UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarter Ended: September 30, 2016

Commission File Number: 000-54587

chatAND, Inc.

(Exact name of registrant as specified in its charter)

Nevada		27-2761655
(State or Jurisdiction of Incorporation or Organization)		(IRS Employer ID No)

244 5^th Avenue, Suite C68

New York, NY 10001

(Address of principal executive office) (Zip code)

(917) 818-2280

(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as 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 [ ] No [X]

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares outstanding of registrant’s common stock, par value $0.00001 per share, as of November 21, 2016, was 41,386,875 shares.

chatAND, Inc.

Table of Contents

		Page No.
Part I	Financial Information (unaudited)
Item 1:	Condensed Consolidated Financial Statements	F-3
	Balance Sheets as of September 30, 2016 and December 31, 2015	F-3
	Statements of Operations for the Three and Nine Months ended September 30, 2016 and 2015	F-4
	Statement of Stockholders’ Equity for the Nine Months ended September 30, 2016	F-5
	Statements of Cash Flows for the Nine months ended September 30, 2016 and 2015	F-6
	Notes to financial statements	F-7
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3:	Quantitative and Qualitative Disclosure about Market Risk	4
Item 4:	Controls and Procedures	4

Part II	Other Information
Item 1:	Legal Proceedings	5
Item 1A:	Risk Factors	5
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	5
Item 3:	Defaults Upon Senior Securities	5
Item 4:	Mine Safety Disclosure	5
Item 5:	Other Information	5
Item 6:	Exhibits	6

F-2

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

chatAND, Inc

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2016			December 31, 2015
	(unaudited)
ASSETS
Current assets:
Cash	$	420		$	101,427
Total current assets		420			101,427

Other assets:
Intellectual Property (Note 4)		1,581,468			1,581,468
Total other assets		1,581,468			1,581,468

Total assets	$	1,581,888		$	1,682,895

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	326,136			346,304
Accrued expenses net of payroll liabilities		19,911			22,614
Accrued interest		9,615			1,017
Advances from stockholders and employees		31,000			31,000
Notes payable, net of discount of $53,521		96,979			26,797
Derivative liabilities		62,656			14,390
Total current liabilities		546,297			442,122

Stockholders’ equity:
Preferred stock: $0.00001 par value; 100,000,000 shares authorized; no shares issued and outstanding.	$	-		$	-
Series A Convertible Stock, $0.00001 par value, $48.07309 stated value, 4,807,309 shares authorized; no shares issued and outstanding.		-			-
Common stock: $0.00001 par value; 500,000,000 shares authorized; 41,386,875 and 39,936,875 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively		414			400
Additional paid in capital		4,266,495			4,237,509
Accumulated deficit		(3,231,318	)		(2,997,136	)
Total stockholders’ equity		1,035,591			1,240,773

Total liabilities and stockholders’ equity	$	1,581,888		$	1,682,895

See the accompanying notes to these unaudited condensed consolidated financial statements.

F-3

chatAND, Inc

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Revenue:
Total revenue	$	-		$	-		$	-		$	-

Costs and expenses:
General and administrative		28,900			15,527			123,795			130,480
Research and development expense		-			-			-			(2,791	)
Asset impairment		-			-			-			749
Total costs and expenses		28,900			15,527			123,795			128,438

Loss from operations		(28,900	)		(15,527	)		(123,795	)		(128,438	)

Other expenses:
Interest expense		(210,791	)		(5,820	)		(271,043	)		(7,988	)
Gain (loss) on change in fair value of derivative liabilities		176,336			97,584			160,656			227,267
Total other income (expenses)		(34,455	)		91,764			(110,387	)		219,279

Net (loss) income before income taxes		(63,355	)		76,237			(234,182	)		90,841

Income taxes		-			-			-			-

NET (LOSS) INCOME	$	(63,355	)	$	76,237		$	(234,182	)	$	90,841

(Loss) earnings per share, basic and diluted	$	(0.00	)	$	0.00		$	(0.01	)	$	0.00

Weighted average number of shares outstanding, basic and diluted		41,386,875			39,150,805			41,069,357			39,108,314

See the accompanying notes to these unaudited condensed consolidated financial statements.

F-4

chatAND, Inc

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

NINE MONTHS MONTHS ENDED SEPTEMBER 30, 2016

(unaudited)

													Additional
	Preferred stock				Series A				Common stock				Paid-in		Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balance, December 31, 2015		-	$	-		-	$	-		39,936,875	$	400	$	4,237,509	$	(2,997,136	)	$	1,240,773
Common stock issued for services		-		-		-		-		1,450,000		14		28,986		-			29,000
Net income (loss)		-		-		-		-		-		-		-		(234,182	)		(234,182	)
Balance, September 30, 2016		-	$	-		-	$	-		41,386,875	$	414	$	4,266,495	$	(3,231,318	)	$	1,035,591

See the accompanying notes to these unaudited condensed consolidated financial statements.

F-5

chatAND, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine months ended September 30,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(234,182	)	$	90,841
Adjustments to reconcile net income (loss) to net cash used in operating activities:
(Gain) loss on change in fair value of derivative liability		(160,656	)		(227,267	)
Stock issued for services		29,000			-
Amortization of debt discount		92,182
Non-cash interest		171,422			-
Impairment of assets		-			749
Changes in operating assets and liabilities:
Accounts payable		(20,168	)		38,750
Accrued interest payable		8,598			-
Accrued expenses		(2,703	)		-
Net cash used in operating activities	$	(116,507	)		(96,926	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Freeline bankruptcy refund		-			18,532
Net cash provided by investing activities		-			18,532

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable		37,500			15,000
Repayments of Notes Payable		(22,000	)		-
Sales of Common Stock		-			35,000
Net cash provided by (used in) financing activities		15,500			50,000

Net increase (decrease) in cash		(101,007	)		(28,395	)

Cash, beginning of the year		101,427			29,421
Cash, end of period	$	420		$	1,026

SUPPLEMENTAL INFORMATION
Cash paid for interest	$	200		$	7,988

Non-cash investing and financing activities:
Common stock issued for services	$	29,000		$	-

See the accompanying notes to these unaudited condensed consolidated financial statements.

F-6

chatAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

chatAND, Inc., a Nevada corporation (the “Company”), organized on May 14, 2010, and its wholly owned subsidiary CHATAND TECH, LLC (“TECH”), a limited liability company organized in Nevada on May 13, 2011, (collectively referred to herein as “Chat&” or the “Company”).

In 2015, the Company decided to abandon the technology platform business it was initially formed to pursue and devote it’s time and energy into fully developing and placing into service its investment asset with the relaunch of the Freeline Sports trademark and patented in-line skating technology.

In 2014, the Company acquired substantially all the assets of Freeline Sports, Inc., an inactive California company. We do not currently have plans to develop these assets or market any products related to these assets. However, we are currently pursuing financing in order to develop these acquired assets.

Our current plans are to develop these assets and market any products related to these assets and we are currently pursuing financing in order to develop these acquired assets.

Our new goal will be focusing on pushing sports forward with innovation in design and technology. Our exclusive skate technology brings new excitement to the skate community. Our technology will have the biggest names in the industry looking to get their hands on it. With a proper launch and sales it possibly can be applied to all board sports. Adding additional products to our line will increase our validity and will further strengthen the core business, especially in the apparel arena.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of September 30, 2016 and for the three and nine months ended September 30, 2016. The results of operations for the nine months ended September 30, 2016 are not necessarily indicative of the operating results for the full year ending December 31, 2016, or any other period. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2015 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on March 28, 2016.

2. GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

As of September 30, 2016, the Company had a cash balance of $420 and a working capital deficit (current liabilities exceeding current assets) of $545,877. During the nine months ended September 30, 2016, the Company used net cash in operating activities of $116,507. The Company has incurred net losses since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s primary source of operating funds since inception has been cash proceeds from private placements of common stock and warrants. The Company intends to raise additional capital through private issuances of debt and equity instruments, but there can be no assurance that these funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully execute on its business plan or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.

F-7

chatAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the fair value of the Company’s stock, stock-based compensation, fair values relating to warrant and other derivative liabilities, the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At September 30, 2016 and December 31, 2015, the Company did not have any derivative instruments that were designated as hedges.

At September 30, 2016, the Company had outstanding convertible notes and warrants that contained embedded derivatives. These embedded derivatives include certain conversion features and reset provisions. (See Note 5 and Note 6).

Net Loss per Share

The Company computes basic net loss per share by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic and diluted loss per share for the three and nine months ended September 30, 2016 and 2015 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

F-8

chatAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:

	September 30, 2016		September 30, 2015
Convertible debt		6,855,000		-
Options to purchase common stock		5,370,000		5,370,000
Series A convertible preferred stock		-		4,807,309
Warrants to purchase common stock		15,700,000		5,275,000
Totals		27,925,000		15,452,309

Recent Accounting Pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements except as disclosed in Note 10.

4. INVESTMENTS

In 2014, we acquired substantially all the assets of Freeline Sports, Inc., an inactive California company in Chapter 7 bankruptcy proceeds for cash payment of $250,000 and 5,000,000 shares of the our common stock, valued in aggregate of $1,350,000. The assets acquired were primarily patents, copyrights and trademarks relating to sports equipment. Specifically, we acquired patents 7,059,613, 8,308,171 and Des567,318 for supporting a user’s foot with a personal transportation device.

Our current plans and focus is the development of the assets acquired from Freeline Sports, Inc., we also may consider additional or alternative opportunities, including a change in the primary focus of our efforts. For example, we could determine to acquire, through a merger, share exchange, asset acquisition, plan of arrangement, recapitalization, reorganization or similar business combination, one or more operating businesses, or control of such operating businesses through contractual arrangements, or additional assets. We currently do not have any arrangement, agreement or understanding with respect to any such transaction and there can be no assurance that we will evaluate or conclude one.

5. NOTES PAYABLE

On July 5, 2016, the Company issued a convertible note for $15,000 to a board member due one year from issuance with interest at 10% per annum due at maturity. The note is convertible into shares of the Company’s common stock, at any time, at a conversion rate of $0.01 per share. The Note contains certain reset provisions should the Company issue or sell its common stock, options or convertible securities less than the conversion price, then the existing conversion price in effect is reduced in the amount to equal to new conversion price. In connection with the note, the Company issued 750,000 warrants to purchase the Company’s common stock at $0.02 per share for fve years. The warrants also contain reset provisions as described above.

F-9

chatAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

On August 10, 2016, the Company issued convertible notes in aggregate of $22,500 ( of which $7,500 to a board member) due one year from issuance with interest at 10% per annum due at maturity. The note is convertible into shares of the Company’s common stock, at any time, at a conversion rate of $0.10 per share. The Notes contain certain reset provisions should the Company issue or sell its common stock, options or convertible securities less than the conversion price, then the existing conversion price in effect is reduced in the amount to equal to new conversion price. In connection with the note, the Company issued 4,000,000 warrants to purchase the Company’s common stock at $0.10 per share for five years. The warrants also contain reset provisions as described above.

The Company has identified the embedded derivatives related to the above issued convertible notes and warrants. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of these notes and to fair value as of each subsequent reporting date which at September 30, 2016 was $61,809.

The fair value of the embedded derivatives at issuance of the notes and warrants, determined using the Black Scholes Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 116.59% to 118.83%, (3) weighted average risk-free interest rate of 0.44% to 1.07%, (4) expected lives of 1.0 to 5.0 years, and (5) estimated fair value of the Company’s common stock from $0.0435 per share.

The initial fair value of the embedded derivatives of $208,922 was allocated as a debt discount up to the proceeds of the notes ($37,500) with the remainder ($171,422) charged to current period operations as interest expense. For the three and nine months ended September 30, 2016, the Company amortized an aggregate of $35,470 and $92,182 of debt discounts to current period operations as interest expense, respectively.

6. DERIVATIVE LIABILITIES

Warrants

In 2016, in connection with the issuance of convertible notes payable (See Note 5) and in 2014, in connection with the sale of common stock, the Company issued an aggregate of 4,750,000 and 5,000,000 common stock purchase warrants to purchase the Company’s common stock with an exercise prices of $0.01 to $0.15 per share for five and three years with anti-dilutive (reset) provisions, respectively.

The Company has identified embedded derivatives related to the issued warrants. The accounting treatment of derivative financial instruments requires that the Company record allocated fair value of the derivatives as of the inception date and to fair value as of each subsequent reporting date.

At September 30, 2016, the fair value of the reset provisions of $50,140 was determined using the Black-Scholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 130.13%; risk free rate: 0.45% to 1.14%; and expected life: 0.50 to 4.86 years. The Company recorded a gain on change in derivative liabilities of $134,634 during the three months ended September 30, 2016.

Debt

In 2016, the Company issued convertible notes with anti-dilutive (reset) provisions (See Note 5).

The Company has identified embedded derivatives related to the issued notes. The accounting treatment of derivative financial instruments requires that the Company record allocated fair value of the derivatives as of the inception date and to fair value as of each subsequent reporting date.

F-10

chatAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

At September 30, 2016, the fair value of the reset provisions of $12,516 was determined using the Black-Scholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 130.13%; risk free rate: 0.59%; and expected life: 0.76 to 0.86 years. The Company recorded a gain on change in derivative liabilities of $41,702 during the three months ended September 30, 2016.

7. STOCKHOLDERS’ EQUITY

Preferred stock

The Company is authorized to issue up to 100,000,000 shares of preferred stock with a par value of $0.00001. At September 30, 2016 and December 31, 2015, no shares were issued and outstanding.

On April 9, 2015, the Company filed a Form 8-K/A and Exhibit 10.1 Series A Convertible Preferred Stock Exchange Agreement. In this filing the Company stated that it issued 4,807,309 shares of Series A Preferred Stock (the “Shares”) to 224 Stanhope Note LLC (“Stanhope”) in exchange for 4,807,309 shares of common stock of the Company. However the Shares in fact have not yet been issued pursuant to that certain Series A Convertible Preferred Stock Exchange Agreement (the “Agreement”), dated April 2, 2015, between the Company and Stanhope because the Common Stock certificate has not yet been returned and therefore the terms of the Agreement have not yet been met.

Common stock

The Company is authorized to issue up to 500,000,000 shares of common stock with a par value of $0.00001. At September 30, 2016 and 2015 there were 41,386,875 and 39,936,875 shares issued and outstanding, respectively.

8. RELATED PARTY TRANSACTIONS

At December 31, 2015 advances from shareholders and employees were granted 411,070 shares of common stock. These shares had an aggregate grant fair date value of $77,367. This was in conjunction with the release and settlement agreements for Daniel and Michael Lebor. Pursuant to Unanimous Board Written Consent dated 12/29/15, it was determined that Msssrs. Daniel and Michael Lebor were never issued Options for their 2012 and 2013 Cash Advanced to the Company. During the 12/29/15 Board meeting it was determined stock be issued with a $0.15 per share price.

	September 30, 2016		December 31, 2015
Michael Lebor, Chief Executive Officer	$	-	$	20,094
Former employees		-		57,273
	$	-	$	77,367

Employment agreements

As of September 30, 2016, the Company does not have any employee accounts.

F-11

chatAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

9. FAIR VALUE MEASUREMENT

The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

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

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

All items required to be recorded or measured on a recurring basis are based upon level 3 inputs.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.

The carrying value of the Company’s cash, accounts payable, short-term borrowings and other current assets and liabilities approximate fair value because of their short-term maturity.

As of September 30, 2016 and December 31, 2015, the Company did not have any items that would be classified as level 1 or 2 disclosures.

The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed in Note 5. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 5 are that of volatility and market price of the underlying common stock of the Company.

As of September 30, 2016 and December 31, 2015, the Company did not have any derivative instruments that were designated as hedges.

F-12

chatAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

The derivative liability as of September 30, 2016, in the amount of $62,656 has a level 3 classification.

		Level 1				Level 2				Level 3
Derivative Liability			-				-			$	62,656

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of September 30, 2016 and for the nine months ended September 30, 2016:

	Derivative
	Liabilities
Balance, December 31, 2015	$	14,390
Transfers in (out):
Initial fair value of issued convertible debt and warrant reset provisions		208,922
Total (gains) losses		-
Mark-to-market		(160,656	)
Balance, September 30, 2016	$	62,656
Net Gain for the period included in earnings relating to the liabilities held at September 30, 2016		160,656

10. SUBSEQUENT EVENTS

F-13

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Form 10-Q. This discussion and analysis may contain forward-looking statements based on assumptions about our future business. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth elsewhere in this Form 10-Q.

Management’s Analysis of Business

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which are prepared in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that management believes are reasonable based upon the information available. We base these estimates on our historical experience, future expectations and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments that may not be readily apparent from other sources. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. These estimates and assumptions relate to estimates of the carrying amount of intangibles, stock based-compensation, valuation allowances for deferred income taxes, accruals and other factors. We evaluate these estimates on an ongoing basis. Actual results could differ from those estimates under different assumptions or conditions, and any differences could be material.

We have not generated any revenues to date and had cash balances of $420 and $101,247 at September 30, 2016 and December 31, 2015, respectively.

ChatAND headquarters are at 244 5^th Avenue, Suite C68, New York, NY 10001. Our telephone number is 917-818-2280.

Chat& is a an up and coming sport action company that expects to fully develop and place into service its investment asset with the relaunch of the Freeline Sports trademark and patented in-line skating technology.

The Company is considered a pre-development company because it has not generated any revenue, has limited resources and has not established operations to generate sufficient capital to complete its business plan.

Recent Business Developments

Results of Operations

Three months ended September 30, 2016 compared to three months ended September 30, 2015

Following is a summary of expenses for the three months ended September 30, 2016 and 2015.

	2016		2015

General and administrative expense	$	28,900	$	15,527

General and administrative expenses are summarized as follows:

	2016			2015

Professional fees	$	21,297		$	6,091
Consultant		12,000			9,100
Other		(4,397	)		336
	$	28,900		$	15,527

General and administrative expense increased by $13,373 for the three months ended September 30, 2016, as compared to the three months ended September 30, 2015. This increase is primarily due to legal and consulting fees.

These costs are expected to increase in the future if additional funding becomes available and additional employees are hired. The Company has had reduced funding since July 2012, resulting in payroll not being paid since July 2012 and a reduction in other costs until funding becomes available.

Other income (expense) consists of the following for the three months ended September 30, 2016 and 2015.

	2016			2015
Interest expense		(210,791	)		(5,820	)
Gain (loss) on change in fair value of derivative liability		176,336			97,583
Other income		-			-
	$	(34,455	)	$	94,764

Interest expense for the three months ended September 30, 2016 is primarily from amortization of debt discounts and non-cash interest incurred relating to our issued convertible notes payable. The debt discounts amortization and non-cash interest incurred during the three months ended September 30, 2016 and 2015 was $205,892 and $-0-, respectively.

Derivative liability expense was calculated using the Black Scholes valuation method as described in Note 6 to the financial statements.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015

Following is a summary of expenses for the nine months ended September 30, 2016 and 2015.

	2016		2015

General and administrative expense	$	123,795	$	130,480

General and administrative expenses are summarized as follows:

	2016		2015

Professional fees	$	62,379	$	113,592
Consultant		57,375		18,800
Other		4,041		(1,912	)
	$	123,795	$	130,480

General and administrative expense decreased by $6,685 for the nine months ended September 30, 2016, as compared to the nine months ended September 30, 2015. This decrease is primarily due to professional fees, net with increase in consulting fees.

Other income (expense) consists of the following for the nine months ended September 30, 2016 and 2015.

	2016			2015
Interest expense		(271,043	)		(7,988	)
Gain (loss) on change in fair value of derivative liability		160,656			227,267
Other income		-			-
	$	(110,387	)	$	219,279

Interest expense for the nine months ended September 30, 2016 is primarily from amortization of debt discounts and non-cash interest incurred relating to our issued convertible notes payable. The debt discounts amortization and non-cash interest incurred during the three months ended September 30, 2016 and 2015 was $263,604 and $-0-, respectively.

Derivative liability expense was calculated using the Black Scholes valuation method as described in Note 6 to the financial statements.

Liquidity and Capital Resources and Going Concern

At September 30, 2016 and December 31, 2015, the Company had current assets of $420 and $101,427; current liabilities of $546,297 and $442,122; and a working capital deficit of $545,877 and $340,695, respectively.

We have not generated any revenues to date and have suspended active development activities. The Company has not had any cash available other than nominal loans from shareholders and has discontinued accruing payroll. The Company’s continuing existence depends upon its ability to find alternative sources of financing.

At September 30, 2016 and December 31, 2015, we had no liquidity. The Company will require additional financing before it can implement its business plan.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our historical operating losses, our operations have not been a source of liquidity. We may seek additional capital in order to develop operations and become profitable. In order to obtain capital, we may need to sell additional shares of common or preferred stock or borrow funds from private lenders pursuant to instruments, which are junior to our outstanding secured debt instruments. There can be no assurance that we will be successful in obtaining additional funding.

If the above events do not occur or the Company is unable to implement its business plan, substantial doubt about the Company’s ability to continue as a going concern exists.

Item 3: QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of September 30, 2016.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of the financial statements of the Company in accordance with U.S. generally accepted accounting principles, or GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

With the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2016 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our evaluation and the material weaknesses described below, management concluded that the Company did not maintain effective internal control over financial reporting as of September 30, 2016 based on the COSO framework criteria. Management has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment. Management of the Company believes that these material weaknesses are due to the small size of the Company’s accounting staff and support personnel. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation.

To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these control deficiencies as described above together constitute a material weakness.

In light of this material weakness, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the three months ended September 30, 2016 included in this Quarterly Report on Form 10-Q were fairly stated in accordance with US GAAP. Accordingly, management believes that despite our material weaknesses, our financial statements for the three months ended September 30, 2016 are fairly stated, in all material respects, in accordance with US GAAP.

Changes in internal control over financial reporting

There have been no significant changes in internal controls or in other factors that could significantly affect these controls during the quarter ended September 30, 2016, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II — OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

None.

ITEM 1A: RISK FACTORS

Not applicable.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4: MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5: OTHER INFORMATION

Not applicable.

ITEM 6: EXHIBITS

The following exhibits are filed with this report on Form 10-Q.

Exhibits		Description

10.1		Form of convertible note payable and warrants in reference to Form 8-K filed on July 7, 2016.

10.2		Resignation of Ms. Victoria Rudman as Chief Executive Officer and Chief Financial Officer and appointment of David Stefansky as Interim Chief Executive Officer and John Steinhouse as Interim Chief Financial Officer by reference to Form 8-K filed on October 27, 2016

31.1		Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer*

31.2		Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer*

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

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

101.INS		XBRL Instance Document**

101.SCH		XBRL Taxonomy Extension Schema Document**

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB		XBRL Taxonomy Extension Label Linkbase Document**

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

* Filed Herewith.

** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

SIGNATURE

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

	chatAND, Inc.

Date: November 21, 2016	By:	/s/ David Stefansky
		David Stefansky
		Interim Chief Executive Officer

Date: November 21, 2016	By:	/s/ John Steinhouse
		John Steinhouse
		Interim Chief Financial Officer

chatAND, Inc. 10-Q