RAADR, INC. - Quarter Report: 2014 March (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 March 31, 2014

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

(844) 748-6639

(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 MARCH 31, 2014

Table of Contents

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, 2013, Annual Report on Form 10-K, previously filed with the Commission on April 14, 2014.

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Condensed Consolidated Balance Sheets

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Condensed Consolidated Balance Sheets-continued

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Condensed Consolidated Statements of Operations

(Unaudited)

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Condensed Consolidated Statements of Cash Flows

(Unaudited)

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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.

On October 31, 2013, the Company, as part of its settlement agreement with the employees of Rockstar Digital (See Footnote 9 - Commitments and Contingencies), ceased operations of its wholly owned subsidiary, Rockstar Digital, Inc.

Note 2 - Summary of Significant Accounting Policies

Principles of consolidation

For the periods ended in 2014, the consolidated financial statements include the accounts of PITOOEY! Inc., Choice One Mobile, Inc., and PITOOEY! Mobile, Inc. For the periods ended in 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. For 2014, PITOOEY!, Inc., Choice One Mobile, Inc., and PITOOEY! Mobile, Inc. will be collectively referred herein to as the “Company”. For 2013, 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.

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.

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Notes to Condensed Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (continued)

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.

Subscriptions receivable

Once the Company receives a firm commitment from an investor to provide either a loan or an equity investment the Company records that commitment as a subscription receivable and a credit to the related liability or equity account. Subscription receivables for stock purchases are carried in the equity section. Subscription for Debentures are carried as Notes Receivable – current. Commitments are evidenced by signed Note or Stock Subscription agreements.

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 years ended December 31, 2013 and 2012, there was no impairment necessary.

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Notes to Condensed Consolidated Financial Statements

Note 2 - 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 December 31, 2013 and 2012. Depreciation expense for the years ended December 31, 2013 and 2012 totaled $14,148 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 December 31, 2013 and 2012, there was $0 and $0 held in the merchant reserve account, respectively.

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Notes to Condensed Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (continued)

Cost of Revenue

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

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 year ended December 31, 2013 and 2012, advertising and marketing costs were $366,541 and $0, respectively.

Loss per common share

Net loss per share is provided in accordance with ASC Subtopic 260-10. The Company presents 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.

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Notes to Condensed Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (continued)

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).

All values for the Company are based on Level 1 observations.

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 March 31, 2014, and believes that none of them will have a material effect on the Company’s financial position, results of operations or cash flows.

Note 3 - 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 $4,194,197 as of March 31, 2014, and had net sales of $37,349 during the three months ended March 31, 2014.

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 PITOOEY!, INC

Notes to Condensed Consolidated Financial Statements

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.

Note 4 - Notes Receivable

Notes receivable consist of receivables for commitments to invest for one Debenture purchase which had been committed to but not paid for as of December 31, 2013.

Detail on notes receivable is as follows:

This Note was non-interest bearing.

Note 5 - Fixed Assets

Fixed assets consisted of the following at:

Depreciation expenses for the three months ended March 31, 2014 and 2013 were $1,086 and $0, respectively.

Note 6 - Deferred Revenue

As of March 31, 2014 and December 31, 2013, the Company had $0 and $0 in deferred revenue related to projects paid in advance of fulfillment.

.

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Notes to Condensed Consolidated Financial Statements

Note 7 – Accrued Liabilities

Accrued liabilities as of March 31, 2014 and December 31, 2013 consisted of:

Note 8 - Debt and 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. This commitment was increased to $2,000,000 based on an agreement modification entered into on December 2, 2013. 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 December 31, 2013, the principal balance owed on this loan is $443,441 plus accrued interest. As of March 31, 2014, the principal balance owed on this loan is $472,441 plus accrued interest. During the quarter ended March 31, 2014, a total of $10,023 has been recorded as interest expense. In connection with the April 29, 2013 Agreement and as modified by the December 2, 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 $25,000,000 of the Company’s common stock. As of the date of these financial statements, no shares of common stock have been issued pursuant to the Agreement.

Notes issued under this Investment Agreement are:

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Notes to Condensed Consolidated Financial Statements

Note 8 - Debt and Interest Expense (continued)

Convertible promissory notes issued to third parties:

The convertible loans and accrued interest are due and payable in full on the maturity date. The notes are 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 42% of the face value of the Note was attributed to the beneficial conversion feature of the note, which amounts are being amortized over the maturity periods. As of December 31, 2013, a total of $28,720 has been amortized and recorded as interest expense, leaving a balance of $16,430 in discounts related to the beneficial conversion feature of these notes. As of March 31, 2014, a total of $39,132 has been amortized and recorded as interest expense, leaving a balance of $6,018 in discounts related to the beneficial conversion feature of these notes.

Debentures with warrants attached issued to third parties:

As of March 31, 2014 and December 31, 2013, the principal balances owed on these loans is $347,664 and $305,000, respectively. Based on a valuation of the warrants using the Black-Sholes method, as of March 31, 2014 and December 31, 2013, discounts of $309,410 and $275,499, respectively, were attributed to the warrants being given in return for loans, which amount is being amortized over the respective twelve month maturity periods of the Notes. As of March 31, 2014 and December 31, 2013, a total of $129,870 and $57,743, respectively, has been amortized and recorded as interest expense, leaving a balance of $179,540 and $217,756, respectively, in discounts related to the attached warrants.

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Notes to Condensed Consolidated Financial Statements

Note 8 - Debt and Interest Expense (continued)

Noninterest-bearing promissory notes issued to related parties:

Debentures with warrants attached issued to related parties:

As of March 31, 2014 and December 31, 2013, the principal balances owed on these loans is $87,500 and $85,000, respectively. Based on a valuation of the warrants using the Black-Sholes method, as of March 31, 2014 and December 31, 2013, discounts of $107,048 and $105,055, respectively, were attributed to the warrants being given in return for loans, which amount is being amortized over the respective twelve month maturity periods of the Notes. As of March 31, 2014 and December 31, 2013, a total of $30,028 and $3,573, respectively, has been amortized and recorded as interest expense, leaving a balance of $77,020 and $101,482, respectively, in discounts related to the attached warrants.

Other promissory notes issued:

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Notes to Condensed Consolidated Financial Statements

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.

For the quarter ended March 31, 2014 no executive salaries were deferred. During the year ended December 31, 2013, two of the Company’s officers had been deferring salaries earned. As of March 31, 2014 and December 31, 2013, the Company has accrued executive compensation to these two officers totaling $38,000.

Note 9 - Commitments and Contingencies

Office Facility Lease - The Company leases its office facility under an operating lease agreement that expires May 31, 2016. The Company recognizes rent expense on a straight-line basis over the lease period.

Equipment Lease - The Company has leases on two pieces of equipment under an operating lease that expires April 28, 2016. The Company recognizes rent expense on a straight-line basis over the lease period.

Rental expense was $17,753 for the three months ended March 31, 2014 and $25,765 for the same period ended March 31, 2013.

The Company’s minimum payments under non-cancelable operating leases for equipment and office space having initial terms in excess of one year are as follows at March 31, 2014:

On March 18, 2013, the Company received a lawsuit brought by a former employee who claimed wrongful discharge and requesting payment of $282,692 in base salary and payment for 3,975,000 shares of the Company’s common stock that he was awarded a part of his employment agreement. The Company is attempting to recover these shares based on its determination that the employee was terminated for cause. On December 23, 2013, the Company commenced litigation against the claimant for defamation, intentional interference with prospective business relations, misappropriation of trade secrets, civil conspiracy, and seeking an injunction against harassment. The claimant responded to the complaint by filing a motion to dismiss dated March 17, 2014. Although the claimant has made no formal, legal claims against the Company, it is anticipated that he may make one or more of his previously-threatened claims as a counterclaim in the case. To the extent the claims are based on his previous allegations, the Company views them as frivolous and unsupported and, therefore, has made no accrual provisions for potential losses.

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Notes to Condensed Consolidated Financial Statements

On October 31, 2013, the Company entered into a settlement agreement with certain former employees to assume responsibility for certain payroll taxes of Rockstar Digital, Inc. (“Rockstar”) and assign its ownership of Mobile Application and Transition Services intellectual property rights to Rockstar. In addition, the Company agreed to not assert a claim against certain computer equipment (cost of $28,307) in use at Rockstar. . The Company agreed to assume liability for any payroll taxes owed on payroll paid by the Company on behalf of Rockstar’s employees. The Company estimated this liability at $30,000 which they have recorded in accrued liabilities.

Note 10 - Income Taxes

For the three months ended March 31, 2014 and 2013, the Company incurred net operating losses and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At March 31, 2014 and December 31, 2013, the Company had approximately $1,573,817 and $1,419,890 of federal net operating losses, respectively. At March 31, 2014 and December 31, 2013, the Company had approximately $4,022,156 and $3,589,530 of state net operating losses, respectively. The federal net operating loss carryforwards, if not utilized, will begin to expire in 2027. The state net operating loss carryforwards, have started to expire. The provision for income taxes consisted of the following components as of March31, 2014 and December 31, 2013:

In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of March 31, 2014 and December 31, 2013, and recorded a full valuation allowance.

Reconciliation between the statutory and the effective rate is as follows:

Note 11 - Stockholders’ Equity

The Company is authorized to issue 400,000,000 shares of its $0.001 par value common stock and 100,000,000 shares of its $0.001 par value preferred stock.

In January, 2014, the Company issued 271,000 shares of its common stock that had been paid for as of December 31, 2013.

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Notes to Condensed Consolidated Financial Statements

Note 11 - Stockholders’ Equity (continued)

In January, 2014, the Company received $20,400 in Subscriptions Receivable for shares that were committed to be purchased as of December 31, 2013. Those shares have not been issued as of March 31, 2014.

In March, 2014, the Company sold 92,500 shares of common stock, at $0.40 per share, to four investors for $37,000. The shares have not been issued as of March 31, 2014.

Note 12 - Warrants and Options

Warrants issued in the quarter ended March 31, 2014:

See “Note 8 - Debt and Interest Expense” for additional discussion regarding warrants issued in connection with debenture issuances.

The following is a summary of the status of all of the Company’s stock warrants as of March 31, 2014.

The following tables summarize information about warrants outstanding and exercisable at March 31, 2014:

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Notes to Condensed Consolidated Financial Statements

Note 13 - 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 from 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 was to 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.

The Company has since decided to complete the purchase of this intellectual property and but has not yet made payments against this Note. The Company does not yet own this intellectual property and is delinquent on payment of this Note.

On April 17, 2014 effective May 1, 2014, the Company entered into an agreement with Innovative Holdings to design and develop the Company’s RAADR mobile app, the purpose of which is to provide customers a mobile application system to allow monitoring of various forms of social media. Compensation for this project is comprised of $25,000 in cash and issuance of 300,000 shares of the Company’s common stock.

Note 14 - Related Party Transactions

During the year ended December 31, 2013, two of the Company’s officers have been deferring salaries earned. As of December 31, 2013, the Company has accrued executive compensation to these two officers totaling $38,000. This amount remains outstanding as of March 31, 2014.

On February 24, 2014, the Company issued a debenture to a related party for $2,500, paying 8% interest. The debenture included 5,000 warrants exercisable until February 24, 2017 at an exercise price of $0.50 per share.

Note 15 - Subsequent Events

The following debenture, with warrants attached, were issued to a third party:

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Notes to Condensed Consolidated Financial Statements

Note 15 - Subsequent Events (continued)

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.

On April 17, 2014, effective May 1, 2014, the Company entered into an agreement with Innovative Holdings to design and develop the Company’s RAADR mobile app, the purpose of which is to provide customers a mobile application system to allow monitoring of various forms of social media. Compensation for this project is comprised of $25,000 in cash and issuance of 300,000 shares of the Company’s common stock.

On April 22, 2014, Richard Hybner was appointed Chief Executive Officer of the Company. Jacob DiMartino, Founder, will remain with the Company as President, Chief Financial Officer, and Principal Accounting Officer.

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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 our $0.001 par value common stock and 100,000,000 shares of our $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 two wholly -owned subsidiaries:

Results of Operations

Due to the recent addition of new business operations and service lines, comparisons of operating results between the three month periods ended March 31, 2014 and 2013 may not be materially reflective of our continuing and future operations.

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Revenue

How we generate revenues

During the current fiscal year, 2014, we generated 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 subsidiary has not generated any revenues.

Three months ended March 31, 2014 compared to the three months ended March 31, 2013

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 March 31, 2014, we recorded $0 in deferred revenue and recognized $0 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 March 31, 2014, costs of sales totaled $38,511 as compared to $34,043 for the same period ended March 31, 2013. After accounting for costs of sales, we realized a gross profit of $5,562 during the three months ended March 31, 2014 as compared to $46,887 for the same period ended March 31, 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 third party 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 March 31, 2014 compared to the three months ended March 31, 2013

For the three months ended March 31, 2014 and 2013, 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 $6,116 during the three months ended March 31, 2014. In the comparable period ended March 31, 2013, we incurred $139,366 in 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 $3,510 during the quarter ended March 31, 2014. In the comparable period ended March 31, 2013, it was $2,455.

Executive Compensation. Executive compensation paid to our corporate officers and directors was $34,200 during the three months ended March 31, 2014 and $109,804 in the comparable period ended March 31, 2013.

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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 three month ended March 31, 2014, general and administrative expenses were $113,821. Comparatively, general and administrative expenses were $183,543 in the period ended March 31, 2013.

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 March 31, 2014 and 2013, total management fees paid to the related entity was $0 and $272,287, respectively. As of December 31, 2013 we have terminated this relationship. As a result, we don’t expect future expenses in this category to be incurred.

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 March 31, 2014, we incurred $35,733 in professional fees as compared to $121,564 for the period ended March 31, 2013.

Salaries and Wages. As of March 31, 2014, we have 4 employees. Salaries and wages paid during the quarters ended March 31, 2014 and 2013 were $69,671 and $189,212, 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 March 31, 2014, we incurred $146,496 of interest expense related to our notes payable. In the period ended March 31, 2013, interest expense was $19. 

Net Loss

Our net loss for the three months ended March 31, 2014 was $416,730, compared to a $971,362 net loss in the year ago period ended March 31, 2013. 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 March 31, 2014, we had $1 in cash and $200 in prepaid expenses and deposits. 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 $296,116 for the three months ended March 31, 2014,. In comparison, our net cash used during the three months ended March 31, 2013 was $796,503 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. 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 three months ended March 31, 2014 and the three months ended March 31, 2013, we purchased $0 and $56,910, respectively of computers, furniture and office equipment. We do expect to make material investments in furniture, fixtures and equipment during the next 12 months of operations.

Financing Activities. Net cash provided by financing activities for the three months ended March 31, 2014 was $154,088, as compared to $446,877 for the comparable period ended March 31, 2013. During 2013, we obtained significant financing in an effort to expand our operations and pursue new business opportunities. To that end, for the three months ended March 31, 2014 and 2013, we obtained financing in the form of loans totaling $74,156 and $15,000, respectively, from third party sources. Also during the three month periods ended March 31, 2014 and 2013, we repaid $51,119 and $137,069 respectively, of our third party notes payable and $1,359 and $0, respectively, of related party notes payable.. In addition to issuing debt securities, during the three months ended March 31, 2014 and 2013, we sold a total of $37,000 and 511,000, respectively, of common stock. We expect to use future sources of 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 three months ended March 31, 2014, we experienced a net decrease in cash on hand of $142,028. Comparatively, we had a net decrease in cash of $406,536 during the three months ended March 31, 2013.

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.

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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.

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.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Both our Chief Executive Officer and President and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Interim Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us 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 is accumulated and communicated to our management, including our principal executive and principal financial officers, 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, 2013, to which reference is made herein.

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

On April 22, 2014 we issued a 10% debentures totaling a principal amount of $20,000 payable on or before the 22nd day of April, 2015 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 22nd day of April, 2017.

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

Not applicable.

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 Principal Accounting Officer. Jacob DiMartino, a Director and Chief Executive Officer, assumed the positions of Chief Financial Officer and Principal Accounting Officer.

On April 22, 2014, Richard Hybner assumed the position of Chief Executive Officer of the Company. Jacob DiMartino holds the position of President and, on an interim basis, serves as the Company’s Chief Financial Officer and Principal 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.