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, 2008





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.  xYes  o No





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 Yes  x 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, 2008, there were
557,941,646 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
      31,2008
              
              
              2007Assets:Current
      assets:Cash
              
              $
              115,352
              
              
              $
              257,802Accounts
      receivable - net
              
              
              480,226
              
              
              
              1,351,648Inventory
              
              
              322,275
              
              
              
              333,184Prepaid
      expense
              
              
              31,102
              
              
              
              23,331Total
      Current Assets
              
              
              948,955
              
              
              
              1,965,965Fixed
      assets:Computer
      equipment & software
              
              
              45,685
              
              
              
              45,685Machinery
      and equipment
              
              
              302,235
              
              
              
              276,408Furniture
      and fixtures
              
              
              5,665
              
              
              
              5,665Less:
      Accumulated Depreciation
              
              
              (141,645
              )
              
              
              (119,154
              )Total
      Fixed Assets
              
              
              211,940
              
              
              
              208,604Other
      non-current assets:Product
      development costs
              
              
              80,407
              
              
              
              73,012Goodwill
              
              
              1,936,020
              
              
              
              1,936,020Deposits
              
              
              15,000
              
              
              
              15,000Total
      other non-current assets
              
              
              2,031,427
              
              
              
              2,024,032Total
      assets
              
              $
              3,192,322
              
              
              $
              4,198,601


2




CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS(Continued)(Unaudited)March
      31,
              
              
              December
      31,2008
              
              
              2007Liabilities
      and Stockholders’ Deficit:Current
      liabilities:Accounts
      payable and accrued expenses
              
              $
              243,663
              
              
              $
              601,946Notes
      and loans payable to related parties - current maturities
              
              
              364,493
              
              
              
              688,305Total
      current liabilities
              
              
              608,156
              
              
              
              1,290,251Non-current
      liabilitiesNotes
      and loans payable to related parties
              
              
              546,025
              
              
              
              546,025Total
      non-current liabilities
              
              
              546,025
              
              
              
              546,025Total
      Liabilities
              
              
              1,154,181
              
              
              
              1,836,276Stockholders'
      Deficit:Preferred
      Stock, Series A, par value $.001 per shareAuthorized
      100,000,000 shares,Issued
      60 at March 31, 2008and
      6,560 shares at December 31, 2007
              
              
              1
              
              
              
              7Preferred
      Stock, Series B, par value $.10 per shareAuthorized
      100,000,000 shares,Issued
      2,108,813 at March 31, 2008and
      1,358,738 at December 31, 2007
              
              
              210,882
              
              
              
              135,874Common
      Stock, par value $.0001 per shareAuthorized
      600,000,000 shares,Issued
      557,941,646 shares at March 31, 2008and
      599,745,646 shares at December 31, 2007
              
              
              55,794
              
              
              
              59,975Additional
      paid-in capital
              
              
              5,227,510
              
              
              
              5,034,527Accumulated
      deficit
              
              
              (3,456,046
              )
              
              
              (2,868,058
              )Total
      Stockholders' Deficit
              
              
              2,038,141
              
              
              
              2,362,325Total
      Liabilities and Stockholders’ Deficit
              
              $
              3,192,322
              
              
              $
              4,198,601The
      accompanying notes are an integral part of these financial
      statements.


3




CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS(Unaudited)For
      the Three Months EndedMarch
      31,2008
              
              
              2007Revenues
              
              $
              574,180
              
              
              $
              211,042Cost
      of Sales
              
              
              (320,436
              )
              
              
              (138,015
              )Gross
      Profit
              
              
              253,744
              
              
              
              73,027Operating
      Expenses:Sales
      and marketing
              
              
              34,430
              
              
              
              13,688Compensation
              
              
              471,206
              
              
              
              95,615Professional
      fees
              
              
              34,334
              
              
              
              47,207Consulting
              
              
              28,130
              
              
              
              66,875Other
      General and administrative
              
              
              249,866
              
              
              
              78,723Total
      Operating Expenses
              
              
              817,966
              
              
              
              302,108Net
      Operating Income (Loss)
              
              
              (564,222
              )
              
              
              (229,081
              )Other
      Income (Expense):Miscellaneous
      income
              
              
              -
              
              
              
              750Interest
      expense
              
              
              (24,375
              )
              
              
              (27,504
              )Interest
      income
              
              
              609
              
              
              
              3,267Total
      Other Income (Expense)
              
              
              (23,766
              )
              
              
              (23,487
              )Net
      Income (Loss)
              
              $
              (587,988
              )
              
              $
              (252,568
              )Income
      (Loss) per Common Share
              
              $
              -
              
              
              $
              -Weighted
      average shares outstanding
              
              
              565,574,034
              
              
              
              543,997,861The
      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
      31,2008
              
              
              2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Continuing
      operations:Net
      Income (Loss)
              
              $
              (587,988
              )
              
              $
              (252,568
              )Adjustments
      necessary to reconcile net lossto
      net cash used in operating activities:Stock
      issued for accrued expenses
              
              
              40,000
              
              
              
              106,813Stock
      issued for expenses
              
              
              2,500
              
              
              
              75,000Depreciation
      and amortization
              
              
              33,980
              
              
              
              5,094Compensation
      expense from stock options
              
              
              221,303
              
              
              
              -(Increase)
      decrease in accounts receivable
              
              
              871,422
              
              
              
              444,075(Increase)
      decrease in inventory
              
              
              10,909
              
              
              
              (54,475
              )(Increase)
      decrease in prepaid expenses
              
              
              (7,771
              )
              
              
              (967
              )(Increase)
      decrease in deposits
              
              
              -
              
              
              
              (1,950
              )(Increase)
      decrease in other assets
              
              
              (18,882
              )
              
              
              (2,769
              )Increase
      (decrease) in accounts payable and accrued expenses
              
              
              (358,283
              )
              
              
              (60,117
              )Increase
      (decrease) in due to/from related parties
              
              
              -
              
              
              
              (100,000
              )Increase
      (decrease) in accrued interest on notes payable
              
              
              (1,813
              )
              
              
              17,184Increase
      (decrease) in deposits from customers
              
              
              -
              
              
              
              18,235Net
      cash provided by (used) in operating activities
              
              
              205,377
              
              
              
              193,555CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of property and equipment
              
              
              (25,827
              )
              
              
              (18,127
              )Net
      cash provided by (used) investing activities
              
              
              (25,827
              )
              
              
              (18,127
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from sale of stock
              
              
              -
              
              
              
              5,000Proceeds
      from notes and loans payable to related parties
              
              
              100,000
              
              
              
              -Repayments
      of notes and loans payable to related parties
              
              
              (422,000
              )
              
              
              (221,975
              )Net
      Cash Provided by Financing Activities
              
              
              (322,000
              )
              
              
              (216,975
              )Net
      (Decrease) Increase in Cash and Cash Equivalents
              
              
              (142,450
              )
              
              
              (41,547
              )Cash
      and Cash Equivalents at Beginning of Period
              
              
              257,802
              
              
              
              198,084Cash
      and Cash Equivalents at End of Period
              
              $
              115,352
              
              
              $
              156,537SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
              
              $
              23,297
              
              
              $
              27,504Franchise
      and income taxes
              
              $
              -
              
              
              $
              -SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:On
      February 21, 2007, the Company issued 468,750 shares of common stock for
      notes payable of $15,000and
      accrued interest of $1,761.On
      March 16, 2007, the Company issued 1,835,050 shares of common stock for
      investor loans payable of $50,000and
      accrued interest of $5,052.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 (formerly, China Direct
Trading Corporation”)  and 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
Corporation changed its name 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 Corporation’s 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, 2008 and for the three month
periods ended March 31, 2008 and 2007 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
Corporation (formerly, “China Direct Trading Corporation”), a Florida
corporation, 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 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. was completely dissolved on December 1, 2007.




On
December 1, 2003, China Direct Trading Corporation 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, 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 to trading Chinese- made building supplies.




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.




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 retailers in the United
States.


6
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)




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, Comfort Products,
Power Tools and Automotive Accessories. . The Company’s products are typically
manufactured in the Peoples’ Republic of China by third-party contract
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
power generators in South Florida and 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 on 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, 2008, 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 $281,834 at March 31, 2008 and $292,743as of December 31, 2007.




In
addition, Black Box Innovations (previously Overseas Building Supply) had
inventory of $40,441 at March 31, 2008 and December 31, 2007.




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 2007 or
the first quarter of 2008.




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 $22,493 and $5,095 for the three months ended March 31, 2008 and
2007, 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, 2007, 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)




The
Company initially recorded goodwill of $1,567,214 in connection with the CPS
acquisition.  Effective December 31, 2006, the Company disposed of its
interest in CPS and, accordingly, wrote off this amount, which is included in
the loss from discontinued operations on the consolidated statement of income
(loss).




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, 2008 and 2007 are not presented as it would be
anti-dilutive.  At March 31, 2008 and 2007, the total number of
potentially dilutive common stock equivalents was 138,416,294 and 85,748,980,
respectively.




Principles
of Consolidation




The
consolidated financial statements for the three months ended March 31, 2008 and
2007 include the accounts of the parent entity and its wholly-owned subsidiaries
Souvenir Direct, Inc., Overseas Building Supply, LLC (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, 2008
approximates their fair values due to the short-term nature of these financial
instruments.




Reclassifications




Certain
reclassifications have been made in the 2007 financial statements to conform
with the 2008 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. Advertising and promotion expense was
$34,430 and $13,688 for the three months ended March 31, 2008 and 2007,
respectively.




Shipping
and Handling




The
Company’s shipping and handling costs, incurred by Capstone, are included in
selling expenses and amounted to $1,901 for the three months ended March 31,
2008.





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, 2007, 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.   For three months ended March 31, 2008, the Company
recognized compensation expense of $188,653 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.   For three months ended March
31, 2008, the Company recognized compensation expense of $10,955 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 three
months ended March 31, 2008, the Company recognized compensation expense of
$1,995 related to these options.


11
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





During
the three months ended March 31, 2008, the Company granted 4,150,000 stock
options to employees and directors of the Company.  The options vest
over one and two years.  For the three months ended March 31, 2008,
the Company recognized compensation expense of $19,700 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, 2008 included $2,500
for consulting fees.  Stock-based compensation expense for the three
months ended March 31, 2007 included $75,000, consisting of $25,000 included in
employee compensation and $50,000 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.





In
December 2007, the FASB issued No. 160, “Noncontrolling 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 noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary.  It clarifies that a noncontrolling 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.


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. 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
noncontrolling 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 December 31, 2007, the Company has cash in excess of FDIC limits of
approximately $140,000.  As of March 31, 2008, the Company did not
have any cash in excess of FDIC limits.




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 difference geographical regions.  The
Company monitors exposure of credit losses and maintains allowances for
anticipated losses considered necessary under the
circumstances.


13
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
2 – CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE
(continued)





Major
Customers





The
Company had three customers who comprised at least ten percent of gross revenue
during 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
      Receivable2007
            
            
            2006
            
            
            2007
            
            
            2006Customer
      A
            
            
            30
            %
            
            
            37
            %
            
            $
            691,110
            
            
            $
            98,834Customer
      B
            
            
            28
            %
            
            
            -
            
            
            
            485,275
            
            
            
            -Customer
      C
            
            
            21
            %
            
            
            34
            %
            
            
            161,571
            
            
            
            341,55279
            %
            
            
            71
            %
            
            $
            1,337,956
            
            
            $
            440,386




Major
Vendors





The
Company had two vendors from which it purchased at least ten percent of
merchandise during 2007.  The loss of these suppliers would adversely
impact the business of the Company.  The percentage of purchases, and
the related accounts payable at December 31, 2007 from each of these vendors is
as follows:





Purchases
      %
            
            
            Accounts
      Payable2007
            
            
            2006
            
            
            2007
            
            
            2006Vendor
      A
            
            
            56
            %
            
            
            86
            %
            
            $
            131,973
            
            
            $
            41,054Vendor
      B
            
            
            10
            %
            
            
            10
            %
            
            
            45,481
            
            
            
            -66
            %
            
            
            96
            %
            
            $
            177,454
            
            
            $
            41,054




NOTE
3 – DUE TO RELATED PARTIES




During
2003 and 2004, a former officer of the Company paid $300,000 to settle a
previously filed lawsuit on behalf of the Company. This $300,000 had been
included in due related parties at December 31, 2006.  During the year
ended December 31, 2007, this debt was forgiven.  Also included in due
to related parties, as of December 31, 2006, was accrued but unpaid officer’s
compensation of $100,000, payable to the Company’s former CEO. During the three
months ended March 31, 2007, the $100,000 accrued compensation was converted
into 3,031,000 shares of common stock.


14
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
4 – NOTES AND LOANS PAYABLE TO RELATED PARTIES




Overseas
Building Supply - Notes Payable to Shareholders




On
September 1, 2004, Overseas Building Supply, LLC (f/k/a China Pathfinder Fund,
LLC), a wholly-owned subsidiary of the Company, executed notes payable of
$15,000 to three shareholders of the Company, including $5,000 to CEO. The notes
carry an interest rate of 5% per annum and are payable in twelve equal monthly
installments with the first installment due and payable on January 31,
2006.  As of December 31, 2006, the total amounts due on these loans
was $16,761, including accrued interest.  During the three months
ended March 31, 2007, these notes were converted into 468,750 shares of common
stock.




CHDT
Corp - Notes Payable to Director




On June
29, 2006, the Company executed a $250,000 note payable to a director of the
Company.  The note carries an interest rate of 7% per annum and is
payable if full, with accrued interest, on June 30, 2007.  The
proceeds from this note were used to advanced funds to CPS. As of December 31,
2006, the total amount payable on the note was $258,750, including $8,750 of
accrued interest.  During the quarter ended June 30, 2007, the Company
paid accrued interest of $13,125 and during the quarter ended September 30,
2007, the Company paid accrued interest of $4,363.  On August 21,
2007, the Company issued 2,804,947 shares of common stock valued at $252,445 as
payment for $250,000 in principal and interest of $2,445 on the
note.




On
September 15, 2006, the Company executed a $750,000 promissory note payable a
director of the Company, secured by the accounts receivable of the note
holder.  The note carries an interest rate of 8% per
annum.  Interest is payable each calendar quarter, commencing with the
quarter ended December 31, 2006.  All principal is payable if full,
with accrued interest, on December 31, 2008.  At the option of the
note holder, any quarterly interest or the principal may be paid in cash or in
shares of the Company’s common stock or a combination of cash or
shares.  Any shares issued shall have a value of $ .08 per share for
purposes of calculating the amount of principal or interest paid by the issuance
of each share.  The proceeds from this note were used to funds to
Capstone acquisition.  As of December 31, 2006, the total amount
payable on the note was $767,589, including $17,589 of accrued
interest.  On November 2, 2007, the Company issued 312,536 shares of
its Preferred Series B stock valued at $750,000 as payment for $750,000 in
principal.  During the year ended December 31, 2007, the Company paid
accrued interest of $62,465.  At December 31, 2007, the balance owed
on this note was $0.




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, 2008, the total amount payable on this note was
$546,025.  Interest payments are being made monthly to the
noteholder.




Overseas
Building Supplies - Notes Payable to Director




On
December 14, 2006, Overseas Building Supply received proceeds from a note
payable of $2,500 to a director. During the quarter ended March 31, 2007,
Overseas Building Supply received proceeds from additional notes payable of
$24,000.  The notes carry an interest rate of 8% per annum and are due
on demand.  On November 2, 2007, the Company issued 11,043 shares of
its Series B Preferred stock valued at $26,500 as payment for $26,500 in
principal.  During the year ended December 31, 2007, the Company paid
accrued interest of $1,125.  At December 31, 2007 and December 31,
2006, the total amount due on these loans was $0 and $2,510,
respectively.


15
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
4 – NOTES AND LOANS PAYABLE TO RELATED PARTIES (continued)




China
Direct and Souvenir Direct - Loans Payable to Director




During
the period from August 24, 2006 through November 30, 2006, a director made loans
to the Company totaling $490,000, including $10,000 to the Company’s wholly
owned subsidiary, Souvenir Direct, Inc.  The loans carry interest of
8% and are payable on demand.  In November 2006, the Company repaid
$50,000 of this amount.  During the quarter ended March 31, 2007, the
Company repaid $278,975 of these loans and received an additional $33,000 in
proceeds from loans.  On November 2, 2007, the Company issued 81,060
shares of its Series B Preferred stock valued at $194,525 as payment for
$194,525 in principal.  During the year ended December 31, 2007, the
Company paid accrued interest of $20,266.  As of December 31, 2006,
the total amount payable on these loans was $448,738, including $8,738 of
accrued interest.  At December 31, 2007, the total amount payable on
these loans was $0.




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.  At March 31, 2008, the total amount payable on this loan was
$108,892, including interest of $5,892.




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.  At March 31, 2008, the total
amount payable on these loans was $155,162, including interest of
$5,162.




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.  At March 31, 2008, the total amount
payable on this loan was $100,438, including interest of $438.


16
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
4 – NOTES AND LOANS PAYABLE TO RELATED PARTIES (continued)




Based on
the above, the total amount payable to officers and directors as of March 31,
2008 and December 31, 2007 was $910,518 and $1,234,330, respectively, including
accrued interest of $11,492 and $13,305, respectively.




The
maturities under the notes and loan payable to related parties for the next five
years are:





Year Ended December 31,2008
            $364,4932009
            546,0252010
            -2011
            -2012
            -Total
      future maturities
            $910,518




NOTE
5 – INVESTOR LOANS PAYABLE




In March,
2006, the Company executed notes payable to an investor of $25,500 and $24,500,
totaling $50,000.  The notes carry an interest rate of 10% per annum
and are payable if full, with accrued interest, in March 2008.  The
notes are secured by shares of the Company’s common stock and convertible into
the Company’s common stock.  As of December 31, 2006, the total amount
payable on the notes was $54,038, including $4,038 of accrued
interest.




Interest
shall be payable, at the option of the note holder, in cash or in shares of the
Company’s common stock.  The number of common shares to be issued as
payment of accrued and unpaid interest shall be determined by dividing the total
amount of accrued and unpaid interest to be converted in common stock by the
Conversion Price. The Note shall be convertible (in whole or in part), at the
option of the note holder, into a number of fully paid and non-assessable shares
of common stock, by dividing that portion of the outstanding principal balance
plus any accrued but unpaid interest as of the conversion date by the Conversion
Price.




The
Conversion Price shall mean a price no lower than $ .03 and higher than $ .04
which will be the average of the closing bid price (adjusted for stock splits,
combinations, certain dividends and distributions, reclassification, exchange or
substitution, reorganization, merger, consolidation or sales of asses, issuances
of additional shares of common stock, and issuance of common stock equivalents)
for ten days trading preceding the conversion date.




In March
2007, the note holders elected to convert the notes payable and accrued
interest, totaling $55,052, into a total of 1,835,050 shares of the Company’s
common stock, at a conversion price of $ .03 per share.




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 $4,145 per
month.




Rental
expense under these leases was approximately $10,887 and $5,645 for the three
months ended March 31, 2008 and 2007, respectively.


17
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




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.





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, 2007, the Company has paid $50,000
in royalty expense to AASTP that is included as part of selling
expenses.




Future
guaranteed minimum royalty payments are as follows:




Guaranteed
      MinimumYear
            
            
            Royalty
      Payments2008
            
            $
            125,0002009
            
            $
            350,0002010
            
            $
            375,000$
            850,000




NOTE
8 - STOCK TRANSACTIONS




Common
Stock




In
February 2007, the Company issued 1,428,571 shares of common
stock  for consulting fees valued at $50,000.  The shares
were valued at $.035 per share.




In
February 2007, the Company issued 250,000 shares of common stock for cash of
$5,000.




In
February 2007, the Company issued 468,750 shares of common stock for notes
payable totaling $16,761.




In March
2007, the Company issued 3,031,000 shares of common stock for accrued
compensation of $100,000.




In March
2007, the Company issued 757,575 shares of common stock for officers
compensation valued at $25,000.  The shares were valued at $.033 per
share.




In March
2007, the Company issued 1,835,050 shares of common stock for investor loans
payable totaling $55,051.




In May
2007, the Company issued 500,000 shares of common stock for expenses totaling
$15,000.




In August
2007, the Company issued 105,882 shares of common stock for legal expenses of
$1,800.


18
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
8 - STOCK TRANSACTIONS (continued)




In August
2007, the Company issued 2,804,947 shares of common stock for notes payable of
$252,445.




In August
2007, the Company issued 2,500,000 shares of common stock for accrued expenses
of $50,000.




In August
2007, the Company issued 340,909 shares of common stock for consulting expenses
of $7,500.




In August
2007, the Company issued 112,510 shares of common stock for legal expenses of
$1,800.




In
September 2007, the Company issued 19,470,588 shares of common stock for cash of
$331,000.




In
October 2007, the Company issued 12,352,941 shares of common stock for cash of
$210,000.




In
November 2007, the Company issued 50,000 shares of common stock for legal
expenses of $1,800.




In
November 2007, the Company issued 275,000 shares of common stock for consulting
fees of  $9,100.




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.




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” 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” 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” preferred stock were
exchanged for 6,500,000 shares of the Company’s common stock.


19
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
8 - STOCK TRANSACTIONS (continued)




As of
March 31, 2008, a total of 60 shares of series “A” preferred stock were issued
and outstanding, and are convertible into common shares, at a rate of 1,000
shares of common stock for each share of series “A” preferred stock and are
redeemable at the option of the Company.




Series
“B” Preferred Stock




In
January 2006 the Company sold 657,000 shares of its series “B” 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” 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” 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” 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” 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 Preferred
stock.




The
series “B” preferred shares are convertible into common shares, at a rate of
66.66 shares of common stock for each share of series “B” preferred
stock.




Warrants




The
Company has issued stock warrants 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.  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.


20
 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, 2007, the
Company recognized compensation expense of $29,214 related to these stock
options in 2007.  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 $43,821 in 2008and $14,607 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 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.





The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. During the year ended December 31, 2007, the
Company recognized compensation expense of $503,075 related to these stock
options in 2007.  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 $754,613 in 2008, $754,613 in
2009, $754,613 in 2010, and $251,537 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.


21
 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, 2007, the
Company recognized compensation expense of $1,330 related to these stock options
in 2007.  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 $7,978 in 2008and $6,648 in 2009
related to these stock options.





During
the three months ended March 31, 2008, the Company granted 4,150,000 stock
options to employees and directors of the Company.  The options vest
over one and two years.





The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. During the three months ended March 31, 2008,
the Company recognized compensation expense of $19,700 related to these stock
options..  The following assumptions were used in the fair value
calculations:





Risk free rate – 1.93% to
3.91%


Expected term – 2 to 11
years


Expected volatility of stock – 133.31%
to 133.83%


Expected dividend yield –
0%


Suboptimal Exercise Behavior Multiple –
2.0


Number of Steps – 100





The
Company will recognize compensation expense of $78,534 in 2008.related to these
stock options.





The
following table summarizes the information with respect to options granted,
outstanding and exercisable under the 2005 plan:





Exercise Price
            OptionsOutstanding
            RemainingContractual
      Life in Years
            AverageExercise
      Price
            Number
      of OptionsCurrently
      Exercisable$.02
            250,000
            7
            $.02
            250,000$.029
            130,500,000
            10
            $.029
            26,100,000$.029
            4,000,000
            11
            $.029
            -0-$.029
            700,000
            12
            $.029
            -0-$.029
            1,000,000
            10
            $.029
            -0-$.029
            150,000
            10
            $.029
            -0-$.029
            2,500,000
            2
            $.029
            -0-$.029
            500,000
            11
            $.029
            -0-


22
 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 China Direct 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 maturiy 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 China Direct under a promissory note in the original principal
amount of $250,000, executed by William Dato on June 27, 2006 and payable to
China Direct, 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 is continuing with legal
action to collect this judgment.




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.


23
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
9 – BUSINESS ACQUISITIONS AND DISPOSALS (continued)




In
connection with the disposal of CPS, the Company recorded a gain from
discontinued operations of $149,424 at December 31, 2006.  The gain
from discontinued operations consists of the following unaudited
amounts:







(Unaudited)For
      the Years EndedDecember
      31,2007
            
            
            2006Net
      loss from discontinued operations
            
            $
            -
            
            
            $
            (518,902
            )Net
      gain on disposal of discontinued operations
            
            
            -
            
            
            
            668,326Income
      (Loss) from discontinued operations
            
            $
            -
            
            
            $
            149,424




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.
China Direct 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:




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.


24
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
10 - INCOME TAXES




As of
December 31, 2007, the Company had a net operating loss carryforward for income
tax reporting purposes of approximately $2,218,000 that may be offset against
future taxable income through 2027. 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.







2007
            
            
            2006Net
      Operating Losses
            
            $
            454,690
            
            
            $
            292,945Valuation
      Allowance
            
            
            (454,690
            )
            
            
            (292,945
            )$
            -
            
            
            $
            -





The
provision for income taxes differ from the amount computed using the federal US
statutory income tax rate as follows:


2007
            
            
            2006Provision
      (Benefit) at US Statutory Rate
            
            $
            (161,745
            )
            
            $
            (84,660
            )Increase
      (Decrease) in Valuation Allowance
            
            
            161,745
            
            
            
            84,660$
            -
            
            
            $
            -





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.




NOTE 11 – CONTINGENCIES





Celeste
Trust Reg., Esquire Trade, et al. v. CBQ, Inc and Deposit on Acquisition of
Treasury Stock




Celeste Trust Reg., Esquire Trade,
et al. v. CBQ, Inc. (Case# 03 Civ. 9650 RMB; US District Court, SDNY,
12/4/2003). As of the date of this Report, the plaintiffs in  this
action have not taken any known actions to perfect an appeal the dismissal of
their amended complaint (see
below). As such, there have been no new developments in this case since
the refusal of the Court of Appeals for the Second Circuit in 2006 to accept an
appeal of the dismissal of plaintiffs’ amended complaint.





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


25
 CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS




NOTE
11 – CONTINGENCIES (continued)





Plaintiffs
are awarded the claimed damages against the Company in this lawsuit, the Company
would be unable to pay such damages, either in a lump-sum or under a schedule,
and would be insolvent.




The
Plaintiff's complaint in Celeste was dismissed by the U.S. District Court for
the Southern District of New York in early 2005 for failure to have all
essential parties to the dispute as parties to the lawsuit. The Plaintiffs filed
an amended complaint prior to the March 1, 2005 deadline for doing so. The
Company defended against the Plaintiff's amended complaint, which added two
former, now defunct, subsidiaries involved in the STC transaction as defendants.
The assets of Networkland, Inc. and Technet Computer Services Corporation were
acquired by the Company on March 15, 2001 and that transaction is at the heart
of the dispute in the Celeste case.The
Court also dismissed the Plaintiff’s amended complaint on July
20,  2006. The Plaintiffs filed an appeal in September 2006 to the
adverse order issued by the Court dismissing the amended
complaint.  The appeal, however, was not accepted by the Court in
October 2006 because there is a pending, unresolved motion for default judgment
against the other defendants, Networkland, Inc. and Technet Computer Services
Corporation, who are two former subsidiaries of Socrates Technologies
Corporation, a defunct Delaware corporation, and not owned by or affiliated with
China Direct. The staff attorney for the 2nd Circuit
stated that said motion must be resolved before the Court will entertain any
appeal.  The Company is not a party to the pending motion for default
judgment before the trial court; however,  the Company filed an
opposition to the motion for default judgment. As of date of this Report, the
Company is not aware of any action by the plaintiffs to date to resolve or
remove the pending motion for default judgment against the other defendants in
order to clear the way for an appeal of the judgment entered in favor of
for  Company by the Court.   While the Company is
confident of prevailing in  this matter, the Company is uncertain at
this time of the final outcome motion for default against the other defendants
or whether the plaintiffs intend to pursue this litigation further.




Sun
Trust Bank Dispute. Sun Trust Bank line of credit and term note




Prior to
being acquired by the company, 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 in 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.




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 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.


26
 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





During
the year ended December 31, 2007, the Company capitalized $73,012 of product
development costs related to the production of the Company’s AASTP
products.  During the three months ended March 31, 2008, the Company
capitalized $18,883 of product development costs related to the production of
the Company’s AASTP products.  These costs will be amortized over
their useful life, which the Company has determined to be two
years.   At March 31, 2008, amortization expense of $11,487 has
been recorded.





NOTE
14 – UNCERTAIN TAX POSITIONS





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, 2007, 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 nine months ended September 30, 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 January 1,
2007:





United
      States (a)
            
            2004
      – Present(a)
      Includes federal as well as state or similar local jurisdictions, as
      applicable.





NOTE
15 – SUBSEQUENT EVENTS





On May 1,
2008, Capstone Industries secured a conventional $2,000,000 asset based line of
credit from Sterling National Bank, located in New York City.





27


28


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”).   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-KSB for the year ended
December 31, 2007.





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, 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,
2008 compared to the three months ended March 31, 2007; 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. We conduct our business through wholly owned
operating subsidiaries.  Our current, sole wholly-owned operating
subsidiary is Capstone Industries, Inc., a Florida corporation, (“Capstone”) and
Capstone currently operates in four primary consumer product business segments:
Automotive Accessories  Comfort Products, Lighting and Power
Tools.





Our
growth strategy has four main strategies:





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.
            Possibly
      supplement such efforts through acquiring businesses that have innovative
      products that would compliment our existing marketing
      strategies.


29


Capstone  Lighting
products  consists of 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, task lights, flashlights and
lighted magnifiers and also offers “Private Label” programs to
major retailers.  “Private Label” is the manufacture of products by a
company whereby those products  are sold under the name or trade name
of the manufacturer’s retailers, distributors or bulk
buyers.  Capstone will be introducing several new book lights and
eco-friendly lights this year, that have been developed in association with the
engineers from the STP®
tools business unit.





Simply Comfort products are a
collection of uniquely designed MP3 speaker comfort products made with various
foams including memory foam.   We expect  to expand
this product line in 2008 as retail placement develops.





STP®-
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 also uses a Universal Battery
System.   We expect this category to expand with the release of
new products.





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, weather center, creeper, mechanics chair and bar stool and the STP®-branded
Tailgate Power – portable power station.  We expect this category to
expand with the release of new products.





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 and automotive accessories 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
by responsive customer service.  We also seek to license established
trade names to assist in competing with larger competitors.  STP®
is an example  of  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 or
Mikita, or  Dewalt .  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.





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 2007 and the first quarter of 2008, but we believe that
this investment in corporate infrastructure is necessary to


30


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
three months ended March 31, 2008 and 2007, the Company’s revenues were derived
from 3 sources: (i) the sale of our booklight and tasklight products (Capstone
and its booklight/tasklight product line was acquired by CHDT in September
2006); (ii) sale of promotional, gift and souvenir items by our recently sold
SDI subsidiary; and (iii) 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 2007, 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.  While we
have secured  bank financing for operations in the
second  quarter of fiscal year 2008
for  Capstone  operations, we may have to continue to raise
working capital for 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.





On May 1,
2008, Capstone Industries secured a conventional $2,000,000 asset based line of
credit from Sterling National Bank, located in New York City.





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.





We intend
to address the above problems in public and market maker support for our Common
Stock by: (1) establishing profitability 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.





31


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, 2008, the Company had a net loss from continuing
operations of approximately $587,988. For the three months ended March 31, 2007
the Company had a net loss from operations of $252,568. That is a net loss
increase of $335,420 over 2007 results. The major reason for this additional
loss was the increase over 2007 in Compensation Expense of
$375,591  and General Administrative Expense of $171,143. In the first
quarter 2007 we did not have the full cost impact of the new management
team.





Total Revenues: For the three
months ended March 31, 2008 and 2007, the Company had total sales of
approximately $574,000 and $211,000 respectively, for an increase of $363,000,
which represents a 172% increase over 2007. All of the revenue was generated by
CHDT’s Capstone subsidiary, which through new product releases expanded its book
light programs with several major national retailers and made its first shipment
of STP® tools products.





Cost of Sales:For the three
months ended March 31, 2008 and 2007, we had cost of sales of approximately
$320,000 and $138,000, respectively.  This cost represents 55.8% and
65.4% respectively of total Revenue. As a percentage of Total Revenue costs have
reduced from the same period last year by 9.6%. This is a direct result of the
improved mix or products now being sold. In first quarter 2007 Revenue included
low margin Souvenir and novelty product lines. These product lines was sold off
at the end of 2007





Gross Profit: For the three
months ended March 31, 2008, gross profit was approximately $254,000, increased
by approximately $181,000 or 248% over $73,000 in 2007. Gross profit as a
percentage of sales was 44.3% for the first quarter of 2008 as compared to 34.6%
for the first quarter of 2007. This  Gross Profit increase is
attributed directly to the increase in product sales volume combined with the
improved mix of products offering higher margins than in the same period
2007





Operating Expenses:For the
three months ended March 31, 2008 and 2007, operating expenses were $818,000 and
$302,000 respectively. This is an  increase  of
approximately $516,000 from 2007  This increase can be attributed to
various factors, noted below





Employee
compensation increased by $375,000 from $96,000 in the first quarter of 2007 to
$471,000 in the first quarter of 2008. This was the result of hiring executives
to build up the management structure for CHDT and the hiring of experienced
sales executives to assist in launching Capstone’s new product lines, STP-branded tools and Simply
Comfort.  CHDT also recognized in the compensation expense
approximately $221,000 for stock options granted in 2007 and 2008.





Consulting
Expenses reduced by $38,000 from approximately $66,000 in the first quarter of
2007 to $28,000 in the first quarter 2008.





Other
General and administrative expenses increased approximately by $171,000 from
$79,000 in the first quarter of 2007 to $250,000 in the first quarter of
2008.  The main reasons for these expenses were directors and officers
insurance premiums of approximately $15,000, STP License costs: $25,000,
increased Travel: $20,500, Office Rent Expense:  $12,000, Storage and
Warehousing: $12,500. Product Sample Expenses $25,000. The increased expense was
related to  Capstone’s  support for  the STP-branded tools product
line and additional expenses related to the CHDT management
infrastructure.





Other Income (Expense):
Interest Expense decreased for the three months ended March 31, 2008 by
approximately $3,100 from $27,500 in the three months ended March 31, 2007 to
$24,400 in the three months ended March 31, 2008. This decreased expense is the
result of loans being paid off by the Company.





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.





32


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





Country
Risks.  Almost all of our contract manufacturing operations and
sources of products are located in 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.





China has
been under 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.
dollars is the currency of 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, 2008.





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.





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




33




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, 2008 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-KSB for the year ended December 31,
2007, for a more complete understanding of the matters covered by such
certifications.





34


PART
II — OTHER INFORMATION





Item 1. Legal
Proceedings.





Other
than as set forth below,  we are not a party  to
any  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. (Case# 03 Civ. 9650 RMB; US District Court, SDNY,
12/4/2003):   This action was brought by certain debenture
holders of Socrates Technologies Corporation (“STC”), a defunct Delaware
corporation, against us for allegedly purchasing certain operating assets of
STC’s subsidiaries in March 2001, which assets were allegedly pledged as
collateral for the STC debentures and which acquisition allegedly violated the
STC debentures’ terms. Plaintiffs are seeking the value of the transferred
assets.





There
have been no new developments or activity in this lawsuit in fiscal year 2007.
As of date of this Report, we are not aware of any action by the plaintiffs to
resolve the pending motion for default judgment against the other defendants in
order to clear the way for an appeal of the judgment entered in our favor by the
trial court, which dismissed the plaintiffs’ initial complaint and then amended
complaint in 2006.  While we are confident of prevailing in this
matter with respect to claims against us it, we are
uncertain at this time of the final outcome of the motion for default against
the other defendants or whether the plaintiffs intend to pursue this litigation
any further.  An adverse judgment in this lawsuit against us, if not
overturn on appeal or settled on favorable terms, would have potentially ruinous
impact on our ability to effectively pursue our business plan and to achieve our
business goals.  We, however, intend to vigorously litigate in this
matter if the plaintiffs seek to appeal their case or obtain a default judgment
against the other defendants.





CPS (Complete Power
Solutions, LLC): As part of the January 26, 2007
Purchase and Settlement Agreement between CPS, CHDT and other parties, CPS
issued of a promissory note  to us in the principal  amount
of $225,560,  bearing annual interest at 7% with
interest-only  payments commencing on July 1,  2007 and
thereafter  being paid quarterly on  October 1st,
January 1st , April
1st
and July1st until
the  principal and all unpaid  interest  thereon
shall become due and payable on the maturity date,  being January 26,
2010, (the "2007 Promissory Note").  The 2007 Promissory Note provides
that if principal and accrued interest thereon is not paid in full by the
maturity date,  then 2007  Promissory  Note's
maturity  date will be roll over for  successive one-year
periods until paid in full.  For any roll over period, the
annual  interest will be increased to 12%.





CPS is
also indebted to us under a second promissory note in the original
principal  amount
of  $250,000,  executed  by Dato on June 27, 2006
and payable to us,  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 for funds
advanced by CPS for  portable  generators  which
were never  delivered  and (ii) $15,000 as an agreed amount
paid to compensate CPS for refunds required to be made to clients of CPS for
cancelled  sales made  personally  by
Howard  Ullman (which amounts  have
been  applied  first 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
Note to maturity (June 30, 2007),  and then to reduce the
principal  amount of the 2006  Promissory  Note to
$210,900).  CPS have failed in their responsibility to pay interest
and principal payments and laid out in both notes and agreement. As a result we
have been forced to take legal action to collect all outstanding amounts
including full payment of principals.





On March
10th, 2008
we were granted a Final Summary judgment against CPS (Case # CACE07-19082(25)
17th
Judicial Court, Broward County, Florida) for the following amounts June note
$238,748.90 and January note $262,990.88 for a total of $501,739.78. We are now
continuing with a legal action to collect this judgment.





35


Potential
Litigation.  CYBERQUEST,  INC.:   There
have been no new developments in  this matter in fiscal year
2007.  We received two claims from certain former shareholders of
Cyberquest, Inc.  in  the summer of 2006.  They
claimed  to  hold  or  own
approximately  70,000  shares of our Series A
redeemable  preferred stock issued in our 1998 acquisition of
Cyberquest.  Cyberquest ceased operations in 2000-2001
period.  We have investigated these claims and has not
been  able to date to  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.  We have not received any further claims or communications
since the late summer of 2006. We are uncertain at this point if the claimants
will pursue or press the aforementioned claim of preferred stock
ownership.





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.





We are
not  currently  a party to any other
legal  proceedings  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, 2008, there were no material changes to the
risk factors previously disclosed in our Annual Report on Form 10-KSB for the
year ended December 31, 2007.





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





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 Preferred
stock.




In
February 2008, the Company issued 1,584,000 shares of common stock for accrued
directors fees of $40,000.




In
February 2008, 6,500 shares of the Company’s series “A” preferred stock were
exchanged for 6,500,000 shares of the Company’s common stock.




In March
2008, the Company issued 112,000 shares of common stock for consulting expenses
of $2,500.





Item 3.  Defaults
Upon Senior Securities





None.





Item
4.  Submission of Matters to Vote of Security
Holders





None.





Item 5.  Other
Information





None.





36


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.





37


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 14th
day of May 2008.





CHDT
CORPORATION





Dated:   May
14, 2008








/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