash flows, ~~the~~foreign ~~commodity~~currency ~~price~~exchange ~~environment~~risk, managing our asset base, our ability to restructure our existing debts in a manner that will allow us to continue operating or to obtain additional debt or equity financing, management’s assessment of internal control over financial reporting, opportunities, growth, business plans, strategies and objectives. Without limiting the foregoing, words such as “believe,” “expect,” “project,” “intend,” “estimate,” “budget,” “plan,” “forecast,” “predict,” “may,” “will,” “could,” “should,” or “anticipate” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, ~~market~~commodity ~~factors~~price fluctuations, market ~~prices~~economic ~~and~~conditions, ~~marketing~~the ~~activity~~availability of funding, market factors, market prices, future revenues and costs, unsettled political conditions, civil unrest and governmental actions, foreign currency fluctuations, ~~commodity~~and ~~price~~local ~~fluctuations~~currency devaluations, and environmental and labor laws and other factors detailed herein and in our other filings with the Commission.

Forward-looking statements are predictions and not guarantees of future performance or events. Forward-looking statements are based on current industry, financial and economic information, which we have assessed but which by its nature, is dynamic and subject to rapid and possibly abrupt changes. Our actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. We hereby qualify all our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of their dates and should not be unduly relied upon. We undertake no obligation to publicly update or revise these forward-looking statements (other than pursuant to reporting obligations imposed on registrants pursuant to the Exchange Act), whether as a result of new information, future events or otherwise.

Business Review

As a result of the ~~recent~~prolonged significant decline in world oil prices and the continued delay in development of the Kashagan oil field, we anticipate demand for our services will be lower throughout the remainder of fiscal ~~2015~~2016, compared to the same periods of fiscal ~~2014~~2015. Current projections place commencement of the second phase of development of the Kashagan oil field some time in 2019. We do not know when world oil prices will rebound. We do not anticipate significant growth in demand for our services until the second phase of the Kashagan development project ramps up and world oil prices rebound. We continue to work to expand our vessel operations to Turkmenistan and Russian sectors of Caspian Sea in hopes of replacing some of the lost demand in Kazakhstan for our vessels.

During the ~~nine~~three months ended ~~June~~December 3031, 2015, we operated three business segments: Vessel Operations, Geophysical Services and Marine Base Services.

	For the Three Months			~~For the Nine Months~~
	Ended June 30,			Ended June 30,
	Ended December 31,
	2015	2014	% change	~~2015~~	~~2014~~	~~% change~~
VESSEL OPERATIONS
Operating Revenue	$ 23,~~620~~737	$ 45,~~495~~137	-4227%	~~$ 9,128~~	~~$ 11,218~~	~~-19%~~
Pretax Operating Loss	~~(336)~~1,134	~~797~~910	~~-142~~25%	~~(826)~~	~~(409)~~	~~102%~~
GEOPHYSICAL SERVICES
Operating Revenue	$ ~~746~~-	$ 31,~~564~~002	-79100%	~~$ 2,842~~	~~$ 10,832~~	~~-74%~~
Pretax Operating Income/(Loss)	(776)	900	-186%	(2,542)	2,633	-197%
Pretax Operating Loss	(920)	(693)	33%
MARINE BASE SERVICES
Operating Revenue	$ 21,~~205~~427	$ ~~564~~414	~~291~~245%	~~$ 5,792~~	~~$ 3,641~~	~~59%~~
Pretax Operating Loss	(215,~~340~~943)	(2,~~664~~376)	~~-12~~571%	~~(7,913)~~	~~(13,205)~~	~~-40%~~
CORPORATE ADMINISTRATION
Operating Revenue	$ -	$ -	n/a	~~$ -~~	~~$ -~~	~~n/a~~
Pretax Operating Loss	(~~669~~1,047)	(~~699~~713)	-447%	~~(2,321)~~	~~(2,419)~~	~~-4%~~

This table includes intercompany revenues, which are eliminated on a consolidation level. For details, please, refer to Note 7 to our condensed consolidated financial statements.

Summary of Operations

Three months ended ~~June~~December 3031, 2015, compared to the three months ended ~~June~~December 3031, 2014

Total revenue during the three months ended ~~June~~December 3031, 2015, was $3,~~268~~655 compared to $86,~~174~~097 during the three months ended ~~June~~December 3031, 2014, a decrease of 6040%.

25Vessel revenues were down 28% due to less utilization of our vessels in the first fiscal quarter 2016. We expect demand for our vessels to be flat or lower during the remainder of fiscal 2016 compared to fiscal 2015.

~~Vessel~~Revenue ~~revenues~~from ~~were~~geophysical ~~down~~services 45decreased 100% from $41,~~046~~002 during the ~~quarter~~first ~~ended~~fiscal ~~June~~quarter 302015, ~~2014~~ to $~~2,244~~0 during the ~~quarter~~first ~~ended~~fiscal ~~June~~quarter ~~30,~~2016. While ~~2015~~we ~~due~~completed toone ~~lower~~successful ~~utilization~~project ofduring ~~our vessels in~~ the ~~third~~first fiscal quarter 2015~~. We expect demand for our vessels~~, ~~and~~there ~~vessel~~were ~~revenue,~~no projects during the ~~remainder~~first of fiscal ~~2015~~2016. inAs ~~the~~a ~~Kazakhstan~~result ~~sector~~ of the ~~Caspian~~significant ~~Sea~~decrease ~~to remain significantly lower compared to fiscal 2014. We continue to pursue opportunities~~ in ~~Turkmenistan~~world ~~and~~oil ~~Russian sectors of Caspian Sea~~prices, ~~but so far~~ we ~~have~~expect ~~not~~less ~~been~~demand ~~successful~~for inour ~~replacing~~geophysical ~~the~~services ~~lost~~until ~~demand~~oil inprices ~~Kazakhstan~~rebound.

~~Revenue~~Marine ~~from~~base ~~geophysical~~service ~~services~~revenues ~~decreased~~were 7936% ~~from~~lower ~~$3,564~~ during the ~~third~~first fiscal quarter ~~2014~~2016 tomostly ~~$746~~due ~~during~~to ~~the~~fewer ~~third~~winter ~~fiscal~~vessels ~~quarter~~standby ~~2015. This~~contracts iswhich aresulted ~~result~~in ~~of completing two successful projects during~~ the ~~third~~generation ~~fiscal quarter 2014 compared to one project during the second fiscal quarter 2015. As a result~~ of ~~the~~less ~~significant decrease in world oil prices, there is very little demand in Kazakhstan for our geophysical services~~revenue. We expect ~~geophysical~~demand ~~services~~for ~~revenue~~our ~~during~~marine ~~the~~base ~~remaining fiscal quarter of 2015 will continue~~ to be ~~significantly~~ lower ~~compared~~throughout to the ~~same~~remainder ~~fiscal quarter~~ of ~~2014. We~~fiscal ~~anticipate~~2016 ~~geophysical~~as ~~services~~compared ~~revenue~~to ~~will~~fiscal ~~remain significantly depressed until world oil prices rebound~~2015.

AsIn aAugust ~~result~~2015, the National Bank of the ~~foregoing,~~Republic ~~our~~of ~~comprehensive~~Kazakhstan ~~loss~~changed ~~attributable~~its monetary policy to ~~Caspian~~switch ~~Services~~the Kazakh tenge to a free-floating exchange rate, ~~Inc.~~which ~~increased~~resulted ~~from~~in $1the value of the Kazakh tenge falling approximately 80% against the US dollar as of December 31,~~606~~ 2015. Due to this significant devaluation, and the remeasurment of our debt obligations, our foreign currency transaction loss increased by $313,~~473~~052 during the ~~third~~first fiscal 2016, compared to the first fiscal quarter 2015. The Kazakh tenge was stable during the first fiscal 2015.

As a result of the foregoing, our comprehensive loss attributable to Caspian Services, Inc. increased from $2,332 during the first fiscal quarter 2015, to $7,656 during the first fiscal quarter 2016.

Vessel Operations

~~Third~~First fiscal quarter ~~2015~~2016 revenue from vessel operations of $23,~~244~~443 was 4528% ~~or $1,802~~ lower than the ~~third~~first fiscal quarter ~~2014~~2015, as fewer vessels were utilized in the ~~third~~first fiscal quarter ~~2015~~2016. WeAs ~~expect~~the ~~vessel~~market ~~revenues~~continues ~~will~~to ~~remain~~react ~~significantly~~to lower ~~throughout~~world ~~the~~oil ~~remainder~~prices, ofwe ~~fiscal~~expect ~~2015~~vessel asrevenues ~~compared~~will tobe ~~the~~flat ~~comparable~~or ~~periods~~lower ofthroughout fiscal ~~2014. We~~2016, and we do not expect significant growth in demand for our vessels in the Kazakhstan sector of the Caspian Sea until commencement of the second phase of the Kashagan oil field project, if then. We continue to seek opportunities to utilize our vessel fleet outside of Kazakhstan, in the Turkmen and Russian sectors of the Caspian Sea. ~~To date, however, we have been unsuccessful in sufficiently expanding to those sectors to replace the demand lost in Kazakhstan.~~

During the three months ended June 30, 2015 vessel operating costs of $1,498 were 31% lower than during the three months ended June 30, 2014 in line with lower utilization level.

As a result of the decreased margins our net income from vessel operations in the third fiscal quarter 2015 decreased to $147 compared to net income of $697 in the third fiscal quarter of 2014. We do not anticipate this to improve during the remainder of fiscal 2015, nor do we anticipate a reversal of this trend in fiscal 2016.

Geophysical Services

Revenue from geophysical services decreased 79% from $3,564 during the third fiscal quarter 2014 to $746 during the third fiscal quarter 2015. This is a result of completing two successful projects during third fiscal quarter 2014 compared to one completed project during the third fiscal quarter 2015. As a result of the decreased activity, cost of geophysical service revenues decreased by 61% to $783.

As a result of decreased activity in our geophysical services business we realized a net loss attributable to Caspian Services, Inc. of $621 during the third fiscal quarter 2015 compared to income of $684 during the third fiscal quarter 2014.

The local market, from which much of our seismic work is generated, remains depressed as a result of the difficult credit market and lower world oil prices and we continue to struggle to obtain payment from overdue accounts from non-related parties.

We anticipate that the remainder of fiscal 2015 will be significantly worse than fiscal 2014 for seismic work as the credit required by local Kazakh companies to finance seismic projects remains elusive. In addition, decreasing world oil prices have resulted in many companies postponing further seismic works until oil prices rebound. We do not foresee a reversal in this trend in the near or medium term.

Marine Base Services

Our marine base services revenues decreased 51% to $278 during the third fiscal quarter 2015 as a result of decreased activity.

The revenue generated by the marine base was insufficient to cover our fixed costs, including depreciation. Additionally, interest expense of $1,723 was accrued to reflect our liability under the EBRD loan, the potential accelerated put option and the portion of interest on the loans from Investor that relate to the marine base.

During the third fiscal quarter 2015 we realized a marine base services loss of $2,343 compared to a loss of $2,129 during the third fiscal quarter 2014.

Although we have been able to enter into agreements with some customers to use our base’s services we do not expect significant demand for the marine base until Kashagan field development and construction activity increases, which is currently anticipated to start in 2019. Until world oil prices rebound and activity in the Caspian Sea region increases significantly, we do not expect the marine base to be able to service its current debt obligations or to operate profitably.

Corporate Administration

During the third fiscal quarter 2015 net loss from corporate administration was $669, which is 4% lower than loss realized during the third fiscal quarter 2014. This decrease is mostly due to a decrease in payroll expenses due to 10%-25% salary cuts to administrative personnel made in March 2015.

~~Depreciation~~During the three months ended December 31, 2015, vessel operating costs of $1,562 were 37% lower than during the three months ended December 31, 2014, primarily as a result of the decrease in vessel utilization. As a result of the improved profit margins our net income from vessel operations in the first fiscal quarter 2016, increased to $1,133 compared to net income of $779 in the first fiscal quarter of 2015.

Depreciation expense increased by $166 or 16% to $1,184 during the third fiscal quarter 2015 compared to the third fiscal quarter 2014 mostly due to MOBY depreciation expense incurred during the third fiscal quarter 2015. As we acquired MOBY in August 2014 no such expense was incurred during the third fiscal quarter 2014.

General and Administrative Expenses

General and administrative expenses decreased 37% to $1,391 during the quarter ended June 30, 2015. This decrease is the result of a decrease in payroll expenses of approximately $400 due to 10%-25% salary cuts to administrative personnel made in March 2015 and an accrual of $310 to reflect the potential outcome of litigation brought against Balykshi by the local electricity network company during the third fiscal quarter 2014.

Interest Expense

Interest expense of $2,340 for the third fiscal quarter 2015 was 11% higher than interest expense for the third fiscal quarter 2014. This increase is attributable to MOBY interest incurred during the third fiscal quarter 2015. As we acquired MOBY in August 2014 no such expense was incurred during the third fiscal quarter 2014.

Foreign Currency Transaction Loss

During the third fiscal quarter 2015 and 2014 we realized foreign currency transaction losses of $147 and $313, respectively.

It is our policy to try and match Euro costs with Euro income and we were able to reduce some of the loss as Euro costs for vessel rental were also lower. It is not our business to speculate on currency movements and we have not historically engaged in currency hedging.

Other Non-operating Income, Net

During the quarter ended June 30, 2015 we realized net other non-operating income of $77 compared to $32 during the quarter ended June 30, 2014.

Net Other Expenses

Net other expenses increased 2% to $2,410 during the third fiscal quarter 2015 mostly due to increased interest expense during this period.

Benefit from (provision for) Income Tax

During the three months ended June 30, 2015 we recorded a benefit for income tax in the amount of $638 compared to provision for $318 during the three months ended June 30, 2014. This change was caused by taxable losses recognized in CSG LLP and Tatarka during the third fiscal quarter 2015. In Kazakhstan each entity is taxed independently.

Net Loss Attributable to Caspian Services, Inc.

As a result of the aforementioned factors, during our third fiscal quarter 2015 we realized a net loss attributable to Caspian Services, Inc. of $3,486. By comparison, during the third fiscal quarter 2014 we realized a net loss attributable to Caspian Services, Inc. of $1,449. We anticipate this trend will continue into the foreseeable future.

Comprehensive Loss Attributable to Caspian Services, Inc.

During the quarter ended June 30, 2015 we realized a foreign currency translation adjustment of $10 and comprehensive income attributable to non-controlling interest of $3, compared to a foreign currency translation adjustment of ($221) and comprehensive income attributable to non-controlling interests of $64 during the quarter ended June 30, 2014. As a result, comprehensive loss attributable to Caspian Services, Inc. was $3,473 during the third fiscal quarter 2015 compared to $1,606 during the third fiscal quarter 2014.

Nine months ended June 30, 2015 compared to the nine months ended June 30, 2014

Total revenue during the nine months ended June 30, 2015 was $12,030 compared to $22,494 during the nine months ended June 30, 2014, a decrease of 47%.

Vessel revenues decreased by 18% to $8,134 during the nine months ended June 30, 2015 due to the lower vessel utilization rate. We expect demand for our vessels during the remainder of fiscal 2015 in the Kazakhstan sector of the Caspian Sea will be significantly lower compared to fiscal 2014. We continue to pursue opportunities in the Turkmenistan and Russian sectors of Caspian Sea to attempt to offset some of the lost demand in Kazakhstan.

Revenue from geophysical services decreased 74% from $10,832 during the nine months ended June 30, 2014 to $2,842 during the nine months ended June 30, 2015. This is a result of completing seven successful projects during the nine months ended June 30, 2014 compared to three projects during the nine months ended June 30, 2015. As a result of the significant decrease in world oil prices, we expect this trend of lower revenues and lower demand for our geophysical services to continue until oil prices rebound.

During the nine months ended June 30, 2014 our onshore seismic segment collected overdue payments from a related party (Bolz LLP) in the amount of $3,154. In prior periods we created an allowance for this overdue trade account receivable from related parties. As a result we reversed this allowance during the nine months ended June 30, 2014 for the amount of the repayment received. No similar transactions occurred during the nine months ended June 30, 2015.

During the nine months ended June 30, 2015 and 2014 we realized foreign exchange transaction losses of $1,128 and $6,776, respectively. This decrease in loss is due to revaluation of our debt denominated in U.S. dollars following a 20% devaluation of the Kazakh Tenge in February 2014. No such dramatic devaluation occurred during the nine months ended June 30, 2015.

As a result of the foregoing, our comprehensive loss attributable to Caspian Services, Inc. decreased from $15,553 during the during the nine months ended March 31, 2014 to $12,381 during the nine months ended June 30, 2015.

Vessel Operations

During the nine months ended June 30, 2015 revenue from vessel operations of $8,134 were 18% less than the results for the nine months ended June 30, 2014 due to the lower vessel utilization rate. We expect vessel revenues will be significantly lower throughout the remainder of fiscal 2015 compared to the same period of fiscal 2014, and we do not expect growth in demand for our vessels in the Kazakhstan sector of the Caspian Sea until commencement of the second phase of the Kashagan oil field project and until world oil prices rebound. We continue to seek opportunities to utilize our vessel fleet outside of Kazakhstan, in the Turkmen and Russian sectors of the Caspian Sea. To date, however, we have been unsuccessful in replacing the lost demand for our vessels in Kazakhstan. As noted above, we do not expect this to improve significantly in the near or medium term.

During the nine months ended June 30, 2015 vessel operating costs of $5,322 were 24% lower than during the nine months ended June 30, 2014, which allowed us to improve operating margins.

As a result of decreased activity we realized net loss of $187 from vessel operations during the nine months ended June 30, 2015 compared to net income of $90 during the nine months ended June 30, 2014. We expect this trend of net loss from vessel operations to continue through the remainder of fiscal 2015 and throughout fiscal 2016.

Geophysical Services

Revenue from geophysical services decreased 74100% from $101,~~832~~002 during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30~~2015, ~~2014~~ to $~~2,842~~0 during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30, 2015~~2016. This is a result of completing ~~seven~~one successful ~~projects~~project during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30~~2015, ~~2014~~ compared to ~~thee~~no projects during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30, 2015~~2016. As a result of the ~~significant~~decreased ~~decrease in world oil prices~~activity, wecost ~~expect~~of ~~the~~geophysical ~~trend~~service ofrevenues ~~less~~decreased ~~demand~~by ~~for~~74% ~~our~~to ~~geophysical~~$241. ~~services~~Even ~~and~~though ~~correspondingly,~~we ~~lower~~performed ~~geophysical~~no ~~services~~projects ~~revenue~~during tothe ~~continue~~first ~~until~~fiscal ~~world~~quarter ~~oil~~2016, ~~prices~~we ~~rebound~~incurred ~~and~~certain ~~the~~fixed ~~local~~costs ~~credit~~to ~~market~~maintain inour ~~Kazakhstan~~geophysical ~~improves~~service assets.

30As a result of decreased activity, we realized a net loss attributable to Caspian Services, Inc. from geophysical operations of $952 during the first fiscal quarter 2016, compared to a loss of $539 during the first fiscal quarter 2015.

During the nine months ended June 30, 2014 we paid a bonus of $1,487 to Mr. Vasilenko, our General Manager of Geophysical Services, in recognition of his efforts to collect this overdue balance from Bolz LLP.

No similar transactions occurred during the nine months ended June 30, 2015.

As a result of significantly decreased activity in our onshore seismic business, net loss attributable to Caspian Services, Inc. from geophysical operations of $2,052 was accrued during the nine months ended June 30, 2015 compared to net income attributable to Caspian Services, Inc. of $1,896 during the nine months ended June 30, 2014.

The local market, from which much of our seismic work is generated, remains depressed as a result of the difficult credit market and reduced oil prices and we continue to struggle to obtain payment from overdue accounts from non-related parties.

WeAlthough we continue to make attempts to diversify into other geophysical services, particularly mining, we anticipate that fiscal ~~2015~~2016, will be ~~significantly~~ worse ~~than fiscal 2014~~ for seismic work as the credit required by local Kazakh companies to finance seismic projects remains elusive. In addition, ~~decreasing~~depressed world oil prices ~~have~~continue ~~resulted~~to result in ~~many~~the ~~companies~~postponement ~~postponing~~of ~~further~~ seismic works ~~until~~by ~~oil~~our ~~prices~~potential ~~rebound~~customer. Currently, we are not engaged in any projects. We are pursuing work from potential customers, but there is no guarantee we will be successful in securing this work. We anticipate ~~these~~this ~~trends~~trend will continue in future periods until world oil prices rebound and the credit market in Kazakhstan improves.

Marine Base Services

Our marine base services revenues decreased 4136% to $~~1,054~~212 during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30~~2016, ~~2015. During~~mostly ~~the~~due ~~nine~~to ~~months~~having ~~ended~~fewer ~~June~~winter ~~30,~~vessels ~~2015~~standby wecontracts. The ~~realized no~~ revenue ~~from~~generated ~~MOBY~~was ~~compared~~insufficient to ~~$931~~cover ~~during~~our ~~the~~fixed ~~nine~~costs, ~~months~~including ~~ended~~depreciation. ~~June 30~~Additionally, ~~2014. As~~interest ~~MOBY~~expense isof ~~now~~$2,021 ~~part~~was ofaccrued ~~the~~to ~~Caspian~~reflect ~~Services~~our ~~group~~liability ofunder ~~companies~~the Balykshi Loan, ~~MOBY’s~~the ~~intercompany~~potential ~~revenue~~accelerated ~~was~~put ~~eliminated~~option ~~during~~and the ~~consolidation~~portion ~~process~~of ~~during~~interest on the ~~nine~~Investor’s ~~months~~Notes ~~ended~~that ~~June~~relate ~~30,~~to ~~2015~~the marine base.

The revenue generated from marine base services was insufficient to cover our fixed costs, including depreciation. Additionally, interest expense of $5,041 was accrued to reflect our liability under the EBRD loan, the potential accelerated put option and the portion of interest on the loans from Investor, which relate to the marine base.28

During the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30~~2016, ~~2015~~ we realized a marine base services loss of $712,~~267~~509 compared to a loss of $101,~~815~~857 during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30,~~ 2015. ~~The~~This ~~decrease~~increase in loss was mostly due to $713,~~131~~142 of foreign ~~exchange~~currency transaction loss ~~that~~resulting ~~resulted~~ from the revaluation of our ~~debt~~obligations to EBRD denominated in ~~U.S.~~US ~~Dollars~~dollars following athe 2080% devaluation of the Kazakh ~~Tenge~~tenge inagainst ~~February~~the ~~2014. No~~US ~~such~~dollar ~~dramatic~~from ~~devaluation~~August ~~occurred~~2015, ~~during~~through the ~~nine~~end ~~months~~of ~~ended~~our ~~June~~first ~~30,~~fiscal ~~2015~~quarter 2016.

31Although we have been able to enter into agreements with some customers to use our base’s services we do not expect significant demand for the marine base until Kashagan field development and construction activity increases, which is currently anticipated to start no earlier than 2019. Until activity in the Caspian Sea region increases, we do not expect the marine base to be able to service its current debt obligations or to operate profitably.

Corporate Administration

During the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30~~2016, ~~2015~~ net loss from corporate administration was $21,~~321~~047, which is 4%$320 ~~lower~~higher than ~~the~~net loss ~~realized~~for ~~during~~ the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30, 2014~~2015. ~~This~~The ~~decrease~~increase isrepresents ~~mostly~~the ~~due~~effect toof athe ~~decrease~~capitalization inof ~~payroll~~interest ~~expenses~~on ~~due~~Investor’s ~~to 10%-25% salary cuts to administrative personnel made in March 2015~~Notes.

Depreciation and Amortization

Depreciation ~~expense~~and ~~increased~~amortization byexpense ~~$345~~of ~~or 10% to~~ $~~3,640~~763 during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30~~2016, ~~2015~~was 37% lower compared to the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30~~2015, ~~2014~~mainly ~~mostly~~ due to ~~MOBY~~the ~~depreciation~~effect ~~expense~~of ~~incurred~~devaluation ~~during~~of ~~the~~Kazakh ~~nine~~tenge, ~~months~~as ~~ended~~our ~~June~~major ~~30,~~assets ~~2015. As~~are wedenominated ~~acquired MOBY~~ in ~~August~~Kazakh ~~2014 no such expense was incurred during the nine months ended June 30, 2014~~tenge.

General and Administrative ~~Expenses~~Expense

General and administrative expenses ~~decreased 8% or $509 to $5,748 during nine months ended June 30, 2015. Excluding the effect~~ of ~~the reversed provision of~~ $~~3,154 for Bolz LLP and $~~1,~~487~~904 ~~bonus paid to Mr. Vasilenko~~ during the ~~nine~~quarter ~~months~~ ended ~~June~~December 3031, ~~2014,~~2015 ~~which~~was ~~were~~in ~~mentioned~~line ~~above,~~with ~~total~~ general and administrative expenses ~~for~~incurred the nine months ended June 30, 2015 would have decreased 27% or $2,176 compared to nine months ended June 30, 2014. The decrease is mostly due to (i) the write-off of $620 of other receivables due from Kazmorgeophisica to Tatarka during ~~nine months ended June 30, 2014, (ii) approximately $500 decrease in payroll expenses due to 10%-25% salary cuts to administrative personnel made in March 2015 (iii) accrual of $310 to reflect~~ the ~~potential~~quarter ~~outcome of litigation brought against Balykshi by the local electricity network company during the nine months~~ ended ~~June~~December 3031, 2014 ~~(iv) payment of $165 of retention bonuses to certain executive officers and (v) payment of $70 of loyalty bonuses to non-executive officers recognized during nine months ended June 30, 2014~~. ~~No such expenses were recognized during the nine months ended June 30, 2015.~~

Interest Expense

Interest expense of $62,~~813~~675 ~~for~~was $437 higher during the ~~nine~~three months ended ~~June~~December 3031, 2015, ~~was 12% higher~~ than during the ~~nine~~three months ended ~~June~~December 3031, 2014. ~~This~~The increase isrepresents ~~attributable to interest incurred on~~ the ~~MOBY-EBRD~~effect ~~loan~~of ~~during~~ the ~~nine~~capitalization ~~months~~of ~~ended~~Investor’s ~~June 30~~Notes, ~~2015. As~~and wethe ~~acquired~~Balykshi ~~MOBY~~Loan inand ~~August 2014 we are now required to consolidate~~ MOBY inLoan ~~our~~interest ~~financial~~during ~~statements. Prior~~the tofirst ~~August~~fiscal ~~2014~~quarter ~~we were not required to recognize and expense related to the MOBY-EBRD loan~~2016.

Foreign Currency Transaction Loss

~~During~~In August 2015, the ~~nine~~National ~~months~~Bank ~~ended~~of ~~June~~the ~~30,~~Republic ~~2015~~of ~~and~~Kazakhstan ~~2014~~changed weits ~~realized~~monetary ~~foreign~~policy ~~currency~~to ~~transaction~~make ~~losses~~the ofKazakh ~~$1,128~~tenge ~~and~~free $6floating. As a result,~~776,~~ ~~respectively.~~the ~~This~~Kazakh ~~decrease~~tenge inhas ~~loss~~suffered isapproximately ~~mostly~~an ~~due~~80% todevaluation ~~revaluation~~against ofthe ~~our~~US ~~EBRD~~dollar ~~loan~~as ~~denominated~~of inDecember U31, 2015.S. As ~~Dollars~~result ~~following~~of athis ~~20%~~ devaluation and the remeasurement of the ~~Kazakh~~debt ~~Tenge~~obligations inof ~~February~~our ~~2014. No~~subsidiaries, ~~such~~our ~~dramatic~~foreign ~~devaluation~~currency ~~occurred~~transaction ~~during~~loss ~~the~~increased ~~nine~~by ~~months~~$13,052 ~~ended~~during ~~June~~our 30first fiscal quarter 2016, compared to our first fiscal 2015. The Kazakh tenge was stable during our first fiscal 2015.

~~Other~~ It ~~Non-operating~~is ~~Income,~~our ~~Net~~policy to try to match Euro costs with Euro income and we were able to reduce some of the loss as Euro costs for vessel rental were also lower. It is not our business to speculate on currency movements and we have not historically engaged in currency hedging.

During the nine months ended June 30, 2015 we realized net other non-operating income of $119 compared to $51 during the nine months ended June 30, 2014.

Net Other Expenses

~~Net~~As ~~other~~a ~~expenses~~result ~~decreased~~of ~~39%~~the tosignificant ~~$7,822~~increase ~~during~~in ~~the~~foreign ~~nine~~currency ~~months~~transaction ~~ended June 30~~loss, ~~2015. The decrease in~~ net other expenses isincreased ~~mostly~~601% ~~attributable~~ to ~~the~~$15,846, ~~decreased foreign currency translation loss resulting from the devaluation of the Kazakh Tenge~~ during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30, 2014~~2016.

Benefit from (Provision for) Income Tax

During the ~~nine~~three months ended ~~June~~December 3031, 2015, we realized a ~~benefit~~provision ~~from~~for income tax in the amount of $~~1,127~~33 compared to a ~~provision~~realized benefit ~~for~~from income tax in the amount of $~~240~~23 during the ~~nine~~three months ended ~~June~~December 3031, 2014. This difference was caused by the fact that ~~our~~all ~~wholly-owned~~entities ~~subsidiaries, CSG LLP and Tatarka,~~ incurred the taxable ~~loss~~losses during ~~nine~~our ~~months~~first ~~ended~~fiscal ~~June~~quarter ~~30, 2015~~2016. In Kazakhstan each entity is taxed independently.

Net Loss Attributable to Caspian Services, Inc.

As a result of the aforementioned factors, during ~~the~~our ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30~~2016, ~~2015~~ we realized a net loss attributable to Caspian Services, Inc. of $1113,~~829~~375. By comparison, during ~~nine~~our ~~months~~first ~~ended~~fiscal ~~June~~quarter 302015, ~~2014~~ we realized a net loss attributable to Caspian Services, Inc. of $112,~~250~~344.

Comprehensive Loss Attributable to Caspian Services, Inc.

During the ~~nine~~quarter ~~months~~ ended ~~June~~December 3031, 2015, we realized a foreign currency translation adjustment of $945,720 and comprehensive loss attributable to non-controlling interest of $~~646~~9, compared to a foreign currency translation adjustment of ($~~4,814)~~12 and comprehensive income attributable to non-controlling ~~interests~~interest of $~~511~~0 during ~~nine~~the ~~months~~quarter ended ~~June~~December 3031, 2014. The dramatic increase in foreign currency translation adjustment in the first fiscal quarter 2016 was caused by Kazakh tenge devaluation, as explained above. As a result, comprehensive loss attributable to Caspian Services, Inc. was $127,~~381~~664 during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30~~2016, ~~2015~~ compared to $152,~~553~~332 during the ~~nine~~first ~~months~~fiscal ~~ended~~quarter ~~June 30, 2014~~2015.

Liquidity and Capital Resources

At ~~June~~December 3031, 2015, we had cash on hand of $~~196~~449 compared to cash on hand of $1,~~957~~372 at September 30, ~~2014~~2015. At ~~June~~December 3031, 2015, total current liabilities exceeded total current assets by $93102,~~721~~975. This was mainly attributable to the ~~EBRD~~Balykshi ~~loans~~ and MOBY Loans, the put option and the Investor’s Notes being classified as current liabilities.

~~In 2007 our subsidiary Balykshi entered into a series of debt and equity financing agreements with EBRD to provide funding for our marine base. As of June~~ 30, 2015 the outstanding loan balance and accrued interest of the Balykshi loan was $27,333. The Balykshi loan matured in May 2015. Under the terms of the EBRD Loan Agreement, as amended, semi-annual repayment installments under the Balykshi loan were due each year on November 20 and May 20. As of the date of this report none of the required installment payments has been made and the loan is now due and payable. The default interest rate of the Balykshi loan of 9% is applied to the payments due but not paid. The EBRD loan is collateralized by the property, including the marine base, and bank accounts of Balykshi and CRE.

InAs ~~connection~~of ~~with~~December ~~the Balykshi financing~~31, ~~EBRD also made a $10~~2015,~~000~~ ~~equity~~the ~~investment~~outstanding toloan ~~purchase~~balance aand ~~22%~~accrued ~~equity~~ interest inof ~~Balykshi. To secure that funding we were required to grant EBRD a put option whereby EBRD can require~~ the ~~Company~~Balykshi toLoan ~~repurchase~~was ~~the 22% equity interest~~$28,639. The ~~put~~Balykshi isLoan ~~exercisable~~matured ~~during~~in ~~the~~May ~~period~~2015. As ~~from~~of ~~six~~the todate ~~ten~~of ~~years~~this ~~after~~report ~~the~~none ~~signing~~ of the ~~Investment~~required ~~Agreement. The~~installment ~~put~~payments ~~price~~have isbeen ~~determined~~made ~~based~~and on the ~~fair~~loan ~~market~~is ~~value~~now ofdue ~~Balykshi~~and aspayable ~~mutually~~in ~~agreed~~full. The bydefault ~~the~~interest ~~parties,~~rate ~~except~~of ~~that in~~ the ~~event~~Balykshi loan of a9% ~~default,~~per ~~EBRD~~annum ~~has~~is ~~the~~applied ~~right~~ to ~~accelerate~~ the ~~put~~payments ~~option~~due atbut anot ~~fixed rate of return as discussed in more detail below~~paid. InThe ~~the~~Balykshi ~~event~~Loan ~~there~~ is acollateralized ~~change~~by inthe ~~control~~property, ofincluding the ~~Company,~~marine ~~EBRD may~~base, ~~but~~and isbank ~~not~~accounts ~~required~~of toBalykshi ~~exercise~~and ~~its~~CRE ~~put~~and ~~right~~is toadditionally ~~require~~secured ~~the~~by ~~Company~~a toCSI ~~repurchase~~corporate ~~the equity interest at its fair market value~~guarantee.

The ~~put~~balance ~~option includes an acceleration right in the event: (i) any financial debt~~ of ~~Balykshi~~our input ~~excess~~option ofliability ~~$1,000~~to ~~is not paid when due~~EBRD, orhad aEBRD ~~default~~accelerated ofits ~~any~~put ~~nature~~option ~~occurs~~ and ~~such~~required ~~financial~~us ~~debt becomes prematurely due and payable or is placed on demand; (ii) any party~~ to ~~the~~repurchase ~~financing agreements (other than EBRD) fails to meet~~ its ~~obligations~~22% ~~under~~equity ofinterest ~~any of the financing agreements between Balykshi, the Company and EBRD; (iii) any actions are taken or proceeding instituted that would result~~ in the Company’s bankruptcy, insolvency, reorganization or similar action, or the Company’s consenting to any such action or proceeding; (iv) any representation or warranty made or confirmed by the Company or Balykshi ~~is found to be false or misleading when made or confirmed. If the put option is accelerated~~, ~~EBRD~~was ~~can require the Company to repurchase the~~ $1024,~~000~~143 ~~equity~~as ~~investment~~of ~~plus~~December a31, ~~20% per annum rate of return~~2015.

34As of December 31, 2015, the outstanding balance of the MOBY Loan was $6,402 including the accrued and unpaid interest. We are currently accruing interest under the MOBY Loan at the default interest rate which is equal to the interbank rate plus 5.6% per annum. As of December 31, 2015, MOBY had made none of the required semi-annual installment payments and was in violation of certain financial covenants under the MOBY Loan Agreement. Pursuant to the MOBY Loan Agreement, if an event of default occurs and is continuing, EBRD may declare all or any portion of the principal and accrued interest of the loan due and payable on demand, or immediately due and payable without further notice and without presentment, demand or protest.

InAs ~~connection~~of ~~with~~December ~~the~~31, ~~Balykshi financing agreements~~2015, the ~~Company is obligated to provide financial assistance to Balykshi to meet its obligations and working capital needs. We have agreed with local authorities to complete~~ outstanding ~~dredging~~balance ~~work at the marine base within a reasonable period~~ of ~~time. Currently, Balykshi has insufficient funds to complete~~ the ~~dredging~~Non-Negotiable ~~project. As~~Note ~~the dredging~~ was ~~not completed in a reasonable period of time~~$10,920 ~~Balykshi~~and ~~could be subject to certain penalties, including~~ the ~~cancelation~~outstanding ofbalance ~~permits and termination~~ of ~~operational activities at~~ the ~~marine~~Consolidated ~~base~~Note ~~until~~was ~~the dredging is completed~~$37,871. ~~The~~We ~~failure~~have byagreed ~~Balykshi or the Company~~ to ~~provide~~secure ~~financing~~these ~~for,~~Notes orwith tonon-marine ~~complete,~~base ~~the~~assets ~~dredging~~that ~~works~~have ~~could~~not ~~constitute~~been apledged ~~default~~to ~~under the Balykshi-~~EBRD ~~financing agreements~~.

InPursuant ~~2008~~to ~~Balykshi~~the ~~entered~~terms ~~into~~of anthe ~~agreement~~Non-Negotiable ~~with~~Note, ~~the~~Investor ~~Investment~~may, ~~Committee~~at ofany ~~the~~time, ~~Republic~~demand and receive payment of ~~Kazakhstan~~the ~~and~~Non-Negotiable ~~agreed~~Note toby athe ~~schedule~~issuance of ~~work~~our tocommon bestock. The ~~performed~~price atper ~~the~~share ~~marine~~for ~~base~~principal and interest is $0.12. AsInvestor ofhas the ~~date~~right, ofat ~~this~~any ~~report~~time, ~~Balykshi~~to ~~has~~demand ~~failed~~the toissuance ~~complete~~of ~~approximately~~shares ~~$3,800~~in satisfaction of the ~~agreed~~Non-Negotiable ~~upon~~Note. If ~~scheduled~~the ~~work,~~issuance ~~which~~of ~~could~~common ~~result~~stock inhas ~~the~~not ~~cancellation~~been ofdemanded ~~tax~~by ~~preferences~~Investor ~~granted~~or tomade ~~Balykshi~~at our election by the ~~Investment~~June ~~Committee~~30, 2016 maturity date, we will be required to repay the principal and interest in cash.

As of ~~June~~the ~~30,~~date ~~2015~~of ~~the~~this ~~outstanding~~report ~~balance~~none of the ~~MOBY~~semi-annual ~~loan~~interest ~~from~~payments ~~EBRD~~under ~~was~~the ~~$6,232~~Consolidated ~~including~~Note ~~the~~have ~~accrued~~been ~~and~~made ~~unpaid~~to ~~interest~~Investor when due. ~~The~~We ~~interest~~have, ~~rate~~however, ~~under~~made ~~the~~partial ~~MOBY~~payments ~~loan~~to isInvestor ~~generally~~in the ~~interbank~~aggregate ~~rate~~amount ~~plus~~of a$2,850 ~~margin~~to reduce the balance of 3the Consolidated Note.~~6%.~~ The ~~MOBY~~failure ~~Loan~~to ~~Agreement~~make ~~provides~~the ~~that~~full ~~during~~semi-annual ~~any~~payments ~~period~~under the Consolidated Note when ~~the~~due ~~loan~~may isconstitute inan event of default, aunder the Consolidated Note. The default interest rate ofunder the ~~interbank~~Consolidated ~~rate~~Note ~~plus~~is a13% ~~margin~~per annum. In the event of ~~3.6%~~a ~~plus~~default anthat ~~additional~~remains 2%uncured, ~~per~~Investor ~~annum~~may, ~~shall~~at beany ~~charged~~time, demand immediate repayment of the Consolidated Note. The ~~MOBY~~maturity ~~Loan~~date ~~Agreement~~of ~~provides~~the ~~for~~Consolidated 14Note ~~equal~~is ~~semi-annual~~June ~~installment~~30, ~~payments~~2016. As ofnoted ~~principal~~herein ~~and~~the ~~interest~~Investor onmay ~~June~~elect 15to ~~and~~have ~~December~~the ~~15,~~Consolidated ~~commencing~~Note ~~after~~repaid ~~August~~in ~~2011~~common (stock of the ~~third~~Company ~~anniversary~~in lieu of ~~the~~cash ~~MOBY~~repayment. The ~~Loan~~price ~~Agreement~~per share for principal and interest is $0.) 10.

As of June 30, 2015 MOBY had made no semi-annual installment payments and was in violation of certain financial covenants under the MOBY Loan Agreement. Pursuant to the MOBY Loan Agreement, if an event of default occurs and is continuing, EBRD may, at its option, by notice to MOBY, declare all or any portion of the principal and accrued interest of the loan due and payable on demand, or immediately due and payable without further notice and without presentment, demand or protest.31

To our knowledge, as of the date of this report neither EBRD ~~has~~nor ~~not~~Investor has sought to accelerate our obligations to them. Should EBRD seek to collect the ~~debt~~Balykshi ~~obligations~~Loan ofor to accelerate the MOBY Loan or the put option, or to enforce the MOBY Loan Guarantee or the Company corporate guarantee, or any of our other financial obligations to EBRD, or should Investor seek to accelerate repayment of the Consolidated Note we would have insufficient funds to satisfy any of those obligations, collectively or individually. If we are unable to satisfy those obligations, EBRD or Investor could seek any legal remedy available to it or him to obtain repayment, including forcing the Company ~~under~~into bankruptcy, or in the ~~Guarantee~~case of EBRD, foreclosing on the loan collateral, which includes the marine base and other assets and bank accounts of Balykshi and CRE, enforcing the Company corporate guarantee, and pursuing the other assets of the Company.

Should EBRD seek to collect the EBRD loan, or to accelerate the put option or the MOBY loan, or should it seek to enforce the MOBY loan guarantee, or our other financial obligations to it, we would have insufficient funds to satisfy those obligations collectively or individually. If we are unable to satisfy those obligations, EBRD could seek any legal remedy available to it to obtain repayment, including forcing the Company into bankruptcy, or foreclosing on the loan collateral, which includes the marine base and other assets and bank accounts of Balykshi and CRE.

We are engaged in ongoing discussions with EBRD about a potential restructuring of our obligations to EBRD. There is no guarantee we will be successful in negotiating, obtaining approval of or concluding a restructuring agreement with EBRD on favorable terms, or at all.

ToWhile ~~help~~we ~~meet~~have made significant efforts to increase our ~~additional~~revenues ~~funding~~and ~~obligations~~control our operating expenses, we continue to ~~construct~~generate ~~the~~net ~~marine~~losses. As ~~base~~noted above, inwe ~~2008~~do wenot ~~entered~~expect ~~into~~a ~~two~~reversal ~~facility~~in ~~agreements~~the ~~pursuant~~trend of lower revenues from operations to ~~which~~improve weuntil ~~obtained~~world ~~debt~~oil ~~funding~~prices rebound, the credit markets in Kazakhstan improve and the second phase of ~~$30~~the Kashagan development ramps up,~~000~~ which at this time is projected to occur no earlier than 2019. In ~~June~~order ~~and~~to ~~July~~diversify ~~2011~~our ~~Investor~~operations, ~~acquired~~we have worked to enter the ~~two~~Turkmen ~~facility~~and ~~agreements~~Russian markets. InTo ~~September~~date, ~~2011~~however, wethese ~~issued~~efforts ~~Investor~~have ~~two~~not ~~secured~~been ~~promissory~~successful ~~notes,~~in replacing the ~~Non-Negotiable~~lost ~~Note~~demand in ~~the~~Kazakhstan. Unless ~~principal~~we ~~amount~~are able to exploit other new markets outside of ~~$10~~Kazakhstan for our services,~~800~~ ~~and~~we ~~the~~do ~~Consolidated~~not ~~Note~~believe inwe ~~the~~will ~~principal~~be ~~amount~~able ofto ~~$24,446~~continue into ~~connection~~sustain ~~with~~net alosses ~~proposed~~until ~~restructuring~~the second phase of ~~the~~Kashagan ~~facility~~development ~~agreements~~ramps up. WeMoreover, ~~agreed~~we toexpect ~~secure~~the ~~these~~ongoing ~~Notes~~depression ~~with~~of ~~non-marine~~world ~~base~~oil ~~assets~~prices ~~that~~will continue to have ~~not~~a ~~been~~significantly ~~pledged~~negative toimpact ~~EBRD~~on our revenues until such time as oil prices rebound.

~~Pursuant~~With toongoing ~~the~~weak ~~terms~~oil ofprices ~~the Non-Negotiable Note, Investor may, at any time, demand~~ and ~~receive payment of~~ the ~~Non-Negotiable~~contracted ~~Note~~market ~~by the issuance of our common stock. The price per share~~ for ~~principal and interest is $0.12. Investor has~~ the ~~right,~~services atwe ~~any time~~offer, towe ~~demand~~have ~~the issuance of shares in satisfaction of the Non-Negotiable Note. If the issuance of common stock has not~~ been ~~demanded~~searching byfor ~~Investor~~new oropportunities ~~made at our election by the June 30, 2016 extended maturity date, we are required~~ to ~~repay~~generate ~~the principal and interest in cash~~income. ~~We do not currently have sufficient cash to repay the principal or interest of the Non-Negotiable Note.~~

~~Pursuant~~During fiscal 2015, we provided financial assistance to Caspian Geo-Consulting Services LLP (“Caspian Geo”) in the ~~terms~~form of ~~the~~loans ~~Consolidated~~which ~~Note,~~has ~~interest~~been ~~accrues~~used atby ~~12%~~Caspian ~~per~~Geo ~~annum~~to ~~and~~explore ~~shall~~for begold ~~paid~~ore ~~semi-annually~~within inthe ~~arrears~~Shoyimbai onDeposit ~~each~~located ~~six~~in ~~month~~the ~~anniversary~~Karaganda Oblast of the ~~Issuance~~Republic ~~Date~~of Kazakhstan (~~September~~the ~~30, 2011~~“Deposit”)~~. The~~ ~~unpaid~~and ~~principal~~to ~~amount~~prove the reserves of the ~~Consolidated~~Deposit ~~Note~~so ~~and~~that ~~any~~Caspian ~~accrued~~Geo ~~but~~and ~~unpaid~~the ~~interest~~holders ~~thereon~~of ~~shall~~the beexploration ~~due~~license ~~and~~on ~~payable~~the onDeposit could prepare the ~~extended~~required ~~maturity~~submission ~~date~~to ofapply for a subsoil use contract for the ~~Consolidated~~production ~~Note,~~of ~~which~~gold isore ~~June~~from ~~30,~~the ~~2016~~Deposit (the “Subsoil Use Contract”). The ~~Consolidated~~application ~~Note~~for ~~provides~~the ~~for~~Subsoil aUse ~~default~~Contract ~~rate~~has ofbeen ~~interest~~submitted ofto ~~13%~~the ~~per~~competent ~~annum~~authority ~~upon~~of the ~~occurrence~~Republic of Kazakhstan and ~~during~~the parties to that contract are in the ~~continuation~~process of anreviewing ~~event~~and offinalizing ~~default,~~it. Upon assuccessful ~~defined~~grant inof the ~~Consolidated~~Subsoil ~~Note~~Use Contract, ~~which~~Caspian ~~shall~~Geo beplans ~~payable~~to inpursue ~~cash~~commercial ~~upon~~production ~~demand~~of gold ore from the Deposit (the “Project”).

~~Investor~~At ~~has~~December ~~the~~31, ~~right~~2015, atthe ~~any~~unpaid ~~time~~outstanding ~~following~~balance awas ~~five-day~~KZT ~~written~~543,500. We ~~notice~~have toagreed ~~convert~~with ~~all~~Caspian orGeo ~~any~~to ~~portion~~consolidate of the ~~principal~~previously ~~and~~provided ~~any~~financial ~~accrued~~assistance ~~but~~into ~~unpaid~~a ~~interest~~single ~~into~~US ~~shares~~dollar ofdenominated ~~our~~outstanding ~~common~~amount ~~stock~~of at $02,195.10 Caspian ~~per~~Geo ~~share.~~will ~~However~~make ~~any~~minimum ~~conversion~~monthly ~~that~~payments ~~would~~of ~~result~~KZT in50,000 afrom ~~change~~January in2016 ~~control~~through ofNovember ~~the~~2016, ~~Company~~and ~~without~~by ~~the~~no ~~prior~~later ~~consent~~than ofDecember ~~EBRD~~30, ~~could~~2016, ~~result~~will inpay athe ~~breach~~remaining unpaid balance of the ~~Balykshi-EBRD~~outstanding ~~financing agreements~~amount.

As of the date of this report none of the semi-annual interest payments under the Consolidated Note have been made to Investor when due. We have, however, made partial interest payments to Investor in the aggregate amount of $2,750 to reduce interest due on the Consolidated Note. The failure to pay the full interest on the Consolidated Note when due may constitute an event of default under the Consolidated Note. In the event of a default that remains uncured, Investor may, at any time, demand immediate repayment of the Consolidated Note. As a result, we have included the Consolidated Note and all accrued but unpaid interest as current liabilities at June 30, 2015. As of the date of this report, to our knowledge, Investor has not made any demand for immediate repayment of the Consolidated Note. As with EBRD, if Investor were to demand immediate repayment of the Consolidated Note, we would have insufficient funds to satisfy that obligation. Were that to occur, we anticipate Investor would seek any legal remedy available to him to obtain repayment.32

36In addition to repayment of the financial assistance, we hold a participation interest right pursuant to which, we will receive 20% of the total amount received by Caspian Geo, which in no event shall be less than 10% percent of the total amount distributed to the holders of the Subsoil Use Contract, from the sale of gold ore from the Deposit (the “Participation Interest”) from January 11, 2016, until seven years from the date of commencement of production following a commercial discovery at the Deposit. In the event we have not exercised our conversion or exchange rights, following repayment in full of the $2,195, Caspian Geo has the right until January 9, 2018 to retire our Participation Interest in exchange for a lump sum payment of $1,825. At this time, we do not know how long it will be before the Project begins generating income or we receive any income from our Participation Interest.

~~While~~We wealso have ~~made~~the ~~significant efforts to increase our revenues and control our operating expenses~~right, weat ~~continue~~any totime ~~generate~~prior ~~net losses. As noted above, we do not expect a reversal in the trend of lower revenues from operations~~ to ~~improve~~retirement ~~significantly until world oil prices rebound and the second phase~~ of the ~~Kashagan~~Participation ~~development ramps up~~Interest, ~~which~~to atconvert ~~this~~our ~~time~~Participation isInterest ~~projected~~into toa ~~occur in 2019~~12. In5% ~~order~~equity tointerest ~~diversify~~in ~~our~~the ~~operations,~~entity weholding ~~have~~the ~~worked~~Subsoil toUse ~~enter~~Contract ~~the~~should ~~Turkmen~~it ~~and~~become ~~Russian~~a ~~markets. To~~public ~~date,~~company ~~however~~or, ~~these efforts have not been successful~~ in ~~replacing~~ the ~~lost~~event ~~demand~~of ina ~~Kazakhstan. Unless~~sale ~~we are able to exploit other new markets outside~~ of ~~Kazakhstan~~the ~~for~~Subsoil ~~our~~Use ~~services~~Contract, ~~we do not believe we will be able~~ to ~~continue~~exchange toour ~~sustain~~Participation ~~net~~Interest ~~losses~~for ~~until~~12.5% ~~the second phase~~ of ~~Kashagan~~the ~~development~~proceeds ~~ramps~~received ~~up. Moreover,~~by weCaspian ~~expect~~Geo ~~the recent significant decrease~~ in ~~world~~connection ~~oil~~with ~~prices will continue to have a significantly negative impact on our revenues until~~ such ~~time as oil prices rebound~~sale.

Our ability to continue as a going concern is dependent upon, among other things, our ability to (i) successfully restructure our financial obligations to EBRD and Investor, (ii) increase our revenues and improve our operating results to a level that will allow us to service our financial obligations, and/or (iii) attract other significant sources of funding, and (iv) a return to higher world oil prices. Uncertainty as to the outcome of each of these events raises substantial doubt about our ability to continue as a going concern.

Cash Flows

We typically realize decreasing cash flows during our first fiscal quarter and limited cash flow during our second fiscal quarter as weather conditions in the north Caspian Sea dictate when oil and gas exploration and development work can be performed. Usually, the work season commences in late March or early April and continues until the Caspian Sea ices over in November. As a result, other than TatArka, which can continue to provide some onshore geophysical services between November and March and the receipt of winter standby rates on vessels, we generate very little revenue from November to March each year.

~~The following table provides an overview of our cash flow during the nine months ended June 30, 2015 and 2014.~~ 33

	Period ended June 30,
	2015	2014
Net cash provided by operating activities	$ 2,287	$ 6,480
Net cash used in investing activities	(3,001)	(3,823)
Net cash used in financing activities	(450)	(700)
Effect of exchange rate changes on cash	(597)	(4,768)
Net Change in Cash	$ (1,761)	$ (2,811)

The following table provides an overview of our cash flow during the three months ended December 31, 2015 and 2014.

	Period ended December 31,
	2015	2014
Net cash provided by operating activities	$ 282	$ 2,944
Net cash used in investing activities	(719)	(1,118)
Net cash used in financing activities	(100)	(300)
Effect of exchange rate changes on cash	(386)	19
Net Change in Cash	$ (923)	$ 1,545

Net cash flow from operations for the ~~nine~~three months ended ~~June~~December 3031, 2015, was positive, mostly due to an aincrease ~~decrease~~ in ~~trade~~other ~~accounts~~receivables ~~receivable~~ of $3468,~~647,~~ which was partially ~~off-set~~offset by an increase in ~~trade~~advances ~~accounts~~paid ~~receivable from related parties~~ of $~~1,123~~186.

Net cash used in ~~financing~~investing activities ~~was~~for ~~mostly due to an increase in short-term notes from related parties of $2,882 during~~ the ~~nine~~three months ended ~~June~~December 3031, 2015, ~~coupled~~represented ~~with partial~~the ~~payment~~cost of ~~interest~~vessel ~~due~~dry-dock toincurred ~~Investor~~during ~~under~~ the ~~Notes~~period.

	Payment Period
Contractual Commitments		Less than			After
	Total	1 Year	1-3 Years	3-5 Years	5 years
Loans from Investor	$ 46,556	$ 46,556	$ -	$ -	$ -
Loans from EBRD	33,565	33,565	-	-	-
Accelerated put option liability	23,140	23,140	-	-	-
Operating leases - vessels	6,846	541	1,795	1,764	2,746
Operating leases - other	392	109	281	2	-
Total	$110,499	$103,911	$ 2,076	$ 1,766	$ 2,746

During the three months ended December 31, 2015, net cash was used in financing activities to make a partial payment of the balance due to Investor under the Consolidated Note.

	Payment Period
		Less than			After
Contractual Commitments	Total	1 Year	1-3 Years	3-5 Years	5 years
Loans from Investor	$ 48,791	$ 48,791	$ -	$ -	$ -
Loans from EBRD	35,041	35,041	-	-	-
Accelerated put option liability	24,143	24,143	-	-	-
Operating leases - vessels	6,482	1,177	1,735	1,739	1,830
Operating leases - other	255	156	96	3	-
Total	$114,712	$109,308	$ 1,831	$ 1,742	$ 1,830

Item 3. Qualitative and Quantitative Disclosures About Market Risk

Because we are a smaller reporting company, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Our~~As of December 31, 2015, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures ~~(as defined in Rules 13a-15(e) or 15d-15(e)~~ under the ~~Exchange~~2103 ~~Act)~~framework as of the ~~end~~Committee of ~~the~~Sponsoring ~~period~~Organizations ~~covered~~of bythe ~~this~~Treadway ~~quarterly report on Form 10-Q~~Commission. Based on this evaluation, of our ~~Chief~~disclosure ~~Executive~~controls ~~Officer~~ and ~~Chief~~procedures ~~Financial~~(as ~~Officer~~defined ~~concluded~~in ~~that~~Rules as13a-15(e) ofand ~~the~~15d-15(e)) ~~end~~our ofChief ~~the~~Executive ~~period~~Officer ~~covered~~and byChief ~~this~~Financial ~~quarterly~~Officer ~~report~~concluded onthat ~~Form 10-Q~~ our disclosure controls and procedures were effective inas ~~(i)~~of ~~recording, processing, summarizing and reporting, information required to be disclosed by us in~~ the ~~reports~~end weof ~~file or submit under~~ the ~~Exchange~~period ~~Act~~covered ~~within~~by ~~the~~this ~~time~~quarterly ~~periods~~report ~~specified~~ in ~~the~~timely ~~Commission’s~~alerting ~~rules~~them ~~and~~to ~~forms and (ii) ensuring that~~ information required to be ~~disclosed~~included ~~by us~~ in ~~such~~the ~~reports~~Company’s isperiodic ~~accumulated~~filings ~~and~~with ~~communicated~~the to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosureCommission.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June~~December 3031, 2015, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. Excluding ordinary routine litigation incidental to our business, we are not currently a party to any legal proceedings that we believe would reasonably be expected to have a materially adverse effect on our business, financial condition or results of operations.

Item 1A. Risk Factors

We believe there are no additions to the risk factors disclosed in our annual report on Form 10-K for the year ended September 30, ~~2014~~2015, filed on January 13, ~~2015~~2016.

Item 3. Defaults Upon Senior Securities

See Note 1 – Business Condition to the condensed consolidated financial statements included in this quarterly report on Form 10-Q.

Item 6. Exhibits

Exhibits. The following exhibits are included as part of this report:

	Exhibit No.		Description of Exhibit
	Exhibit 10.1		Master Financial Assistance Repayment Agreement, dated January 11, 2016, between Caspian Geo-Consulting Services, LLP and Caspian Services, Inc.(1)
	Exhibit 31.1		Certification of Principal Executive Officer pursuant to
			Section 302 of the Sarbanes-Oxley Act of 2002
			Section 302 of the Sarbanes-Oxley Act of 2002*
	Exhibit 31.2		Certification of Principal Financial Officer pursuant to
			Section 302 of the Sarbanes-Oxley Act of 2002
			Section 302 of the Sarbanes-Oxley Act of 2002*
	Exhibit 32		Certification pursuant to 18 U.S.C. Section 1350 as
			adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 101		The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2015 formatted in XBRL (eXtensive Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements.

3935

	Exhibit 32.1		Certification pursuant to 18 U.S.C. Section 1350 as
			adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

	Exhibit 101		The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2015, formatted in XBRL (eXtensive Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements*

* Filed herewith.

(1) Incorporated by reference to Registrant’s Annual Report on Form 10-K filed with the Commission on January 13, 2016.

SIGNATURES

Pursuant to the requirements 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.

	CASPIAN SERVICES, INC.
Date: August 19, 2015	By:	/s/ Alexey Kotov
Date: February 22, 2016	By:	/s/ Alexey Kotov
		Alexey Kotov
		Chief Executive Officer

Date: August 19, 2015	By:	/s/ Indira Kaliyeva
Date: February 22, 2016	By:	/s/ Indira Kaliyeva
		Indira Kaliyeva
		Chief Financial Officer

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