VERUS INTERNATIONAL, INC. - Quarter Report: 2010 July (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 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 July 31, 2010
OR
¨ TRANSITION
REPORT UNDER SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
transition period from _______ to _______
Commission
File Number 0-53359
WEBDIGS,
INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
11-3820796
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
3433 West
Broadway St, NE, Suite 501, Minneapolis, MN
(Address
of Principal Executive Offices)
(612)
767-3854
(Registrant’s
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed from last
report)
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. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
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 ¨ No x
As of
September 14, 2010 there were 33,396,719 shares of the issuer’s common stock,
$0.001 par value, outstanding.
Table of
Contents
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Page
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PART
I – FINANCIAL INFORMATION
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Item
1.
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Consolidated
Financial Statements
|
1
|
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition
|
|
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and
Results of Operations
|
2
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
|
11
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Item
4.
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Controls
and Procedures
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11
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PART
II – OTHER INFORMATION
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Item
1.
|
Legal
Proceedings
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12
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Item
1A.
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Risk
Factors
|
12
|
|
Item
2.
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Unregistered
Sales of Equity Securities
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12
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Item
3.
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Defaults
Upon Senior Securities
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12
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Item
4.
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Submission
of matters to a Vote of Security Holders
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12
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Item
5.
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Other
Information
|
12
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Item
6.
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Exhibits
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12
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SIGNATURES
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13
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EXHIBIT
INDEX
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14
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PART
I – FINANCIAL INFORMATION
Item
1. Consolidated Financial Statements.
WEBDIGS,
INC.
CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
FOR
THE THREE AND NINE MONTH
PERIODS
ENDED JULY 31, 2010 AND 2009
1
WEBDIGS,
INC.
TABLE
OF CONTENTS
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PAGE
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|
Consolidated
Financial Statements:
|
||
|
Consolidated
Balance Sheets
|
F-2
|
|
|
Consolidated
Statements of Operations
|
F-4
|
|
|
Consolidated
Statements of Cash Flows
|
F-5
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|
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Notes
to Consolidated Financial Statements
|
F-7
|
|
F
– 1
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
|
July 31, 2010
(Unaudited)
|
October 31, 2009
(Audited)
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 4,685 | $ | 36,023 | ||||
|
Commissons
and fees receivable
|
14,871 | 9,449 | ||||||
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Prepaid
expenses and deposits
|
5,533 | 10,847 | ||||||
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Other
current assets
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9,084 | 10,284 | ||||||
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Total
current assets
|
34,173 | 66,603 | ||||||
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Office
equipment and fixtures, net
|
13,932 | 30,678 | ||||||
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Intangible
assets, net
|
133,385 | 2,103,243 | ||||||
|
Total
assets
|
$ | 181,490 | $ | 2,200,524 | ||||
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
F –
2
WEBDIGS,
INC.
CONSOLIDATED
BALANCE SHEETS (continued)
(Unaudited)
|
July 31, 2010
(Unaudited)
|
October 31, 2009
(Audited)
|
|||||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
||||||||
|
Current
liabilities:
|
||||||||
|
Current
portion of capital lease obligations
|
$ | 4,498 | $ | 4,197 | ||||
|
Accounts
payable
|
143,454 | 259,064 | ||||||
|
Accounts
payable - minority stockholder
|
569,949 | 562,858 | ||||||
|
Due
to officers
|
8,330 | 58,606 | ||||||
|
Convertible
notes payable - officer/stockholder
|
492,800 | 173,000 | ||||||
|
Accrued
expenses:
|
||||||||
|
Professional
fees
|
29,250 | 39,000 | ||||||
|
Payroll
and commissions
|
213,708 | 53,207 | ||||||
|
Other
liabilities
|
58,362 | 20,174 | ||||||
|
Total
current liabilities
|
1,520,351 | 1,170,106 | ||||||
|
Long
term liabilities:
|
||||||||
|
Capital
lease obligation, less current portion
|
2,822 | 6,233 | ||||||
|
Total
liabilities
|
1,523,173 | 1,176,339 | ||||||
|
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 common
or
|
||||||||
|
preferred
stock; 33,396,719 common shares issued and
|
||||||||
|
outstanding
at July 31, 2010 and October 31, 2009
|
33,397 | 33,397 | ||||||
|
Treasury
stock - $.001 par value; 963,628 and 1,063,628 shares held
in
|
||||||||
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treasury
as of July 31, 2010 and October 31, 2009, respectively
|
(240,907 | ) | (265,907 | ) | ||||
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Additional
paid-in-capital
|
5,045,826 | 5,034,458 | ||||||
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Accumulated
deficit
|
(6,179,999 | ) | (3,777,763 | ) | ||||
|
Total
stockholders' equity (deficit)
|
(1,341,683 | ) | 1,024,185 | |||||
|
Total
liabilities and stockholders' equity (deficit)
|
$ | 181,490 | $ | 2,200,524 | ||||
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
F –
3
WEBDIGS,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
July 31,
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July 31,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|||||||||||||
|
Revenue:
|
||||||||||||||||
|
Gross
revenues
|
$ | 176,159 | $ | 451,841 | $ | 592,931 | $ | 631,033 | ||||||||
|
Less:
customer rebates and third-party agent commissions
|
(54,889 | ) | (204,515 | ) | (217,867 | ) | (285,839 | ) | ||||||||
|
Net
revenues
|
121,270 | 247,326 | 375,064 | 345,194 | ||||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Selling
|
114,969 | 238,270 | 358,082 | 489,170 | ||||||||||||
|
General
and administrative
|
106,707 | 180,837 | 359,635 | 528,490 | ||||||||||||
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Amortization
of intangible assets
|
291,188 | 49,878 | 728,913 | 118,797 | ||||||||||||
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Impairment
charge
|
1,262,705 | - | 1,262,705 | - | ||||||||||||
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Total
operating expenses
|
1,775,569 | 468,985 | 2,709,335 | 1,136,457 | ||||||||||||
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Operating
loss from continuing operations
|
(1,654,299 | ) | (221,659 | ) | (2,334,271 | ) | (791,263 | ) | ||||||||
|
Other
income (expense):
|
||||||||||||||||
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Equity
in income from Marketplace Home Mortgage
|
||||||||||||||||
|
Webdigs,
LLC
|
- | 117 | - | 18,902 | ||||||||||||
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Interest
expense
|
(14,683 | ) | (210,630 | ) | (46,965 | ) | (303,484 | ) | ||||||||
|
Loss
on change in fair value of derivatives and warrants
|
- | - | - | (63,708 | ) | |||||||||||
|
Total
other income (expense)
|
(14,683 | ) | (210,513 | ) | (46,965 | ) | (348,290 | ) | ||||||||
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Loss
from continuing operations before income taxes
|
(1,668,982 | ) | (432,172 | ) | (2,381,236 | ) | (1,139,553 | ) | ||||||||
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Income
tax provision
|
- | - | - | - | ||||||||||||
|
Net
loss from continuing operations
|
(1,668,982 | ) | (432,172 | ) | (2,381,236 | ) | (1,139,553 | ) | ||||||||
|
Income
from discontinued operations of Marquest
|
||||||||||||||||
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Financial
Inc. net of applicable taxes of zero
|
- | 292,686 | - | 284,409 | ||||||||||||
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Net
loss
|
$ | (1,668,982 | ) | $ | (139,486 | ) | $ | (2,381,236 | ) | $ | (855,144 | ) | ||||
|
Net
loss per common share - basic and diluted:
|
||||||||||||||||
|
Loss
from continuing operations
|
$ | (0.05 | ) | $ | (0.01 | ) | $ | (0.07 | ) | $ | (0.04 | ) | ||||
|
Income
from discontinued operations
|
- | 0.01 | - | 0.01 | ||||||||||||
|
Net
loss
|
$ | (0.05 | ) | $ | - | $ | (0.07 | ) | $ | (0.03 | ) | |||||
|
Weighted
average common shares outstanding -
|
||||||||||||||||
|
basic
and diluted
|
33,396,719 | 28,417,170 | 33,396,719 | 24,553,883 | ||||||||||||
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
F –
4
WEBDIGS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
Nine
Months Ended
|
||||||||
|
July
31,
|
||||||||
|
2010
|
2009
|
|||||||
|
(unaudited)
|
(unaudited)
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
loss
|
$ | (2,381,236 | ) | $ | (855,144 | ) | ||
|
Adjustments
to reconcile net loss to net cash flows used in operating
activities:
|
||||||||
|
Depreciation
|
16,746 | 10,948 | ||||||
|
Stock
warrant expense to debt holders for agreement modification
|
- | 138,010 | ||||||
|
Amortization
of intangible assets
|
728,913 | 145,331 | ||||||
|
Amortization
of convertible note payable discounts
|
- | 129,873 | ||||||
|
Amortization
or debt issuance costs
|
- | 3,520 | ||||||
|
Impairment
charge
|
1,262,705 | - | ||||||
|
Loss
on change in fair value of derivatives and warrants
|
- | 63,708 | ||||||
|
Equity
in the income of Marketplace Home Mortgage - Webdigs, LLC
|
- | (18,902 | ) | |||||
|
Share-based
compensation
|
15,368 | 179,447 | ||||||
|
Gain
on sale of subsidiary
|
- | (297,412 | ) | |||||
|
Common
stock issued for services
|
- | 7,000 | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Commissions
and fees receivable
|
(5,422 | ) | (19,145 | ) | ||||
|
Prepaid
expenses and deposits
|
5,314 | 119,109 | ||||||
|
Other
current assets
|
1,200 | (7,955 | ) | |||||
|
Accounts
payable
|
(115,610 | ) | (25,893 | ) | ||||
|
Accounts
payable - minority stockholder
|
7,091 | 76,580 | ||||||
|
Accrued
expenses
|
117,476 | 48,481 | ||||||
|
Other
liabilities
|
38,188 | 3,728 | ||||||
|
Net
cash flows used in operating activities
|
(309,267 | ) | (298,716 | ) | ||||
|
Cash
flows from investing activities:
|
||||||||
|
Purchase
of equipment and intangible assets
|
(21,760 | ) | (157,733 | ) | ||||
|
Cash
paid for business acquisition
|
- | (5,000 | ) | |||||
|
Net
cash flows used in investing activities
|
(21,760 | ) | (162,733 | ) | ||||
|
Cash
flows from financing activities:
|
||||||||
|
Proceeds
from issuance of common stock
|
- | 335,500 | ||||||
|
Proceeds
from issuance of convertible debentures, net of debt
issuance
|
||||||||
|
costs
of $4,000 and unrelated accrued legal fees of $20,000
|
- | 226,000 | ||||||
|
Principal
payments on convertible/promissory note
|
- | (100,000 | ) | |||||
|
Proceeds
from issuance of convertible notes payable to
officer/stockholder
|
319,800 | - | ||||||
|
Increase
(decrease) in due to officers
|
(17,001 | ) | 11,294 | |||||
|
Principal
payments on capital lease obligations
|
(3,110 | ) | (2,838 | ) | ||||
|
Net
cash flows provided by financing activities
|
299,689 | 469,956 | ||||||
|
Net
change in cash and cash equivalents
|
(31,338 | ) | 8,507 | |||||
|
Cash
and cash equivalents, beginning of period
|
36,023 | 37,802 | ||||||
|
Cash
and cash equivalents, end of period
|
$ | 4,685 | $ | 46,309 | ||||
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
F –
5
WEBDIGS,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
Nine
Months Ended
|
||||||||
|
July 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
(unaudited)
|
(unaudited)
|
|||||||
|
Supplemental cash flow
information
|
||||||||
|
Cash
paid for interest
|
$ | - | $ | 16,958 | ||||
|
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
option
|
$ | - | $ | 127,583 | ||||
|
Accrued
legal fees paid from convertible debenture proceeds
|
$ | - | $ | 20,000 | ||||
|
Related
party contribution of Webdigs common stock to consultant for
prepaid
|
||||||||
|
consulting
fees
|
$ | - | $ | 40,000 | ||||
|
Common
stock issued for prepaid consulting fees
|
$ | - | $ | 80,000 | ||||
|
Reclassification
of amounts due to officers as accrued expenses
|
$ | 33,275 | $ | - | ||||
|
Webdigs
common stock received in connection with the divestiture of
Marquest
Financial, Inc.
|
$ | - | $ | 265,907 | ||||
|
Issuance
of common stock to acquire Iggy’s assets
($17,648 for computer
hardware
and $1,797,977 for intangible assets)
|
$ | - | $ | 1,815,625 | ||||
|
Issuance
of common stock to acquire theMLSDirect.com
|
$ | - | $ | 47,000 | ||||
|
Convert
accrued officer salary to common stock
|
$ | - | $ | 55,000 | ||||
|
Void
forfeited balance of unearned compensation
|
$ | - | $ | 41,098 | ||||
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
F –
6
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and 2009
|
1
|
BASIS
OF PRESENTATION
|
The
accompanying unaudited consolidated financial information has been prepared by
Webdigs, Inc. (the “Company”) in accordance with accounting principles generally
accepted in the United States of America for interim financial information and
the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities
and Exchange Commission (SEC). Accordingly, it does not include all
of the information and notes required by accounting principles generally
accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair statement of
this financial information have been included. Financial results for
the interim period presented are not necessarily indicative of the results that
may be expected for the fiscal year as a whole or any other interim
period. This financial information should be read in conjunction with
the audited consolidated financial statements and notes included in the
Company’s Annual Report on Form 10K for the year ended October 31,
2009.
Certain
reclassifications have been made to prior year amounts to conform to the current
year presentation. These changes had no effect on our results of operations or
stockholder’s equity as previously reported.
|
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Nature of
Business
Webdigs,
Inc. (“the Company”), a Delaware corporation, became a public company in October
2007 after a reverse shell transaction with Select Video, Inc. which was
incorporated in Delaware in 1994. Our business is dedicated to
web-assisted residential real estate brokerage services. This is done through
our wholly-owned subsidiary Webdigs, LLC.
All of
the Company’s real estate brokerage operations are operated under Webdigs, LLC.
Our three main real estate brokerage brands are Webdigs, Iggys House and
theMLSDirect.com. Webdigs.com is a web-assisted real estate
website and brokerage, offering a similar customer experience as a full service
brokerage utilizing a discounted percentage fee structure for listing services
to their selling customers and a graduated fee structure for their buying
customers by rebating up to 1% of the sale price of the home to the buyer.
IggysHouse.com is a web-assisted real-estate listing service which enables the
customer to pay a monthly discounted fee of $49.95 to list their homes on their
local real estate multiple listing service. Our third brand, theMLSDirect.com,
offers consumers a flat-fee MLS listing for $299. Similar to IggysHouse.com,
there is a full menu of add-on services available for customers to
purchase.
F –
7
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and 2009
Basis of
Consolidation
The
consolidated financial statements for the three and nine month periods ended
July 31, 2010 and
2009 include the accounts of Webdigs, Inc. and its wholly-owned subsidiary,
Webdigs, LLC, which includes wholly-owned subsidiaries of Home Equity Advisors,
LLC, and Credit Garage, LLC. The consolidated financial statements
for Webdigs, Inc. for the three and nine month periods ended July 31, 2009 also
includes its former wholly-owned subsidiary of Marquest Financial Inc.
(Marquest). The Company divested Marquest on June 4, 2009 (see Note
5). The net results from Marquest have been segregated for all
periods presented in the statement of operations. The
investment of Marketplace Home Mortgage – Webdigs, LLC (49% ownership) was
recorded on the equity method. This unconsolidated joint venture was
dissolved on October 26, 2009 (see Note 7). All significant intercompany
accounts and transactions have been eliminated in the
consolidation.
Estimates
The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Intangible
Assets
The
Company has two types of intangible assets:
Website
Development
The
primary interface with the customer in our web-assisted real estate broker
operation is the Webdigs.com website. Certain costs incurred in
development of this website have been capitalized. Amortization is on
a straight-line method over the estimated three year useful life of the
website. The Company also has incurred costs for the
IggysHouse.com website. Those costs are being amortized on a straight-line
method over the estimated two year useful life of the website.
Website Domain
Names
The
Company capitalizes the fair value of website domain names acquired through
business combinations or asset acquisitions. The Company purchased 17
domain names in 17 states in May 2009 from theMLSDirect.com and are amortizing
the fair value of these names over a 2 year estimated useful life.
The
Company reviews the carrying values of its intangible asset whenever facts and
circumstances indicate the assets may be impaired. Recoverability of assets to
be held and used is measured by comparing the carrying amount of an asset to
future net undiscounted cash flows expected to be generated by the asset. If an
asset is considered impaired, the impairment is measured by the amount by which
the carrying amount of the asset exceeds its fair value.
F –
8
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and 2009
The
Company has experienced limited revenue from the IggysHouse.com website since it
went live on January 6, 2010. A continued lack of growth from this website
has resulted in the Company’s management
evaluating the intangible assets acquired from IggysHouse.com with respect to
future financial results and cash flows. As a result of this review,
the Company’s management determined that the estimated future undiscounted cash
flows of the intangible assets were less than their carrying value. At July 31,
2010, the IggyHouse.com assets had a net carrying value of
$1,351,455. The estimated fair value of the intangible assets was
reduced to $100,000 at July 31, 2010 (See Note 6). As a result, the Company
recognized an impairment loss of $1,251,455 for the three month period ended
July 31, 2010.
A
separate impairment test for the intangible assets acquired in the May 2009
acquisition of the MLSDirect,com also produced an impairment charge of
$11,250. The Company’s re-evaluation of the 17 affiliate broker
relationships acquired as part of the acquisition revealed than none of the 17
affiliates were acting as brokers for the MLSDirect.com as of July 31,
2010. After the impairment charge, the Company maintains an
intangible asset balance of assets for the MLSDirect.com of $10,412 for the
domain names acquired as part of the MLSDirect.com acquisition.
Including
the remaining $22,973 net value of the Company’s Webdigs.com website, as of July
31, 2010, the Company’s total net intangible assets are $133,385.
Investment in Marketplace
Home Mortgage – Webdigs, LLC
On August
1, 2008, the Company contributed non-cash assets into a joint venture created
with Marketplace Home Mortgage, LLC for a 49% ownership interest (see Note 7).
The Company previously accounted for its investment in the joint venture using
the equity method. Accordingly, the Company recorded an increase in its
investment for contributions to the joint venture and for its 49% share of any
income of the joint venture, and a reduction in its investment for its 49% share
of any losses of the joint venture or disbursements of profits from the joint
venture. On October 26, 2009, the Company and Marketplace Home
Mortgage, LLC agreed to dissolve Marketplace Home Mortgage – Webdigs,
LLC. All remaining assets were distributed upon
dissolution.
Segments
Historically,
the Company has reported two strategic operating segments; (1) web-assisted real
estate brokerage and (2) mortgage brokerage. Due to the divestiture
of Marquest Financial, Inc. and the dissolution of Marketplace Home Mortgage –
Webdigs, LLC in 2009, the Company has determined that the mortgage segment is no
longer significant to its operations and therefore, now reports as one strategic
reporting segment.
F –
9
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and 2009
Income
Taxes
The
Company accounts for income taxes using an asset and liability approach to
financial accounting and reporting for income taxes. Accordingly,
deferred tax assets and liabilities arise from the difference between the tax
basis of an asset or liability and its reported amount in the consolidated
financial statements. Deferred tax amounts are determined using the
tax rates expected to be in effect when the taxes will actually be paid or
refunds received, as provided under currently enacted tax
law. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense or benefit is the tax payable or refundable, respectively, for the
period plus or minus the change in deferred tax assets and liabilities during
the period. The Company has recorded a full valuation allowance
against its net deferred tax assets as of July 31, 2010 and October 31, 2009
because realization of those assets is not reasonably assured.
The
Company will recognize a financial statement benefit of a tax position only
after determining that the relevant tax authority would more likely than not
sustain the position following an audit. For tax positions meeting
the more-likely-than-not threshold, the amount recognized in the financial
statements is the largest benefit that has a greater than fifty percent
likelihood of being realized upon ultimate settlement with the relevant tax
authority.
The
Company believes its income tax filing positions and deductions will be
sustained upon examination and, accordingly, no reserves, or related accruals
for interest and penalties has been recorded at July 31, 2010 and October 31,
2009.
Recently Issued Accounting
Pronouncements
In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures (Topic 820). ASU 2010-06 provides additional disclosure
requirements related to fair value measurements. ASU 2010-06 is effective
for interim and annual reporting periods beginning after December 15, 2009,
except for the disclosures about purchases, sales, issuances, and settlements in
the roll forward of activity in Level 3 fair value
measurements. Disclosure requirements applicable to Level 3
transactions are effective for fiscal years beginning after December 15,
2010 and for interim periods within those fiscal years, with early adoption
permitted. The portion of ASU 2010-06 that was effective beginning
after December 15, 2009 did not have a material effect on the financial
position, results of operations or cash flows of the Company. Additionally, the
Company does not anticipate that the disclosure requirements applicable to
Level 3 transactions that are effective for fiscal years beginning after
December 15, 2010 will have a material effect on the financial position,
results of operations or cash flows of the Company.
|
3
|
GOING
CONCERN
|
The
Company has incurred significant operating losses for the three and nine month
periods ended July 31, 2010 and 2009. At July 31, 2010, the Company
reports a negative working capital position of $1,486,178, and an accumulated
deficit of $6,179,999. It is management’s opinion that these facts
raise substantial doubt about the Company’s ability to continue as a going
concern without additional debt or equity financing.
F –
10
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and
2009
In order
to meet its working capital needs through the next twelve months, the Company
plans to raise additional funds through the issuance of debt to its officers and
other private placements. The Company is also working with some of
its current vendors (including the Company’s principal website
developer/minority stockholder) to potentially negotiate a payout settlement
that could be less than the July 31, 2010 balances owed. Although the Company
intends to obtain additional financing to meet our cash needs, we may be unable
to secure any additional financing on terms that are favorable or acceptable to
us, if at all. The Company significantly reduced operating
expenditures during the year ended October 31, 2009 and has continued reducing
operating expenses during the nine months ended July 31,
2010. Management of the Company anticipates that further expense
reductions will be difficult to achieve during the last quarter of our current
fiscal year. The Company expects to increase revenues through
its existing Webdigs.com customer base, increased website traffic (driven
largely by internet advertising) and the addition of real estate agents joining
the Webdigs team in the months ahead.
|
4
|
RELATED
PARTY TRANSACTIONS
|
Accounts Payable – Minority
Stockholder
The
Company’s principal advertising agency/website developer was owed $569,949 at
July 31, 2010 and $562,858 at October 31, 2009. The two principals of
this advertising company are also minority stockholders in the Company – holding
approximately 1.6% of the Company’s outstanding shares at July 31,
2010. For the nine month periods ended July 31, 2010 and 2009, the
Company incurred $57,091 and $126,579 in services and rent from this related
party, respectively. Included in these amounts is office rent expense for the
Company of $31,500 for each of the nine month periods ended July 31, 2010 and
2009. The Company informally rents office space for its headquarters
and real estate operation in Minneapolis from the related party on a month to
month basis. The Company is currently in negotiations with the
website developer to settle this debt with cash and some form of the Company’s
equity.
Due to
Officers
As of
July 31, 2010 and October 31, 2009, the Company was indebted to its officers for
amounts totaling $8,330 and $58,606 respectively, for business
expenses. All of the indebtedness represents non-interest bearing
payables due on demand.
F –
11
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and 2009
Convertible Note Payable –
Officer/Stockholder
During
the nine months ended July 31, 2010, the Company borrowed $319,800 from its CEO
under a
convertible promissory note accruing interest at an annual rate of
12%. At July 31, 2010 and October 31, 2009, the balances due
under this note were $492,800 and $173,000, respectively. The
board of directors has approved conversion of up to $300,000 of the note into
the Company’s common stock at $0.11 per share at any time. An
additional $166,000 of the note has been approved for conversion into the
Company’s common stock at a price equal to the price
of shares to potentially be sold
to current shareholders under a resolution passed by the Company’s board
of directors on April 23, 2010. Under the April 23, 2010
resolution, the Company is authorized to sell up to 15 million shares of the
Company’s common stock to existing shareholders at a price as low as $0.03 per
share. There was no beneficial conversion feature for the first
conversion element because the Company’s stock price was trading at $0.11 at the
time the Board of Directors approved the first conversion feature (allowing the
CEO to convert shares at $0.11 per share). The second conversion
feature is a contingent conversion feature and will need to be reviewed for a
beneficial conversion feature if and when the conversion occurs. For
the three and nine month periods ended July 31, 2010, the Company incurred
$14,497 and $35,053 of interest expense in connection with this note,
respectively. Accrued interest due under the note as of July
31, 2010 was $36,469.
|
5
|
DISCONTINUED
OPERATIONS
|
On June
4, 2009, the Company sold its 100% equity interest in Marquest Financial, Inc.,
a non-operating entity which until August 2008 had been the Company’s principal
mortgage brokerage operation, back to its former owner and founder.
As of
July 31, 2010 and for the three and nine month periods ended July 31, 2010,
there were no assets or liabilities related to the discontinued operations and
there were no revenues and expenses. All of the assets and liabilities were sold
back to its former owner as of June 4, 2009.
A
summarized statement of operations for the discontinued operations for the
comparable three and nine month periods ended July 31, 2009 is as
follows:
F –
12
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and 2009
|
Discontinued Operations of
|
Three months ended
|
Nine months ended
|
||||||
|
Marquest Financial, Inc.
|
July 31, 2009
|
July 31, 2009
|
||||||
|
Net
revenue
|
$ | - | $ | - | ||||
|
Operating
loss
|
(4,726 | ) | (13,003 | ) | ||||
|
Other
income
|
297,412 | 297,412 | ||||||
|
Earnings
before income taxes
|
292,686 | 284,409 | ||||||
|
Income
taxes
|
- | - | ||||||
|
Net
operating income
|
$ | 292,686 | $ | 284,409 | ||||
|
6
|
FIXED
ASSETS AND INTANGIBLE ASSETS
|
At July
31, 2010 and October 31, 2009, the Company’s fixed assets are as
follows:
|
Fixed Assets
|
July 31, 2010
|
October 31, 2009
|
||||||
|
Furniture
and Fixtures
|
$ | 9,981 | $ | 9,981 | ||||
|
Computer
hardware
|
50,972 | 50,972 | ||||||
| 60,953 | 60,953 | |||||||
|
Accumulated
depreciation
|
(47,021 | ) | (30,275 | ) | ||||
|
Net
fixed assets
|
$ | 13,932 | $ | 30,678 | ||||
Depreciation
expense amounted to $5,582 and $4,260 for the three month periods ended July 31,
2010 and 2009, respectively. For the nine month periods ended July
31, 2010 and 2009, depreciation expense was $16,746 and $10,948,
respectively.
F –
13
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and
2009
At July
31, 2010 and October 31, 2009, the Company’s intangible assets are as
follows:
|
Intangible Assets
|
July 31, 2010
|
October 31, 2009
|
||||||
|
Website
Software
|
$ | 1,793,397 | $ | 1,771,637 | ||||
|
Customer
lists
|
355,922 | 355,922 | ||||||
|
Non-compete
agreements
|
266,019 | 266,019 | ||||||
|
Other
|
52,000 | 52,000 | ||||||
| 2,467,338 | 2,445,578 | |||||||
|
Accumulated
amortization
|
(1,071,248 | ) | (342,335 | ) | ||||
|
Net
before impairment charge
|
1,396,090 | 2,103,243 | ||||||
|
Impairment
charge
|
(1,262,705 | ) | - | |||||
|
Net
intangible assets
|
$ | 133,385 | $ | 2,103,243 | ||||
The
acquired intangible assets of IggysHouse.com, Webdigs.com and the MLSDirect.com
were tested for impairment on July 31, 2010. At this time, the carrying
value of these assets was reduced to $133,385, resulting in an impairment charge
of $1,262,705 for the three month period ended July 31, 2010. Amortization
expense of intangible assets amounted to $291,188 and $49,878 for the three
month periods ended July 31, 2010 and 2009, respectively. For the nine month
periods ended July 31, 2010 and 2009, amortization expense of intangible assets
was $728,913 and $145,331, respectively. The Company also capitalized
$21,760 in development costs relating to the IggysHouse.com website during the
nine month period ended July 31, 2010.
|
7
|
INVESTMENT
IN MARKETPLACE HOME MORTGAGE – WEBDIGS,
LLC
|
On August
1, 2008, the Company entered into a joint venture arrangement with Marketplace
Home Mortgage, LLC whereby they created a new joint venture entity called
Marketplace Home Mortgage – Webdigs, LLC. The Company contributed
assets with a net book value totaling $34,804 less transferred liabilities of
$23,558 for a 49% ownership stake in the joint venture, and Marketplace Home
Mortgage, LLC contributed cash totaling $23,039 for 51%
ownership. The assets and liabilities contributed came entirely from
the Company’s mortgage brokerage subsidiaries; Marquest Financial, Inc. and Home
Equity Advisors, LLC. The joint venture ceased operations on July 31,
2009 and on October 26, 2009, the Company and Marketplace Home Mortgage, LLC
dissolved their joint venture.
F –
14
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and
2009
At
October 31, 2009 and July 31, 2010, there were no assets or liabilities related
to the investment in Marketplace Home Mortgage – Webdigs, LLC and there were no
operational activities for the three and nine month periods ended July 31, 2010.
See the table below for a summarized
statement of operations for this joint venture for the three and nine month
periods ended July 31, 2009:
|
Three months ended
|
Nine months ended
|
|||||||
|
July 31, 2009
|
July 31, 2009
|
|||||||
|
Revenue
|
$ | - | $ | 246,413 | ||||
|
Operating
expenses
|
(1,314 | ) | (212,491 | ) | ||||
|
Operating
income (loss)
|
(1,314 | ) | 33,922 | |||||
|
Other
expense
|
- | - | ||||||
|
Net
income (loss)
|
$ | (1,314 | ) | $ | 33,922 | |||
|
The
Company's share in the income of Marketplace Home Mortgage Webdigs, LLC
(49%)
|
$ | (643 | ) | $ | 16,622 | |||
|
Amortization
of deferred gain on transfer of non-cash assets
|
760 | 2,280 | ||||||
|
Net
equity in the income of Marketplace Home Mortgage - Webdigs,
LLC
|
$ | 117 | $ | 18,902 | ||||
|
8
|
SHARE-BASED
COMPENSATION
|
The
Company recognizes compensation expense for stock option grants over the
requisite service period for vesting of the award. Total stock-option
compensation expense included in the Company's consolidated statements of
operations for the nine months ended July 31, 2010 and 2009 was $8,243 and
$18,861, respectively. This expense is included in general and
administrative expense. The compensation expense had less than a $0.01 per
share impact on the basic loss per common share for the three and nine
month periods ended July 31, 2010 and 2009. As of July 31,
2010, the Company had $2,080 of unrecognized compensation expense related to the
outstanding stock options, which will be recognized over a weighted average
period of 12 months.
The
following is a summary of stock option activity for the nine month period ended
July 31, 2010:
F –
15
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and
2009
|
Weighted average
|
||||||||||||||||
|
Weighted
|
Aggregate
|
remaining
|
||||||||||||||
|
Number of
|
average
|
intrinsic
|
contractual term
|
|||||||||||||
|
options
|
exercise price
|
value
|
(years)
|
|||||||||||||
|
Outstanding
at October 31, 2009
|
1,000,000 | $ | 0.25 | $ | - | |||||||||||
|
Granted
|
- | - | - | |||||||||||||
|
Exercised
|
- | - | - | |||||||||||||
|
Forfeited
or expired
|
(200,000 | ) | - | - | ||||||||||||
|
Outstanding
at July 31, 2010
|
800,000 | $ | 0.25 | $ | - | 3.13 | ||||||||||
|
Exercisable
at July 31, 2010
|
750,000 | $ | 0.25 | $ | - | 3.05 | ||||||||||
The
aggregate intrinsic value in the table above represents the difference between
the closing stock price on July 31, 2010 and the exercise price, multiplied by
the number of in-the-money options that would have been received by the option
holders had all option holders exercised their options on July 31,
2010. There were no options exercised during the nine months ended
July 31, 2010.
Restricted Stock
Compensation
The
Company recorded $7,125 and $160,586 of stock compensation expense in the
consolidated statement of operations related to vested shares (restricted stock)
for the nine month periods ended July 31, 2010 and 2009,
respectively.
A summary
of the status of non-vested shares and changes as of July 31, 2010 is set forth
below:
F –
16
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and
2009
|
Restricted
|
Unearned
|
|||||||
|
Shares
|
Compensation
|
|||||||
|
Outstanding,
October 31, 2008
|
1,940,813 | 198,490 | ||||||
|
Granted
|
- | - | ||||||
|
Vested
|
(652,311 | ) | (60,860 | ) | ||||
|
Forfeited/canceled
|
- | |||||||
|
Outstanding,
January 31, 2009
|
1,288,502 | 137,630 | ||||||
|
Granted
|
- | - | ||||||
|
Vested
|
(652,309 | ) | (60,861 | ) | ||||
|
Forfeited/canceled
|
- | - | ||||||
|
Outstanding,
April 30, 2009
|
636,193 | 76,769 | ||||||
|
Granted
|
50,000 | 12,500 | ||||||
|
Vested
|
(407,999 | ) | (38,865 | ) | ||||
|
Forfeited/canceled
|
(240,970 | ) | (41,098 | ) | ||||
|
Outstanding,
July 31, 2009
|
37,224 | 9,306 | ||||||
|
Granted
|
- | |||||||
|
Vested
|
(24,724 | ) | (6,181 | ) | ||||
|
Forfeited/canceled
|
- | |||||||
|
Outstanding,
October 31, 2009
|
12,500 | 3,125 | ||||||
|
Granted
|
- | - | ||||||
|
Vested
|
(12,500 | ) | (3,125 | ) | ||||
|
Forfeited/canceled
|
- | - | ||||||
|
Outstanding,
January 31, 2010
|
- | - | ||||||
|
Granted
|
- | - | ||||||
|
Vested
|
- | - | ||||||
|
Forfeited/canceled
|
- | - | ||||||
|
Outstanding,
April 30, 2010
|
- | - | ||||||
|
Granted
|
- | - | ||||||
|
Vested
|
- | - | ||||||
|
Forfeited/canceled
|
- | - | ||||||
|
Outstanding,
July 31, 2010
|
- | $ | - | |||||
Stock
Warrants
The
following is a summary of stock warrant activity for the nine month period ended
July 31, 2010:
F –
17
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and
2009
|
Weighted
|
||||||||||||||||
|
average
|
||||||||||||||||
|
Weighted
|
Aggregate
|
remaining
|
||||||||||||||
|
Number of
|
average
|
intrinsic
|
contractual term
|
|||||||||||||
|
warrants
|
exercise price
|
value
|
(years)
|
|||||||||||||
|
Outstanding
at October 31, 2009
|
500,000 | $ | 0.13 | $ | - | |||||||||||
|
Granted
|
- | - | - | |||||||||||||
|
Exercised
|
- | - | - | |||||||||||||
|
Forfeited
or expired
|
(300,000 | ) | 0.01 | - | ||||||||||||
|
Outstanding
at July 31, 2010
|
200,000 | $ | 0.30 | $ | - | 1.36 | ||||||||||
|
Exercisable
at July 31, 2010
|
200,000 | $ | 0.30 | $ | - | 1.36 | ||||||||||
|
9
|
SHAREHOLDERS
EQUITY
|
In May
2010, the Company issued 100,000 treasury common stock shares, held by the
Company, to an employee as compensation with a total fair value of $4,000.
The treasury shares had a cost of $25,000 and the resulting $21,000 difference
was recorded against the accumulated deficit account.
|
10
|
BASIC
AND DILUTED EARNINGS PER SHARE
|
The
Company computes earnings per share under two different methods, basic and
diluted, and presents per share data for all periods in which statements of
operations are presented. Basic earnings per share are computed by dividing net
income by the weighted average number of shares of common stock outstanding.
Diluted earnings per share are computed by dividing net income by the weighted
average number of common stock and common stock equivalents
outstanding.
The
following table provides a reconciliation of the numerators and denominators
used in calculating basic and diluted earnings per share for the three and nine
month periods ended July 31, 2010 and 2009, respectively.
F –
18
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and
2009
|
Three
months ended
|
Nine
months ended
|
|||||||||||||||
|
July 31,
|
July 31,
|
|||||||||||||||
|
Basic
earnings per share calculation:
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Net
loss from continuing operations
|
$ | (1,668,982 | ) | $ | (432,172 | ) | $ | (2,381,236 | ) | $ | (1,139,553 | ) | ||||
|
Net
income (loss) from discontinued operations
|
- | 292,686 | - | 284,409 | ||||||||||||
|
Net
loss
|
$ | (1,668,982 | ) | $ | (139,486 | ) | $ | (2,381,236 | ) | $ | (855,144 | ) | ||||
|
Weighted
average of common shares outstanding
|
33,396,719 | 28,417,170 | 33,396,719 | 24,553,883 | ||||||||||||
|
Net
loss per share - basic
|
||||||||||||||||
|
Loss
from continuing operations
|
$ | (0.05 | ) | $ | (0.01 | ) | $ | (0.07 | ) | $ | (0.04 | ) | ||||
|
Loss
from discontinued operations
|
- | 0.01 | - | 0.01 | ||||||||||||
|
Net
loss per basic share
|
$ | (0.05 | ) | $ | - | $ | (0.07 | ) | $ | (0.03 | ) | |||||
|
Diluted
earnings per share calculation:
|
||||||||||||||||
|
Net
loss from continuing operations
|
$ | (1,668,982 | ) | $ | (432,172 | ) | $ | (2,381,236 | ) | $ | (1,139,553 | ) | ||||
|
Net
income (loss) from discontinued operations
|
- | 292,686 | - | 284,409 | ||||||||||||
|
Net
loss
|
$ | (1,668,982 | ) | $ | (139,486 | ) | $ | (2,381,236 | ) | $ | (855,144 | ) | ||||
|
Weighted
average of common shares outstanding
|
33,396,719 | 28,417,170 | 33,396,719 | 24,553,883 | ||||||||||||
|
Stock
options (1)
|
- | - | - | - | ||||||||||||
|
Stock
warrants (2)
|
- | - | - | - | ||||||||||||
|
Convertible
notes payable - officer/stockholder (3)
|
- | - | - | - | ||||||||||||
|
Diluted
weighted average common shares outstanding
|
33,396,719 | 28,417,170 | 33,396,719 | 24,553,883 | ||||||||||||
|
Net
loss per common share - diluted
|
||||||||||||||||
|
Loss
from continuing operations
|
$ | (0.05 | ) | $ | (0.01 | ) | $ | (0.07 | ) | $ | (0.04 | ) | ||||
|
Loss
from discontinued operations
|
- | 0.01 | - | 0.01 | ||||||||||||
|
Net
loss per diluted share
|
$ | (0.05 | ) | $ | - | $ | (0.07 | ) | $ | (0.03 | ) | |||||
F –
19
WEBDIGS,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Three and Nine Month Periods Ended July 31, 2010 and
2009
|
|
(1)
|
The
dilutive effect of stock options in the above table excludes 800,000 and
600,000 of underlying stock options for the three and nine month periods
ended July 31, 2010 and 2009, respectively as they would be anti-dilutive
to our net loss for those periods.
|
|
|
(2)
|
The
dilutive effect of stock warrants in the above table excludes 200,000 and
500,000 of underlying stock warrants for the three and nine month
periods ended July 31, 2010 and 2009, respectively, as they would be
anti-dilutive to our net loss for those
periods.
|
|
|
(3)
|
The
dilutive effect of potential convertible notes equivalent to 2,727,273
shares related to the loan from our CEO has been excluded as it would be
anti-dilutive to our net loss for those
periods.
|
|
11
|
SUBSEQUENT
EVENTS
|
Loan from Related
Party
From July
31, 2010 to September 13, 2010, the Company’s Chairman and Chief Executive
Officer loaned the Company $17,700 under the Convertible Note Payable –
Officer/Stockholder (See Note 4). The total principal amount outstanding at
September 13, 2010 is $510,500.
F –
20
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
Our Management’s Discussion and Analysis
of Financial Condition and Results of Operation set forth below should be read
in conjunction with our audited consolidated financial statement contained in
our Form 10K filed with the SEC on January 29,
2010 relating to our fiscal year ended October 31,
2009.
Cautionary Note Regarding
Forward-Looking Statements
Some of the statements made in this
section of our report are forward-looking statements. These forward-looking
statements generally relate to and are based upon our current plans,
expectations, assumptions and projections about future events. Our
management currently believes that the various plans, expectations, and
assumptions reflected in or suggested by these forward-looking statements are
reasonable. Nevertheless, all forward-looking statements involve
risks and uncertainties and our actual future results may be materially
different from the plans, objectives or expectations, or our assumptions and
projections underlying our present plans, objectives and expectations, which are
expressed in this section.
In light of the foregoing, prospective
investors are cautioned that the forward-looking statements included in this
filing may ultimately prove to be inaccurate—even materially
inaccurate. Because of the significant uncertainties inherent in such
forward-looking statements, the inclusion of such information should not be
regarded as a representation or warranty by Webdigs, Inc. or any other person
that our objectives, plans, expectations or projections that are contained in
this filing will be achieved in any specified time frame, if ever. We
undertake no obligation to publicly release any revisions to the forward-looking
statements or reflect events or circumstances after the date of this document.
The risks discussed in the 10K filed with the SEC on January 29, 2010 should be considered in
evaluating our prospects and future performance.
General Overview
We are a web-assisted real estate
brokerage primarily for residential home buyers and sellers. We utilize the
Internet, proprietary technology and efficient business processes to attempt to
deliver significant savings to our home sellers and rewards to our home buyers
over the traditional “full commission” brokerage model. We attempt to
emphasize client service, when and as needed or requested by our
clients, to separate us from other discount brokerage models; and we
attempt to provide efficiency and cost savings that will differentiate
us from traditional brokerage models.
We operate under three brands. Webdigs.com, our first brand, is
our full-service discounted real estate
brokerage. Webdigs offers rebates to its customers of up to 1% of the sales price of the
home they purchase through us and offers listing services starting as
low as 3.99% (compared to a traditional
full-service brokerage
which we believe most often charge 5-7% for listing service).
Our second brand, IggysHouse.com, which
launched in January 2010, is a month-to-month listing service that allows home
sellers to list their home on their local MLS and on IggysHouse.com completely
free for 30 days. After 30 days, the seller has the option to continue to list their home
for a flat fee of $49.95 per month, with various other ala carte
services available for purchase.
2
Our third brand, theMLSDirect.com,
offers a $299 fixed price six month MLS listing to consumers not wishing to
engage the services of a listing real estate
agent. TheMLSDirect.com appeals to consumers who otherwise
might choose to sell their home themselves without a realtor (commonly referred
to as For Sale by Owner).
Currently, we market to potential
customers principally through internet ad campaigns, limited but highly targeted
e-mail, direct mail, and print advertising. Our most consistent
source of business, however, has been referrals from previous
satisfied customers of our Webdigs.com business.
Results of Operation
For the three month periods ended
July 31, 2010 and 2009
Our third quarter results were very
disappointing. For the quarter ended July 31, 2010 our net revenue fell 51% to $121,270 from $247,326 for the same period in
2009. On a transaction basis, we closed 34 home sale
transactions in the quarter ended July 31, 2010. In 2009, we closed
62 transactions in the same period. Our operating loss for the three
months ended July 31, 2010 was $1,654,299 compared to $221,659 for the
comparable three month period ended July 31, 2009. Fueling the large
operating loss increase was an impairment charge of $1,262,705 for the write-down of selected
intangible assets purchased in 2009 for our IggysHouse.com and MLSDirect.com
business units. On a comparable basis excluding the
impairment charge, operating losses increased by $169,935 from $221,659 for the
three month period ended July 31, 2009 to $391,594 for the three months ended July 31, 2010. If we further exclude amortization from
our operating losses, our
operating loss from continuing operations declined in 2010 by 42% - from $171,781 to $100,406.
We believe the sales decrease results
largely from the expiration of the April 30, 2010 federal government’s home
buyer tax credit program. The home buyer tax credit program, while
well intentioned, seems to have served more to move home buying forward than
actually increasing home buyer demand. In the Twin Cities, our
principal market, July 2010 signed home sales agreements fell 38% from July 2009
to the lowest level in over 10 years according to data included in the
Minneapolis Area of Realtors (MAR) Monthly Indicators Report for July
2010. MAR also reports that “there were 3,226 signed purchased
agreements in July (for the Twin Cities MLS area), a decrease of 1,948 contracts
from last year.” Seller activity has also
slowed.
We also made a significant change in
pricing in the quarter ended July 31, 2010. We revised our overall
buyer rebate program to make it simpler for our customers to
understand. Up until June 2010, we offered buyers a cash rebate of up
to 50% of the commission Webdigs received as the buyer’s broker in a
transaction. This typically averaged 1.35% of the sales price of the
home. Starting in June, we switched our rebate to a straight 1% of the home
purchase price. In both cases, we will maintain our minimum
commission at $3,000. We are confident the simplified rebate
structure will benefit us in the future. It is much easier for a
prospective customer to calculate 1% of the sales price of a home than it is to
calculate 50% of our broker commission. Furthermore, we will actually
save money by switching to the clearer pricing structure. We hope to
notice a benefit to this policy change in the upcoming
quarter.
3
Helping us reduce our non-GAAP operating
loss (excluding amortization and impairment charges) were significant decreases
in selling and general and administrative expenses. We reduced
selling expenses by 52% from $238,270 for three months ended July 31, 2009 to
$114,969 for the comparable period in 2010. The most significant
selling expense decreases come from a decrease in sales commission expense
resulting from the year to year decline in sales and our own restraint in
spending. Our sales commission expenses declined by
$47,760 (43%) due to decreased sales. We also cut advertising and
promotion expenses by $17,864 (58%) versus last year. We continue to
strive to reach a break-even quarterly cash flow. For that reason, we
have also reduced staffing and cut spending on our website. We
reduced selling related wages and salaries by about $29,416 for the three months
ended July 31, 2010. In addition, we reduced website maintenance
spending by $19,097. We are in the process of developing a new
more cost-effective website that should be implemented in September
2010. For that reason, we anticipate spending almost no money on new
activities for our existing website.
In addition to our selling expense cuts,
we reduced general
and administrative spending
by $74,130 ($106,707 for the quarter ended July 31, 2010 versus $180,837 for the same period last
year). The primary factors in our general and administrative expenses were decreased
non-cash compensation costs and investor relations expenses. Overall
non-cash compensation costs decreased by $45,030 for the three months ended July
31, 2010 versus July 31, 2009 (from $48,479 to $3,449). We also achieved
reductions in investor relations expense (from $80,000 to
$0). Offsetting some of the expense reductions was an increase
in wage and salary expense of $49,243. Of this total, nearly $33,000
comes from recognition this year that some previously classified executive
salaries are more administrative than selling related in
nature. These costs were classified as selling expenses for the three
months ended July 31, 2009. In addition, we accrued an additional
$9,973 for administrative payroll for the quarter ended July 31, 2010. The
remaining difference can be attributed to having one more full-time accounting
staff person than last year. This represents a year over year salary
expense increase of $6,270.
Our biggest disappointment for the
quarter continues to be our “pay as you go” IggysHouse.com brand. For the
quarter ended July 31, 2010, we recorded only $1,566 in revenue for
Iggyshouse.com. We launched the brand in January 2010 with the
expectation that our “pay
as you go model” would
be unique to the consumer
real estate market and
capable of generating significant revenues. Combined with the
revenues recorded by IggysHouse.com for the 4 months ended April 30, 2010,
IggysHouse.com has only provided us $2,026 in total
revenue since its launch in January 2010.
The financial struggles of
IggysHouse.com have forced us to record an impairment charge of $1,251,455 for
the three months ended July 31, 2010. The only
remaining intangible asset relating to IggysHouse.com is the website and
associated database. We have re-valued these together at
$100,000.
While IggysHouse.com has disappointed,
we remain hopeful that the brand will eventually produce positive results. As of
August 1, 2010, we have temporarily switched Iggys to a lower cost website
platform. We have also upgraded the consumer interface portion
of the new website. Results of these two changes have been moderately
encouraging. In August 2010, we recorded by far the most monthly
revenues ever for IggysHouse.com. We recorded $1,563 in sales revenue, 77% of the $2,026 total we had booked in the
first seven months since Iggys launch in January 2010. We
believe the IggysHouse.com website technology, which we have temporarily stopped
using, remains a valuable asset. It can handle massive transaction
volumes and activity and will be useful to us if the Iggys brand grows
substantially. If not, our analysis suggests there will be a ready
market for the website technology for use in a high volume national real estate
operation.
4
In addition to the IggysHouse.com
intangible asset impairment charge, we also took a $11,250 impairment charge for
our MLSDirect.com intangible assets. The $11,250 represents the
remaining book value of MLSDirect’s affilitate broker relationships that were
assumed by Webdigs in its acquisition of the MLSDirect in May
2009. Due to our focus on the Minnesota and Florida markets for
our MLSDirect.com brand, we have not realized value from the affiliate broker
relationships in other states for the MLSDirect. These relationships
no longer retain any value and therefore the impairment was
necessary. The encouraging part of our MLSDirect.com
business is that our core markets in Florida and Minnesota are healthy and
vibrant with quarterly revenues up 109% versus the quarter ended April 30, 2010
to $5,477. For the three months ended July 31, 2009 MLSDirect.com
produced only $205 in sales revenue.
We incurred interest costs of
$14,683 in the quarter ended July 31, 2010 compared to $210,630 for the period ended July 31, 2009. Of the current quarter’s
interest expense, $14,497 is for accrued interest on a loan from
our CEO with an additional $186 resulting from interest charges passed
on from vendors. For the same period ended July 31, 2009,
we experienced significant
interest costs of $210,630. Of the $210,630, approximately $202,000 related to a now repaid promissory note with
Lantern Advisors LLC. The remaining increase of
approximately $8,000 comes from interest charges from our suppliers for overdue
payables.
Our joint venture was dissolved on
October 26, 2009, so there is no joint venture income
for the three months ended July 31, 2010.
We also booked a net gain of $292,686 on
the disposition of Marquest Financial, Inc. in June
2009.
For the nine month periods ended July 31, 2010 and 2009
The Company incurred operating losses of
$2,334,271 for the nine month period ended July 31, 2010 compared to a loss of $791,263 for the same period last
year. Net revenues increased 9% from $345,194 for the nine months ended July 31, 2009 to $375,064 for the nine months ended July 31, 2010. Our revenues increased over the prior
year as a result of higher net revenues per transactions (up 11% from $3,831 in
FY 2009 to $4,263 in FY 2010) and incremental revenues of $2,026 from
IggysHouse.com and $11,590 from the MLSDirect.com in the current fiscal
year. On a transaction basis, we were stagnant as real estate
transactions closed dropped by one from 87 to 86 for the nine months ended July
31, 2009 and 2010, respectively.
As noted above, we lost our sales
momentum in the most recent three month period ended July 31,
2010. Through April 30, 2010, year to date sales had risen by
159%. To have to report that year to year revenue growth had dropped
to only 9% for the nine months ended July 31, 2010 versus the nine months ended
July 31, 2009 really stings. Though valid reasons exist for our
current struggles, namely the expiration of the federal government generous home
buyer tax credits and overall sluggishness of the economy, we acknowledge that
we must re-ignite our sales engine in the months ahead.
5
Fortunately, we believe that we have
excelled at controlling expenses. For the nine month period ended July 31, 2010, we reduced general and
administrative expenses by $168,855 from $528,490 for the nine months ended July 31, 2009 to $359,635 for the same period this
year. Two main items comprised the decrease: First, non-cash
compensation, which relates primarily to accounting for share grants made to
company founders, was reduced by $164,079 from $179,447 for the nine months ended July 31, 2009 to $15,368 for the nine mo
nths ended July 31, 2010. The second
significant general and administrative expense decrease comes from reductions in
investor relations expenses of $95,000. Additionally, an aggressive
focus on cost cutting produced expense reductions of approximately $25,000 in legal
fees. Partially
offsetting the above mentioned decreases was an increase of $115,015 for wages and salaries versus the prior
year (of which $88,145 can be attributed to re-classifying CEO
compensation expense from selling to general and administrative and $26,870 can be attributed to having one additional accounting and finance employee on staff in the current
year.
We have identified recruitment of agents
to be a key component in the growth of our Webdigs.com real estate
brokerage. Our selling expenses for the nine months ended July 31,
2010 reflects a continuation of our re-prioritization of efforts towards
lower advertising expenses offset by increased emphasis on the creation of a
high performance sales team. Total selling expenses
declined by 27% to $358,082 for the nine months ended July 31, 2010
from $489,170 for the nine months ended July 31, 2009. The
biggest components of the selling expense decrease were cuts of $61,283 in
advertising and promotion expense. Of the remaining decrease in
selling expenses, $88,145 comes from a reclassification this year of a portion
of our CEO compensation costs into general and administrative
expenses. Small increases in sales compensation costs due to a higher
rate of payment on closed transactions and the contracting of a part time
consultant to run our MLSDirect operation accounts for the offset to the two
decreases mentioned above. We do expect sales
commissions and overall sales compensation costs to continue to increase in
coming months as we recently have enacted a more generous sales commission plan
that should help us recruit new agents.
For the nine months ended July 31, 2010,
we incurred $46,965 in interest costs compared to $303,484 for
the nine months ended July 31, 2009. Interest expense for the nine months
ended July 31, 2010 includes $35,053 of accrued interest on a loan from our CEO
and $11,912 interest charges passed on from
vendors. For the nine months ended July 31, 2009, we incurred $289,400 in interest expense for our convertible
promissory note with Lantern Advisors. In our prior fiscal year, we also were
invoiced $14,084 in
interest expense from one
of our main vendors bringing the total interest for the nine months ended July
31, 2009 to $303,484.
The loss on change in fair value of
derivatives and warrants of $63,708 for the nine months ended July 31, 2009
relates to the convertible
promissory note mentioned above. We settled this note on September 30,
2009.
6
Assets and Employees; Research and
Development
Aside from our dedicated team of agents
and employees, our primary assets are cash and intellectual-property rights,
which are the foundation for our services. As mentioned above, in the current
quarter ended July 31, 2010, we were forced to take a $1,251,455 impairment
charge against intangible
assets acquired
in our June 2009 IggysHouse.com asset purchase. As mentioned above, we re-launched our
IggysHouse.com service in January 2010 and
believed that the assets we acquired from Iggys,
Inc. would be critical to our
success. IggysHouse.com was formerly a web-based online real
estate brokerage that had operations in 38
states. As
mentioned above, results thus far have not been satisfactory with only $2,026 in
revenues for the nine months ended July 31, 2010.
As of July 31, 2010, we revalued the intangible assets for the IggysHouse.com website and
database to be only worth $100,000. We believe this valuation
represents a reasonable resale valuation for a self-service online MLS listing
service capable of handling hundreds of thousands of
listings.
Philosophically, we are now looking to
maximize our cash flows and minimize fixed asset investment. For that
reason, prior to the end of fiscal year 2010, we will replace our current
Webdigs.com website with a new site that should require significantly less
ongoing maintenance costs than our current website. The website, which
will be built to our exact specifications at minimal cost, will not produce any
intangible assets but will provide our sales and marketing teams with enhanced
capabilities to market our services and serve our consumers. The
existing website will be fully amortized in September 2010 - approximately the
same time we will start up with our new website solution.
Liquidity and Capital Resources;
Anticipated Financing Needs
As of July 31, 2010, we had $4,685 of cash and cash equivalents
and current liabilities of
$1,520,351. The most significant change in
liabilities versus October 31, 2009 has been the increase in the balance
due our CEO on the convertible note payable he has with
us. This balance increased by $319,800 to $492,800 as of July 31, 2010.
We used $309,267 of cash in operating activities during the
nine months ended
July 31, 2010 compared to $298,716 for the nine months ended July 31, 2009. Cash used in operations for
the nine months ended July 31, 2010 included a net loss of
$2,381,236 which was partially offset by
$2,023,732 of various non-cash expenses for
depreciation, amortization,
impairment charges, and
share-based compensation. For the nine months ended July 31, 2009, these non-cash items plus some
additional non-cash items generated by our convertible promissory note and our
joint venture totaled $361,523. For the nine months ended July 31, 2010, we were able to make progress on
reducing balances owed to some of our main vendors through a
combination of cash payments by Webdigs and vendor
forgiveness of a portion of payables. Offsetting a payables decrease of $108,519 100,615 was an increase of $117,476 in accrued expenses. The entire increase in
accrued expenses as of July
31, 2010 is due to
increases in accrued payroll - primarily due to officers of the
company.
For the nine months ended July 31, 2010, cash flows used in investing
activities included payments of $21,760 for the purchase of website development
for the IggysHouse.com website. For
the same period last year, we used $162,733 in cash to purchase the
assets of IggysHouse.com and the MLSDiect.com.
7
In total, financing activities provided
$299,689 and $469,956 for
the nine month periods
ended July 31, 2010 and 2009, respectively. As
mentioned above, an increase in the balance due our CEO accounted for financing
cash proceeds of $319,800. A decrease in the payable to our group of officers
(for commissions and
business expenses)
accounted for a use of
$17,001 for the nine months ended July 31, 2010. In the prior year, proceeds from
the convertible/promissory note we issued in
December 2008 with Lantern Advisors provided net cash proceeds of
$226,000. We
also raised $335,500 in cash from the sale of common stock in the quarter ended
July 31, 2009. An
additional $11,294 was provided by an increase in balances
due company officers.
Given our relatively low cash position,
our near term focus for the remaining three months of fiscal 2010 continues
to be to create positive operating cash flow from our web-assisted real
estate brokerage operations. While we believe that our
year over year revenue growth will rebound in the fourth quarter of our
current year, we recognize
that we will need to
continue to manage our working capital to the absolute most stringent standard
possible. We are presently
expanding our efforts to recruit agents and believe that these efforts will be
successful.
We also retain our expectation that the growth
of our core Webdigs.com brand will provide us with a solid base from
which we will be able to
raise additional funding in the future. The repositioning of
IggysHouse.com to a new website interface which took place in August 2010
appears promising. We expect that lower Iggys operating expenses and higher
Iggys revenues will help us in reaching our goal of generating positive cash
flow sometime in fiscal 2011.
Critical Accounting
Policies
The discussion and analysis of our
financial condition and results of operations are based upon our financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosures. We evaluate these estimates on an on-going basis. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. Our
significant estimates are 1) determining the life and fair value of our website
and customer list intangible assets, 2) determining some of the inputs for our
stock option fair value calculation and 3) assessing the valuation allowance for
income taxes.
We consider the following accounting
policies to be those most important to the portrayal of our results of
operations and financial condition:
Revenue
Recognition. Our
web-assisted real estate brokerage business recognizes revenue at the closing of
a real estate transaction. Commissions and rebates due to third party real
estate agents or consumers are accrued at the time of closing and treated
as an offset to gross revenues. There is no judgment or estimating in
our revenue recognition model.
8
Income
Taxes. We account for
income taxes using an asset and liability approach to financial accounting and
reporting for income taxes. Accordingly, deferred tax assets and
liabilities arise from the difference between the tax basis of an asset or
liability and its reported amount in the consolidated financial
statements. Deferred tax amounts are determined using the tax rates
expected to be in effect when the taxes will actually be paid or refunds
received, as provided under currently enacted tax law. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense or benefit is the
tax payable or refundable, respectively, for the period plus or minus the change
in deferred tax assets and liabilities during the period. We have
recorded a full valuation
allowance against
our net deferred tax assets
as of July 31, 2010 and
2009 because realization of those assets is
not reasonably assured.
We will recognize a financial statement
benefit of a tax position only after determining that the relevant tax authority
would more likely than not sustain the position following an
audit. For tax positions meeting the more-likely-than-not threshold,
the amount recognized in the financial statements is the largest benefit that
has a greater than fifty percent likelihood of being realized upon ultimate
settlement with the relevant tax authority.
Share-Based
Compensation. We account
for stock incentive plans by measurement and recognition of compensation expense
for all stock-based awards based on fair values, net of estimated
forfeitures. Share-based compensation expense includes compensation
costs for restricted stock awards and stock
options. We use the Black-Scholes option-pricing model to determine
the fair value of options granted as of the grant date.
Intangible
Assets. We have
two types of intangible
assets:
Website
Development
The primary interface with the customer
in our web-assisted real estate brokerage operation is the Webdigs.com
website. Certain costs incurred in development of this website have
been capitalized. Amortization is on a straight-line method over the
estimated three year useful life of the website. We also have
incurred costs for the IggysHouse.com website. Those costs are being
amortized on a straight-line method over the estimated two year useful life of the
website.
Website
Domain Names
The Company capitalizes the fair value
of non-compete agreements at the inception of the agreement. Amortization
expense is calculated using the straight-line method (which approximates the
anticipated revenue stream back to the Company) over the agreement’s estimated 2
year life.
Commissions
and Fees Receivable. Fees receivable are recorded at the
amount the Company expects to collect on real estate transactions
closed. These receivables represent broker commission balances due
the Company from investors/lenders or listing real estate brokers and usually
are settled within 10-15 days after closing.
Office
Equipment and Fixtures.
Office equipment and fixtures are recorded at cost. Maintenance and
repairs are charged to expense as incurred; major renewals and betterments are
capitalized. When items of property or equipment are sold or retired, the
related costs and accumulated depreciation are removed from the accounts and any
gain or loss is included in operating income.
9
Depreciation is provided on the
straight-line method over the estimated useful lives of the respective assets as
follows:
|
Office
equipment
|
2 to 5
years
|
|
Furniture and
fixtures
|
3 to 7
years
|
Segment Information
Historically, we have reported two
strategic operating segments; (1) web-assisted real estate brokerage and (2) mortgage brokerage. Due to the divestiture of
Marquest Financial, Inc. and the dissolution of Marketplace Home Mortgage – Webdigs, LLC
in 2009, we have determined that the mortgage
segment is no longer significant to our operations and therefore, we now report
and operate our business as one strategic reporting segment.
Recently Issued Accounting
Pronouncements
In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures (Topic 820). ASU 2010-06 provides additional disclosure
requirements related to fair value measurements. ASU 2010-06 is effective
for interim and annual reporting periods beginning after December 15, 2009,
except for the disclosures about purchases, sales, issuances, and settlements in
the roll forward of activity in Level 3 fair value
measurements. Disclosure requirements applicable to Level 3
transactions are effective for fiscal years beginning after December 15,
2010 and for interim periods within those fiscal years, with early adoption
permitted. The portion of ASU 2010-06 that was effective beginning
after December 15, 2009 did not have a material effect on the financial
position, results of operations or cash flows of the Company. Additionally, the
Company does not anticipate that the disclosure requirements applicable to
Level 3 transactions that are effective for fiscal years beginning after
December 15, 2010 will have a material effect on the financial position,
results of operations or cash flows of the Company.
Seasonality
of Business
The
residential real estate market has traditionally experienced seasonality, with a
peak in the spring and summer seasons and a decrease in activity during the fall
and winter seasons. We expect revenues in each quarter to be significantly
affected by activity during the prior quarter, given the time lag between
contract execution and closing. A typical real estate
transaction has a 30 day lag between contract signing and closing of the
transaction. As we look ahead, we expect improved results in our
current quarter versus our recent quarter ended July 31, 2010 despite a typical
seasonal fall slowdown.
Going Concern
The Company incurred significant
operating losses for the nine months ended July 31, 2010. At July 31, 2010, the Company reports a negative working
capital position of $1,486,178 and accumulated deficit of
$6,179,999. It is management’s opinion
that these facts raise substantial doubts about the Company’s ability to
continue as a going concern without additional debt or equity
financing.
Our consolidated financial statements
included do not include any adjustments related to recoverability and
classification of asset carrying amounts, or the amount and classification of
liabilities that might result, should we be unable to continue as a going
concern. Our ability to continue as a going concern ultimately
depends on achieving profitability, producing revenues or raising additional
capital to sustain operations. Although we intend to obtain
additional financing to meet our cash needs, we may be unable to secure any
additional financing on terms that are favorable or acceptable to us, if at
all.
10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
Not
applicable.
Item 4. Controls and
Procedures.
Management’s Report On Internal Control
Over Financial Reporting
Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under
the Securities and Exchange Act of 1934, as amended (the “Exchange Act”))) as of the end of the
period covered by this Quarterly Report on Form 10-Q to ensure that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission’s rules and forms, and is
accumulated and communicated to our management as appropriate to allow timely
decisions regarding required disclosure.
Based on this evaluation and taking into
account that certain material weaknesses existed as of October 31, 2009, our Chief Executive Officer and Chief
Financial Officer have each concluded that our disclosure controls and
procedures were not effective. As a result of this conclusion, the
financial statements for the period covered by this Quarterly
Report on Form 10-Q were
prepared with particular attention to the material weaknesses previously
disclosed. Notwithstanding the material weaknesses in internal controls that
continue to exist as of July 31, 2010, we have concluded that the financial
statements included in this
Quarterly Report on Form 10-Q present fairly, the financial position,
results of operations and cash flows of the Company as required for interim
financial statements.
Changes in Internal Control Over
Financial Reporting
During the fiscal quarter ended
July 31, 2010, there was no change in our internal control over
financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting. Management has concluded that the
material weaknesses in internal control as described in Item 9A of the Company’s
Form 10-K for the year ended October 31, 2009 have not been remediated. Due to the small number of employees
dealing with general administrative and financial matters and the expenses
associated with increasing the number of employees to remediate the disclosure
control and procedure material weaknesses that have been identified, the Company
continued to operate without changes to its internal controls over financial
reporting for the period covered by this Quarterly Report on Form 10-Q while
continuing to seek the expertise its needs to remediate the material
weaknesses.
11
PART II – OTHER
INFORMATION
Item 1. Legal Proceedings
We are not currently a party to any
material litigation and are not aware of any threatened litigation that would
have a material effect on our business.
Item 1A. Risk
Factors.
None.
Item 2. Unregistered Sales of Equity
Securities
None.
Item 3. Defaults Upon Senior
Securities
None.
Item 4 Submission of Matters to a Vote of
Shareholders
None.
Item 5. Other Information
There
have been no material changes to the procedures by which security holders may
recommend nominees to the registrant’s board of directors.
Item
6. Exhibits.
|
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
|
12
SIGNATURES
In accordance with the requirements of
the Securities Exchange Act of 1934, the registrant has caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
|
WEBDIGS,
INC.
|
|
/s/ Robert A. Buntz,
Jr.
|
|
Robert A. Buntz,
Jr.
|
|
Chief Executive
Officer
|
|
Dated: September 14,
2010
|
|
/s/ Edward
Wicker
|
|
Edward
Wicker
|
|
Chief Financial
Officer
|
|
Dated: September 14,
2010
|
13
INDEX TO EXHIBITS FILED WITH THIS
REPORT
|
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
|
14