In February 2009, the Company issued 2,100,000 shares of common stock for consulting expenses of $21,000.

In September 2010, the Company issued 725,000 shares of common stock for consulting expenses of $6,525.

For issuances of shares of common stock during the periods described above, the Company issued restricted shares (Rule 144). The shares issued were valued by the Company based upon the closing price of the shares on the date of issuance. The value of these shares issued for services was charged to expense, unless they were in consideration for future services, in which case they were recorded as deferred consulting fees. Shares retired / cancelled were recorded at par value.

A total of 8,100 shares of series “A” preferred stock were issued in 2004, and, in May 2005, 100 shares were returned to the treasury and cancelled.

In January 2006 the Company issued 600,000 shares of series “A” convertible preferred stock, convertible into 50,738,958 shares of the Company’s common stock, in connection with the acquisition of a 51% majority interest in CPS. The shares were valued at $1,200,000.

In January 2007 (effective December 31, 2006), the 600,000 shares of series “A” convertible preferred issued to CPS were returned to the treasury and cancelled, in connection with the Company’s sale of its interest in CPS. The shares were valued at $1,775,864. None of the preferred shares were converted to common shares. At December 31, 2006, the shares had not been returned, and a related party receivable of $1,775,864 was recorded. During the three months ended March 31, 2007, these shares were returned to the treasury and cancelled.

In June, 2006, 1,000 shares of the Company’s series “A” convertible preferred stock, beneficially owned by the Company’s CEO, were exchanged for 1,000,000 shares of the Company’s common stock. In February 2007, 74 shares of the Company’s series “A” preferred stock were exchanged for 73,400 shares of the Company’s common stock. In May 2007, 367 shares of the Company’s series “A” preferred stock were exchanged for 367,000 shares of the Company’s common stock.

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

As of December 31, 2008, a total of 60 shares of series “A” convertible preferred stock were issued and outstanding, and are convertible into CHDT common shares, at a rate of 1,000 shares of common stock for each share of series “A” convertible preferred stock and are redeemable at the option of the Company. During the three months ended March 31, 2009, the remaining 60 shares were cancelled.

In January 2006 the Company sold 657,000 shares of its series “B” convertible preferred stock for cash of $637,000, including 387,000 shares to the Company’s former CEO and the remaining shares to other directors of the Company. During the three months ended March 31, 2007, 15,000 shares of the Company’s series “B” preferred shares issued to a director were exchanged for 990,000 shares of the Company’s common stock.

In September 2006 the Company issued 300,030 shares of its series “B” convertible preferred stock to the Company’s former CEO in exchange for 20,000,000 shares of its common stock held by the former CEO.

In September, 2006 the Company issued an additional 236,739 shares of its series “B” convertible preferred stock in connection with the acquisition of 100% of the voting interest of Capstone Industries, Inc. The shares were valued at $1,250,000. During the three months ended March 31, 2007, 236,739 shares of the Company’s series “B” convertible preferred stock were converted into 15,624,774 shares of the Company’s common stock.

In November 2007, the Company issued 416,708 shares of its series “B” convertible preferred stock to a director for notes payable of $1,000,000.

In January 2008, the Company’s chairman exchanged 50,000,000 shares of the Company’s common stock for 750,075 shares of the Company’s series B” convertible preferred stock.

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

On July 9, 2009, the 2,108,813 outstanding Series B Preferred Shares were converted to Series B-1 Preferred Shares, while canceling 779,813 of the outstanding Series B Preferred Shares, leaving 1,329,000 shares of the new Series B-1 Preferred Shares outstanding. The Series B-1 Preferred Shares are convertible into common shares, at a rate of 66.66 shares of common stock for each share of series “B-1” convertible preferred stock. The par value of the new Series B-1 Preferred Shares is $0.0001.

In December 2009, the remaining 1,329,000 shares of the new Series B-1 Preferred Shares were converted into 88,591,140 shares of common stock.

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.

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.

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:

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:

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.

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:

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:

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:

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:

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:

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:

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:

For the year ended December 31, 2011, the Company recognized compensation expense of $16,500 related to these stock options. A further $16,500 will be recognized in 2012 related to these options..

The following table sets forth the Company’s stock options outstanding as of December 31, 2011 and December 31, 2010 and activity for the years then ended:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Shares		Exercise Price		Contractual Term (Years)		Intrinsic Value

Outstanding, January 1, 2010		68,933,333	$	0.029		-	$	-
Granted		4,800,000		0.029		-		-
Exercised		-		-		-		-
Forfeited/expired		4,000,000		0.029		-		-

Outstanding, December 31 , 2010		69,733,333	$	0.029		5.92	$	-
Granted		4,650,000	$	0.029		-		-
Exercised		-		-		-		-
Forfeited/expired		4,500,000	$	0.029		-		-

Outstanding, December31, 2011		69,883,333	$	0.029		5.26	$	-

Vested/exercisable at December 31, 2010		53,936,666	$	0.029		5.95	$	-
Vested/exercisable at December 31, 2011		65,233,333	$	0.029		5.30	$	-

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	3.42	$.020	250,000
$.029	54,983,333	5.33	$.029	54,983,333
$.029	2,500,000	6.33	$.029	2,500,000
$.029	700,000	7.33	$.029	700,000
$.029	1,000,000	6.00	$.029	1,000,000
$.029	150,000	6.08	$.029	150,000
$.029	850,000	7.42	$.029	850,000
$.029	4,500,000	3.33	$.029	4,500,000
$.029	300,000	8.33	$.029	300,000
$.029	4,500,000	4.50	$.029	4,500,000
$.029	150,000	9.50	$.029	150,000

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

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