October
26, 2007
Linda
Van
Doorn, Senior Assistant Chief Accountant
Wilson
K.
Lee, Staff Accountant
Division
of Corporation Finance
U.S.
Securities and Exchange Commission
100
F
Street, N.E.
Washington,
D.C. 20549
RE: CHDT
CORPORATION RESPONSE TO
COMMISSION
LETTER, DATED 17 OCTOBER
2007
BY
FAX (202) 772-9210 & FEDEX
PREPAID
Dear
Ms.
Doorn and Mr. Lee:
Pursuant
to the follow up letter by Mr. Wilson K. Lee, this is the timely filed response
of CHDT Corporation, a Florida corporation, (“Company”) (SEC File#: 000-28831)
to the Commission’s inquiry letter, dated 17 October, 2007, (“SEC Letter”) in
respect of the Company’s Form 10-KSB Report for the fiscal year ending December
31, 2006 and filed with the Commission on April 17, 2007 (“Form
10K”).
CHDT
CORPORATION RESPONSE:
|
1.
|
We
have read your response to comment two. Based upon your
description of the events that lead to the need for the restatement,
it
seems that the disclosure controls were ineffective in that a human
error
that resulted in the misstatement was not detected. Your
response seems to be addressing the improvements you have made to
disclosure controls and procedures subsequent to the
deficiency. Please revise your disclosures
accordingly.
|
Response: Comment
noted. The disclosures will be revised in the amended 10KSB for
2006.
|
2.
|
We
will review your amended 10KSB for compliance with comments one,
three,
four, and six. Please note that when you file your amendment,
new certifications should be filed and all amended Items should be
filed
in their entirety.
|
Response: Comment
noted.
350,
Jim
Moran Blvd, Suite 120, Deerfield Beach, Fl. 954-252-3440, fax
954-252-3442
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COMMISSION
INQUIRY: FINANCIAL STATEMENTS AND NOTES
5. COMMISSION
INQUIRY: We note that you acquired Capstone to expand your customer
base. Tell us what consideration was given to allocating a portion of
the purchase price to other identifiable intangible assets apart from goodwill
such as customer lists and customer relationships. Reference is made
to paragraph 39 of SFAS 141 and EITF 02-17.
COMPANY
RESPONSE: In reviewing paragraph 39 of SFAS 141, it was determined that customer
lists or customer relationships acquired did not arise from contractual or
other
legal rights, and that they were not capable of being separated from the
acquired entity and sold, transferred, licensed, rented or
exchanged. Therefore, it was determined not to separate the customer
lists or customer relationships from goodwill.
COMMISSION
INQUIRY RESPONSE – October 17th, 2007
We
have
read and considered your response to comment five. We understand that the
registrant acquired retail contract agreements with mass market retailers in
connection with these acquisitions. Based upon guidance of paragraph 39 and
A20
of SFAS 141 as well as EITF 02-17, the value of these contracts and the related
customer relationships should be recognized as an intangible asset apart from
goodwill. Please revise the financial statements appropriately to separately
recognize these intangibles assets.
COMPANY
RESPONSE:
We
do not
believe that the retail contract agreements with mass market retailers that
were
acquired in the acquisition of Capstone should be separated from goodwill,
as
they have no value. These really are not contracts, but agreements
with the retailers stating the terms and conditions required to do business
with
the retailers, such as payment terms, discount allowances, shipping methods,
packaging guidelines, order processing, child labor laws and factory
certification. Capstone gave no consideration and received no
consideration when these agreements were signed. The agreements
essentially act as a screening process by the retailer to do business with
them. We have to accept all of the conditions in the agreements to be
in a position to bid for orders. These agreements do not require the
retailers to buy any products from us, so there is no contractual obligation
between the retailer and the Company. We have signed the above
referenced agreements with some retailers who have never placed an order with
us. The agreements are also not separable from the Company, as anyone
wanting to do business with the retailer would need to sign their own agreement
with the retailer.
2
CHDT
Corporation acknowledges that it is responsible for the adequacy and accuracy
of
the disclosures in its SEC filings; that staff comments or changes to the
disclosures in response to SEC staff comments do not foreclose the SEC from
taking any action with respect to such filings; and CHDT Corporation may not
assert SEC Staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United
States.
Sincerely,
/s/
Gerry
McClinton
Chief
Operating Officer
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