Delaware
(State or other jurisdiction
of
incorporation or organization)
|
11-3820796
(I.R.S. Employer
Identification No.)
|
|
3433 Broadway Street NE, Suite 501
Minneapolis, Minnesota
(Address of principal executive offices)
|
55413
(Zip code)
|
|
(612) 767-3854
(Registrant’s telephone number, including area code)
|
Large accelerated filer
|
o
|
|
Accelerated filer
|
o
|
|
|
|
|
|
|
|
Non-accelerated filer
|
o
|
|
Smaller reporting company
|
x
|
|
· |
Commission
fees charged by traditional real estate agents, expressed in absolute
dollars, have risen in the past years.
Traditional commissions vary from market to market, but generally
range
from 5-6% of the total sales price of the home. Although the average
total
commission expressed as a percentage of the property being transacted
has
slowly declined in recent years, the gross dollar amount of the average
per-transaction commission has increased as home prices have
risen.
|
· |
The
traditional agent incentive structure creates conflicting priorities
between agents and their clients.
Traditionally, real estate agents are paid commissions based on the
sales
price of the subject property. They do not receive a salary and they
do
not receive their commissions unless a transaction closes. As a result,
their economic interests are not fully aligned with the consumer,
as they
only receive compensation when and if a property is sold. As a result,
it
is reasonable to assume that traditional agents place great emphasis
on
closing transactions and may often encourage their clients to accept
offers even when it may be in a selling client’s best interest to hold out
for a better price.
|
· |
submitted
to us more than 1,000 requests for us to schedule a personal visit
of a
property
|
· |
submitted
to us more than 200 requests to prepare purchase
offers
|
· |
had
over 40 accepted offers to purchase properties,
and
|
· |
closed
over 35 purchases of properties.
|
· |
Invest
in our website interface and technology.
We believe our website interface and technology platform will provide
us
with a competitive advantage. Our goal is to make the interface more
easy
to use, more intuitive, more enjoyable and distinguishable from the
other
websites and internet tools that buyers and sellers of homes are
accustomed to. We believe that continuing to update and enhance our
website and technology will be a key element in increasing traffic
and use
of our services.
|
· |
Focus
on branding and creating market awareness.
We have spent considerable attention to building our brand and market
awareness with an advertising campaign that uses a mix of media,
including
the internet, television, print, radio, direct-mail, outdoor signage
and
various moveable signage (e.g., branded public buses in the Twin
Cities
metropolitan area). We expect to continue this branding effort on
a
selective and thoughtful basis, with a view towards achieving maximum
return for our marketing and advertising dollars and
efforts.
|
· |
Develop
an efficient transaction-processing and back-office
operation.
We believe that one important factor in our overall profitability,
especially given our discounted commissions and flat-fee model, will
be
our ability to process high transaction volumes efficiently. Traditional
full-fee real estate brokerages typically do not have the volume,
expertise or need to have efficient and low-cost administrative
operations. Accordingly, we intend to structure our administrative
model
to reach outside traditional real estate and utilize transaction
processes
and computer systems more commonly found in high-volume industries
such as
banking and insurance.
|
· |
Attain
profitability in our current markets.
There are a number of internet-based real estate brokers presently
attempting to capitalize on market, demographic, trade/industry and
economic changes. To our knowledge, none of these businesses have
reached
sustained profitability needed to validate the discounted internet-based
real estate brokerage model. Therefore, we believe that an initial
critical strategic goal is for Webdigs to attain overall profitability
across its two current markets in the Minneapolis-St. Paul metropolitan
area and southern Florida. We believe that profitability—especially
sustained profitability—will buoy consumer confidence in our services and
lead to further successes.
|
· |
domain
name rights to www.webdigs.com
|
· |
domain
name rights to
www.homeequityadvisorsllc.com
|
· |
domain
name rights to www.creditgarage.com
|
· |
domain
name rights to www.marquestfin.com
|
· |
certain
patents in process (applications for which have not yet been filed)
relating to proprietary software
|
· |
trademark
and trade name for “Webdigs”; and
|
· |
trademark
for: “The New Way to do Real
Estate”
|
Online
Real Estate
Brokerage
|
Retail
Mortgage
Brokerage
|
Corporate
and Other
|
Total
|
||||||||||
Net
revenues
|
$
|
6,400
|
$
|
93,454
|
$
|
-
|
$
|
99,854
|
|||||
Operating
loss
|
(305,220
|
)
|
(70,267
|
)
|
(227,229
|
)
|
(602,716
|
)
|
|||||
Depreciation
and amortization
|
11,486
|
3,425
|
1,492
|
16,403
|
|||||||||
Assets
|
412,030
|
187,372
|
157,892
|
757,294
|
|||||||||
Capital
expenditures and website development costs
|
413,516
|
-
|
17,386
|
430,902
|
Online
Real Estate
Brokerage
|
Retail
Mortgage
Brokerage
|
Corporate
and Other
|
Total
|
||||||||||
Net
revenues
|
$
|
65,333
|
$
|
434,028
|
$
|
-
|
$
|
499,361
|
|||||
Operating
loss
|
(845,088
|
)
|
(79,902
|
)
|
(262,527
|
)
|
(1,187,517
|
)
|
|||||
Interest
expense
|
-
|
4,512
|
42
|
4,554
|
|||||||||
Depreciation
and amortization
|
73,392
|
39,775
|
-
|
113,167
|
|||||||||
Assets
|
371,130
|
194,318
|
114,338
|
679,786
|
|||||||||
Capital
Expenditures
|
15,938
|
2,278
|
-
|
18,216
|
ITEM 4. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
· |
each
Company director
|
· |
each
executive officer of the Company
|
· |
all
executive officers and directors of the Company as a group,
and
|
· |
each
other beneficial holder (or group of holders) of five percent or
more of
our common stock
|
Name
|
Shares Beneficially
Owned (1)
|
Percentage of
Outstanding
Shares
|
|||||
Robert
A. Buntz, Jr.
(2)
|
4,545,710
|
20.8
|
%
|
||||
Thomas
Meckey
(3)
|
1,304,598
|
5.9
|
%
|
||||
Robert
L. Lumpkins
(4)
Po
Box 16228
St
Louis Park, MN 55416
|
403,843
|
1.8
|
%
|
||||
Steven
Sjoblad
(5)
5115
Green Farms Rd,
Edina,
MN 55436
|
100,000
|
*
|
|||||
Christopher
Larson (6)
8418
W 100th St,
Bloomington,
MN 55438
|
100,000
|
*
|
|||||
Edward
Wicker (7)
|
1,344,598
|
6.2
|
%
|
||||
All
current executive officers and directors
as
a group (six persons) (8)
|
7,798,749
|
35.3
|
%
|
||||
Jesse
Olson
(9)
|
1,304,598
|
5.9
|
%
|
||||
Larry
Olson
(9)
|
1,304,598
|
5.9
|
%
|
||||
Ed
Graca
(9)
|
1,304,598
|
5.9
|
%
|
||||
Amit
Sela
13564
Westernesse Road
Minnetonka,
MN 55305
|
1,240,400
|
5.6
|
%
|
(1)
|
Beneficial
ownership is determined in accordance with the applicable rules of
the
SEC. In computing the number of shares beneficially owned by a person
and
the percentage ownership of that person, shares of common stock subject
to
options or warrants (or similar purchase rights) held by that person
that
are presently exercisable, or will become exercisable within 60 days
hereafter, are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing percentage ownership of any
other
person. Unless otherwise indicated, the business address of each
of the
following persons is 3433 Broadway Street NE, Suite 501, Minneapolis,
Minnesota 55413.
|
(2)
|
Mr.
Buntz is a director of the Company and the Company’s Chief Executive
Officer and President.
|
(3)
|
Mr.
Meckey is a director of the Company, and also serves as Vice President
of
Operations. 644,000 shares held by Mr. Meckey are contractually
restricted pursuant to the Company’s Restricted Stock Plan and the terms
and conditions of a Member Services Agreement by and between Mr.
Meckey
and Webdigs, LLC, dated as of October 22, 2007. Restrictions lapse
thereunder based on certain service-based conditions set forth
in the
Member Services Agreement. All restricted shares are eligible to
vest on
July 15, 2009.
|
(4)
|
Mr.
Lumpkins is a non-employee director of the Company. Of those shares
set
forth on the table, 100,000 shares are issuable upon exercise of
vested
options to purchase common stock. In addition, 203,843 outstanding
common
shares are held jointly with Mr. Lumpkins’
spouse.
|
(5)
|
Mr.
Sjoblad is a non-employee director of the Company. Of those shares
set
forth on the table, 100,000 shares are issuable upon exercise of
vested
options to purchase common stock.
|
(6)
|
Mr.
Larson is a non-employee director of the Company. All 100,000 shares
are
issuable upon exercise of vested options to purchase common
stock.
|
(7)
|
Mr.
Wicker is the Company’s Chief Financial Officer. 644,000 shares held
by Mr. Wicker are contractually restricted pursuant to the Company’s
Restricted Stock Plan and the terms and conditions of a Member
Services
Agreement by and between Mr. Wicker and Webdigs, LLC, dated as
of October
22, 2007. Restrictions lapse thereunder based on certain service-based
conditions set forth in the Member Services Agreement. All restricted
shares are eligible to vest on July 15,
2009.
|
(8)
|
Includes
Messrs. Buntz, Meckey, Lumpkins, Sjoblad, Larson and
Wicker.
|
(9)
|
644,000 shares
held by the stockholder are contractually restricted pursuant to
the
Company’s Restricted Stock Plan and the terms and conditions of a Member
Services Agreement by and between the stockholder and Webdigs,
LLC.
Restrictions lapse thereunder based on certain service-based conditions
set forth in the Member Services Agreement. All restricted shares are
eligible to vest on July 15,
2009.
|
Name
|
Age
|
Position(s)
|
Independent
Director
|
|||
Robert
A. Buntz, Jr.
|
56
|
Director
(Chairman), Chief Executive Officer and President
|
No
|
|||
Robert
L. Lumpkins
|
64
|
Director
|
Yes
|
|||
Steven
Sjoblad
|
58
|
Director
|
Yes
|
|||
Christopher
Larson
|
36
|
Director
|
Yes
|
|||
Thomas
Meckey
|
32
|
Director,
Vice President of Operations
|
No
|
|||
Edward
Wicker
|
48
|
Chief
Financial Officer
|
N/A
|
Name
and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Awards ($)
|
All Other
Compensation ($)
|
Total ($)
|
|||||||||||||
Robert
A. Buntz, Jr.,
Chief
Executive Officer
and
President
(1)
|
2007
|
$
|
100,000
|
(2) |
$
|
0
|
$
|
0
|
$ |
0
|
$
|
100,000
|
|||||||
Daniel
J. Shrader,
Chief
Executive Officer (3)
|
2007
|
0
|
0
|
90,000
|
(4)
|
0
|
90,000
|
(1)
|
Mr.
Buntz become our President and Chief Executive Officer on October
24,
2007. Mr. Buntz is also the Chairman of our Board of Directors.
Mr. Buntz
did not receive any contractually restricted stock during
2007.
|
(2) |
$85,000
of this amount was paid in the form of stock in lieu of cash
compensation.
|
(3)
|
Mr.
Shrader was the Chief Executive Officer of Select Video, Inc. prior
to the
October 24, 2007 merger transaction with Webdigs, LLC.
|
(4)
|
Amounts
listed reflects the estimated fair value of a stock award of 900,000
shares of Select Video based on contemporaneous sales of common stock
of
Select Video prior to the October 24, 2007 merger transaction with
Webdigs, LLC.
|
ITEM 9. |
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
|
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
Number of Securities
Remaining Available for
Issuance Under Equity
Compensation Plans
(excluding securities reflected
in column a)
|
|||||||
|
(a)
|
(b)
|
(c)
|
|||||||
Equity
compensation plans approved by shareholders
|
0
|
0
|
0
|
|||||||
|
||||||||||
Equity
compensation plans not approved by shareholders (1)
|
8,610,347
|
N/A
|
None
|
· |
any
breach of his or her duty of loyalty to us or our
stockholders
|
· |
acts
or omissions not in good faith which involve intentional misconduct
or a
knowing violation of law
|
· |
the
payment of dividends or the redemption or purchase of stock in violation
of Delaware law; or
|
· |
any
transaction from which the director derived an improper personal
benefit.
|
|
Page
|
|
|
|
|
|
|
Consolidated
Financial Statements from inception (May 1, 2007) to October 31,
2007
|
|||
Report
of Independent Registered Public Accounting Firm
|
|
F-1
|
|
Consolidated
Balance Sheet
|
|
F-2
|
|
Consolidated
Statement of Operations
|
F-3
|
||
Consolidated
Statement of Stockholders’ Equity
|
F-4
|
||
Consolidated
Statement of Cash Flows
|
F-5
|
||
Notes
to Consolidated Financial Statements
|
|
F-6
|
|
Consolidated
Financial Statements for the three and six months ended April 30,
2008
(unaudited)
|
|||
Consolidated
Balance Sheets
|
F-22 | ||
Consolidated
Statement of Operations
|
F-24 | ||
Consolidated
Statements of Cash Flows
|
F-25 | ||
Notes
to Consolidated Financial Statements
|
F-26 |
ASSETS
|
||||
Current
assets:
|
||||
Cash
and cash equivalents
|
$
|
113,280
|
||
Commissions
and fees receivable
|
12,255
|
|||
Prepaid
expenses and deposits
|
19,192
|
|||
Total
current assets
|
144,727
|
|||
Office
equipment and fixtures, net
|
55,699
|
|||
Intangible
assets, net
|
556,868
|
|||
Total
assets
|
$
|
757,294
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||
Current
liabilities:
|
||||
Current
portion of capital lease obligations
|
$
|
8,929
|
||
Accounts
payable
|
98,581
|
|||
Accounts
payable - minority stockholder
|
274,413
|
|||
Due
to officer
|
17,601
|
|||
Accrued
expenses:
|
||||
Professional
fees
|
50,000
|
|||
Commissions
|
11,183
|
|||
Insurance
and other
|
11,902
|
|||
Total
current liabilities
|
472,609
|
|||
Long
term liabilities:
|
||||
Capital
lease obligations, less current portion
|
36,470
|
|||
Total
long term liabilities
|
36,470
|
|||
Total
liabilities
|
509,079
|
|||
Stockholders'
equity
|
||||
Common
stock - $.001 par value; 125,000,000 shares authorized as
|
||||
common
stock and an additional 125,000,000 shares designated as
|
||||
either
common or preferred stock; 18,442,840 common shares
|
||||
issued
and outstanding
|
18,443
|
|||
Additional
paid-in capital
|
1,197,886
|
|||
Unearned
compensation
|
(365,398
|
)
|
||
Accumulated
deficit
|
(602,716
|
)
|
||
Total
stockholders' equity
|
248,215
|
|||
Total
liabilities and stockholders' equity
|
$
|
757,294
|
Revenue:
|
||||
Gross
revenue
|
$
|
105,675
|
||
Less:
customer rebates and third-party agent commissions
|
(5,821
|
)
|
||
Net
revenues
|
99,854
|
|||
Operating
expenses:
|
||||
Selling
|
385,955
|
|||
General
and administrative
|
316,615
|
|||
Total
operating expenses
|
702,570
|
|||
Operating
loss
|
(602,716
|
)
|
||
Interest
expense
|
-
|
|||
Net
loss before income taxes
|
(602,716
|
)
|
||
Income
tax provision
|
-
|
|||
Net
loss
|
$
|
(602,716
|
)
|
|
Net
loss per common share - basic and diluted
|
$
|
(0.06
|
)
|
|
Weighted
average common shares outstanding -
|
||||
basic
and diluted
|
9,359,495
|
Additional
|
Total
|
||||||||||||||||||
Common
Stock
|
Paid-in
|
Unearned
|
Accumulated
|
Stockholders'
|
|||||||||||||||
Shares
|
Amount
|
Capital
|
Compensation
|
Deficit
|
Equity
|
||||||||||||||
Balance
at inception (May 1, 2007)
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Issuance
of founders' shares
|
4,403,020
|
4,403
|
6,097
|
-
|
-
|
10,500
|
|||||||||||||
Restricted
common stock awards - value at grant date
|
8,610,347
|
8,610
|
454,750
|
(463,360
|
)
|
-
|
-
|
||||||||||||
Shares
issued to acquire Home Equity Advisors, LLC
|
260,920
|
261
|
31,739
|
-
|
-
|
32,000
|
|||||||||||||
Shares
issued to acquire Marquest Financial, Inc.
|
260,920
|
261
|
63,739
|
-
|
-
|
64,000
|
|||||||||||||
Shares
issued in private placement offering net of issuance costs
of $6,563,
pre-merger
|
1,936,510
|
1,936
|
466,501
|
-
|
-
|
468,437
|
|||||||||||||
Shares
issued to officer (CEO) in lieu of cash compensation
|
346,534
|
347
|
84,653
|
-
|
-
|
85,000
|
|||||||||||||
Preferred
dividends paid prior to the reverse merger with Select Video,
Inc.
|
-
|
-
|
(5,857
|
)
|
-
|
-
|
(5,857
|
)
|
|||||||||||
Recapitalization
of shares issued by Select Video, Inc. prior to the merger
|
3,952,325
|
3,952
|
23,929
|
-
|
-
|
27,881
|
|||||||||||||
Shares
issued in private placement offering, post-merger
|
300,000
|
300
|
74,700
|
-
|
-
|
75,000
|
|||||||||||||
Compensation
related to vesting of restricted common stock awards, net of
forfeitures
|
(1,627,736
|
)
|
(1,627
|
)
|
(2,365
|
)
|
97,962
|
-
|
93,970
|
||||||||||
Net
loss for the period from inception (May 1, 2007) to October
31,
2007
|
-
|
-
|
-
|
-
|
(602,716
|
)
|
(602,716
|
)
|
|||||||||||
Balances,
October 31, 2007
|
18,442,840
|
$
|
18,443
|
$
|
1,197,886
|
$
|
(365,398
|
)
|
$
|
(602,716
|
)
|
$
|
248,215
|
Cash
flows from operating activities:
|
||||
Net
loss
|
$
|
(602,716
|
)
|
|
Adjustments
to reconcile net loss to net cash flows
|
||||
used
in operating activities:
|
||||
Depreciation
|
1,492
|
|||
Amortization
|
14,911
|
|||
Share
based compensation
|
178,970
|
|||
Changes
in operating assets and liabilities:
|
||||
Commissions
and fees receivable
|
6,288
|
|||
Prepaid
expenses and deposits
|
(8,837
|
)
|
||
Accounts
payable
|
43,942
|
|||
Accounts
payable - minority stockholder
|
274,413
|
|||
Accrued
expenses
|
34,656
|
|||
Net
cash flows used in operating activities
|
(56,881
|
)
|
||
Cash
flows from investing activities:
|
||||
Payments
for web-site development costs
|
(413,516
|
)
|
||
Purchase
of equipment and fixtures
|
(17,386
|
)
|
||
Cash
paid in connection with acquisition of HEA,
|
||||
net
of cash acquired totaling $1,896
|
(92
|
)
|
||
Cash
acquired with acquisition of Marquest,
|
||||
net
of legal costs of $560
|
7,593
|
|||
Cash
obtained from reverse merger with Select Video, Inc.
|
27,881
|
|||
Net
cash flows used in investing activities
|
(395,520
|
)
|
||
Cash
flows from financing activities:
|
||||
Payment
of preferred dividends
|
(5,857
|
)
|
||
Issuance
of common stock, net of issuance costs of $6,563
|
553,937
|
|||
Increase
in due to officer
|
17,601
|
|||
Net
cash flows provided by financing activities
|
565,681
|
|||
Net
change in cash and cash equivalents
|
113,280
|
|||
Cash
and cash equivalents, at May 1, 2007
|
-
|
|||
Cash
and cash equivalents, at October 31, 2007
|
$
|
113,280
|
1 |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
2 |
GOING
CONCERN
|
3 |
ACQUISITIONS
|
Cash
|
$
|
1,896
|
||
Commissions
receivable
|
15,543
|
|||
Office
equipment
|
900
|
|||
Customer
lists
|
27,404
|
|||
Accounts
payable and accrued expenses
|
(11,745
|
)
|
||
$
|
33,998
|
Cash
|
$
|
8,153
|
||
Commissions
receivable
|
3,000
|
|||
Prepaid
expenses
|
10,355
|
|||
Office
equipment
|
38,905
|
|||
Deferred
tax assets, net
|
11,000
|
|||
Valuation
allowance
|
(11,000
|
)
|
||
Customer
lists
|
130,859
|
|||
Accounts
payable
|
(49,281
|
)
|
||
Accrued
expenses
|
(32,032
|
)
|
||
Capital
lease obligation
|
(45,399
|
)
|
||
$
|
64,560
|
Webdigs, Inc.
|
HEA
|
Marquest
|
Total
|
||||||||||
Net
revenues
|
$
|
6,400
|
$
|
143,269
|
$
|
465,334
|
$
|
615,003
|
|||||
Selling,
general and administrative expense
|
(538,699
|
)
|
(185,541
|
)
|
(530,212
|
)
|
(1,254,452
|
)
|
|||||
Operating
(loss)
|
(532,299
|
)
|
(42,272
|
)
|
(64,878
|
)
|
(639,449
|
)
|
|||||
Interest
expense
|
-
|
(266
|
)
|
(7,489
|
)
|
(7,755
|
)
|
||||||
Net
loss before income taxes
|
(532,299
|
)
|
(42,538
|
)
|
(72,367
|
)
|
(647,204
|
)
|
|||||
Income
tax provision
|
-
|
-
|
-
|
-
|
|||||||||
Net
loss
|
$
|
(532,299
|
)
|
$
|
(4,538
|
)
|
$
|
(72,367
|
)
|
$
|
(647,204
|
)
|
|
Loss
per common share - basic and diluted
|
$
|
(0.06
|
)
|
$
|
(0.00
|
)
|
$ |
(0.01
|
)
|
$
|
(0.07
|
)
|
|
Weighted
average common shares outstanding - basic and diluted
|
9,359,494
|
9,359,494
|
9,359,494
|
9,359,494
|
4 |
RELATED
PARTY TRANSACTIONS
|
5 |
OFFICE
EQUIPMENT AND FIXTURES
|
Office
equipment and fixtures
|
$
|
57,191
|
||
Less
accumulated depreciation
|
(1,492
|
)
|
||
Office
equipment and fixtures, net
|
$
|
55,699
|
6 |
INTANGIBLE
ASSETS
|
Website
development
|
$
|
413,516
|
||
Customer
lists
|
158,263
|
|||
571,779
|
||||
Less
accumulated amortization
|
(14,911
|
)
|
||
Intangible
assets, net
|
$
|
556,868
|
Years
ending October 31,
|
||||
2008
|
$
|
195,164
|
||
2009
|
191,735
|
|||
2010
|
169,969
|
|||
$
|
556,868
|
7 |
CAPITAL
LEASE
|
Years
ending October 31,
|
||||
2008
|
$
|
12,756
|
||
2009
|
12,756
|
|||
2010
|
12,756
|
|||
2011
|
12,756
|
|||
2012
|
4,252
|
|||
Total
|
55,276
|
|||
Less:
amount representing interest
|
(9,877
|
)
|
||
Net
capital lease obligation
|
45,399
|
|||
Less:
current portion
|
(8,929
|
)
|
||
Long-term
obligations under capital lease
|
$
|
36,470
|
8 |
COMMITMENTS
AND CONTINGENCIES
|
Years
ending October 31,
|
||||
2008
|
$
|
102,524
|
||
2009
|
77,967
|
|||
Total
|
$
|
180,491
|
9 |
EMPLOYEE
BENEFIT PLAN
|
10 |
INCOME
TAXES
|
Current
|
$
|
-
|
||
Deferred
|
(8,000
|
)
|
||
(8,000
|
)
|
|||
Establishment
of the net deferred tax asset as of October 24, 2007 due to the reverse
merger and change in tax status
|
(32,000
|
)
|
||
(40,000
|
)
|
|||
Valuation
allowance
|
40,000
|
|||
Provision
for income taxes
|
$
|
-
|
|
Amount
|
|||
Federal
income tax benefit at statutory rate (34%)
|
$
|
(205,000
|
)
|
|
State
tax benefit, net of federal
|
(36,000
|
)
|
||
Operating
loss passed to LLC members prior to reverse merger (May 1, 2007 to
October
23, 2007)
|
232,000
|
|||
Non-deductible
expenses
|
1,000
|
|||
Establishment
of net deferred tax asset due to tax status change
|
(32,000
|
)
|
||
Current
valuation allowance
|
40,000
|
|||
Provision
for income taxes
|
$
|
-
|
Deferred
tax assets (liabilities):
|
||||
Net
operating loss carryforwards
|
$
|
76,000
|
||
Accrued
expenses
|
20,000
|
|||
Depreciation
|
(5,000
|
)
|
||
Amortization
|
(51,000
|
)
|
||
Net
deferred tax assets
|
40,000
|
|||
Valuation
allowance
|
(40,000
|
)
|
||
Net
deferred tax assets
|
$
|
-
|
11 |
SHAREHOLDERS'
EQUITY
|
Shares
|
Unearned
Compensation
|
||||||
Outstanding,
May 1, 2007
|
-
|
$
|
-
|
||||
Granted
|
8,610,347
|
|
463,360
|
||||
Vested
|
(2,295,707
|
)
|
(93,970
|
)
|
|||
Forfeited/canceled
|
(1,627,736
|
)
|
(3,992
|
)
|
|||
Outstanding,
October 31, 2007
|
4,686,904
|
$
|
365,398
|
Shares
|
|
Amount
|
|
||||
2008
|
2,311,225
|
$
|
166,908
|
||||
2009
|
2,375,679
|
198,490
|
|||||
4,686,904
|
$
|
365,398
|
12 |
SEGMENT
FINANCIAL INFORMATION
|
Online
Real Estate
Brokerage
|
Retail
Mortgage
Brokerage
|
Corporate
and Other
|
Total
|
||||||||||
Net
revenues
|
$
|
6,400
|
$
|
93,454
|
$
|
-
|
$
|
99,854
|
|||||
Operating
loss
|
(305,220
|
)
|
(70,267
|
)
|
(227,229
|
)
|
(602,716
|
)
|
|||||
Depreciation
and amortization
|
11,486
|
3,425
|
1,492
|
16,403
|
|||||||||
Assets
|
412,030
|
187,372
|
157,892
|
757,294
|
|||||||||
Capital
expenditures and
|
|||||||||||||
website
development costs
|
413,516
|
-
|
17,386
|
430,902
|
13 |
SUPPLEMENTAL
CASH FLOW INFORMATION
|
Acquisition
of HEA by issuing common stock valued at $32,000:
|
||||
Fair
value of assets acquired
|
$
|
45,743
|
||
Liabilities
assumed
|
(11,745
|
)
|
||
Cash
paid for acquisition costs
|
(1,998
|
)
|
||
Shares
issued for the acquisition
|
$
|
32,000
|
||
Acquisition
of Marquest by issuing common stock valued at $64,000:
|
||||
Fair
value of assets acquired
|
$
|
191,272
|
||
Liabilities
assumed
|
(126,712
|
)
|
||
(560
|
)
|
|||
Shares
issued for the acquisition
|
$
|
64,000
|
14 |
SUBSEQUENT
EVENTS
|
April 30, 2008
|
October 31, 2007
|
||||||
(Unaudited)
|
(Audited)
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
114,338
|
$
|
113,280
|
|||
Commissions
and fees receivable
|
35,513
|
12,255
|
|||||
Prepaid
expenses and deposits
|
12,586
|
19,192
|
|||||
Total
current assets
|
162,437
|
144,727
|
|||||
Office
equipment and fixtures, net
|
58,062
|
55,699
|
|||||
Intangible
assets, net
|
459,287
|
556,868
|
|||||
Total
assets
|
$
|
679,786
|
$
|
757,294
|
April 30, 2008
|
October 31, 2007
|
||||||
(Unaudited)
|
(Audited)
|
||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
|||||||
Current
liabilities:
|
|||||||
Current
portion of capital lease obligation
|
$
|
9,350
|
$
|
8,929
|
|||
Accounts
payable
|
277,497
|
98,581
|
|||||
Accounts
payable - minority stockholder
|
340,426
|
274,413
|
|||||
Due
to officer
|
-
|
17,601
|
|||||
Accrued
expenses
|
54,729
|
73,085
|
|||||
Total
current liabilities
|
682,002
|
472,609
|
|||||
Long
term liabilities:
|
|||||||
Capital
lease obligation, less current portion
|
31,687
|
36,470
|
|||||
Total
long term liabilities
|
31,687
|
36,470
|
|||||
Total
liabilities
|
713,689
|
509,079
|
|||||
Stockholders'
equity (deficit):
|
|||||||
Common
stock - $.001 par value; 125,000,000 shares authorized as common
stock and
an additional 125,000,000 shares designated as either common or preferred
stock; 21,748,840 and 18,442,840 common shares issued and outstanding
at
April 30, 2008 and October 31, 2007, respectively
|
21,749
|
18,443
|
|||||
Additional
paid-in capital
|
2,021,080
|
1,197,886
|
|||||
Unearned
compensation
|
(281,945
|
)
|
(365,398
|
)
|
|||
Accumulated
deficit
|
(1,794,787
|
)
|
(602,716
|
)
|
|||
Total
stockholders' equity (deficit)
|
(33,903
|
)
|
248,215
|
||||
Total
liabilities and stockholders' equity (deficit)
|
$
|
679,786
|
$
|
757,294
|
Three Months
|
Six Months
|
||||||
Ended
|
Ended
|
||||||
April 30, 2008
|
April 30, 2008
|
||||||
Revenue:
|
|||||||
Gross
revenue
|
$
|
371,308
|
$
|
565,964
|
|||
Less:
customer rebates and third-party agent commissions
|
(41,329
|
)
|
(66,603
|
)
|
|||
Net
revenues
|
329,979
|
499,361
|
|||||
Operating
expenses:
|
|||||||
Selling
|
775,536
|
1,345,720
|
|||||
General
and administrative
|
180,852
|
341,158
|
|||||
Total
operating expenses
|
956,388
|
1,686,878
|
|||||
Operating
loss
|
(626,409
|
)
|
(1,187,517
|
)
|
|||
Interest
expense
|
(2,344
|
)
|
(4,554
|
)
|
|||
Net
loss before income taxes
|
(628,753
|
)
|
(1,192,071
|
)
|
|||
Income
tax provision
|
-
|
-
|
|||||
Net
loss
|
$
|
(628,753
|
)
|
$
|
(1,192,071
|
)
|
|
Net
loss per common share - basic and diluted
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
|
Weighted
average common shares outstanding - basic and diluted
|
20,984,507
|
20,131,891
|
Six Months
|
||||
Ended
|
||||
April 30, 2008
|
||||
Cash
flows from operating activities:
|
||||
Net
loss
|
$
|
(1,192,071
|
)
|
|
Adjustments
to reconcile net income to net cash flows used in operating
activities:
|
||||
Depreciation
|
15,586
|
|||
Amortization
|
97,581
|
|||
Loss
on disposal of fixed assets
|
267
|
|||
Share
based compensation
|
83,453
|
|||
Changes
in operating assets and liabilities:
|
||||
Commissons
and fees receivable
|
(23,258
|
)
|
||
Prepaid
expenses and deposits
|
6,606
|
|||
Accounts
payable
|
178,916
|
|||
Accounts
payable - minority stockholder
|
66,013
|
|||
Accrued
expenses
|
(18,356
|
)
|
||
Net
cash flows used in operating activities
|
(785,263
|
)
|
||
Cash
flows from investing activities:
|
||||
Purchases
of computer equipment
|
(18,216
|
)
|
||
Net
cash flows used in investing activities
|
(18,216
|
)
|
||
Cash
flows from financing activities:
|
||||
Issuance
of common stock
|
826,500
|
|||
Principal
payments on capital lease obligation
|
(4,362
|
)
|
||
Decrease
in due to officer
|
(17,601
|
)
|
||
Net
cash flows provided by financing activities
|
804,537
|
|||
Net
increase in cash and cash equivalents
|
1,058
|
|||
Cash
and cash equivalents, beginning of year
|
113,280
|
|||
Cash
and cash equivalents, end of year
|
$
|
114,338
|
1 |
BASIS
OF PRESENTATION
|
2 |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
3 |
GOING
CONCERN
|
4 |
RELATED
PARTY TRANSACTIONS
|
5 |
SHAREHOLDERS'
EQUITY
|
Restricted
|
Unearned
|
||||||
Shares
|
Compensation
|
||||||
Outstanding,
May 1, 2007
|
-
|
$
|
-
|
||||
Granted
|
8,610,347
|
|
463,360
|
||||
Vested
|
(2,295,707
|
)
|
(93,970
|
)
|
|||
Forfeited/canceled
|
(1,627,736
|
)
|
(3,992
|
)
|
|||
Outstanding,
October 31, 2007
|
4,686,904
|
365,398
|
|||||
Granted
|
-
|
-
|
|||||
Vested
from November 1, 2007 to January 31, 2008
|
(577,806
|
)
|
(41,727
|
)
|
|||
Vested
from February 1, 2008 to April 30, 2008
|
(577,806
|
)
|
(41,726
|
)
|
|||
Outstanding,
April 30, 2008
|
3,531,292
|
$
|
281,945
|
Shares
|
Amount
|
||||||
2008
- remaining
|
1,155,613
|
$
|
83,455
|
||||
2009
|
2,375,679
|
198,490
|
|||||
3,531,292
|
$
|
281,945
|
6 |
SEGMENT
FINANCIAL INFORMATION
|
Online
|
Retail
|
||||||||||||
Real
Estate
|
Mortgage
|
Corporate
|
|||||||||||
Brokerage
|
Brokerage
|
and
Other
|
Total
|
||||||||||
Net
revenues
|
$
|
65,333
|
$
|
434,028
|
$
|
-
|
$
|
499,361
|
|||||
Operating
loss
|
(845,088
|
)
|
(79,902
|
)
|
(262,527
|
)
|
(1,187,517
|
)
|
|||||
Interest
expense
|
-
|
4,512
|
42
|
4,554
|
|||||||||
Depreciation
and amortization
|
73,392
|
39,775
|
-
|
113,167
|
|||||||||
Assets
|
371,130
|
194,318
|
114,338
|
679,786
|
|||||||||
Capital
expenditures and website development costs
|
15,938
|
2,278
|
-
|
18,216
|
Online
|
Retail
|
||||||||||||
Real
Estate
|
Mortgage
|
Corporate
|
|||||||||||
Brokerage
|
Brokerage
|
and
Other
|
Total
|
||||||||||
Net
revenues
|
$
|
46,237
|
$
|
283,742
|
$
|
-
|
$
|
329,979
|
|||||
Operating
loss
|
(458,926
|
)
|
(13,930
|
)
|
(153,553
|
)
|
(626,409
|
)
|
|||||
-
|
2,302
|
42
|
2,344
|
||||||||||
Depreciation
and amortization
|
37,099
|
19,924
|
-
|
57,023
|
7 |
SUBSEQUENT
EVENTS
|
ITEM 14. |
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM 15. |
FINANCIAL
STATEMENTS AND EXHIBITS
|
Exhibit
No.
|
|
Description
|
2.1
|
|
Agreement
and Plan of Merger and Reorganization.*
|
2.2
|
Stock
Purchase Agreement with Home Equity Advisors, LLC.*
|
|
2.3
|
Stock
Purchase Agreement with Marquest Financial, Inc.*
|
|
|
|
|
3.1
|
|
Amended
and Restated Certificate of Incorporation of Webdigs, Inc.
(originally
submitted and filed under the Company’s prior name, “Select Video,
Inc.”)*
|
3.2
|
Amendment
to Amended and Restated Certificate of Incorporation of Webdigs,
Inc.
(originally submitted and filed under the Company’s prior name, “Select
Video, Inc.”) (filed with the Minnesota Secretary of State on October 23,
2007)*
|
|
|
|
|
3.3
|
|
Bylaws
of Webdigs, Inc.*
|
|
|
|
4
|
|
Form
of Specimen Stock Certificate.*
|
|
|
|
10.1
|
Webdigs,
Inc. Restricted Stock Plan.*
|
|
10.2
|
Form
of Webdigs, LLC Member Services Agreements.*
|
|
10.3 | Member Services Agreement with Robert A. Buntz, Jr., dated May 1, 2007 (filed herewith). | |
10.4 |
Member
Services Agreement with Thomas Meckey, dated October 22, 2007 (filed
herewith).
|
|
10.5 |
Member
Services Agreement with Edward Wicker, dated October 22, 2007 (filed
herewith).
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21
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Subsidiaries
of Webdigs, Inc. (filed herewith).
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99.1
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Financial
statements of Home Equity Advisors, LLC from inception (September
18,
2006) to December 31, 2006 .*
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99.2
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Financial
statements of Marquest Financial, Inc. for the fiscal years ended
December
31, 2006 and 2005.*
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99.3 | Financial statements of Home Equity Advisors, LLC from January 1, 2007 to June 30, 2007 (filed herewith). | |
99.4 | Financial statements of Marquest Financial, Inc. from Junuary 1, 2007 to September 30, 2007 (filed herewith) |
* |
Exhibits
are incorporated by reference to the corresponding exhibit number
filded
as part of the registrant's original registation statement on Form
10,
filed on June 20, 2008.
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Webdigs,
Inc.
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Date:
July 31, 2008
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/s/
Robert A. Buntz, Jr.
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By:
Robert A. Buntz, Jr.
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Chief
Executive Officer and
President
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