UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NUMBER ONE
TO
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from __________ to __________
Commission file number 000-28831
CHDT Corporation
(Formerly China Direct Trading Corporation)
(Exact name of small business issuer as
specified in its charter)
| Florida | 84-1047159 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
350 Jim Moran Blvd., Suite 120, Deerfield Beach, Florida 33442
(Address of principal executive offices)
(954) 252-3440
Issuer's telephone number
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o
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: September 30, 2007 Approximately 587,067,705 shares
Transitional Small Business Disclosure Format (check one). Yes o; No x
EXPLANATORY NOTE: This Amendment Number One to the Form 10-QSB for the quarter ending September 30, 2007 is filed solely to include exhibits referenced as “filed herein” in the Form 10-QSB.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than as set forth below, the Company is not a party to any material pending legal proceedings and, to the best of its knowledge, no such action by or against the Company has been threatened. The Company is subject to legal proceedings and claims that arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have material adverse effect on its financial position, results of operations or liquidity.
Celeste Trust Reg., Esquire Trade, et al. v. CBQ, Inc. (Case# 03 Civ. 9650 RMB; US District Court, SDNY, 12/4/2003). As of the date of this Report, the plaintiffs in this action have not taken any known actions to perfect an appeal the dismissal of their amended complaint (see below). As such, there have been no new developments in this case since the refusal of the Court of Appeals for the Second Circuit in 2006 to accept an appeal of the dismissal of plaintiffs’ amended complaint.
This case concerns a lawsuit that was filed against the Company by three plaintiffs on or about December 4, 2003, but which the Company did not receive notice of until the week of February 18, 2004 or thereabouts. The Plaintiffs purchased debentures issued by Socrates Technologies Corporation (STC), a public Delaware corporation in 2000. When the Company purchased the assets of two STC subsidiaries in March 2001, the plaintiffs allege that the Company promised to issue to the Plaintiffs and others the consideration that was to be paid to STC for the acquired assets and to so do in order to compensate the plaintiffs for their investment in the STC debentures, which were apparently in default at that time. The total consideration paid for the STC subsidiaries' assets were 7.65 million shares of company Common Stock and a Promissory Note made by the Company for $700,000 principal amount. The Company has defended against the Plaintiffs' claims to date. If the Plaintiffs win a judgment on their claims, the judgment, if collected, would prove potentially ruinous the Company, unless a settlement involving no cash was arranged between the parties to the lawsuit. The Plaintiff's claims include a claim for receipt of the money due under the Promissory Note with a principal amount of $700,000. The Company lacks the cash flow or cash reserves or funding resources to pay such a claim, either in a lump sum or over time. If the Plaintiffs are awarded the claimed damages against the Company in this lawsuit, the Company would be unable to pay such damages, either in a lump-sum or under a schedule, and would be insolvent.
The Plaintiff's complaint in Celeste was dismissed by the U.S. District Court for the Southern District of New York in early 2005 for failure to have all essential parties to the dispute as parties to the lawsuit. The Plaintiffs filed an amended complaint prior to the March 1, 2005 deadline for doing so. The Company defended against the Plaintiff's amended complaint, which added two former, now defunct, subsidiaries involved in the STC transaction as defendants. The assets of Networkland, Inc. and Technet Computer Services Corporation were acquired by the Company on March 15, 2001 and that transaction is at the heart of the dispute in the Celeste case. The Court also dismissed the Plaintiff’s amended complaint on July 20, 2006. The Plaintiffs filed an appeal in September 2006 to the adverse order issued by the Court dismissing the amended complaint. The appeal, however, was not accepted by the Court in October 2006 because there is a pending, unresolved motion for default judgment against the other defendants, Networkland, Inc. and Technet Computer Services Corporation, who are two former subsidiaries of Socrates Technologies Corporation, a defunct Delaware corporation, and not owned by or affiliated with China Direct. The staff attorney for the 2nd Circuit stated that said motion must be resolved before the Court will entertain any appeal. The Company is not a party to the pending motion for default judgment before the trial court; however, the Company filed an opposition to the motion for default judgment. As of date of this Report, the Company is not aware of any action by the plaintiffs to date to resolve or remove the pending motion for default judgment against the other defendants in order to clear the way for an appeal of the judgment entered in favor of for Company by the Court. While the Company is confident of prevailing in this matter, the Company is uncertain at this time of the final outcome motion for default against the other defendants or whether the plaintiffs intend to pursue this litigation further.
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SunTrust Bank Claim. Prior to being acquired by the company, Quantum Technology Group (“QTG”), a now defunct subsidiary, had a $4 million line of credit with Crestar Bank (Crestar was subsequently acquired by Sun Trust). This line of credit was guaranteed by Quantum and five individual guarantors, including Ray Kostkowski, Anne Sigman, Skip Lewis, and Anthony Saunders. This line of credit was opened during April, 2000. On August 8, 2000, the Company acquired all of the shares of QTG. Sun Trust asserted that $1.3 million of the line of credit had been used, and was owing to Sun Trust, as well as line of credit, a $200,000 term loan from Sun Trust to QTG, approximately $200,000 in accrued interest and $100,000 in attorney fees -- all of which SunTrust had sought to collect from the individual guarantors, not the company.
RAS Investment, Inc., a company apparently affiliated with Anne Sigman, a former employee of the Company, advised the Company in 2004 that RAS has acquired the Sun Trust note and demanded payment in cash or stock. As of the date of this Report, the Company's position remains as before, that is, that the Company is not obligated to pay the Sun Trust debts and any claims made to collect that debt could be defeated by several potential defenses and counterclaims. The Company has not received any further claims by RAS Investment, Inc. in this matter and the Company is uncertain at this point if RAS Investment, Inc. intends to pursue the aforementioned claims.
Cyberquest, Inc.: The Company received two claims from certain former shareholders of Cyberquest, Inc. in 2006. They claimed to hold or own approximately 70,000 shares of a class of the Company's redeemable preferred stock issued in the Company's 1998 acquisition of Cyberquest. Cyberquest ceased operations in 2000-2001 period. The Company has investigated these claims and has not been able to date to substantiate any of the claims to date and the claimants have not pursued their claims beyond an initial communication asserting ownership of these shares of serial preferred stock. The Company has not received any further claims or communications since the late summer of 2006. The Company is uncertain at this point if the claimants will pursue or press the aforementioned claim of preferred stock ownership.
No director, officer or affiliate of the Company, or owner of record of more than five percent (5%) of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to us or has a material interest adverse to us in reference to pending litigation.
We are not currently a party to any other legal proceedings that we believe will have a material adverse effect on our financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES
In July 2007, the Company issued 2,058,824 shares of common stock for cash of $35,000.
In August 2007, the Company issued 105,882 shares of common stock for legal expenses of $1,800.
In August 2007, the Company issued 4,117,647 shares of common stock for cash of $70,000.
In August 2007, the Company issued 2,804,947 shares of common stock for notes payable of $252,445.
In August 2007, the Company issued 2,500,000 shares of common stock for accrued expenses of $50,000.
In August 2007, the Company issued 340,909 shares of common stock for consulting expenses of $7,500.
In August 2007, the Company issued 112,510 shares of common stock for legal expenses of $1,800.
In September 2007, the Company issued 13,294,117 shares of common stock for cash of $226,000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None/Not Applicable.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The majority shareholders of the Company have taken an corporate action by written consent and without a meeting of the holders of the Common Stock(hereinafter “Majority Shareholder Action”) pursuant to Florida Statutes Section 607.0704 and, by that written consent, holders of approximately 70% of the outstanding shares of the Common Stock approved the following: (1) an amendment of the Articles of Incorporation of the Company to change the name of the Company from "China Direct Trading Corporation" to "CHDT Corporation"; and (2) election of Stewart Wallach, Howard Ullman, Jeffrey Postal, Laurie Holtz, Larry Sloven and Jeffrey Guzy, all incumbent directors as of May 7, 2007, for election to the Company Board of Directors for a term ending in 2008 when their successors are elected and assume office. An Information Statement was filed with the Commission for this corporate action on May 15, 2007. The Company received no consents in opposition to the foregoing proposals.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
| (a) | EXHIBITS |
| 2.1 | Purchase Agreement, dated January 27, 2006, by and among China Direct Trading Corporation, William Dato and Complete Power Solutions, LLC. + |
| 2.1.1 | Purchase and Settlement Agreement by and among China Direct Trading Corporation, Complete Power Solutions, LLC, William Dato and Howard Ullman, January 26, 2007 ++ |
| 2.1.1.1 | Stock Purchase Agreement, dated September 15, 2006, by and among China Direct Trading Corporation, Capstone Industries, Inc. and Certain Selling Shareholdersº |
| 3.1 | Articles of Incorporation of the Company * |
| 3.1.1 | Amendment to Articles of Incorporation, dated May 7, 2007, changing the name of China Direct Trading Corporation to CHDT Corporation.***** |
| 3.2 | By-laws of the Company*** |
| 4.1 | Form of Warrant issued under 2007 Rule 506 Private Placement by CHDT Corporation. ++++ |
| 4.2 | Form of Subscription Agreement issued under 2007 Rule 506 Private Placement by CHDT Corporation. ++++ |
| 10.1 | Voting Agreement, dated January 27, 2006, by and among China Direct Trading Corporation, William Dato and Howard Ullman. + |
| 10.2 | Operating Agreement, dated January 27, 2006, for Complete Power Solutions, LLC. + |
| 10.3 | Employment Agreement, dated January 27, 2006, among William Dato, China Direct Trading Corporation and Complete Power Solutions, LLC. + |
| 10.4 | Form of July 20, 2005 sales agency agreement between China Direct Trading Corporation and Sutter's Mill Specialties. + |
| 10.5 | Form of Non-Qualified Stock Option+ |
| 14 | Code of Ethics Policy, dated December 31, 2006+++ |
| 31 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.++++ |
| 32 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.++++ |
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* Incorporated by reference to Annex C to the Special Meeting Proxy Statement, dated April 15, 2004, filed by China Direct Trading Corporation with the Commission on April 20, 2004.
** Incorporated by reference to Annex G to the Special Meeting Proxy Statement, dated April 15, 2004, filed by China Direct Trading Corporation with the Commission on April 20, 2004.
*** Incorporated by reference to Annex D the Special Meeting Proxy Statement, dated April 15, 2004, filed by China Direct Trading Corporation with the Commission on April 20, 2004.
**** Incorporated by reference to Annex H the Special Meeting Proxy Statement, dated April 15, 2004, filed by China Direct Trading Corporation with the Commission on April 20, 2004.
***** Incorporated by reference to Exhibit 3.1.1 to the Information Statement under Regulation 14C, dated May 11, 2007, and filed with the Commission on May 15, 2007.
+ Incorporated by reference to Exhibit 2 to the Form 8-K filed by China Direct Trading Corporation with the Commission on January 31, 2006.
++ Incorporated by reference to Exhibit 2 to the Form 8-K filed by China Direct Trading Corporation with the Commission on January 26, 2007.
º Incorporated by reference to Exhibit 2.1 to the Form 8-K filed by China Direct Trading Corporation with the Commission on September 18, 2006.
+++ Incorporated by reference to Exhibit 14 to the Form 10KSB filed by China Direct Trading Corporation with the Commission on April 17, 2007.
++++ Filed Herein
(b) Reports on Form 8-K filed.
The following reports were filed during the last quarter of the 2007 fiscal year: Form 8-K, August 21, 2007; Form 8-K, August 22, 2007; Form 8-K, August 27, 2007; Form 8-K, August 29, 2007; Form 8-K, October 12, 2007.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 20th day of November, 2007.
China Direct Trading Corporation
November 20, 2007
/s/ Stewart Wallach
Stewart Wallach
CEO and President
(Principal Executive Officer)
/s/ Gerry McClinton
Gerry McClinton
Chief Operating Officer & Secretary
(Principal Financial & Accounting Officer)
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