RAADR, INC. - Quarter Report: 2013 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]  Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2013

Commission File Number 000-53991

PITOOEY!, INC.

(Exact name of registrant as specified in its charter)

15685 N. Cave Creek Rd,, Suite 101,

Scottsdale, Arizona 85032

(888) 273-0929

(Address and telephone number of principal executive offices)

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

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

Yes [X]   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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X]   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.:

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

Yes [  ]   No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

PITOOEY!, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013

Table of Contents

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission ("Commission"). While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto, which are included in the Company's December 31, 2012, Annual Report on Form 10-K, previously filed with the Commission on April 1, 2013.

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PITOOEY!, Inc.

Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of these financial statements.

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PITOOEY!, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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PITOOEY!, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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Notes to Condensed Consolidated Financial Statements

Note 1 - History and Organization

The Company was organized March 29, 2006 (Date of Inception) under the laws of the State of Nevada, as White Dental Supply, Inc.  The Company is authorized to issue 100,000,000 shares of its $0.001 par value common stock and 100,000,000 shares of its $0.001 par value preferred stock.  

On December 27, 2012, the Company formed a wholly-owned subsidiary, Choice One Mobile, Inc., under the laws of the State of Nevada.

On December 27, 2012, the Company formed a wholly-owned subsidiary, Pitooey! Mobile, Inc., under the laws of the State of Nevada.

On January 7, 2013, the Board of Directors of the Company authorized and a majority of the stockholders of the Company ratified, by written consent, resolutions to change the name of the Company to Pitooey!, Inc. and to increase the authorized number of shares of the Company to 400,000,000 shares of $0.001 par value common stock and 100,000,000 shares of $0.001 par value preferred stock.  The name change and increase in authorized capital was effective with the State of Nevada February 7, 2013.

On February 6, 2013, the Company formed a wholly-owned subsidiary, Rockstar Digital, Inc., under the laws of the State of Nevada.

Note 2 - Basis of Presentation

The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, however, in the opinion of the Company’s management, all adjustments necessary for a fair statement of the Company’s interim financial results have been included. These adjustments were of a normal recurring nature. The results for the interim periods are not necessarily indicative of results to be expected for any other interim period or for the entire year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2012 and notes thereto included in the Company's Form 10-K annual report. The Company follows the same accounting policies in the preparation of interim reports.

Note 3 - Summary of Significant Accounting Policies

Principles of consolidation

For the nine months ended September 30, 2013, the consolidated financial statements include the accounts of Pitooey!, Inc., Choice One Mobile, Inc., Pitooey! Mobile, Inc. and Rockstar Digital, Inc.  All significant intercompany balances and transactions have been eliminated.   Pitooey!, Inc., Choice One Mobile, Inc., Pitooey! Mobile, Inc. and Rockstar Digital, Inc. will be collectively referred herein to as the “Company”.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.

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Notes to Condensed Consolidated Financial Statements

Note 3 - Summary of Significant Accounting Policies (Continued)

Cash and cash equivalents

For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.

Accounts receivable

Accounts receivable are stated at the amount the Company expects to collect from outstanding balances and do not bear interest. The Company provides for probable uncollectible amounts through an allowance for doubtful accounts, if an allowance is deemed necessary. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable, however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. On a periodic basis, management evaluates its accounts receivable and determines the requirement for an allowance for doubtful accounts based on its assessment of the current and collectible status of individual accounts with past due balances over 90 days. Account balances are charged against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote.

Intangible assets

Management regularly reviews property, equipment, intangibles and other long-lived assets for possible impairment. This review occurs quarterly, or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If there is indication of impairment, then management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. Management believes that the accounting estimate related to impairment of its property and equipment, is a “critical accounting estimate” because: (1) it is highly susceptible to change from period to period because it requires management to estimate fair value, which is based on assumptions about cash flows and discount rates; and (2) the impact that recognizing an impairment would have on the assets reported on our balance sheet, as well as net income, could be material. Management’s assumptions about cash flows and discount rates require significant judgment because actual revenues and expenses have fluctuated in the past and are expected to continue to do so.

The Company capitalizes the costs associated with the development of the Company’s website pursuant to ASC Topic 350.  Other costs related to the maintenance of the website are expensed as incurred. Amortization is provided over the estimated useful lives of 3 years using the straight-line method for financial statement purposes. The Company will commence amortization once the economic benefits of the assets began to be consumed.

The Company reviews the carrying value of intangible assets for impairment whenever events and circumstances indicate that the carrying value may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the fair value.  The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors.  During the nine months ended September 30, 2013 and 2012, there was no impairment necessary.

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Notes to Condensed Consolidated Financial Statements

Note 3 - Summary of Significant Accounting Policies (Continued)

Property and equipment

Property and equipment is recorded at cost.  Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred.  When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.  Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes.  The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate.  The estimated useful lives for significant property and equipment categories are as follows:

The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.  In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets.  The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors.  Based on this assessment there was no impairment as of September 30, 2013 and 2012.  Depreciation expense for the nine months ended September 30, 2013 and 2012 totaled $10,976 and $0, respectively.

Revenue recognition

The Company recognizes revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable.

Sales related to long-term contracts for services (such as programming, website development and maintenance) extending over several years are accounted for under the percentage-of-completion method of accounting.  Sales and earnings under these contracts are recorded based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract under the cost-to-cost method based budgeted milestones or tasks as designated per each contract. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable.

For all other sales of product or services the Company recognizes revenues based on the terms of the customer agreement.  The customer agreement takes the form of either a contract or a customer purchase order and each provides information with respect to the product or service being sold and the sales price.  If the customer agreement does not have specific delivery or customer acceptance terms, revenue is recognized on the date of the customer agreement, invoice or purchase order.

Merchant Reserves

The Company processes sales through a third-party credit card merchant processor.  A percentage of all sales is deducted and held by the merchant in a reserve account in the event of chargeback, refunds or customer voids.  As of September 30, 2013 and 2012, there was $48,487 and $0 held in the merchant reserve account, respectively.

Cost of Revenue

The Company’s cost of revenue primarily consists of credit card processing fees and client-specific dedicated Internet service costs.

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PITOOEY!, INC.

Notes to Condensed Consolidated Financial Statements

Note 3 - Summary of Significant Accounting Policies (Continued)

Stock-based compensation

The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards.  This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

Advertising and marketing costs

The Company expenses all costs of advertising as incurred.  During the nine months ended September 30, 2013 and 2012, advertising and marketing costs were $507,354 and $0, respectively.

Loss per common share

Net loss per share is provided in accordance with ASC Subtopic 260-10. We present basic loss per share (“EPS”) and diluted EPS on the face of statements of operations.  Basic EPS is computed by dividing reported losses by the weighted average shares outstanding.  Except where the result would be anti-dilutive to income from continuing operations, diluted earnings per share has been computed assuming the conversion of the convertible long-term debt and the elimination of the related interest expense, and the exercise of stock warrants. Loss per common share has been computed using the weighted average number of common shares outstanding during the year.

Fair Value of Financial Instruments

The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

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Notes to Condensed Consolidated Financial Statements

Note 3 - Summary of Significant Accounting Policies (Continued)

Income Taxes

The Company follows FASB Codification Topic 740-10-25 (ASC 740-10-25) for recording the provision for income taxes.  Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.  Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.  Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

Dividends

The Company has not yet adopted any policy regarding payment of dividends.  No dividends have been paid or declared since inception

Recent pronouncements

The Company has evaluated the recent accounting pronouncements through November 25, 2013, and believes that none of them will have a material effect on the company’s financial position, results of operations or cash flows.

Note 4 - Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As shown in the accompanying financial statements, the Company has an accumulated deficit of ($2,947,727) as of September 30, 2013, and had net sales of $355,033 during the nine month period ended September 30, 2013.  

In order to continue as a going concern, the Company will need, among other things, additional capital resources.  The Company is significantly dependent upon its ability, and will continue to attempt, to secure equity and/or additional debt financing.  The Company is currently conducting a private placement of its preferred stock to raise proceeds to finance its plan of operation.  There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.  These financial statements do not include any adjustments that might arise from this uncertainty.

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Notes to Condensed Consolidated Financial Statements

Note 5 - Fixed Assets

Fixed assets consisted of the following at:

Depreciation expenses for the nine months ended September 30, 2013 and 2012 were $10,976 and $0, respectively.

Note 6 - Deferred Revenue

As of September 30, 2013 and December 31, 2012, the Company had $46,240 and $0 in deferred revenue related to projects paid in advance of fulfillment.

Note 7 - Prepaid expenses and deposits

On December 27, 2012, the Company entered into a professional service agreement with a related entity for use of client services staff, administrative support and office space and equipment, for which the Company paid a retainer of $30,000. The retainer will be expensed at the sole discretion of the service firm and all ongoing expenses will be billed to the Company as incurred. As of September 30, 2013 and December 31, 2012, the balance in prepaid expenses was $0 and $30,000.

On January 29, 2013, the Company entered into an advertising arrangement with a radio network, for which the Company paid a deposit of $8,186 for two months of advertising and marketing services. As of September 30, 2013, total prepaid expenses remaining related to this service provider was $0.

On February 24, 2013, the Company entered into a contract with a third party consulting firm. As a portion of the compensation therefor, the Company issued warrants to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $1.75 per share. The Company recorded Prepaid Stock Compensation in the amount of $56,494 related to the warrants issued to the consulting firm. As of September 30, 2013, the balance in prepaid stock compensation was $0.  See Note 10 - Warrants and Options for additional discussion regarding the warrants. See Note 11 - Agreements for additional discussion regarding the Letter of Agreement.

On February 26, 2013, the Company entered into a Letter of Agreement with a third party consulting firm. In exchange for certain consulting services, the Company is obligated to pay a total of $42,500, of which $30,000 was prepaid for services to be rendered and balance of $12,500 will be due upon completion of such services to be rendered. As of September 30, 2013, the balance in prepaid expenses related to this Agreement was $30,000. As additional compensation therefor, the Company issued warrants to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $1.30 per share. The Company recorded Prepaid Stock Compensation in the amount of $640,551 related to the warrants issued to the consulting firm. As of September 30, 2013, the balance in prepaid stock compensation was $243,469.  See Note 10 - Warrants and Options for additional discussion regarding the warrants.  See Note 11 - Agreements for additional discussion regarding the Letter of Agreement.

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Notes to Condensed Consolidated Financial Statements

Note 7 - Prepaid expenses and deposits (continued)

On June 11, 2013, the Company issued 340,000 shares of its common stock to various employees of the Company, as incentive compensation valued at $136,000.  The shares vest quarterly over a period of one year.  The Company recorded Prepaid Stock Compensation in the amount of $136,000 related to the common stock issued to the employees.  As of September 30, 2013, the Company recorded $39,278 as salaries expense and the balance in prepaid stock compensation was $96,722.

On June 24, 2013, the Company issued 250,000 shares of its common stock to one entity, in exchange for prepaid advertising and marketing services valued at $100,000.  The services are to be performed for a period of 6 months from the date of issuance.  The Company recorded Prepaid Stock Compensation in the amount of $100,000 related to the common stock issued for prepaid services.  As of September 30, 2013, the Company recorded $100,000 as advertising and marketing expense and the balance in prepaid stock compensation was $0.

On July 8, 2013, the Company issued 1,000,000 shares of its common stock to one entity, in exchange for prepaid advertising and marketing services valued at $400,000. The services are to be performed for a period of 6 months from the date of issuance. The Company recorded Prepaid Stock Compensation in the amount of $400,000 related to the common stock issued for prepaid services. As of September 30, 2013, the Company recorded $186,667 as advertising and marketing expense and the balance in prepaid stock compensation was $213,333.

As of September 30, 2013 and December 31, 2012, the Company had $2,779 and $0 in undeposited Funds related specifically to funds charged to customers through merchant accounts, but have not yet settled to the Company’s cash accounts.

Note 8 - Debt and Interest Expense

Through September 30, 2012, a non-affiliated third-party loaned the Company an aggregate of $7,250 in cash.  The note bears no interest and is due upon demand.  

On April 10, 2012, the Company issued a Promissory Note to one non-affiliated entity in the amount of $15,254. The loan is due and payable in full on the earlier of April 9, 2013 or at the closing of a private placement offering that nets us a minimum of $2,000,000 in financing. The loan bears an interest rate of 10% per annum, payable on maturity. During the year ended December 31, 2012, the lender agreed to convert the entire principal balance of $15,254, as well as $1,107 of interest accrued thereupon, to date, into 40,904 shares of common stock. As of December 31, 2012, the principle balance owed on this loan is $0. See Note 9 - Stockholders’ Equity for additional information.

On April 10, 2012, the Company issued a Promissory Note to one non-affiliated entity in the amount of $82,373. The loan is due and payable in full on the earlier of April 9, 2013 or at the closing of a private placement offering that nets us a minimum of $2,000,000 in financing. The loan bears an interest rate of 10% per annum, payable on maturity. During the year ended December 31, 2012, the lender agreed to convert a portion of the principal balance in the amount of $20,000, as well as $5,981 of interest accrued thereupon, to date, into 64,952 shares of common stock.  In January 2013, the Company repaid the note, in full. As of September 30, 2013 and December 31, 2012, the principle balance owed on this loan was $0 and $62,373, respectively. See Note 9 - Stockholders’ Equity for additional information.

On April 10, 2012, the Company issued a Promissory Note to one non-affiliated entity in the amount of $74,746. The loan is due and payable in full on the earlier of April 9, 2013 or at the closing of a private placement offering that nets us a minimum of $2,000,000 in financing. The loan bears an interest rate of 10% per annum, payable on maturity. During the year ended December 31, 2012, the lender agreed to convert $5,427 of interest accrued thereupon, to date, into 13,567 shares of common stock. In January 2013, the Company repaid the note, in full.  As of September 30, 2013 and December 31, 2012, the principle balance owed on this loan was $0 and $74,746, respectively. See Note 9 - Stockholders’ Equity for additional information.

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Notes to Condensed Consolidated Financial Statements

Note 8 - Debt and Interest Expense (continued)

On July 25, 2012, the Company entered into an Intellectual Property Assignment Agreement.  (See note 11 to the financial statements for details concerning the Agreement).  In accordance with the terms and conditions contained therein, the Company has agreed to pay the Seller $8,000 in two installments:

1. The first payment of $4,000 is due July 25, 2013, the first anniversary date of the Agreement, and is considered a current note payable.  

2. The second and final payment of $4,000 is due July 25, 2014, the second anniversary date of the Agreement and is considered a current note payable.  

On March 18, 2013, the Company issued a Promissory Note in the amount of $15,000 to one non-affiliated entity.  The loan was due and payable in full on May 15, 2013.  The loan bears an interest rate of 8% per annum, payable on maturity.  On April 29, 2013, the entire principal balance of $15,000 and interest accrued thereupon of $138 was repaid.  As of September 30, 2013, the principle balance owed on this loan was $0.  

On March 21, 2013, the Company issued a Promissory Note to an entity owned and controlled by a shareholder in the amount of $12,500.  The loan was due and payable in full on April 21, 2013.  The loan bears an interest rate of 8% per annum, payable on maturity.  On March 28, 2013, the entire principal balance and $19 of interest accrued thereupon was paid by an officer and director on behalf of the company.  As of September 30, 2013, the principle balance owed on this loan is $0.  During the nine months ended September 30, 2013, a total of $19 has been recorded as interest expense.  

On April 8, 2013, the Company issued a Promissory Note in the amount of $50,000, which is due and payable on or before May 31, 2014.  The loan bears an interest rate of 10% per annum, with payments due on the last day of each month.  As of September 30, 2013, the principle balance owed on this loan is $42,972.  During the nine months ended September 30, 2013, a total of $2,417 has been recorded as interest expense.  

On April 29, 2013, the Company entered into an Investment Agreement, in which an investor agreed to purchase debentures up to a total principal amount of $1,100,000.  Each debenture will accrue interest on the unpaid principal of each individual debenture at the rate of 8% per year from the date each Debenture is issued until paid.  As of September 30, 2013, the principle balance owed on this loan is $364,058.  During the nine months ended September 30, 2013, a total of $8,811 has been recorded as interest expense.  In connection with the April 29, 2013 Agreement, the Company also agreed to issue and sell to the investor, from time to time and subject to certain terms and conditions set forth in the Agreement, up to $15,000,000 of the Company’ common stock.  As of the date of these financial statements, no shares of common stock have been issued pursuant to the Agreement.

On June 19, 2013, the Company entered into a Convertible Promissory Note, whereby the Company borrowed $42,500 from a third party entity.  The loan is due and payable in full on March 21, 2014 and bears an interest rate of 8% per annum, payable on maturity.  As of September 30, 2013, the principle balance owed on this loan is $42,500.  Interest expense through September 30, 2013 in relation to this note is $952.  The note is convertible into shares of the Company’s par value common stock at the later of (a) maturity or (b) prepayment prior to the maturity date at a variable conversion price calculated as 58% of the average of the lowest three trading prices during the ten trading days prior to the conversion date.  Resultantly, a discount of $21,250 was attributed to the beneficial conversion feature of the note, which amount is being amortized over a period of nine months.  As of September 30, 2013, a total of $7,949 has been amortized and recorded as interest expense, leaving a balance of $13,301 in discounts related to the beneficial conversion feature of this note.

On July 22, 2013 we issued a 8% debenture in the original principal amount of $10,000 payable on or before the 22nd day of July 2014 with attached warrants to purchase up to 20,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 22nd day of October 2016. On July 23, 2013 we issued a 8% debenture in the original principal amount of $30,000 payable on or before the 23rd day of July 2014 with attached warrants to purchase up to 60,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 23rd day of October 2016. On July 29, 2013 we issued a 8% debenture in the original principal amount of $100,000 payable on or before the 29th day of July 2014 with attached warrants to purchase up to 200,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 29th day of October 2016. On September 11, 2013 we issued a 15% debenture in the original principal amount of $10,000 payable on or before the 11th day of September 2014 with attached warrants to purchase up to 20,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 11th day of October 2016. As of September 30, 2013, the principle balance owed on these loans is $150,000. Resultantly, a discount of $62,959 was attributed to the warrants being given in return for loans, which amount is being amortized over a period of twelve months.  As of September 30, 2013, a total of $10,493 has been amortized and recorded as interest expense, leaving a balance of $52,466 in discounts related to the beneficial conversion feature of this note

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Notes to Condensed Consolidated Financial Statements

Note 8 - Debt and Interest Expense (continued)

On August 19, 2013, the Company entered into a Convertible Promissory Note, whereby the Company borrowed $32,500 from a third party entity.  The loan is due and payable in full on May 21, 2014 and bears an interest rate of 8% per annum, payable on maturity.  As of September 30, 2013, the principle balance owed on this loan is $32,500.  Interest expense through September 30, 2013 in relation to this note is $235.  The note is convertible into shares of the Company’s par value common stock at the later of (a) maturity or (b) prepayment prior to the maturity date at a variable conversion price calculated as 58% of the average of the lowest three trading prices during the ten trading days prior to the conversion date.  Resultantly, a discount of $16,250 was attributed to the beneficial conversion feature of the note, which amount is being amortized over a period of nine months.  As of September 30, 2013, a total of $3,173 has been amortized and recorded as interest expense, leaving a balance of $13,077 in discounts related to the beneficial conversion feature of this note.

The securities were issued without registration in reliance on the exemption from registration in section 4(a)(2) of the Securities Act of 1933 because the offer and sale was made only to accredited investors as defined in Rule 501 of Regulation D without general solicitation or advertising; and the purchasers given access to information about our business and the opportunity to ask questions and receive answers about our business prior to making any investment decision.

During the nine months ended September 30, 2013, the Company issued Promissory Notes to a shareholder of the Company in the total of $6,231.  The notes are due on demand and bear no interest.  As of September 30, 2013, the remaining principal balance outstanding is $6,231.

During the nine months ended September 30, 2013, the Company issued Promissory Notes to two directors of the Company in the aggregate of $132,701.  The notes are due on demand and bear no interest.  As of September 30, 2013, the Company repaid $62,057 of the notes and the remaining principal balance outstanding is $70,644.

During the nine months ended September 30, 2013, two of the Company’s officers have been deferring salaries earned.  As of September 30, 2013, the Company has accrued executive compensation to these two officers totaling $14,000.

Note 9 - Stockholders’ Equity

The Company is authorized to issue 100,000,000 shares of its $0.001 par value common stock and 100,000,000 shares of its $0.001 par value preferred stock.  

On June 18, 2008, the Board of Directors authorized and declared a forward stock split to be affected in the form of a stock dividend, whereby eight new shares of common stock will be issued for each one existing share of common stock that is outstanding as of June 18, 2008, resulting in a total of nine post-split shares for each pre-split share outstanding, payable on July 17, 2008.  All references to share and per share information in the financial statements and related notes have been adjusted to reflect the stock split on a retroactive basis.   

On January 3, 2013, the Company filed a Certificate of Designation with the State of Nevada to designate up to 20,000,000 shares of preferred stock as “Series A.”  The Series A Preferred Stock holds no voting rights, but is automatically convertible into shares of the Company’s common stock immediately upon the effectiveness of a Certificate of Change filed by the Company to increase the number of shares of common stock the Company would become authorized to issue.

On January 7, 2013, the Board of Directors authorized and a majority of the stockholders of the Company ratified, by written consent, a resolution to increase the authorized number of shares of the Company to 400,000,000 shares of $0.001 par value common stock and 100,000,000 shares of $0.001 par value preferred stock (of which 20,000,000 have been designated as Series A Preferred Stock and 80,000,000 shares of preferred stock available for the Company to assign or designate such provisions or preferences as may be assigned by the Board of Directors).  The increase in authorized capital became effective with the State of Nevada on February 7, 2013.

Through the year ended December 31, 2012, the founding shareholder of the Company donated cash in the amount of $42,800.  The entire amount is considered donated capital and recorded as additional paid-in capital.

During the month of December, 2012, the Company conducted a private offering, in which it sold 927,500 shares of Series A Preferred Stock for $371,000 in cash.  The Series A Preferred Stock was subscribed and paid for as of December 31, 2012; however, the certificates representing the shares were not issued during the period and resultantly, there was $927 in Series A Preferred Stock Payable.  On January 9, 2013, the Company issued stock certificates to subscribers of 927,500 shares of the Company’s Series A Preferred Stock in satisfaction of the Company’s $927 Series A Preferred Stock Payable as of December 31, 2012.

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PITOOEY!, INC.

Notes to Condensed Consolidated Financial Statements

Note 9 - Stockholders’ Equity (continued)

On December 31, 2012, the Company issued a total of 119,423 shares of common stock for the conversion of a total of $47,769 in principal and interest accrued thereupon.  The Common Stock was subscribed and paid for as of December 31, 2012; however, the certificates representing the shares were not issued during the period and resultantly, there was $119 in Common Stock Payable.  January 9, 2013, the Company issued stock certificates to subscribers of 119,423 shares of the Company’s Common Stock in satisfaction of the Company’s $119 Common Stock Payable as of December 31, 2012.  See Note 8 - Debt and Interest Expense for additional information.

From January 1, 2013 through March 31, 2013, the Company sold 1,277,500 shares of its Series A Preferred Stock for total proceeds of $511,000.  

On February 7, 2013, in connection with the effectiveness of the Company’s Certificate of Change to increase the authorized capital of the Company, all shares of the Company’s Series A Preferred Stock were automatically converted into 1,605,000 shares of the Company’s common stock.  

On April 4, 2013, the Company issued 30,000 shares of its common stock to two individuals for advertising and marketing services rendered, valued at $12,000.

On June 11, 2013, the Company issued 340,000 shares of its common stock to various employees of the Company, as incentive compensation valued at $136,000.  The shares vest quarterly over a period of one year.

On June 24, 2013, the Company issued 250,000 shares of its common stock to one entity, in exchange for prepaid advertising and marketing services valued at $100,000.

From April 1, 2013 to September 30, 2013, the Company sold 285,000 shares of its common stock for aggregate cash proceeds of $114,000.  As of September 30, 2013, 55,000 shares of common stock were subscribed and paid for, but not yet issued; resultantly, the Company recorded $55 as common stock owed but not issued.

On July 8, 2013, the Company issued 1,000,000 shares of its common stock to one entity, in exchange for prepaid advertising and marketing services valued at $400,000.  The services are to be performed for a period of 6 months from the date of issuance.  The Company recorded Prepaid Stock Compensation in the amount of $400,000 related to the common stock issued for prepaid services.  As of September 30, 2013, the Company recorded $186,667 as advertising and marketing expense and the balance in prepaid stock compensation was $213,333.

From July 1, 2013 to September 30, 2013, the Company sold 7,500 shares of its common stock for aggregate cash proceeds of $3,000.

As of September 30, 2013, there have been no other issuances of common stock.

Note 10 - Warrants and Options

As of December 31, 2012, there were no warrants or options outstanding to acquire any additional shares of common stock.

On February 24, 2013, the Company entered into a contract with a third party consulting firm.  As a portion of the compensation therefor, the Company issued warrants to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $1.75 per share.  The warrants carry a life of 2 years.  See Note 11 - Agreements for additional discussion regarding the Letter of Agreement.

On February 26, 2013, the Company entered into a Letter of Agreement with a third party consulting firm.  As a portion of the compensation therefor, the Company issued warrants to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $1.30 per share.  The warrants carry a life of 2 years.  See Note 11 - Agreements for additional discussion regarding the Letter of Agreement.

On July 22, 2013 in connection with a debenture issuance we issued warrants to purchase up to 20,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 22nd day of October 2016.

On July 23, 2013 in connection with a debenture issuance we issued warrants to purchase up to 60,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 23rd day of October 2016.

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PITOOEY!, INC.

Notes to Condensed Consolidated Financial Statements

Note 10 - Warrants and Options (continued)

On July 29, 2013 in connection with a debenture issuance we issued warrants to purchase up to 200,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 29th day of October 2016.

On September 11, 2013 in connection with a debenture issuance we issued warrants to purchase up to 20,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 11th day of October 2016.

The securities were issued without registration in reliance on the exemption from registration in section 4(a)(2) of the Securities Act of 1933 because the offer and sale was made only to accredited investors as defined in Rule 501 of Regulation D without general solicitation or advertising; and the purchasers given access to information about our business and the opportunity to ask questions and receive answers about our business prior to making any investment decision.

The following is a summary of the status of all of the Company’s stock warrants as of September 30, 2013 and 2012 and changes during the nine months ended on those dates:

The following tables summarize information about warrants outstanding and exercisable at September 30, 2013:

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PITOOEY!, INC.

Notes to Condensed Consolidated Financial Statements

Note 11 - Agreements

On July 25, 2012, the Company entered into and closed an Intellectual Property Assignment Agreement (“July IP Agreement”) by and between the Company and Mr. Sebastian Barr, an individual (“Seller”).  In accordance with the July IP Agreement, the Company acquired certain patents, prototypes and technical information the Seller (“Assets”), pertaining to child safety devices.  In exchange for the Assets, the Company agreed to pay the Seller an aggregate of $42,500, pursuant to the following schedule:

1.

An initial payment of $10,000 paid to Sunbeam Packing Services, LLC upon execution of the July IP Agreement;

2.

$24,500 paid to the Seller upon execution of the July IP Agreement;

3.

The balance of $8,000 shall be paid in two installments: $4,000 upon the first anniversary date of the July IP Agreement and $4,000 upon the second anniversary date of the July IP Agreement.

4.

Additionally, the Company has agreed to pay to the Seller royalties of 2.5% of gross sales of products based on or directly derived from the Assets.  In the event the Company sells, assigns of otherwise transfers the Assets, the Company has agreed to pay the Seller 2.5% of the gross amount of the sale of the Assets.

On December 24, 2012, the Company entered into and closed an Intellectual Property Assignment Agreement (“COS Agreement”) by and between the Company and Choice One Solutions, Inc., a Nevada corporation (“COS”).  In accordance with the Agreement, the Company acquired research and development expenses related to certain information, ideas, know-how, concepts, techniques, systems, processes, procedures, methods and Internet domain addresses involving or relating to social media marketing.  In exchange for the Assets, the Company agreed to pay the Seller an aggregate of $5,000 in cash.

On December 24, 2012, the Company entered into and closed an Intellectual Property Assignment Agreement (“MC Agreement”) by and between the Company and Mobile Caviar, LLC, an Arizona limited liability corporation (“MC”).  In accordance with the Agreement, the Company acquired research and development expenses related to certain information, ideas, know-how, concepts, techniques, systems, processes, procedures, methods and Internet domain addresses involving or relating to mobile media marketing.  In exchange for the Assets, the Company agreed to pay the Seller an aggregate of $5,000 in cash.

On December 24, 2012, the Company entered into and closed an Intellectual Property Assignment Agreement (“LCC Agreement”) by and between the Company and Lynn Cole Capital Corp., an Arizona corporation (“LCC”).  In accordance with the Agreement, the Company acquired research and development expenses related to certain rights, title and interest in and to all intellectual property related to the text messaging platform called “Pitooey!”  In exchange for the Assets, the Company agreed to pay the Seller an aggregate of $5,000 in cash.

On December 27, 2012, the Company entered into a professional service agreement with a related entity for use of client services staff, administrative support and office space and equipment, for which the Company paid a retainer of $30,000.  The retainer will be expensed at the sole discretion of the service firm and all ongoing expenses will be billed to the Company as incurred.  As of September 30, 2013 and December 31, 2012, the balance in prepaid expenses was $0 and $30,000.

On January 29, 2013, the Company entered into an advertising arrangement with a radio network, for which the Company paid a deposit of $8,186 for two months of advertising and marketing services.  As of September 30, 2013 and December 31, 2012, total prepaid expenses remaining related to this service provider was $0 ad $0.

On February 24, 2013, the Company entered into a contract with a third party consulting firm.  As compensation therefor, the Company paid an initial fee of $4,750 for services rendered and is obligated to pay $3,000 per month for the next 11 months thereafter.  In addition, the Company issued warrants to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $1.75 per share.  See Note 7 - Prepaid Expenses and Deposits for additional discussion regarding the Prepaid Stock Compensation.  See Note 10 - Warrants and Options for additional discussion regarding the warrants.  

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PITOOEY!, INC.

Notes to Condensed Consolidated Financial Statements

Note 11 - Agreements (continued)

On February 26, 2013, the Company entered into a Letter of Agreement with a third party consulting firm.  In exchange for certain consulting services, the Company is obligated to pay a total of $42,500, of which $30,000 was prepaid for services to be rendered and balance of $12,500 will be due upon completion of such services to be rendered.  As additional compensation, the Company issued warrants to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $1.30 per share.  See Note 7 - Prepaid Expenses and Deposits for additional discussion regarding the Prepaid Stock Compensation.  See Note 10 - Warrants and Options for additional discussion regarding the warrants.

Note 12 - Related Party Transactions

Since the inception of the Company, a shareholder, officer and director of the Company donated cash to the Company in the aggregate amount of $42,800.  This amount has been donated to the Company and is not expected to be repaid and is considered additional paid-in capital.

On December 24, 2012, the Company entered into and closed an Intellectual Property Assignment Agreement by and between the Company and Choice One Solutions, Inc., a Nevada corporation owned and controlled by a related-party, whereby the Company acquired research and development expenses related to social media marketing.  In exchange, the Company agreed to pay the Seller an aggregate of $5,000 in cash.  See Note 11 - Agreements for additional information.  

On December 24, 2012, the Company entered into and closed an Intellectual Property Assignment Agreement by and between the Company and Mobile Caviar, LLC, an Arizona limited liability corporation owned and controlled by a related-party, whereby the Company acquired research and development expenses related to mobile media marketing.  In exchange, the Company agreed to pay the Seller an aggregate of $5,000 in cash.  See Note 11 - Agreements for additional information.  

On December 24, 2012, the Company entered into and closed an Intellectual Property Assignment Agreement by and between the Company and Lynn Cole Capital Corp., an Arizona corporation owned and controlled by a related-party, whereby the Company acquired research and development expenses related to the text messaging platform called “Pitooey!”  In exchange, the Company agreed to pay the Seller an aggregate of $5,000 in cash.  See Note 11 - Agreements for additional information.  

On December 27, 2012, the Company entered into a professional service agreement with a related entity for use of client services staff, administrative support and office space and equipment, for which the Company paid a retainer of $30,000.  The retainer will be expensed at the sole discretion of the service firm and all ongoing expenses will be billed to the Company as incurred.  As of September 30, 2013 and December 31, 2012, the balance in prepaid expenses was $0 and $30,000.

On March 21, 2013, the Company issued a Promissory Note to an entity owned and controlled by a shareholder in the amount of $12,500.  The loan is due and payable in full on April 21, 2013.  The loan bears an interest rate of 8% per annum, payable on maturity.  On March 28, 2013, the entire principal balance and $19 of interest accrued thereupon was paid by an officer and director on behalf of the company.  As of September 30, 2013, the principle balance owed on this loan is $0.

During the nine months ended September 30, 2013, the Company issued Promissory Notes to a shareholder of the Company in the aggregate of $6,231.  The notes are due on demand and bear no interest.  As of September 30, 2013, the remaining principal balance outstanding is $6,231.

During the nine months ended September 30, 2013, the Company issued Promissory Notes to two directors of the Company in the aggregate of $132,701.  The notes are due on demand and bear no interest.  As of September 30, 2013, the Company repaid $62,057 of the notes and the remaining principal balance outstanding is $70,644.

During the nine months ended September 30, 2013, two of the Company’s officers have been deferring salaries earned.  As of September 30, 2013, the Company has accrued executive compensation to these two officers totaling $14,000.

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PITOOEY!, INC.

Notes to Condensed Consolidated Financial Statements

Note 13 - Subsequent Events

On October 7, 2013, the Company entered into a Convertible Promissory Note, whereby the Company borrowed $32,500 from a third party entity.  The loan is due and payable in full on July 9th, 2014 and bears an interest rate of 8% per annum, payable on maturity. The note is convertible into shares of the Company’s par value common stock at the later of (a) maturity or (b) prepayment prior to the maturity date at a variable conversion price calculated as 58% of the average of the lowest three trading prices during the ten trading days prior to the conversion date.

On October 24, 2013 we issued a 20% debenture in the original principal amount of $20,000 payable on or before the 24nd day of March 2014 with attached warrants to purchase up to 40,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 24nd day of October 2016.

On October 24, 2013 we issued a 20% debenture in the original principal amount of $20,000 payable on or before the 24nd day of March 2014 with attached warrants to purchase up to 40,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 24nd day of October 2016.

On October 24, 2013 we issued a 20% debenture in the original principal amount of $10,000 payable on or before the 24nd day of March 2014 with attached warrants to purchase up to 20,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 24nd day of October 2016.

On October 24, 2013 we issued a 20% debenture in the original principal amount of $20,000 payable on or before the 21st day of October 2014 with attached warrants to purchase up to 40,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 21nd day of October 2016.

On November 1, 2013, the Company issued 300,000 shares of its common stock to one entity for services to be rendered over a period ending January 31, 2014.

On November 20, 2013 we issued a 20% debenture in the original principal amount of $10,000 payable on or before the 24nd day of March 2014 with attached warrants to purchase up to 20,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 24nd day of October 2016.

The securities were issued without registration in reliance on the exemption from registration in section 4(a)(2) of the Securities Act of 1933 because the offer and sale was made only to accredited investors as defined in Rule 501 of Regulation D without general solicitation or advertising; and the purchasers given access to information about our business and the opportunity to ask questions and receive answers about our business prior to making any investment decision.

The Company’s Management has reviewed all other material events through the date of this report in accordance with ASC 855-10, and believes there are no further material subsequent events to report.

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

Forward-Looking Statements

The statements contained in all parts of this document that are not historical facts are, or may be deemed to be, "forward-looking statements" within the meaning of  Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements include, but are not limited to, those relating to the following: the Company's ability to secure necessary financing; expected growth; future operating expenses; future margins; fluctuations in interest rates; ability to continue to grow and implement growth, and regarding future growth, cash needs, operations, business plans and financial results and any other statements that are not historical facts.

When used in this document, the words "anticipate," "estimate," "expect," "may," "plans," "project," and similar expressions are intended to be among the statements that identify forward-looking statements.  PITOOEY!, Inc.’s results may differ significantly from the results discussed in the forward-looking statements.  Such statements involve risks and uncertainties, including, but not limited to, those relating to costs, delays and difficulties related to the Company’s dependence on its ability to attract and retain skilled managers and other personnel; the uncertainty of the Company's ability to manage and continue its growth and implement its business strategy; its vulnerability to general economic conditions; accuracy of accounting and other estimates; the Company's future financial and operating results, cash needs and demand for services; and the Company's ability to maintain and comply with permits and licenses; as well as other risk factors described in this Annual Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected.

Management’s Discussion and Analysis

We were originally incorporated in the State of Nevada on March 29, 2006, under the name “White Dental Supply, Inc.”  We were authorized to issue 100,000,000 shares of its $0.001 par value common stock and 100,000,000 shares of its $0.001 par value preferred stock.  On February 7, 2013, we changed our corporate name to PITOOEY!, Inc. and increased the number of shares we are authorized to issue to 400,000,000 shares of $0.001 par value common stock and 100,000,000 shares of $0.001 par value preferred stock.

PITOOEY !, Inc., is a complete digital marketing agency offering an array of products and services that will enhance communication between our clients and their target audience.  Through our unique service packages, we offer businesses a comprehensive set of tools that focuses on engaging with the rapidly growing number of social and mobile-centric consumers.  These social and mobile marketing products and services are served up via our three wholly-owned subsidiaries:

1.

 Choice One Mobile, Inc., which provides mobile and social media marketing and advertising solutions.

2.

PITOOEY! Mobile, Inc., which retains all intellectual property related to our PITOOEY! ^TM iPhone ^® app, including patents, trademarks, software and trade processes.  

3.

Rockstar Digital, Inc., which specializes in internet branding through social media marketing, mobile marketing and iPhone ^® app development.

Results of Operations

Due to the recent addition of new business operations and service lines, comparisons of operating results between the three and six month periods ended September 30, 2013 and 2012 may not be materially reflective of our continuing and future operations.

Revenue

How we generate revenues

During the current fiscal year, 2013, we began to generate sales from our wholly-owned subsidiary, Choice One Mobile, Inc., a provider of mobile and social media marketing and advertising services.  Choice One Mobile assists clients build a strategy to attract and engage with customers using social media outlets including, but not limited to, Facebook, Twitter and YouTube.  In addition to social media marketing, we offer complementary services customized to meet the needs of each client, including mobile and desktop website development, search engine optimization, text message marketing, content writing and video creation.

Through the periods covered in this report, our PITOOEY! Mobile and Rockstar Digital subsidiaries have not generated any revenues.

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Three months ended September 30, 2013 compared to the three months ended September 30, 2012

Revenue was comprised, as follows:

In the normal course of our business, the bulk of our sales are paid and rendered either immediately or on a monthly basis.  These sales are recognized as revenue at the time of the transaction.  Periodically, we enter into longer-term arrangements with clients, whereby they pay for three to 12 months of service up-front.  These sales are recorded as deferred revenue and recognized as revenue over the actual life of the arrangement.  During the three months ended September 30, 2013, we recorded $0 in deferred revenue and recognized $22,794 as revenue earned during the period.

Costs of sales consist primarily of credit card merchant fees, commissions paid to sales staff and fees paid to contractors directly attributable to specific clients.  A vast majority of our services incur few direct, unique and immediately identifiable costs per client.  During the quarter ended September 30, 2013, costs of sales totaled $44,577.  After accounting for costs of sales, we realized a gross profit of $193,769 during the three months ended September 30, 2013.

Nine months ended September 30, 2013 compared to the Nine months ended September 30, 2012

Revenue was comprised, as follows:

During the nine months ended September 30, 2013, we recorded $91,828 in deferred revenue and recognized $45,588 as revenue earned during the period.

Costs of sales during the nine months ended September 30, 2013 amounted to $70,808.  After accounting for costs of sales, we realized a gross profit of $284,225 in the nine month period ended September 30, 2013.

Factors Affecting Future Growth

We are continuously refining our services to maximize revenue, while providing a rate of return to business customers greater than they would be able to obtain advertising or marketing through traditional media outlets.  Blending the two disparate objectives is an art form that we are attempting to master and slight dips in revenue may occur in future periods, as a result.  We are actively pursuing the following operational objectives:

1. Choice One Mobile recently launched the C1M affiliate program to allow credit card processing companies to provide its agents an additional revenue stream by selling C1M's mobile and social media services to existing merchant clientele.  The benefits for Choice One Mobile include greater market penetration, with lower overhead and customer acquisition costs.  We began negotiations with several large credit card processing companies and independent sales organizations.  As of the date of this quarterly report, we have not entered into any contractual relationships.

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2. The PITOOEY! ^TM iPhone ^® app is a preference based, searchable ad network. The PITOOEY! app provides businesses with a unique engagement tool while serving consumers deals, valuable content, and location-based information.  Our Rockstar development team has been engaged in refining the consumer experience, as well as the back-end mechanics, to ensure adoption of Version 2 of the app.  We have experienced delays in the release of our app and are currently working internally to assure a timely launch of the best software product we can possibly construct.  As a result, we are currently unable to disclose a specific time frame the release of Version 2.  

Costs and Operating Expenses

Three months ended September 30, 2013 compared to the three months ended September 30, 2012

For the three months ended September 30, 2013 and 2012, the components of our operating expenses were, as follows:

Advertising and Marketing.  We are a young company attempting to establish brand recognition and have engaged third parties to assist us.  Our advertising and marketing activities cost $214,077 during the three months ended September 30, 2013.  In the comparable period ended September 30, 2012, we did not incur any advertising and marketing expenses.  We expect to increase our advertising and marketing budget to coincide with the launch of Version 2 of the PITOOEY! app, although the timing of such increase cannot yet be determined.

Depreciation.  Depreciation expense related to our computers, furniture and office equipment was $4,245 during the quarter ended September 30, 2013.  In the comparable period ended September 30, 2012, we did not incur any depreciation expense.

Executive Compensation.  Executive compensation paid to our corporate officers and directors was $74,372 during the three months ended September 30, 2013 and $0 in the comparable period ended September 30, 2012.  

General and Administrative.  In the course of our operations, we incur operating expenses composed primarily of computer and internet expenses, professional fees, payroll, and other general and administrative costs.  General and administrative expenses are essentially the cost of doing business, and encompass, without limitation, the following: business and operating licenses; taxes; general office expenses, such as postage, supplies and printing; utilities; bank charges; website costs; and other miscellaneous expenditures not otherwise classified.  During the three month ended September 30, 2013, general and administrative expenses were $93,702.  Comparatively, general and administrative expenses were $18,580 in the period ended September 30, 2012.  

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Management Fees Paid to a Related Party.   On December 27, 2012, we entered into a professional service agreement with a related entity for use of client services staff, human resource functions, administrative support and office space and equipment.  During the three months ended September 30, 2013 and 2012, total management fees paid to the related entity was $0 and $0, respectively.  During the quarter ended September 30, 2013, we have reduced our reliance upon this related entity and have sought third party service providers.  As a result, we expect fees paid to the related party under the professional services agreement to continue to materially decline.

Professional Fees.  We expect to continue to incur professional fees in relation to maintaining our public reporting status with the Securities and Exchange Commission and significant increases in research and development expenses related to our proprietary PITOOEY! ^TM app, which will have an adverse effect on our operating results for the foreseeable future.  During the period ended September 30, 2013, we incurred $340,992 in professional fees.  In comparison, we did not incur any professional fees in the three month period ended September 30, 2012.

Salaries and Wages.  As of September 30, 2013, we have 10 employees.  Salaries and wages paid during the quarters ended September 30, 2013 and 2012 were $380,167 and $0, respectively.  Our staffing levels tend to fluctuate substantially from month-to-month; therefore, it is difficult to forecast changes in salaries and wages from period to period.

Interest Expense .  During the three months ended September 30, 2013, we incurred $56,901 of interest expense related to our notes payable.  In the year ago period ended September 30, 2012, interest expense was $4,345.

Nine months ended September 30, 2013 compared to the nine months ended September 30, 2012

For the nine months ended September 30, 2013 and 2012, the components of our operating expenses were, as follows:

Advertising and Marketing.  We are a young company attempting to establish brand recognition and have engaged third parties to assist us.  Our advertising and marketing activities cost $507,354 during the nine months ended September 30, 2013.  In the comparable period ended September 30, 2012, we did not incur any advertising and marketing expenses.  We expect to increase our advertising and marketing budget to coincide with the launch of Version 2 of the PITOOEY! app, although the timing of such increase cannot yet be determined.

Depreciation.  Depreciation expense related to our computers, furniture and office equipment was $10,976 during the six month period ended September 30, 2013.  In the comparable period ended September 30, 2012, we did not incur any depreciation expense.

Executive Compensation.  Executive compensation paid to our corporate officers and directors was $292,344 during the nine months ended September 30, 2013 and $10,000 in the comparable period ended September 30, 2012.

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General and Administrative.  In the course of our operations, we incur operating expenses composed primarily of computer and internet expenses, professional fees, payroll, and other general and administrative costs.  General and administrative expenses are essentially the cost of doing business, and encompass, without limitation, the following: business and operating licenses; taxes; general office expenses, such as postage, supplies and printing; utilities; bank charges; website costs; and other miscellaneous expenditures not otherwise classified.  During the nine months ended September 30, 2013, general and administrative expenses were $392,397.  Comparatively, general and administrative expenses were $30,080 in the period ended September 30, 2012.  

Management Fees Paid to a Related Party.   On December 27, 2012, we entered into a professional service agreement with a related entity for use of client services staff, human resource functions, administrative support and office space and equipment.  During the nine month periods ended September 30, 2013 and 2012, total management fees paid to the related entity was $297,127 and $0, respectively.  During the nine months ended September 30, 2013, we have reduced our reliance upon this related entity and have sought third party service providers.  As a result, we expect fees paid to the related party under the professional services agreement to continue to materially decline.

Professional Fees.  We expect to continue to incur professional fees in relation to maintaining our public reporting status with the Securities and Exchange Commission and significant increases in research and development expenses related to our proprietary PITOOEY! ^TM app, which will have an adverse effect on our operating results for the foreseeable future.  During the period ended September 30, 2013, we incurred $600,501 in professional fees.  In comparison, we did not incur any professional fees in the nine month period ended September 30, 2012.

Salaries and Wages.  As of September 30, 2013, we had 10 employees.  Salaries and wages paid during the nine month periods ended September 30, 2013 and 2012 were $762,699 and $0, respectively.  Our staffing levels tend to fluctuate substantially from month-to-month; therefore, it is difficult to forecast changes in salaries and wages from period to period.

Interest Expense .  During the nine months ended September 30, 2013, we incurred $62,221 of interest expense related to our notes payable.  In the year ago period ended September 30, 2012, interest expense was $8,170.

Interest Income.  We realized interest income of $1 during the quarter ended September 30, 2013.  We did not earn any interest income in the year ago period ended September 30, 2012.

Taxes.  During the nine months ended September 30, 2013 and 2012, we recorded provisions for income taxes of $0 and $50, respectively, related to the minimum tax payable to the State of Arizona.  

Net Loss

Our net loss for the three months ended September 30, 2013 was $970,687, compared to a $22,925 net loss in the year ago period ended September 30, 2012.  During the nine months ended September 30, 2013 and 2012, we incurred net losses of $2,641,393 and $48,300, respectively.  We expect to continue to incur net losses for the foreseeable future and cannot assure you when, if ever, we will be able to mitigate our losses or begin to achieve profitability. Our management believes that expansion of our operations and continued global economic uncertainty are likely to continue to adversely affect our operating results and will lead to net losses for at least the next 12 months of operations.

Liquidity and Capital Resources

As of September 30, 2013, we had $931 in cash and equivalents, $59,852 in accounts receivable, and $32,978 in prepaid expenses and deposits.  Additionally, we had $48,487 in a reserve account maintained by our credit card merchant as security for potential chargebacks and returns.  To date, we have financed our operations through the issuance of stock and debt securities, in addition to sales-generated revenue.  The following table provides detailed information about our net cash flow for all financial statement periods presented in this Report.

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Operating Activities.   Net cash used in operating activities was $2,911,053 for the nine months ended September 30, 2013, the bulk of which was attributable to increased expenditures related to our entry into the digital media marketing space and development of our PITOOEY! ^TM app.  In comparison, our net cash used during the nine months ended September 30, 2012 was $40,786.  Our management expects to continue to experience net cash outflows related to operating activities for at least the next fiscal year, related primarily to continued PITOOEY! ^TM app development, expansion of our service offerings and continued growth of our base of operations.  

Investing Activities.   During the nine months ended September 30, 2013, we purchased $53,712 of computers, furniture and office equipment.  In the period ended September 30, 2012, we purchased $42,500 of intellectual property.  We do expect to make material investments in furniture, fixtures and equipment during the next 3-6 months of operations.  

Financing Activities.   Net cash provided by financing activities for the nine months ended September 30, 2013 was $2,547,592, as compared to $187,773 for the comparable period ended September 30, 2012.  During the 2013, we obtained significant financing in an effort to expand our operations and pursue new business opportunities.  To that end, we obtained financing in the form of loans totaling $695,107, of which $80,875 was borrowed from related parties and the balance of $614,232 was obtained from third party sources.  During the nine month period ended September 30, 2013, we repaid $175,925 of our notes payable.  In addition to issuing debt securities, we sold a total of $2,028,360 of common stock and Series A Preferred Stock that was automatically converted into shares of common stock.   We expect to use our cash to invest in our core businesses, including new product and service innovations, advertising and marketing, as well as the capital expenditures in the expansion of our business.

Net Change in Cash. During the nine months ended September 30, 2013, we experienced a net decrease in cash on hand of $417,173.  Comparatively, we had a net increase in cash of $104,487 during the nine months ended September 30, 2012.  

Factors Affecting Future Growth

We expect to require significant capital to continue to fund research and development activities related to development of the PITOOEY! ^TM app.  Without sufficient cash flow from operations we will require additional cash resources, including the sale of equity or debt securities, to meet our planned capital expenditures and working capital requirements for the next 12 months.  We will require additional cash resources due to changed business conditions, implementation of our strategy to successfully expand our operations.  If our own financial resources and then current cash-flows from operations are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities.  The sale of additional equity securities will result in dilution to our stockholders.  The incurrence of indebtedness will result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations or modify our plans to grow the business.  Financing may not be available in amounts or on terms acceptable to us, if at all.  Any failure by us to raise additional funds on terms favorable to us, or at all, will limit our ability to expand our business operations and could harm our overall business prospects.

We only recently began to venture into the mobile and social media marketing space.  We are experiencing significant changes to our corporate and operational structures and have been expanding our base of employees.  Over the next 12 months, we expect the number of full- and part-time employees to fluctuate substantially, though we are unable to predict the amount of such fluctuations.

There are no known trends, events or uncertainties that have had or that are reasonably expected to have a material impact on our revenues from continuing operations.  However, we may not adequately encapsulate unforeseen economic or industry specific factors that may be beyond our control.  These external forces may restrict growth and advertising spending by our clients, which could, in turn, adversely affect our operations.

We currently do not own any significant plant or equipment that we would seek to sell in the near future.  

We have not paid for expenses on behalf of our directors.  Additionally, we believe that this fact shall not materially change.

Hiring and Retaining Key Personnel

Our ability to compete and grow depends in large part on the efforts and talents of our employees. During the first nine months of 2013, in addition to experiencing employee attrition, we also implemented, and continue to implement, certain cost reduction initiatives to better align our operating expenses with our revenue, including reducing our headcount and consolidating certain facilities.  These cost reduction initiatives could negatively impact our ability to attract, hire and retain key employees which is critical to our ability to grow our business and execute on our business strategy.

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Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and related notes. Our significant accounting policies are described in Note 3 to our consolidated financial statements included in our Annual Report on Form 10- K for the year ended December 31, 2012.  We have identified below our critical accounting policies and estimates that we believe require the greatest amount of judgment. These estimates and judgments have a significant impact on our consolidated financial statements. Actual results could differ materially from those estimates. The accounting policies that reflect our more significant estimates and judgments and that we believe are the most critical to fully understand and evaluate our reported financial results include the following:

1. Intangible assets

2. Merchant reserves

3. Property and equipment

4. Revenue recognition

5. Stock-based compensation

Item 3. Quantitative and Qualitative Disclosures About Market Risk

This item is not applicable to smaller reporting companies, such as ourselves.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Principal Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the period covered by this Report. Based on that evaluation, it was concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure

Changes in internal controls over financial reporting  

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material legal proceedings.

Item 1A. Risk Factors

Our significant business risks are described in Item 1A to our Form 10-K for the year ended December 31, 2012, to which reference is made herein.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On October 24, 2013 we issued a 20% debenture in the original principal amount of $20,000 payable on or before the 24nd day of March 2014 with attached warrants to purchase up to 40,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 24nd day of October 2016.

On October 24, 2013 we issued a 20% debenture in the original principal amount of $20,000 payable on or before the 24nd day of March 2014 with attached warrants to purchase up to 40,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 24nd day of October 2016.

On October 24, 2013 we issued a 20% debenture in the original principal amount of $10,000 payable on or before the 24nd day of March 2014 with attached warrants to purchase up to 20,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 24nd day of October 2016.

On October 24, 2013 we issued a 20% debenture in the original principal amount of $20,000 payable on or before the 21st day of October 2014 with attached warrants to purchase up to 40,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 21nd day of October 2016.

On November 20, 2013 we issued a 20% debenture in the original principal amount of $10,000 payable on or before the 24nd day of March 2014 with attached warrants to purchase up to 20,000 shares of the Company’s common stock at a price of $.50 per share at any time prior to the 24nd day of October 2016.

The securities were issued without registration in reliance on the exemption from registration in section 4(a)(2) of the Securities Act of 1933 because the offer and sale was made only to accredited investors as defined in Rule 501 of Regulation D without general solicitation or advertising; and the purchasers given access to information about our business and the opportunity to ask questions and receive answers about our business prior to making any investment decision.

Item 3. Defaults Upon Senior Securities

On the 20^th day of November 2013 we received a notice of default related to convertible promissory notes with present total outstanding principal amount in the amount of $107,500. The notes provide that failure to comply with the reporting requirements of the Securities Exchange Act of 1934 is an event of default.

We believe the default is cured by filing this Form 10-Q prior to expiration of the time to cure

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers.

Effective November 23, 2013 Patrick Deparini resigned all positions with the registrant, including Director, Chief Financial Officer and Chief Account officer. Jacob DiMartino, a director and chief executive officer assumed the positions of Chief Financial Officer and Chief Accounting Officer.

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Item 6. Exhibits and Reports on Form 8-K

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SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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