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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 (Mark One)
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
fiscal year ended March 31, 2006
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
the transition period from to
 Commission file number 1-12214
 CHAD Therapeutics, Inc.
  California
    
    95-3792700(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)21622 Plummer Street, Chatsworth, CA
(Address of principal executive offices)
    
    91311
(Zip Code)
   Name of each exchangeTitle of each class
    
    on which registeredCommon Shares, $.01 par value
    
    American Stock Exchange
  o þ
 o þ
 þ o
 o
  o o þ
 o þ




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B.Unresolved Staff CommentsItem 2.PropertiesItem 3.Legal ProceedingsItem 4.Submission of Matters to a Vote of Security HoldersPART IIItem 5.Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6.Selected Financial DataItem 7.Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7a.Quantitative and Qualitative Disclosures about Market RiskItem 8.Financial Statements and Supplementary DataItem 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A.Controls and ProceduresItem 9B.Other InformationPART IIIItem 10.Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and ManagementItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-KSIGNATURESExhibit IndexExhibit 13.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 99.12    Table of Contents  
  
 Business
  Pulmonary Disease and Oxygen Therapy
         2




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CHADs Products
  OXYMIZER® and OXYMIZER Pendant Oxygen-Conserving Devices
   3




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OXYMATIC® Electronic Oxygen Conservers
   LOTUS Electronic Oxygen Conserver.
 CYPRESS OXYPneumatic® Conservers
 4




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SAGEOxygen Therapeutic Device
 OXYCOIL® Coiled Oxygen Tubing
 TOTAL O2® Delivery System 2  2
 2 2 2 2
 2
 5




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2
 Other Products
 Products Under Development
  Research and Development
  Licensing and Related Agreements
   6




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2
  Manufacturing and Sources of Supply
    7




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2
   Marketing
   2
   8




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Customers, Backlog and Orders
  
 2006
    
    2005
    
    2004SalesUnited States
    
    $
    17,996
    
    
    $
    22,912
    
    
    $
    20,498Canada
    
    
    193
    
    
    
    306
    
    
    
    303Japan
    
    
    506
    
    
    
    405
    
    
    
    238Europe
    
    
    3,337
    
    
    
    418
    
    
    
    278All other countries
    
    
    322
    
    
    
    246
    
    
    
    224Total
    
    $
    22,354
    
    
    $
    24,287
    
    
    $
    21,541
   9




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Competition
     2 2 2
 10




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Patents and Trademarks
 2
     2.
 Governmental Regulation
 2,
 11




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2
 Employees
  
     12




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13




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14




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Unresolved Staff Comments
  
 Properties
  
 Legal Proceedings
  
 Submission of Matters to a Vote of Security Holders
  
  
 Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
  
 Selected Financial Data
  15




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Managements Discussion and Analysis of Financial Condition and Results of
Operations
  
 Quantitative and Qualitative Disclosures about Market Risk
  
 Financial Statements and Supplementary Data
  
 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
 (b) Changes in Internal Control Over Financial Reporting
 
 Other Information
  16




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Directors and Executive Officers of the Registrant
  Name
    
    Age
    
    Position
    
    Director SinceClass IPhilip T. Wolfstein (1) (2) (3)
    
    55
    
    Director
    
    1994James M. Brophy (1) (2) (3)
    
    56
    
    Director
    
    2000Kathleen M. Griggs (1) (3) (4)
    
    51
    
    Director
    
    2003Class IIThomas E. Jones
    
    62
    
    Chairman and Director
    
    1997John C. Boyd (2) (3)
    
    73
    
    Director
    
    1986Earl L. Yager
    
    60
    
    Chief Executive Officer,
President and 
Director
    
    1988
 
 (1)
    
    Member of Audit Committee(2)
    
    Member of Compensation Committee(3)
    
    Member of Corporate Governance Committee(4)
    
    Audit Committee Expert     17




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18




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Name
    
    Age
    
    PositionThomas E. Jones
    
    
    62
    
    
    ChairmanEarl L. Yager
    
    
    60
    
    
    President and Chief Executive OfficerAlfonso Del Toro
    
    
    48
    
    
    Vice President, ManufacturingTracy A. Kern
    
    
    38
    
    
    Chief Financial OfficerErika Laskey
    
    
    40
    
    
    Vice President, Sales and MarketingKevin McCulloh
    
    
    45
    
    
    Vice President, EngineeringPaula OConnor
    
    
    53
    
    
    SecretarySamuel Patton
    
    
    45
    
    
    Vice President, Quality Assurance and Regulatory
AffairsOscar J. Sanchez
    
    
    64
    
    
    Vice President, Business Development
     19




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Long-TermCompensation AwardsAnnual Compensation
    
    Securities
    
    All OtherSalary
    
    Bonus
    
    Underlying
    
    CompensationName and
    
    
    
    
    
    
    
    (1)
    
    Options
    
    (2)Principal Position
    
    Year
    
    ($)
    
    ($)
    
    (#)
    
    ($)Thomas E. Jones
    
    
    2006
    
    
    
    160,000
    
    
    
    
    
    
    
    
    
    
    
    7,550Chairman
    
    
    2005
    
    
    
    160,000
    
    
    
    24,000
    
    
    
    
    
    
    
    3,4502004
    
    
    
    160,000
    
    
    
    
    
    
    
    
    
    
    
    10,583Earl L. Yager
    
    
    2006
    
    
    
    240,000
    
    
    
    
    
    
    
    
    
    
    
    3,000President and Chief
    
    
    2005
    
    
    
    235,500
    
    
    
    24,975
    
    
    
    
    
    
    
    7,500Executive Officer
    
    
    2004
    
    
    
    222,000
    
    
    
    
    
    
    
    
    
    
    
    7,000Alfonso Del Toro
    
    
    2006
    
    
    
    142,200
    
    
    
    
    
    
    
    
    
    
    
    7,052Vice President,
    
    
    2005
    
    
    
    138,000
    
    
    
    12,420
    
    
    
    
    
    
    
    6,500Manufacturing
    
    
    2004
    
    
    
    138,000
    
    
    
    8,694
    
    
    
    
    
    
    
    6,098Erika Laskey
    
    
    2006
    
    
    
    169,200
    
    
    
    27,554
    
    
    
    
    
    
    
    6,991Vice President,
    
    
    2005
    
    
    
    163,560
    
    
    
    33,000
    
    
    
    
    
    
    
    6,500Sales and Marketing
    
    
    2004
    
    
    
    166,290
    
    
    
    32,246
    
    
    
    
    
    
    
    5,953Kevin McCulloh
    
    
    2006
    
    
    
    148,800
    
    
    
    
    
    
    
    
    
    
    
    7,135Vice President,
    
    
    2005
    
    
    
    138,000
    
    
    
    16,560
    
    
    
    
    
    
    
    6,500Engineering
    
    
    2004
    
    
    
    138,000
    
    
    
    8,694
    
    
    
    
    
    
    
    6,098
 
 (1)
    
    Annual bonus amounts are earned and accrued during the fiscal years indicated and paid
within 30 days subsequent to the end of the fiscal year indicated.(2)
    
    These amounts consist of contributions by the Company in 2006, 2005, and 2004 to the CHAD
Therapeutics, Inc. Employee Savings and Retirement Plan. 20




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Potential Realized Value at% of Total
    
    
    
    
    
    Assumed Annual Rates ofOptions Granted
    
    Exercise
    
    
    
    Stock Price AppreciationOptions
    
    to Employees
    
    Price ($) Per
    
    Expiration
    
    for Option TermName
    
    Granted
    
    During 2006
    
    Share
    
    Date
    
    5%
    
    10%NONE
  Shares
    
    
    
    
    
    Number of SecuritiesAcquired
    
    
    
    
    
    Underlying Unexercised
    
    Value of Unexercised In-on
    
    
    
    
    
    Options at March 31, 2006
    
    The-Money Options atExercise
    
    Value
    
    Exercisable/
    
    March 31, 2006 Exercisable/Name
    
    (#)
    
    Realized
    
    Unexercisable
    
    UnexercisableThomas E. Jones
    
    
    -0-
    
    
    
    -0-
    
    
    
    128,000/
    
    
    
    $210,000/Earl L. Yager
    
    
    -0-
    
    
    
    -0-
    
    
    
    88,000/
    
    
    
    150,000/Alfonso Del Toro
    
    
    -0-
    
    
    
    -0-
    
    
    
    40,000/
    
    
    
    73,000/Erika Laskey
    
    
    -0-
    
    
    
    -0-
    
    
    
    31,000/9,000
    
    
    
    62,000/Kevin McCulloh
    
    
    -0-
    
    
    
    -0-
    
    
    
    41,000/
    
    
    
    23,000/16,000
     21




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Number of SecuritiesNumber of Securities to
    
    
    Weighted-Average
    
    
    Remaining Available forbe Issued Upon
    
    
    Exercise Price of
    
    
    Future Issuance UnderExercise of
    
    
    Outstanding
    
    
    Equity Compensation PlansOutstanding Options,
    
    
    Options, Warrants,
    
    
    [Excluding SecuritiesPlan Category
    
    Warrants, and Rights
    
    
    and Rights
    
    
    Reflected in Column (a)](a)
    
    
    
    (b)
    
    
    
    (c)1994 Stock Option
Plan
    
    
    940,000
    
    
    
    $2.16
    
    
    
    -0-2004Equity
Compensation Plan
    
    
    45,000
    
    
    
    $3.47
    
    
    
    705,000Total
    
    
    985,000
    
    
    
    
    
    
    
    705,000
 22




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
    
    Attract and retain well-qualified executives who are willing to work in a
small, growing company;
    
    Create a performance-oriented environment which recognizes both annual and
long-term results;
    
    Strengthen the identification of executive officers with shareholder
interests; and
    
    Reward long-term commitment to the Company.
     23




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Security Ownership of Certain Beneficial Owners and Management
  24




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Name and Address (1)
    
    Amount (2)
    
    Percent OwnedThomas E. Jones
    
    
    328,573
    
    
    
    3.2
    %Earl L. Yager
    
    
    269,131
    
    
    
    2.7
    %John C. Boyd
    
    
    188,129
    
    
    
    1.9
    %Philip T. Wolfstein
    
    
    185,497
    
    
    
    1.8
    %James M. Brophy
    
    
    53,579
    
    
    
    0.5
    %Kathleen M. Griggs
    
    
    27,905
    
    
    
    0.3
    %All Officers & Directors as a group (11 people)
    
    
    1,398,569
    
    
    
    13.8
    %Kevin Kimberlin (3)
    
    
    836,560
    
    
    
    8.2
    %
 
 (1)
    
    The address of each director is 21622 Plummer Street, Chatsworth, CA 91311.(2)
    
    Includes shares subject to options which are currently exercisable or which become
exercisable within sixty (60) days: Thomas E. Jones  127,779 shares, John C. Boyd  62,485
shares, Philip T. Wolfstein  68,665 shares, James M. Brophy  43,174 shares, Kathleen M.
Griggs  15,000 shares, Earl L. Yager  88,107 shares, all
Officers and Directors as a group 
558,210 shares.(3)
    
    Mr. Kimberlins address is c/o Spencer Trask, 535 Madison Avenue, New York, NY 10022.
 
 Certain Relationships and Related Transactions
  
 Principal Accountant Fees and Services
   Fee Category
    
    Fiscal 2006 Fees
    
    
    Fiscal 2005 FeesAudit Fees
 Aggregate fees billed for professional services rendered for the audit of our 2006 and 2005
fiscal year annual financial statements and review of
financial statements included in our quarterly reports
on Form 10-Q or services that are normally provided
in connection with statutory and regulatory filings or
engagements for the 2006 and 2005 fiscal years
    
    $
    154,000
    
    
    $
        145,150Audit-Related
Fees  Aggregate fees billed for assurance and related services that are reasonably
related to the performance of the audit or review of
our financial statements which are not reported under
Audit Fees above
    
    
    
    
    
    
    Tax Fees
 Aggregate fees billed for tax compliance and tax planning
    
    
    21,500
    
    
    
    17,750All Other Fees
 Aggregate fees billed for products and services provided other than as described in the
preceding three (3) categories
    
    
    
    
    
    
    Total Fees
    
    $
    175,500
    
    
    $
    162,900
 25




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26




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27




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2
    28




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2
   2
    *
    
    Previously filed as an Exhibit to the Registrants Registration Statement on Form S-18,
File No. 2-83926.**
    
    Previously filed as an Exhibit to the Registrants Annual Report on Form 10-K for the year
ended March 31, 1984.***
    
    Previously filed as an Exhibit to the Registrants Annual Report on Form 10-K for the year
ended March 31, 1986.****
    
    Previously filed as an Exhibit to the Registrants Annual Report on Form 10-K for the
year ended March 31, 1993.*****
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended March 31, 1994. 29
    Table of Contents  ******
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended March 31, 1996.*******
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the year
ended March 31, 1998.********
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the year
ended March 31, 2001.*********
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended March 31, 2002.**********
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended March 31, 2003.***********
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended March 31, 2004.************
    
    Previously filed as Appendix A of the Registrants Proxy Statement for the 2004 Annual
Shareholders Meeting.*************
    
    Previously filed as an exhibit to the Registrants Annual Report on Form 10-K for the
year ended March 31, 2005. 30
    Table of Contents  CHAD THERAPEUTICS, INC.By
    
    /s/ Earl L. Yager

Earl L. Yager, Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ Thomas E. Jones

Thomas E. Jones
    
    Chairman of the Board of Directors
    
    June 29, 2006/s/ Earl L. Yager

Earl L. Yager
    
    Chief Executive Officer, President,
and Director
(Principal Executive Officer)
    
    June 29, 2006/s/ Tracy A. Kern

Tracy A. Kern
    
    Chief Financial Officer
(Principal Financial and Accounting Officer)
    
    June 29, 2006/s/ Kathleen M. Griggs

Kathleen M. Griggs
    
    Director
    
    June 29, 2006/s/ John C. Boyd

John C. Boyd
    
    Director
    
    June 29, 2006/s/ Philip T. Wolfstein

Philip T. Wolfstein
    
    Director
    
    June 29, 2006/s/ James M. Brophy

James M. Brophy
    
    Director
    
    June 29, 2006
 31
    Table of Contents  Exhibit No.
    
    Document13.1
    
    Annual Report to Shareholders for the year ended March 31, 200623.1
    
    Consent of Independent Accountant31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200299.12
    
    Press release dated June 29, 2006