Delaware
|
11-3820796
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
(Do not check if a smaller reporting company)
|
Smaller
reporting company x
|
Page
|
||
PART
I – FINANCIAL INFORMATION
|
||
Item
1.
|
Consolidated
Financial Statements
|
1
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
24
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
35
|
Item
4.
|
Controls
and Procedures
|
35
|
PART
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
36
|
Item
1A.
|
Risk
Factors
|
36
|
Item
2.
|
Unregistered
Sales of Equity Securities
|
37
|
Item
3.
|
Defaults
Upon Senior Securities
|
37
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
37
|
Item
5.
|
Other
Information
|
37
|
Item
6.
|
Exhibits
|
37
|
SIGNATURES
|
38
|
|
EXHIBIT
INDEX
|
39
|
PAGE
|
||
Consolidated
Financial Statements:
|
||
Consolidated
Balance Sheets
|
3
|
|
Consolidated
Statements of Operations
|
5
|
|
Consolidated
Statements of Cash Flows
|
6
|
|
Notes
to Consolidated Financial Statements
|
8
|
January 31, 2009
(Unaudited) |
October 31, 2008
(Audited) |
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 88,467 | $ | 37,802 | ||||
Commissons
and fees receivable
|
8,969 | 12,467 | ||||||
Prepaid
expenses and deposits
|
109,885 | 14,011 | ||||||
Debt
issuance costs, net
|
3,200 | - | ||||||
Other
current assets
|
2,989 | 6,125 | ||||||
Total
current assets
|
213,510 | 70,405 | ||||||
Investment
in Marketplace Home Mortgage Webdigs, LLC
|
21,035 | 2,182 | ||||||
Office
equipment and furniture, net
|
26,803 | 30,202 | ||||||
Intangible
assets, net
|
306,065 | 351,430 | ||||||
Total
assets
|
$ | 567,413 | $ | 454,219 |
January 31, 2009
(Unaudited) |
October 31, 2008
(Audited) |
|||||||
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Current
portion of capital lease obligations
|
$ | 3,917 | $ | 3,828 | ||||
Accounts
payable
|
289,691 | 377,538 | ||||||
Accounts
payable - minority stockholder
|
583,071 | 550,206 | ||||||
Due
to officers
|
32,108 | 27,277 | ||||||
Accrued
expenses:
|
||||||||
Professional
fees
|
35,000 | 50,000 | ||||||
Payroll
and commissions
|
40,650 | 32,269 | ||||||
Lease
expenses for vacated office space
|
55,913 | 55,913 | ||||||
Other
|
14,217 | 15,170 | ||||||
Convertible
note payable, net of discount
|
131,933 | - | ||||||
Liabilities
for warrant to purchase common stock
|
4,648 | - | ||||||
Embedded
derivatives of convertible debt instruments
|
148,489 | - | ||||||
Total
current liabilities
|
1,339,637 | 1,112,201 | ||||||
Long
term liabilities:
|
||||||||
Capital
lease obligation, less current portion
|
9,417 | 10,431 | ||||||
Total
long term liabilities
|
9,417 | 10,431 | ||||||
Total
liabilities
|
1,349,054 | 1,122,632 | ||||||
Stockholders'
deficit:
|
||||||||
Common
stock - $.001 par value; 125,000,000 shares authorized as
common
|
||||||||
stock
and an additional 125,000,000 shares designated as common
or
|
||||||||
preferred
stock; 22,739,511 and 22,308,711 common shares issued
and
|
||||||||
outstanding
at January 31, 2009 and October 31, 2008, respectively
|
22,740 | 22,309 | ||||||
Additional
paid-in-capital
|
2,214,780 | 2,002,226 | ||||||
Accumulated
deficit
|
(3,019,161 | ) | (2,692,948 | ) | ||||
Total
stockholders' deficit
|
(781,641 | ) | (668,413 | ) | ||||
Total
liabilities and stockholders' deficit
|
$ | 567,413 | $ | 454,219 |
Three
Months Ended
|
||||||||
January 31,
|
||||||||
2009
|
2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Revenue:
|
||||||||
Gross
revenues
|
$ | 88,026 | $ | 194,656 | ||||
Less:
commissions, rebates and third party agent commissions
|
(49,399 | ) | (25,274 | ) | ||||
Net
revenues
|
38,627 | 169,382 | ||||||
Operating
expenses:
|
||||||||
Selling
|
164,415 | 570,184 | ||||||
General
and administrative
|
156,682 | 160,306 | ||||||
Total
operating expenses
|
321,097 | 730,490 | ||||||
Operating
loss
|
(282,470 | ) | (561,108 | ) | ||||
Other
income (expense):
|
||||||||
Equity
in income from Marketplace Home Mortgage Webdigs, LLC
|
18,853 | - | ||||||
Interest
expense
|
(37,042 | ) | (2,210 | ) | ||||
Loss
on change in fair value of derivatives and warrants
|
(25,554 | ) | - | |||||
Total
other income (expense)
|
(43,743 | ) | (2,210 | ) | ||||
- | ||||||||
Net
loss before income taxes
|
(326,213 | ) | (563,318 | ) | ||||
Income
tax provision
|
- | - | ||||||
Net
loss
|
$ | (326,213 | ) | $ | (563,318 | ) | ||
Net
loss per common share - basic and diluted
|
$ | (0.01 | ) | $ | (0.03 | ) | ||
Weighted
average common shares outstanding - basic and diluted
|
22,504,968 | 19,279,275 |
WEBDIGS,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Three
Months Ended January 31, 2009 and 2008
|
(Unaudited)
|
Three
Months Ended
January 31,
|
||||||||
2009
|
2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (326,213 | ) | $ | (563,318 | ) | ||
Adjustments
to reconcile net loss to net cash flows
|
||||||||
used
in operating activities:
|
||||||||
Depreciation
|
3,399 | 7,357 | ||||||
Amortization
of intangible assets
|
45,365 | 48,792 | ||||||
Amortization
of convertible note payable discounts
|
29,516 | - | ||||||
Amortization
or debt issuance costs
|
800 | - | ||||||
Loss
on change in fair value of derivatives and warrants
|
25,554 | - | ||||||
Equity
in the income of Marketplace Home Mortgage -
|
||||||||
Webdigs,
LLC
|
(18,853 | ) | - | |||||
Share-based
compensation
|
65,485 | 41,727 | ||||||
Common
stock issued for services
|
7,000 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Commissions
and fees receivable
|
3,498 | 3,520 | ||||||
Prepaid
expenses and deposits
|
24,126 | 4,754 | ||||||
Other
current assets
|
3,136 | (1,478 | ) | |||||
Accounts
payable
|
(87,847 | ) | 41,721 | |||||
Accounts
payable - minority stockholder
|
32,865 | 106,684 | ||||||
Accrued
expenses and other liabilities
|
12,428 | (28,542 | ) | |||||
Net
cash flows used in operating activities
|
(179,741 | ) | (338,783 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Purchase
of equipment and fixtures
|
- | (6,814 | ) | |||||
Net
cash flows used in investing activities
|
- | (6,814 | ) | |||||
Cash
flows from financing activities:
|
||||||||
Issuance
of common stock
|
500 | 269,000 | ||||||
Proceeds
from issuance of convertible debentures, net of debt issuance costs of
$4,000 and unrelated accrued legal fees of $20,000
|
226,000 | - | ||||||
Increase
(decrease) in due to officers
|
4,831 | (19,552 | ) | |||||
Principal
payments on capital lease obligations
|
(925 | ) | (2,156 | ) | ||||
Net
cash flows provided by financing activities
|
230,406 | 247,292 | ||||||
Net
change in cash and cash equivalents
|
50,665 | (98,305 | ) | |||||
Cash
and cash equivalents, beginning of period
|
37,802 | 113,280 | ||||||
Cash
and cash equivalents, end of period
|
$ | 88,467 | $ | 14,975 |
WEBDIGS,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Three
Months Ended January 31, 2009 and 2008
|
(Unaudited)
|
Three
Months Ended
January
31,
|
||||||||
2009
|
2008
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Supplemental cash flow
information
|
||||||||
Cash
paid for interest
|
$ | 6,029 | $ | 2,210 | ||||
Supplemental disclosure of non-cash investing
and
|
||||||||
financing activities
|
||||||||
Issuance
of common stock to convertible debt holder as a discount
on
|
||||||||
the
debt
|
$ | 20,000 | $ | - | ||||
Discount
on convertible debt due to detachable warrant and
embedded
|
||||||||
conversion
options
|
$ | 127,583 | $ | - | ||||
Accrued
legal fees paid by withholding from debt proceeds
|
$ | 20,000 | $ | - | ||||
Related
party contribution to consultant for prepaid consulting
fees
|
$ | 40,000 | $ | - | ||||
Common
stock issued for prepaid consulting fees
|
$ | 80,000 | $ | - |
1
|
BASIS
OF PRESENTATION
|
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
3
|
GOING
CONCERN
|
4
|
RELATED
PARTY TRANSACTIONS
|
5
|
PREPAID
EXPENSES
|
January
31,
2009
|
October
31,
2008
|
|||||||
(unaudited)
|
(audited)
|
|||||||
Prepaid
consulting fees
|
$ | 100,000 | $ | - | ||||
Other
prepaid expenses
|
9,885 | 14,011 | ||||||
Total
|
$ | 109,885 | $ | 14,011 |
6
|
INVESTMENT
IN MARKETPLACE HOME MORTGAGE - WEBDIGS,
LLC
|
January 31,
2009
|
||||
Current
assets
|
$ | 71,331 | ||
Other
assets
|
20,822 | |||
Liabilities
|
(30,101 | ) | ||
Net
equity
|
$ | 62,052 | ||
The
Company's share in the equity in Marketplace Home Mortgage
-
|
||||
Webdigs,
LLC (49%)
|
$ | 30,405 | ||
Less:
Deferred gain on excess of fair value received over net
book
|
||||
value
of assets contributed to Marketplace Home Mortgage -
|
||||
Webdigs,
LLC (1)
|
(9,370 | ) | ||
Investment
in Marketplace Home Mortgage - Webdigs, LLC at
|
||||
January
31, 2009
|
$ | 21,035 |
|
(1)
|
At
January 31, 2009, the Company’s share of the underlying assets of
Marketplace Home Mortgage – Webdigs, LLC exceeded its investment by
$9,370. The excess, which relates to office equipment, is
being amortized into income over the estimated remaining life of the
respective assets (37 months).
|
Three Months
Ended January
31, 2009
|
||||
Revenue
|
$ | 169,120 | ||
Operating
expenses
|
(132,195 | ) | ||
Operating
income
|
36,925 | |||
Other
expense
|
- | |||
Net
income
|
$ | 36,925 | ||
The
Company's share in the income of Marketplace Home Mortgage
-
|
||||
Webdigs,
LLC (49%)
|
$ | 18,093 | ||
Amortization
of deferred gain on transfer of non-cash assets
|
760 | |||
Net
equity in the income of Marketplace Home Mortgage - Webdigs,
LLC
|
$ | 18,853 |
7
|
CONVERTIBLE
NOTE PAYABLE
|
Original
gross proceeds
|
$
|
250,000
|
||
Less:
Debt discount arising from issuance of common stock
|
(20,000
|
)
|
||
Net
proceeds prior to paying transaction costs
|
230,000
|
|||
Less:
Fair value assigned to conversion feature and detachable
warrants
|
(127,583
|
)
|
||
Net
balance at December 12, 2008
|
102,417
|
|||
Plus:
Amortization of debt discount, conversion feature and
warrant
|
29,516
|
|||
Balance
at January 31, 2009
|
$
|
131,933
|
8
|
SHARE- BASED
COMPENSATION
|
Number
of
options
|
Weighted
average
exercise
price
|
Aggregate
intrinsic
value
|
Weighted
average
remaining
contractual
term
(years)
|
|||||||||||||
Outstanding
at October 31, 2008
|
600,000 | $ | 0.25 | $ | — | 4.5 | ||||||||||
Granted
|
— | — | — | — | ||||||||||||
Exercised
|
— | — | — | — | ||||||||||||
Forfeited
or expired
|
— | — | — | — | ||||||||||||
Outstanding
at January 31, 2009
|
600,000 | $ | 0.25 | — | 4.25 | |||||||||||
Exercisable
at January 31, 2009
|
300,000 | $ | 0.25 | — | 4.25 |
Restricted
Shares
|
Unearned
Compensation
|
|||||||
Outstanding,
October 31, 2007
|
4,686,904 | $ | 365,398 | |||||
Granted
|
- | - | ||||||
Vested
|
(577,806 | ) | (41,727 | ) | ||||
Forfeited/canceled
|
- | - | ||||||
Outstanding,
January 31, 2008
|
4,109,098 | 323,671 | ||||||
Granted
|
- | - | ||||||
Vested
|
(577,806 | ) | (41,727 | ) | ||||
Forfeited/canceled
|
- | - | ||||||
Outstanding,
April 30, 2008
|
3,531,292 | 281,944 | ||||||
Granted
|
- | - | ||||||
Vested
|
(577,806 | ) | (41,727 | ) | ||||
Forfeited/canceled
|
- | - | ||||||
Outstanding,
July 31, 2008
|
2,953,486 | 240,217 | ||||||
Granted
|
- | - | ||||||
Vested
|
(659,344 | ) | (41,727 | ) | ||||
Forfeited/canceled
|
(353,329 | ) | - | |||||
Outstanding,
October 31, 2008
|
1,940,813 | 198,490 | ||||||
Granted
|
- | - | ||||||
Vested
|
(652,311 | ) | (60,859 | ) | ||||
Forfeited/canceled
|
- | - | ||||||
Outstanding,
January 31, 2009
|
1,288,502 | $ | 137,631 |
9
|
STOCKHOLDERS'
EQUITY
|
10
|
FAIR
VALUE MEASUREMENT
|
11
|
COMMITMENTS
AND CONTINGENCIES
|
Three Months Ended
|
||||||||
January 31, 2009
|
January 31, 2008
|
|||||||
Accrued
exit costs at October 31, 2008
|
$ | 55,913 | — | |||||
Additional
expenses accrued during the period
|
— | — | ||||||
Payments
made during the period
|
— | — | ||||||
Accrued
exit costs at January 31, 2009
|
$ | 55,913 | — |
12
|
BASIC
AND DILUTED EARNINGS PER SHARE
|
Three Months
Ended
|
||||||||
January 31,
|
||||||||
|
2009
|
2008
|
||||||
Basic
earnings per share calculation:
|
||||||||
Net
loss to common shareholders
|
$ | (326,213 | ) | $ | (563,318 | ) | ||
Weighted
average of common shares outstanding
|
22,504,968 | 19,279,275 | ||||||
Basic
net loss per share
|
$ | (0.01 | ) | $ | (0.03 | ) | ||
Diluted
earnings per share calculation:
|
||||||||
Net
loss to common shareholders
|
$ | (326,213 | ) | $ | (563,318 | ) | ||
Weighted
average of common shares outstanding
|
22,504,968 | 19,279,275 | ||||||
Stock
options, warrants, and convertible debt (1)
|
- | - | ||||||
Diluted
weighted average common shares outstanding
|
22,504,968 | 19,279,275 | ||||||
Diluted
net loss per share
|
$ | (0.01 | ) | $ | (0.03 | ) |
|
(1)
|
The
computation of diluted net loss per share as of January 31, 2009 does not
differ from the basic computation because potentially dilutive issuable
securities of warrants and options of 500,000 shares and 3,703,704
conversion shares related to the convertible debt promissory note would be
anti-dilutive. There were no potentially anti-dilutive shares
as of January 31, 2008.
|
13
|
SEGMENT FINANCIAL
INFORMATION
|
Web-
Assisted
Real Estate
Brokerage
|
Retail
Mortgage
Brokerage
|
Corporate
and Other
|
Total
|
|||||||||||||
Three Months Ended January 31,
2009
|
||||||||||||||||
Net
revenues
|
$ | 38,627 | $ | - | $ | - | $ | 38,627 | ||||||||
Operating
loss
|
(95,766 | ) | (13,286 | ) | (173,418 | ) | (282,470 | ) | ||||||||
Equity
in income from Marketplace Home
|
||||||||||||||||
Mortgage
- Webdigs, LLC
|
- | 18,853 | - | 18,853 | ||||||||||||
Interest
expense
|
- | - | 37,042 | 37,042 | ||||||||||||
Depreciation
& amortization
|
37,859 | 10,905 | - | 48,764 | ||||||||||||
Assets
|
274,014 | 80,697 | 212,702 | 567,413 | ||||||||||||
Capital
expenditures and website
|
||||||||||||||||
development
costs
|
- | - | - | - | ||||||||||||
Three Months Ended January 31,
2008
|
||||||||||||||||
Net
revenues
|
$ | 19,096 | $ | 150,286 | $ | - | $ | 169,382 | ||||||||
Operating
loss
|
(357,048 | ) | (65,971 | ) | (138,089 | ) | (561,108 | ) | ||||||||
Equity
in income from Marketplace Home
|
||||||||||||||||
Mortgage
- Webdigs, LLC
|
- | - | - | - | ||||||||||||
Depreciation
& amortization
|
36,295 | 19,854 | - | 56,149 | ||||||||||||
Assets
|
401,012 | 188,821 | 14,975 | 604,808 | ||||||||||||
Capital
expenditures and website
|
||||||||||||||||
development
costs
|
6,814 | - | - | 6,814 |
Item 2.
|
Management’s Discussion and
Analysis of Financial Condition and Results of
Operations.
|
|
·
|
The
Company does not currently have an audit committee that is actively
involved with the financial reporting process and thus the Company lacks
the board oversight role within the financial reporting
process.
|
|
·
|
The
Company’s small size and only “one financial person” office prohibits the
segregation of duties and the timely review of financial data and banking
information. The Company has limited review procedures in
place.
|
|
·
|
Numerous
GAAP audit adjustments were made to the financial statements for the
period ended January 31, 2009 and the year ended October 31,
2008.
|
|
a)
|
All
information required to be disclosed on a report on Form 8-K during the
period ended January 31, 2009 has previously been
reported.
|
|
b)
|
There
have been no material changes to the procedures by which security holders
may recommend nominees to the registrant’s board of
directors.
|
Exhibit No.
|
Description
|
|
31.1
|
Certification
of Chief Executive Officer
|
|
31.2
|
Certification
of Chief Financial Officer
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
WEBDIGS,
INC.
|
||
/s/
Robert A. Buntz, Jr.
|
||
Robert
A. Buntz, Jr.
|
||
Chief
Executive Officer
|
||
Dated: March
17, 2009
|
||
/s/
Edward Wicker
|
||
Edward
Wicker
|
||
Chief
Financial Officer
|
||
Dated: March
17, 2009
|
Exhibit No.
|
Description
|
|
31.1
|
Certification
of Chief Executive Officer
|
|
31.2
|
Certification
of Chief Financial Officer
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|