##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For Quarterly Period Ended: June 30, 2008
 Or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 Commission file number: 1-12214
 CHAD THERAPEUTICS, INC.
  California
(State of other jurisdiction of 
incorporation or organization)
    
    95-3792700
(I.R.S. Employer
Identification No.)
 
 
 
  þ o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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TABLE OF CONTENTS  Item 2. | Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RisksItem 4. Controls and ProceduresItem 4T. Controls and ProceduresPart IIOther InformationItem 1. Legal ProceedingsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATUREINDEX TO EXHIBITSExhibit 31.1Exhibit 31.2Exhibit 32    Table of Contents  
 June 30,
    
    
    March 31,2008
    
    
    2008ASSETSCurrent assets:Cash
    
    $
    683,000
    
    
    $
    2,068,000Accounts receivable, less allowance for
doubtful accounts of $28,000 at June 30, 2008
and $166,000 and March 31, 2008
    
    
    103,000
    
    
    
    526,000Prepaid expenses and other assets
    
    
    89,000
    
    
    
    127,000Total current assets
    
    
    875,000
    
    
    
    2,721,000Property and equipment, at cost
    
    
    65,000
    
    
    
    65,000Less accumulated depreciation
    
    
    33,000
    
    
    
    30,000Net property and equipment
    
    
    32,000
    
    
    
    35,000Intangible assets, net
    
    
    776,000
    
    
    
    761,000Other assets
    
    
    32,000
    
    
    
    25,000Total assets
    
    $
    1,715,000
    
    
    $
    3,542,000LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    74,000
    
    
    $
    95,000Accrued expenses
    
    
    1,049,000
    
    
    
    2,274,000Total current liabilities
    
    
    1,123,000
    
    
    
    2,369,000Commitments and contingencies (Note 12)Shareholders equity:Common shares, $.01 par value, authorized
40,000,000 shares; 10,180,000 and 10,180,000
shares issued and outstanding
    
    
    14,208,000
    
    
    
    14,208,000Accumulated deficit
    
    
    (13,616,000
    )
    
    
    (13,035,000
    )Total shareholders equity
    
    
    592,000
    
    
    
    1,173,000Total liabilities and shareholders equity
    
    $
    1,715,000
    
    
    $
    3,542,000




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##### Table of Contents



Three Months EndedJune 30,2008
    
    
    2007Costs and expenses:Selling, general, and administrative
    
    $
    403,000
    
    
    $
    647,000Research and development
    
    
    208,000
    
    
    
    224,000Costs and expenses from continuing operations
    
    
    611,000
    
    
    
    871,000Other income
    
    
    30,000
    
    
    
    Interest Expense
    
    
    
    
    
    
    22,000Loss from continuing operations before
income tax expense
    
    
    (581,000
    )
    
    
    (893,000
    )Income tax expense
    
    
    
    
    
    
    4,000Net loss from continuing operations
    
    
    (581,000
    )
    
    
    (897,000
    )Discontinued operations (Note 2)Earnings (Loss) from discontinued operations
    
    
    
    
    
    
    (393,000
    )Net loss
    
    $
    (581,000
    )
    
    $
    (1,290,000
    )Basic and diluted loss per share,
continuing operations
    
    $
    (0.06
    )
    
    $
    (0.09
    )Basic and diluted loss per share,
discontinued operations
    
    $
    
    
    
    $
    (0.04
    )Total basic and diluted loss per share
    
    $
    (0.06
    )
    
    $
    (0.13
    )Weighted shares outstanding:Basic
    
    
    10,180,000
    
    
    
    10,180,000Diluted
    
    
    10,180,000
    
    
    
    10,180,000




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Common Shares
    
    
    AccumulatedShares
    
    
    Amount
    
    
    DeficitBalance as of March 31, 2008
    
    
    10,180,000
    
    
    
    14,208,000
    
    
    $
    (13,035,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (581,000
    )Balance at June 30, 2008
    
    
    10,180,000
    
    
    
    14,208,000
    
    
    $
    (13,616,000
    )




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Three Months EndedJune,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (581,000
    )
    
    $
    (1,290,000
    )Adjustments to reconcile net loss to net cash (used in) provided
by operating activities:Depreciation and amortization of property and equipment
    
    
    3,000
    
    
    
    77,000Amortization of intangibles
    
    
    7,000
    
    
    
    59,000Provision for losses on receivables
    
    
    (138,000
    )
    
    
    (1,000
    )Stock-based compensation
    
    
    
    
    
    
    4,000Changes in assets and liabilities:Decrease (increase) in accounts receivable
    
    
    561,000
    
    
    
    895,000Decrease (increase) in inventories
    
    
    
    
    
    
    687,000Decrease (increase) in prepaid expenses and other assets
    
    
    31,000
    
    
    
    33,000Increase (decrease) in accounts payable
    
    
    (21,000
    )
    
    
    (551,000
    )Increase (decrease) in accrued expenses
    
    
    (1,225,000
    )
    
    
    18,000Net cash used in operating activities
    
    
    (1,363,000
    )
    
    
    (69,000
    )Cash flows from investing activities:Additions to intangible assets
    
    
    (22,000
    )
    
    
    (25,000
    )Capital expenditures
    
    
    
    
    
    
    (20,000
    )Net cash used in investing activities
    
    
    (22,000
    )
    
    
    (45,000
    )Net increase (decrease) in cash
    
    
    (1,385,000
    )
    
    
    (114,000
    )Cash beginning of period
    
    
    2,068,000
    
    
    
    375,000Cash end of period
    
    $
    683,000
    
    
    $
    261,000




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CHAD THERAPEUTICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 1.
    
    Basis of Presentation and Going ConcernCHAD Therapeutics, Inc. (the Company) is now working exclusively on the development and
commercialization of diagnostic and therapeutic devices for the sleep disorder market. In
February and March 2008, the Company sold all of its oxygen product assets, in two separate
transactions, and exited the oxygen market entirely. The Company closed its production
facilities located in Chatsworth, California in June 2008, and there will be no further costs or
revenues associated with its former oxygen product line. The Company is currently developing
diagnostic and therapeutic products for the sleep disorder market. It received 510k clearance
for its first product in July 2008. Currently, the Company is not generating revenues from any
of the sleep products it has under development.In the opinion of management, all adjustments necessary, which are of a normal and recurring
nature, for a fair presentation of the results for the interim periods presented, have been
made. The results for the three-month period ended June 30, 2008, are not necessarily indicative
of the results expected for the year ended March 31, 2009. The interim statements are condensed
and do not include some of the information necessary for a more complete understanding of the
financial data. Accordingly, your attention is directed to the footnote disclosures found in the
March 31, 2008, Annual Report and particularly to Note 1 which includes a summary of significant
accounting policies.The Companys financial statements have been prepared and presented on a basis assuming it will
continue as a going concern. However, the Companys prospects must be considered in light of
substantial risks. The Company has experienced net losses since its fiscal year ended March 31,
2006 and as of June 30, 2008, it had an accumulated deficit of approximately $13,616,000. For
the three-months ended June 30, 2008, the Company had a net loss of $581,000 and utilized
approximately $1,363,000 of cash in operating activities. The Company expects operating losses
to continue through its foreseeable future as the sleep products do not yet generate revenue.
The Company is in need of additional financing or a strategic arrangement in order to continue
operations. These factors, amongst others, raise substantial doubts about the Companys ability
to continue as a going concern.On November 16, 2007, the Company entered into a definitive agreement, subject to shareholder
approval, to sell to Inovo, Inc. (the Buyer) substantially all of the assets of the Company
related to the oxygen conserver business including accounts receivable, inventory, and certain
equipment and intellectual property (the Asset Sale) pursuant to an Asset Purchase Agreement
(the APA). Pursuant to the APA, the Buyer assumed certain liabilities and obligations related
to the Companys oxygen conserver business. The Companys shareholders voted to approve the
sale of the Companys oxygen conserver business on January 31, 2008 and the Asset Sale was
completed for $5,250,000 on February 15, 2008. On March 6, 2008, the Company entered into an
Asset Purchase Agreement (the Purchase Agreement) with Respironics, Inc., (Respironics).
Pursuant to the Purchase Agreement, Respironics acquired the Companys assets related to the
transfilling oxygen business, the Total O2




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Delivery System, including the OMNI-5 In-Home Filling System, OMNI-2 In-Home Filling System,
Omni Fill technology and the Companys Post Valve patent for the purchase price of $1.825
million. Under the terms of the Purchase Agreement, Respironics assumed certain liabilities and
obligations related to the Companys transfilling oxygen business and the Company agreed to
indemnify Respironics for expenses arising out of any breach of its representations or
warranties. As a result of the discontinued operations presentation, the net earnings (loss)
related to the discontinued operations of $(393,000) for the three months ended June 30, 2007,
has been presented in the Statements of Operations as a component of earnings (loss) from
discontinued operations.During the next twelve months, the Company intends to seek outside financing arrangements in
order to facilitate its ability to fund anticipated capital expenditures, support its
development of the sleep products, and enhance its working capital resources. Financing may be
obtained through the sale of equity or debt securities, through the establishment of credit
arrangements or through some combination of the foregoing. The Company has no established
lines of credit or other arrangements in place to obtain working capital, and no assurance can
be given regarding if and when other sources of working capital would be available. Moreover,
the Company does not currently have in place any arrangements to raise additional funds through
the sale of securities and it is not possible at this time to predict the terms upon which
securities might be sold, or if the Company can raise any funds from prospective investors.2.
    
    Discontinued OperationsA protracted period of reductions in reimbursement for home respiratory care and continuing
uncertainty with respect to future prospects for an adequate reimbursement regime caused the
Company to make the decision to exit the oxygen business. In February and March 2008, the
Company exited the oxygen therapy business by selling all of its oxygen assets in two separate
transactions. On November 16, 2007, the Company entered into a definitive agreement, subject to
shareholder approval, to sell to Inovo, Inc. (the Buyer) substantially all of the assets of
the Company related to the oxygen conserver business including accounts receivable, inventory,
and certain equipment and intellectual property (the Asset Sale) pursuant to an Asset
Purchase Agreement (the APA). Pursuant to the APA, the Buyer would assume certain
liabilities and obligations related to the Companys oxygen conserver business. The Companys
shareholders voted to approve the sale of the Companys oxygen conserver business on January
31, 2008 and the Asset Sale was completed for $5,250,000 on February 15, 2008. On March 6,
2008, the Company entered into an Asset Purchase Agreement (the Purchase Agreement) with
Respironics, Inc., (Respironics). Pursuant to the Purchase Agreement, Respironics acquired
the Companys assets related to the transfilling oxygen business, the Total O2 Delivery System,
including the OMNI-5 In-Home Filling System, OMNI-2 In-Home Filling System, Omni Fill
technology and the Companys Post Valve patent for the purchase price of $1,825,000. Under the
terms of the Purchase Agreement, Respironics assumed certain liabilities and obligations
related to the Companys transfilling oxygen business and the Company agreed to indemnify
Respironics for expenses arising out of any breach of its representations or warranties. As a
result of the discontinued operations presentation, the net earnings (loss) related to the




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discontinued operations have been presented in the Statements of Operations as a component of
earnings (loss) from discontinued operations.In accordance with provisions of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets,  it was determined that the oxygen therapy business should be presented as
a discontinued operation in the financial statements.The following results of the oxygen business have been presented as earnings (loss) from
discontinued operations in the accompanying statements of operations:
 2008
    
    
    2007Net sales
    
    $
    
    
    
    $
    3,973,000Cost of sales
    
    
    
    
    
    
    3,178,000Gross profit
    
    
    
    
    
    
    795,000Operating expenses
    
    
    
    
    
    
    1,141,000Other expenses
    
    
    
    
    
    
    47,000Earnings (loss) from discontinued operations
    
    $
    
    
    
    $
    (393,000
    )
 3.
    
    Revenue RecognitionRevenue from product sales is recognized upon shipment of merchandise when title and risk of
loss transfers to the customer and the earnings process is complete. Products are shipped FOB
shipping point and title to the products transfers to the purchaser upon shipment. Under a
sales-type lease agreement, revenue is recognized at the time of the shipment with interest
income recognized over the life of the lease. Shipping charges billed to customers are
included in net sales. Allowances for customer returns have not been established, as
historically customer return experience has been minor. Costs paid to shipping companies are
recorded as a cost of sales.4.
    
    Major Customers
 Three Months EndedJune 30,2008
    
    2007Customer A**
    
    
    *
    
    
    
    47.7
    %
 
 *
    
    Indicates sales less than 10% of the Companys Net Sales balance**
    
    Indicates national chain customer 5.
    
    Concentration of Credit RiskAt times the Company maintains balances of cash that exceed $100,000 per financial institution,
the maximum insured by the Federal Deposit Insurance Corporation. Further, the Company
maintains a portion of its cash funds in an interest bearing, uninsured account. The Companys
right to the cash is subject to the risk that the financial institution will not pay when cash
is requested. The potential loss is the amount in any one financial institution over $100,000 and/or all funds in the interest bearing
account. At June 30, 2008, the amount at risk was approximately $142,000.The significant outstanding accounts receivable balances in 2008 were as follows:




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June 30
    
    March 31Customer A
    
    
    41.7
    %
    
    
    47.1
    %Customer B
    
    
    *
    
    
    
    20.8
    %Customer C
    
    
    26.1
    %
    
    
    *Customer D
    
    
    16.6
    %
    
    
    *
 
 *
    
    Indicates receivables balance less than 10% of the Companys net accounts receivable balance. 6.
    
    InventoriesDue to the sales of its oxygen assets in February and March of 2008, the Company did not have
any inventory at June 30, 2008 or March 31, 2008.7.
    
    Long-Term Debt and Revolving Line of CreditIn March 2007, the Company entered into a one-year factoring arrangement that provided for the
sale of up to $1,500,000 of the Companys accounts receivable. Assignments under the agreement
incurred interest at the banks prime rate plus two percent (2%) to three percent (3%)
depending on the total accounts receivable balance. The Company had a minimum monthly interest
payment of $6,000 beginning April 2007. The Company voluntarily terminated the factoring
agreement on July 30, 2007.On July 30, 2007, the Company entered into a financing transaction with Calliope Capital
Corporation , a Delaware corporation (the Investor) pursuant to which the Company issued to
the Investor a $750,000 convertible term note (Convertible Note) and a $2,750,000 revolving
credit line (Credit Line), all secured by the Companys assets. The Convertible Note was
payable in equal installments over 36 months beginning in November 2007 and maturing in July
2010 and bore interest at prime plus 2%, and the Credit Line bore interest at prime plus 1.5%.
A portion of that financing was used to pay all outstanding obligations on the Companys
factoring arrangement. At the Investors option, the Convertible Note could have been converted
into shares of the Companys common stock at any time during the term of the note at a
conversion price of $1.18. The closing price of the Companys common stock on the issue date of
the Convertible Note was $1.00 per share. In addition, warrants to purchase up to 976,744
shares of the Companys common stock were issued to the Investor with an exercise price of
$1.24 per share. The Investor was granted registration rights with respect to the shares
underlying the warrants. The warrants include a lock-up feature for a period of 12 months after
any warrants are exercised. On February 13, 2008, the Company voluntarily terminated both the
Convertible Note and the revolving Credit Line. The warrants issued to Calliope Capital
Corporation remain outstanding but unexercised at June 30, 2008.In order to address the Companys limited ability to draw against its Credit Line at the end of
the second fiscal quarter, on January 2, 2008, the Company entered a Subordinated Secured Note and Warrant Purchase Agreement (the Credit Facility) with Mr. Earl
Yager and Mr. Thomas Jones, our Chief Executive Officer and our Chairman of the Board,
respectively. The Company entered into the financing arrangement after it was unsuccessful in
obtaining financing on acceptable terms




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from a third party. The terms of the financing
arrangement were negotiated and approved by the Companys independent directors who concluded
that the terms were more favorable to the Company than those available from third party
lenders. Pursuant to the terms of the Credit Facility, the Company could draw an aggregate of
$1,000,000, subject to certain conditions. The Company voluntarily terminated the Credit
Facility on February 15, 2008.In connection with the Credit Facility, Mr. Yager and Mr. Jones each received 321,428 warrants
to purchase our common stock at a price per share equal to $0.28 (the average closing price of
our common stock on the American Stock Exchange for the five days immediately preceding the
initial funding under the Credit Facility). The number of shares issuable for each warrant
will be equal to (a) the principal amount of the Note issued at the initial closing multiplied
by 0.30, divided by (b) the exercise price. The warrants have a term of five years. No
additional warrants are issuable in connection with any additional borrowings the Company may
make under the Credit Facility.8.
    
    Income Tax ExpenseBased on managements earnings projections for the fiscal year ended 2008, the Company has
forecasted an effective tax rate of 35 percent. As of March 31, 2008, the Company has Federal
net operating loss carryforwards of approximately $12,000,000 of which $1,459,000 expires in
2027 and the balance in 2028 and California net operating loss carryforwards of approximately
$11,000,000 of which $3,442,000 expires in 2013 with the balance expiring in 2014. In assessing
the realizability of deferred tax assets, management considered whether it is more likely than
not that some portion or all of the deferred tax assets will not be realized. At June 30,
2008, the Companys deferred tax assets are fully offset by a valuation allowance.9.
    
    Geographic InformationThe Company has one reportable operating segment. Geographic information regarding the
Companys net sales is as follows:
 Three Months EndedJune 30,2008
    
    
    2007United States
    
    $
    
    
    
    $
    3,579,000Canada
    
    
    
    
    
    
    35,000Japan
    
    
    
    
    
    
    58,000Europe
    
    
    
    
    
    
    143,000All other countries
    
    
    
    
    
    
    158,000$
    
    
    
    $
    3,973,000
 Sales for the three-months ended June 30, 2007 are solely of the Companys oxygen related
products. Due to the sale of the all of the Companys oxygen assets, there will be no further
sales of oxygen related products. The Company has not yet brought any of its sleep products to
market.




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All long-lived assets are located in the United States.Sales of OXYMATIC®, LOTUS and CYPRESS OXYPneumatic® conservers and SAGE Therapeutic devices
accounted for 70% of the Companys sales for the three-month period ended June 30, 2007.10.
    
    Stock Option PlanOn April 1, 2006, the Company adopted Statement of Financial Accounting Standards 123R,
Share-Based Payment, which revised SFAS 123, Accounting for Stock-Based Compensation. The
Company adopted FAS 123R using the modified prospective transition method. Previously, the
Company had followed APB 25, accounting for employee stock options at intrinsic value.
Accordingly, during the three-month period ended June 30, 2007, the Company recorded
stock-based compensation expense for awards granted prior to, but not yet vested, as of April
1, 2006, as if the fair value method required for pro forma disclosure under FAS 123 were in
effect for expense recognition purposes, adjusted for estimated forfeitures. For stock-based
awards granted after April 1, 2006, the Company would recognize compensation expense based on
the estimated grant date fair value method using the Black-Scholes valuation model. For these
awards, the Company would recognize compensation expense using a straight-line method. As FAS
123R requires that stock based compensation expense be based on awards that are ultimately
expected to vest, stock-based compensation for the three-month period ended June 30, 2007, has
been reduced for estimated forfeitures. For the three-month period ended June, 2007,
stock-based compensation expense of $4,000 was recorded to selling, general, and administrative
expenses, all of which was due to FAS 123R option expense. All of the Companys options were
fully vested prior to the three-months ended June 30, 2008 so no stock compensation expense was
recorded. Due to the prospective adoption of SFAS No. 123R, results for prior period have
not been restated.The Company has an equity incentive plan (the Plan) for key employees as defined under Section
422(A) of the Internal Revenue Code. The Plan provides that 750,000 common shares be reserved
for issuance under the Plan, which expires on September 8, 2014, of which approximately 535,000
are available for future grant at June 30, 2008. In addition, the Plan provides that
non-qualified options can be granted to directors and independent contractors of the Company.
Stock options are granted with an exercise price equal to the market value of a share of the
Companys stock on the date of the grant. Historically, grants to non-employee directors have
vested over two years, while the majority of grants to employees have vested over two to five
years of continuous service.The fair value of each stock option award is estimated on the date of the grant using the
Black-Scholes option valuation model. Expected volatility is based on the historical volatility of the Companys stock. No expected dividend yield is used since the
Company has not historically declared or paid dividends and no dividends are expected in the
foreseeable future. The risk-free interest rate is based on the U.S. treasury yield curve on
the grant date for the expected term of the option. The Company did not grant any stock
options during the three months ended June 30, 2008 and 2007, respectively. A summary of stock
option activity as of and for the three-months ended June 30, 2008, is presented below:




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RemainingExercise
    
    
    ContractualPrice Per
    
    
    TermShares
    
    
    Share
    
    
    (in years)Outstanding at March 31, 2008
    
    
    844,000
    
    
    $
    2.01Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    139,000
    
    
    
    2.28Outstanding at June 30, 2008
    
    
    705,000
    
    
    $
    1.94
    
    
    
    3.0As of June 30, 2008:Exercisable
    
    
    705,000
    
    
    $
    1.94
    
    
    
    3.0Vested and expected to vest
    
    
    705,000
    
    
    $
    1.94
    
    
    
    3.0
   11.
    
    Warrants




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12.
    
    Commitments
     13.
    
    Use of Estimates




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14.
    
    Accounting Standards
  Accounting for Uncertainty in Income
Taxes- an interpretation of FASB Statement No. 109 Accounting for Income Taxes




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




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Accounting for Uncertainty in Income Taxes- an
interpretation of FASB Statement No. 109 Accounting for Income Taxes




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(a)




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10.24
    
    1994 Stock Option Plan (1)10.27
    
    2004 Equity Incentive Plan (1)10.28
    
    Security Agreement dated July 30, 2007 (2)10.29
    
    Registration Rights Agreement dated July 30, 2007 (3)10.30
    
    Secured Convertible Term Note dated July 30, 2007 (3)10.31
    
    Secured Revolving Note dated July 30, 2007 (3)10.32
    
    Warrant dated July 30, 2007 (3)10.33
    
    Asset Purchase Agreement dated November 16, 2007(4)31.1
    
    Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 for CEO31.2
    
    Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 for CFO32*
    
    Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
Sarbanes-Oxley Act of 2002
 
 *
    
    The information in Exhibit 32 shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the Exchange Act) or otherwise subject to the
liabilities of that section, nor shall they be deemed incorporated by reference in any filing under
the Securities Act of 1933, as amended, or the Exchange Act (including this quarterly report),
unless CHAD Therapeutics specifically incorporates the foregoing information into those documents
by reference.(1)
    
    Previously filed as an exhibit to the Registrants Annual Report
on Form 10-K for the year ended March 31, 1996.(2)
    
    Previously filed as an exhibit to the Registrants Annual Report on Form
10-K for the year ended March 31, 1998.(3)
    
    Previously filed as an Exhibit to the Registrants Form 8-K dated August 3,
2007.(4)
    
    Previously filed as an Exhibit to the Registrants Report on Form 10-Q for
the quarter ended September 30, 2007.




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CHAD THERAPEUTICS, Inc.(Registrant)Date 08/14/2008
    /s/ Earl L. YagerEarl L. YagerPresident and Chief Executive OfficerDate 08/14/2008
    /s/ Tracy A. KernTracy A. KernChief Financial Officer




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Exhibit No.
    
    Description of Exhibits31.1
    
    Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 for CEO31.2
    
    Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 for CFO32*
    
    Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
Sarbanes-Oxley Act of 2002
 
 *
    
    The information in Exhibit 32 shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the Exchange Act) or otherwise subject to the
liabilities of that section, nor shall they be deemed incorporated by reference in any filing under
the Securities Act of 1933, as amended, or the Exchange Act (including this quarterly report),
unless CHAD Therapeutics specifically incorporates the foregoing information into those documents
by reference.