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, 2012

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 o
Non-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, 2012, there were 649,510,532 shares of the issuer's $.0001 par value common stock issued and outstanding.

1

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

CHDT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	(Unaudited)
	March 31,			December 31,
	2012			2011
Assets:
Current Assets:
Cash	$	199,988		$	164,610
Accounts receivable – net		143,730			1,477,279
Inventory		661,337			58,717
Prepaid expense		340,260			417,743
Total Current Assets		1,345,315			2,118,349
Fixed Assets:
Computer equipment & software		66,448			64,047
Machinery and equipment		546,919			546,919
Furniture and fixtures		5,665			5,665
Less: Accumulated depreciation		(554,920	)		(546,193	)
Total Fixed Assets		64,112			70,438
Other Non-current Assets:
Product development costs – net		15,747			13,624
Goodwill		1,936,020			1,936,020
Total Other Non-current Assets		1,951,767			1,949,644
Total Assets	$	3,361,194		$	4,138,431

2

CHDT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
	(Unaudited)
	March 31,			December 31,
	2012			2011
Liabilities and Stockholders’ Equity:
Current Liabilities:
Accounts payable and accrued expenses	$	479,656		$	526,936
Note payable - Sterling National		24,212			441,607
Notes and loans payable to related parties - current maturities		1,558,578			0
Total Current Liabilities		2,062,446			968,543
Long Term Liabilities
Notes and loans payable to related parties - Long Term		-			1,531,215
Total Liabilities		2,062,446			2,499,758
Stockholders' Equity:
Preferred Stock, Series A, par value $.001 per share
Authorized 100,000,000 shares, issued -0- shares		-			-
Preferred Stock, Series B, par value $.10 per share
Authorized 100,000,000 shares, issued -0- shares		-			-
Preferred Stock, Series B-1, par value $.0001 per share
Authorized 50,000,000 shares, issued -0- shares		-			-
Preferred Stock, Series C, par value $1.00 per share
Authorized 1,000 shares, issued 1,000 shares		1,000			1,000
Common Stock, par value $.0001 per share
Authorized 850,000,000 shares,
Issued 649,510,532 shares at March 31, 2012
and December 31, 2011		64,951			64,951
Additional paid-in capital		7,050,108			7,041,858
Accumulated deficit		(5,817,311	)		(5,469,136	)
Total Stockholders' Equity		1,298,748			1,638,673
Total Liabilities and Stockholders’ Equity	$	3,361,194		$	4,138,431
The accompanying notes are an integral part of these financial statements.

3

CHDT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	For the Three Months Ended
	March 31st,
	2012			2011
Revenue	$	338,670		$	2,417,494
Cost of Sales		(230,788	)		(1,826,243	)
Gross Profit		107,882			591,251
Operating Expenses:
Sales and marketing		49,187			52,773
Compensation		220,079			184,603
Professional fees		47,323			37,737
Product Development		27,102			52,083
Other general and administrative		80,435			81,227
Total Operating Expenses		424,126			408,423
Net Operating Income (Loss)		(316,244	)		182,828
Other Income (Expense):
Interest expense		(31,931	)		(75,710	)
Total Other Income (Expense)		(31,931	)		(75,710	)
Net Income (Loss)	$	(348,175	)	$	107,118
Income (Loss) per Common Share
Basic	$	-		$	-
Diluted	$	-		$	-
Weighted Average Shares Outstanding
Basic		649,510,532			649,357,786
Diluted		804,957,109			801,162,409
The accompanying notes are an integral part of these financial statements.

4

CHDT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For the Three Months Ended
	March 31,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Continuing operations:
Net Income (Loss)	$	(348,175	)	$	107,118
Adjustments necessary to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization		12,174			17,446
Compensation expense from stock options		8,250			15,484
(Increase) decrease in accounts receivable		1,333,549			(808,220	)
(Increase) decrease in inventory		(602,621	)		196,405
(Increase) decrease in prepaid expenses		77,483			(216,977	)
(Increase) decrease in deposits		-			-
(Increase) decrease in other assets		(5,570	)		-
Increase (decrease) in accounts payable and accrued expenses		(47,279	)		195,553
Increase (decrease) in accrued interest on notes payable		27,363			31,604
Net cash provided by (used in) operating activities		455,174			(461,587	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(2,401	)		(2,250	)
Net cash provided by (used in) investing activities		(2,401	)		(2,250	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable		1,107,628			256,095
Repayments of notes payable		(1,525,023	)		-
Proceeds from notes and loans payable to related parties		-			997,000
Repayments of notes and loans payable to related parties		-			(811,624	)
Net cash provided by financing activities		(417,395	)		441,471
Net (Decrease) Increase in Cash and Cash Equivalents		35,378			(22,366	)
Cash and Cash Equivalents at Beginning of Period		164,610			115,239
Cash and Cash Equivalents at End of Period	$	199,988		$	92,873
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	4,568		$	32,745
Franchise and income taxes	$	-		$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
None
The accompanying notes are an integral part of these financial statements.

5

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.

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 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.   With the name change, the trading symbol was changed to “CHDO.”

Interim Financial Statements

The unaudited financial statements as of March 31, 2012 and for the three month period ended March 31, 2012 and 2011 reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three months.  Operating results for interim periods are not necessarily indicative of the results which can be expected for full years.

Nature of Business

Since the beginning of fiscal year 2007, the Company has been primarily engaged in the business of developing, marketing and selling consumer products through national and regional retailers and distributors, in North America.  Capstone currently operates in four primary business segments: Induction Charged Power Failure Lights, Motion Sensor Lights, Portable Book and Task Lights and Desk Lamps.  The Company’s products are typically manufactured in the Peoples’ Republic of China by third-party manufacturing companies.

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 March 31, 2012, 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 $661,337 and $58,717 at March 31, 2012 and December 31, 2011, respectively.

6

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

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 years
Computer software	3 - 7 years
Machinery and equipment	3 - 7 years
Furniture 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 2011 or the quarter ended March 31, 2012.

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 $8,727 and $13,112for the period ended March 31, 2012 and March 31, 2011, respectively.

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, 2011, 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.  At March 31, 2012 and 2011, the total number of potentially dilutive common stock equivalents was155,446,577 and 151,651,877 respectively.

7

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

Principles of Consolidation

The consolidated financial statements as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and March 31, 2011 include the accounts of the parent entity and its wholly-owned subsidiaries Capstone Lighting Technologies, L.L.C (formerly 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 cash, prepaid expenses, accounts receivable, accounts payable and accrued liabilities at March 31, 2012 and March 31, 2011 approximates their fair values due to the short-term nature of these financial instruments. The fair value hierarchy under GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

·   Level one — Quoted market prices in active markets for identical assets or liabilities;

·   Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

·   Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.

Reclassifications

Certain reclassifications have been made in the 2011 financial statements to conform to the 2012 presentation.  There were no material changes in classifications made to previously issued financial statements.

Revenue Recognition

Product sales are recognized when an agreement of sale exists, product delivery has occurred, pricing is final or determinable, and collection is reasonably assured.

Allowances for sales returns, rebates and discounts are recorded as a component of net sales in the period the allowances are recognized.  In addition, accrued liabilities contained in the accompanying balance sheet include accruals for estimated amounts of credits to be issued in future years based on potentially defective product, other product returns and various allowances.  These estimates could change significantly in the near term.

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 $28,615 and $ 23,670 for the quarters ended March 31, 2012 and March 31, 2011, respectively.  As of March 31, 2012 the company has $275,019 in capitalized advertising costs included in prepaid expenses on the balance sheet.

Shipping and Handling

The Company’s shipping and handling costs, incurred by Capstone amounted to $11,662 and $28,826 for the quarters ended March 31, 2012 and 2011, 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.

8

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

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.  ASC 718 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 ASC 718.  The Company has applied the provision of SAB 107 in its adoption of ASC 718.

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 day of the Company’s fiscal year.  The Company’s consolidated financial statements as of and for the years ended December 31, 2006 and later, 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).

SFAS 123(R)ASC 718 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 ASC 718, 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 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 ASC 718.

In conjunction with the adoption of ASC 718, 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.  ASC 718 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, 2011, 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 ASC 718, 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 year ended December 31, 2010, the Company recognized a compensation expense of $156,558 related to these options. For the year ended December 31, 2011, the Company recognized compensation expense of $52,186 related to these options. No further compensation expense will be recognized for these options.

9

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

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 and 2009, 1,500,000 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.  During 2010, 3,500,000 of the above options expired.  No further compensation expense will be recognized for these options.

On May 1, 2008, the Company granted 850,000 stock options to an employee of the Company.  The options vest over two years.  For the year ended December 31, 2008, the Company recognized compensation expense of $5,242 related to these options.  For the year ended December 31, 2009, the Company recognized compensation expense of $7,862 related to these options.  For the year ended December 31, 2010, the Company recognized compensation expense of $2,620 related to these options. No further expense will be recognized for 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 year ended December 31, 2010, the Company recognized compensation expense of $33,837 related to these options. No further expense will be recognized for these options.  These options expired on June 8, 2011.

On April 23, 2010, the Company granted 4,800,000 stock options to four directors of the Company and the Company Secretary. The options vest in one year.  For the year ended December 31, 2010, the Company recognized compensation expense of $27,000 related to these options.  For the year ended December 31, 2011 the Company recognized compensation expense of $12,000.  No further expense will be recognized for these options.

On July 1, 2011, the Company granted 4,650,000 stock options to four directors of the Company and the Company Secretary. The options vest in one year. For the year ended December 31, 2011 the Company recognized compensation expense of $16,500.  For the quarter ended March 31, 2012, the Company recognized an expense of $8,250.  Another $8,250 of expense will be incurred in 2012 relating 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 ASC 718 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.

10

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

Stock-Based Compensation Expense

Stock-based compensation for the three months ended March 31, 2012 was $8,250. Stock-based compensation expense for the three months ended March 31, 2011 was $15,484

Recent Accounting Standards

In May 2011, FASB issued ASU 2011-04 “Fair Value Measurement (Topic 820).” The amendments in ASU 2011-04 change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments include (1) those that clarify the Board's intent about the application of existing fair value measurement and disclosure requirements and (2) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. In addition, to improve consistency in application across jurisdictions some changes in wording are necessary to ensure that U.S. GAAP and IFRS fair value measurement and disclosure requirements are described in the same way (for example, using the word shall rather than should to describe the requirements in U.S. GAAP). The amendments that clarify the Board's intent about the application of  existing fair value measurement and disclosure requirements include (a) the application of the highest and best use and valuation premise concepts, (b) measuring the fair value of an instrument classified in a reporting entity's shareholders' equity, and (c) disclosures about fair value measurements that clarify that a reporting entity should disclose quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. The amendments in this Update that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements include (a) measuring the fair value of financial instruments that are managed within a portfolio, (b) application of premiums and discounts in a fair value measurement, and (c) additional disclosures about fair value measurements that expand the disclosures about fair value measurements. The amendments in ASU 2011-04 are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company’s adoption of ASU 2011-04 did not have a material effect on the Company’s financial position, results of operations or cash flows.

In June 2011, FASB issued ASU 2011-05 “Comprehensive Income (Topic 220).”  Under the amendments in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.  The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The amendments do not require any transition disclosures.  The Company’s adoption of ASU 2011-04 did not have a material effect on the Company’s financial position, results of operations or cash flows.

In December 2011, FASB issued ASU 2011-12 “Comprehensive Income (Topic 220).”  In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. The amendments are being made to allow the Board time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05.All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company’s adoption of ASU 2011-04 did not have a material effect on the Company’s financial position, results of operations or cash flows.

11

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

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 revenue 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, 2012, 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, 2011 and 2010.  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 Receivable
	2011	2010	2011	2010
Customer A	55%	42%	$  1,014,690	$       82,041
Customer B	19%	23%	488,468	987,231
Customer C	13%	6%	-	48,046
	87%	71%	$  1,503,158	$  1,117,318

Major Vendors

The Company had three vendors from which it purchased at least ten percent (10%) of merchandise during the fiscal year ended December 31, 2011 and four vendors from which it purchased at least ten percent (10%) of merchandise during the fiscal year ended December 31, 2010.  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 Payable
	2011	2010	2011	2010
Vendor A	62%	71%	$  291,350	$  24,597
Vendor B	35%	17%	350	14,701
Vendor C	2%	9%	-	-
	99%	97%	$  291,700	$  39,298

12

NOTE 3 – NOTES PAYABLE

Sterling National Bank

On September 8,2010, in order to fund increasing Accounts Receivables and support working capital needs, Capstone secured a Financing Agreement from Sterling Capital Funding,(now called Sterling National Bank) , located in New York, whereby Capstone receives funds for assigned retailer shipments. The assignments provide funding for an amount up to 85% of net invoices submitted.  There will be a base management fee equal to .45% of the gross invoice amount. The interest rate of the loan advance is ¼% above Sterling National Bank Base Rate which at time of closing was 5%.  The amounts borrowed under this agreement are secured by a right to set-off on or against any of the following (collectively as “Collateral”): all accounts including those at risk, all reserves, instruments, documents, notes, bills and chattel paper, letter of credit rights, commercial tort claims, proceeds of insurance, other forms of obligations owing to Sterling, bank and other deposit accounts whether or not reposed with affiliates, general intangibles (including without limitation all tax refunds, contract rights, trade names, trademarks, trade secrets, customer lists, software and all other licenses, rights, privileges and franchises), all balances, sums and other property at any time to our credit or in Sterling’s possession or in the possession of any Sterling Affiliates, together with all merchandise, the sale of which resulted in the creation of accounts receivable and in all such merchandise that may be returned by customers and all books and records relating to any of the foregoing, including the cash and non-cash proceeds of all of the foregoing.  CHDT Corp and Howard Ullman, the previous Chairman of the Board of Directors of CHDT, had personally guaranteed Capstone’s obligations under the Financial Agreement. As part of the 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 $81,000 (plus future interest) due to Howard Ullman (or his assigns), to the Sterling National Bank loan.  No payments will be made on the subordinated debt until the Sterling loan is paid in full.  As of March 31, 2012, the balance due to Sterling was $24,212.

On July 21,2011 Stewart Wallach, the Chief Executive Officer and Director of CHDT and JWTR Holdings, LLC   owned by a Director, Jeffrey Postal entered into a Securities and Notes Purchase Agreement  with Howard Ullman, the previous Chairman of the Board of CHDT, whereby they would purchase equally all of Howard Ullmans notes including the notes subordinated to Sterling National Bank.

On July 15, 2011, Stewart Wallach individually and accepted by Sterling National Bank, agreed to replace Howard Ullman as the sole personal guarantor to Sterling National Bank for all of Capstone Industries, Inc. loans previously guaranteed by Howard Ullman.

Effective July 12, 2011, Capstone Industries, Inc., credit line with Sterling National Bank was increased from $2,000,000 up to $4,000,000 to provide additional funding for increased revenue growth.

Effective October 1st, 2011 Sterling Capital Funding will be conducting business as the Factoring and Trade Division of Sterling National Bank. All obligations under our agreements have been assigned to Sterling National Bank.

NOTE 4 – NOTES AND LOANS PAYABLE TO RELATED PARTIES

CHDT Corp - Notes Payable to Officers and Directors

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.  The loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.

On July 12, 2011 Stewart Wallach, the Chief Executive Officer and Director of CHDT and JWTR Holdings, LLC owned by a Director, Jeffrey Postal entered into a Securities and Notes Purchase Agreement  with Howard Ullman, the previous Chairman of the Board of CHDT, whereby they would purchase equally all of Howard Ullmans notes including the subordinated notes net of any offsets, monies due by Howard Ullman to the Company. The original terms of all notes would remain the same. On July 12, 2011 this note payable was reassigned by Howard Ullman, equally split between Stewart Wallach Director and JWTR Holdings LLC.   The note balance of $466,886 was reduced by $47,940 for offsets due by Howard Ullman. The revised loan balance of $418,946 was reassigned equally $209,473 to Stewart Wallach and $209,473 to JWTR Holdings LLC. At March 31, 2012, the total amount payable on the reassigned notes to Stewart Wallach was $220,676which includes accrued interest of $11,203 and JWTR Holdings; LLC was $220,676 which includes accrued interest of $11,203.  For the revised notes the interest payments are being accrued monthly to the note holders.

On July 11, 2008, the Company received a loan from a director of $250,000.  As amended, the note is due on of before January 2, 2013 and carries an interest rate of 8% per annum.  At March31, 2012, the total amount payable on this note was $294,986 including interest of $44,986.

13

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

As part of this note payable, the Company also issued a warrant to the loan holder to purchase 4,000,000 shares of common stock at a price of $.025 per share.  At the date of issuance, the stock price was $.021 per share.  The Company accounted for the debt and warrants using APB 14, whereby the proceeds of $250,000 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. As amended, the note is due on or before January 2, 2013 and carries an interest rate of 8% per annum.  At March 31, 2012 the total amount payable on this note was $116,461 including interest of $16,461.

On May 11, 2010, the Company received a loan from a director of $75,000. As amended, the note is due on or before January 2, 2013 and carries an interest rate of 8% per annum.  The loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.  At March 31, 2012 the total amount payable on this note was $86,343, including interest of $11,343.

On June 11, 2010, the Company received a loan from a director of $150,000. As amended, the note is due on or before January 2, 2013and carries an interest rate of 8% per annum.  The loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.  At March 31, 2012 the total amount payable on this note was $171,666 including interest of $21,666.

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.  As amended, the notes are due on or before January 2, 2013 and carry an interest rate of 8% per annum.  These loans grant to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.  At March 31, 2012 the total amount due on these notes was $235,989, including interest of $35,989.

Capstone Industries – Notes Payable to Officers and Directors

On July 16, 2007, Capstone Industries executed a $103,000 promissory note payable to a director of the Company.  As amended, the note carries an interest rate of 8% per annum and is due on or before January 2, 2013.  In December 2008, the Company borrowed an additional $75,000 from this director.  As amended, this note is due on or before January 2, 2013.  These loans grant to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.

On July 12, 2011 Stewart Wallach, the Chief Executive Officer and Director of CHDT and JWTR Holdings, LLC owned by a Director, Jeffrey Postal entered into a Securities and Notes Purchase Agreement  with Howard Ullman, the previous Chairman of the Board of CHDT, whereby they would purchase all of Howard Ullman’s notes including the subordinated notes. The original terms of all notes would remain the same.  On July 12, 2011 the subordinated note payable was reassigned by Howard Ullman, to Stewart Wallach director and JWTR Holding LLC.  The original note balance of $178,000 was reassigned to Stewart Wallach and to JWTR Holdings LLC. For the year 2011 the interest payments were paid monthly to the note holder as of July 31, 2011.

At March 31, 2012 the total amount due on these notes was $211,782, including interest of $33,782.

Notes and Loans Payable to Related Parties – Maturities

Based on the above, the total amount payable to officers, directors and related parties as of March 31, 2012 and December 31, 2011 was 1,558,578 and $1,531,215, respectively, including accrued interest of $27,364  and $82,019, respectively.  The maturities under the notes and loan payable to related parties for the next five years are:

Year Ended December, 31,
2012	$	-
2013		1,558,578
2014		-
2015		-
2016		-
Total future maturities	$	1,558,578

14

NOTE 5 – 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 $13,968 and $13,968 for the periods ended March 31, 2012 and 2011, respectively.

NOTE 6 – 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, for 2010, Mr. Wallach was paid $175,412 and for 2011 was paid $180,000.  The difference between the $180,000 that was paid in 2011 and the amount due per the agreement has been accrued and is included on the balance sheet as part of accounts payable and accrued expenses.  The term of the contract begins February 5, 2008 and ends on February 5, 2011, but the term of the contract has been extended for a further two years.

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 for 2010 Mr. McClinton was paid $113,546 and for 2011 was paid $146,250.  The difference between the $180,000 that was paid in 2011 and the amount due per the agreement has been accrued and is included on the balance sheet as part of accounts payable and accrued expenses.  The term of the contract begins February 5, 2008 and ends on February 5, 2011 but the term of the contract has been extended for a further two years.

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. For 2010 Mr. Ullman was paid $73,444. The term of the contract began February 5, 2008 and ended on February 5, 2011 and was been extended until June 30, 2011.  As of July 1st 2011 Mr. Ullman is no longer an employee of the Company.

NOTE 7 - STOCK TRANSACTIONS

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. 1,975,000 of these warrants had an exercise price of $.05 and expired on November 11, 2011.  The remaining 4,000,000 warrants expire July 20, 2014. The warrants have an exercise price of $.03.

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.

On July 11, 2008, the Company received a loan from a director of $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.

15

NOTE 7 - STOCK TRANSACTIONS (continued)

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, 2010 these options were fully vested and compensation expense fully recognized.  No further compensation expense will be recognized for these options.

On April 23, 2007, the Company granted a ten-year non-qualified, non-statutory stock option for 102,400,000 “restricted” shares of the Company’s common stock to Stewart Wallach, the Company’s CEO, as incentive compensation.  The exercise price of the options is $.029 per share, which was the fair market value of the stock on the date of grant.  Twenty percent of the options vested on the date of issuance, and twenty percent per year will vest on the anniversary date through April 23, 2011.  On May 23, 2008, 74,666,667 of these options were cancelled.  Compensation expense was recognized through the date of the cancellation of the options. On 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, 2010 and 2009, the Company recognized compensation expense of $156,558 and $156,557 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 has recognized compensation expense of $52,186 for the year ended December 31, 2011. As of December 31, 2011 these options were fully vested and compensation expense fully recognized.  No further compensation expense will be recognized for these options.  No further compensation expense will be recognized for these options after 2011.

On October 22, 2007, the Company granted 700,000 stock options to a business associate of the Company.  The options vest over two years.

16

NOTE 7 - STOCK TRANSACTIONS (continued)

The Binomial Lattice (Suboptimal) option pricing model was used to calculate the fair value of the options granted. During the years ended December 31, 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, 2010 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.

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, 2010 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, 2010 these options were fully vested and compensation expense fully recognized.  No further compensation expense will be recognized for these options.

On May 1, 2008, the Company granted 850,000 stock options to an employee of the Company.  The options vest over two years.

The Binomial Lattice (Suboptimal) option pricing model was used to calculate the fair value of the options granted. For the years ended December 31, 2010 and 2009, the Company recognized compensation expense of $2,620 and $7,862 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

17

NOTE 7 - STOCK TRANSACTIONS (continued)

The Company recognized compensation expense of $2,620 in 2010 related to these stock options. As of December 31, 2010 these options were fully vested and compensation expense fully recognized.  No further compensation expense will be recognized for these 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, 2010, the Company recognized compensation expense of $33,837 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

As of December 31, 2010 these options were fully vested and compensation expense fully recognized.  As of June 8, 2011 these options had expired. No further compensation expense will be recognized for these options.

On April 23rd, 2010, the Company granted 4,500,000 stock options to four directors of the Company and 300,000 stock options to the Company Secretary.  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, 2010, the Company recognized compensation expense of $27,000 related to these options.  The following assumptions were used in the fair value calculations:

Risk free rate – 2.61%

Expected term – 5 to 10 years

Expected volatility of stock – 500.5%

Expected dividend yield – 0%

Suboptimal Exercise Behavior Multiple – 2.0

Number of Steps – 100

For the year ended December 31, 2011, the Company recognized compensation expense of $12,000 related to these stock options. As of December 31, 2011 these options were fully vested and compensation expense fully recognized.  No further compensation expense will be recognized for these options.

On July 1, 2011, the Company granted 4,500,000 stock options to four directors of the Company and 150,000 stock options to the Company Secretary.  The options vest over one year.

The Binomial Lattice (Suboptimal) option pricing model was used to calculate the fair value of the options granted.  The following assumptions were used in the fair value calculations:

Risk free rate – 1.80 – 3.22%

Expected term – 5 to 10 years

Expected volatility of stock – 500%

Expected dividend yield – 0%

Suboptimal Exercise Behavior Multiple – 2.0

Number of Steps – 150

For the quarter ended March 31, 2012, the Company recognized compensation expense of $ 8,250 related to these stock options.  A further $8,250 will be recognized in 2012 related to these options.

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NOTE 7 - STOCK TRANSACTIONS (continued)

The following table sets forth the Company’s stock options outstanding as of March 31, 2012 and December 31, 2011 and activity for the years then ended:

			Weighted
		Weighted	Average
		Average	Remaining	Aggregate
		Exercise	Contractual	Intrinsic
	Shares	Price	Term (Years)	Value
Outstanding, January 1, 2011	69,733,333	$    0.029	5.92	$          -
Granted	4,650,000	0.029	-	-
Exercised	-	-	-	-
Forfeited/expired	4,500,000	0.029	-	-
Outstanding, December 31 , 2011	69,883,333	$    0.029	5.26	$           -
Granted	-	-	-	-
Exercised	-	-	-	-
Forfeited/expired	-	-	-	-
Outstanding, March31, 2012	69,883,333	$    0.029	5.01	$           -
Vested/exercisable at December 31, 2011	65,233,333	$    0.029	5.30	$          -
Vested/exercisable at March  31, 2012	65,233,333	$    0.029	5.05	$          -

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	3.17	$.020	250,000
$.029	54,983,333	5.08	$.029	54,983,333
$.029	2,500,000	6.08	$.029	2,500,000
$.029	700,000	7.08	$.029	700,000
$.029	1,000,000	5.75	$.029	1,000,000
$.029	150,000	5.83	$.029	150,000
$.029	850,000	7.17	$.029	850,000
$.029	4,500,000	3.08	$.029	4,500,000
$.029	300,000	8.08	$.029	300,000
$.029	4,500,000	4.25	$.029	4,500,000
$.029	150,000	9.25	$.029	150,000

NOTE 8 - INCOME TAXES

As of December 31, 2011, 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 2031. 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 carry forwards will expire unused. Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount.

	2011			2010
Net Operating (Profit) Losses	$	819,000		$	903,000
Valuation Allowance		(819,000	)		(903,000	)
	$	-		$	-

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NOTE 8 - INCOME TAXES (continued)

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

	2011			2010
Provision (Benefit) at US Statutory Rate	$	121,000		$	(155,000	)
Depreciation and Other		(37,000	)		-
Increase (Decrease) in Valuation Allowance		(84,000	)		155,000
	$	-		$	-

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.

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, 2011 and 2010.  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 2008. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2011:

United States (a)	2008 – Present
(a) Includes federal as well as state or similar local jurisdictions, as applicable.

NOTE 9 – INTANGIBLE ASSETS

The Company capitalized $5,570 and $16,755 at March 31, 2012 and December   31, 2011 respectively, related to packaging artwork and design costs., The Company recognized amortization expense of $3,447   and $22,027 at March 31, 2012 and December 31, 2011 respectively, related to these assets.  At March 31, 2012 and December 31, 2011, the net amount of the intangible asset was $15,747 and $13,624 respectively.

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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 OTCQB system of The OTC Markets, Inc. under the trading symbol “CHDO.”  Prior to February 23, 2011, the Common Stock was quoted on the Bulletin Board of the Over-the-Counter quotation system 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, 2011.

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.  The Company is a “penny stock” under Commission rules and the public stock market price for its Common Stock has been depressed for several consecutive fiscal quarters.  The Company’s Common Stock lacks sufficient or active market maker and institutional investor support in the public market and this lack of support, coupled with successive fiscal quarters of financial losses, means that any increase in the per share price of our Common Stock in the public market is usually eliminated by selling pressure from profit taking by investors.  As of May 1, 2012, the Common Stock was trading above one cent on the Bid Investment in our Common Stock, which is highly risky and should only be considered by investors who can afford to lose their investment and do not require liquidity.  Investors should consider risk factors in this Report and other SEC filings of the Company.

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 provides an introduction to our company, its strategy and customers and summarizes the significant factors affecting: (i) our consolidated results of operations for the three months and year to date ended March 31, 2012 compared with the same period in 2011 and (ii) final liquidity and capital resources.

We are a public holding Company organized under the laws of the State of Florida and are a leading designer and manufacturer of specialty power failure lighting solutions and innovator of consumer products for the North American and Latin American retail markets.  We develop, manufacture and sell a broad range of stylish, innovative and easy to use consumer products including portable booklights, specialty booklights, multi-task lights, e reader lights, power failure lights and night lights, wireless motion sensor lights and desk lamps that are designed to make today’s lifestyles simpler and safer.  Our products are sold under our wholly-owned subsidiary Capstone Industries Inc. brand name as well as being private labeled for our retailer customers.  CHDT Corporation seeks to deliver strong, consistent business results and superior shareholder returns by providing consumers on a global basis with products that make their lives simpler and safer.

We oversee the manufacturing of our products, which are all made in China by contract manufacturers, through our two wholly-owned operating subsidiaries; (a) Capstone Industries, Inc., a Florida corporation organized in 1997 and acquired on September 13, 2006 (“Capstone”) and (b) Capstone Lighting Technologies, a Florida limited liability Company (“CLTL”) formerly known as Black Box Innovations, L.L.C., a Florida limited liability Company (“BBIL”) formerly known as “Overseas Building Supply, L.C.” and formed on February 20, 2004.  CLTL has no significant business operations at this time.

Strategy

Our growth strategy is to develop and maintain positions ofinnovative and technical leadership by continually introducing new ideas and concepts to our consumer product categories while maintaining low competitive prices.  We plan to leverage our product successes and continually expanding channels as our brands continue to gain traction at retail levels by merchandisers, buyers and consumers.  This brand recognition and expanded product placement is expected to continue to increase annual sales growth.  We also plan to selectively acquire business with similar technical capabilities that could benefit from our leadership position and strategic direction.

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We have extensive experience with introducing new products into retail market channels and believe that provides us a competitive edge.  Typically, we seek to find niche product opportunities that may be overlooked or underexploited by competitors, and believe that we can win a profitable niche of the market share.  We believe these opportunities exist with innovative, aesthetically-pleasing products that include the following characteristics:

·   Designed for an everyday use or task;

·   Affordable, that is we can produce with a reasonable profit within the range of manufacturer’s suggested retail price for such a product

·   Represent value when compared with items produced or marketed by major consumer product companies on a national scale; and

·   Generates reasonable profit and profit margin opportunity with acceptable market penetration costs.

We believe that it can be more economical and efficient to develop and manufacture certain products in China and have them shipped to the United States rather than to have such products produced in North America.  While this resource is available to and used by large numbers of U.S. companies, including our competitors, we believe this Chinese manufacturing resource gives us the level of production cost and quality that allows us to be competitive with larger competitors in the United States.  In Hong Kong, we also have personnel experienced in Engineering and Design, Product Development, International Logistics and Quality Control, who work   with our OEM Chinese factories to develop and prototype new product concepts and to ensure products meet Consumer Product Regulations and rigorous Quality Control standards.  All products are tested by certified testing laboratories, before and during production by company personnel and certified testing laboratories.  This team also provides extensive, product development, quality control and logistics support to our factory partners to ensure on time shipments.  The Company plans to expand its staff in Hong Kong and the Company’s relative presence in 2012 as product line extensions and increased number of factories utilized become factors.

Products and Customers

We are an innovative company in the design and development of a variety of lighting and other products that consumers would typically buy for functional purposes that we design for expanded use as well as improved aesthetics.  Our current largest selling product group is the Eco-i-Lite power failure light and nightlight program, which accounted for 57.7%, of our revenue in 2011, 63.8%, of our revenue in 2010, and 61.05% and, of our revenue in 2009.  Our other products include Light Ringers® Lamps, Pathway Lights® book and multi-task lights, Battery Powered Wireless Motion Sensor Lights and eBook-Lite, e reader lights.  We also plan to expand our product line into other growing lighting and security segments specific to different region and market demands.

Since inception, we have focused on establishing and growing relationships with numerous leading international, national and regional retailers including but not limited to: Target, Wal-Mart, Sam’s Club, Costco, BJ’s Warehouse, Barnes & Noble, Brookstone, Meijer Stores, Office Depot, Fred Meyer-Kroger Stores, The Container Store, True Value, and Home Depot.  These distribution channels may sell our products through the internet as well as through retail storefronts and catalogs/mail order.

Our experience in management, operations, and the export business has enabled us to develop the scale, manufacturing efficiencies and design expertise that serves as the foundation for us to aggressively pursue niche product opportunities in the largest consumer markets and growing international market opportunities.  While we have traditionally generated the majority of our sales in the domestic market, urbanization, rising family incomes and increased living standards have spurred demand for small consumer appliances internationally.  In order to capture this market opportunity, we introduced the Capstone Industries brand of power failure lights to Central and South American markets through our master distributor Avtek.  Due to the rate of natural and man-made occurrences resulting in loss of electricity worldwide, we are optimistic about the potential growth rate in fiscal years 2012 and 2013 for our power failure lighting (assuming sufficient marketing support and subject to the response of competitors and key markets).

We believe CHDT is positioned to become a leading manufacturer in the rapidly growing home emergency lighting and security lighting sector and will continue to be a potential leader of power-failure lighting solutions for consumers in our industry segment.  Despite the global recession in 2008, 2009 and 2010, we believe that we were able to maintain our revenue growth because of our ability to deliver products on time, the quality reputation of our products, our business relationships with our retailers and our aggressive expansion in the North American and Latin American markets.

Sales and Marketing

CHDT’s products are marketed primarily through a direct independent sales force, distributors and wholesalers.  The sales force markets our products through numerous retail locations worldwide, including mass merchandisers, warehouse clubs, food, drug and convenience stores, department stores and hardware centers.  We actively promote our products to retailers and distributors at North American trade shows, but rely on the retail sales channels to advertise our products directly to the end consumer.  Domestically and internationally, the sales teams market our full portfolio of product offerings.  All sales activities at major account levels involve direct company executive staff participation.

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During the quarter, we expanded our approach on how we deliver product to our customers by implementing a domestic distribution program which includes warehousing inventory for expected customer requirements that we can deliver on demand for shelf stocking in their stores.  The change was made to expand distribution to such noted retailers as Home Depot, Target, Walmart, and Office Depot for non promotional periods, enabling retailers to stock our products daily and replenish based on the rate of sales.  The first retailers to endorse this formal domestic program add an estimated 4,800 increase in stores across the country that will have our products available for their retail customers.  The revenue of these increased outlets will be recognized over the course of 2012 with launch dates starting as early as April 2012. Historically, we only sold large, bulk shipment promotional program lots that were shipped directly from our operations in China.  This approach was not conducive to our customers’ regular shelf stocking to meet pull-through retail customer demand, but suited well for event driven promotional programs.  Having developed a strong response from the retail customer through these promotional campaigns, our customers wanted to have a regular on demand supply of product for regular shelf stocking.  The Company anticipates this domestic program to be incremental to its existing direct import programs and moreover it has opened the doors to retailers including Home Depot and Walmart.  This will require greater working capital requirements which will be available from existing sources

As a result of the change in our model to address regular stocking, we expect our revenue stream will become steadier throughout the quarter and less lumpy than it has been historically.  Therefore, during 2012 there will be periods when the comparatives will be unusual during the transition and as we build scale, but will help to normalize the business by minimizing the spikes in activity associated with the majority of the Company's historic business being promotional or seasonal.  The large backlog that is traditionally evident in the Company for its direct import orders we expect to be reduced as the business for the domestic distribution program is more evenly spread over the course of the year and orders are generated based on point of sale activity, not in anticipation of promotions.

Working Capital Requirements

As noted above, during the quarter the Company transitioned from a primarily direct import business model to a domestic distribution program.  The Company's previous business model (primarily direct import) was intended to serve very large promotional programs as retailers elected to have them.  Because parts and components for our products can be quickly developed by our contract manufacturers, we could supply very large shipments for the advance orders for the promotional programs which eliminated the need to carry large amounts of inventory.  Our direct import program business model, resulted in large infrequent orders, and the Company could have at any point in time within a reporting period a large amount of work in process inventory or finished goods on hand as we completed the order for shipment.  Under the domestic distribution model, we expect smaller, frequent orders as we meet shelving demand of our customers based on the rate of sales requiring higher levels of inventory to meet the expected increase in regular demand.

Competitive Conditions

The consumer products and small electronics businesses are highly competitive, both in the United States and on a global basis, as large manufacturers with global operations compete for consumer acceptance and, increasingly, limited retail shelf space.  Competition is based upon brand perceptions, product performance, customer service and price.  Social media has a growing impact on consumer response to products and brands.

Our principal lighting competitors in the U.S. are General Electric (Jasco), Energizer, Sylvania, Zelco and Lightwedge, LLC.  We believe private-label sales by large retailers has some impact on the market in some parts of the world as many national retailers such as Target, Wal-Mart, Home Depot and Costco offer lighting as part of their  private branded product lines.

With trends and technology continually changing, CHDT will continue to develop and introduce new products and color options at competitive pricing.  Success in the markets we serve depends upon product innovation, pricing, retailer support, responsiveness and cost management.  We continue to invest in developing the technologies and design critical to competing in our markets.

Raw Materials

The principal raw materials used by us are sourced in China, as we manufacture our products exclusively through contract manufacturers in the region.  Although prices of materials have fluctuated over time, CHDT believes that adequate supplies of raw materials required for its operations are available at the present time.  CHDT, of course, cannot predict the future availability or prices of such materials.  These raw materials are generally available from a number of different sources, and the prices of those raw materials are susceptible to currency fluctuations and price fluctuations due to transportation, government regulations, price controls, economic climate, or other unforeseen circumstances.  In the past, CHDT has not experienced any significant interruption in availability of raw materials.  We believe we have extensive experience in manufacturing and have taken positions to assure supply and to protect margins on anticipated sales volume.

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Prior History:

Prior to the acquisition of Capstone Industries, we experienced a high turnover in management and business lines.  We have sought to avoid the problems of the past and recruited an experienced management and sales team for the stated purpose to develop and expand our consumer products business.  We believe that this investment in corporate infrastructure was necessary to lay the foundation for any hope of future success and effective business and product development.  While we are not certain 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 or any growth.  2011 has proven to be our best performing year since 2007 and is our first profitable year.  Our board of directors continues to review alternate business strategies, which may include sale of an existing business line, acquisition of new product lines, and merger and/or acquisition transaction with other companies.  While no board decision has been made on any of these corporate transactions or actions, our board continues to periodically evaluate and consider such options.

Acquisition of Capstone:  on September 15, 2006, we entered into a Stock Purchase Agreement with Capstone and Stewart Wallach, the sole shareholder, a director and a senior executive officer of Capstone.  Under the Stock Purchase Agreement, we acquired 100% of the issued and outstanding shares of Capstone Common Stock in exchange for $750,000 in cash (funded by a credit line provided by certain directors of CHDT) and $1.25 million in Series B Preferred Stock, $0.01 par value per share, which Series B Stock is convertible into 15.625 million “restricted” shares of our Common Stock, $0.0001 par value (“Common Stock”).  On July 9, 2009, the outstanding Series B Preferred Shares were converted to Series B-1 Preferred Shares.  The series B-1 shares were convertible into common stock; at a rate of 66.66 of common shares for each share of series “B-1” On December 17, 2009.

CONSOLIDATED RESULTS OF OPERATIONS

	1st Qtr 2012			1st Qtr 2011			1st Qtr 2010
(Dollars in thousands)
Sales	$	339		$	2,417		$	353
Gross Margin		31.8	%		24.5	%		32.5	%
Impairment Loss	$	0		$	0		$	0
SG&A Expenses as a Percentage of Sales		125.2	%		16.9	%		166.8	%
Interest Expense	$	32		$	76		$	34
Effective Tax (Benefit) Rate		0	%		0	%		0	%
Net (Loss) Earnings	$	(348)		$	107		$	(508)

CONSOLIDATED OVERVIEW OF OPERATIONS

For the 3 months ended March 31, 2012 and 2011, the Company had total net sales of approximately $338,700 and $2,417,500 respectively.  The $2,078,800, or 86%, decline reflects the variability of timing of orders and shipments associated with our Direct Import business model, as revenue fluctuates from quarter to quarter, depending on when a retailer plans to promote the product.  In the first quarter March 31, 2012, we did not ship any promotional programs.  These programs are planned for later in the year.

For the 3 months ended March 31, 2012, gross profit was approximately $107,800 a reduction of approximately $483,300 or 81.7% from the first quarter 2011 gross profit of $591,300.  The gross profit reduction compared with the same period last year was a direct result of reduced shipments in the quarter.  Gross profit as a percentage of net sales was 31.8% for the quarter compared with 24.5% for the same period 2011.  The increased gross profit percentage of sales of 7.3% in the quarter as compared with the same period 2011 was the result of the sale of higher margin products in the quarter.

For the 3 months ended March 31, 2012, the Company had a net loss from continuing operations of approximately $348,200 as compared with a net profit in the same period last year of $107,100.  That is a net income reduction of $455,300 compared with the first quarter 2011 results.

For the 3 months ended March 31, 2012 and 2011, costs of sales were approximately $230,800 and $1,826,200 respectively.  This represents 68.1% and 75.5% respectively of total Net Revenue, which represents a decrease of 7.4% over the same quarter last year.  The lower cost of sales as a percent to sales has improved as we have sold new products with a higher blended margin.

Operating expenses for the first quarter 2012 were approximately $424,100 as compared with $408,400 in 2011, a net increase of $15,700 or 3.8%.

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For the 3 month ending March 31, 2012, interest expenses were approximately $31,900 a reduction of $43,800 or 57.9% as compared with $75,700 expensed in the same quarter 2011.  The reduction in interest expense as compared with 2011 was the result of a lower volume of loans required to fund the purchase of product overseas during the quarter.

SEGMENT RESULTS OF OPERATIONS AND OUTLOOK

Operating profit, as presented below, is sales less cost of sales and other operating expenses excluding interest expense, and other non-operating revenue and expenses.  Cost of sales and operating expenses are directly attributable to the respective segment.

Sales

	1st QTR, 2012			1st QTR, 2011			1st QTR, 2010
(In thousands, except percentages)
Sales	$	339		$	2,417		$	353
Operating Profit(Loss)		(316)			183			(474)
Operating Margin		(93.2)	%		7.6	%		(134.3)	%

It is our intention to continue investing in capabilities and technologies as needed that allows us to execute our strategy to increase sales and production volume in all markets that we serve.  The rate of spending on these activities, however, will continue to be driven by market opportunities.

With the current retail interest in our product offerings, expansion of distribution channels through the domestic purchase program and the launch of exciting new products this year, the Company expects its sales volumes to continue to grow and produce revenue in the range of $15 million to $20 million within the next one to two fiscal years, subject to economic conditions not deteriorating.

Off Balance Sheet Arrangements

We do not have material off-balance sheet arrangements that have or are reasonably likely to have a material future effect on our results of operations or financial condition.

Contractual Obligations

The following table represents contractual obligations as of March 31, 2012:

	Payments Due by Period*
	Total		2012		2013		2014		After 2014
(In thousands)
Purchase Obligations	$	2,580	$	2,580	$	-	$	-	$	-
Short-Term Debt		24		24		-		-		-
Long-Term Debt		1,372		0		1,372		-		-
Operating Leases		55		55		-		-		-
Interest on Long-Term Debt		186		-		186		-		-
Other Long-Term Liabilities		-		-		-		-		-
Total Contractual Obligations	$	4,217	$	2,659	$	1,558	$	-	$	-

Notes to Contractual Obligations Table

Purchase Obligations — Purchase obligations are comprised of the Company’s commitments for goods and services in the normal course of business.

Note Payable and Long-Term Debt — See Note 3 Financial Statements and Supplementary Data, in this report.

Operating Leases — Operating lease obligations are primarily related to facility leases for our operations.

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LIQUIDITY AND CAPITAL RESOURCES

	1st QTR 2012			1st QTR 2011			1st QTR 2010
(In thousands)
Net cash provided (used) by:
Operating Activities	$	455		$	(462	)	$	831
Investing Activities		(2	)		(2	)		(6	)
Financing Activities		(417	)		441			(875	)

Our limited borrowing capacity and our cash flow from operations provide us with the financial resources needed to run our operations and reinvest in our business.

Operating Activities

Cash flow provided by operating activities in the first quarter was approximately $455 thousand in 2012 compared with approximately $(462) thousand in the prior year period.  The increase of $917 thousand as compared with the first quarter 2011 was a result of collections of outstanding Accounts Receivable.  This helped to more than offset the $603 thousand invested in the quarter to increase domestic inventory in order to launch the Company’s new domestic Sales business model.

Our cash flow from operations is primarily dependent on our net income adjusted for non-cash expenses and the timing of collections of receivables, level of inventory and payments to suppliers.  Sales are influenced significantly by the build rates of products, which are subject to general economic conditions.  Our sales are also impacted by our ability to obtain new orders.  Over time, sales will also be impacted by our success in executing our strategy to increase productivity volume.

Investing Activities

Cash used for investing activities in the first quarter of 2012 was approximately $2 thousand.  Cash used for investing activities in 2011 and 2010 were $2 thousand and $ 6 thousand respectively.  Cash flows used in investing activities for all three years were due primarily to capital expenditures to expand design and production capacity.  Our expectation for 2012 is that we will invest between $250 thousand and $500 thousand.  Future capital requirements depend on numerous factors, including expansion of existing product lines and introduction of new products.  Management believes that our cash flow from operations and current borrowing sources will provide for these necessary capital expenditures.

Financing Activities

Our ability to maintain sufficient liquidity is highly dependent upon achieving expected operating results.  Failure to achieve expected operating results could have a material adverse effect on our liquidity, our ability to obtain financing and our operations in the future.  As of March 31, 2011, the Company was in compliance with all of the covenants pursuant to existing credit facilities.  The Company’s cash needs for working capital, debt service and capital equipment during 2012 are expected to be met by cash flows from operations and cash balances, the existing bank loan facility and if necessary additional notes payable funding from established sources.

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, volume purchases or re-engineering products, but may have to increase the price of our products in fiscal year 2012 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 2012.

Country Risks- Changes in foreign, cultural, political and financial market conditions could impair CHDT’s international manufacturing operations and financial performance.

CHDT’s manufacturing is currently conducted in China.  Consequently, CHDT is subject to a number of significant risks associated with manufacturing business in China, including:

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·   the possibility of expropriation, confiscatory taxation or price controls;

·   adverse changes in local investment or exchange control regulations;

·   political or economic instability, government nationalization of business or industries, government corruption, and civil unrest;

·   legal and regulatory constraints;

·   tariffs and other trade barriers; and

·   difficulty in enforcing contractual and intellectual property rights.

Currency- Currency fluctuations may significantly increase CHDT’s expenses and affect the results of operations, especially where the currency is subject to intense political and other outside pressure.

All of CHDT’s sales in the first quarter ending March 31, 2012 and in fiscal 2011 were transacted in U.S. dollars, and the weakening of the U.S. dollar relative to foreign currencies can negatively impact our operating profits, through higher unit costs.  However, as the company volumes continue to increase the leveraged buying power has enabled the Company to minimize the impact on costs.  The recent economic crises revealed that exchange rates can be highly volatile.  Changes in currency exchange rates may also affect the relative prices at which CHDT and our competitors sell products in the same market.  There can be no assurance that the U.S. dollar foreign exchange rates will be stable in the future or that fluctuations in such rates will not have a material adverse effect on our business, results of operations or financial condition.

Interest Rate Risk- We do not have significant interest rate risk during the fiscal quarter ending March 31, 2012.

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 shipped to only the most financially stable customers or advance payments before shipment are required for those accounts less financially secured.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

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

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2012 and concluded that the disclosure controls and procedures were effective under Rules 13a-15(e) and 15d-15(e) under the Exchange Act and as of March 31, 2012, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Commission regulations and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Item 4(T). Controls and Procedures.

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

The certifications of our chief executive officer and chief financial officers attached as Exhibits 31.1 and 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 Item 4, including the information incorporated by reference to our annual report on Form 10-K for the year ended December 31, 2011, for a more complete understanding of the matters covered by such certifications.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to any material pending or threatened 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 our 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.

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.

Item 1A. Risk Factors.

During the three months ended March 31, 2012, 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, 2011.

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, 2012.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to Vote of Security Holders

As of March 31, 2012, there have been no submissions of Matters to vote, since the following proposals were approved by the written consent of holders of the Common Stock, as of the record date of September 30. 2011.  There were 649,510,532 shares of Common Stock outstanding and 1,000 shares of Series C Preferred Stock of the Company outstanding as of September 30, 2011.

	For	Against	Withheld
Ratify the appointment of Robison Hill & Co. as auditors for fiscal year 2011	7	0	0
Approve election of following nominees as directors to the Board of Directors – all being incumbents: 1. Stewart Wallach 2. Jeffrey Postal 3. Jeffrey Guzy 4. Larry Sloven 5. Laurie Holtz 6. Gerry McClinton	6	0	0

Item 5.  Other Information

None.

Item 6.  Exhibits

EXHIBIT #	DESCRIPTION OF EXHIBIT
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^

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^ Filed herein.

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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, 2012.

CHDT CORPORATION

Dated:  May 14, 2012

/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

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