UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q








xQUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 2010








oTRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period
from               to





Commission
File Number: 000-28831





CHDT
CORPORATION




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





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





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





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





Indicate
by check mark whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.xYesoNo





Indicate
by check mark whether the registrant is a large accelerated file, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer   o(Do not check if a
      smaller reporting company)
            Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


oYes           xNo





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, 2010, there were
648,632,786 shares of the issuer's $.0001 par value common stock issued and
outstanding.














PART
I - FINANCIAL INFORMATION





Item 1.  Financial
Statements




CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS(Unaudited)March
      30,
              
              
              December
      31,2010
              
              
              2009Assets:Current
      Assets:Cash
              
              $
              216,418
              
              
              $
              266,867Accounts
      receivable - net
              
              
              133,902
              
              
              
              1,341,883Inventory
              
              
              497,693
              
              
              
              397,908Prepaid
      expense
              
              
              155,695
              
              
              
              57,076Total
      Current Assets
              
              
              1,003,708
              
              
              
              2,063,734Fixed
      Assets:Computer
      equipment & software
              
              
              64,047
              
              
              
              63,448Machinery
      and equipment
              
              
              466,325
              
              
              
              461,146Furniture
      and fixtures
              
              
              5,665
              
              
              
              5,665Less:
      Accumulated depreciation
              
              
              (385,890
              )
              
              
              (353,854
              )Total
      Fixed Assets
              
              
              150,147
              
              
              
              176,405Other
      Non-current Assets:Product
      development costs - net
              
              
              40,551
              
              
              
              44,756Goodwill
              
              
              1,936,020
              
              
              
              1,936,020Deposits
              
              
              -
              
              
              
              15,000Total
      Other Non-current Assets
              
              
              1,976,571
              
              
              
              1,995,776Total
      Assets
              
              $
              3,130,426
              
              
              $
              4,235,915







CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS(Continued)(Unaudited)March
      30,
              
              
              December
      31,2009
              
              
              2009Liabilities
      and Stockholders’ Equity:Current
      Liabilities:Accounts
      payable and accrued expenses
              
              $
              523,477
              
              
              $
              306,196Note
      payable - Sterling Bank
              
              
              215,104
              
              
              
              1,277,151Notes
      and loans payable to related parties - current maturities
              
              
              1,397,113
              
              
              
              1,198,288Total
      Current Liabilities
              
              
              2,135,694
              
              
              
              2,781,635Total
      Liabilities
              
              
              2,135,694
              
              
              
              2,781,635Stockholders'
      Equity:Preferred
      Stock, Series A, par value $.001 per shareAuthorized
      100,000,000 shares, issued -0- sharesat
      March 31, 2010 and December 31, 2009
              
              
              -
              
              
              
              -Preferred
      Stock, Series B, par value $.10 per shareAuthorized
      100,000,000 shares, issued -0- sharesat
      March 31, 2009 and December 31, 2009Preferred
      Stock, Series B-1, par value $.0001 per share
              
              
              -
              
              
              
              -Authorized
      2,108,813 shares, issued -0- sharesat
      March 31, 2010 and December 31, 2009
              
              
              -
              
              
              
              -Preferred
      Stock, Series C, par value $1.00 per shareAuthorized
      1,000 shares, issued 1,000 sharesat
      March 31, 2010 and December 31, 2009
              
              
              1,000
              
              
              
              1,000Common
      Stock, par value $.0001 per shareAuthorized
      850,000,000 shares,Issued
      648,632,786 shares at March 31, 2010and
      December 31, 2009
              
              
              64,863
              
              
              
              64,863Related
      party receivable
              
              
              (40,441
              )
              
              
              (40,441
              )Additional
      paid-in capital
              
              
              6,782,974
              
              
              
              6,734,720Accumulated
      deficit
              
              
              (5,813,664
              )
              
              
              (5,305,862
              )Total
      Stockholders' Equity
              
              
              994,732
              
              
              
              1,454,280Total
      Liabilities and Stockholders’ Equity
              
              $
              3,130,426
              
              
              $
              4,235,915The
      accompanying notes are an integral part of these financial
      statements.





CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS(Unaudited)For
      the Three Months EndedMarch
      30,2010
              
              
              2009Revenues
              
              $
              353,036
              
              
              $
              1,697,927Cost
      of Sales
              
              
              (238,256
              )
              
              
              (1,195,754
              )Gross
      Profit
              
              
              114,780
              
              
              
              502,173Operating
      Expenses:Sales
      and marketing
              
              
              102,928
              
              
              
              60,230Compensation
              
              
              287,584
              
              
              
              277,109Professional
      fees
              
              
              54,583
              
              
              
              35,866Product
      Development
              
              
              35,392
              
              
              
              56,927Other
      general and administrative
              
              
              108,239
              
              
              
              294,877Total
      Operating Expenses
              
              
              588,726
              
              
              
              725,009Net
      Operating Income (Loss)
              
              
              (473,946
              )
              
              
              (222,836
              )Other
      Income (Expense):Debt
      forgiveness
              
              
              -
              
              
              
              0Miscellaneous
      income
              
              
              -
              
              
              
              57Interest
      expense
              
              
              (33,856
              )
              
              
              (76,711
              )Interest
      income
              
              
              -
              
              
              
              0Total
      Other Income (Expense)
              
              
              (33,856
              )
              
              
              (76,654
              )Net
      Income (Loss)
              
              $
              (507,802
              )
              
              $
              (299,490
              )Income
      (Loss) per Common Share
              
              $
              -
              
              
              $
              -Weighted
      Average Shares Outstanding
              
              
              648,632,786
              
              
              
              558,980,535The
      accompanying notes are an integral part of these financial
      statements.










CHDT
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS(Unaudited)For
      the Three Months EndedMarch
      30,2010
              
              
              2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Continuing
      operations:Net
      Income (Loss)
              
              $
              (507,802
              )
              
              $
              (299,490
              )Adjustments
      necessary to reconcile net lossto
      net cash used in operating activities:Stock
      issued for expenses
              
              
              -
              
              
              
              21,000Depreciation
      and amortization
              
              
              42,242
              
              
              
              52,787Compensation
      expense from stock options
              
              
              48,254
              
              
              
              46,134(Increase)
      decrease in accounts receivable
              
              
              1,207,980
              
              
              
              2,131,923(Increase)
      decrease in inventory
              
              
              (99,785
              )
              
              
              10,166(Increase)
      decrease in prepaid expenses
              
              
              (98,619
              )
              
              
              (150,246
              )(Increase)
      decrease in deposits
              
              
              15,000
              
              
              
              -(Increase)
      decrease in other assets
              
              
              (6,001
              )
              
              
              (6,834
              )Increase
      (decrease) in accounts payable and accrued expenses
              
              
              217,281
              
              
              
              (1,500,163
              )Increase
      (decrease) in accrued interest on notes payable
              
              
              12,264
              
              
              
              13,091Net
      cash provided by (used in) operating activities
              
              
              830,814
              
              
              
              318,368CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of property and equipment
              
              
              (5,777
              )
              
              
              (440
              )Net
      cash provided by (used in) investing activities
              
              
              (5,777
              )
              
              
              (440
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from notes payable
              
              
              -
              
              
              
              150,000Repayments
      of notes payable
              
              
              (1,062,047
              )
              
              
              (483,389
              )Proceeds
      from notes and loans payable to related parties
              
              
              192,000
              
              
              
              -Repayments
      of notes and loans payable to related parties
              
              
              (5,439
              )
              
              
              -Net
      cash provided by financing activities
              
              
              (875,486
              )
              
              
              (333,389
              )Net
      (Decrease) Increase in Cash and Cash Equivalents
              
              
              (50,449
              )
              
              
              (15,461
              )Cash
      and Cash Equivalents at Beginning of Period
              
              
              266,867
              
              
              
              156,371Cash
      and Cash Equivalents at End of Period
              
              $
              216,418
              
              
              $
              140,910SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
              
              $
              21,592
              
              
              $
              58,452Franchise
      and income taxes
              
              $
              -
              
              
              $
              -SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:NONE.The
      accompanying notes are an integral part of these financial
      statements.


CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  This
summary of accounting policies for CHDT Corporation, a Florida corporation
(formerly, “China Direct Trading Corporation”) (“Company” or “CHDT”) and its
wholly-owned subsidiaries (“Subsidiaries”) is presented to assist in
understanding the Company's financial statements. The accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.  CHDT changed
its name to “CHDT Corporation” by amending its Articles of Incorporation, which
name change was effective July 16, 2007 in respect of NASD Regulation, Inc. and
OTC Bulletin Board approval of the name change, the trading symbol change from
“CHDT.OB” to “CHDO.OB” and change in CUSIP Number for CHDT Common Stock and
effective May 7, 2007 in terms of approval by the State of Florida of the
charter amendment.
  Interim
Financial Statements
  The
unaudited financial statements as of March 31, 2010 and for the three month
periods ended March 31, 2010 and 2009 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 and
nine months.  Operating results for interim periods are not
necessarily indicative of the results which can be expected for full
years.
  Organization
and Basis of Presentation
  CHDT was
initially incorporated September 18, 1986 under the laws of the State of
Delaware under the name "Yorkshire Leveraged Group, Incorporated", and then
changed its domicile situs to Colorado in 1989 by merging into a Colorado
corporation, named "Freedom Funding, Inc." Freedom Funding, Inc. then changed
its name to "CBQ, Inc." by amendment of its Articles of Incorporation on
November 25, 1998. In May 2004, the Company changed its name from “CBQ, Inc.” to
“China Direct Trading Corporation” as part of a reincorporation from the State
of Colorado to the State of Florida.  Effective May 7, 2007, the
Company amended its charter to change its name from “China Direct Trading
Corporation” to “CHDT Corporation.”  This name change was effective as
of July 16, 2007 for purposes of the change of its name on the OTC Bulletin
Board.
  Souvenir
Direct, Inc. was incorporated on September 9, 2002 under the laws of the State
of Florida.  On December 1, 2003, CHDT issued 97 million shares common
stock to acquire 100% of the outstanding common stock of Souvenir Direct, Inc.
in a reverse acquisition. At that time, a new reporting entity was created.
Souvenir Direct, Inc. was 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.  Souvenir Direct, Inc. operations were transferred to
Capstone Industries, Inc. in the first quarter of fiscal year 2007 and Souvenir
Direct, Inc.’s operating assets were sold on December 1, 2007 to an unaffiliated
buyer.
  In
February 2004, the Company established a new subsidiary, initially named “China
Pathfinder Fund, L.L.C.”, a Florida limited liability company. During 2005, the
name was changed to “Overseas Building Supply, LLC” to reflect its shift in
business lines from business development consulting services in China for North
American companies to trading Chinese-made building supplies in South
Florida.  This business line was ended in fiscal year 2007 and OBS’
name was changed to “Black Box Innovations, L.L.C.” (“BBI”) on March 20,
2008.
  On
January 27, 2006, the Company entered into a Purchase Agreement with Complete
Power Solutions ("CPS") to acquire 51% of the member interests of CPS. CPS was
organized by William Dato on September 20, 2004, as a Florida limited liability
company to distribute power generators in Florida and adjacent
states.  The Company subsequently sold its 51% membership interest in
CPS, pursuant to a Purchase and Settlement Agreement dated and effective as of
December 31, 2006.
  On
September 13, 2006 the Company entered into a Stock Purchase Agreement with
Capstone Industries, Inc., a Florida corporation (Capstone).  Capstone
was incorporated in Florida on May 15, 1996 and is engaged primarily in the
business of wholesaling low technology consumer products to distributors
and retailers in the United States.
  Nature
of Business
  Since the
beginning of fiscal year 2007, the Company has been primarily engaged in the
business of marketing and selling consumer products through national and
regional retailers and distributors, in North America.  Capstone
currently operates in four primary business segments: Lighting Products, Power
Tools, Automotive Accessories and Computer peripherals.  The Company’s
products are typically manufactured in the Peoples’ Republic of China by
third-party manufacturing companies.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  Cash
and Cash Equivalents
  The
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents, to the extent the funds are not
being held for investment purposes.
  Allowance
for Doubtful Accounts
  An
allowance for doubtful accounts is established as losses are estimated to have
occurred through a provision for bad debts charged to earnings.  The
allowance for bad debt is evaluated on a regular basis by management and is
based upon management’s periodic review of the collectability of the
receivables.  This evaluation is inherently subjective and requires
estimates that are susceptible to significant revisions as more information
becomes available.
  As of
December 31, 2009, management has determined that the accounts receivable are
fully collectible.  As such, management has not recorded an allowance
for doubtful accounts.
  Inventory
  The
Company's inventory, which is recorded at lower of cost (first-in, first-out) or
market, consists of finished goods for resale by Capstone, totaling $497,693 and
$397,908 at March 31, 2010 and December 31, 2009, respectively.
  BBI
(previously “Overseas Building Supply, L.C.”) had inventory of $40,441 at
December 31, 2007.  During 2008, a director and shareholder of the
Company took the remaining inventory of BBI and agreed to pay the Company for
the cost of the inventory, which was $40,441.  As a result, the
inventory was removed from the balance sheet as an asset, and a shareholder
receivable was recorded and disclosed in the equity section of the balance
sheet.
  Property
and Equipment
  Fixed
assets are stated at cost. Depreciation and amortization are computed using the
straight- line method over the estimated economic useful lives of the related
assets as follows:
 
 Computer
      equipment
              3 -
      7 yearsComputer
      software
              3 -
      7 yearsMachinery
      and equipment
              3 -
      7 yearsFurniture
      and fixtures
              3 -
      7 years
  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 2009 and the first quarter of
2010.
  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 $32,037 and $31,805 for the three months ended March 31, 2010 and
2009, respectively.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  Goodwill
and Other Intangible Assets
  Intangible assets acquired, either
individually or with a group of other assets (but not those acquired in a
business combination), are initially recognized and measured based on 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.
  The cost
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 circumstances 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.  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 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,
2009, whereas the fair value of the intangible asset exceeds its carrying
amount.
  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, 2010 and 2009 are not presented as it would
be anti-dilutive.  At March 31, 2010 and 2009, the total number of
potentially dilutive common stock equivalents was 152,971,577 (Includes
4,925,000 options which vest within 60 days) and 203,295,071,
respectively.
  Principles
of Consolidation
  The
consolidated financial statements for the three months ended March 31, 2010 and
2009 include the accounts of the parent entity and its wholly-owned subsidiaries
Black Box Innovations, L.L.C., and Capstone Industries, Inc.
  The
results of operations attributable to subsidiaries are included in the
consolidated results of operations beginning on the date on which the Company’s
interest in a subsidiary was acquired.
  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, 2010 and 2009
approximates their fair values due to the short-term nature of these financial
instruments.
  Reclassifications
  Certain
reclassifications have been made in the 2009 financial statements to conform to
the 2010 presentation.  There were no material changes in
classifications made to previously issued financial statements.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  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.
  Advertising
and Promotion
  Advertising
and promotion costs, including advertising, public relations, and trade show
expenses, are expensed as incurred and included in Sales and Marketing
expenses.  Advertising and promotion expense was $6,536 and $_16,110
for the three months ended March 31, 2010 and 2009, respectively.
  Shipping
and Handling
  The
Company’s shipping and handling costs, incurred by Capstone amounted to $9,781
and $12,895 for the three months ended March 31, 2010 and 2009,
respectively.
  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 (now ASC 740) 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), (now ASC 718) 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).
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  SFAS
123(R) requires companies to estimate the fair value of share-based payment
awards on the date of the grant using an option-pricing model.  The
value of the portion of the award that is ultimately expected to vest is
recognized as expenses over the requisite service periods in the Company’s
consolidated statements of income (loss).  Prior to the adoption of
SFAS 123(R), the Company accounted for stock-based awards to employees and
directors using the intrinsic value method in accordance with APB 25, as allowed
under SFAS No. 123, Accounting for Stock-Based Compensation, (SFAS
123).  Under the intrinsic value method, compensation expense under
fixed term option plans was recorded at the date of grant only to the extent
that the market value of the underlying stock at the date of grant exceeded the
exercise price.  Accordingly, for those stock options granted for
which the exercise price equaled the fair market value of the underlying stock
at the date of grant, no expense was recorded.
  Stock-based
compensation expense recognized during the period is based on the value of the
portion of share-based payment awards that is ultimately expected to vest during
the period.  There was no stock-based compensation expense
attributable to options for the years ended December 31, 2007 and 2006 for
compensation expense for share-based payment awards granted prior to, but not
vested as of December 31, 2005.  Such stock-based compensation is
based on the grant date fair value estimated in accordance with the pro forma
provisions of SFAS 123.  Compensation expense for share-based payment
awards granted subsequent to December 31, 2005 are based on the grant date fair
value estimated in accordance with the provisions of SFAS 123(R).
  In
conjunction with the adoption of SFAS 123(R), the Company adopted the
straight-line single option method of attributing the value of stock-based
compensation expense.  As stock-based compensation expense is
recognized during the period is based on awards ultimately expected to vest, it
is subject to reduction for estimated forfeitures.  SFAS 123(R)
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates.  As of and for the year ended December 31, 2008, there were
no material amounts subject to forfeiture.  The Company has not
accelerated vesting terms of its out-of-the-money stock options, or made any
other significant changes, prior to adopting FASB 123(R), Share-Based
Payments.
  On April
23, 2007, the Company granted 130,500,000 stock options to two officers of the
Company.  The options vest at twenty percent per year beginning April
23, 2007.  For the year ended December 31, 2007, the Company
recognized compensation expense of $503,075 related to these
options.  On May 1, 2008, 850,000 of the above stock options were
canceled and on May 23, 2008, 74,666,667 of the above stock options were
cancelled.  For year ended December 31, 2008, the Company recognized
compensation expense of $405,198 related to these options.  For the
year ended December 31, 2009, the Company recognized compensation expense of
$156,557 related to these options.  For the three months ended March
31, 2010, the Company recognized compensation expense of $39,139 related to
these options.
  On May 1,
2007, the Company granted 4,000,000 stock options to five employees of the
Company.  The options vest over two years.  For the year
ended December 31, 2007, the Company recognized compensation expense of $29,214
related to these options.  During 2008, 1,000,000 of the above options
were cancelled prior to vesting.  For the year ended December 31,
2008, the Company recognized compensation expense of $25,131 related to these
options.  For the year ended December 31, 2009, the Company recognized
compensation expense of $10,869 related to these options.  As of
December 31, 2009 these options were fully vested and compensation expense fully
recognized.  No further compensation expense will be recognized for
these options.
  On
October 22, 2007, the Company granted 700,000 stock options to a business
associate of the Company.  The options vest over two
years.  For the year ended December 31, 2007, the Company recognized
compensation expense of $1,330 related to these options.  For the year
ended December 31, 2008, the Company recognized compensation expense of $7,978
related to these options.  For the year ended December 31, 2009, the
Company recognized compensation expense of $6,648 related to these
options.  As of December 31, 2009 these options were fully vested and
compensation expense fully recognized.  No further compensation
expense will be recognized for these options.
  On
January 10, 2008, the Company granted 1,000,000 stock options to an advisor of
the Company.  The options vest over one year.  For the year
ended December 31, 2008, the Company recognized compensation expense of $19,953
related to these options.  As of December 31, 2008 these options were
fully vested and compensation expense fully recognized.  No further
compensation expense will be recognized for these options.
  On
February 5, 2008, the Company granted 3,650,000 stock options to four directors
and one employee of the Company.  The options vest over two
years.  For the year ended December 31, 2008, the Company recognized
compensation expense of $59,619 related to these options.  For the
year ended December 31, 2009, the Company recognized compensation expense of
$2,603 related to these options.  As of December 31, 2009 these
options were fully vested and compensation expense fully
recognized.  No further compensation expense will be recognized for
these options.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  On May 1,
2008, the Company granted 850,000 stock options to an employee of the
Company.  The options vest over two years.  For the year
ended December 31, 2008, the Company recognized compensation expense of $5,242
related to these options.  For the year ended December 31, 2009, the
Company recognized compensation expense of $7,862 related to these
options.  For the three months ended March 31, 2010, the Company
recognized compensation expense of $655 related to these options.
  On June
8, 2009, the Company granted 4,500,000 stock options to four directors of the
Company.  The options vest in one year.  For the year ended
December 31, 2009, the Company recognized compensation expense of $42,663
related to these options.  For the three months ended March 31, 2010,
the Company recognized compensation expense of $8,459 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, 2010 included $0 for
consulting fees.  Stock-based compensation expense for the three
months ended March 31, 2009 included $21,000 for consulting fees.
  Recent
Accounting Standards
  In April
2009, the FASB updated ASC 820 to provide additional guidance for estimating
fair value when the volume and level of activity for the asset or liability have
decreased significantly. ASC 820 also provides guidance on identifying
circumstances that indicate a transaction is not orderly. The implementation of
ASC 820 did not have a material effect on the Company’s financial
statements.
  In April
2009, the FASB updated ASC 825 regarding interim disclosures about fair value of
financial instruments.  ASC 825 requires disclosures about fair value
of financial instruments in interim reporting periods of publicly traded
companies that were previously only required to be disclosed in annual financial
statements. The implementation of ASC 825 did not have a material effect on the
Company’s financial statements.
  In April
2009, the FASB updated ASC 320 for proper recognition and presentation of
other-than-temporary impairments.  ASC 320 provides additional
guidance designed to create greater clarity and consistency in accounting for
and presenting impairment losses on securities.  The implementation of
ASC 320 did not have a material effect on the Company’s consolidated financial
statements.
  In June
2009, the FASB created the Accounting Standards Codification, which is codified
as ASC 105.  ASC 105 establishes the codification as the single
official non-governmental source of authoritative accounting principles (other
than guidance issued by the SEC) and supersedes and effectively replaces
previously issued GAAP hierarchy framework.  All other literature that
is not part of the codification will be considered
non-authoritative.  The codification is effective for interim and
annual periods ending on or after September 15, 2009.  The Company has
applied the codification, as required, beginning with the 2009 Form
10-K.  The adoption of the codification did not have a material impact
on the Company’s financial position, results of operations or cash
flows.
  In June
2009, the FASB updated ASC 855, which established principles and requirements
for subsequent events.  This guidance details the period after the
balance sheet date which the Company should evaluate events or transactions that
may occur for potential recognition or disclosure in the financial statements,
the circumstances under which the Company should recognize events or
transactions occurring after the balance sheet date in its financial statements
and the required disclosures for such events.  ASC 855 is effective
for interim and annual periods ending after June 15, 2009.  The
implementation of ASC 855 did not have a material effect on the Company’s
financial statements.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
  In
October 2009, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update 2009-13 (ASU 2009-13), which provided an update to
ASC 605.  ASU 2009-13 addresses how to separate deliverables and how
to measure and allocate arrangement consideration to one or more units of
accounting in multiple-deliverable arrangements. The amendments in this update
will be effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010. The
Company is currently evaluating the impact that this update will have on its
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 its cash and cash equivalents with high
credit quality financial institutions which minimize these risks.  As
of March 31, 2010, the Company had no 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 different geographical
regions.  The Company monitors exposure of credit losses and maintains
allowances for anticipated losses considered necessary under the
circumstances.
  Major
Customers
  The
Company had three customers who comprised at least ten percent (10%) of gross
revenue during the fiscal years ended December 31, 2009 and 2008.  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
      Receivable2009
              
              2008
              
              
              2009
              
              
              2008Customer
      A
              
              41%
              
              44%
              
              $
              2,500
              
              $
              1,742,135Customer
      B
              
              24%
              
              22%
              
              
              -
              
              
              614,384Customer
      C
              
              23%
              
              15%
              
              
              1,305,821
              
              
              21,77388%
              
              81%
              
              $
              1,308,321
              
              $
              2,378,292
 
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
2 – CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE
(continued)
  Major
Vendors
  The
Company had four vendors from which it purchased at least ten percent (10%) of
merchandise during the fiscal year ended December 31, 2009 and three vendors
from which it purchased at least ten percent (10%) of merchandise during the
fiscal year ended December 31, 2008.  The loss of these suppliers
would adversely impact the business of the Company.  The percentage of
purchases, and the related accounts payable from each of these vendors is as
follows:
  Purchases
      %
              
              
              Accounts
      Payable2009
              
              2008
              
              
              2009
              
              
              2008Vendor
      A
              
              36%
              
              52%
              
              $
              -
              
              $
              169,997Vendor
      B
              
              25%
              
              31%
              
              
              2,524
              
              
              969,741Vendor
      C
              
              17%
              
              14%
              
              
              12,688
              
              
              -Vendor
      D
              
              10%
              
              -
              
              
              75,525
              
              
              -88%
              
              97%
              
              $
              90,737
              
              $
              1,139,738
  NOTE
3 – NOTES AND LOANS PAYABLE TO RELATED PARTIES
  CHDT
Corp - Notes Payable to Director
  On May
30, 2007, the Company executed a $575,000 promissory note payable to a director
of the Company.  This note was amended on July 1, 2009 and again on
January 2, 2010. As amended, the note carries an interest rate of 8% per
annum.  All principal is payable in full, with accrued interest, on
January 2, 2011.  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, 2010 and December 31, 2009, the total amount
payable on this note was $540,586 and $546,025,
respectively.  Interest payments are being made monthly to the note
holder.
  On July
11, 2008, the Company received a loan from a director of
$250,000.  This note was amended on January 2, 2010.  As
amended, the note is due on of before January 11, 2011 and carries an interest
rate of 8% per annum.  .  At March 31, 2010, the total
amount payable on this note was $254,932, including interest of
$4,932.  At December 31, 2009, the total amount due on these notes was
$250,000.
  As part
of this note payable, the Company also issued a warrant to the loan holder to
purchase 4,000,000 shares of common stock at a price of $.025 per
share.  At the date of issuance, the stock price was $.021 per
share.  The Company accounted for the debt and warrants using APB 14,
whereby the proceeds of $250,000 were allocated between the debt and
warrants.  This resulted in the warrants being valued at $56,375 which
was recorded as additional paid-in capital, and a discount on the note of
$56,375 being recognized.  The discount was amortized over the term of
the note (6 months) to interest expense.  At December 31, 2008, the
discount had been fully amortized resulting in interest expense of $56,375 being
recognized.
  On March
11, 2010, the Company received a loan from a director of
$100,000.  The note is due on or before March 11, 2011 and carries an
interest rate of 8% per annum.  At March 31, 2010 the total amount
payable on this note was $100,438, including interest of $438.
  CHDT
Corp - Notes Payable to Officers
  During
the quarter ended June 30, 2008, the Company executed three notes payable for a
combined total of $200,000 to an officer of the Company.  These were
amended on January 2, 2010.  As amended, the notes are due on or
before January 2, 2011 and carry an interest rate of 8% per annum and were due
within six months.  At March 31, 2010 the total amount due on these
notes was $203,945, including interest of $3,945.  At December 31,
2009, the total amount due on these notes was $200,000.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
3 – NOTES AND LOANS PAYABLE TO RELATED PARTIES (continued)
  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 was 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.  This note was amended on January 2,
2010.  As amended, the note carries an interest rate of 8% per annum
and is due on or before January 2, 2011  In December 2008, the Company
borrowed an additional $75,000 from this director.  This note was
amended on January 2, 2010.  As amended, this note is due on or before
January 2, 2011.  At March 31, 2010 the total amount due on these
notes was $202,263, including interest of $24,263.  At December 31,
2009, the total amount payable on this loan was $202,263, including interest of
$24,263
  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 was 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 and were due on January 31,
2008.  At December 31, 2007, the total amount payable on this loan was
$404,043, including interest of $4,043.  In January 2008, the Company
paid $250,000 towards this note payable.  On May 9, 2008, the Company
paid principal of $150,000 and interest of $6,443 to pay off the remainder of
this note.
  On March
11, 2008, Capstone Industries executed a $100,000 promissory note payable to an
officer of the Company.  The note carries an interest rate of 8% per
annum and was due on June 30, 2008.  On August 5, 2008, the Company
paid principal of $100,000 and interest of $3,222 to pay off this
note.
  On June
24, 2008, Capstone Industries executed a $25,000 promissory note payable to an
officer of the Company.  The note carries an interest rate of 8% per
annum and was due September 24, 2008.  On August 5, 2008, the Company
paid principal of $25,000 and interest of $230 to pay off this
note.
  Based on
the above, the total amount payable to officers and directors as of March 31,
2010 and December 31, 2009 was $1,302,164 and
$1,198,288, respectively, including accrued interest of $33,578 and $24,263,
respectively.  The maturities under the notes and loan payable to
related parties for the next five years are:
 
 Year Ended December 31,2010
              $1,302,1642011
              -2012
              -2013
              -2014
              -Total
      future maturities
              $1,302,164
 
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
4 – NOTE PAYABLE – STERLING BANK
  On May 1,
2008, Capstone secured a conventional $2,000,000 asset based loan agreement from
Sterling National Bank, located in New York City whereby Capstone received a
credit line to fund working capital needs.  The loan provides funding
for an amount up to 85% of eligible Capstone accounts receivable and 50% of
eligible Capstone inventory.  The interest rate of the loan is the
Wall Street Journal prime rate plus one and one-half percent per
annum.  CHDT and Howard Ullman, the Chairman of the Board of Directors
of CHDT, have personally guaranteed Capstone’s obligations under the Loan. As
part of the loan agreement with Sterling National Bank, a subordination
agreement was executed with Howard Ullman, a shareholder and director of the
Company.  These agreements subordinated the debt of $121,263 (plus
future interest) and $546,025 due to Howard Ullman to the Sterling National Bank
loan.  No payments will be made on the subordinated debt until the
Sterling Bank is paid in full, except for scheduled payments of
interest.
  On
February 19, 2010, the Company entered into a loan modification agreement with
Sterling National Bank, whereby the interest rate was changed to “Base Rate
shall mean the base commercial lending rate of interest of the Bank in effect
from time to time” plus one and three-fourths percent per annum, and the
maturity date of the loan was extended from May 1, 2010 to February 19,
2012.  At March 31, 2010 and December 31, 2009, there was $215,104 and
$1,277,151 due on this loan, respectively.
  NOTE
5 – PURCHASE ORDER ASSIGNMENT-FUNDING AGREEMENT
  On
February 27, 2009, Capstone Industries, Inc. entered into a Purchase Order
Assignment Funding Agreement with Examsoft Worldwide, whereby Examsoft will
advance funds to Capstone to secure the purchase of materials, and in return
Capstone will assign purchase orders to Examsoft in exchange for the
funding.  The total funding will be up to a total of
$441,100.  The interest rate is 18% per annum and the total loan plus
accrued interest will be due no later than July 15, 2009.  As security
for the performance by Examsoft of its services under the agreement, Capstone
has granted a security interest in the inventory purchased by the submitted
purchase orders and upon product shipment in the accounts receivable until the
loan is paid in full.  At June 30, 2009, the total amount due on this
loan was $459,080, including interest of $19,080.This loan was paid
in full in July 2009.
  On May
22, 2009, Capstone Industries, Inc. entered into a Purchase Order Assignment
Funding Agreement with Examsoft Worldwide, whereby Examsoft will advance funds
to Capstone to secure the purchase of materials, and in return Capstone will
assign purchase orders to Examsoft in exchange for the funding.  The
total funding will be up to a total of $843,847.  The interest rate is
18% per annum and the total loan plus accrued interest will be due no later than
February 28, 2010.  As security for the performance by Examsoft of its
services under the agreement, Capstone has granted a security interest in the
inventory purchased by the submitted purchase orders and upon product shipment
in the accounts receivable until the loan is paid in full.  At
September 30, 2009, the total amount due on this loan was $551,885, including
interest of $9,885.This loan was paid
in full in November 2009.
  On June
18, 2009, Capstone Industries, Inc. entered into a Purchase Order Assignment
Funding Agreement with Examsoft Worldwide, whereby Examsoft will advance funds
to Capstone to secure the purchase of materials, and in return Capstone will
assign purchase orders to Examsoft in exchange for the funding.  The
total funding will be up to a total of $548,615.  The interest rate is
18% per annum and the total loan plus accrued interest will be due no later than
February 28, 2010.  As security for the performance by Examsoft of its
services under the agreement, Capstone has granted a security interest in the
inventory purchased by the submitted purchase orders and upon product shipment
in the accounts receivable until the loan is paid in full.  At
September 30, 2009, the total amount due on this loan was $269,320, including
interest of $9,320.This loan was paid
in full in November 2009.
  On June
16, 2009, Capstone Industries, Inc. received a $100,000 loan from Examsoft
Worldwide.  The loan was due July 16, 2009 and carries an interest
rate of 1.5% simple interest per month.  At June 30, 2009, the total
amount due on this loan was $100,690, including accrued interest of
$690.  This loan was paid in full in July 2009.
  Stewart
Wallach, the Company’s Chief Executive Officer and President, was a director of
Examsoft Worldwide until November 2009.
  On
January 25, 2010, Capstone Industries, Inc. received a $92,000 loan from
Systematic Development Group, LLC.  The loan is due on or
before  Dec 15, 2010 and carries an interest rate of 1.5% simple
interest per month.  At March 31, 2010, the total amount due on this
loan was $94,949, including accrued interest of $2,949.
  Stewart
Wallach, the Company’s Chief Executive Officer and President, is a 65% owner of
Systematic Development Group, LLC.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   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 $4,650 per
month.
  Rental
expense under these leases was approximately $52,684 and $51,809 for the years
ended December 31, 2009 and 2008, respectively.
  NOTE
7 - COMMITMENTS
  Employment
Agreements
  On
February 5, 2008, the Company entered into an Employment Agreement with Stewart
Wallach, the Company’s Chief Executive Officer and President, whereby Mr.
Wallach will be paid $225,000 per annum.  As part of the agreement,
Mr. Wallach will receive a minimum increase of 5% per year.  For 2009,
Mr. Wallach was paid $236,250, and for 2010, Mr. Wallach will be paid
$247,500.  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.  As part of the agreement, Mr. McClinton will
receive a minimum increase of 5% per year.  For 2009, Mr. McClinton
was paid $157,500 and for 2010 Mr. McClinton will be paid
$165,000.  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.
  License
Agreement
  On April
12, 2007, the Company entered into a trademark and licensing agreement with The
Armor All/STP Products Company (“AASTP”).  As part of the agreement,
the Company is required to pay AASTP royalties either at fixed periodic amounts
or 7% of product sales.  The Company is required to make guaranteed
minimum royalty payments during 2010 as follows: $187,500 payable in
2010.  Future guaranteed minimum royalty payments are as
follows:
  Guaranteed
      MinimumYear
              
              
              Royalty
      Payments2010
              
              $
              187,500$
              187,500
  NOTE
8 - STOCK TRANSACTIONS
  Common
Stock
  In
February 2008, the Company issued 1,584,000 shares of common stock for accrued
directors’ fees of $40,000.
  In March
2008, the Company issued 112,000 shares of common stock for consulting expenses
of $2,500.
  In
February 2009, the Company issued 2,100,000 shares of common stock for
consulting expenses of $21,000.
  For
issuances of shares of common stock during the periods described above, the
Company issued restricted shares (Rule 144). The shares issued were valued by
the Company based upon the closing price of the shares on the date of issuance.
The value of these shares issued for services was charged to expense, unless
they were in consideration for future services, in which case they were recorded
as deferred consulting fees. Shares retired / cancelled were recorded at par
value.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
8 - STOCK TRANSACTIONS (continued)
  Series
“A” Preferred Stock
  A total
of 8,100 shares of series “A” preferred stock were issued in 2004, and, in May
2005, 100 shares were returned to the treasury and cancelled.
  In
January 2006 the Company issued 600,000 shares of series “A” convertible
preferred stock, convertible into 50,738,958 shares of the Company’s common
stock, in connection with the acquisition of a 51% majority interest in
CPS.  The shares were valued at $1,200,000.
  In
January 2007 (effective December 31, 2006), the 600,000 shares of series “A”
convertible preferred issued to CPS were returned to the treasury and cancelled,
in connection with the Company’s sale of its interest in CPS.  The
shares were valued at $1,775,864.  None of the preferred shares were
converted to common shares.  At December 31, 2006, the shares had not
been returned, and a related party receivable of $1,775,864 was
recorded.  During the three months ended March 31, 2007, these shares
were returned to the treasury and cancelled.
  In June,
2006, 1,000 shares of the Company’s series “A” convertible preferred stock,
beneficially owned by the Company’s CEO, were exchanged for 1,000,000 shares of
the Company’s common stock.  In February 2007, 74 shares of the
Company’s series “A” preferred stock were exchanged for 73,400 shares of the
Company’s common stock.  In May 2007, 367 shares of the Company’s
series “A” preferred stock were exchanged for 367,000 shares of the Company’s
common stock.
  In
February 2008, 6,500 shares of the Company’s series “A” convertible preferred
stock were exchanged for 6,500,000 shares of the Company’s common
stock.
  As of
December 31, 2008, a total of 60 shares of series “A” convertible preferred
stock were issued and outstanding, and are convertible into CHDT common shares,
at a rate of 1,000 shares of common stock for each share of series “A”
convertible preferred stock and are redeemable at the option of the
Company.  During the three months ended March 31, 2009, the remaining
60 shares were cancelled.
  Series
“B” Preferred Stock
  In
January 2006 the Company sold 657,000 shares of its series “B” convertible
preferred stock for cash of $637,000, including 387,000 shares to the Company’s
former CEO and the remaining shares to other directors of the
Company.  During the three months ended March 31, 2007, 15,000 shares
of the Company’s series “B” preferred shares issued to a director were exchanged
for 990,000 shares of the Company’s common stock.
  In
September 2006 the Company issued 300,030 shares of its series “B” convertible
preferred stock to the Company’s former CEO in exchange for 20,000,000 shares of
its common stock held by the former CEO.
  In
September, 2006 the Company issued an additional 236,739 shares of its series
“B” convertible preferred stock in connection with the acquisition of 100% of
the voting interest of Capstone Industries, Inc.  The shares were
valued at $1,250,000.  During the three months ended March 31, 2007,
236,739 shares of the Company’s series “B” convertible preferred stock was
converted into 15,624,774 shares of the Company’s common stock.
  In
November 2007, the Company issued 416,708 shares of its series “B” convertible
preferred stock to a director for notes payable of $1,000,000.
  In
January 2008, the Company’s chairman exchanged 50,000,000 shares of the
Company’s common stock for 750,075 shares of the Company’s series B” convertible
preferred stock.
  The
series “B” convertible preferred shares are convertible into common shares, at a
rate of 66.66 shares of common stock for each share of series “B” convertible
preferred stock.
  On July
9, 2009, the 2,108,813 outstanding Series B Preferred Shares were converted to
Series B-1 Preferred Shares, while canceling 779,813 of the outstanding Series B
Preferred Shares, leaving 1,329,000 shares of the new Series B-1 Preferred
Shares outstanding.  The Series B-1 Preferred Shares are convertible
into common shares, at a rate of 66.66 shares of common stock for each share of
series “B-1” convertible preferred stock.  The par value of the new
Series B-1 Preferred Shares is $0.0001.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
8 - STOCK TRANSACTIONS (continued)
  In
December 2009, the remaining 1,329,000 shares of the new Series B-1 Preferred
Shares were converted into 88,591,140 shares of common stock.
  Series
“C” Preferred Stock
  On July
9, 2009, the Company authorized and issued 1,000 shares of Series C Preferred
Stock in exchange for $700,000.  The 1,000 shares of Series C Stock
are convertible into 67,979,725 common shares.  The par value of the
Series C Preferred shares is $1.00.
  Warrants
  The
Company has outstanding stock warrants that were issued in prior years to its
officers and directors for a total of 5,975,000 shares of the Company's common
stock. The warrants expire between November 11, 2011 and July 20, 2014. The
warrants have an exercise price of $.03 to $.05.
  The
Company issued a stock warrant to each of two former officers of the Company in
December 2003 for a total of 35,000 shares of the Company's common stock. Each
of the stock warrants expires on July 20, 2014, and entitles each former officer
to purchase 10,000 and 25,000 shares, respectively, of the Company's common
stock at an exercise price of $0.05.
  During
September and October 2007, the Company issued 31,823,529 shares of common stock
for cash at $.017 per share, or $541,000 total as part of a Private Placement
under Rule 506 of Regulation D.  Along with the stock, each investor
also received a warrant to purchase 30% of the shares purchased in the Private
Placement.  A total of 9,548,819 warrants were issued.  The
warrants are ten year warrants and have an exercise price of $.025 per
share.
  Options
  In 2005,
the Company authorized the 2005 Equity Plan that made available 10,000,000
shares of common stock for issuance through awards of options, restricted stock,
stock bonuses, stock appreciation rights and restricted stock
units.  On May 20, 2005 the Company granted non-qualified stock
options under the company’s 2005 Equity Plan for a maximum of 250,000 shares of
the Company’s common stock for $0.02 per share. The options expire May 25, 2015
and may be exercised any time after May 25, 2005.
  On May 1,
2007, the Company granted 4,000,000 stock options to five employees of the
Company under the 2005 Plan.  The options vest over two
years.  During 2008, 1,000,000 of these options were cancelled prior
to vesting.
  The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. During the years ended December 31, 2009 and
2008, the Company recognized compensation expense of $10,869 and $25,131 related
to these stock options.  The following assumptions were used in the
fair value calculations:
  Risk free rate – 4.64%
  Expected term – 11 years
  Expected volatility of stock –
131.13%
  Expected dividend yield –
0%
  Suboptimal Exercise Behavior Multiple –
2.0
  Number of Steps – 100
  As of
December 31, 2009 these options were fully vested and compensation expense fully
recognized.  No further compensation expense will be recognized for
these options.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
8 - STOCK TRANSACTIONS (continued)
  On April
23, 2007, the Company granted a ten-year non-qualified, non-statutory stock
option for 102,400,000 “restricted” shares of the Company’s common stock to
Stewart Wallach, the Company’s CEO, as incentive compensation.  The
exercise price of the options is $.029 per share, which was the fair market
value of the stock on the date of grant.  Twenty percent of the
options vested on the date of issuance, and twenty percent per year will vest on
the anniversary date through April 23, 2011.  On May 23, 2008,
74,666,667 of these options were cancelled.  Compensation expense was
recognized through the date of the cancellation of the options. On July 31st,
2009, 5,000,000 of the fully vested options  and fully expensed
options were amended and transferred to G. McClinton.
  On April
23, 2007, the Company granted a ten-year non-qualified, non-statutory stock
option for 28,100,000 “restricted” shares of the Company’s common stock to Gerry
McClinton, the Company’s COO and Secretary, as incentive
compensation.  The exercise price of the options is $.029 per share,
which was the fair market value of the stock on the date of
grant.  Twenty percent of the options vested on the date of issuance,
and twenty percent per year will vest on the anniversary date through April 23,
2011.  On May 1, 2008, 850,000 of these options were cancelled. On
July 31st  2009
, 5,000,000 of S.Wallach fully vested  and fully expensed options were
amended and transferred to G. McClinton
  The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. During the years ended December 31, 2009 and
2008, the Company recognized compensation expense of $156,557 and $405,198
related to these stock options.  The following assumptions were used
in the fair value calculations:
  Risk free rate – 4.66%
  Expected term – 10 years
  Expected volatility of stock –
133.59%
  Expected dividend yield –
0%
  Suboptimal Exercise Behavior Multiple –
2.0
  Number of Steps - 100
  The
Company will recognize compensation expense of $156,557 in 2010, and $52,186 in
2011 related to these stock options.
  On
October 22, 2007, the Company granted 700,000 stock options to a business
associate of the Company.  The options vest over two
years.
  The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. During the years ended December 31, 2009 and
2008, the Company recognized compensation expense of $6,648 and $7,978 related
to these stock options.  The following assumptions were used in the
fair value calculations:
  Risk free rate – 4.42%
  Expected term – 11 and 12
years
  Expected volatility of stock –
134.33%
  Expected dividend yield –
0%
  Suboptimal Exercise Behavior Multiple –
2.0
  Number of Steps – 100
  As of
December 31, 2009 these options were fully vested and compensation expense fully
recognized.  No further compensation expense will be recognized for
these options.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
8 - STOCK TRANSACTIONS (continued)
  On
January 10, 2008, the Company granted 1,000,000 stock options to an advisor of
the Company.  The options vest over one year.
  The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted.  During the year ended December 31,
2008, the Company recognized compensation expense of $19,953 related to these
options.  The following assumptions were used in the fair value
calculations:
  Risk free rate – 3.91%
  Expected term – 10 years
  Expected volatility of stock –
133.83%
  Expected dividend yield –
0%
  Suboptimal Exercise Behavior Multiple –
2.0
  Number of Steps – 100
  As of
December 31, 2009 these options were fully vested and compensation expense fully
recognized.  No further compensation expense will be recognized for
these options.
  On
February 5, 2008, the Company granted 3,650,000 stock options to four directors
and one employee of the Company.  The options vest over two
years.
  The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. For the years ended December 31, 2009 and
2008, the Company recognized compensation expense of $2,603 and $59,619 related
to these options.  The following assumptions were used in the fair
value calculations:
  Risk free rate – 1.93% to
3.61%
  Expected term – 2 to 10
years
  Expected volatility of stock –
133.83%
  Expected dividend yield –
0%
  Suboptimal Exercise Behavior Multiple –
2.0
  Number of Steps – 100
  As of
December 31, 2009 these options were fully vested and compensation expense fully
recognized.  No further compensation expense will be recognized for
these options.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
8 - STOCK TRANSACTIONS (continued)
  On May 1,
2008, the Company granted 850,000 stock options to an employee of the
Company.  The options vest over two years.
  The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. For the years ended December 31, 2009 and
2008, the Company recognized compensation expense of $7,862 and $5,242 related
to these options.  The following assumptions were used in the fair
value calculations:
  Risk free rate – 3.78%
  Expected term – 11 years
  Expected volatility of stock –
133.59%
  Expected dividend yield –
0%
  Suboptimal Exercise Behavior Multiple –
2.0
  Number of Steps – 100
  The
Company will recognize compensation expense of $2,620 in 2010 related to these
stock options.
  On June
8, 2009, the Company granted 4,500,000 stock options to four directors of the
Company.  The options vest over one year.
  The
Binomial Lattice (Suboptimal) option pricing model was used to calculate the
fair value of the options granted. For the years ended December 31, 2009, the
Company recognized compensation expense of $42,663 related to these
options.  The following assumptions were used in the fair value
calculations:
  Risk free rate – 1.42%
  Expected term –
2  years
  Expected volatility of stock –
500.5%
  Expected dividend yield –
0%
  Suboptimal Exercise Behavior Multiple –
2.0
  Number of Steps – 100
  The
Company will recognize compensation expense of $33,837 in 2010 related to these
stock options.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
8 - STOCK TRANSACTIONS (continued)
  The
following table sets forth the Company’s stock options outstanding as of March
31, 2010, December 31, 2009 and 2008 and activity for the years then
ended:
  WeightedWeighted
              
              
              AverageAverage
              
              
              Remaining
              
              
              AggregateShares
              
              
              Exercise
                Price
              
              
              Contractual
                Term
      (Years)
              
              
              Intrinsic
      ValueOutstanding,
      December 31, 2007
              
              
              135,450,000
              
              
              $
              0.029Granted
              
              
              5,500,000
              
              
              
              0.029Exercised
              
              
              -
              
              
              
              -Forfeited/expired
              
              
              76,516,667
              
              
              
              0.029Outstanding,
      December 31, 2008
              
              
              64,433,333
              
              
              
              0.029Granted
              
              
              4,500,000
              
              
              
              0.029Exercised
              
              
              -
              
              
              
              -Forfeited/expired
              
              
              -
              
              
              
              -Outstanding,
      December 31, 2009
              
              
              68,933,333
              
              
              
              0.029
              
              
              
              6.67
              
              
              $
              -Granted
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -Exercised
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -Forfeited/expired
              
              
              3,500,000
              
              
              
              0.028
              
              
              
              
              
              
              
              -Outstanding,
      March 31, 2010
              
              
              65,433,333
              
              
              $
              0.029
              
              
              
              6.77
              
              
              $
              -Vested/exercisable
      at December 31, 2008
              
              
              43,102,777
              
              
              $
              0.029
              
              
              
              6.37
              
              
              $
              -Vested/exercisable
      at December 31, 2009
              
              
              57,266,667
              
              
              $
              0.029
              
              
              
              6.99
              
              
              $
              -Vested/exercisable
      at March 31, 2010
              
              
              53,766,677
              
              
              $
              0.029
              
              
              
              7.19
              
              
              $
              -
  The
following table summarizes the information with respect to options granted,
outstanding and exercisable under the 2005 plan:
  Exercise
      Price
              Options
      Outstanding
              Remaining
      Contractual Life in Years
              Average
      Exercise Price
              Number
      of Options Currently Exercisable$.02
              250,000
              6
              $.020
              250,000$.029
              54,983,333
              8
              $.029
              48,241,677$.029
              3,000,000
              9
              $.029
              3,000,000$.029
              700,000
              10
              $.029
              700,000$.029
              1,000,000
              9
              $.029
              1,000,000$.029
              150,000
              9
              $.029
              150,000$.029
              850,000
              10
              $.029
              425,000$.029
              4,500,000
              2
              $.029
              -
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
9 – BUSINESS ACQUISITIONS AND DISPOSALS
  Complete
Power Solutions
  On
January 27, 2006, the Company entered into a Purchase Agreement (the "Purchase
Agreement") with William Dato and Complete Power Solutions ("CPS") pursuant to
which the Company acquired 51% of the member interests of CPS owned by Mr. Dato
for a purchase price consisting of the payment of $637,000 in cash and the
delivery of 600,000 shares of Company's Series A Convertible Preferred Stock
(the "Series A Preferred Stock") having a stated value of $1,200,000, which
Series A Preferred Stock are convertible into 50,739,958 shares of the Company's
Common Stock at the demand of Mr. Dato. The cash paid in the transaction was
obtained from capital provided to the Company for use in connection with
acquisitions by Howard Ullman, our Chief Executive Officer and President, and
certain of our directors and principal shareholders.
  On
January 26, 2007, the Company entered into a Purchase and Settlement Agreement
(the "Settlement Agreement"), dated and effective as of December 31, 2006, with
William Dato and CPS whereby: (a) CPS repurchased the 51% membership interest
owned by China Direct in return for the transfer of the 600,000 shares of the
Company’s "Series A Preferred Stock”, which are convertible into 50,739,958
shares of the Company's common stock, and (b) the issuance of a promissory note
by CPS to CHDT for 225,560, bearing annual interest at 7% with interest-only
payments commencing on July 1, 2007 and thereafter being paid quarterly on April
1st, July 1st, October 1st, and January 1st until the principal and all unpaid
interest thereon shall become due and payable on the maturity date, being
January 6, 2010 (the “2007 Promissory Note”).  The 2007 Promissory
Note also provides that the principal amount may be automatically increased by
an amount of up to $7,500 if the amount of a customer claim is settled for less
than $7,500. As of the date of this report the principal amount has not been
increased by an amount up to $7,500, as described above.  The shares
were valued at $1,775,864 based on the market value of the common stock the
shares are convertible into.
  As of
December 31, 2006, the balance due on the $225,560 was classified on the
Company’s balance sheet as an amount due from former subsidiary.  This
item was classified as long-term as of December 31, 2006, in anticipation of its
conversion to a note receivable, the maturity of which is more than one year
from the balance sheet date.  Subsequently, upon execution of the 2007
Promissory Note on January 26, 2007, the Company reclassified the balance as a
long-term note receivable from former subsidiary.
  CPS is
also indebted to CHDT under a promissory note in the original principal amount
of $250,000, executed by William Dato on June 27, 2006 and payable to CHDT,
bearing interest at 7% per annum and maturing on June 30, 2007, subject to
extension (the “2006 Promissory Note”) and subject to offset by (i) $41,600 owed
by an affiliate of CHDT to the CPS funds advanced by CPS for portable generators
that were never delivered and (ii) $15,000 as an agreed amount paid to
compensate CPS for certain refunds required to be made by CPS (which amounts
have been first applied to accrued and unpaid interest due September 30, 2006
and December 31, 2006 and then applied to quarterly interest payable on the
principal of the 2006 Promissory Note to maturity (June 30, 2007) and then to
reduce the principal amount of the 2006 Promissory Note to
$210,900.
  On March
10, 2008, the Company was granted a Final Summary judgment against CPS for
$501,740 related to the two notes due from CPS to the Company as part of the
disposal agreement entered into in January 2007.   As of December
31, 2007, the Company determined these two notes to be uncollectible and
wrote-off $427,710 to expense.  The Company has pursued legal action
to collect this judgment, but it is now considered uncollectible.
  The
Company disposed of its interest in CPS to further its goal of focusing on its
Capstone Industries consumer product business line in an effort to achieve
sustained profitability from low-coast, low inventory consumer products that are
direct shipped from Chinese and other low cost contract manufacturing sources to
the Company’s customers.
  Capstone
Industries
  On
September 13, 2006 the Company entered into a Stock Purchase Agreement (the
Purchase Agreement) with Capstone Industries, Inc., a Florida corporation
(Capstone), engaged in the business of producing and selling portable book
lights and related consumer goods, and Stewart Wallach, the sole shareholder of
Capstone. Under the Stock Purchase Agreement the Company acquired 100% of the
issued and outstanding shares of Capstone Common Stock in exchange for $750,000
in cash (funded by a note payable to the Company’s CEO and $1.25 million of the
Company’s Series B Preferred Stock, $0.01 par value per share, which Series “B”
stock is convertible into 15.625 million “restricted” shares of CHDT Common
Stock, $0.0001 par value (common stock). CHDT has agreed to register shares of
Common Stock under the Securities Act of 1933, as amended, to cover conversion
of the Series “B” Stock issued to Mr. Wallach in the acquisition of
Capstone.  Such registration has not been filed as of the date of this
Report. CHDT will operate Capstone as a wholly-owned subsidiary. As of the date
of this report these share have not been registered.
   CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
9 – BUSINESS ACQUISITIONS AND DISPOSALS (continued)
  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.
  NOTE
10 - INCOME TAXES
  As of
December 31, 2009, the Company had a net operating loss carryforward for income
tax reporting purposes of approximately $3,900,000 that may be offset against
future taxable income through 2029. 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.
  2009
              
              
              2008Net
      Operating Losses
              
              $
              799,500
              
              
              $
              554,500Valuation
      Allowance
              
              
              (799,500
              )
              
              
              (554,500
              )$
              -
              
              
              $
              -
  The
provision for income taxes differ from the amount computed using the federal US
statutory income tax rate as follows:
  2009
              
              
              2008Provision
      (Benefit) at US Statutory Rate
              
              $
              (205,000
              )
              
              $
              (139,810
              )Increase
      (Decrease) in Valuation Allowance
              
              
              205,000
              
              
              
              139,810$
              -
              
              
              $
              -
  The
Company evaluates its valuation allowance requirements based on projected future
operations.  When circumstances change and cause 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.
  CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
10 - INCOME TAXES (continued)
  Effective
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB
Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The adoption of the provisions of FIN 48
did not have a material impact on the company’s condensed consolidated financial
position and results of operations. At January 1, 2008, the company had no
liability for unrecognized tax benefits and no accrual for the payment of
related interest.
  Interest
costs related to unrecognized tax benefits are classified as “Interest expense,
net” in the accompanying consolidated statements of operations. Penalties, if
any, would be recognized as a component of “Selling, general and administrative
expenses”. The Company recognized $0 of interest expense related to unrecognized
tax benefits for the year ended December 31, 2009 and 2008.  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 2006. The following
describes the open tax years, by major tax jurisdiction, as of December 31,
2009:
  United
      States (a)
              
              2006
      – Present(a)
      Includes federal as well as state or similar local jurisdictions, as
      applicable.
  NOTE 11 – CONTINGENCIES
  ESQUIRE TRADE
& FINANCE INC. & INVESTOR, LLC v.(Case Number 03 CIV. 9650 (SC),decided November 5, 2009) (formerly styled “CELESTE TRUST
REG., ESQUIRE TRADE, ET AL. V. CBQ, INC., Case Number 03 CIV. 9650 RMB)
(“Celeste case”).  The parties settled this case on February 18,
2010.  A summary of the settlement is below. A stipulation withdrawing the
plaintiff's appeal in the Celeste case was filed with and accepted by the court
on February 8, 2010, which filing effectively ended the litigation in the
Celeste case.
  The
settlement and release provides a mutual, general release of all claims that
plaintiffs and Company may have against each other as the date of the release,
including any causes of action or claims under the Celeste case and any related
proceedings.  The settlement provides, in part, that: (1) the parties will
seek a court order dismissing the Celeste case; (2) the parties will release
each other from any and all claims and causes of action in or related to the
Celeste case or the pending appeal to the U.S. Circuit Court for the Second
Circuit;  (3) the plaintiffs will pay $100,000 towards the Company’s legal
fees incurred in the Celeste case; (4) the Company will support the release of
shares of Company Common Stock, $0.0001 par value per share, (“Common Stock”)
owned of record by Networkland, Inc., a Virginia corporation, (“NET”) and
Technet Computer Services, Inc., a Virginia corporation, (“TECH”) to the
plaintiffs or their designees (each such block of Common Stock was sought by the
plaintiffs in the Celeste case as part of their claims against the Company
(collectively, said shares of Common Stock held of record by NET and TECH being
referred to as the “N&T Shares”));  (5) the issuance of 350,000 shares
of Common Stock owned by Howard Ullman, a director of the Company, to the
plaintiffs or their designees; and (6) the granting by Mr. Ullman of a five year
option to purchase 20 million shares of Common Stock owned by Mr. Ullman to the
plaintiffs or their designees, which option has an exercise price of $0.029 per
share.  Under the proposed settlement agreement and release, the Company
will grant piggy-back registration rights to the option and underlying shares of
Common Stock referenced in (6) above, which rights will be effective after June
1, 2010.  The Company will pay all registration fees and legal costs
associated with any such registration, which are currently estimated to be
approximately $3,000 to $5,000.
   The
settlement and release, which consists of a settlement agreement and release and
option agreement by Mr. Ullman, was negotiated by Mr. Ullman on behalf of the
Company with the plaintiffs. Mr. Ullman has provided case administration of the
Celeste case for the Company.
   The
Company believes that the settlement and release is in the best interests of the
Company and its public shareholders because (1) it will, when effective,
eliminate the possibility of an adverse ruling by the U.S. Court of Appeals for
the Second Circuit on the plaintiffs’ appeal, which adverse ruling could
potentially impose a significant liability on the Company; and (2) the
continuation of the Celeste case may discourage potential investors and funding
sources from assisting the Company in financing operations and business
development as well as make it more difficult to pursue any possible future
merger and acquisition transactions.
   CHDT
CORPORATION AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   NOTE
11 – CONTINGENCIES (continued)
   The
Company’s board of directors approved the general terms of the settlement and
release on February 1, 2010, but approval and execution of all documents
necessary to reaching a settlement and release was not achieved until the
February 18, 2010 signing of the option granted by Mr. Ullman.  A copy of
the settlement agreement and release and the option granted by Mr. Ullman are
attached as Exhibit 99.1 and Exhibit 99.2, respectively, to the Form 8-K, dated
February 19, 2010 and filed by the Company with the Commission on February 22,
2010).  The above summary of the settlement agreement and release and
option are qualified in its entirety by reference to the proposed settlement
agreement and release as attached as Exhibit 99.1 and the option attached as
Exhibit 99.2 to the aforesaid Form 8-K report.
   Potential
Litigation
  Cyberquest,
Inc.
  As
reported previously, the Company has received two claims from certain former
shareholders of Cyberquest, Inc. that they hold or own approximately 70,000
shares of a class of the Company's redeemable preferred stock that was issued in
the Company's 1998 acquisition of Cyberquest. Cyberquest ceased operations in
2000-2001 period. The Company has investigated these claims and has not been
able to date to fully substantiate any of the ownership claims to date to the
preferred stock in question and the claimants have not pursued their claims
beyond an initial communication asserting ownership of these shares of serial
preferred stock. The Company did not maintain preferred stock ownership records
with a stock transfer agent at the time in question and has to rely on available
internal records in this matter. The Company has not received any further claims
or communications since mid-2006.   Since the Company has no record of
the claimants as preferred stock shareholders, the Company is taking the
position that they are no shareholders of record and the alleged redeemable
preferred stock is not issued and outstanding.
   NOTE
12 – INTANGIBLE ASSETS
  During
2008, the Company had capitalized $168,900 related to packaging artwork and
design costs related to the Company’s AASTP products and Lighting products as
intangible assets.  These costs are being amortized over their useful
life, which the Company has determined to be two years.  During 2008,
the Company recorded $65,200 of amortization expense related to these
assets.  During 2009, the Company capitalized an additional $37,142
related to packaging artwork and design costs and recognized amortization
expense of $96,086 during the year.  During 2010, the Company
capitalized an additional $6,000 and recorded $10,205 of amortization expense
related to these assets.  At March 31, 2010 and December 31, 2009, the
net amount of the intangible asset was $40,551 and $44,756,
respectively.
  NOTE
13 – SUBSEQUENT EVENTS
  The
Company adopted ASC 855, and has evaluated all events occurring after March 31,
2010, the date of the most recent balance sheet, for possible adjustment to the
financial statements or disclosures through May 14, 2010, which is the date on
which the financial statements were issued.  The Company has concluded
that there are no significant or material transactions to be reported for the
period from April 1, 2010 to May 14, 2010, other than what was reported in Note
11.





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





General – CHDT Corporation, a
Florida corporation, (“CHDT,” “Company,” “we,” or “our”) is a public holding
company with its Common Stock, $0.0001 par value per share, (“Common Stock”)
quoted on the Over-The-Counter Bulletin Board under the trading symbol
“CHDO.OB.”   This discussion should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's annual report on Form 10-K for the year ended
December 31, 2009.





Forward
Looking Statements





Management’s
Discussion and Analysis contains “forward-looking” statements within the meaning
of Private Securities Litigation Reform Act of 1995, as amended, as well as
historical information. The expectations reflected in these forward-looking
statements may prove to be incorrect or could change with changing
circumstances. Our actual results could differ materially from those anticipated
in forward-looking statements as a result of certain factors – many of those
factors being beyond our control or ability to predict. Forward-looking
statements include those that use forward-looking terminology, such as the words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,”
“plan,” “will,” “shall,” “should,” and similar expressions, including when used
in the negative. Although we believe that the expectations reflected in these
forward-looking statements are reasonable and achievable at the time made, these
statements involve risks and uncertainties and no assurance can be given that
actual results will be consistent with these forward-looking
statements.  Actual results may differ significantly from anticipated
business and financial results.





All
forward-looking statements attributable to us are expressly qualified in their
entirety by the above and all other applicable factors. We undertake no
obligation to update or revise these forward-looking statements, except as
required by law, 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,
2010 compared to the three months ended March 31, 2009; and (ii) financial
liquidity and capital resources.





Through
our operating subsidiaries, we are a developer and manufacturer of niche
consumer products selling to primarily distributors and retailers in the
United States. Our Capstone subsidiary currently operates in five primary
business segments: Reading Lights, Task Lights, Power Failure Lighting, Power
Tools, Automotive Accessories and Computer Peripherals.





Our
growth strategy has four main elements:





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


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


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


4.
            Through
      acquiring businesses that have innovative products that would compliment
      our existing marketing strategies or allow the company to diversify into
      other markets.





Capstone
Lighting products specialize in value priced, innovative portable lighting
products that we believe can win a profitable niche in market share without high
market penetration costs (especially marketing and advertising
costs).  Capstone sells booklights, multi-task lights, and Eco
flashlights and also offers “Private Label” programs marketed to major
retailers.  “Private Label” is the manufacture of products by a
company and those products are sold under the name or trade name of the
manufacturer or manufacturer’s retailers, distributors or bulk
buyers.  In March 2009 at the International Hardware Show, Capstone
launched a new and expanded line of booklights and multi-tasklights under the
name PathwayLightsTM. In March 2010 at the International Housewares show the
PathwayLightsTM continued to expand the line with the eReader e·Lite specifically
designed to provide lighting for the eReader ebook products and the Retro
Taskbright series, which is a collection of trendy colored tasklights in a Retro
look design.








In 2008
Capstone also launched the Eco-i-Lite Power Failure Lights. In March 2009 the
company launched additional Eco-i –Lite products in new trendy
colors.  In 2010 also at the International Housewares Show the Midi
sized Eco-i-Lite was launched as well as new motif designs such as the PAWPRINT
designed as a Dog Walking Light. In March 2010 at the International Housewares
Show, Capstone also launched the C-LITETM, a new line of “Wireless Motion Sensor
Lights” These products were specifically designed to provide portable lighting
in areas that may need lighting for enhanced security such as lighting a foyer
or in areas that would not have available normal electrical service such as in
an attic. The products have intended to have unique feature sets that adapt to
various uses.





In March
2010 also at the International Housewares Show, Capstone launched the Light
RingersTM Lamps. This program offers 12 and 20 LED Lamps in trendy colors powered
by AA batteries, Rechargeable batteries, and Direct Current.





STP®-branded
tools were launched in October 2007. This product line includes the new
technology lithium batteries for the 3.6v, 4.0v, 8.0v screwdrivers and 12v and
20v drill driver lines.





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





However,  after
initial successes this business category, the STP®-branded line has been
impacted by the  continued severe economic downturn in the retail
market especially in the Hardware and Automotive segments as well as usual and
customary impact of competitive products. After exhausting our efforts in this
market, it is evident that this category will remain severely depressed and slow
to recover as a result of the recession and we do not plan to continue marketing
this line beyond 2010.   We have reduced our marketing and sales
area for STP®-branded line to focus on more successful product
lines.





As a
small reporting company with limited resources, we do not have the resources to
compete head-to-head with larger, more established competitors for any of the
products.   We face many national or regional brand-named
competitors in all of our product lines. However we attempt to compete by
leveraging the engineering and manufacturing capabilities of our Chinese
contract manufacturers in order to provide quality products with more functions
at what we deem to be a value price and supported.  We believe that we
can compete in most of our product lines, subject to targeted marketing or
competitive tactics by larger and/or more established competitors.





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
continued losses in 2009. but we believe that this investment in corporate
infrastructure is necessary to lay the foundation for any hope of future success
and effective business and product development.  While we are not
certain that our current strategy and business lines 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.  In light of continuing losses, our board of
directors is reviewing alternative business strategies, which include sale of an
existing business line, acquisition of new product lines, merger or acquisition
transactions with other companies and discontinuing one or more business
lines.  While no board decision has been made on any of these possible
corporate transactions or actions, our board continues to periodically evaluate
and consider such options.





For the
years ended December 31, 2009 and 2008, the Company’s revenues were derived from
4 sources: (i) the sale of our booklight products (Capstone and its booklight
product line was acquired by CHDT in September 2006); (ii) sale of Eco-i-Lite
Power Failure Lights, (iii) sale of our Black Box Innovations USB computer
peripherals and (iv) STP® tools power drills and automotive
accessories;





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 2009 and through 2010 to
date, we had to continue our historical reliance on raising working capital for
operations and business and product development by selling securities to
investors and/or receiving loans or investment from members of management or
their affiliates. We   were able to obtain a conventional asset
based bank loan to help support Capstone operations and working capital needs,
however we may have to continue to raise working capital for CHDT and working
capital for Capstone business and product development (as well as any possible
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 significant
number of outstanding shares of Common Stock, significantly 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.  The market price for our Common
Stock has consistently trended downward in the first quarter of fiscal year 2010
and this trend only increases our difficulty in pursuing our business plan or
any alternatives thereto as well as hampers our efforts to fund such operations
or plans.





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 or maintaining stability in the market for our 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 have
attempted to address and intend to continue to address the above problems in
public and market maker support for our Common Stock by: (1) seeking to
establish  revenue growth  in consecutive fiscal quarters in
our current consumer product business line in order to demonstrate that current
management has a sound business line and business strategy; (2) upon
establishing a record of profitability, if ever, 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) from time to time and
when deemed practical by our management, seek investment banker assistance in
developing a strategic plan, including an acquisition plan, to dramatically grow
CHDT, in our core business line or in other  market
opportunities.  We can make no assurances that we shall succeed in
this effort.





We intend
to remain focused on niche 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. Subject to adequate funding, we intend to develop new products by
internal efforts as well as acquire new products by mergers and
acquisitions.  We may pursue new product lines and/or end or sell
existing business lines.





Results of Operations: For the
three months ended March 31, 2010, the Company had a net loss from continuing
operations of approximately $508,000. For the three months ended March 31, 2009
the Company had a net loss from operations of approximately $299,000. That is a
net loss increase of approximately $209,000 or 70% over 2009
results.





Total Net Revenues: For the
three months ended March 31, 2010 and 2009, the Company had total sales of
approximately $353,000 and $1,698,000 respectively, for a decrease of
approximately $1,345,000 which represents a 79% decrease from 2009 results. All
of the revenue was generated by Capstone. The continued retail downturn has
impacted this quarter’s revenue, primarily as a result of orders being delayed
and shipped at a later date by our principal customers.





Cost of Sales: For the three
months ended March 31, 2010 and 2009, we had cost of sales of approximately
$238,000 and $1,196,000, respectively. This cost represents 67% and 70%
respectively of total Revenue. As a percentage of Total Revenue costs have
decreased. The lower Cost of Sales is a result of the reduced revenue. The cost
reduction percentage of 3% of total revenue as compared to 2009 is the result of
improved Gross Profit in the categories that were sold in the
quarter.




Gross Profit: For the three
months ended March 31, 2010, gross profit was approximately $115,000 a decrease
by approximately $387,000 or 77% from the three months ended March 31,
2009.  For the three months ended March 31, 2009, gross profit was
approximately $502,000.  Gross profit as a percentage of sales was 33%
for the three months ended March 31, 2010 as compared to 29.5% for the three
months ended March 31st
2009.   The large Gross profit reduction is solely attributed to
reduced shipments in the quarter as compared to the same period last year. The
higher gross profit percentage over 2009 is the result of an improved blend of
Gross Profits for certain categories sold in the quarter.




Operating
expenses were approximately $589,000 for the three months ended March 31, 2010
as compared to approximately $725,000 for the three months ended March 31, 2009,
a decrease of approximately $136,000 or 19%. This decrease can be attributed to
various factors.





Consulting
Fees of $7,500 for the three months ended March 31st 2010
were $49,000 lower than the same period in 2009. For the three months ended
March 31, 2010 the Sales and Marketing Allowances were $0 a reduction of $37,000
as compared to the same period in 2009





Travel
and Lodging Expenses were $4,000 for the quarter ended March 31st 2010
this was $16,000 lower than the same period last year.





Packaging
and Amortization Expenses were $10,000 for the three months ended March 31,
2010; a reduction of $12,000 for the three months ended March 31,
2009.  This represents the amortization of the cost of investment in
new packaging design and molds.  This represents another investment
for possible future revenue growth.





Quality
Control Expenses and Product Development Expenses were $35,000 for the quarter
ended March 31st
2010; a reduction of $14,000 for the same period last year.








Other Income (Expense):
Interest Expenses for the three months ended March 31, 2010 was approximately
$34,000, a decrease of $43,000 or 56% from approximately $77,000 expensed for
the three months ended March 31, 2009.  This expense reduction was the
result of the reduced number of orders that needed to be financed overseas
during the quarter.





Net Income (Loss):The Loss
for the three months ended March 31, 2010 was approximately $508,000 against a
loss of approximately $299,000 for the three months ended March 31, 2009, an
increased loss of approximately $209,000 or 70%. This substantial loss increase
was the result of the delay of retail orders during the quarter. As a result of
the continued recession at retail, rather than cancel orders retailers have
delayed shipments until later in the year.





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





Impact of Inflation:  Our major expenses have been the cost of selling and
marketing product lines to customers in North America.  That effort
involves mostly sales staff traveling to make direct marketing and sales pitches
to customers and potential customers trade shows around North America and
visiting China to maintain and seek to expand distribution and manufacturing
relationships and channels.  As a result of world economic conditions
and the current price of world oil and resulting increased material costs, there
are now pressures from Chinese Manufacturers to  increase costs. We
generally have been able to reduce cost increases by strong negotiating or
re-engineering products, but we will have to increase the price of our products
in fiscal year 2010 in response to such inflationary pressures.  Since
we operate in industries where the consumer tends to be price sensitive, any
such increase in the prices of our products may adversely impact our sales and
financial results in fiscal year 2010.





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





China has
been under ongoing international pressure to value its currency in a manner that
would increase the value of Chinese currency in respect of otherworld 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.  The currency issue may produce a conflict between the U.S. and
China that affects trade or commerce between those nations and may affect us as
well.





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








Interest Rate Risk. We do not have significant
interest rate risk during the fiscal quarter ending March 31, 2010.





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





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





Item 3. Quantitative and
Qualitative Disclosures about Market Risk





Not
applicable.





Item 4. Controls and
Procedures





Evaluation of disclosure controls and
procedures.We maintain “disclosure controls and procedures,” as defined
in Rules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), that are designed to ensure that information
required to be disclosed by us in reports we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to our management, including our principal executive officer
and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating our disclosure
controls and procedures, management recognized that disclosure controls and
procedures, no matter how well conceived and operated, can provide only
reasonable assurance of achieving the desired control objectives, and we
necessarily are required to apply our judgment in evaluating the cost-benefit
relationship of possible disclosure controls and procedures.





Our
management, including our principal executive officer and principal financial
officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of March 31, 2010 and concluded that the
disclosure controls and procedures were effective.





Item 4(T). Controls and
Procedures.





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





The
certifications of our chief executive officer and chief financial officers
attached as Exhibits 31.1, 31.2 and 31.3 to this Report include information
concerning our disclosure controls and procedures and internal control over
financial reporting. Such certifications should be read in conjunction with the
information contained in this Item 4, including the information incorporated by
reference to our annual report on Form 10-K for the year ended December 31,
2009, for a more complete understanding of the matters covered by such
certifications.








PART
II — OTHER INFORMATION





Item 1. Legal
Proceedings.





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





ESQUIRE TRADE & FINANCE INC.
& INVESTOR, LLC v.  CBQ, Inc. (former name of our
company)(Case Number 03 CIV. 9650 (SC), decided November 5, 2009)
(formerly styled “CELESTE TRUST
REG., ESQUIRE TRADE, ET AL. V. CBQ, INC., Case Number 03 CIV. 9650 RMB)
(“Celeste case”).   The parties settled this case by mutual agreement on
February 18, 2010.  A summary of the settlement is below. A stipulation
withdrawing the plaintiffs’ appeal in the Celeste case was filed with and
accepted by the court on March 8, 2010, which filing effectively ended the
litigation in the Celeste case between the parties.  With the entry of
the stipulation, there is no pending litigation in this matter.





The
settlement and release provides a mutual, general release of all claims that
plaintiffs and the Company may have against each other as the date of the
release, including any causes of action or claims under the Celeste case and any
related proceedings.  The settlement provides, in part, that: (1) the
parties will seek a court order dismissing the Celeste case (which is the above
referenced stipulation); (2) the parties will release each other from any and
all claims and causes of action in or related to the Celeste case or the pending
appeal to the U.S. Circuit Court for the Second Circuit;  (3) the
plaintiffs will pay $100,000 towards the Company’s legal fees incurred in the
Celeste case, which will go to legal counsel for the Company; (4) the Company
will support the release of shares of Company Common Stock, $0.0001 par value
per share, (“Common Stock”) owned of record by Networkland, Inc., a Virginia
corporation, (“NET”) and Technet Computer Services, Inc., a Virginia
corporation, (“TECH”) to the plaintiffs or their designees (each such block of
Common Stock was sought by the plaintiffs in the Celeste case as part of their
claims against the Company) (collectively, said shares of Common Stock held of
record by NET and TECH being referred to as the “N&T Shares”));  (5)
the issuance of 350,000 shares of Common Stock owned by Howard Ullman, a
director of the Company, to the plaintiffs or their designees; and (6) the
granting by Mr. Ullman of a five year option to purchase 20 million shares of
Common Stock owned by Mr. Ullman to the plaintiffs or their designees, which
option has an exercise price of $0.029 per share.  Under the settlement
agreement and release, the Company will grant piggy-back registration rights to
the option and underlying shares of Common Stock referenced in (6) above, which
rights will be effective after June 1, 2010.  The Company will pay all
registration fees and legal costs associated with any such registration, which
are currently estimated to be approximately $5,000.





The
settlement and release, which consists of a settlement agreement and release and
option agreement by Mr. Ullman, was negotiated by Mr. Ullman on behalf of the
Company with the plaintiffs. Mr. Ullman has provided case administration of the
Celeste case for the Company in his capacity as a Company director (with
assistance from a former company officer and director).





The
Company believes that the settlement and release is in the best interests of the
Company and its public shareholders because (1) it will eliminate the
possibility of an adverse ruling by the U.S. Court of Appeals for the Second
Circuit on the plaintiffs’ appeal, which adverse ruling could potentially impose
a significant liability on the Company; and (2) the continuation of the Celeste
case may discourage potential investors and funding sources from assisting the
Company in financing operations and business development as well as make it more
difficult to pursue any possible future merger and acquisition transactions, and
(3) it may have suppressed the market price of the Company Common Stock due to
the potentially significant liability presented by the case to the
Company.








Potential
Litigation




Cyberquest,
Inc.




As
reported previously, the Company has received two claims from certain former
shareholders of Cyberquest, Inc. that they hold or own approximately 70,000
shares of a class of the Company's redeemable preferred stock that was issued in
the Company's 1998 acquisition of Cyberquest. Cyberquest ceased operations in
2000-2001 period. The Company has investigated these claims and has not been
able to date to fully substantiate any of the ownership claims to date to the
preferred stock in question and the claimants have not pursued their claims
beyond an initial communication asserting ownership of these shares of serial
preferred stock.The Company did not
maintain preferred stock ownership records with a stock transfer agent at the
time in question and has to rely on available internal records in this matter.
The Company has not received any further claims or communications since
mid-2006.   Since the Company has no record of the claimants as
preferred stock shareholders, the Company is taking the position that they are
no shareholders of record and the alleged redeemable preferred stock is not
issued and outstanding.





Other Legal Matters. To the
best of our knowledge, none of our directors, officers or owners 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 not disclosed above that we
believe will have a material adverse effect on our financial condition or
results of operations.





Item 1A. Risk
Factors.





During
the three months ended March 31, 2010, there were no material changes to the
risk factors previously disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2009.





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





There were no unregistered issuances of
Company securities in the quarter ending March 31, 2010.





Item 3.  Defaults
Upon Senior Securities





None.





Item
4.  Submission of Matters to Vote of Security
Holders





None.





Item 5.  Other
Information





None.





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. +++2.1.1.2
            Stock
      Purchase Agreement, dated 9 July 2009, by and between CHDT Corporation and
      Involve, LLC †2.1.1.3
            Indemnification
      Agreement, dated June 6th, 2009, by Howard Ullman and CHDT Corporation
      ΩΩ3.1
            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++++++10.12
            Memorandum
      Decision in Esquire
      Trade & Finance Inc. & Investor, LLC v. CBQ, Inc.,Case # 03 CIV. 9650
      (SC), S.D.N.Y., 11/05/2009) Ω10.13
            Settlement
      agreement and release as approved by the CHDT Corporation Board of
      Directors on February 1, 2010, in the matter of Esquire Trade & Finance,
      Inc. and Investcor, LLC v. CBQ, Inc., Case Number 03 CIV. 9650
      (SC). ≠10.14
            Option,
      dated February 1, 2010, granted by Howard Ullman in settlement of Esquire Trade & Finance,
      Inc. and Investcor, LLC v. CBQ, Inc., Case Number 03 CIV. 9650
      (SC). ≠≠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 Gerry
      McClinton, Chief  Financial Officer and 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 Gerry
      McClinton, Chief Financial Officer and 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.


†     Incorporated
by reference to Exhibit 10.1 to the Form 8-K, dated 9 July 2009, and filed with
the Commission on 14 July 2009, File # 000-28831.


Ω   Incorporated
by reference to Exhibit 99.1 to the Form 8-K, dated November 6, 2009, as filed
with the Commission on 9 November 2009.


ΩΩ  Incorporated
by reference to Exhibit 2.1.1.3 to the Form 10-Q for the quarter ending June 30,
2009, as filed with the Commission on 14 August 2009.


≠   Incorporated
by reference to Exhibit 99.1 to the Form 8-K, dated  Feb. 19, 2010,
and filed by the Company with the Commission on Feb. 22, 2010,


≠≠
Incorporated by reference to Exhibit 99.2 to the Form 8-K, dated  Feb.
19, 2010, and filed by the Company with the Commission on Feb. 22,
2010,


^  Filed
herein.


Note: All
Exchange Act reports referenced above and filed by the Company has a Commission
file number of #000-28813.











SIGNATURES





In
accordance with Section13 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, 2010.





CHDT
CORPORATION





Dated:   May
14, 2010








/s/Stewart Wallach
              Stewart
      Wallach
              Principal
      Executive Officer
            
            Chief
      Executive Officer/s/Gerry McClinton
              Gerry
      McClinton
              Principal
      Operations Executive
            
            Chief
      Financial Officer  and Chief Operating Officer