UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q








x QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 2009








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: 000-28831





CHDT
CORPORATION




(Exact
name of small business issuer as specified in its charter)





Florida
            84-1047159(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)





350 Jim Moran Boulevard, Suite 120, Deerfield
      Beach, Florida  33442(Address
      of principal executive offices)





(954) 252-3440(Issuer’s
      Telephone Number)





Indicate
by check mark whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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.xYesoNo





Indicate
by check mark whether the registrant is a large accelerated file, 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.





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer   o  (Do
      not check if a smaller reporting company)
            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).o Yesx No





APPLICABLE
ONLY TO CORPORATE ISSUERS




State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practical date.  As of March 31, 2009, there were
560,041,646 shares of the issuer's $.0001 par value common stock issued and
outstanding.




1









PART
I - FINANCIAL INFORMATION





Item 1.  Financial
Statements




CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS(Unaudited)March
      31,
                                        
                                        
                                        December
      31,2009
                                        
                                        
                                        2008Assets:Current
      assets:Cash
                                        
                                        $
                                        140,910
                                        
                                        
                                        $
                                        156,371Accounts
      receivable - net
                                        
                                        
                                        267,936
                                        
                                        
                                        
                                        2,399,859Inventory
                                        
                                        
                                        377,583
                                        
                                        
                                        
                                        387,749Prepaid
      expense
                                        
                                        
                                        234,092
                                        
                                        
                                        
                                        83,846Total
      Current Assets
                                        
                                        
                                        1,020,521
                                        
                                        
                                        
                                        3,027,825Fixed
      assets:Computer
      equipment & software
                                        
                                        
                                        60,648
                                        
                                        
                                        
                                        60,648Machinery
      and equipment
                                        
                                        
                                        408,868
                                        
                                        
                                        
                                        408,429Furniture
      and fixtures
                                        
                                        
                                        5,665
                                        
                                        
                                        
                                        5,665Less:
      Accumulated Depreciation
                                        
                                        
                                        (251,697
                                        )
                                        
                                        
                                        (219,894
                                        )Total
      Fixed Assets
                                        
                                        
                                        223,484
                                        
                                        
                                        
                                        254,848Other
      non-current assets:Product
      development costs - net
                                        
                                        
                                        89,516
                                        
                                        
                                        
                                        103,700Goodwill
                                        
                                        
                                        1,936,020
                                        
                                        
                                        
                                        1,936,020Deposits
                                        
                                        
                                        15,000
                                        
                                        
                                        
                                        15,000Total
      other non-current assets
                                        
                                        
                                        2,040,536
                                        
                                        
                                        
                                        2,054,720Total
      assets
                                        
                                        $
                                        3,284,541
                                        
                                        
                                        $
                                        5,337,393


2


CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS(Continued)(Unaudited)March
      31,
                                                                        
                                                                        
                                                                        December
      31,2009
                                                                        
                                                                        
                                                                        2008Liabilities
      and Stockholders’ Equity:Current
      liabilities:Accounts
      payable and accrued expenses
                                                                        
                                                                        $
                                                                        324,133
                                                                        
                                                                        
                                                                        $
                                                                        1,824,295Note
      payable - Sterling Bank
                                                                        
                                                                        
                                                                        239,159
                                                                        
                                                                        
                                                                        $
                                                                        722,547Note
      payable - Examsoft
                                                                        
                                                                        
                                                                        152,145
                                                                        
                                                                        
                                                                        
                                                                        -Notes
      and loans payable to related parties - current maturities
                                                                        
                                                                        
                                                                        1,196,316
                                                                        
                                                                        
                                                                        
                                                                        1,185,407Total
      current liabilities
                                                                        
                                                                        
                                                                        1,911,753
                                                                        
                                                                        
                                                                        
                                                                        3,732,249Total
      Liabilities
                                                                        
                                                                        
                                                                        1,911,753
                                                                        
                                                                        
                                                                        
                                                                        3,732,249Stockholders'
      Equity:Preferred
      Stock, Series A, par value $.001 per shareAuthorized
      100,000,000 shares,Issued
      -0- at March 31, 2009and
      60 shares at December 31, 2008
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        1Preferred
      Stock, Series B, par value $.10 per shareAuthorized
      100,000,000 shares,Issued
      2,108,813 at March 31, 2009and
      December 31, 2008
                                                                        
                                                                        
                                                                        210,882
                                                                        
                                                                        
                                                                        
                                                                        210,882Common
      Stock, par value $.0001 per shareAuthorized
      600,000,000 shares,Issued
      560,041,646 shares at March 31, 2009and
      557,941,646 shares at December 31, 2008
                                                                        
                                                                        
                                                                        56,004
                                                                        
                                                                        
                                                                        
                                                                        55,794Related
      party receivable
                                                                        
                                                                        
                                                                        (40,441
                                                                        )
                                                                        
                                                                        
                                                                        (40,441
                                                                        )Additional
      paid-in capital
                                                                        
                                                                        
                                                                        5,652,626
                                                                        
                                                                        
                                                                        
                                                                        5,585,702Accumulated
      deficit
                                                                        
                                                                        
                                                                        (4,506,283
                                                                        )
                                                                        
                                                                        
                                                                        (4,206,794
                                                                        )Total
      Stockholders' Equity
                                                                        
                                                                        
                                                                        1,372,788
                                                                        
                                                                        
                                                                        
                                                                        1,605,144Total
      Liabilities and Stockholders’ Equity
                                                                        
                                                                        $
                                                                        3,284,541
                                                                        
                                                                        
                                                                        $
                                                                        5,337,393The
      accompanying notes are an integral part of these financial
      statements.





3




CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS(Unaudited)For
      the Three Months EndedMarch
      31,2009
                                                                            
                                                                            
                                                                            2008Revenues
                                                                            
                                                                            $
                                                                            1,697,927
                                                                            
                                                                            
                                                                            $
                                                                            574,180Cost
      of Sales
                                                                            
                                                                            
                                                                            (1,195,754
                                                                            )
                                                                            
                                                                            
                                                                            (320,436
                                                                            )Gross
      Profit
                                                                            
                                                                            
                                                                            502,173
                                                                            
                                                                            
                                                                            
                                                                            253,744Operating
      Expenses:Sales
      and marketing
                                                                            
                                                                            
                                                                            60,230
                                                                            
                                                                            
                                                                            
                                                                            34,430Compensation
                                                                            
                                                                            
                                                                            277,109
                                                                            
                                                                            
                                                                            
                                                                            471,206Professional
      fees
                                                                            
                                                                            
                                                                            35,866
                                                                            
                                                                            
                                                                            
                                                                            34,334Consulting
                                                                            
                                                                            
                                                                            56,927
                                                                            
                                                                            
                                                                            
                                                                            28,130Other
      General and administrative
                                                                            
                                                                            
                                                                            294,877
                                                                            
                                                                            
                                                                            
                                                                            249,866Total
      Operating Expenses
                                                                            
                                                                            
                                                                            725,009
                                                                            
                                                                            
                                                                            
                                                                            817,966Net
      Operating Income (Loss)
                                                                            
                                                                            
                                                                            (222,836
                                                                            )
                                                                            
                                                                            
                                                                            (564,222
                                                                            )Other
      Income (Expense):Debt
      forgiveness
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Miscellaneous
      income
                                                                            
                                                                            
                                                                            57
                                                                            
                                                                            
                                                                            
                                                                            -Interest
      expense
                                                                            
                                                                            
                                                                            (76,711
                                                                            )
                                                                            
                                                                            
                                                                            (24,375
                                                                            )Interest
      income
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            609Total
      Other Income (Expense)
                                                                            
                                                                            
                                                                            (76,654
                                                                            )
                                                                            
                                                                            
                                                                            (23,766
                                                                            )Net
      Income (Loss)
                                                                            
                                                                            $
                                                                            (299,490
                                                                            )
                                                                            
                                                                            $
                                                                            (587,988
                                                                            )Income
      (Loss) per Common Share
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            -Weighted
      average shares outstanding
                                                                            
                                                                            
                                                                            558,980,535
                                                                            
                                                                            
                                                                            
                                                                            565,574,034The
      accompanying notes are an integral part of these financial
      statements.


4




CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS(Unaudited)For
      the Three Months EndedMarch
      31,2009
                                                                            
                                                                            
                                                                            2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Continuing
      operations:Net
      Income (Loss)
                                                                            
                                                                            $
                                                                            (299,490
                                                                            )
                                                                            
                                                                            $
                                                                            (587,988
                                                                            )Adjustments
      necessary to reconcile net lossto
      net cash used in operating activities:Stock
      issued for accrued expenses
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            40,000Stock
      issued for expenses
                                                                            
                                                                            
                                                                            21,000
                                                                            
                                                                            
                                                                            
                                                                            2,500Depreciation
      and amortization
                                                                            
                                                                            
                                                                            52,787
                                                                            
                                                                            
                                                                            
                                                                            33,980Compensation
      expense from stock options
                                                                            
                                                                            
                                                                            46,134
                                                                            
                                                                            
                                                                            
                                                                            221,303(Increase)
      decrease in accounts receivable
                                                                            
                                                                            
                                                                            2,131,923
                                                                            
                                                                            
                                                                            
                                                                            871,422(Increase)
      decrease in inventory
                                                                            
                                                                            
                                                                            10,166
                                                                            
                                                                            
                                                                            
                                                                            10,909(Increase)
      decrease in prepaid expenses
                                                                            
                                                                            
                                                                            (150,246
                                                                            )
                                                                            
                                                                            
                                                                            (7,771
                                                                            )(Increase)
      decrease in deposits
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -(Increase)
      decrease in other assets
                                                                            
                                                                            
                                                                            (6,834
                                                                            )
                                                                            
                                                                            
                                                                            (18,882
                                                                            )Increase
      (decrease) in accounts payable and accrued expenses
                                                                            
                                                                            
                                                                            (1,500,163
                                                                            )
                                                                            
                                                                            
                                                                            (358,283
                                                                            )Increase
      (decrease) in due to/from related parties
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Increase
      (decrease) in accrued interest on notes payable
                                                                            
                                                                            
                                                                            13,091
                                                                            
                                                                            
                                                                            
                                                                            (1,813
                                                                            )Increase
      (decrease) in deposits from customers
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Net
      cash provided by (used) in operating activities
                                                                            
                                                                            
                                                                            318,368
                                                                            
                                                                            
                                                                            
                                                                            205,377CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of property and equipment
                                                                            
                                                                            
                                                                            (440
                                                                            )
                                                                            
                                                                            
                                                                            (25,827
                                                                            )Net
      cash provided by (used) investing activities
                                                                            
                                                                            
                                                                            (440
                                                                            )
                                                                            
                                                                            
                                                                            (25,827
                                                                            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from sale of stock
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Proceeds
      from notes payable
                                                                            
                                                                            
                                                                            150,000
                                                                            
                                                                            
                                                                            
                                                                            -Repayments
      of notes payable
                                                                            
                                                                            
                                                                            (483,389
                                                                            )
                                                                            
                                                                            
                                                                            -Proceeds
      from notes and loans payable to related parties
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            100,000Repayments
      of notes and loans payable to related parties
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (422,000
                                                                            )Net
      Cash Provided by Financing Activities
                                                                            
                                                                            
                                                                            (333,389
                                                                            )
                                                                            
                                                                            
                                                                            (322,000
                                                                            )Net
      (Decrease) Increase in Cash and Cash Equivalents
                                                                            
                                                                            
                                                                            (15,461
                                                                            )
                                                                            
                                                                            
                                                                            (142,450
                                                                            )Cash
      and Cash Equivalents at Beginning of Period
                                                                            
                                                                            
                                                                            156,371
                                                                            
                                                                            
                                                                            
                                                                            257,802Cash
      and Cash Equivalents at End of Period
                                                                            
                                                                            $
                                                                            140,910
                                                                            
                                                                            
                                                                            $
                                                                            115,352SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
                                                                            
                                                                            $
                                                                            58,452
                                                                            
                                                                            
                                                                            $
                                                                            23,297Franchise
      and income taxes
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            -SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:NONE.The
      accompanying notes are an integral part of these financial
      statements.


5
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  
  NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  This
summary of accounting policies for CHDT Corporation, a Florida corporation
(formerly, “China Direct Trading Corporation”) (“Company” or “CHDT”) and its
wholly-owned subsidiaries (“Subsidiaries”) is presented to assist in
understanding the Company's financial statements. The accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.  CHDT changed
its name to “CHDT Corporation” by amending its Articles of Incorporation, which
name change was effective July 16, 2007 in respect of NASD Regulation, Inc. and
OTC Bulletin Board approval of the name change, the trading symbol change from
“CHDT.OB” to “CHDO.OB” and change in CUSIP Number for CHDT Common Stock and
effective May 7, 2007 in terms of approval by the State of Florida of the
charter amendment.
 
 The
unaudited financial statements as of March 31, 2009 and for the three month
periods ended March 31, 2009 and 2008 reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly state the financial position and results of operations for the three
months.  Operating results for interim periods are not necessarily
indicative of the results which can be expected for full years.
  Organization
and Basis of Presentation
  CHDT was
initially incorporated September 18, 1986 under the laws of the State of
Delaware under the name "Yorkshire Leveraged Group, Incorporated", and then
changed its domicile situs to Colorado in 1989 by merging into a Colorado
corporation, named "Freedom Funding, Inc." Freedom Funding, Inc. then changed
its name to "CBQ, Inc." by amendment of its Articles of Incorporation on
November 25, 1998. In May 2004, the Company changed its name from “CBQ, Inc.” to
“China Direct Trading Corporation” as part of a reincorporation from the State
of Colorado to the State of Florida.  Effective May 7, 2007, the
Company amended its charter to change its name from “China Direct Trading
Corporation” to “CHDT Corporation.”  This name change was effective as
of July 16, 2007 for purposes of the change of its name on the OTC Bulletin
Board.
  Souvenir
Direct, Inc. was incorporated on September 9, 2002 under the laws of the State
of Florida.  Souvenir Direct, Inc. operations were transferred to
Capstone Industries, Inc. in the first quarter of fiscal year 2007 and Souvenir
Direct, Inc.’s operating assets were sold on December 1, 2007 to an unaffiliated
buyer.
  On
December 1, 2003, CHDT issued 97 million shares common stock to acquire 100% of
the outstanding common stock of Souvenir Direct, Inc. in a reverse acquisition.
At this time, a new reporting entity was created. Souvenir Direct, Inc. is
considered the reporting entity for financial reporting purposes. Also on
December 1, 2003, an additional 414,628,300 shares of common stock were issued
to the previous owners of the Company.
  In
February 2004, the Company established a new subsidiary, initially named “China
Pathfinder Fund, L.L.C.”, a Florida limited liability company. During 2005, the
name was changed to “Overseas Building Supply, LLC” to reflect its shift in
business lines from business development consulting services in China for North
American companies to trading Chinese-made building supplies in South
Florida.  This business line was ended in fiscal year 2007 and OBS’
name was changed to “Black Box Innovations, L.L.C.” (“BBI”) on March 20,
2008.
  On January
27, 2006, the Company entered into a Purchase Agreement with Complete Power
Solutions ("CPS") to acquire 51% of the member interests of CPS. CPS was
organized by William Dato on September 20, 2004, as a Florida limited liability
company to distribute power generators in Florida and adjacent
states.  The Company subsequently sold its 51% membership interest in
CPS, pursuant to a Purchase and Settlement Agreement dated and effective as of
December 31, 2006.
  6
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  On
September 13, 2006 the Company entered into a Stock Purchase Agreement with
Capstone Industries, Inc., a Florida corporation (Capstone). Capstone was
incorporated in Florida on May 15, 1996 and is engaged primarily in the business
of wholesaling low technology consumer products to distributors and
retailers in the United States.
  Nature
of Business
  From the
beginning of fiscal year 2007, the Company has been primarily engaged in the
business of marketing and selling consumer products through national and
regional retailers and distributors, in North America.  Capstone
currently operates in four primary business segments: Lighting Products, , Power
Tools, Automotive Accessories and Computer peripherals. The Company’s products
are typically manufactured in the Peoples’ Republic of China by
third-party  manufacturing companies.
  During the
period that the Company owned a 51% interest in CPS (January 27, 2006 through
December 31, 2006), the Company, through CPS, engaged in the business of selling
and installing standby commercial and residential power generators in South
Florida and, to a lesser extent, in adjacent states.
  Cash
and Cash Equivalents
  The
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents, to the extent the funds are not
being held for investment purposes.
  Allowance
for Doubtful Accounts
  An
allowance for doubtful accounts is established as losses are estimated to have
occurred through a provision for bad debts charged to earnings.  The
allowance for bad debt is evaluated on a regular basis by management and is
based upon management’s periodic review of the collectability of the
receivables.  This evaluation in inherently subjective and requires
estimated that are susceptible to significant revisions as more information
becomes available.
  As of
March 31, 2009, management has determined that the accounts receivable are fully
collectible.  As such, management has not recorded an allowance for
doubtful accounts.
 
 Inventory
  The
Company's inventory, which is recorded at the lower of cost (first-in,
first-out) or market, consists of finished goods for resale by Capstone,
totaling $377,583 and $387,749 at March 31, 2009 and December 31, 2008,
respectively.
  BBI
(previously “Overseas Building Supply, L.C.”) had inventory of $40,441 at
December 31, 2007.  During 2008, a director and shareholder of the
Company took the remaining inventory of BBI and agreed to pay the Company for
the cost of the inventory, which was $40,441.  As a result, the
inventory was removed from the balance sheet as an asset, and a shareholder
receivable was recorded and disclosed in the equity section of the balance
sheet.
  Property
and Equipment
  Fixed
assets are stated at cost. Depreciation and amortization are computed using the
straight- line method over the estimated economic useful lives of the related
assets as follows:
 
 Computer
      equipment
                3 -
      7 yearsComputer
      software
                3 -
      7 yearsMachinery
      and equipment
                3 -
      7 yearsFurniture
      and fixtures
                3 -
      7 years
  
  7
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  The
Company follows FASB Statement No. 144 (SFAS 144), "Accounting for the
Impairment of Long-Lived Assets." SFAS 144 requires that long-lived assets to be
held and used are reviewed for impairment whenever events or changes in
circumstances indicate that the related carrying amount may not be recoverable.
When required, impairment losses on assets to be held and used are recognized
based on the fair value of the asset. Long-lived assets to be disposed of, if
any, are reported at the lower of carrying amount or fair value less cost to
sell.  No impairments were recognized by the Company during 2008 and
the first quarter of 2009.
  Upon sale
or other disposition of property and equipment, the cost and related accumulated
depreciation or amortization are removed from the accounts and any gain or loss
is included in the determination of income or loss.
  Expenditures
for maintenance and repairs are charged to expense as incurred. Major overhauls
and betterments are capitalized and depreciated over their estimated economic
useful lives.
  Depreciation
expense was $31,805 and $22,493 for the three months ended March 31, 2009 and
2008, respectively.
  Goodwill
and Other Intangible Assets
  Goodwill and other intangible assets are recorded under the
provisions of the Financial Accounting Standards Board (FASB) Statement No.142
(SFAS 142), Goodwill and Other Intangible Assets. SFAS 142 requires that an
intangible asset that is acquired either individually or with a group of other
assets (but not those acquired in a business combination) shall be initially
recognized and measured based on its fair value.  Goodwill acquired in
business combinations is initially computed as the amount paid by the acquiring
company in excess of the fair value of the net assets acquired.
  Costs of
internally developing, maintaining and restoring intangible assets (including
goodwill) that are not specifically identifiable, that have indeterminate lives,
or that are inherent in a continuing business and related to an entity as a
whole, are recognized as an expense when incurred.
  An
intangible asset (excluding goodwill) with a definite useful life is amortized;
an intangible asset with an indefinite useful life is not amortized until its
useful life is determined to be no longer indefinite. The remaining useful lives
of intangible assets not being amortized are evaluated at least annually to
determine whether events and circumstance continue to support an indefinite
useful life. If and when an intangible asset is determined to no longer have an
indefinite useful life, the asset shall then be amortized prospectively over its
estimated remaining useful life and accounted for in the same manner as other
intangibles that are subject to amortization.
  An
intangible asset (including goodwill) that is not subject to amortization shall
be tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. The impairment test
consists of a comparison of the fair value of the intangible assets with its
carrying amount. If the carrying amount of an intangible asset exceeds its fair
value, an impairment loss shall be recognized in an amount equal to that excess.
In accordance with SFAS 142, goodwill is not amortized.
  It is the
Company's policy to test for impairment no less than annually, or when
conditions occur that may indicate an impairment. The Company's intangible
assets, which consist of goodwill of $1,936,020 recorded in connection with the
Capstone acquisition, were tested for impairment and determined that no
adjustment for impairment was necessary as of December 31, 2008, whereas the
fair value of the intangible asset exceeds its carrying amount.
  8
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  Net
Income (Loss) Per Common Share
 
 Basic
earnings per common share were computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the
year.  In periods where losses are reported, the weighted average
number of common shares outstanding excludes common stock equivalents because
their inclusion would be anti-dilutive. Diluted loss per common share for the
three months ended March 31, 2009 and 2008 are not presented as it would be
anti-dilutive.  At March 31, 2009 and 2008, the total number of
potentially dilutive common stock equivalents was 203,295,071 and 138,416,294,
respectively.
  Principles
of Consolidation
  The
consolidated financial statements for the three months ended March 31, 2009 and
the year ended December 31, 2008 include the accounts of the parent entity and
its wholly-owned subsidiaries Souvenir Direct, Inc., Black Box Innovations,
L.L.C. (formerly “Overseas Building Supply, LLC” and formerly “China Pathfinder
Fund, LLC”), and Capstone Industries, Inc.
  The
results of operations attributable to Capstone are included in the consolidated
results of operating beginning on September 13, 2006, the date on which the
Company’s interest in Capstone was acquired.
  The
results of operations attributable to the Company’s interest in its former
subsidiary, CPS, for the period of time in which majority interest in CPS was
held by the Company (January 27, 2006 through December 31, 2006) are included in
the loss from discontinued operations on the consolidated statement of income
(loss).  All significant intercompany balances and transactions have
been eliminated.
 
 Fair
Value of Financial Instruments
 
 The
carrying value of the Company's financial instruments, including accounts
receivable, accounts payable and accrued liabilities at March 31, 2009 and
December 31, 2008 approximates their fair values due to the short-term nature of
these financial instruments.
  Reclassifications
  Certain
reclassifications have been made in the 2008 financial statements to conform
with the 2009 presentation. There were no material changes in classifications
made to previously issued financial statements.
  Revenue
Recognition
  Product
Sales are recognized when an agreement of sale exists, product delivery has
occurred, pricing is final or determinable, and collection is reasonably
assured.
  Allowances
for sales returns, rebates and discounts are recorded as a component of net
sales in the period the allowances are recognized.  In addition,
accrued liabilities contained in the accompanying balance sheet include accruals
for estimated amounts of credits to be issued in future years based on
potentially defective product, other product returns and various
allowances.  These estimates could change significantly in the near
term.
  9
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  Advertising
and Promotion
  Advertising
and promotion costs, including advertising, public relations, and trade show
expenses, are expensed as incurred and included in Selling and Marketing
expenses. Advertising and promotion expense was $60,230 and $34,430 for the
three months ended March 31, 2009 and 2008, respectively.
  Shipping
and Handling
  The
Company’s shipping and handling costs, incurred by Capstone amounted to $12,293
for the three months ended March 31, 2009.
 
 Accrued
Liabilities
 
 Accrued
liabilities contained in the accompanying balance sheet include accruals for
estimated amounts of credits to be issued in future years based on potentially
defective products, other product returns and various
allowances.  These estimates could change significantly in the near
term.
  Income
Taxes
  The
Company accounts for income taxes under the provisions of Financial Accounting
Standards Board (FASB) Statement No. 109 (SFAS 109), "Accounting for Income
Taxes." SFAS 109 requires recognition of deferred income tax assets and
liabilities for the expected future income tax consequences, based on enacted
tax laws, of temporary differences between the financial reporting and tax bases
of assets and liabilities. The Company and its subsidiaries intend to file
consolidated income tax returns
 
 Stock-Based
Compensation
 
 On January
1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123
(Revised 2004), Share-Based Payments, SFAS 123(R), which requires the
measurement and recognition of compensation expense for all share-based payment
awards made to employees and directors, including employee stock options, based
on estimated fair values. SFAS 123(R) supersedes the Company’s previous
accounting under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25) and related interpretations, applied for
periods through December 31, 2005. In March 2005, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 107 (SAB 107) relating to SFAS
123(R). The Company has applied the provision of SAB 107 in its adoption of SFAS
123(R).
 
 The
Company adopted SFAS 123(R) using the modified prospective application
transition method, which requires the application of the accounting standard as
of January 1, 2006, the first date of the Company’s fiscal year. The Company’s
consolidated financial statements as of and for the year ended December 31, 2006
reflect the impact of SFAS 123(R). In accordance with the modified prospective
method, the Company’s consolidated financial statements for prior periods have
not been restated to reflect, and do not include, the impact of SFAS
123(R).
  10
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  
 SFAS
123(R) requires companies to estimate the fair value of share-based payment
awards on the date of the grant using an option-pricing model. The value of the
portion of the award that is ultimately expected to vest is recognized as
expenses over the requisite service periods in the Company’s consolidated
statements of income (loss). Prior to the adoption of SFAS 123(R), the Company
accounted for stock-based awards to employees and directors using the intrinsic
value method in accordance with APB 25, as allowed under SFAS No. 123,
Accounting for Stock-Based Compensation, (SFAS 123). Under the intrinsic value
method, compensation expense under fixed term option plans was recorded at the
date of grant only to the extent that the market value of the underlying stock
at the date of grant exceeded the exercise price. Accordingly, for those stock
options granted for which the exercise price equaled the fair market value of
the underlying stock at the date of grant, no expense was recorded.
 
 Stock-based
compensation expense recognized during the period is based on the value of the
portion of share-based payment awards that is ultimately expected to vest during
the period.  There was no stock-based compensation expense attributable to
options for the years ended December 31, 2007 and 2006 for compensation expense
for share-based payment awards granted prior to, but not vested as of December
31, 2005.  Such stock-based compensation is based on the grant date fair
value estimated in accordance with the pro forma provisions of SFAS 123. 
Compensation expense for share-based payment awards granted subsequent to
December 31, 2005 are based on the grant date fair value estimated in accordance
with the provisions of SFAS 123(R).
 
 In
conjunction with the adoption of SFAS 123(R), the Company adopted the
straight-line single option method of attributing the value of stock-based
compensation expense. As stock-based compensation expense is recognized during
the period is based on awards ultimately expected to vest, it is subject to
reduction for estimated forfeitures. SFAS 123(R) requires forfeitures to be
estimated at the time of grant and revised, if necessary, in subsequent periods
if actual forfeitures differ from those estimates. As of and for the year ended
December 31, 2008, there were no material amounts subject to forfeiture. The
Company has not accelerated vesting terms of its out-of-the-money stock options,
or made any other significant changes, prior to adopting FASB 123(R),
Share-Based Payments.
 
 On April
23, 2007, the Company granted 130,500,000 stock options to two officers of the
Company.  The options vest at twenty percent per year beginning April
23, 2007.  For the year ended December 31, 2007, the Company
recognized compensation expense of $503,075 related to these options. On May 1,
2008, 850,000 of the above stock options were canceled and on May 23, 2008,
74,666,667 of the above stock options were cancelled.  For year ended
December 31, 2008, the Company recognized compensation expense of $405,198
related to these options.  For the three months ended March 31, 2009,
the Company recognized compensation expense of $39,139 related to these
options.
 
 On May 1,
2007, the Company granted 4,000,000 stock options to five employees of the
Company.   The options vest over two years.  For the
year ended December 31, 2007, the Company recognized compensation expense of
$29,214 related to these options.   During 2008, 1,000,000 of the
above options were cancelled prior to vesting.  For the year ended
December 31, 2008, the Company recognized compensation expense of $25,131
related to these options.  For the three months ended March 31, 2009,
the Company recognized compensation expense of $2,717 related to these
options.
 
 On October
22, 2007, the Company granted 700,000 stock options to a business associate of
the Company.  The options vest over two years.  For the year
ended December 31, 2007, the Company recognized compensation expense of $1,330
related to these options.  For the year ended December 31, 2008, the
Company recognized compensation expense of $7,978 related to these
options.  For the three months ended March 31, 2009, the Company
recognized compensation expense of $1,662 related to these options.
 
  11
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
 
 On January
10, 2008, the Company granted 1,000,000 stock options to an advisor of the
Company.  The options vest over one year.  For the year
ended December 31, 2008, the Company recognized compensation expense of $19,953
related to these options.
 
 On
February 5, 2008, the Company granted 3,650,000 stock options to four directors
and one employee of the Company.  The options vest over two
years.  For the year ended December 31, 2008, the Company recognized
compensation expense of $59,619 related to these options.  For the
three months ended March 31, 2009, the Company recognized compensation expense
of $650 related to these options.
 
 On May 1,
2008, the Company granted 850,000 stock options to an employee of the
Company.  The options vest over two years.  For the year
ended December 31, 2008, the Company recognized compensation expense of $5,242
related to these options.  For the three months ended March 31, 2009,
the Company recognized compensation expense of $1,966 related to these
options.
 
 The
Company recognizes compensation expense paid with common stock and other equity
instruments issued for assets and services received based upon the fair value of
the assets/services or the equity instruments issued, whichever is more readily
determined.
 
 As of the
date of this report the Company has not adopted a method to account for the tax
effects of stock-based compensation pursuant to SFAS 123(R) and related
interpretations. However, whereas the Company has substantial net operating
losses to offset future taxable income and its current deferred tax asset is
completely reduced by the valuation allowance, no material tax effects are
anticipated.
 
 During the
year ended December 31, 2005, the Company valued stock options using the
intrinsic value method prescribed by APB 25.  Since the exercise price
of stock options previously issued was greater than or equal to the market price
on grant date, no compensation expense was recognized.
 
 
 Stock-Based
Compensation Expense
 
 Stock-based
compensation expense for the three months ended March 31, 2009 included $21,000
for consulting fees.  Stock-based compensation expense for the three
months ended March 31, 2008 included $2,500 for consulting fees.
 
 Recent
Accounting Standards
 
 In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 provides
companies with an option to report selected financial assets and liabilities at
fair value. The objective of SFAS 159 is to reduce both complexity in accounting
for financial instruments and the volatility in earnings caused by measuring
related assets and liabilities differently. Generally accepted accounting
principles have required different measurement attributes for different assets
and liabilities that can create artificial volatility in earnings. The FASB has
indicated it believes that SFAS 159 helps to mitigate this type of
accounting-induced volatility by enabling companies to report related assets and
liabilities at fair value, which would likely reduce the need for companies to
comply with detailed rules for hedge accounting. SFAS 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar types
of assets and liabilities.  SFAS 159 does not eliminate disclosure
requirements included in other accounting standards, including requirements for
disclosures about fair value measurements included in SFAS 157 and SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." SFAS 159 is effective
for the Company as of the beginning of fiscal year 2008. The adoption of this
pronouncement is not expected to have an impact on the Company's financial
position, results of operations or cash flows.
 
  12
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
 
 In
December 2007, the FASB issued No. 160, “Non-controlling Interests in Financial
Statements, an amendment of ARB No. 51" (“SFAS 160").  SFAS 160 amends
ARB 51 to establish accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a
subsidiary.  It clarifies that a non-controlling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements.  This
Statement is effective for fiscal years beginning on or after December 15,
2008.  Early adoption is not permitted. Management is currently
evaluating the effects of this statement, but it is not expected to have any
impact on the Company’s financial statements.
 
 In
December 2007, the FASB issued No. 141(R), “Business Combinations” (“SFAS
141(R)”).  SFAS 141(R) provides companies with principles and
requirements on how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, liabilities assumed, and any
non-controlling interest in the acquiree as well as the recognition and
measurement of goodwill acquired in a business combination. SFAS 141(R) also
requires certain disclosures to enable users of the financial statements to
evaluate the nature and financial effects of the business combination.
Acquisition costs associated with the business combination will generally be
expensed as incurred. SFAS 141(R) is effective for business combinations
occurring in fiscal years beginning after December 15, 2008, which will require
the Company to adopt these provisions for business combinations occurring in
fiscal 2009 and thereafter. Early adoption of SFAS 141(R) is not
permitted.  Management is currently evaluating the effects of this
statement, but it is not expected to have any impact on the Company’s financial
statements.
 
 In March
2008, the FASB issued No. 161, “Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133.  (“SFAS
161").  SFAS 161 requires enhanced disclosures about an entity's
derivative and hedging activities and thereby improves the transparency of
financial reporting.  This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. This Statement encourages, but does
not require, comparative disclosures for earlier periods at initial
adoption.  Management is currently evaluating the effects of this
statement, but it is not expected to have any impact on the Company’s financial
statements.
  Pervasiveness
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates, and the differences could be
material.
  NOTE
2 – CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE
  Financial
instruments that potentially subject the Company to credit risk consist
principally of cash and cash equivalents and accounts receivable.
  The
Company has no significant off-balance-sheet concentrations of credit risk such
as foreign exchange contracts, options contracts or other foreign hedging
arrangements.
  Cash
and Cash Equivalents
  The
Company at times has cash and cash equivalents with its financial institution in
excess of Federal Deposit Insurance Corporation (FDIC) insurance
limits.  The Company places in cash and cash equivalents with high
credit quality financial institution which minimize these risks.  As
of March 31, 2009, the Company had no cash in excess of FDIC
limits.
  13
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
2 – CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE
(continued)
  Accounts
Receivable
  The
Company grants credit to its customers, substantially all of whom are retail
establishments located throughout the United States.  The Company
typically does not require collateral from customers. Credit risk is limited due
to the financial strength of the customers comprising the Company’s customer
base and their dispersion across different geographical regions.  The
Company monitors exposure of credit losses and maintains allowances for
anticipated losses considered necessary under the circumstances.
 
 Major
Customers
 
 The
Company had three customers who comprised at least ten percent (10%) of gross
revenue during the fiscal years ended December 31, 2008 and 2007.  The
loss of these customers would adversely impact the business of the
Company.  The percentage of gross revenue and the accounts receivable
from each of these customers is as follows:
 Gross
      Revenue %
                    
                    
                    Accounts
      Receivable2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Customer
      A
                    
                    
                    44
                    %
                    
                    
                    30
                    %
                    
                    $
                    1,742,135
                    
                    
                    $
                    691,110Customer
      B
                    
                    
                    22
                    %
                    
                    
                    28
                    %
                    
                    
                    614,384
                    
                    
                    
                    485,275Customer
      C
                    
                    
                    15
                    %
                    
                    
                    21
                    %
                    
                    
                    21,773
                    
                    
                    
                    161,57181
                    %
                    
                    
                    79
                    %
                    
                    $
                    2,378,292
                    
                    
                    $
                    1,337,956
 
 Major
Vendors
 
 The
Company had two vendors from which it purchased at least ten percent (10%) of
merchandise during the fiscal year ended December 31, 2007 and three vendors
from which it purchased at least ten percent (10%) of merchandise during the
fiscal year ended December 31, 2008.  The loss of these suppliers
would adversely impact the business of the Company.  The percentage of
purchases, and the related accounts payable from each of these vendors is as
follows:
 Purchases
      %
                    
                    
                    Accounts
      Payable2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Vendor
      A
                    
                    
                    52
                    %
                    
                    
                    56
                    %
                    
                    $
                    169,997
                    
                    
                    $
                    131,973Vendor
      B
                    
                    
                    31
                    %
                    
                    
                    10
                    %
                    
                    
                    969,741
                    
                    
                    
                    45,481Vendor
      C
                    
                    
                    14
                    %
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -97
                    %
                    
                    
                    66
                    %
                    
                    $
                    1,139,738
                    
                    
                    $
                    177,454
  NOTE
3 – NOTES AND LOANS PAYABLE TO RELATED PARTIES
  CHDT
Corp - Notes Payable to Director
  On May 30,
2007, the Company executed a $575,000 promissory note payable to a director of
the Company.  The note carries an interest rate of 10.459% per
annum.  All principal is payable in full, with accrued interest, on
May 30, 2009.  As of September 30, 2007, the total amount payable on
the note was $575,000.  On November 2, 2007, the Company issued 12,074
shares of its Series B Preferred stock valued at $28,975 as payment towards this
loan.  At March 31, 2009 and December 31, 2008, the total amount
payable on this note was $546,025.  Interest payments are being made
monthly to the note holder.
 
 On July
11, 2008, the Company received a loan from a director of
$250,000.  The note will be due on January 11, 2009 and carries an
interest rate of 8% per annum.  At December 31, 2008, the total amount
payable on this note was $254,932, including interest of
$4,932.  During the three months ended March 31, 2009, the Company
paid the interest accrued during 2008 of $9,479.
  14
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
3 – NOTES AND LOANS PAYABLE TO RELATED PARTIES (continued)
 
 As part of
this note payable, the Company also issued a warrant to the loan holder to
purchase 4,000,000 shares of common stock at a price of $.025 per
share.  At the date of issuance, the stock price was $.021 per
share.  The Company accounted for the debt and warrants using APB 14,
whereby the proceeds of $250,000 was allocated between the debt and
warrants.  This resulted in the warrants being valued at $56,375 which
was recorded as additional paid-in capital, and a discount on the note of
$56,375 being recognized.  The discount was amortized over the term of
the note (6 months) to interest expense.  At December 31, 2008, the
discount had been fully amortized resulting in interest expense of $56,375 being
recognized.
  CHDT
Corp - Notes Payable to Officers
  During the
quarter ended June 30, 2008, the Company executed three notes payable for
$200,000 to an officer of the Company.  The notes carry an interest
rate of 8% per annum and are due within six months.  At March 31,
2009, the total amount due on these notes was $205,303, including interest of
$5,303.  At December 31, 2008, the total amount due on these notes was
$201,358, including interest of $1,358.
  Capstone
Industries – Loans Payable to Director
  On June
15, 2007, Capstone Industries executed a $72,000 promissory note payable to a
director of the Company.  The note carries an interest rate of 8% per
annum and is due on February 15, 2008.  During the quarter ended
September 30, 2007, the Company paid accrued interest of $240.  At
December 31, 2007, the total amount payable on this loan was $74,904, including
interest of $2,904.  In January 2008, the Company repaid this note
payable.
  On July
16, 2007, Capstone Industries executed a $103,000 promissory note payable to a
director of the Company.  The note carries an interest rate of 8% per
annum and is due on December 31, 2007.  At December 31, 2007, the
total amount payable on this loan was $106,838, including interest of
$3,838.  In December 2008, the Company borrowed an additional $75,000
from this director.  At March 31, 2009, the total amount payable on
this loan was $190,055, including interest of $12,055.  At December
31, 2008, the total amount payable on this loan was $188,023, including interest
of $10,023.
  Capstone
Industries – Loans Payable to Officer
  On
September 7, 2007, Capstone Industries executed a $100,000 promissory note
payable to an officer of the Company.  The note carries an interest
rate of 8% per annum and is due on December 31, 2007.  At December 31,
2007, the total amount payable on this loan was $102,521, including interest of
$2,520.  In January 2008, this note was repaid.
  During the
quarter ended December 31, 2007, Capstone Industries executed two promissory
notes payable totaling $400,000 to an officer of the Company.  The
notes carry an interest rate of 8% per annum is and due on January 31,
2008.  At December 31, 2007, the total amount payable on this loan was
$404,043, including interest of $4,043.  In January 2008, the Company
paid $250,000 towards this note payable.  On May 9, 2008, the Company
paid principal of $150,000 and interest of $6,443 to pay off the remainder of
this note.
  On March
11, 2008, Capstone Industries executed a $100,000 promissory note payable to an
officer of the Company.  The note carries an interest rate of 8% per
annum is due on June 30, 2008.  On August 5, 2008, the Company paid
principal of $100,000 and interest of $3,222 to pay off this note.
  On
June 24, 2008, Capstone Industries executed a $25,000 promissory note payable to
an officer of the Company.  The note carries an interest rate of 8%
per annum and is due September 24, 2008.  On August 5, 2008, the
Company paid principal of $25,000 and interest of $230 to pay off this
note.
  Based on
the above, the total amount payable to officers and directors as of March 31,
2009 and December 31, 2008 was $1,196,316 and $1,185,407, respectively,
including accrued interest of $22,291 and $20,861, respectively.  The
maturities under the notes and loan payable to related parties for the next five
years are:
 
 Year Ended December 31,2009
                  
                  $
                  1,196,3162010
                  
                  
                  -2011
                  
                  
                  -2012
                  
                  
                  -2013
                  
                  
                  -Total
      future maturities
                  
                  $
                  1,196,316
  
  15
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
4 – NOTE PAYABLE – STERLING BANK
  On May 1,
2008, Capstone secured a conventional $2,000,000 asset based loan agreement from
Sterling National Bank, located in New York City whereby Capstone received a
credit line to fund working capital needs.  The loan provides funding
for an amount up to 85% of eligible Capstone accounts receivable and 50% of
eligible Capstone inventory.  The interest rate of the loan is the
Wall Street Journal prime rate plus one and one-half percent per
annum.  CHDT and Howard Ullman, the Chairman of the Board of Directors
of CHDT, have personally guaranteed Capstone’s obligations under the Loan. At
March 31, 2009 and December 31, 2008, there was $239,158 and $722,547 due on
this loan, respectively.
  As part of
the loan agreement with Sterling National Bank, a subordination agreement was
executed with Howard Ullman, a shareholder and director of the
Company.  These agreements subordinated the debt of $115,055 (plus
future interest) and $546,025 due to Howard Ullman to the Sterling National Bank
loan.  No payments will be made on the subordinated debt until the
Sterling Bank is paid in full, except for scheduled payments of
interest.
 
 NOTE
5 – PURCHASE ORDER ASSIGNMENT-FUNDING AGREEMENT
 
 On February 27, 2009, Capstone
Industries, Inc. entered into a Purchase Order Assignment Funding Agreement with
Examsoft Worldwide, whereby Examsoft will advance funds to Capstone to secure
the purchase of materials, and in return Capstone will assign purchase orders to
Examsoft in exchange for the funding.  The total funding will be up to
a total of $441,100.  The interest rate is 18% per annum and the total
loan plus accrued interest will be due no later than July 15,
2009.  As security for the performance by Examsoft of its services
under the agreement, Capstone has granted a security interest in the inventory
purchased by the submitted purchase orders and upon product shipment in the
accounts receivable until the loan is paid in full.  At March 31,
2009, the total amount due on this loan was $152,145, including interest of
$2,145.
  NOTE
6 – LEASES
  On June
29, 2007, the Company relocated its principal executive offices and sole
operations facility to 350 Jim Moran Blvd., Suite 120, Deerfield Beach, Florida
33442, which is located in Broward County.  This space consists of
4,000 square rentable feet and is leased on a month to month
basis.  Monthly payments are approximately $4,250 per
month.
  Rental
expense under these leases was approximately $15,556 and $10,887 for the three
months ended March 31, 2009 and 2008, respectively.
  NOTE
7 - COMMITMENTS
  Employment
Agreements
 
 On
February 5, 2008, the Company entered into an Employment Agreement with Stewart
Wallach, the Company’s Chief Executive Offer and President, whereby Mr. Wallach
will be paid $225,000 per annum.  The term of the contract begins
February 5, 2008 and ends on February 5, 2011.
 
 On
February 5, 2008, the Company entered into an Employment Agreement with Gerry
McClinton, the Company’s Chief Operating Officer, whereby Mr. McClinton will be
paid $150,000 per annum.  The term of the contract begins February 5,
2008 and ends on February 5, 2011.
 
 On
February 5, 2008, the Company entered into an Employment Agreement with Howard
Ullman, the Chairman of Board of Directors of the Company, whereby Mr. Ullman
will be paid $100,000 per annum.  The term of the contract begins
February 5, 2008 and ends on February 5, 2011.
  16
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
7 – COMMITMENTS (continued)
  License
Agreement
 
 On April
12, 2007, the Company entered into a trademark and licensing agreement with The
Armor All/STP Products Company (“AASTP”).  As part of the agreement,
the Company is required to pay AASTP royalties either at fixed periodic amounts
or 5% of product sales.  The Company is required to make guaranteed
minimum royalty payments as follows:  $100,000 payable in the 1st year of
the contract; $300,000 payable in the 2nd year of
the contract; and $500,000 payable in the 3rd year of
the contract.  As of December 31, 2008, the Company has paid $175,000
in royalty expense to AASTP that is included as part of selling
expenses.  Future guaranteed minimum royalty payments are as
follows:
  Guaranteed
      MinimumYear
                  
                  Royalty
      Payments2009
                  
                  $
                  350,0002010
                  
                  $
                  375,000$
                  725,000
  NOTE
8 - STOCK TRANSACTIONS
  Common
Stock
  In
February 2008, the Company issued 1,584,000 shares of common stock for accrued
directors fees of $40,000.
  In March
2008, the Company issued 112,000 shares of common stock for consulting expenses
of $2,500.
  In
February 2009, the Company issued 2,100,000 shares of common stock for
consulting expenses of $21,000.
  For
issuances of shares of common stock during the periods described above, the
Company issued restricted shares (Rule 144). The shares issued were valued by
the Company based upon the closing price of the shares on the date of issuance.
The value of these shares issued for services was charged to expense, unless
they were in consideration for future services, in which case they were recorded
as deferred consulting fees. Shares retired / cancelled were recorded at par
value.
  Series
“A” Preferred Stock
  A total of
8,100 shares of series “A” preferred stock were issued in 2004, and, in May
2005, 100 shares were returned to the treasury and cancelled.
  In January
2006 the Company issued 600,000 shares of series “A” convertible preferred
stock, convertible into 50,738,958 shares of the Company’s common stock, in
connection with the acquisition of a 51% majority interest in
CPS.  The shares were valued at $1,200,000.
  In January
2007 (effective December 31, 2006), the 600,000 shares of series “A” convertible
preferred issued to CPS were returned to the treasury and cancelled, in
connection with the Company’s sale of its interest in CPS.  The shares
were valued at $1,775,864.  None of the preferred shares were
converted to common shares.  At December 31, 2006, the shares had not
been returned, and a related party receivable of $1,775,864 was
recorded.  During the three months ended March 31, 2007, these shares
were returned to the treasury and cancelled.
  In June,
2006, 1,000 shares of the Company’s series “A” convertible preferred stock,
beneficially owned by the Company’s CEO, were exchanged for 1,000,000 shares of
the Company’s common stock.  In February 2007, 74 shares of the
Company’s series “A” preferred stock were exchanged for 73,400 shares of the
Company’s common stock.  In May 2007, 367 shares of the Company’s
series “A” preferred stock were exchanged for 367,000 shares of the Company’s
common stock.
  In
February 2008, 6,500 shares of the Company’s series “A” convertible preferred
stock were exchanged for 6,500,000 shares of the Company’s common
stock.
  As of
December 31, 2008, a total of 60 shares of series “A” convertible preferred
stock were issued and outstanding, and are convertible into CHDT common shares,
at a rate of 1,000 shares of common stock for each share of series “A”
convertible preferred stock and are redeemable at the option of the
Company.  During the three months ended March 31, 2009, the remaining
60 shares were cancelled.
  17
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
8 - STOCK TRANSACTIONS (continued)
  Series
“B” Preferred Stock
  In January
2006 the Company sold 657,000 shares of its series “B” convertible preferred
stock for cash of $637,000, including 387,000 shares to the Company’s former CEO
and the remaining shares to other directors of the Company.  During
the three months ended March 31, 2007, 15,000 shares of the Company’s series “B”
preferred shares issued to a director were exchanged for 990,000 shares of the
Company’s common stock.
  In
September 2006 the Company issued 300,030 shares of its series “B” convertible
preferred stock to the Company’s former CEO in exchange for 20,000,000 shares of
its common stock held by the former CEO.
  In
September, 2006 the Company issued an additional 236,739 shares of its series
“B” convertible preferred stock in connection with the acquisition of 100% of
the voting interest of Capstone Industries, Inc.  The shares were
valued at $1,250,000.  During the three months ended March 31, 2007,
236,739 shares of the Company’s series “B” convertible preferred stock was
converted into 15,624,774 shares of the Company’s common stock.
  In
November 2007, the Company issued 416,708 shares of its series “B” convertible
preferred stock to a director for notes payable of $1,000,000.
 
 In January
2008, the Company’s chairman exchanged 50,000,000 shares of the Company’s common
stock for 750,075 shares of the Company’s series B” convertible preferred
stock.
  The series
“B” convertible preferred shares are convertible into common shares, at a rate
of 66.66 shares of common stock for each share of series “B” convertible
preferred stock.
  Warrants
  The
Company has outstanding stock warrants that were issued in prior years to its
officers and directors for a total of 5,975,000 shares of the Company's common
stock. The warrants expire between November 11, 2011 and July 20, 2014. The
warrants have an exercise price of $.03 to $.05.
  The
Company issued a stock warrant to each of two former officers of the Company in
December 2003 for a total of 35,000 shares of the Company's common stock. Each
of the stock warrants expires on July 20, 2014, and entitles each former officer
to purchase 10,000 and 25,000 shares, respectively, of the Company's common
stock at an exercise price of $0.05.
 
 During
September and October 2007, the Company issued 31,823,529 shares of common stock
for cash at $.017 per share, or $541,000 total as part of a Private Placement
under Rule 506 of Regulation D.  Along with the stock, each investor
also received a warrant to purchase 30% of the shares purchased in the Private
Placement.
 
 A total of
9,548,819 warrants were issued.  The warrants are ten year warrants
and have an exercise price of $.025 per share.
  Options
  In 2005,
the Company authorized the 2005 Equity Plan that made available 10,000,000
shares of common stock for issuance through awards of options, restricted stock,
stock bonuses, stock appreciation rights and restricted stock
units.  On May 20, 2005 the Company granted non-qualified stock
options under the company’s 2005 Equity Plan for a maximum of 250,000 shares of
the Company’s common stock for $0.02 per share. The options expire May 25, 2015
and may be exercised any time after May 25, 2005.
 
 On May 1,
2007, the Company granted 4,000,000 stock options to five employees of the
Company under the 2005 Plan.  The options vest over two
years.  During 2008, 1,000,000 of these options were cancelled prior
to vesting.
  18
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
8 - STOCK TRANSACTIONS (continued)
 
 The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. During the years ended December 31, 2008 and
2007, the Company recognized compensation expense of $25,131 and $29,214 related
to these stock options.  The following assumptions were used in the
fair value calculations:
 
 Risk free rate – 4.64%
 Expected term – 11 years
 Expected volatility of stock –
131.13%
 Expected dividend yield –
0%
 Suboptimal Exercise Behavior Multiple –
2.0
 Number of Steps – 100
 
 The
Company will recognize compensation expense of  $10,869 in 2009
related to these stock options.
  On April
23, 2007, the Company granted a ten-year non-qualified, non-statutory stock
option for 102,400,000 “restricted” shares of the Company’s common stock to
Stewart Wallach, the Company’s CEO, as incentive compensation.  The
exercise price of the options is $.029 per share, which was the fair market
value of the stock on the date of grant.  Twenty percent of the
options vested on the date of issuance, and twenty percent per year will vest on
the anniversary date through April 23, 2011.  On May 23, 2008,
74,666,667 of these options were cancelled.  Compensation expense was
recognized through the date of the cancellation of the options.
  On April
23, 2007, the Company granted a ten-year non-qualified, non-statutory stock
option for 28,100,000 “restricted” shares of the Company’s common stock to Gerry
McClinton, the Company’s COO and Secretary, as incentive
compensation.  The exercise price of the options is $.029 per share,
which was the fair market value of the stock on the date of
grant.  Twenty percent of the options vested on the date of issuance,
and twenty percent per year will vest on the anniversary date through April 23,
2011.  On May 1, 2008, 850,000 of these options were
cancelled.
 
 The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. During the years ended December 31, 2008 and
2007, the Company recognized compensation expense of $405,198and $503,075
related to these stock options.  The following assumptions were used
in the fair value calculations:
 
 Risk free rate – 4.66%
 Expected term – 10 years
 Expected volatility of stock –
133.59%
 Expected dividend yield –
0%
 Suboptimal Exercise Behavior Multiple –
2.0
 Number of Steps - 100
 
 The
Company will recognize compensation expense of $156,557 in 2009, $156,557 in
2010, and $52,186 in 2011 related to these stock options.
 
 On October
22, 2007, the Company granted 700,000 stock options to a business associate of
the Company.  The options vest over two years.
 
 The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. During the years ended December 31, 2008 and
2007, the Company recognized compensation expense of $7,978 and $1,330 related
to these stock options.  The following assumptions were used in the
fair value calculations:
 
 Risk free rate – 4.42%
 Expected term – 11 and 12
years
 Expected volatility of stock –
134.33%
 Expected dividend yield –
0%
 Suboptimal Exercise Behavior Multiple –
2.0
 Number of Steps – 100
 
 The
Company will recognize compensation expense of $6,648 in 2009 related to these
stock options.
 
 On January
10, 2008, the Company granted 1,000,000 stock options to an advisor of the
Company.  The options vest over one year.
  19
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
8 - STOCK TRANSACTIONS (continued)
 
 The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted.  During the year ended December 31,
2008, the Company recognized compensation expense of $19,953 related to these
options.  The following assumptions were used in the fair value
calculations:
 
 Risk free rate – 3.91%
 Expected term – 10 years
 Expected volatility of stock –
133.83%
 Expected dividend yield –
0%
 Suboptimal Exercise Behavior Multiple –
2.0
 Number of Steps – 100
 
 On
February 5, 2008, the Company granted 3,650,000 stock options to four directors
and one employee of the Company.  The options vest over two
years.
 
 The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. For the year ended December 31, 2008, the
Company recognized compensation expense of $59,619 related to these
options.  The following assumptions were used in the fair value
calculations:
 
 Risk free rate – 1.93% to
3.61%
 Expected term – 2 to 10
years
 Expected volatility of stock –
133.83%
 Expected dividend yield –
0%
 Suboptimal Exercise Behavior Multiple –
2.0
 Number of Steps – 100
 
 The
Company will recognize compensation expense of $2,603 in 2009 related to these
stock options.
 
 On May 1,
2008, the Company granted 850,000 stock options to an employee of the
Company.  The options vest over two years.
 
 The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. For the year ended December 31, 2008, the
Company recognized compensation expense of $5,242 related to these
options.  The following assumptions were used in the fair value
calculations:
 
 Risk free rate – 3.78%
 Expected term – 11 years
 Expected volatility of stock –
133.59%
 Expected dividend yield –
0%
 Suboptimal Exercise Behavior Multiple –
2.0
 Number of Steps – 100
 
 The
Company will recognize compensation expense of $7,862 in 2009 and $2,620 in 2010
related to these stock options.
 
  20
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
8 - STOCK TRANSACTIONS (continued)
 
  The
following table sets forth the Company’s stock options outstanding as of
December 31, 2008 and 2007 and activity for the years then ended:
  WeightedWeighted
                  
                  
                  AverageAverage
                  
                  
                  Remaining
                  
                  
                  AggregateShares
                  
                  
                  Exercise
                    Price
                  
                  
                  Contractual
                    Term
      (Years)
                  
                  
                  Intrinsic
      ValueOutstanding,
      December 31, 2007
                  
                  
                  135,450,000
                  
                  
                  $
                  0.028Granted
                  
                  
                  5,500,000
                  
                  
                  
                  0.028Exercised
                  
                  
                  -
                  
                  
                  
                  -Forfeited/expired
                  
                  
                  76,516,667
                  
                  
                  
                  0.028Outstanding,
      December 31, 2008
                  
                  
                  64,433,333
                  
                  
                  
                  0.028Granted
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  -Forfeited/expired
                  
                  
                  -
                  
                  
                  
                  -Outstanding,
      March 31, 2009
                  
                  
                  64,433,333
                  
                  
                  $
                  0.028
                  
                  
                  
                  8.64
                  
                  
                  $
                  -Vested/exercisable
      at December 31, 2008
                  
                  
                  43,102,777
                  
                  
                  $
                  0.028
                  
                  
                  
                  8.68
                  
                  
                  $
                  -Vested/exercisable
      at March 31, 2009
                  
                  
                  43,102,777
                  
                  
                  $
                  0.028
                  
                  
                  
                  8.68
                  
                  
                  $
                  -
 
 The
following table summarizes the information with respect to options granted,
outstanding and exercisable under the 2005 plan:
 
 Exercise
      Price
                Options
      Outstanding
                Remaining
      Contractual Life in Years
                Average
      Exercise Price
                Number
      of Options Currently Exercisable$.02
                250,000
                6
                $.02
                250,000$.029
                54,983,333
                9
                $.029
                39,252,777$.029
                4,000,000
                10
                $.029
                1,500,000$.029
                700,000
                11
                $.029
                350,000$.029
                1,000,000
                9
                $.029
                -0-$.029
                150,000
                9
                $.029
                -0-$.029
                2,000,000
                1
                $.029
                2,000,000$.027
                1,500,000
                1
                $.027
                -0-$.029
                850,000
                10
                $.029
                -0-
  
  21
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
9 – BUSINESS ACQUISITIONS AND DISPOSALS
  Complete
Power Solutions
  On January
27, 2006, the Company entered into a Purchase Agreement (the "Purchase
Agreement") with William Dato and Complete Power Solutions ("CPS") pursuant to
which the Company acquired 51% of the member interests of CPS owned by Mr. Dato
for a purchase price consisting of the payment of $637,000 in cash and the
delivery of 600,000 shares of Company's Series A Convertible Preferred Stock
(the "Series A Preferred Stock") having a stated value of $1,200,000, which
Series A Preferred Stock are convertible into 50,739,958 shares of the Company's
Common Stock at the demand of Mr. Dato. The cash paid in the transaction was
obtained from capital provided to the Company for use in connection with
acquisitions by Howard Ullman, our Chief Executive Officer and President, and
certain of our directors and principal shareholders.
  On January
26, 2007, the Company entered into a Purchase and Settlement Agreement (the
"Settlement Agreement"), dated and effective as of December 31, 2006, with
William Dato and CPS whereby: (a) CPS repurchased the 51% membership interest
owned by China Direct in return for the transfer of the 600,000 shares of the
Company’s "Series A Preferred Stock”, which are convertible into 50,739,958
shares of the Company's common stock, and (b) the issuance of a promissory note
by CPS to CHDT for 225,560, bearing annual interest at 7% with interest-only
payments commencing on July 1, 2007 and thereafter being paid quarterly on April
1st, July 1st, October 1st, and January 1st until the principal and all unpaid
interest thereon shall become due and payable on the maturity date, being
January 6, 2010 (the “2007 Promissory Note”).  The 2007 Promissory
Note also provides that the principal amount may be automatically increased by
an amount of up to $7,500 if the amount of a customer claim is settled for less
than $7,500. As of the date of this report the principal amount has not been
increased by an amount up to $7,500, as described above.  The shares
were valued at $1,775,864 based on the market value of the common stock the
shares are convertible into.
  As of
December 31, 2006, the balance due on the $225,560 was classified on the
Company’s balance sheet as an amount due from former subsidiary.  This
item was classified as long-term as of December 31, 2006, in anticipation of its
conversion to a note receivable, the maturity of which is more than one year
from the balance sheet date.  Subsequently, upon execution of the 2007
Promissory Note on January 26, 2007, the Company reclassified the balance as a
long-term note receivable from former subsidiary.
  CPS is
also indebted to CHDT under a promissory note in the original principal amount
of $250,000, executed by William Dato on June 27, 2006 and payable to CHDT,
bearing interest at 7% per annum and maturing on June 30, 2007, subject to
extension (the “2006 Promissory Note”) and subject to offset by (i) $41,600 owed
by an affiliate of CHDT to the CPS funds advanced by CPS for portable generators
that were never delivered and (ii) $15,000 as an agreed amount paid to
compensate CPS for certain refunds required to be made by CPS (which amounts
have been first applied to accrued and unpaid interest due September 30, 2006
and December 31, 2006 and then applied to quarterly interest payable on the
principal of the 2006 Promissory Note to maturity (June 30, 2007) and then to
reduce the principal amount of the 2006 Promissory Note to
$210,900.
 
 On March
10, 2008, the Company was granted a Final Summary judgment against CPS for
$501,740 related to the two notes due from CPS to the Company as part of the
disposal agreement entered into in January 2007.   As of December
31, 2007, the Company determined these two notes to be uncollectible and
wrote-off $427,710 to expense.  The Company has
pursued  legal action to collect this judgment, but it is now
considered uncollectible.
  The
Company disposed of its interest in CPS to further its goal of focusing on its
Capstone Industries consumer product business line in an effort to achieve
sustained profitability from low-coast, low inventory consumer products that are
direct shipped from Chinese and other low cost contract manufacturing sources to
the Company’s customers.
  Capstone
Industries
  On
September 13, 2006 the Company entered into a Stock Purchase Agreement (the
Purchase Agreement) with Capstone Industries, Inc., a Florida corporation
(Capstone), engaged in the business of producing and selling portable book
lights and related consumer goods, and Stewart Wallach, the sole shareholder of
Capstone. Under the Stock Purchase Agreement the Company acquired 100% of the
issued and outstanding shares of Capstone Common Stock in exchange for $750,000
in cash (funded by a note payable to the Company’s CEO and $1.25 million of the
Company’s Series B Preferred Stock, $0.01 par value per share, which Series “B”
stock is convertible into 15.625 million “restricted” shares of CHDT Common
Stock, $0.0001 par value (common stock). CHDT has agreed to register shares of
Common Stock under the Securities Act of 1933, as amended, to cover conversion
of the Series “B” Stock issued to Mr. Wallach in the acquisition of
Capstone.  Such registration has not been filed as of the date of this
Report. CHDT will operate Capstone as a wholly-owned subsidiary. As of the date
of this report these share have not been registered.  The Capstone
acquisition was recorded as follows:
  22
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
9 – BUSINESS ACQUISITIONS AND DISPOSALS (continued)
 
 Cash
                    
                    $
                    33,676Accounts
      receivable
                    
                    
                    208,851Inventory
                    
                    
                    340,109Prepaid
      expenses
                    
                    
                    7,500Property
      and equipment
                    
                    
                    16,127Goodwill
                    
                    
                    1,936,020Accounts
      payable and accrued expenses
                    
                    
                    (417,283
                    )Loan
      payable to China Direct
                    
                    
                    (125,000
                    )Total
      purchase price
                    
                    $
                    2,000,000
  Capstone
was acquired to expand the Company’s customer base and sources of supply, the
value of which contributed to the recording of goodwill.
  For tax
purposes, the goodwill is expected to be amortized as an IRC Sec. 197 intangible
over a period of fifteen years from date of acquisition.
  NOTE
10 - INCOME TAXES
  As of
December 31, 2008, the Company had a net operating loss carryforward for income
tax reporting purposes of approximately $2,900,000 that may be offset against
future taxable income through 2028. Current tax laws limit the amount of loss
available to be offset against future taxable income when a substantial change
in ownership occurs. Therefore, the amount available to offset future taxable
income may be limited. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same
amount.
 2008
                  
                  
                  2007Net
      Operating Losses
                  
                  $
                  594,500
                  
                  
                  $
                  454,690Valuation
      Allowance
                  
                  
                  (594,500
                  )
                  
                  
                  (454,690
                  )$
                  -
                  
                  
                  $
                  -
 
 The
provision for income taxes differ from the amount computed using the federal US
statutory income tax rate as follows:
 2008
                  
                  
                  2007Provision
      (Benefit) at US Statutory Rate
                  
                  $
                  (139,810
                  )
                  
                  $
                  (161,745
                  )Increase
      (Decrease) in Valuation Allowance
                  
                  
                  139,810
                  
                  
                  
                  161,745$
                  -
                  
                  
                  $
                  -
 
 The
Company evaluates its valuation allowance requirements based on projected future
operations.  When circumstances change and causes a change in
management’s judgment about the recoverability of deferred tax assets, the
impact of the change on the valuation is reflected in current
income.
 
 Effective
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB
Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The adoption of the provisions of FIN 48
did not have a material impact on the company’s condensed consolidated financial
position and results of operations. At January 1, 2008, the company had no
liability for unrecognized tax benefits and no accrual for the payment of
related interest.
 
 Interest
costs related to unrecognized tax benefits are classified as “Interest expense,
net” in the accompanying consolidated statements of operations. Penalties, if
any, would be recognized as a component of “Selling, general and administrative
expenses”. The Company recognized $0 of interest expense related to unrecognized
tax benefits for the year ended December 31, 2008 and 2007.  In many
cases the company’s uncertain tax positions are related to tax years that remain
subject to examination by relevant tax authorities. With few exceptions, the
company is generally no longer subject to U.S. federal, state, local or non-U.S.
income tax examinations by tax authorities for years before 2004. The following
describes the open tax years, by major tax jurisdiction, as of December 31,
2008:
 
 United
      States (a)
                
                2005
      – Present(a)
      Includes federal as well as state or similar local jurisdictions, as
      applicable.
  
  23
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
11 – CONTINGENCIES
 
 CELESTE TRUST
REG., ESQUIRE TRADE, ET AL. V. CBQ, INC. (Second Circuit Court of
Appeals, Case #07-1701-CV, April 2007; Lower Court Case# 03 Civ. 9650 RMB; US
District Court, SDNY, 12/4/2003): Both the initial and amended complaint of the
plaintiffs in this case against us were dismissed by the trial court upon our
motion to dismiss.  The plaintiffs perfected their appeal of the
dismissal of the amended complaint and the appeal was briefed in November
2007.  The appeal is currently pending before the Second Circuit Court
of Appeals in New York City. CHDT is uncertain when or how the Second Circuit
will rule on the plaintiffs’ appeal.  CHDT has moved that the Second
Circuit to make a ruling on the briefs without oral arguments, but CHDT believes
that the plaintiffs have requested oral arguments.  There has been no
ruling to date on the overall appeal or CHDT’s motion for a ruling based solely
on the written appeal briefs submitted to date.   While CHDT
intends to appeal any adverse ruling in this case by the Second Circuit, and
CHDT is confident of prevailing in this matter, if the plaintiffs ultimately
prevailed in this case and received their requested relief with no further right
of appeal by CHDT, the Company lacks the available funds or financing to pay
such relief and if a settlement was not possible, in the event of such an
adverse outcome,  such an adverse judgment could not be paid from
available Company resources.   The New York City office of Dorsey
& Whitney currently represents CHDT in this case.
 
 This case
concerns a lawsuit that was filed against the Company by three Plaintiffs on or
about December 4, 2003, but which the Company did not receive notice of until
the week of February 18, 2004 or thereabouts. The Plaintiffs purchased
debentures issued by Socrates Technologies Corporation (STC), a public Delaware
corporation in 2000. When the Company purchased the assets of two STC
subsidiaries in March 2001, the Plaintiffs allege that the Company promised to
issue to the Plaintiffs and others the consideration that was to be paid to STC
for the acquired assets and to so do in order to compensate the plaintiffs for
their investment in the STC debentures, which were apparently in default at that
time. The total consideration paid for the STC subsidiaries' assets were 7.65
million shares of company Common Stock and a Promissory Note made by the Company
for $700,000 principal amount. The Company has defended against the Plaintiffs'
claims to date. If the Plaintiffs win a judgment on their claims, the judgment,
if collected, would prove potentially ruinous the Company, unless a settlement
involving no cash was arranged between the parties to the lawsuit. The
Plaintiff's claims include a claim for receipt of the money due under the
Promissory Note with a principal amount of $700,000. The Company lacks the cash
flow or cash reserves or funding resources to pay such a claim, either in a lump
sum or over time. If the Plaintiffs are awarded the claimed damages against the
Company in this lawsuit and the Company did not or could not appeal such an
award, then under such circumstances the Company would be unable to pay such
damages, either in a lump sum or under any short-term schedule, and would be
insolvent without an emergency infusion of capital from investors.
 
 Sun
Trust Bank Dispute. Sun Trust Bank line of credit and term note
  Prior to
being acquired by CHDT, Quantum Technology Group had a $4 million line of credit
with Crestar Bank, which was subsequently acquired by Sun Trust. This line of
credit was guaranteed by Quantum and five individual guarantors, including Ray
Kostkowski, Anne Sigman, Skip Lewis, and Anthony Saunders. This line of credit
was opened during April, 2000. On August 8, 2000, the Company acquired all of
the shares of Quantum. Sun Trust asserted that $1.3 million of the line of
credit had been used, and was owing to Sun Trust, as well as line of credit, a
$200,000 term loan from Sun Trust to Quantum, approximately $200,000 in accrued
interest and $100,000 in attorney fees -- all of which SunTrust had sought to
collect from the individual guarantors. Sun Trust had not sued the Company and
has not raised its prior threat to sue since 2005.
  RAS
Investment, Inc., a company affiliated with Anne Sigman, a former employee of
the Company, has advised the Company that RAS has acquired the Sun Trust note
and has demanded payment in cash or stock. As of the date of this Report, the
Company's position remains as before, that is, that the Company is not obligated
to pay the Sun Trust debts and any claims made to collect that debt could be
defeated by several potential defenses and counterclaims.  CHDT has
not received any communication in this matter from RAS Investment, Inc. since
2006.  The Company will aggressively defend against any effort to
assert any claim against CHDT based on the above credit line.
  Potential
Litigation
  Cyberquest,
Inc.
  As
reported previously, the Company has received two claims from certain former
shareholders of Cyberquest, Inc. that they hold or own approximately 70,000
shares of a class of the Company's redeemable preferred stock that was issued in
the Company's 1998 acquisition of Cyberquest. Cyberquest ceased operations in
2000-2001 period. The Company has investigated these claims and has not been
able to date to fully substantiate any of the claims to date and the claimants
have not pursued their claims beyond an initial communication asserting
ownership of these shares of serial preferred stock.The Company has not received any further claims or
communications since mid-2006.
  24
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
12 - SALE OF ASSETS
 
 The assets
and liabilities of Souvenir Direct were transferred into Capstone January 1,
2007.  The assets consisted of cash of $13,816, accounts receivable of
$20,967, deposits of $1,775, net fixed assets of $3,329, and intercompany
receivables of $160,263. The liabilities consisted of accrued expenses of
$38,387 and loans payable of $10,000.
 
 On
December 1, 2007, the Company sold the remaining assets of Souvenir Direct for
$206,284.  For the year ended December 31, 2007, a gain on disposal of
assets of $206,284 was recognized in the financial statements of the
Company.
 
 NOTE
13 - INTANGIBLE ASSETS
 
 At
December 31, 2008, the Company had capitalized $168,890 related to packaging
artwork and design costs related to the Company’s AASTP products and Lighting
products as intangible assets. These costs are being amortized over their useful
life, which the Company has determined to be two years.  During 2008,
the Company recorded $65,199 of amortization expense related to these
assets.  For the three months ended March 31, 2009, the Company
capitalized an additional $7,784 related to packaging artwork and design costs
and recognized amortization expense of $21,967 during the quarter.  At
March 31, 2009 and December 31, 2008, the net amount of the intangible asset was
$89,517 and $103,700, respectively.


25


Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations





General – CHDT Corporation, a
Florida corporation, (“CHDT,” “Company,” “we,” or “our”) is a public holding
company with  its Common Stock, $0.0001 par value per share, (“Common
Stock”) quoted on the Over-The-Counter Bulletin Board under the trading symbol
“CHDO.OB.”   This discussion should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's annual report on Form 10-K for the year ended
December 31, 2008.





Forward
Looking Statements





Management’s
Discussion and Analysis contains “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, as well as historical information. Although we believe
that the expectations reflected in these forward-looking statements are
reasonable, we can give no assurance that the expectations reflected in these
forward-looking statements will prove to be correct. Our actual results could
differ materially from those anticipated in forward-looking statements as a
result of certain factors – many of those factors being beyond our control or
ability to predict. Forward-looking statements include those that use
forward-looking terminology, such as the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,”
“should,” and similar expressions, including when used in the negative. Although
we believe that the expectations reflected in these forward-looking statements
are reasonable and achievable at the time made, these statements involve risks
and uncertainties and no assurance can be given that actual results will be
consistent with these forward-looking statements.  Actual results may
differ significantly from anticipated business and financial
results.





All
forward-looking statements attributable to us are expressly qualified in their
entirety by these and other factors. We undertake no obligation to update or
revise these forward-looking statements, whether to reflect events or
circumstances after the date initially filed or published, to reflect the
occurrence of unanticipated events or otherwise.





Introduction





The
following discussion and analysis summarizes the significant factors affecting:
(i) our consolidated results of operations for the three months ended March 31,
2009 compared to the three months ended March 31, 2008; and (ii) financial
liquidity and capital resources.





We are a
developer and manufacturer of niche consumer products selling to distributors
and retailers in the United States. Our Capstone subsidiary currently operates
in five primary business segments:  Lighting, Power Failure Lighting,
Power Tools, Automotive Accessories and Computer Peripherals.





Our growth
strategy has four main elements:





1. Introduce our
new product lines to more departments at existing retail distribution channels;
and


2. Continue to
expand retail distribution and move into new distribution channels;
and


3. Release new
innovative products in order to expand existing categories; and


4. Through
acquiring businesses that have innovative products that would compliment our
existing marketing strategies.





Capstone
Lighting products specialize in low cost, innovative portable lighting products
that we believe can win a profitable niche in market share without high market
penetration costs (especially marketing and advertising
costs).  Capstone sells booklights, multi-task lights, flashlights and
also offers “Private Label” programs to major retailers.  “Private
Label” is the manufacture of products by a company and those products are sold
under the name or trade name of the manufacturer’s retailers, distributors or
bulk buyers.  In March 2009 at the International Hardware Show,
Capstone launched a new and expanded line of booklights and multi-tasklights
under the name PATHWAY LIGHTS.





In 2008
Capstone also launched the Eco-i-Lite TM Power Failure Lights. In March 2009 the
company launched additional Eco-i –LiteTM products and many in new trendy colors.
The Eco-i-Lite products have been developed in association with the engineers
from the STP® tools business unit.





26


STP®-branded
tools were launched in October 2007. This product line includes the new
technology lithium batteries for the 3.6v, 4.0v, 8.0v screwdrivers and 12v and
20v drill driver lines. The 20v system incorporates the Capstone designed Power
Axis Universal Battery System which allows the same battery to be
interchangeable with other 20v STP®-branded power tools such as reciprocating
saw, jig saw, circular saw, impact wrench, work light, detail sander and other
products. The line also includes the 19.2v Ni-cad drill driver system, which
system also uses a Universal Battery System.





STP®-branded
Automotive Accessories were also launched in October 2007. This product line
includes 200w, 400w, 800w and 1000w inverters, rechargeable Spotlights from 1
million candle power up to 10 million candle power, 12v air compressor, garage
clocks and weather centers.





As of the
date of this Report, we do not believe that we have a long enough history in
promoting the STP®-branded products to determine if this product line will be
successful or sustainable.





As a small
business issuer with limited resources, we do not have the resources to compete
head-to-head with larger, more established competitors for any of the
products.  While we face fewer competitors in our booklight and
specialty light product line, we face many national or regional brand-named
competitors in the power tool product line. In general, we attempt to compete by
leveraging the engineering and manufacturing capabilities of our Chinese
contract manufacturers in order to provide quality products with more functions
at what we deem to be a value price and supported.





We also
seek to license established trade names to assist in competing with larger
competitors.  STP® is the first instance of trying this strategy. We
believe that the use of a trade name like STP® combined with the competitive (in
terms of functions, quality and features) products offered will reduce the cost
of market penetration, which is essential because we do not have the money or
funding to compete head-to-head, market-to-market with large competitors like
Black & Decker, Mikita, Bosch or Ryobi.  We believe that licensing
an established trade name like STP® was important to compete in the home use
power tool market because that industry has many very large competitors with
established market shares and years of consumer loyalty to their product lines.
Black & Decker is one example of a large, established competitor in the
North American home use power tool market.





Since the
start of the 1990’s, the history of CHDT has been a series of failed operating
subsidiaries engaged in various business lines.  With each failed
business, we usually experienced a change in management and business
focus.  We believe that these past failures were due to a combination
of one or more of the following: (1) inadequate financing of operations; (2)
absence of a readily available sources of affordable funding for operations and
product and business exception; (3) absence of any or enough experienced
managers or executives; (4) lack of adequate strategic and financial planning
and accurate budgeting projections; (5) general economic conditions and
downturns in industries that undermined many small businesses, especially in the
value-added reseller of computer hardware and software developer and systems
developer industries; (6) inability to raise money in the public markets due to
poor financial track record of CHDT, resulting low stock market
price  and lack of sufficient institutional investor and market maker
support for CHDT Common Stock; (7) selection of business lines that CHDT was ill
suited to compete in or acquire; (8) operating losses severely limiting the
business  and financial options and resources of CHDT;  (9)
frequent changes in management and business lines; (10) concurrently operating
incompatible business lines that were ill-suited for a small business issuer;
and (11) acquisitions that diverted resources from existing operations and
ultimately failed and, as such, hindered CHDT’s efforts to attain profitability
on a sustained basis.





27


Starting
in 2007, we have sought to avoid the problems of the past by recruiting an
experienced management and sales team for the stated purpose to develop and
expand a consumer products business and we have endeavored to raise funds for
planned business development efforts.  These steps have resulted in
losses on a quarter-by-quarter basis for fiscal year 2008, except the 3rd quarter
in which we had a profit, but we believe that this investment in corporate
infrastructure is necessary to lay the foundation for future success and
business and product development.  While we are not certain that our
current strategy and business line will produce sustained future profitability
or any growth, we believe that the current strategy and business line is the
best approach for our current management team and available resources and, in
our opinion, the most likely path to any hope of sustained future
profitability.





For the
years ended December 31, 2008 and 2007, the Company’s revenues were derived from
5 sources: (i) the sale of our booklight products (Capstone and its booklight
product line was acquired by CHDT in September 2006); (ii) sale of Eco-i-Lite TM
Power Failure Lights, (iii) sale of our STP® tools power drills and automotive
accessories; (iv) for fiscal year 2007, the sale of promotional, gift and
souvenir items by our sold SDI subsidiary; and (v) revenues, if any, from our
51% membership interest in CPS, which interest we divested in 2007.





Despite
the recent efforts to make CHDT and its operations a focused and professionally
run organization, we continue to be hampered in our efforts to achieve sustained
profitability by problems that stem from the past and our history of failed
businesses.





The
failure of CHDT to achieve sustained profitability in its operations continues
to hamper our efforts to establish and sustain a profitable, growing
business.  In fiscal year 2008, we had to continue our historical
reliance on raising working capital for operations and business and product
development by selling securities to investors and/or receiving loans or
investment from members of management or their affiliates.
We   were able to obtain a conventional asset based bank
loan  to help support Capstone operations and working capital needs
,however we may have to continue to raise working capital for  CHDT
working capital and for Capstone business and product development (as well as
mergers and acquisitions of other companies or their products) by selling our
securities in private placements to investors and/or loans or investments by our
management and their affiliates. This reliance on private placements of
securities and insider loans or investments adds to the already huge number of
outstanding shares of Common Stock, dilutes our shareholders and further weakens
our ability to attract primary market makers and institutional investor support
for our Common Stock as a publicly traded security and also adversely impacts on
our ability to do mergers and acquisitions, attract traditional bank funding or
raise working capital by public offerings of our securities.





Our lack
of primary market makers and institutional investor support of our Common Stock
also contributes to our burden in achieving sustained, profitable business
lines.   These problems stem from the manner in which CHDT was
taken public in the late 1980’s and developed a public market for the Common
Stock in 1998.  CHDT did not, and perhaps could not under then current
circumstances, do an underwritten initial public offering and produce a national
network of broker-dealers and institutional investors interested in long-term
investment in CHDT and stability in the market price for the Common Stock. As a
result, we have had difficulty in sustaining any increases in the market price
of the Common Stock.  When the market price of the Common Stock enjoys
any significant percentage increase, shareholders tend to sell the Common Stock
to reap any gains (no matter how small) from the market price increase and the
selling causes the market price of the Common Stock to fall back to prior
levels.  Since there are no primary market makers or institutional
investors supporting the Common Stock, there are no investors effectively
countering the impact of the selling pressure on the market price for the Common
Stock. The low market price and lack of support for our Common Stock means that
we are hampered in our ability to resort to the public markets to raise working
capital because of the low stock market price. As such, we do not readily enjoy
one of the principal benefits of being a public company: ready access to the
public securities markets for working capital.


28


We intend
to address the above problems in public and market maker support for our Common
Stock by: (1) establishing  revenue growth  in consecutive
fiscal quarters in our current consumer product business line in order to
demonstrate that current management has a sound business line and business
strategy; (2) upon establishing a record of profitability, members of management
and agents will solicit support from institutional investors, asset managers,
market makers and others to provide long-term investors in the Common Stock and
stability in the public market for the Common Stock; (3) seek investment banker
assistance in developing a strategic plan, including an acquisition plan, to
dramatically grow CHDT in our core business line, the consumer product
line.  We can make no assurances that we shall succeed in this
effort.





We intend
to remain focused on niche consumer products that we believe can attain a
profitable market niche with minimal market penetration costs and is attractive
to our existing distribution channel of regional and national retailers and
distributors. We intend to develop new products by internal efforts as well as
acquire new products by mergers and acquisitions.





Results of Operations: For the
three months ended March 31, 2009, the Company had a net loss from continuing
operations of approximately $299,000. For the three months ended March 31, 2008
the Company had a net loss from operations of $588,000. That is a net loss
decrease of $289,000 or 49 % over 2008 results.





Total Net Revenues: For the
three months ended March 31, 2009 and 2008, the Company had total sales of
approximately $1,698,000 and $574,000 respectively, for an increase of
$1,124,000 which represents a 196% increase over 2008 results. All of the
revenue was generated by Capstone. This increase was due to placement of the
Eco-i-Lite, the Company’s new multi functional power failure light which we
expect will be a strong revenue producer in 2009 and continued sales of our
STPtools program.





Cost of Sales: For the three
months ended March 31, 2009 and 2008, we had cost of sales of approximately
$1,196,000 and $320,000, respectively. This cost represents 70.4% and 55.8%
respectively of total Revenue. As a percentage of Total Revenue costs have
increased. This is a direct result of the expanded mix of products now being
sold.




Gross Profit: For the three
months ended March 31, 2009, gross profit was $502,000, an increase by
approximately $248,000 or 97.6% from the three months ended March 31,
2008.  For the three months ended March 31, 2008, gross profit was
$254,000.  Gross profit as a percentage of sales was 29.6% for the
three months ended March 31, 2009 as compared to 44.3% for the three months
ended March 31, 2008.  This gross profit decrease is a direct result
of two factors.






1.
            With
      our expanded product lines the Gross Profit is now a blended
      percentage.  Each product category provides a different Gross
      Profit percentage




2.
            Our
      larger customers are now buying on a direct import basis. The gross margin
      percentages are lower in this selling scenario but the Company’s expenses
      are also reduced as the customer is responsible for related expenses such
      as freight, duties and handling
costs.





Even
though the blended gross profit percentage to sales has decreased, the overall
gross profit increased by $248,000 or 97.6% from 2008. This increase is
attributed directly to the increase in product sales volume.





Operating
expenses were $725,000 for the three months ended March 31, 2009 as compared to
$818,000 for the three months ended March 31, 2008, a decrease of approximately
$93,000. This decrease can be attributed to various factors.





29


Employee
compensation for three months ended March 31, 2009 was $277,000 a decrease of
$194,000 from $471,000 for the three months ended March 31, 2008. This decrease
was the result of a decrease in the amount of compensation expense recognized
from stock options issued in 2007 and 2008 for the three months ended March 31,
2009 as compared to the three months ended March 31, 2008.





For the
three months ended March 31, 2009 the Sales and Marketing Expenses were $60,000
an increase of $26,000 or 76.4% over the $34,000 expensed for the three months
ended March 31, 2008. This reflects the increased sales and marketing efforts
being made to promote our new product lines and investment for future continued
revenue growth.





Depreciation
and Amortization Expenses were $53,000 for the three months ended March 31,
2009, an increase of $19,000 or 55.9% over the $34,000 expensed for the three
months ended March 31, 2008. This represents the depreciation and amortization
of the cost of investing in the new moulds for the power tools and Eco-i-Lite
programs and investment in new packaging design and molds. This represents
another investment for possible future revenue growth.





Other Income (Expense):
Interest Expenses for the three months ended March 31, 2009 was $77,000, an
increase of $53,000 or 221% over $24,000 expensed for the three months ended
March 31, 2008. This expense increase was the direct result of the new bank line
of credit and additional funding required to finance the increased order
activity overseas.





Net Income (Loss):The Loss
for the three months ended March 31, 2009 was $299,000 against a loss of
$588,000 for the three months ended March 31, 2008, a decreased loss of
$289,000. The loss decreased because of the increase of revenues and decrease in
operating expenses.





Directors & Officers
Insurance: We currently operate with directors’ and officers’ insurance
and we believe our coverage is adequate to cover likely liabilities under such a
policy.





Impact of Inflation:  Our major expenses have been the cost of selling and
marketing product lines to customers in North America.  That effort
involves mostly sales staff traveling to make direct marketing and sales pitches
to customers and potential customers trade shows around North America and
visiting China to maintain and seek to expand distribution and manufacturing
relationships and channels.  As a result of world economic conditions
and the current price of world oil and resulting increased material costs, there
are now pressures from Chinese Manufacturers to gradually increase costs. We
generally have been able to reduce cost increases by strong negotiating or
re-engineering products, but we may have to increase the price of our products
in fiscal year 2009 in response to such inflationary pressures.  Since
we operate in industries where the consumers tend to be price sensitive, any
such increase in the prices of our products may adversely impact our sales and
financial results in fiscal year 2009.





Country
Risks.  Almost all of our contract manufacturing operations and
sources of products are located in Peoples’ Republic of China or
“China.”  We are dependent on China for almost all of the design and
production of our consumer products.  As such, we are subject to
significant risks not typically faced by companies operating in or obtaining
products from North America and Western Europe manufacturing
sources.  Political,  economic and
trade  conflicts  between the United  States and
China,  including  possible conflict over
North  Korea's  nuclear  weapons  program
or the  independence  of Taiwan,  could severely
hinder the ability of  CHDT to obtain products and fill customer
orders from our current Chinese  manufacturing  sources.
Further, Chinese commercial law is still evolving to accommodate increasing
capitalism in Chinese society, especially in terms of commercial relationships
and dealings with foreign companies, and can be unpredictable in application or
principal.  The same unpredictability exists with respect to the
central Chinese government,  which can  unilaterally and
without prior warning impose new legal,
economic  and  commercial  laws,  policies  and  procedures.   This
element of unpredictability heightens the risk of doing business in
China.  While dramatic anti-trade shift in Chinese policy or laws
would seem to be clearly against the best interests of China and its current
economic trends, China has a central government with the authority to make such
changes and an incentive to take actions designed to reaffirm the control of the
central government over the economy and society.





30


China has
been under ongoing international pressure to value its currency in a manner that
would increase the value of Chinese currency in respect of other world
currencies and thereby increase the cost of Chinese goods in the world
market.  Such a revaluation of Chinese currency could adversely impact
business by increasing costs to consumers, but this cost impact would also
affect our competitors with products produced in China.  China adopted
a 2% revaluation of its currency in 2005 and the U.S. Dollar declined slightly
in response to this revaluation.  While under international pressure
to value the Chinese currency in a manner that more realistically reflects the
strength and value of the Chinese currency, China may continue to keep Chinese
currency at a level that some regard as below its perceived, true
value.





Currency.  The U.S.
dollar is the currency used in all of our commercial transactions and our
property and business is conducted in North America. As a result, the effect of
the fluctuations of exchange rates is considered minimal to our business
operations.





Interest Rate Risk. We do not have significant
interest rate risk during the fiscal quarter ending March 31, 2009.





Credit Risk. We have not experienced
significant credit risk, as most of our customers are long-term customers with
superior payment records. Our managers monitor our receivables regularly and our
Direct Import Programs are typically supported by a customers’ Letter of Credit
which is a guaranteed form of payment.





Off-Balance Sheet
Arrangements.We have no off-balance sheet
arrangements.





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,” as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), that are designed to ensure that information
required to be disclosed by us in reports we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to our management, including our principal executive officer
and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating our disclosure
controls and procedures, management recognized that disclosure controls and
procedures, no matter how well conceived and operated, can provide only
reasonable assurance of achieving the desired control objectives, and we
necessarily are required to apply our judgment in evaluating the cost-benefit
relationship of possible disclosure controls and procedures.





Our
management, including our principal executive officer and principal financial
officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of March 31, 2009 and concluded that the
disclosure controls and procedures were effective.





Item 4(T). Controls and
Procedures.





Changes in internal controls.There were no changes in our internal control over financial reporting
that occurred during the fiscal quarter covered by this report that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.





The
certifications of our chief executive officer and chief financial officers
attached as Exhibits 31.1, 31.2 and 31.3 to this Report include information
concerning our disclosure controls and procedures and internal control over
financial reporting. Such certifications should be read in conjunction with the
information contained in this Item 4, including the information incorporated by
reference to our annual report on Form 10-K for the year ended December 31,
2008, for a more complete understanding of the matters covered by such
certifications.





31


PART
II — OTHER INFORMATION





Item 1. Legal
Proceedings.





Other than
as set forth below,  we are not a party  to any other
material  pending  legal  proceedings  and,  to
the  best  our  knowledge,  no such
action by or against us has been  threatened.  From time to
time, we are subject to legal proceedings and claims that arise in the ordinary
course of its business. Although occasional adverse decisions or settlements may
occur in such routine lawsuits, we believe that the final disposition of such
routine lawsuits will not have material adverse effect on its financial
position, results of operations or status as a going concern.





CELESTE TRUST
REG., ESQUIRE TRADE, ET AL. V. CBQ, INC. (Second Circuit Court of
Appeals, Case #07-1701-CV, April 2007; Lower Court Case# 03 Civ. 9650 RMB; US
District Court, SDNY, 12/4/2003): On April 16, 2009, the U.S. Court of Appeals
for the Second Circuit in New York City vacated the trial court’s dismissal of
the plaintiffs’ amended complaint in Celeste Trust et al. v. CBQ,
Inc. (former name of CHDT Corporation) (Docket #07-1701-cv), decided
April 16, 2009) on the grounds that a prior settlement agreement with a third
party and the plaintiffs applied to the action against CBQ, Inc. and the amended
complaint was barred by the doctrine of res judicata. The case has
been remanded to the U.S. District Court for the Southern District of New York,
the original trial court, for further proceedings. As of the date of this Form
10-Q Report, the CHDT Corporation intends to defend against this complaint in
any further proceedings in the U.S. District Court for the Southern District of
New York.. The foregoing summary is qualified in its entirety by the full text
of the Second Circuit Court’s opinion as set forth as Exhibit 99.1 to our Form
8-K Report, dated April 16, 2009 and filed with the Commission on April 23,
2009.





This case
concerns a lawsuit that was filed against the Company by three Plaintiffs on or
about December 4, 2003, but which the Company did not receive notice of until
the week of February 18, 2004 or thereabouts. The Plaintiffs purchased
debentures issued by Socrates Technologies Corporation (STC), a public Delaware
corporation in 2000. When the Company purchased the assets of two STC
subsidiaries in March 2001, the Plaintiffs allege that the Company promised to
issue to the Plaintiffs and others the consideration that was to be paid to STC
for the acquired assets and to so do in order to compensate the plaintiffs for
their investment in the STC debentures, which were apparently in default at that
time. The total consideration paid for the STC subsidiaries' assets were 7.65
million shares of company Common Stock and a Promissory Note made by the Company
for $700,000 principal amount. The Company has defended against the Plaintiffs'
claims to date. If the Plaintiffs win a judgment on their claims, the judgment,
if collected, would prove potentially ruinous the Company, unless a settlement
involving no cash was arranged between the parties to the lawsuit. The
Plaintiff's claims include a claim for receipt of the money due under the
Promissory Note with a principal amount of $700,000. The Company lacks the cash
flow or cash reserves or funding resources to pay such a claim, either in a lump
sum or over time. If the Plaintiffs are awarded the claimed damages against the
Company in this lawsuit and the Company did not or could not appeal such an
award, then under such circumstances the Company would be unable to pay such
damages, either in a lump sum or under any short-term schedule, and would be
insolvent without an emergency infusion of capital from investors.







Potential
Litigation




Cyberquest,
Inc.




As
reported previously, the Company has received two claims from certain former
shareholders of Cyberquest, Inc. that they hold or own approximately 70,000
shares of a class of the Company's redeemable preferred stock that was issued in
the Company's 1998 acquisition of Cyberquest. Cyberquest ceased operations in
2000-2001 period. The Company has investigated these claims and has not been
able to date to fully substantiate any of the claims to date and the claimants
have not pursued their claims beyond an initial communication asserting
ownership of these shares of serial preferred stock.The Company has not received any further claims or
communications since mid-2006.





Other Legal Matters. To the
best of our knowledge, none of our directors, officers or owner of record of
more than five percent (5%) of the  securities of the
Company,  or any associate of any such director, officer or security
holder is a party adverse to us or has a material interest adverse to us in
reference to pending litigation.





32


We are not
currently a party to any other legal  proceedings not disclosed above
that we believe will have a material adverse effect on our financial condition
or results of operations.





Item 1A. Risk
Factors.





During the
three months ended March 31, 2009, there were no material changes to the risk
factors previously disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2008.





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




In
February 2009, the Company issued 2,100,000 shares of restricted common stock
for consulting expenses of $21,000.





Item 3.  Defaults
Upon Senior Securities





None.





Item
4.  Submission of Matters to Vote of Security
Holders





None.





Item 5.  Other
Information





None.


33


Item
6.  Exhibits


EXHIBIT #
              DESCRIPTION OF EXHIBIT2.1
              Purchase
      Agreement, dated January 27, 2006, by and among CHDT Corporation, William
      Dato and Complete Power Solutions, LLC. +2.1.1
              Purchase
      and Settlement Agreement by and among CHDT Corporation, Complete Power
      Solutions, LLC, William Dato and Howard Ullman, January 26, 2007
      ++2.1.1.1
              Stock
      Purchase Agreement dated September 15, 2006, by and between CHDT
      Corporation, and Capstone Industries, Inc. +++3.1
              Articles
      of Incorporation of CHDT Corp.*3.1.1
              Amendment
      to the Articles of Incorporation of CHDT Corp. **3.2
              By-laws
      of the Company***3.3
              Certificate
      of Designation of the Preferences, Limitations, and Relative Rights of
      Series B Convertible Preferred Stock of CHDT Corp. ****10.1
              Voting
      Agreement,  dated  January 27, 2006,  by and
      among CHDT Corp., William Dato and Howard Ullman. +10.2
              Operating
      Agreement, dated January 27, 2006, for Complete Power Solutions, LLC.
      +10.3
              Employment
      Agreement dated January 27, 2006, by and between William Dato, CHDT
      Corporation and Complete Power Solutions, LLC. +10.4
              Purchase
      Agreement, dated December 1, 2007, by Capstone Industries, Inc. and Magnet
      World, Ltd. For sale of operating assets of Souvenir Direct, Inc.
      ++++10.6
              2005
      Equity Plan of CHDT Corp.++++++10.7
              2008
      Employment Agreement by Stewart Wallach and CHDT
    Corp.++++++10.8
              CHDT
      Corp. ++++++10.9
              2008
      Employment Agreement by Howard Ullman and CHDT
  Corp.++++++10.10
              Form
      of Non-Qualified Stock Option+10.11
              Non-Employee
      Director Compensation++++++14
              Code
      of Ethics Policy, dated December 31, 2006+++++31.1
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Stewart
      Wallach, Chief Executive Officer^31.2
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Laurie Holtz,
      Chief Financial Officer^31.3
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Gerry
      McClinton, Chief Operating Officer^32.1
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Stewart
      Wallach, Chief Executive Officer. ^32.2
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Laurie Holtz,
      Chief Financial Officer^32.3
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Gerry
      McClinton, Chief Operating
Officer^


------------------------------------------


*
Incorporated by reference to Annex G to the Special Meeting Proxy
Statement,


Dated
April 15, 2004, filed by CHDT Corporation with the Commission on April 20,
2004.


**
Incorporated by reference to Exhibit 3(I) to the Form 8-K filed by CHDT
Corporation with the Commission on July 10, 2007.


***
Incorporated by reference to Annex H the Special Meeting Proxy
Statement,


Dated
April 15, 2004, filed by CHDT Corporation with the Commission on April 20,
2004.


****
Incorporated by reference to Exhibit 99.2 to the Form 8-K filed by CHDT Corp.
With the Commission on November 6, 2007.


+  Incorporated
by reference to Exhibit 2 to the Form 8-K filed by CHDT Corporation with the
Commission on January 31, 2006.


++
Incorporated by reference to Exhibit 2 to the Form 8-K filed by CHDT Corporation
with the Commission on January 26, 2007.


+++
Incorporated by reference to Exhibit 2.1 to the Form 8-K filed by CHDT
Corporation with the Commission on September 18, 2006.


++++
Incorporated by reference to Exhibit 99 to the Form 8-K filed by CHDT Corp. With
the Commission on December 3, 2007.


+++++
Incorporated by reference to Exhibit 14 to the Form 10-KSB for the fiscal year
ended December 31, 2006 and filed by CHDT


Corp. With
the Commission on April 17, 2007.


++++++Incorporated
by reference to Form 10-KSB for the fiscal year ended December 31, 2007 and
filed by CHDT Corp. with the Commission on March 31, 2008.


^ Filed
Herein.


34


SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, CHDT
Corporation has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Broward County, Florida on this 13th
day of May 2009.





CHDT
CORPORATION





Dated:   May
13, 2009








/s/ Stewart Wallach
                Stewart
      Wallach
                Principal
      Executive Officer
              
              Chief
      Executive Officer and President/s/ Laurie Holtz
                Laurie
      Holtz
                Principal
      Financial and Accounting Officer
              
              Chief
      Financial Officer/s/ Gerry McClinton
                Gerry
      McClinton
                Principal
      Operations Executive
              
              Chief
      Operating Officer










35