VIRTUAL PIGGY, INC. (Form: 10-Q, Received: 11/06/2015 15:41:06)

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

o 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:

0-53944

(Exact Name of Registrant as Specified in Its Charter)

Delaware		35-2327649
(State or Other Jurisdiction of		(IRS Employer
Incorporation or Organization)		Identification No.)

1221 Hermosa Avenue, Suite 210

Hermosa Beach, CA 90254

(Address of principal executive offices) (Zip Code)

(310) 853-1950

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 ý NO ¨

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer	¨	Smaller reporting company	ý
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 117,267,626 shares of common stock outstanding at November 6, 2015.

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

	September 30, 2015			December 31, 2014
	(Unaudited)			(Audited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	224,857		$	1,652,392
Accounts receivable		526			7,607
Prepaid expenses		306,302			591,929

TOTAL CURRENT ASSETS		531,685			2,251,928

PROPERTY AND EQUIPMENT
Computer equipment		94,782			109,978
Furniture and fixtures		72,967			79,634
Leasehold improvements		81,659			81,659
		249,408			271,271
Less: accumulated depreciation		(135,737	)		(91,742	)
		113,671			179,529

OTHER ASSETS
Deposit		34,680			46,483
Patents and trademarks, net of accumulated
amortization of $103,289 and $75,292		636,274			636,230
		670,954			682,713

TOTAL ASSETS	$	1,316,310		$	3,114,170


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	1,336,543		$	829,372
Deferred revenue		7,885			2,685
Preferred stock dividend liability		1,536,022			723,649
Convertible notes payable - stockholders		2,940,000			-
Notes payable - stockholders, net of discount of $32,294		443,006			-

TOTAL CURRENT LIABILITIES		6,263,456			1,555,706

CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)

Preferred stock, $.0001 par value; 2,000,000 preferred shares
authorized; 195,000 preferred shares Series A authorized; 108,600 shares
issued and outstanding at September 30, 2015 and December 31, 2014		11			11

Preferred stock, $.0001 par value; 2,000,000 preferred shares
authorized; 222,222 preferred shares Series B authorized; 28,378 shares
issued and outstanding at September 30, 2015 and December 31, 2014		3			3

Common stock, $ .0001 par value; 230,000,000 shares authorized;
117,267,626 and 119,117,626 shares issued and outstanding at
September 30, 2015 and December 31, 2014		11,727			11,912

Additional paid in capital		53,952,552			53,458,324

Accumulated deficit		(58,911,439	)		(52,060,191	)

Cumulative translation adjustment		-			148,405

STOCKHOLDERS' EQUITY (DEFICIT)		(4,947,146	)		1,558,464

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,316,310		$	3,114,170

See accompanying notes to these financial statements.

For the Three and Nine Months Ended September 30, 2015 and 2014

	For the Three Months Ended						For the Nine Months Ended
	Ended September 30,						Ended September 30,
	2015			2014			2015			2014

SALES	$	4,856		$	736		$	14,242		$	2,414

OPERATING EXPENSES
Sales and marketing		131,987			1,195,440			1,530,263			3,882,869
Product development		283,310			871,093			1,380,102			2,575,665
Integration and customer support		46,110			281,409			166,820			656,550
General and administrative		385,968			1,555,652			2,677,053			4,057,491
Strategic consulting		1,667			251,533			340,167			531,581
Total operating expenses		849,042			4,155,127			6,094,405			11,704,156

NET OPERATING LOSS		(844,186	)		(4,154,391	)		(6,080,163	)		(11,701,742	)

OTHER INCOME (EXPENSE)
Interest income		40			1,959			339			5,900
Interest expense		(88,739	)		-			(165,984	)		(94,565	)
Change in fair value of embedded derivative liability		-			1,194,600			-			1,193,975
Cumulative translation adjustment upon closing of England office		206,933			-			206,933			-
		118,234			1,196,559			41,288			1,105,310

NET LOSS	$	(725,952	)	$	(2,957,832	)		(6,038,875	)		(10,596,432	)

Less: Deemed dividend distributions		-			(439,397	)		-			(5,855,419	)

Less: Accrued preferred dividends		(280,223	)		-			(812,373	)		(439,397	)

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(1,006,175	)	$	(3,397,229	)	$	(6,851,248	)	$	(16,891,248	)

BASIC AND DILUTED NET LOSS PER
COMMON SHARE	$	(0.01	)	$	(0.03	)	$	(0.06	)	$	(0.15	)

BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING		117,267,626			117,117,626			118,517,626			116,325,785

See accompanying notes to these financial statements.

For the Three and Nine Months Ended September 30, 2015 and 2014

	For the Three Months						For the nine months
	Ended September 30,						Ended September 30,
	2015			2014			2015			2014

NET LOSS	$	(725,952	)	$	(2,957,832	)	$	(6,038,875	)	$	(10,596,432	)

OTHER COMPREHENSIVE INCOME
Foreign Currency Translation Adjustments, net of tax		98,893			93,227			58,528			48,175
TOTAL OTHER COMPREHENSIVE INCOME, net of tax		98,893			93,227			58,528			48,175

COMPREHENSIVE LOSS	$	(627,059	)	$	(2,864,605	)	$	(5,980,347	)	$	(10,548,257	)

See accompanying notes to these financial statements.

For the Periods from January 1, 2015 to September 30, 2015

	Preferred				Preferred				Common
	Stock Series A				Stock Series B				Stock						Additional						Cumulative
	Number of				Number of				Number of						Paid-In			Accumulated			Translation
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Adjustment			Total

Balance December 31, 2014		108,600	$	11		28,378	$	3		119,117,626		$	11,912		$	53,458,324		$	(52,060,191	)	$	148,405		$	1,558,464

Revaluation of options and warrants		-		-		-		-		-			-			169,110			-			-			169,110
Issuance of warrants with notes payable		-		-		-		-		-			-			8,342			-			-			8,342
Issuance of options for services		-		-		-		-		-			-			316,676			-			-			316,676
Issuance of equity for services		-		-		-		-		150,000			15			279,900			-			-			279,915
Forfeited restricted stock		-		-		-		-		(2,000,000	)		(200	)		(279,800	)		-			-			(280,000	)
Accrued preferred dividend		-		-		-		-		-			-			-			(812,373	)		-			(812,373	)
Net loss		-		-		-		-		-			-			-			(6,038,875	)		-			(6,038,875	)
Cumulative translation adjustment		-		-		-		-		-			-			-			-			(148,405	)		(148,405	)

Balance September 30, 2015		108,600	$	11		28,378	$	3		117,267,626		$	11,727		$	53,952,552		$	(58,911,439	)	$	-		$	(4,947,146	)

See accompanying notes to these financial statements.

For the Nine Months Ended September 30, 2015 and 2014

	Nine Months Ended September 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(6,038,875	)	$	(10,596,432	)
Adjustments to reconcile net loss to net cash
used in operating activities
Provision for bad debts		6,433			-
Fair value of options issued in exchange for services and extension of warrants		-			136,663
Fair value of options issued in exchange for services		316,676			820,230
Forfeiture of restricted stock		(280,000	)		-
Fair value of stock issued in exchange for services		279,915			381,000
Revaluation of options		169,110			-
Change in fair value of embedded derivative liability		-			(1,193,975	)
Accretion of discount on notes payable		7,945			86,087
Depreciation and amortization		87,799			68,468
Loss on disposal of fixed assets		13,750			12,074
Loss on abandonment of patents		-			114,552
Foreign currency translation adjustment from closing England office		(206,933	)		-
(Increase) decrease in assets
Accounts receivable		648			(1,356	)
Insurance receivable		-			4,325
Prepaid expenses		285,627			(225,898	)
Deposits		11,803			(130,531	)
Increase (decrease) in liabilities
Accounts payable, accrued expenses and litigation settlement		475,274			(938,023	)
Deferred revenue		5,200			-

Net cash used in operating activities		(4,865,628	)		(11,462,816	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment		(7,693	)		(154,088	)
Patent and trademark costs		(28,042	)		(173,562	)

Net cash used in investing activities		(35,735	)		(327,650	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes payable - stockholders		2,940,000			-
Proceeds (repayment) from notes payable - stockholders		475,300			(1,000,000	)
Proceeds from issuance of preferred stock and warrants		-			10,860,000
Proceeds from exercise of options		-			75,000
Proceeds from exercise of warrants					2,660,429
Stock issuance costs		-			(173,684	)

Net cash provided by financing activities		3,415,300			12,421,745

EFFECT OF EXCHANGE RATE ON CASH		58,528			48,175

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS		(1,427,535	)		679,454

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		1,652,392			1,752,461

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	224,857		$	2,431,915


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during year for:
Interest	$	-		$	8,478
Income taxes	$	-		$	-


SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Fair value of beneficial conversion value as discount against Preferred Stock	$	-		$	5,137,825
Fair value of warrant liability as discount against Preferred Stock	$	-		$	5,137,825
Accretion of discount on preferred stock as deemed distribution	$	-		$	5,137,825
Deemed dividend distribution in conjunction with warrant exchange	$	-		$	717,594
Accrued preferred dividend	$	812,373		$	439,397
Fair value of stock issued for prepaid expenses	$	-		$	-
Fair value of warrants issued as discount for note payable	$	8,342		$	-
Accrued interest as discount on notes payable	$	31,898		$	-
Forfeited stock reclassified as additional paid in capital	$	200		$	-

See accompanying notes to these financial statements.

Virtual Piggy, Inc.

Notes to the Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business

Virtual Piggy, Inc. (the “Company”) was incorporated in the state of Delaware on February 11, 2008. Virtual Piggy is a technology company that delivers an online ecommerce solution for the family. Its system allows parents and their children to manage, allocate funds and track their expenditures, savings and charitable giving online. Its system is designed to allow the child to transact online without a credit card by gaining the parent’s permission ahead of time and allowing the parent to set up the rules of use and authorized spending limits. The Company’s principal office is located in Hermosa Beach, California.

Virtual Piggy’s technology, branded as “Oink,” enables online businesses to interact and transact with the “Under 18” market in a manner consistent with the Children’s Online Privacy Protection Act (“COPPA”) and other similar international children’s privacy laws. Oink was launched in the US in 2012 and in the European market in 2013.

The Company secures agreements with merchants, retail and gaming e-commerce platforms and payment processors, which allows it to offer its Oink service to its user base. A number of retailers and gaming companies are using Oink with their e-commerce systems and the Company is in the process of integrating the other signed retailers and gaming companies. The Company is seeking to add merchants which would provide more opportunities for its registered systems users to purchase products online.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as amended, as filed with the Securities and Exchange Commission (the “SEC”). Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ended December 31, 2015.

The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to continue operations and fully commercialize the Company’s current technology before another company implements similar technology to compete with the Company.

It is management’s opinion that all adjustments necessary for the fair statement of the results for interim periods have been made, and disclosures have been made so as to not make such financial information misleading.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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 these estimates.

Comprehensive Income

The Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 220 in reporting comprehensive income. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. The Company has one item of other comprehensive income, consisting of a foreign translation adjustment.

Fair Value of Financial Instruments

The Company’s financial instruments consist of accounts receivable, accounts payable and accrued expenses and notes payable. The carrying value of accounts receivable, accounts payable and accrued expenses approximate their fair value because of their short maturities. The Company believes the carrying amount of its notes payable approximate fair value based on rates and other terms currently available to the Company for similar debt instruments.

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Foreign Currency Translation

The functional currency of operations outside the U.S. was British Pounds. During the three months ended September 20, 2015, the Company closed its sales office in England and the cumulative translation adjustment was reported as part of the gain on closing the England office in accordance with FASB ASC 830-30, Foreign Currency Matters .

Concentration of Credit Risk Involving Cash

The Company may have deposits with a financial institution which at times exceed Federal Deposit Insurance Corporation (“FDIC”) coverage. The Company has not experienced any losses from maintaining cash accounts in excess of federally insured limits.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and certificates of deposit and commercial paper with original maturities of 90 days or less to be cash or cash equivalents.

Property and Equipment

Property, equipment and leasehold improvements are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Maintenance and repairs of property are charged to operations, and major improvements are capitalized. Upon retirement, sale, or other disposition of property and equipment, the costs and accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in operations. The cost of leasehold improvements is amortized over the lesser length of the related leases or the estimated useful lives of the assets. Depreciation of property and equipment was $18,826 and $18,726 for the three months ended September 30, 2015 and 2014 and was $59,802 and $39,013 for the nine months ended September 30, 2015 and 2014, and is included in general and administrative expenses.

The Company’s depreciation and amortization policies on property and equipment are as follows:

		Useful life
		(in years)

Computer equipment		3 – 5
Furniture and fixtures		7
Leasehold improvements		Term of lease

Patents and Trademarks

The Company has three issued patents with the United States Patent and Trademark Office (“USPTO”), entitled “System and Method for Verifying the Age of an Internet User,” “System and Method for Virtual Piggy Bank Wish-List,” and “System and Method for Virtual Piggy Bank.” The Company has filed for one provisional U.S. patent application, as well as twelve non-provisional U.S. patent applications, four of which are pending, three of which have been allowed, and five of which have been abandoned. Additionally, the Company has been granted two patents in Germany, entitled “Virtual Piggy Bank” and “Parent Match.” The Company also has patents pending in Australia, Brazil, Canada (“Parent Match” has been allowed), Europe, and the Republic of Korea under the Patent Cooperation Treaty (“PCT”). Costs associated with the registration and legal defense of the patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents.

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets in accordance with FASB ASC 360 “Property, Plant, and Equipment.” The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset, undiscounted and without interest or independent appraisals. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the assets.

Deferred Financing Costs

Costs incurred in securing long-term debt are deferred and amortized, as a charge to interest expense, over the term of the related debt. In the case of long-term debt modifications, the Company follows the guidance provided by FASB ASC 470-50, Debt – Modification and Extinguishments .

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Convertible Notes Payable

Convertible notes payable, for which the embedded conversion feature does not qualify for derivative treatment, are evaluated to determine if the effective or actual rate of conversion per the terms of the convertible note agreement is below market value. In these instances, the Company accounts for the value of the beneficial conversion feature (BCF) as a debt discount, which is then accreted to interest expense over the life of the related debt using the straight-line method which approximates the effective interest method.

Revenue Recognition

In accordance with FASB ASC 605 Revenue Recognition , the Company will recognize revenue when (i) persuasive evidence of a customer or distributor arrangement exists or acceptance occurs, (ii) a retailer, distributor or wholesaler receives the goods, (iii) the price is fixed or determinable, and (iv) collectability of the sales revenues is reasonably assured. Subject to these criteria, the Company will generally recognize revenue at the time of the sale of the associated product.

Income Taxes

The Company follows FASB ASC 740 when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Tax years from 2011 through 2014 remain subject to examination by major tax jurisdictions.

Stock-based Payments

The Company accounts for stock-based compensation under the provisions of FASB ASC 718, Compensation—Stock Compensation which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company estimates the fair value of stock-based awards on the date of grant using the Black-Scholes model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. The Company accounts for stock-based compensation awards to non-employees in accordance with FASB ASC 505-50, Equity-Based Payments to Non-Employees . Under FASB ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Non-employee equity based payments that do not vest immediately upon grant are recorded as an expense over the service period, as if the Company had paid cash for the services. At the end of each financial reporting period, prior to vesting or prior to the completion of the services, the fair value of the equity based payments will be re-measured and the non-cash expense recognized during the period will be adjusted accordingly. Since the fair value of equity based payments granted to non-employees is subject to change in the future, the amount of the future expense will include fair value re-measurements until the equity based payments are fully vested or the service completed.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs were $1,464 and $41,629 for the three months ended September 30, 2015 and 2014 and were $135,981 and $189,796 for the nine months ended September 30, 2015, and 2014 and were are included in sales and marketing expenses.

Product Development Costs

In accordance with FASB ASC 730, research and development costs are expensed when incurred. Research and development costs were $283,310 and $871,093 for the three months ended September 30, 2015 and 2014 and were $1,380,103 and $2,575,665 for the nine months ended September 30, 2015 and 2014.

Loss Per Share

The Company follows FASB ASC 260 when reporting Earnings Per Share resulting in the presentation of basic and diluted earnings per share. Because the Company reported a net loss for each of the periods presented, common stock equivalents, including preferred stock, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same.

Start-up Costs

In accordance with FASB ASC 720 , start-up costs are expensed as incurred.

Segment Information

The Company is organized and operates as one operating segment. In accordance with FASB ASC 280, Segment Reporting , the chief operating decision-maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company subject to Board approval. Since the Company operates in one segment and provides one group of similar products, all financial segment and product line information required by FASB ASC 280 can be found in the financial statements.

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Recently Adopted Accounting Pronouncements

As of September 30, 2015 and for the three and nine months then ended, there were no recently adopted accounting pronouncements that had a material effect on the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 30, 2015, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements through 2017.

Reclassifications

Certain amounts in the 2014 financial statements have been reclassified in order for them to be in conformity with the 2015 presentation.

NOTE 2 – MANAGEMENT PLANS

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses and experienced negative cash flow from operations since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Since inception, the Company has focused on developing and implementing its business plan. The Company believes that its existing cash resources will not be sufficient to sustain operations during the next twelve months. The Company currently needs to generate revenue in order to sustain its operations. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to further reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing shareholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company would likely be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on the business, financial condition and results of operations.

The Company’s current monetization model is to derive a percentage of all revenues generated by online merchants using the Oink service. Merchants are billed at the end of each month for all transactions that have been processed by the Company on their behalf in the prior month. As the merchant base and consumer base grows, and as the trend to higher online spending levels continues, the Company expects to generate additional revenue to help support operations.

As of November 6, 2015, the Company had a cash position of approximately $0.2 million . Based upon the current cash position, management believes the Company has the capability to finance its operations through December 31, 2015.

NOTE 3 – PATENTS AND TRADEMARKS

The Company continues to apply for patents and purchased the Oink trademark in November 2013. Accordingly, costs associated with the registration of the patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents (20 years). The trademark is also being amortized on a straight-line basis over its estimated useful life of 20 years. At September 30, 2015 and December 31, 2014, capitalized patent and trademark costs, net of accumulated amortization, were $636,274 and $636,230. Amortization expense for patents and trademarks were $9,723 and $12,016 for the three months ended September 30, 2015 and 2014 and were $27,997 and $29,455 for the nine months ended September 30, 2015, and 2014.

NOTE 4 – CONVERTIBLE NOTES PAYABLE-STOCKHOLDERS

On March 6, 2015, the Company, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”), issued $2,000,000 aggregate principal amount of its 10% Secured Convertible Promissory Notes due March 5, 2016 (the “Notes”) to certain stockholders. On May 11, 2015, the Company issued an additional $940,000 of Notes to stockholders.

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The Notes are convertible by the holders, at any time, into shares of the Company’s Series B Preferred Stock at a conversion price of $90.00 per share, subject to adjustment for stock splits, stock dividends and similar transactions with respect to the Series B Preferred Stock only. Each share of Series B Preferred Stock is currently convertible into 100 shares of the Company’s common stock at a current conversion price of $0.90 per share, subject to anti-dilution adjustment as described in the Certificate of Designation of the Series B Preferred Stock. In addition, pursuant to the terms of a Security Agreement entered into on March 6, 2015 by and among the Company, the Investors and a collateral agent acting on behalf of the Investors (the “Security Agreement”), the Notes are secured by a lien against substantially all of the Company’s business assets. Pursuant to the Purchase Agreement, the Company also granted piggyback registration rights to the holders of the Series B Preferred Stock upon a conversion of the Notes.

The Notes are recorded as a current liability as of September 30, 2015. Interest accrued on the notes during the three and nine months ended September 30, 2015 was $74,104 and $151,348, respectively.

NOTE 5 – NOTES PAYABLE-STOCKHOLDERS

On December 27, 2013, the Company entered into two identical agreements with two stockholders that each included a note payable (“Notes Payable”) in the amount of $500,000 and two-year warrants to purchase 37,500 shares of the Company’s common stock at $0.01 and two-year warrants to purchase 50,000 shares of the Company’s common stock at $1.00 per share. The notes bore interest at 10% per annum and were payable upon the earlier of:

	a.	5 days after the sale of the Company’s securities in one transaction or series of related transactions, which sale resulted in gross proceeds to the Company of at least $3 million;
	b.	Upon (i) the sale or other disposition of all or substantially all of the Company’s assets or (ii) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is a party other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain, as a result of shares in the Company held by such holders prior to such transaction, at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction or series of transactions; or
	c.	February 28, 2014.

The warrants were valued at $92,470, fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 22.2%, risk free interest rate of .4% and expected option life of 2 years. The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes. These notes were repaid in full in January 2014 and therefore the remaining unamortized discount was fully accreted.

On July 20, 2015, the Company entered into agreements with three stockholders that consist of notes payable in the aggregate amount of $250,200, and two-year warrants to purchase an aggregate of 50,000 shares of the Company’s common stock at $0.90. The notes bear interest at 10% per annum and notes payable in the amount of $200,200 contain a commitment fee of 7.5%, which with the principal balance are payable upon the earlier of:

	a.	The 6 month anniversary of the note payable;
	b.	The Company closing a specific joint venture agreement; or
	c.	The Company completes an additional $1 million minimum financing pursuant to its offering of 10% Secured Convertible Promissory Notes.

The warrants were valued at $4,073, fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 114.9%, risk free interest rate of .71% and expected option life of 2 years. The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and are being accreted over the term of the note payable for financial statement purposes.

On August 12, 2015, the Company entered into an agreement with a stockholder to issue a note payable in the amount of $100,100, and two-year warrants to purchase 20,000 shares of the Company’s common stock at $0.90. The note bears interest at 10% per annum and has the same commitment fee and repayment terms as above. The warrants were valued at $1,175, fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 118.7%, risk free interest rate of .67% and expected option life of 2 years. The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and are being accreted over the term of the note payable for financial statement purposes.

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On September 18, 2015, the Company entered into an agreement with a stockholder to issue a notes payable in the amount of $125,000, and two-year warrants to purchase 25,000 shares of the Company’s common stock at $0.90. The note bears interest at 10% per annum, contains a commitment fee of 7.5%, and has the same repayment terms as above. The warrants were valued at $3,093 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 118.7%, risk free interest rate of .69% and expected option life of 2 years. The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and are being accreted over the term of the note payable for financial statement purposes.

The 7.5% commitment fees, amounting to $31,898, on the notes payable were treated as a discount to the value of the notes payable in accordance with FASB ASC 835-30-25, Recognition and are being accreted over the term of the notes payable for financial statement purposes. The same amount is included in accrued interest until the liability is paid.

The notes payable are recorded as a current liability as of September 30, 2015. Interest accrued including the 7.5% commitment fee on the notes during the three and nine months ended September 30, 2015 was $38,588.

NOTE 6 – INCOME TAXES

Income tax expense was $0 for the three and nine months ended September 30, 2015 and 2014.

As of December 31, 2014, the Company had net operating loss carry forwards approximating $48 million.

As of January 1, 2015, the Company had no unrecognized tax benefits, and accordingly, the Company did not recognize interest or penalties during 2014 related to unrecognized tax benefits. There has been no change in unrecognized tax benefits during the nine months ended September 30, 2015, and there was no accrual for uncertain tax positions as of September 30, 2015. Tax years 2011 through 2014 remain subject to examination by major tax jurisdictions.

There is no income tax benefit for the losses for the nine months ended September 30, 2015 and 2014, since management has determined that the realization of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits.

NOTE 7 – LITIGATION

On April 10, 2014, the Company was named in a law suit in superior court for the State of California filed by a former employee alleging wrongful termination and seeking monetary damages and legal fees. During the three months ended September 30, 2014, the matter was settled in mediation.

NOTE 8 – CONVERTIBLE PREFERRED STOCK

Series A Preferred Stock

In January 2014, the Company, pursuant to a Securities Purchase Agreement (the “Series A Purchase Agreement”), issued in a private placement to certain accredited investors, 50,450 shares of the Company’s Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”) at an original issue price of $100 per share (the “Original Series A Issue Price”) and two-year warrants to purchase 5,045,000 shares of the Company’s common stock at an exercise price of $1.00 per share (the “Series A Warrants”), for an aggregate purchase price of $5,045,000. Pursuant to the Series A Purchase Agreement, the Company also granted piggyback registration rights to the holders of the Series A Preferred Stock and Series A Warrants. The Series A Purchase Agreement provides that the holders of the Series A Preferred Stock shall be entitled to nominate two directors of the Company. Dividends accrue at a rate of 8% and are cumulative. The Company had incurred and capitalized approximately $141,000 of costs associated with this offering, which were charged to additional paid in capital when the transaction was consummated.

In accordance with FASB ASC 480 and 815, the Series A Preferred Stock has been classified as permanent equity and was valued at $3,396,175, net of the beneficial conversion feature of $1,648,825, at January 27, 2014.

The conversion feature of the Series A Preferred Stock is an embedded derivative, which is classified as a liability in accordance with FASB ASC 815 and was valued in accordance with FASB ASC 470 as a beneficial conversion feature at a fair market value of $1,648,825 at January 27, 2014, and $0 at September 30, 2015. This was classified as an embedded derivative liability and a discount to Series A Preferred Stock. Since the Series A Preferred Stock can be converted at any time, the full amount of the discount was accreted and reflected as a deemed distribution.

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The Series A Warrants associated with the Series A Preferred Stock were also classified as equity, in accordance with FASB ASC 480-10-25. Therefore it is not necessary to bifurcate the Series A Warrants from the Series A Preferred Stock.

The Series A Preferred Stock has a preference in liquidation equal to two times the Original Series A Issue Price to be paid out of assets available for distribution prior to holders of common stock and thereafter participates with the holders of common stock in any remaining proceeds subject to an aggregate cap of 2.5 times the Original Series A Issue Price. The Series A Preferred Stockholders may cast the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred Stock can be converted. The Series A Preferred Stock also contains customary approval rights with respect to certain matters.

The conversion price of the Series A Preferred Stock is subject to anti-dilution adjustment and was subsequently reduced from $1.00 to $0.90 per share, resulting from the issuance by the Company of Series B Preferred Stock with a conversion price of $0.90 per share.

The Series A Preferred Stock is subject to mandatory conversion if certain registration or related requirements are satisfied and the average closing price of the Company’s common stock exceeds 2.5 times the conversion price over a period of twenty consecutive trading days.

On April 30, 2014, the Company sold, in a private placement to certain accredited investors, an additional 58,150 shares of Series A Preferred Stock and Series A Warrants to purchase 5,815,000 shares of the Company’s common stock for an aggregate purchase price of $5,815,000. In accordance with FASB ASC 480 and 815, the additional Series A Preferred Stock has been classified as permanent equity and was valued at $2,326,000, net of the beneficial conversion feature of $3,489,000, at April 30, 2014. The Company had incurred and capitalized approximately $6,000 of costs associated with this offering, which were charged to additional paid in capital when the transaction was consummated.

The conversion feature of the additional Series A Preferred Stock is an embedded derivative, which is classified as a liability in accordance with FASB ASC 815 and was valued in accordance with FASB ASC 470 as a beneficial conversion feature at a fair market value of $3,489,000 at April 30, 2014 and $0 at September 30, 2015. This was classified as an embedded derivative liability and a discount to Series A Preferred Stock. Since the Series A Preferred Stock can be converted at any time, the full amount of the discount was accreted and reflected as a deemed distribution.

Series B Preferred Stock

In October 2014, the Company, pursuant to a Securities Purchase Agreement (the “Series B Purchase Agreement”), issued in a private placement to certain accredited investors, 28,378 shares of the Company’s Series B Cumulative Convertible Preferred Stock (the “Series B Preferred Stock”) at an original issue price of $90 per share (the “Original Series B Issue Price”) and two-year warrants to purchase 2,837,800 shares of the Company’s common stock at an exercise price of $1.00 per share (the “Series B Warrants”), for an aggregate purchase price of $2,554,020. Pursuant to the Series B Purchase Agreement, the Company also granted piggyback registration rights to the holders of the Series B Preferred Stock and Series B Warrants. Dividends accrue at a rate of 8% and are cumulative. The Company has incurred and capitalized approximately $24,029 of costs associated with this offering, which were charged to additional paid in capital when the transaction was consummated.

In accordance with FASB ASC 480 and 815, the Series B Preferred Stock has been classified as permanent equity and was valued at $2,178,179, net of the beneficial conversion feature of $375,841, at October 30, 2014.

The conversion feature of the Series B Preferred Stock is an embedded derivative, which is classified as a liability in accordance with FASB ASC 815 and was valued in accordance with FASB ASC 470 as a beneficial conversion feature at a fair market value of $375,841 at October 30, 2014, and $0 at September 30, 2015. This was classified as an embedded derivative liability and a discount to Series B Preferred Stock. Since the Series B Preferred Stock can be converted at any time, the full amount of the discount was accreted and reflected as a deemed distribution.

Because the Series B Preferred Stock can be converted at any time, the embedded derivative is classified as a current liability.

The Series B Warrants associated with the Series B Preferred Stock were also classified as equity, in accordance with FASB ASC 480-10-25. Therefore it is not necessary to bifurcate the Series B Warrants from the Series B Preferred Stock.

The Series B Preferred Stock is pari passu with the Series A Preferred Stock and has a preference in liquidation equal to two times the Original Issue Price to be paid out of assets available for distribution prior to holders of common stock and thereafter participates with the holders of common stock in any remaining proceeds subject to an aggregate cap of 2.5 times the Original Issue Price. The Series B Preferred Stockholders may cast the number of votes equal to the number of whole shares of common stock into which the shares of Series B Preferred Stock can be converted. The Series B Preferred Stock also contains customary approval rights with respect to certain matters.

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The conversion price of the Series B Preferred Stock is currently $0.90 per share, subject to anti-dilution adjustment. The Series B Preferred Stock is subject to mandatory conversion if certain registration or related requirements are satisfied and the average closing price of the Company’s common stock exceeds 2.5 times the conversion price over a period of twenty consecutive trading days.

As of September 30, 2015, the value of the cumulative 8% dividends for all preferred stock was $1,536,022. Such dividends will be paid when and if declared payable by the Company’s board of directors or upon the occurrence of certain liquidation events. In accordance with FASB ASC 260-10-45-11, the Company has recorded these accrued dividends as a current liability.

NOTE 9 – STOCKHOLDERS’ EQUITY

Extension and Revaluation of Warrants and Options

In February 2015, the Board of Directors of the Company approved amendments extending the term of outstanding warrants to purchase in the aggregate 3,877,970 shares of common stock of the Company at exercise prices ranging from $0.01 per share to $1.00 per share. These warrants were scheduled to expire at various dates during 2015 and were each extended for an additional one year period from the applicable current expiration date, with the new expiration dates ranging from February 23, 2016 to December 28, 2016. The increase in fair value of this term extension was $219,051 which was expensed during the period. The Company used the Black-Scholes option pricing model to calculate the increase in fair value, with the following assumptions for the extended warrants: no dividend yield, expected volatility of 95.1%, risk free interest rate of 0.33%, and expected warrant life of 1.28 years.

In February 2015, the Company extended the term of the options by two years for options previously granted to two of its executive officers, which included 3,500,000 options exercisable at $0.04 per share. The increase in fair value of this term extension was $9,692 which was expensed during the period. The Company used the Black-Scholes option pricing model to calculate the increase in fair value after the extension, with the following assumptions: no dividend yield, expected volatility of 96.4%, risk free interest rate of 0.64%, and expected option life of 2 years.

In April 2015, the Company extended the term of the options by two years for options previously granted to an executive officer, which included 250,000 options exercisable at $0.75 per share and 250,000 options exercisable at $0.90 per share. The increase in fair value of this term extension was $25,175. The Company used the Black-Scholes option pricing model to calculate the increase in fair value after the extension, with the following assumptions; no dividend yield, expected volatility of 100.9%, risk free interest rate of 0.23% and 0.42%. and expected life of 2 years.

In accordance with FASB ASC 505-50, options with performance conditions should be revalued based on the modification accounting methodology described in ASC 718-20. As such the Company has revalued certain options with consultants and determined that there was a decrease in fair value of $84,808 during the nine months ended September 30, 2015. The Company used the Black-Scholes option pricing model to calculate the decrease in fair value with the following assumptions; no dividend yield, volatility of 112.9% to 131.50%, risk free interest rate of 0.64% to 1.37% and expected life of 2 to 4 years.

Issuance of Restricted Shares

In April, 2014, the Company issued 300,000 shares of restricted stock in connection with a consulting agreement. Such shares vested monthly over a six month period. The shares were valued at the closing stock price on the date of issuance which was $1.27, valuing the shares at $381,000 which were expensed over a six month period. For the three and six months ended June 30, 2014, the Company recorded expense of $190,500. The remaining $190,500 was expensed as of September 30, 2014.

In November, 2014, one of the Company’s executive officers voluntarily terminated his option grant of 1,000,000 shares. The Company issued to such executive a replacement grant of 2,000,000 shares of restricted stock which vest annually over a three year period pursuant to the Company’s 2013 Equity Incentive Plan. The shares were valued at the closing stock price on the date of issuance which was $0.70, valuing the shares at $1.4 million, fair value, which were expensed over the vesting term. The officer resigned in July 2015 and the restricted stock was retired unvested. For the three and nine months ended September 30, 2015 the expense recorded was $0 and $231,415. The total expense previously recognized was $280,000 which was reversed as of September 30, 2015.

During the nine months ended September 30, 2015, the Company issued a consultant a total of 150,000 shares of the Company’s common stock which were valued at the closing stock price on the date of issuance of $0.27, $0.40 and $0.30, valuing the shares at $48,500 which were expensed immediately.

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NOTE 10 - STOCK OPTIONS AND WARRANTS

During 2008, the Board of Directors (“Board”) of the Company adopted the 2008 Equity Incentive Plan (“2008 Plan”) that was approved by the shareholders. Under the 2008 Plan, the Company is authorized to grant options to purchase up to 25,000,000 shares of common stock to any officer, other employee or director of, or any consultant or other independent contractor who provides services to the Company. The 2008 Plan is intended to permit stock options granted to employees under the 2008 Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the 2008 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options (“Non-Statutory Stock Options”). As of September 30, 2015, options to purchase 11,589,994 shares of common stock have been issued and are unexercised, and 2,893,339 shares are available for grants under the 2008 Plan.

During 2013, the Board adopted the 2013 Equity Incentive Plan (“2013 Plan”), which was approved by stockholders at the 2013 annual meeting of stockholders. Under the 2013 Plan, the Company is authorized to grant awards of stock options, restricted stock, restricted stock units and other stock-based awards of up to an aggregate of 5,000,000 shares of common stock to any officer, employee, director or consultant. The 2013 Plan is intended to permit stock options granted to employees under the 2013 Plan to qualify as Incentive Stock Options. All options granted under the 2013 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be Non-Statutory Stock Options. As of September 30, 2015, under the 2013 Plan grants of restricted stock and options to purchase 2,593,332 shares of common stock have been issued and are unvested or unexercised, and 2,406,668 shares of common stock remain available for grants under the 2013 Plan.

The 2008 Plan and 2013 Plan are administered by the Board or its compensation committee, which determines the persons to whom awards will be granted, the number of awards to be granted, and the specific terms of each grant, including the vesting thereof, subject to the terms of the applicable Plan.

In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company).

Prior to January 1, 2014, volatility in all instances presented is the Company’s estimate of volatility that is based on the volatility of other public companies that are in closely related industries to the Company. Beginning January 1, 2014, volatility in all instances presented is the Company’s estimate of volatility that is based on the historical volatility of the Company’s stock price.

The following table presents the weighted-average assumptions used to estimate the fair values of the stock options granted during the nine months ended September 30, 2015:

Risk-free interest rate			1.3%
Expected volatility			99.2%
Expected life (in years)			4.5
Dividend yield			0%
Weighted-average estimated fair value of options granted during the period			$0.24

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The following table summarizes the activities for stock options for the nine months ended September 30, 2015:

	Options Outstanding
	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s) (1)

Balance as of December 31, 2014		16,670,827		$	0.78
Granted		3,075,000		$	0.34
Exercised		-		$	-
Forfeited/canceled		(3,297,505	)	$	0.95
Expired		(1,184,996	)	$	1.29
Balance as of September 30, 2015		15,263,326		$	0.62		2.1	$	744
Exercisable as of September 30, 2015		11,432,481		$	0.65		1.5	$	736
Exercisable as of September 30, 2015 and expected to vest thereafter		11,432,481		$	0.65		1.5	$	736

(1)	The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $0.25 for our common stock on September 30, 2015.

During the nine months ended September 30, 2015, the weighted average fair value of stock options granted during the period was $740,215. The fair value of stock options is expensed over the vesting term in accordance with the terms of the related stock option agreements.

As of September 30, 2015, there was $821,147 of unrecognized compensation cost related to outstanding stock options and restricted stock. This amount is expected to be recognized over a weighted-average period of 2.2 years. To the extent the actual forfeiture rate is different from what we have estimated, stock-based compensation related to these awards will be different from our expectations.

The following table summarizes the activities of unvested stock options for the nine months ended September 30, 2015:

	Unvested Stock Options
	Number of Awards			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Amortization Period (Years)
Unvested stock options at December 31, 2014		4,663,767		$	0.98	$	0.40
Granted		3,075,000		$	0.34	$	0.24
Cancelled/Forfeited		(1,903,339	)	$	0.90	$	0.43
Expired		-		$	-	$	-
Vested		(2,004,583	)	$	0.97	$	0.33
Unvested stock options at September 30, 2015		3,830,845		$	0.51	$	0.30		2.25

The following table summarizes the activities for warrants for the nine months ended September 30, 2015:

	Warrants Outstanding
	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s) (1)

Balance as of December 31, 2014		26,631,410		$	1.01
Granted		95,000		$	0.90
Exercised		-		$	-
Forfeited/canceled		-		$	-
Expired		(515,714	)	$	0.50
Balance as of September 30, 2015		26,210,696		$	1.02		0.59	$	258
Exercisable as of September 30, 2015 and expected to vest thereafter		26,210,696		$	1.02		0.59	$	258

(1)	The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.25 for our common stock on September 30, 2015. All warrants were vested on the date of grant.

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NOTE 11 - OPERATING LEASES

Rent expense was $42,991 and $161,326 for the three months ended September 30, 2015 and 2014, and was $272,252 and $472,199 for the nine months ended September 30, 2015 and 2014. At September 30, 2015, the Company was obligated under various non-cancelable operating lease arrangements for property as follows:

2015	$	22,587
2016		52,701

	$	75,288

NOTE 12 – SUBSEQUENT EVENTS

From October 6, 2015 through October 15, 2015, the Company issued $350,000 aggregate principal amount of unsecured Promissory Notes to certain accredited investors (the “Investors”) pursuant to Promissory Note Agreements. The investors also received two-year warrants to purchase an aggregate of 115,000 shares of the Company’s common stock at an exercise price of $0.90 per share.

The Notes bear interest at a rate of ten percent (10%) per annum and mature on the six (6) month anniversary of the issuance date, or on such earlier date that (i) the Company completes the closing of a specified joint venture agreement or (ii) the Company completes the sale of at least an additional $1 million of 10% Secured Convertible Promissory Notes. As an additional inducement on $200,000 of these notes payable, the investor will receive, on the maturity date, a commitment fee of seven and one-half percent (7.5%) of the original principal amount.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Cautionary Statements Regarding Forward-Looking Statements

This report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts included or incorporated by reference in this quarterly report on Form 10-Q, including without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expects," "intends," "plans," "projects," "estimates," "anticipates," or "believes" or the negative thereof or any variation thereon or similar terminology or expressions.

We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to: our ability to raise additional capital, the absence of any material revenue, our ability to attract and retain qualified personnel, our dependence on third party developers who we cannot control, our ability to develop and introduce a new service to the market in a timely manner, market acceptance of our services, our limited experience in a relatively new industry, the ability to successfully develop licensing programs and generate business, rapid technological change in relevant markets, unexpected network interruptions or security breaches, changes in demand for current and future intellectual property rights, legislative, regulatory and competitive developments, intense competition with larger companies, general economic conditions, as well as other factors set forth under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014, as amended, filed with the Securities and Exchange Commission.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Except as required by law, we assume no duty to update or revise our forward-looking statements.

The following discussion analyzes the financial condition and results of operations of the Company as of September 30, 2015. The following discussion should be read in conjunction with the condensed financial statements and notes appearing elsewhere in this Report. Historical results and trends that might appear in the financial statements should not be interpreted as being indicative of future operations.

Overview

Virtual Piggy, Inc. (“the Company”) was incorporated in the state of Delaware on February 11, 2008. Oink from Virtual Piggy is a family wallet and shopping application that provides a safe and secure payment solution for the family. Oink is designed to provide efficiency and security for online and mobile payments, and is expanding to handle in store payments. Oink is in operational use in the US, Canada and the UK. Oink functions as a digital wallet allowing payments to be made by all family members while providing the ability for parents to allocate and monitor funds and spending. Key benefits to the consumer of the Oink service include payment security, the payment consent and the transparency provided.

The Oink product enables online businesses to interact and transact with the “Under 18” market in a manner consistent with the Children’s Online Privacy Protection Act (“COPPA”) and other similar international children’s privacy laws. Oink was launched in the US in 2012 and was launched in the European market in 2013.

We secure agreements with a variety of businesses including merchants, gaming publishers, e-commerce platforms, payment aggregators, and payment processors to provide Oink’s services. We have affiliate agreements with over 200 merchants in the US market. In 2014, we embarked on a program to build our channel partners and to date have secured over 20 channel partner arrangements in the US and Europe.

To date we have not generated material revenues. We currently earn revenue by charging a percentage to the merchant or gaming publisher for each transaction processed. In addition, in the second quarter ended June 30, 2014, we received our first affiliate marketing revenues. We also expect to see some revenue from partner referral agreements. We charge an annual fee of $10 for an Oink prepaid card product. It is our intention to keep the fees to the consumer as low as possible. We also expect additional revenue from our channel partners as the online gaming side of our business develops. As part of our launch of the Oink card with Discover, Discover is paying us basis point fees for every time the cards are presented on the Discover network. While low, these fees are starting to generate revenue.

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Strategic Outlook

We believe that the virtual goods market will continue to grow over the long term. Within the market, we intend to provide services to the online industry to allow merchants to transact with children in compliance with COPPA and similar international privacy laws. We believe that this particular opportunity is relatively untapped and are seeking to be a leading provider of online transactions for children.

Sustained spending on technology, our ability to raise additional financing, the continued growth of the online market, and compliance with regulatory and reporting requirements are all external conditions that may affect our ability to execute our business plan. In addition, the online payment industry is intensely competitive, and most participants have longer operating histories, significantly greater financial, technical, marketing, customer service and other resources, and greater name recognition. In addition, certain potential customers, particularly large organizations, may view our small size and limited financial resources as a negative even if they prefer our offering to those of our competitors.

Our primary strategic objectives are to increase our user base and the engagement level of that base. We plan to achieve that by the addition of several new gaming publishers who are currently in the integration phase and by the introduction of our new prepaid card program backed by Discover. The Oink Discover card is linked to the teens Oink wallet and provides parents with the ability to provide a safe and controlled payment method for their teens. The Oink app gives secure access to parents and teens on family spending and allows parents to easily add funds, monitor spending, remove and select categories and shut down a card if necessary. We are planning to market our new Discover card offering, our expanded online merchant and gaming network and affiliate marketing programs through a combination of social media programs and co-promotions with publishers, merchants and other strategic partners. In addition, we believe our new streamlined teen app and our peer to peer payment capability will drive additional exposure and usage for Oink. As our service grows, we may hire additional information technology staff to maintain our product offerings and develop new products to increase our market share.

We believe that our near-term success will depend particularly on our ability to develop customer awareness and confidence in our service. Since we have limited capital resources, we will need to closely manage our expenses and conserve our cash by continually monitoring any increase in expenses and reducing or eliminating unnecessary expenditures. Our prospects must be considered in light of the risks, expenses and difficulties encountered by companies at an early stage of development, particularly given that we operate in new and rapidly evolving markets, that we have limited financial resources, have generated no material revenue and face an uncertain economic environment. We may not be successful in addressing such risks and difficulties in the near term or at all.

Results of Operations

Comparison of the three months ended September 30, 2015 and 2014

The following discussion analyzes our results of operations for the three months ended September 30, 2015 and 2014. The following information should be considered together with our financial statements for such periods and the accompanying notes thereto.

Revenue/Net Loss

Revenue

We have not generated significant revenue since our inception. For the three months ended September 30, 2015 and 2014, we generated revenues of $4,856 and $736. As we add merchants and in particular, online gaming companies, we anticipate that our transaction volume will increase. Additionally, the addition of the Discover Card program in the fourth quarter of 2014 is also expected to increase our transaction volume over time. The Oink service is available through an iOS App, merchant or game publisher website, Android app and through the Oink.com website.

A user may access and use the service through any of these points of entry. Revenue is generated through a number of mechanisms as follows:

Transactional Revenue

A merchant or game publisher pays fees on any transactions that are driven through the Oink payment service. Oink has several live integrated online retail merchants, gaming companies and over 1,000 Facebook games in this category. The typical fees for this service are 1.5% to 3.0%. We expect to receive transactional revenue in the US, Canada and the UK.

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Affiliate Revenue

This is a new category of revenue for Virtual Piggy and is currently in the US only. Oink serves up curated offers to consumers and receives a percentage fee on any transactions that occur by the consumer regardless of whether the consumer uses Oink as the payment method. The typical fees from this service are 2% to 8%. In September 2014, the Oink app v2.0 was launched which includes affiliate deals and offers. The app is free to use and a user does not have to be a member of the Oink community to access Oink deals. We encourage users to sign up for Oink so they can save offers for later use and management. To date, we have affiliate programs with over 200 retailers in the US.

Partner Referrals

In 2014, Oink has signed a number of partnerships with e-commerce platform partners and receives referral fees for any time a merchant or gaming publisher signs up with the partner. Our first revenue from this program was recognized towards the end of the third quarter ended September 2014.

Card Fees

In the fourth quarter of 2014, Oink launched a prepaid card tied to a user’s Oink account. The fees consist of an annual fee and usage fees which will be paid by the card user. In addition, we receive fees from Discover for each transaction made using the Oink card.

Net Loss

Our net loss decreased $2.3 million to $0.7 million for the three months ended September 30, 2015 compared to $3.0 million for the three months ended September 30, 2014, as a result of a concerted effort to decrease expenses.

Sales and Marketing Expenses

Sales and marketing expenses decreased by $1.1 million, or 89.0% in the third quarter of 2015 to $0.1 million compared with $1.2 million for the third quarter of 2014. During 2015, we decreased our spending on marketing promotions as we balanced our marketing programs with our available cash resources.

Product Development

Product development expenses decreased by $0.6 million, or 67.5% in the third quarter of 2015 to $0.3 million compared with $0.9 million during the second quarter of 2014. During 2015, we decreased the size of our development staff and relied in part on outside resources for product development work.

Integration and Customer Support

Integration and customer support expenses decreased by $0.3 million, or 83.6% in the third quarter of 2015 to $0 million compared with $0.3 million in 2014. During 2015, we decreased the size of our integration staff.

General and Administrative Expenses

General and administrative expenses decreased by $1.2 million, or 75.2% in the third quarter of 2015 to $0.4 million compared with $1.6 million in the third quarter of 2014. This was an effort to reduce general and administrative expenses in order to conserve capital, which included closing our sales office in England.

Strategic Consulting Expenses

Strategic consulting expenses were $0 million in the third quarter of 2015 compared with $0.3 million in the third quarter of 2014. As part of our cost containment measures we spent nothing on strategic consulting in the third quarter of 2015 whereas in the third quarter of 2014 we still had a more active interest in strategic consulting.

Embedded Derivative Liability

The price of the conversion feature related to the Preferred Stock is in excess of the current market price of the Company’s stock, and has been as of the beginning of 2015. Therefore, during the three months ended September 30, 2015, there was no income or expense to be recognized during the quarter and there will be no expense recognized until the stock price is in excess of the conversion price.

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Comparison of the nine months ended September 30, 2015 and 2014

The following discussion analyzes our results of operations for the nine months ended September 30, 2015 and 2014. The following information should be considered together with our financial statements for such periods and the accompanying notes thereto.

Revenue/Net Loss

Revenue

For the nine months ended September 30, 2015 and 2014, we generated revenues of $14,242 and $2,414, respectively.

Net Loss

Our net loss decreased $4.4 million to $6.0 million for the nine months ended September 30, 2015 compared to $10.6 million for the nine months ended September 30, 2014, as a result of decreased expenses.

Sales and Marketing Expenses

Sales and marketing expenses decreased by $2.4 million, or 60.6% for the nine months ended September 30, 2015 to $1.5 million compared with $3.9 million for the nine months ended September 30, 2014. During 2015, we decreased our spending on marketing promotions as we balanced our marketing programs with our available cash resources.

Product Development

Product development expenses decreased by $1.2 million, or 46.4% in the nine months ended September 30, 2015 to $1.4 million compared with $2.6 million during the nine months ended September 30, 2014. During 2015, we decreased the size of our development staff and relied in part on outside resources for product development work.

Integration and Customer Support

Integration and customer support expenses decreased by $0.5 million, or 74.6% in the nine months ended September 30, 2015 to $0.2 million compared with $0.7 million in the nine months ended September 30, 2014. During 2015, we decreased the size of our integration staff.

General and Administrative Expenses

General and administrative expenses decreased $1.4 million in the nine months ended September 30, 2015 to $2.7 million compared with $4.1 million in the nine months ended September 30, 2014. The effort to reduce general and administrative expenses in order to conserve capital began primarily in the second quarter. This was an effort to reduce general and administrative expenses in order to conserve capital, which included closing our sales office in England.

Strategic Consulting Expenses

Strategic consulting expenses were $0.3 million during the nine months ended September 30, 2015 compared with $0.5 million in the prior year period. In 2015, we paid fees to an investment banking firm to advise the Company’s board of directors on strategic alternatives.

Interest Expense

Interest expense increased $0.1 million in the nine months ended September 30, 2015 to $0.2 million compared to $0.1 million in the nine months ended September 30, 2014. This was a result of issuing debt to continue our operations, until other funding sources can be obtained.

Embedded Derivative Liability

The price of the conversion feature related to the Preferred Stock is in excess of the current market price of the Company’s stock, and has been as of the beginning of 2015. Therefore, during the nine months ended September 30, 2015, there was no income or expense to be recognized during the period and there will be no expense recognized until the stock price is in excess of the conversion price.

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Liquidity and Capital Resources

Net cash used in operating activities decreased $6.6 million to $4.9 million for the nine months ended September 30, 2015 compared to $11.5 million for the nine months ended September 30, 2014. The decrease resulted from a lower operating loss, as the Company decreased the size of its staff and reduced operating expenses in an effort to manage its cash flow.

Net cash used in investing activities was $0 million for the nine months ended September 30, 2015, compared with $0.3 million for the nine months ended September 30, 2014. The Company reduced cash outlays in 2015 for purchases of property and equipment, along with its costs to secure patents and trademarks.

Net cash provided by financing activities decreased by $9.0 million to $3.4 million for the nine months ended September 30, 2015 from $12.4 million for the nine months ended September 30, 2014. Cash provided by financing activities during the nine months ended September 30, 2015 consisted of our secured convertible debt offering of $2.9 million and issuance of unsecured debt of approximately $0.5 million. In the nine months ended September 30, 2014, cash provided from financing activities consisted of our Series A Preferred stock offering, netting $10.9 million and our warrant exchange offer, netting $2.7 million, offset by the re-payment of our $1.0 million bridge loan.

As we have not realized significant revenues since our inception, we have financed our operations through public and private offerings of debt and equity securities. We do not currently maintain a line of credit or term loan with any commercial bank or other financial institution.

Since our inception, we have focused on developing and implementing our business plan. We believe that our existing cash resources will not be sufficient to sustain our operations during the next twelve months. We currently need to generate sufficient revenues to support our cost structure to enable us to pay ongoing costs and expenses as they are incurred, finance the continued development of Oink, and execute the business plan. If we cannot generate sufficient revenue to fund our business plan, we intend to seek to raise such financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing shareholders. If we are unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to us, we will be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on our business, financial condition and results of operations.

Even if we are successful in generating sufficient revenue or in raising sufficient capital in order to complete the marketing of Oink, our ability to continue in business as a viable going concern can only be achieved when our revenues reach a level that sustains our business operations. We raised approximately $7.3 million through sales of common stock and warrants, in addition to a bridge loan, in 2013, and $14.9 million in 2014, net of repayment of the bridge loan, and $3.4 million in 2015 through the sale of our convertible debt and other debt. The Oink product was introduced to the marketplace in the third quarter of 2011 and formally launched in the U.S. in 2012. We do not project that significant revenue will be developed in the near term. There can be no assurance that we will raise sufficient proceeds, or any proceeds, for us to implement fully our proposed business plan to aggressively develop and market our Oink product. Moreover there can be no assurance that even if our Oink product is marketed effectively and we achieve our user acquisition goals, that we will generate revenues sufficient to fund our operations. In either such situation, we may not be able to continue our operations and our business might fail.

As of November 6, 2015, the Company had a cash position of approximately $ 0.2 million. Based upon the current cash position, management believes the Company has the capability to finance its operations through December 31, 2015.

The foregoing forward-looking information was prepared by us in good faith based upon assumptions that we believe to be reasonable. No assurance can be given, however, regarding the attainability of the projections or the reliability of the assumptions on which they are based. The projections are subject to the uncertainties inherent in any attempt to predict the results of our operations, especially where new products and services are involved. Certain of the assumptions used will inevitably not materialize and unanticipated events will occur. Actual results of operations are, therefore, likely to vary from the projections and such variations may be material and adverse to us. Accordingly, no assurance can be given that such results will be achieved. Moreover due to changes in technology, new product announcements, competitive pressures, system design and/or other specifications we may be required to change the current plans for our Oink products.

Off-Balance Sheet Arrangements

As of September 30, 2015, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

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Contractual Obligations

At June 30, 2015, the Company was obligated under various non-cancelable operating lease arrangements for property as follows:

2015	$	22,587
2016		52,701

	$	75,288

Critical Accounting Policies

Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 1 of the Notes to Financial Statements included elsewhere herein. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management.

Stock-based Compensation

We have adopted the fair value recognition provisions in Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 718. In addition, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 “ Share-Based Payment ” (“SAB 107”) in March 2005, which provides supplemental FASB ASC 718 application guidance based on the views of the SEC. Under FASB ASC 718, compensation cost recognized includes compensation cost for all share-based payments granted beginning January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of FASB ASC 718.

We have used the Black-Scholes option-pricing model to estimate the option fair values. The option-pricing model requires a number of assumptions, of which the most significant are, expected stock price volatility, the expected pre-vesting forfeiture rate and the expected option term (the amount of time from the grant date until the options are exercised or expire).

Compensation expense for unvested options granted to non-employees in previous periods is being amortized over the term of the consulting agreement.

Revenue Recognition

In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104, Revenue Recognition (Codified in FASB ASC 605), we will recognize revenue when (i) persuasive evidence of a customer or distributor arrangement exists or acceptance occurs, (ii) a retailer, distributor or wholesaler receives the goods, (iii) the price is fixed or determinable, and (iv) collectability of the sales revenues is reasonably assured. Subject to these criteria, we will generally recognize revenue from Oink at the time of the sale of the associated product.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are discussed in Note 1 of the Notes to Financial Statements contained elsewhere in this report.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes in market risk from the information provided in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” set forth in the Company’s 2014 Annual Report on Form 10-K.

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ITEM 4.

CONTROLS AND PROCEDURES.

As of September 30, 2015, we carried out the evaluation of the effectiveness of our disclosure controls and procedures required by Rule 13a-15(e) under the Exchange Act under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2015, our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during our fiscal quarter ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

In September 2014, the Company received a subpoena from the Securities and Exchange Commission with respect to the preservation and production of documents relating to an investigation into trading in the Company’s stock. The subpoena states that it should not be construed as an indication by the Securities and Exchange Commission that any violation of law has occurred, nor as a reflection upon any person, entity or security. The Company is cooperating fully with the terms of the subpoena.

ITEM1A.

RISK FACTORS.

Investing in our common stock involves a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and in our 2014 Form 10-K, under the caption “Risk Factors”, our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of Part I of this Quarterly Report on Form 10-Q, our financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes, as well as our Management’s Discussion and Analysis of Financial Condition and Results of Operations and the other information in our 2014 Form 10-K. Readers should carefully review those risks, as well as additional risks described in other documents we file from time to time with the Securities and Exchange Commission.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5.

OTHER INFORMATION.

None.

ITEM 6.	EXHIBITS

10.1	Form of Promissory Note Agreement

10.2	Form of Promissory Note Agreement (including commitment fee)

10.3	Form of Warrant

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURE

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.

		VIRTUAL PIGGY, INC.



Date:	November 6, 2015	By:	/s/ Scott A. McPherson
			Scott A. McPherson
			Chief Financial Officer (Duly authorized officer and principal financial officer)

PROMISSORY NOTE AGREEMENT

FOR VALUE RECEIVED, Virtual Piggy, Inc., a Delaware corporation with an address of 1221 Hermosa Ave, Ste 210, Hermosa Beach, CA (“Maker”), promises to pay to the order of _____________________ _______________________________ with an address of ______________________________________ its successors and assigns (“Holder”), the principal sum of ___________________ Dollars ($________), in lawful money of the United States of America, together with interest thereon as hereinafter specified.

The principal balance of this Note Agreement, together with all accrued but unpaid interest accrued thereon, shall be due and payable in full on the “Maturity Date”, which shall be the earlier of: (i) the 6 months anniversary of the date hereof, or on such earlier date that (i) the Maker completes the closing of its joint venture agreement with ________, LLC or (ii) the Maker completes the closing of an additional $1 million minimum of financing pursuant to its offering of 10% Secured Convertible Promissory Notes.

Payments under this Note Agreement shall be made to Holder at the address reflected above or at such other such address as Holder may designate in writing from time to time. Maker will have the right to prepay any or all of the principal balance outstanding under this Note Agreement in whole or in part at any time and from time to time without notice, premium or penalty. Any such prepayment shall be applied first to any unpaid interest that may have accrued through the date of payment, and then to the unpaid principal balance of this Note Agreement.

If Maker fails to make any payment of principal or interest due under this Note Agreement as and when due, or if Maker fails to keep any other agreement or covenant set forth herein, and such failure continues uncured for ten (10) days or more after the date on which Holder sends written notice thereof to Maker specifying such failure with particularity, then Holder may declare Maker to be in default hereunder. For the avoidance of doubt, the 10-day grace period provided for herein, shall not apply to payment in full of all sums due under the Note Agreement which shall be due on the Maturity Date.

Maker hereby waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note Agreement. Any notice, request, or presentation to or upon Holder in respect of this Note Agreement may be given or made in writing and shall be deemed to be duly given if delivered personally, by registered or certified mail, postage prepaid, or by a nationally recognized overnight courier service to the address set forth above or, if any other address shall at any time be designated for this purpose by Maker in writing to Holder, to such other address.

The rights, powers and remedies of Holder, available at law, in equity or as stated herein, shall be cumulative and concurrent and may be exercised or otherwise pursued by Holder singly, successively or concurrently against Maker at the sole discretion of Holder, and may be exercised as often as occasion therefor shall incur. The failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof.

Holder shall not be deemed, by any act of omission or commission, to have waived any of his rights or remedies hereunder unless such waiver is in writing and signed by Holder, and then only to the extent specifically set forth in writing. A waiver on one event shall not be construed as continuing or as a bar to or waiver of any right or remedy to a subsequent event.

Maker agrees to reimburse Holder for all costs and expenses (including without limitation reasonable attorneys’ fees) incurred by Holder in enforcing the provisions of this Note Agreement and in collecting on Maker’s obligations hereunder.

As an equity inducement for Holder to extend credit to Maker as evidenced by this Note Agreement, Maker agrees to issue to Holder two-year common stock purchase warrants to purchase ________ shares of Common Stock exercisable at $0.90 per share, such warrants to be otherwise in substantially the same form as those issued by the Maker in its most-recent Series B Preferred Stock financing (the “Warrants”).

This Note Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to principles of conflicts of laws. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note Agreement. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Maker in any other jurisdiction to collect on the Maker’s obligations to Holder, or to enforce a judgment or other court in favor of the Holder.

This Note Agreement may not be changed or terminated orally, but only by an agreement in writing signed by the party against whom enforcement of such change or termination is sought.

The provisions of this Note Agreement are severable. If any term or provision of this Note Agreement shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby.

This Note Agreement shall bind Maker and its successors and assigns, and shall inure to the benefit of Holder and to his personal representatives, successors and assigns. Notwithstanding the foregoing, Maker may not assign or transfer its rights or obligations hereunder without the express written consent of Holder which may granted or withheld in Holder’s sole and absolute discretion.

It is expressly stipulated and agreed to be the intent of Maker and Holder at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Holder to contract for, charge, take, reserve, or receive a greater amount of interest than under state law) and that this paragraph shall control every other covenant and agreement in this Note Agreement. If the applicable law (state or federal) is ever judicially interpreted so as to render usurious any amount called for under this Note Agreement, or contracted for, charged, taken, reserved, or received with respect to the loan evidenced by this Note Agreement, or if Holder's exercise of the option to accelerate the Maturity Date, results in Holder having paid any interest in excess of that permitted by applicable law, then it is Holder's express intent that all excess amounts theretofore collected by Payee shall be credited on the principal balance of this Note Agreement and all other debt and the provisions of this Note Agreement immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid or agreed to be paid to Payee for the use, forbearance, or detention of the loan evidenced by the Note Agreement shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Note Agreement until payment in full so that the rate or amount of interest on account of the Note Agreement does not exceed the maximum lawful rate from time to time in effect and applicable to the loan amount for so long as the Note Agreement is outstanding. Notwithstanding anything to the contrary contained herein, it is not the intention of Holder to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

Maker (and the undersigned representative of Maker, if any) represents that Maker has full power, authority and legal right to execute, deliver and perform its obligations pursuant to this Note Agreement and that this Note Agreement constitutes the valid and binding obligations of Maker.

THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THE LOAN, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTION OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER’S AGREEMENT TO MAKE THE LOAN, WITHOUT WHICH LENDER WOULD NOT MAKE THE LOAN. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS HAD THE OPPORTUNITY TO REVIEW THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IF IT HAS SO REVIEWED THIS WAIVER WITH LEGAL COUNSEL IT HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING SUCH CONSULTATION OR IF IT HAS NOT REVIEWED THIS WAIVER WITH LEGAL COUNSEL HAS DONE SO KNOWINGLY AND INTENTIONALLY AND AGAINST THE ADVICE OF THE OTHER PARTY WITH THE FULL UNDERSTANDING THAT THIS PROVISION IS LEGALLY ENFORCEABLE IN ACCORDANCE WITH ITS TERMS. IF FOR ANY REASON THIS JURY TRIAL WAIVER IS DEEMED TO BE UNENFORCEABLE, AND A PARTY HERETO SHALL ELECT JURY TRIAL AS A DISPUTE RESOLUTION MECHANISM SUCH ELECTION SHALL BE UNENFORCEABLE TO THE MAXIMUM EXTENT PERMITTED BY LAW AND THE DISPUTE SHALL INSTEAD BE RESOLVED BY JUDICIAL REFERENCE IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638, ET SEQ.

Maker hereby warrants, represents and covenants that the loan evidenced hereby is for business or commercial purposes only, and no advance of funds evidenced hereby shall be used by Maker for personal, family, agricultural or household purposes.

The Holder hereby represents and warrants to the Maker as follows:

The Holder has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and to carry out its provisions. All corporate action on Holder's part required for the lawful execution and delivery of this Agreement has been or will be effectively be taken prior to the Closing. Upon its execution and delivery, this Agreement will be a valid and binding obligation of Holder, enforceable in accordance with its terms.

Holder understands that the Warrants and underlying shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act of 1933, as amended (the “Securities Act”), based in part upon Holder's representations including, without limitation, that the Holder is an "accredited investor" within the meaning of Regulation D under the Securities Act. The Holder confirms that it has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Note Agreement and the Warrants. The Holder further confirms that it has had an opportunity to ask questions and receive answers from the Maker regarding the Maker's business, management and financial affairs and the terms and conditions of this Note Agreement, and the Warrants and to obtain additional information necessary to verify any information furnished to the Holder or to which the Holder had access.

The Holder has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Maker so that it is capable of evaluating the merits and risks of its investment in the Maker. The Holder understands that it must bear the economic risk of this investment until the Maturity Date and until the Warrants or underlying shares are sold pursuant to: (i) an effective registration statement under the Securities Act; or (ii) an exemption from registration is available with respect to such sale.

The Holder is acquiring the Note Agreement and the Warrants and underlying shares for the Holder's own account for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with their distribution.

Holder represents that it is an accredited investor within the meaning of Regulation D under the Securities Act.

The Warrants and underlying shares shall bear a legend which shall be in substantially the following form until such shares and Warrants are covered by an effective registration statement filed with the SEC:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO. THAT SUCH REGISTRATION IS NOT REQUIRED."

The Holder covenants and agrees with the Company as follows:

The Holder agrees that it will not disclose, and will not include in any public announcement, the name of the Maker, unless expressly agreed to by the Maker or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement.

The Holder agrees not to effect any sales in the Warrants or the Maker's Common Stock while in possession of material, non-public information regarding the Maker if such sales would violate applicable securities law.

Holder acknowledges that he has read and understands the contents of this Agreement.

Holder further acknowledges that he has been specifically advised by the Maker to consult with an attorney before signing it. Holder further acknowledges that this Agreement was reached after negotiation in which Holder was advised to be, and afforded the opportunity to be, represented by counsel. Holder acknowledges that he has executed this Agreement voluntarily and of his own free will, without coercion and with full knowledge of what it means to do so.

This Note Agreement may be executed and delivered by facsimile in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.

(Remainder of the page intentionally left blank)

IN WITNESS WHEREOF, intending to be legally bound thereby, the parties have caused this Note Agreement to be signed in their names effective as of the date hereof.

	MAKER:

	VIRTUAL PIGGY, INC.



	By:
	Name:
	Title:



	HOLDER:

PROMISSORY NOTE AGREEMENT

$________

___, 2015

FOR VALUE RECEIVED, Virtual Piggy, Inc., a Delaware corporation with an address of 1221 Hermosa Ave, Ste 210, Hermosa Beach, CA (“Maker”), promises to pay to the order of _____________________ _______________________________ with an address of ______________________________________ its successors and assigns (“Holder”), the principal sum of ________________________ Dollars ($_______), in lawful money of the United States of America, together with interest thereon as hereinafter specified.

The principal balance of this Note Agreement, together with all accrued but unpaid interest accrued thereon, shall be due and payable in full on the “Maturity Date”, which shall be the earlier of: (i) the 6 months anniversary of the date hereof, or on such earlier date that (i) the Maker completes the closing of its joint venture agreement with _________, LLC or (ii) the Maker completes the closing of an additional $1 million minimum of financing pursuant to its offering of 10% Secured Convertible Promissory Notes.

The principal balance of this Note Agreement shall accrue interest at a rate of ten percent (10%) per annum (the “Interest Rate”). Accrued interest on the outstanding principal balance of this Note Agreement will be due and payable on the Maturity Date, together with a commitment fee equal to seven and one-half percent (7.5%) of the principal amount set forth in this Note Agreement (the “Commitment Fee”).

As an equity inducement for Holder to extend credit to Maker as evidenced by this Note Agreement, Maker agrees to issue to Holder two-year common stock purchase warrants to purchase _________ shares of Common Stock exercisable at $0.90 per share, such warrants to be otherwise in substantially the same form as those issued by the Maker in its most-recent Series B Preferred Stock financing (the “Warrants”).

This Note Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note Agreement. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Maker in any other jurisdiction to collect on the Maker’s obligations to Holder, or to enforce a judgment or other court in favor of the Holder.

This Note Agreement may not be changed or terminated orally, but only by an agreement in writing signed by the party against whom enforcement of such change or termination is sought.

The Holder hereby represents and warrants to the Maker as follows:

Holder represents that it is an accredited investor within the meaning of Regulation D under the Securities Act.

The Holder covenants and agrees with the Company as follows:

Holder acknowledges that he has read and understands the contents of this Agreement.

(Remainder of the page intentionally left blank)

IN WITNESS WHEREOF, intending to be legally bound thereby, the parties have caused this Note Agreement to be signed in their names effective as of the date hereof.

	MAKER:

	VIRTUAL PIGGY, INC.



	By:
	Name:
	Title:



	HOLDER:

WARRANT TO PURCHASE COMMON STOCK

OF VIRTUAL PIGGY, INC.

WARRANT NO.: 201_- [_________]

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES REPRESENTED HEREBY HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER OR OTHER APPLICABLE SECURITIES LAWS.

This WARRANT (“ Warrant ”) is to verify that, FOR VALUE RECEIVED, [_________________] (“ Holder ”) is entitled to purchase, subject to the terms and conditions hereof, from Virtual Piggy, Inc. a Delaware corporation (the “ Company ”), [_____________] shares of common stock, $0.0001 par value per share, of the Company (the “ Common Stock ”), at any time during the period commencing at 9:00 a.m., Eastern Time on the date hereof (the “ Commencement Date ”) and ending at 5:00 p.m. Eastern Time on _____[__], 201[_] (the “ Termination Date ”), at an exercise price (the “ Exercise Price ”) of $1.00 per share of Common Stock. The number of shares of Common Stock purchasable upon exercise of this Warrant and the Exercise Price per share shall be subject to adjustment from time to time upon the occurrence of certain events as set forth below.

The shares of Common Stock or any other shares or other units of stock or other securities or property, or any combination thereof, then receivable upon exercise of this Warrant, as adjusted from time to time, are sometimes referred to hereinafter as “ Exercise Shares .” The exercise price per share as from time to time in effect is referred to hereinafter as the “ Exercise Price .”

1. Exercise of Warrant; Issuance of Exercise Shares .

(a) Exercise of Warrant . Subject to the terms hereof, the purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, at any time, or from time to time, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) accompanied by payment of the Exercise Price in full in cash or by bank or certified check for the Exercise Shares with respect to which this Warrant is exercised and a completed and duly executed Notice of Exercise form attached hereto as Appendix A .

In the event that this Warrant shall be duly exercised in part prior to the Termination Date, the Company shall issue a new Warrant or Warrants of like tenor evidencing the rights of the Holder thereof to purchase the balance of the Exercise Shares purchasable under the Warrant so surrendered that shall not have been purchased.

(b) Issuance of Exercise Shares: Delivery of Warrant Certificate . The Company shall, within three (3) business days of the exercise of this Warrant (“ Warrant Share Delivery Date ”), issue in the name of and cause to be delivered to the Holder one or more certificates representing the Exercise Shares to which the Holder shall be entitled upon such exercise under the terms hereof. Such certificate or certificates shall be deemed to have been issued and the Holder shall be deemed to have become the record holder of the Exercise Shares as of the date of the due exercise of this Warrant. In addition to any other rights available to the Holder, if the Company fails to transmit to the Holder a certificate or the certificates representing the Exercise Shares or to credit the Holder’s balance account at DTC for such number of Exercise Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Exercise Shares which the Holder anticipated receiving upon such exercise (a “ Buy-In ”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “ Buy-In Amount ”) exceeds (y) the amount obtained by multiplying (1) the number of Exercise Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either (i) reinstate the portion of the Warrant and equivalent number of Exercise Shares for which such exercise was not honored and refund the exercise paid therefor or (ii) deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder’s Buy-In Amount is $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock and if the aggregate sales price of the shares giving rise to such Buy-In obligation was $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

(c) Exercise Shares Fully Paid and Non-assessable . The Company agrees and covenants that all Exercise Shares issuable upon the due exercise of the Warrant represented by this Warrant certificate (“ Warrant Certificate ”) will, upon issuance and payment therefor in accordance with the terms hereof, be duly authorized, validly issued, fully paid and non-assessable and free and clear of all taxes (other than taxes which, pursuant to Section 2 hereof, the Company shall not be obligated to pay) or liens, charges, and security interests created by the Company with respect to the issuance thereof.

(d) Reservation of Exercise Shares . The Company covenants that during the term that this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Exercise Shares upon the exercise of this Warrant.

(e) Fractional Shares . The Company shall not be required to issue fractional shares of capital stock upon the exercise of this Warrant or to deliver Warrant Certificates that evidence fractional shares of capital stock. In the event that any fraction of an Exercise Share would, except for the provisions of this subsection (e), be issuable upon the exercise of this Warrant, the Company shall pay to the Holder exercising the Warrant an amount in cash equal to such fraction multiplied by the Current Market Value of the Exercise Share on the last business day prior to the date on which this Warrant is exercised. For purposes of this Warrant, the “ Current Market Value ” for any day shall be determined as follows:

(i) if the Exercise Shares are traded in the over-the-counter market and not on any national securities exchange, the average of the mean between the last bid and asked prices per share, as reported by Bloomberg, L.P., or an equivalent generally accepted reporting service, or if not so reported, the average of the closing bid and asked prices for an Exercise Share as furnished to the Company by any member of the Financial Industry Regulatory Authority, selected by the Company for that purpose; or

(ii) if the Exercise Shares are listed or traded on a national securities exchange, the closing price on the principal national securities exchange on which they are so listed or traded, on the last business day prior to the date of the exercise of this Warrant. The closing price referred to in this clause (ii) shall be the last reported sales price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case on the national securities exchange on which the Exercise Shares are then listed; or

(iii) if the Exercise Shares are not traded in the over-the-counter market or on any national securities exchange or no such closing price or closing bid and asked prices are available, as determined in any reasonable manner as may be prescribed by the Board of Directors of the Company.

2. Payment of Taxes .

(a) Stamp Taxes . The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Exercise Shares upon the exercise of this Warrant; provided , however , that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Exercise Shares in a name other than that of the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Except as specifically provided in this Section 2 , Holder shall be responsible for the payment of all other taxes incurred in connection with the receipt, transfer or sale of the Warrant or the Exercise Shares.

(b) Withholding . The Holder shall pay to the Company, or make arrangements satisfactory to the Company regarding payment of, any federal, state, local and/or payroll taxes of any kind required by law to be withheld with respect to the grant of this Warrant or the issuance of the Exercise Shares. The Company may, to the extent permitted by law, deduct any such taxes from any payment of any kind otherwise due to the Holder whether or not pursuant to this Warrant. The Holder may elect, with the consent of the Company, to have such tax withholding obligation satisfied, in whole or in part, by: (i) authorizing the Company to withhold from the Exercise Shares a number of shares of Common Stock having an aggregate Current Market Value that would satisfy the minimum withholding amount due, or (ii) delivering to the Company a number of shares of Common Stock of which the Holder is the record and beneficial owner and that have been held by the Holder for at least six (6) months with an aggregate Current Market Value that would satisfy the minimum withholding amount due. The Company may require that any fractional share amount be settled in cash. For the purposes of this Section 2 , Current Market Value shall be determined as of the date on which the amount of tax to be withheld is determined.

3. Mutilated or Missing Warrant Certificates . In case any Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, in exchange and substitution for and upon cancellation of the mutilated Warrant, or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a new Warrant or Warrants of like tenor and in the same aggregate denomination, but only (i) in the case of loss, theft or destruction, upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and indemnity or bond, if requested, also satisfactory to them and (ii) in the case of mutilation, upon surrender of the mutilated Warrant. Applicants for such substitute Warrants shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or its counsel may prescribe.

4. Rights of Holder . The Holder shall not, by virtue of anything contained in this Warrant or otherwise, be entitled to any right whatsoever, either in law or equity, of a stockholder of the Company, including without limitation, the right to receive dividends or to vote or to consent or to receive notice as a shareholder in respect of the meetings of shareholders or the election of directors of the Company or any other matter.

5. Registration of Transfers and Exchanges . This Warrant may be transferred or exchanged, at the option of the Holder thereof and without change, when surrendered to the Company at its principal office, or at the office of its transfer agent, if any, for another Warrant or other Warrants of like tenor and representing in the aggregate the right to purchase from the Company a like number and kind of Exercise Shares as the Warrant surrendered for exchange, and the Warrant so surrendered shall be canceled by the Company or transfer agent, as the case may be.

6. Adjustment of Exercise Shares and Exercise Price . The Exercise Price and the number and kind of Exercise Shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the happening of certain events as hereinafter provided. The Exercise Price in effect at any time and the number and kind of securities purchasable upon exercise of each Warrant shall be subject to adjustment as follows:

(a) In case of any consolidation or merger of the Company with another corporation (other than a merger with another corporation in which the Company is the surviving corporation and which does not result in any reclassification or change -- other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination -- of outstanding Common Stock issuable upon such exercise), the rights of the Holder of this Warrant shall be adjusted in the manner described below:

(i) In the event that the Company is the surviving corporation or is merged into a wholly owned subsidiary for the purpose of incorporating the Company in a different jurisdiction, this Warrant shall, without payment of additional consideration therefor, be deemed modified so as to provide that the Holder of this Warrant, upon the exercise thereof, shall procure, in lieu of each share of Common Stock theretofore issuable upon such exercise, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change, consolidation or merger by the holder of each share of Common Stock, had exercise of this Warrant occurred immediately prior to such reclassification, change, consolidation or merger. This Warrant (as adjusted) shall be deemed to provide for further adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6 . The provisions of this clause (i) shall similarly apply to successive reclassifications, changes, consolidations and mergers.

(ii) In the event that the Company is not the surviving corporation (except in the case of a merger of the Company into a wholly owned subsidiary for the purpose of incorporating the Company in a different jurisdiction), Holder shall be given at least fifteen (15) days prior written notice of such transaction and shall be permitted to exercise this Warrant, to the extent it is exercisable as of the date of such notice, during this fifteen (15) day period. Upon expiration of such fifteen (15) day period, this Warrant and all of Holder’s rights hereunder shall terminate.

(b) If the Company, at any time while this Warrant, or any portion thereof, remains outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 6 .

(c) In case the Company shall (i) pay a dividend or make a distribution on its shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification, shall be proportionally adjusted so that the Holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares that, if this Warrant had been exercised by such Holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, subdivision, combination or reclassification. For example, if the Company declares a 2 for 1 stock dividend or stock split and the Exercise Price immediately prior to such event was $0.40 per share, the adjusted Exercise Price immediately after such event would be $0.20 per share. Such adjustment shall be made successively whenever any event listed above shall occur. Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to this subsection (c), the number of Exercise Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Exercise Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted.

(d) In the event that at any time, as a result of an adjustment made pursuant to subsection (a), (b) or (c) above, the Holder of this Warrant thereafter shall become entitled to receive any Exercise Shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in subsections (a), (b) or (c) above.

(e) Irrespective of any adjustments in the Exercise Price or the number or kind of Exercise Shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Warrant.

(f) Whenever the Exercise Price shall be adjusted as required by the provisions of the foregoing Section 6 , the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer’s certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer’s certificate shall be made available at all reasonable times for inspection by the holder and the Company shall, forthwith after each such adjustment, mail a copy of such certificate to the Holder.

(g) All calculations under this Section 6 shall be made to the nearest cent or to the nearest one one-hundredth (1/100th) of a share, as the case may be.

7. Investment Intent, Exercise Restrictions and Transfer Restrictions .

(a) The Warrant and the Exercise Shares may not be offered for sale or sold, or otherwise transferred or sold in any transaction which would constitute a sale thereof within the meaning of the Securities Act of 1933, as amended (the “ 1933 Act ”), unless (i) such security has been registered for sale under the 1933 Act and registered or qualified under applicable state securities laws relating to the offer and sale of securities, or (ii) exemptions from the registration requirements of the 1933 Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel satisfactory to the Company that the proposed sale or other disposition of such securities may be effected without registration under the 1933 Act and would not result in any violation of any applicable state securities laws relating to the registration or qualification of securities for sale, such counsel and such opinion to be satisfactory to the Company.

The Holder agrees to indemnify and hold harmless the Company against any loss, damage, claim or liability arising from the disposition of this Warrant or any Exercise Share held by such holder or any interest therein in violation of the provisions of Section 5 or 7 hereof, respectively.

(b) The certificates evidencing any Exercise Shares issued upon the exercise of this Warrant shall have endorsed thereon (except to the extent that the restrictions described in any such legend are no longer applicable) substantially the following legend, appropriate notations thereof will be made in the Company's stock transfer books, and stop transfer instructions reflecting these restrictions on transfer will be placed with the transfer agent of the Exercise Shares.

8. Intentionally Omitted.

9. Registration Rights . The Holder shall be entitled to the rights and subject to the obligations set forth in Section 6 of that certain Securities Purchase Agreement by and between the Company, the Holder and other holders.

10. Notices . All notices hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented overnight delivery service or, to the extent receipt is confirmed, telecopy, telefax or other electronic transmission service to the appropriate address or number as set forth below:

1221 Hermosa Avenue, Suite 210

Hermosa Beach, CA 90254

Attention: Chief Financial Officer

281 Tresser Boulevard

Attention: Michael Grundei

and to the Holder at the address of the Holder appearing on the books of the Company or the Company's transfer agent, if any.

Either of the Company or the Holder may from time to time change the address to which notices to it are to be mailed hereunder by notice in accordance with the provisions of this Section 10 .

11. Supplements and Amendments . The Company may from time to time supplement or amend this Warrant without the approval of the Holder of this Warrant in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision, or to make any other provisions in regard to matters or questions herein arising hereunder which the Company may deem necessary or desirable and which shall not materially adversely affect the interests of the Holder. Except as set forth in the immediately preceding sentence, this Warrant may not be amended, modified or supplemented except by an instrument or instruments in writing signed by the party against whom enforcement of any such amendment, modification or supplement is sought.

12. Successors . This Warrant shall inure to the benefit of and be binding on the respective successors, assigns and legal representatives of the Holder and the Company.

13. Severability . If for any reason any provision, paragraph or terms of this Warrant is held to be invalid or unenforceable, all other valid provisions herein shall remain in full force and effect and all terms, provisions and paragraphs of this Warrant shall be deemed to be severable.

14. Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of New York, without regard to the laws that might otherwise govern under applicable principles of conflicts of laws thereof, except to the extent that the General Corporation Law of the State of Delaware shall apply to the internal corporate governance of the Company.

15. Arbitration . The parties agree that any dispute, claim or controversy directly or indirectly relating to or arising out of this Warrant, the termination or validity hereof, any alleged breach of this Agreement or the engagement contemplated hereby (any of the foregoing, a “Claim”) shall be submitted to the Judicial Arbitration and Mediation Services, Inc. (JAMS), or its successor, in New York, for final and binding arbitration in front of a panel of three arbitrators with JAMS in New York, New York under the JAMS Comprehensive Arbitration Rules and Procedures (with each of the Holder and the Company choosing one arbitrator, and the chosen arbitrators choosing the third arbitrator). The arbitrators shall, in their award, allocate all of the costs of the arbitration, including the fees of the arbitrators and the reasonable attorneys’ fees of the prevailing party, against the party who did not prevail. The award in the arbitration shall be final and binding. The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. Sec.1-16, and the judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. The Company and the Holder agree and consent to personal jurisdiction, service of process and venue in any federal or state court within the State and County of New York in connection with any action brought to enforce an award in arbitration.

16. Headings . Section and subsection headings used herein are included herein for convenience of reference only and shall not affect the construction of this Warrant nor constitute a part of this Warrant for any other purpose.

[Signature page follows]

IN WITNESS WHEREOF, the Company has caused these presents to be duly executed as of the ___ day of ______________, 201_.

	VIRTUAL PIGGY, INC.




	By:
		Name:
		Title:

APPENDIX A

To:	Virtual Piggy, Inc.
	1221 Hermosa Avenue, Suite 210
	Hermosa Beach, CA 90254

Attention: Chief Financial Officer

(1) The undersigned hereby elects to purchase ____________ shares of Common Stock of Virtual Piggy, Inc., a Delaware corporation, pursuant to the terms of the attached Warrant, and tenders herewith payment of the Exercise Price for such shares in full in accordance with the terms of the Warrant.

(2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of Common Stock to be issued upon conversion hereof are being acquired solely for the account of the undersigned, not as a nominee for any other party, and for investment purposes only (unless such shares are subject to resale pursuant to an effective prospectus), and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws.

(3) Terms not otherwise defined in this Notice of Exercise shall have the meanings ascribed to such terms in the attached Warrant

(4) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned.

			HOLDER






(Date)			(Signature)

Exhibit 31.1

CERTIFICATION

I, Jo Webber, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Virtual Piggy, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2015	By:	/s/ Jo Webber
		Jo Webber
		Chief Executive Officer

I, Scott A. McPherson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Virtual Piggy, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2015	By:	/s/ Scott A. McPherson
		Scott A. McPherson
		Chief Financial Officer

CHIEF EXECUTIVE OFFICER

OF VIRTUAL PIGGY, INC.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Virtual Piggy, Inc. (the "Company") for the period ended September 30, 2015, as filed with the Securities and Exchange Commission (the "Report"), I, Jo Webber, Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2015	/s/ Jo Webber
	Jo Webber
	Chief Executive Officer

CHIEF FINANCIAL OFFICER

OF VIRTUAL PIGGY, INC.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Virtual Piggy, Inc. (the "Company") for the period ended September 30, 2015, as filed with the Securities and Exchange Commission (the "Report"), I, Scott A. McPherson, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2015	/s/ Scott A. McPherson
	Scott A. McPherson
	Chief Financial Officer

	PAGE

BALANCE SHEETS	4


STATEMENTS OF OPERATIONS	5


STATEMENTS OF COMPREHENSIVE LOSS	6


STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)	7


STATEMENTS OF CASH FLOWS	8


NOTES TO THE FINANCIAL STATEMENTS	9-19

TABLE OF CONTENTS		Page No.


PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	25
ITEM 4.	Controls and Procedures	26

PART II	OTHER INFORMATION
ITEM 1.	Legal Proceedings	27
ITEM 1A.	Risk Factors	27
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
ITEM 3.	Defaults Upon Senior Securities	27
ITEM 4.	Mine Safety Disclosures	27
ITEM 5.	Other Information	27
ITEM 6.	Exhibits	27