10-Q 1 caddy10q.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: May 31, 2008 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ________________ to __________________ Commission File Number: 333-141907 CADDYSTATS, INC. ______________________________________________________ (Exact name of registrant as specified in its charter) Delaware 20-5034780 _________________________________ ___________________ (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 105 - 501 Silverside Road Wilmington, DE 19809 ________________________________________ (Address of principal executive offices) (877) 903-8600 ________________________________________________ (Issuer's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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. Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] (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). Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of May 31, 2008 the registrant had 10,750,000 shares of common stock, $0.001 par value, issued and outstanding. Index Page Number PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS......................................... 3 Balance Sheets as of May 30, 2008 and August 31, 2007(audited)....... 4 Interim Statements of Operations for three months ended May 31, 2008 and May 31, 2007; nine months ended May, 31 2008 and May 31, 2007 and cumulative from inception (June 5, 2006) to May 31, 2008............. 5 Interim Statement of Stockholders' Equity (Deficit) From inception (June 5, 2006) to May 31, 2008)...................................... 6 Interim Statements of Cash Flows for three months Ended May 31, 2008 and May 31, 2007; nine months ended May 31, 2008; and May 31, 2007 and cumulative results from inception (June 5, 2006) to May 31, 2008. 7 Notes to Interim Financial Statements to May 31, 2008................ 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.... 12 ITEM 3. CONTROLS AND PROCEDURES...................................... 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS............................................ 15 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.. 15 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.............................. 15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......... 15 ITEM 5. OTHER INFORMATION............................................ 15 ITEM 6. EXHIBITS..................................................... 16 2 CADDYSTATS, INC. (A DEVELOPMENT STAGE COMPANY) INTERIM FINANCIAL STATEMENTS MAY 31, 2008 (UNAUDITED) INTERIM BALANCE SHEETS INTERIM STATEMENTS OF OPERATIONS INTERIM STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) INTERIM STATEMENTS OF CASH FLOWS NOTES TO INTERIM FINANCIAL STATEMENTS 3 CADDYSTATS, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS May 31, August 31, 2008 2007 (Audited) ________________________________________________________________________________ ASSETS CURRENT ASSETS Cash $ 5,034 $ 1,304 Prepaid expense 46 - ______________________ TOTAL ASSETS $ 5,080 $ 1,304 ====================== LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable and accrued liabilities 3,000 2,500 Due to related party 10,625 6,690 ______________________ TOTAL LIABILITIES 13,625 9,190 ______________________ STOCKHOLDERS' EQUITY (DEFICIT) Capital stock (Note 4) Authorized 75,000,000 shares of common stock, $0.001 par value, Issued and outstanding 10,750,000 shares of common stock 10,750 10,000 Additional paid-in capital 14,250 - ______________________ Deficit accumulated during the development stage (33,545) (17,886) ______________________ TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (8,545) (7,886) ______________________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 5,080 $ 1,304 ====================== The accompanying notes are an integral part of these financial statements 4
CADDYSTATS, INC. (A DEVELOPMENT STAGE COMPANY) INTERIM STATEMENTS OF OPERATIONS (UNAUDITED) Cumulative results of operations from June 5, Three months Three months Nine months Nine months 2006 (date of ended ended ended ended inception) to May 31, 2008 May 31, 2007 May 31, 2008 May 31, 2007 May 31, 2008 ________________________________________________________________________________________________________________ REVENUE $ - $ - $ - $ - $ - EXPENSES Office and general $ 1,334 $ 1,138 5,321 $ 2,364 $ 8,845 Professional fees 3,800 1,331 10,338 10,062 24,700 ______________________________________________________________________________ LOSS FROM OPERATIONS (5,134) (2,469) (15,659) (12,426) (33,545) PROVISION FOR INCOME TAX $ - $ - $ - $ - $ - NET LOSS $ (5,134) $ (2,469) $ (15,659) $ (12,426) $(33,545) ============================================================================== BASIC AND DILUTED NET LOSS PER SHARE $ 0.00 $ 0.00 ============================================= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,925,722 9,418,283 ============================================= The accompanying notes are an integral part of these financial statements
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CADDYSTATS, INC. (A DEVELOPMENT STAGE COMPANY) INTERIM STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) FROM INCEPTION (JUNE 5, 2006) TO MAY 31, 2008 (UNAUDITED) Deficit Accumulated Common Stock Additional Share During the _____________________________ Paid-in Subscription Development Number of shares Amount Capital Receivable Stage Total ______________________________________________________________________________________________________________________________ Balance, June 5, 2006 - $ - $ - $ - $ - $ - Net Loss, August 31, 2006 (1,086) (1,086) Common stock issued for cash at $0.001 per share -June 26, 2006 10,000,000 10,000 - - - 10,000 ________________________________________________________________________________________ Balance August 31, 2006 10,000,000 10,000 - (1,086) 8,914 ________________________________________________________________________________________ Net Loss August 31, 2007 - - - - (16,800) (16,800) ________________________________________________________________________________________ Balance, August 31, 2007 10,000,000 $ 10,000 - - (17,886) (7,886) ________________________________________________________________________________________ Common stock issued for cash at $0.02 per share - November 5, 2007 750,000 750 14,250 15,000 Net loss, February 29, 2008 - - - - (10,525) (10,525) ________________________________________________________________________________________ Balance, February 29, 2008 10,000,000 $ 10,750 $ 14,250 - $ (28,411) $ ( 3,411) ________________________________________________________________________________________ Net Loss May 31, 2008 (5,134) (5,134) Balance, May 31, 2008 10,000,000 $ 10,750 $ 14,250 - $ (33,545) $ (8,545) ________________________________________________________________________________________ The accompanying notes are an integral part of these financial statements
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CADDYSTATS, INC. (A DEVELOPMENT STAGE COMPANY) INTERIM STATEMENTS OF CASH FLOWS Cumulative results of operations from June 5, Three months Three months Nine months Nine months 2006 (date of ended ended ended ended inception) to May 31, 2008 May 31, 2007 May 31, 2008 May 31, 2007 May 31, 2008 ________________________________________________________________________________________________________________ OPERATING ACTIVITIES Net loss $ (5,134) $ (2,469) $ (15,659) $ (12,426) $(33,545) Adjustment to reconcile net loss to net cash used in operating activities - prepaid expense 954 1,000 (46) - (46) - accrued liabilities (1,200) (933) 500 2,066 3,000 ________________________________________________________________________________________________________________ NET CASH USED IN OPERATING ACTIVITIES (5,380) (2,402) (15,205) (10,360) (30,591) ________________________________________________________________________________________________________________ FINANCING ACTIVITIES Proceeds from sale of common stock - - 15,000 - 25,000 Shareholder Loan - 5,603 3,935 5,603 10,625 Share subscription receivable - - 10,000 - ________________________________________________________________________________________________________________ NET CASH PROVIDED BY FINANCING ACTIVITIES - 5,603 18,935 15,603 35,625 ________________________________________________________________________________________________________________ NET INCREASE (DECREASE) IN CASH (5,380) 3,201 3,730 5,243 5,034 CASH, BEGINNING OF PERIOD 10,413 2,043 1,304 - - ________________________________________________________________________________________________________________ CASH, END OF PERIOD 5,037 $ 5,244 $ 5,034 $ 5,243 $ 5,034 ================================================================================================================ SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH FINANCING ACTIVITIES: Cash paid for: Interest $ - $ - $ - $ - $ - ================================================================================= Income taxes $ - $ - $ - $ - $ - ================================================================================= NON CASH ACTIVITIES Stock issued for services $ - $ - $ - $ - $ - Stock issued for accounts payable $ - $ - $ - $ - $ - Stock issued for notes payable $ - $ - $ - $ - $ - Stock issued for convertible debentures and interest $ - $ - $ - $ - $ - Convertible debentures issued for services $ - $ - $ - $ - $ - Warrants issued $ - $ - $ - $ - $ - Stock issued for penalty on default of convertible debenture $ - $ - $ - $ - $ - Note payable issued for finance charges $ - $ - $ - $ - $ - Forgiveness of not payable and accrued interest $ - $ - $ - $ - $ - Stock issued for investment $ - $ - $ - $ - $ - The accompanying notes are an integral part of these financial statements
7 CADDYSTATS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE INTERIM FINANCIAL STATEMENTS (UNAUDITED) MAY 31, 2008 ________________________________________________________________________________ NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION ________________________________________________________________________________ Caddystats, Inc. ("Company") is in the initial development stage and has incurred losses since inception totaling $33,545. The Company was incorporated on June 5, 2006 in the State of Delaware and established a fiscal year end of August 31. The Company is a development stage company organized to enter into the golf course guide book publication industry with our proprietary CaddyStats Golf Course Guides. The Company expects to provide golf courses throughout North America with low cost, attractive and easy to use guide books. The ability of the Company to continue as a going concern is dependent on raising capital to fund its business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. The Company is funding its initial operations by way of issuing Founders' shares. As of May 31, 2008, the Company had issued 10,000,000 Founders shares at $0.001 per share for net proceeds of $10,000 and 750,000 shares at $0.02 per share for net proceeds of $15,000. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ________________________________________________________________________________ BASIS OF PRESENTATION These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States. SEGMENTED REPORTING SFAS Number 131, "Disclosure About Segments of an Enterprise and Related Information", changed the way public companies report information about segments of their business in their quarterly reports issued to shareholders. It also requires entity-wide disclosures about the products and services the entity provides, the material countries in which it holds assets and reports revenues and its major customers. COMPREHENSIVE LOSS SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at May 31, 2007 and May 31, 2008 the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements. USE OF ESTIMATES AND ASSUMPTIONS Preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain 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 revenues and expenses during the period. Accordingly, actual results could differ from those estimates. FINANCIAL INSTRUMENTS All significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practical the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed. 8 CADDYSTATS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE INTERIM FINANCIAL STATEMENTS (UNAUDITED) MAY 31, 2008 ________________________________________________________________________________ NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ________________________________________________________________________________ LOSS PER COMMON SHARE Basic earnings (loss) per share includes no dilution and is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. Because the Company does not have any potential dilutive securities, the accompanying presentation is only on the basic loss per share. INCOME TAXES The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances and tax loss carry-forwards. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. STOCK-BASED COMPENSATION The Company accounts for stock-based compensation issued to employees based on SFAS No. 123R "Share Based Payment". SFAS No. 123R is a revision of SFAS No. 123 "Accounting for Stock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees" and its related implementation guidance. SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123 as originally issued and Emerging Issues Task Force Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services". SFAS 123R does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans". SFAS 123R requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period (usually the vesting period). SFAS 123R requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The scope of SFAS 123R includes a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. As at February 29, 2008 the Company had not adopted a stock option plan nor had it granted any stock options. Accordingly no stock-based compensation has been recorded to date. 9 CADDYSTATS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE INTERIM FINANCIAL STATEMENTS (UNAUDITED) MAY 31, 2008 ________________________________________________________________________________ NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ________________________________________________________________________________ RECENT ACCOUNTING PRONOUNCEMENTS In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities". This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS 155 establishes framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of this statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. The statement is effective for fiscal years beginning after November 15, 2007 and periods with those fiscal years. The Financial Accounting Standards Board has issued SFAS No. 155 "ACCOUNTING FOR CERTAIN HYBRID FINANCIAL INSTRUMENTS AN AMENDMENT OF FASB STATEMENTS NO. 133 AND 140" and No. 156 "ACCOUNTING FOR SERVICING OF FINANCIAL ASSETS - AN AMENDMENT OF FASB STATEMENT NO. 140", but they will not have a material effect in the COMPANY'S RESULTS OF OPERATIONS OR FINANCIAL POSITION. The adoption of these new pronouncements is not expected to have a material effect on the Company's financial position or results of operations NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS ________________________________________________________________________________ In accordance with the requirements of SFAS No. 107 and SFAS No. 157, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities approximate their carrying value due to the short-term maturity of the instruments. NOTE 4 - CAPITAL STOCK ________________________________________________________________________________ The Company's capitalization is 75,000,000 common shares with a par value of $0.001 per share. No preferred shares have been authorized or issued. As of May 31, 2008, the Company has not granted any stock options and has not recorded any stock-based compensation. As of May 31, 2008, the sole Director had purchased 10,000,000 shares of the common stock in the Company at $0.001 per share with proceeds to the Company totalling $10,000. As of May 31, 2008, the Company has issued 750,000 shares of the common stock of the Company at $0.02 per share with proceeds to the Company totalling $15,000. 10 CADDYSTATS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE INTERIM FINANCIAL STATEMENTS (UNAUDITED) MAY 31, 2008 ________________________________________________________________________________ NOTE 5 - RELATED PARTY TRANSACTIONS ________________________________________________________________________________ As of May 31, 2008, the Company received advances from a Director in the amount of $10,625 to pay for Incorporation costs, filing fees and general administration costs. The amounts due to the related party are unsecured and non-interest bearing with no set terms of repayment. NOTE 6 - INCOME TAXES ________________________________________________________________________________ As of May 31, 2008 the Company had net operating loss carry forwards of approximately $33,545 that may be available to reduce future years' taxable income and will expire commencing in 2016. Availability of loss usage is subject to change of ownership limitations under Internal Revenue Code 382. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a full valuation allowance for the deferred tax asset relating to these tax loss carryforwards. 11 ITEM 2: MANAGEMENT DISCUSSION OF FINANCIAL CONDITION OR PLAN OF OPERATION Overview This interim report contains forward looking statements relating to our Company's future economic performance, the plans and objectives of management for future operations, projections of revenue mix and other financial items that are based on the beliefs of, as well as assumptions made by and information currently known to, our management. The words "expects, intends, believes, anticipates, may, could, should" and similar expressions and variations thereof are intended to identify forward-looking statements. The cautionary statements set forth in this section are intended to emphasize that actual results may differ materially from those contained in any forward looking statement. The following discussion should be read in conjunction with our financial statements and related notes included elsewhere in this report. CaddyStats, Inc. ("CaddyStats," "the Company", "us", "our" or "we,") was incorporated in the State of Delaware as a for-profit company on June 5, 2006 and established a fiscal year-end of August 31. We are a development-stage company established to enter into the golf course guide book publications business with our proprietary CaddyStats Golf Course Guides. The Company intends to supply golf courses throughout North America with low cost, attractive and easy to use guide books which they can offer as promotions or sell to golfers using their courses. The guide is designed specifically for each golf course and is a combination of a golf course guide, yardage book and enhanced scorecard. CaddyStats Course Guides are intended for one-time use. We will be competing with traditional publishers of golf course guides, yardage books and score cards by combining all three of these documents into one single low-cost CaddyStats Golf Course Guide. The Company did not generate any revenue during the quarter ended May31, 2008. As of the fiscal quarter ended May 31, 2008 we had $5,034 of cash on hand in the bank. We incurred operating expenses in the amount of $5,134 in the quarter ended May 31, 2008. These operating expenses were comprised of professional fees and office and general expenses. Operating expenses for the fiscal quarter ended May 31, 2007 were $2,469. The increase in operating expenses in the fiscal quarter ended May 31, 2008 as compared to the same quarter of 2007 is due to increases in both office expenses and professional fees. PLAN OF OPERATION We anticipate that our current cash and cash equivalents and cash generated from operations, if any, will be insufficient to satisfy our liquidity requirements for at least the next 12 months. We will require additional funds prior to such time and the Company will seek to sell additional capital through private equity placements, debt or alternative sources of financing. If we are unable to obtain sufficient additional financing, we may be required to reduce the scope of our business plan, which could harm our business, financial condition and operating results. In addition, we may also require additional funds to accomplish a more rapid expansion, to develop new or enhanced products or to invest in complementary businesses, technologies, services or products. Additional funding to meet our requirements may not be available on favorable terms, if at all. To date our operations have been limited to the design of our CaddyStats Course Guide booklets and undertaking market research on the golf course and country club industries in North America. We have not yet implemented our business model or printed any booklets. Over the next 12 month period we will continue to raise capital and begin creating and marketing our guides to golf courses throughout North America. 12 Our first activity will to procure the computer hardware and image-processing software required to produce camera ready copies of our course guides. The estimated cost of hardware and software is $22,000. With the equipment in place we will begin the design and production of a sample CaddyStats Course Guide booklet for a typical North American golf course. We expect to produce camera-ready proofs for printing and initiate our sales and marketing activities by soliciting prospective clients from a number of North American "flagship" golf courses. An important aspect of our marketing activity will be the development of a website that will display our product and its features as well as enable us to solicit orders. The estimated of cost our sales and marketing plan is $40,000. If we can complete these activities and we receive a positive result from our sales efforts, as determined by obtaining sufficient interest from golf courses to produce our guides, we will attempt to raise money through a private placement, public offering or through loans to purchase additional equipment or finance large product orders. We will seek this additional funding if we are able to secure an agreement with approximately four to six golf courses to acquire and sell our Course Guides and player acceptance at these courses is demonstrated though ongoing sales. The Company has raised $25,000 in cash to initiate our business plan through the sale of its common stock. The amount raised from our stock offering is insufficient and we will need additional cash to continue to implement our business plan. If we are unable to raise it, we will either suspend marketing operations until we do raise the cash, or cease operations entirely. Other than as described in this paragraph, we have no other financing plans. If we are unable to complete any aspect of our development or marketing efforts because we don't have enough money, we will cease these development and or marketing operations until we raise money. Attempting to raise capital after failing in any phase of our business plan would be difficult. As such, if we cannot secure additional proceeds we will have to cease operations and investors would lose their entire investment. Management does not plan to hire additional employees at this time. Our sole officer and director will be responsible for the initial product sourcing. The Company intends to hire sales representatives initially on a commission only basis to keep administrative overhead to a minimum. We will use third party web designers to build and maintain our website. Off Balance Sheet Arrangements. As of the date of this Quarterly Report, the current funds available to the Company will not be sufficient to continue operations. The cost to establish the Company and begin operations is estimated to be approximately $62,000 over the next twelve months. Administrative expenses and the cost of maintaining our reporting status is estimated to be an additional $18,000 over this same period. Our officer and director, Gordon Dawson has undertaken to provide the Company with initial operating capital to sustain our business over the next twelve month period as the expenses are incurred in the form of a non-secured loan. However, there is no contract in place or written agreement securing this agreement. Management believes that if the Company cannot raise sufficient revenues or maintain its reporting status with the SEC it will have to cease all efforts directed towards the Company. As such, any investment previously made would be lost in its entirety. Other than the above described situation the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. 13 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required ITEM 4. CONTROLS AND PROCEDURES The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with U.S. generally accepted accounting principles. As of May 31, 2008 management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. The matters involving internal controls and procedures that the Company's management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by the Company's Chief Financial Officer in connection with the review of our financial statements as of May 31, 2008 and communicated the matters to our management. Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an affect on the Company's financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures can result in the Company's determination to its financial statements for the future years. We are committed to improving our financial organization. As part of this commitment, we will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to the Company: i) Appointing one or more outside directors to our board of directors who shall be appointed to the audit committee of the Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and ii) Preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements. 14 Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Company's Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support the Company if personnel turn over issues within the department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues the company may encounter in the future. We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. There have been no significant changes in our internal controls over financial reporting that occurred during the quarter ended May 31, 2008 that have materially affected or are reasonably likely to materially affect, our internal controls over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated. No director, officer, or affiliate of the issuer and no owner of record or beneficiary of more than 5% of the securities of the issuer, or any security holder is a party adverse to the small business issuer or has a material interest adverse to the small business issuer. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None 15 ITEM 6. EXHIBITS 31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer 31.2 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer * 32.1 Section 1350 Certification of Chief Executive Officer 32.2 Section 1350 Certification of Chief Financial Officer ** * Included in Exhibit 31.1 ** Included in Exhibit 32.1 SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CADDYSTATS, INC. By: /s/ GORDON DAWSON ____________________________________________ Gordon Dawson President, Secretary Treasurer, Principal Executive Officer, Principal Financial Officer and Director Dated: June 30, 2008 16