NOTE 3 – ACCOUNTS PAYABLE – RELATED PARTIES
As of March 31, 2016, the former Chairman of the Board had paid expenses on behalf of the Company in the amount of $88,658. The Company also owes the Chief Financial Officer a total of $13,848 as of March 31, 2016, including unpaid health insurance of $7,335 and unpaid accounting services, to the Chief Financial Officer’s accounting firm for services provided prior to his becoming the Chief Financial Officer of the Company, in the amount of $6,513. Additionally, the Company owes a company owned by a beneficial owner of more than 5% of the Company $7,487.
NOTE 4 – CONVERTIBLE NOTES PAYABLE
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. The maturity dates of the notes were extended to March 5, 2017 with the consent of the note holders.
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 May 11, 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 March 31, 2016. Interest accrued on the notes was $298,751 and $225,452 as of March 31, 2016 and December 31, 2015. Interest expense related to these notes payable was $73,299 and $14,247 for the three months ended March 31, 2016 and 2015.
NOTE 5 – NOTES PAYABLE - STOCKHOLDERS
On January 15 and 19, 2016, the Company entered into agreements with two stockholders that includes notes payable in the aggregate amount of $62,500, and two-year warrants to purchase 12,500 shares of the Company’s common stock at $0.90. The notes bear interest at 10% per annum, and mature on the six 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 the 10% Secured Convertible Promissory Notes.
On January 29 and February 3, 2016, the Company entered into agreements with two stockholders that includes notes payable in the aggregate amount of $90,000, and two-year warrants to purchase 18,000 shares of the Company’s common stock at $0.90. The notes bear interest at 10% per annum, and mature on the six 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 the 10% Secured Convertible Promissory Notes.
On February 23, 2016, the Company entered into agreements with three stockholders that includes notes payable in the aggregate amount of $26,000, and two-year warrants to purchase 5,200 shares of the Company’s common stock at $0.90 per share. The notes bear interest at 10% per annum, and mature on the six 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 the 10% Secured Convertible Promissory Notes.
On February 23, 2016, the Company entered into Amendments to Promissory Note Agreements (the “Amendments”) with five holders of the Company’s outstanding unsecured Promissory Notes in the aggregate principal amount of $475,300 (the “Outstanding Notes”), pursuant to which the maturity date of such Outstanding Notes was extended to the twelve (12) month anniversary of the original issuance date (formerly the six (6) month anniversary of the original issuance date) or such earlier date that (i) the Company completes the closing of specified joint venture agreement or (ii) the Company completes the sale of at least an additional $1 million of 10% Secured Convertible Promissory Notes. The Outstanding Notes were previously to mature between January 20, 2016 and March 18, 2016 and will now mature not later than dates between July 20, 2016 and September 18, 2016. The Amendments took effect retroactive to the prior applicable maturity date.
On March 2, 2016, the Company entered into an agreement with a stockholder that includes a note payable in the amount of $5,000, and two-year warrants to purchase 1,000 shares of the Company’s common stock at $0.90. The note bears interest at 10% per annum, and matures on the six 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 the 10% Secured Convertible Promissory Notes.
On March 4, 2016, the Company entered into an agreement with a stockholder that includes a note payable in the amount of $100,100, and two-year warrants to purchase 20,020 shares of the Company’s common stock at $0.90. The note bears interest at 10% per annum, and matures on the six 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 the 10% Secured Convertible Promissory Notes. This note contains a 7.5% commitment fee, which is payable upon maturity of the note.
On March 15, 2016, the Company entered into an agreement with a stockholder that includes notes payable in the amount of $200,000, and two-year warrants to purchase 40,000 shares of the Company’s common stock at $0.90 per share. The note bears interest at 10% per annum, and matures on the six 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 the 10% Secured Convertible Promissory Notes. This note contains a 7.5% commitment fee, which is payable upon maturity of the note.
The 7.5% commitment fees, amounting to $76,913 and $54,405 as of March 31, 2016 and December 31, 2015, 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 note 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 March 31, 2016. Interest accrued including the 7.5% commitment fee on the notes as of March 31, 2016 and December 31, 2015 was $134,601 and $81,831. Interest expense, including accretion of discounts, related to these notes payable was $68,932 and $0 for the three months ended March 31, 2016 and 2015.
On January 25, 2016, the Board of Directors approved amendments extending the term of outstanding warrants to purchase in the aggregate 24,372,838 shares of common stock of the Company at exercise prices ranging from $0.01 per share to $3.00 per share (the “Warrants”). These Warrants were scheduled to expire at various dates during 2016 and were each extended for an additional one year period from the applicable current expiration date, with the new expiration dates ranging from January 26, 2017 to December 28, 2017. The increase in fair value of this term extension was $1,305,411 which was expensed during the three months ended March 31, 2016. 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 161.3%, risk free interest rate of 0.47%, and expected warrant life of 1.27 years.
NOTE 9 – 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 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 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 March 31, 2016, options to purchase 6,101,664 shares of common stock have been issued and are unexercised, and 9,048,336 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 March 31, 2016, under the 2013 Plan grants of restricted stock and options to purchase 2,105,000 shares of common stock have been issued and are unvested or unexercised, and 2,895,000 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 history.
The following table summarizes the activities for our stock options for the three months ended March 31, 2016:
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
|
Weighted -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
Number of
|
|
|
Average
|
|
|
Term
|
|
|
Value
|
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
in years)
|
|
|
(in 000's) (1)
|
|
|
Balance December 31, 2015
|
|
|
8,822,500
|
|
|
$
|
0.76
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited
|
|
|
(535,837
|
)
|
|
$
|
(0.57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2016
|
|
|
8,286,663
|
|
|
$
|
0.77
|
|
|
|
2.2
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2016
|
|
|
5,345,824
|
|
|
$
|
0.86
|
|
|
|
1.3
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2016 and expected to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
vest thereafter
|
|
|
8,286,663
|
|
|
$
|
0.77
|
|
|
|
2.2
|
|
|
$
|
-
|
|
NOTE 11 – SUBSEQUENT EVENTS
On April 14, 2016, the Company appointed a new Chief Executive Officer and Chairman of the Board, with such appointments taking effect on April 18, 2016. In this connection with his appointment, the Company also simultaneously entered into an Employment Agreement with the Chief Executive Officer and Chairman of the Board, pursuant to which he will be employed on an at will basis at an annual salary of $240,000 during the first year of employment. He also received options to purchase 3,000,000 shares of the Company’s common stock at an exercise price of $0.90 per share, vesting over three years and 250,000 restricted stock units.
On April 18, 2016, the Company issued $20,000 in aggregate principal amount of unsecured Promissory Notes to two accredited investors pursuant to Promissory Note Agreements (the “Notes”). The Investors also received two-year Warrants to purchase an aggregate of 4,000 shares of Company 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.
On April 25, 2016, the Company issued a $50,000 principal amount unsecured Promissory Note to an accredited investor pursuant to a Promissory Note Agreement (the “Note”). The Investor also received two-year Warrants to purchase an aggregate of 10,000 shares of Company common stock at an exercise price of $0.90 per share. The Note bears interest at a rate of ten percent (10%) per annum and matures 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.
On May 5, 2016, the Company issued $100,000 aggregate principal amount of its 10% Secured Convertible Promissory Notes due March 6, 2017 (the “New Notes”) to an accredited investor. The New Notes are in addition to currently outstanding promissory notes of the same series, in the principal amount of $2,940,000 (the “Prior Notes”), which were originally due March 5, 2016 and the maturity date thereof was subsequently extended to March 6, 2017 with the consent of the Note holders.
On May 11, 2016, the Company entered into a consulting agreement with
a company owned by a beneficial owner of more than 5% of the Company. The agreement requires the payment of $12,500 per month and continues on a monthly basis until terminated.
Virtual Piggy, Inc. (the “Company,” “we”, or “us”) was incorporated in Delaware on February 11, 2008 under the name Chimera International Group, Inc. On April 4, 2008, we amended our certificate of incorporation and changed our name to Moggle, Inc. On August 22, 2011, we filed a Certificate of Ownership with the Secretary of State of Delaware, pursuant to which the Company’s newly-formed wholly-owned subsidiary, Virtual Piggy Incorporated was merged into and with the Company (the “Merger”). In connection with the Merger and in accordance with Section 253 of the Delaware General Corporation Law, the name of the Company was changed from “Moggle, Inc.” to “Virtual Piggy, Inc.” Our principal offices are located at 100 S. Murphy Avenue, Suite 200, Sunnyvale, California 94086 and our telephone number is (310) 853-1950.
On December 3, 2015, the Company incorporated a newly-formed wholly-owned Subsidiary, Finity, Inc. On December 11, 2015, the Company filed a Statement of Correction with the Pennsylvania Department of State, to change the name of Finity, Inc. to Finitii, Inc. The purpose of Finitii, Inc. is to teach children financial responsibility as a not for profit organization.
Management believes that a future alternative for Virtual Piggy, Inc. will revolve around the FinTech industry with a partner-first go to market model in which established payments market leaders and vertical market participants can incorporate and integrate the company’s platform into co-branded payments solutions targeting youth and family. Management believes this approach will enable the company to reduce expenses while broadening its reach.
Within this partner-first model, the company will be incorporating licensing fees and customization services. This should enable the company to begin creating shareholder value above and beyond consumer transaction fees.
In addition, we are analyzing specific components of our technology for individual monetization as well as exploring opportunities in the Business to Business (“B2B”) realm.
To date we have not generated material revenues. For the first quarter of 2016, we earned revenue by charging a percentage to the merchant or gaming publisher for each transaction processed, which continued until March 2016, when the decision was made to discontinue the Oink product offering. As we proceed through 2016, we expect to generate additional revenue streams by generating licensing and customization fees from our co-branding partners.
The Company is currently adding enhancements to the platform, to enable the platform to update itself with any new regulations that are passed, in order to reduce costs associated with manually updating the platform. This will enable the Company to market the platform to other companies in need of a solution to comply with COPPA or other regulatory requirements.
Strategic Outlook
We believe that the virtual goods market and the FinTech industry will continue to grow over the long term. Within the market and industry, we intend to provide services to allow transactions with children in compliance with COPPA and similar international privacy laws. We believe that this particular opportunity is relatively untapped and will seek 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 FinTech industry, and compliance with regulatory and reporting requirements are all external conditions that may affect our ability to execute our business plan. In addition, the FinTech 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 objective over the next 12 -18 months is to increase the value of the underlying technical assets of the company by incorporating new essential functionality that will act as a key differentiator in the financial services market. These new technology advances will also augment our current portfolio of patents that give the company its competitive advantage. In addition, the company is redirecting its marketing efforts to increase its user base by entering into affinity marketing agreements with companies targeting specific user communities. This will increase our potential user community while bringing in substantial development and licensing revenue for those sectors. This approach will greatly reduce the expense associated with direct marketing efforts.
Within this affinity partner model, the Company is incorporating licensing fees and customization services. This should enable the Company to begin creating shareholder value above and beyond consumer transaction fees.
As our service grows, we intend to 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, and face an uncertain economic environment. We may not be successful in addressing such risks and difficulties.
Comparison of the Three Months Ended March 31, 2016 and 2015
The following discussion analyzes our results of operations for the three months ended March 31, 2016 and 2015. The following information should be considered together with our condensed financial statements for such period and the accompanying notes thereto.
We have not generated significant revenue since our inception. For the three months ended March 31, 2016 and 2015, we generated sales of $1,025 and $4,109. For the three months ended March 31, 2016 and 2015, we had a net loss of $2,168,945 and $3,179,186.
Sales and marketing expenses for the three months ended March 31, 2016 were $35,103 as compared to $889,237 for the three months ended March 31, 2015, a decrease of $854,134. The Company closed its sales office in England in September of 2015 and reduced the sales force in 2015 that was not replenished in 2016, as the Company focuses on enhancements to the platform.
Product development expenses were $247,573 and $590,870 for the three months ended March 31, 2016 and 2015, a decrease of $343,297. The decrease is related to cost containment initiatives, while still emphasizing enhancements to the platform, which will benefit the Company.
Integration and Customer Support
Integration and customer support expenses decreased $27,600 to $34,238 for the three months ended March 31, 2016 from $61,838 for the three months ended March 31, 2015. The decrease was a result of the Company scaling back its prepaid card business, thus requiring less customer support.
General and Administrative Expenses
General and administrative expenses increased $225,976 to $1,718,226 for the three months ended March 31, 2016 from $1,492,252 for the three months ended March 31, 2015. The increase resulted from the revaluation of warrants for the three months ended March 31, 2016 exceeding the revaluation of warrants for the three months ended March 31, 2015.
Strategic consulting expenses were $0 for the three months ended March 31, 2016, a decrease of $135,000 from the three months ended March 31, 2015. The Company did not require any strategic consulting for the three months ended March 31, 2016.
During the three months ended March 31, 2016, the Company incurred interest expense of $142,231 as compared to $14,247 for the three months ended March 31, 2015, an increase of $127,984. The increase in interest expense was a result of issuing short term notes in latter part of 2015 and continuing this process in the first quarter of 2016, in order to continue its operations.
Liquidity and Capital Resources
As of May 13, 2016, we had cash on hand of approximately $44
,000
.
Net cash used in operating activities decreased $1,828,535 to $449,338 for the three months ended March 31, 2016 as compared to $2,277,873 for the three months ended March 31, 2015. The decrease resulted primarily from a decline in the net loss from operations as explained previously.
Net cash used in investing activities was $0 for the three months ended March 31, 2016, compared to $33,170 for the three months ended March 31, 2015. As a result of cost containment measures, the Company did not invest in any capital expenditures.
Net cash provided by financing activities decreased by $1,516,500 to $483,500 for the three months ended March 31, 2016 from $2,000,000 for the three months ended March 31, 2015. Cash provided by financing activities during the three months ended March 31, 2016, consisted of short-term notes payable to provide capital to continue operations.
Subsequent to March 31, 2016, the Company raised gross proceeds of $170
,000
through
the issuance of notes payable.
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 development of our platform, 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 platform, 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. The launch of the platform is expected in the fourth quarter of 2016, however, we do not project that significant revenue will be developed until later in 2017. There can be no assurance that we will raise sufficient proceeds, or any proceeds, for us to implement fully our proposed business plan. Moreover there can be no assurance that even if platform is developed and launched, 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 May 13, 2016, the Company has a cash position of approximately $44,000. Based upon the current cash position and the Company’s planned expense run rate, management believes the Company will not be able to finance its operations through May 2016.
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.
Off-Balance Sheet Arrangements
As of March 31, 2016, we do not have any off-balance sheet arrangements.
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
in the Company’s Form 10-K for the year ended December 31, 2015
. 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 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).
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 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 is completed.
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 have generally recognized revenue from Oink and ParentMatch 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.