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, 2009

¨ 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 21, 2009 there were 32,293,184 shares of the issuer’s common stock, $0.001 par value, outstanding.

Table of Contents

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities	40
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Submission of Matters to a Vote of Shareholders	41
Item 5.	Other Information	41
Item 6.	Exhibits	41

SIGNATURES		41

EXHIBIT INDEX		42

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, 2009 AND 2008

WEBDIGS, INC.

TABLE OF CONTENTS

		PAGE

Consolidated Financial Statements:

Consolidated Balance Sheets		3

Consolidated Statements of Operations		5

Consolidated Statements of Cash Flows		6

Notes to Consolidated Financial Statements		8

WEBDIGS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	July 31, 2009 (Unaudited)		October 31, 2008 (Audited)

ASSETS

Current assets:
Cash and cash equivalents	$	46,309	$	37,802
Commissons and fees receivable		31,612		12,467
Prepaid expenses and deposits		14,902		14,011
Debt issuance costs, net		480		-
Other current assets		14,080		6,125

Total current assets		107,383		70,405

Investment in Marketplace Home Mortgage Webdigs, LLC		21,084		2,182

Office equipment and furniture, net		36,902		30,202

Intangible assets, net		2,153,104		351,430

Total assets	$	2,318,473	$	454,219

The accompanying notes are an integral part of these unaudited consolidated financial statements.

WEBDIGS, INC.

CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited)

	July 31, 2009 (Unaudited)			October 31, 2008 (Audited)
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Current portion of capital lease obligations	$	4,102		$	3,828
Accounts payable		315,346			377,538
Accounts payable - minority stockholder		626,786			550,206
Due to officers		38,571			27,277
Accrued expenses:
Professional fees		27,000			50,000
Payroll and commissions		27,500			32,269
Lease expenses for vacated office space		-			55,913
Other		20,148			15,170
Promissory note payable, net of discount		132,290			-

Total current liabilities		1,191,743			1,112,201

Long term liabilities:
Capital lease obligation, less current portion		7,319			10,431

Total liabilities		1,199,062			1,122,632

Stockholders' deficit:
Common stock - $.001 par value; 125,000,000 shares authorized as common
stock and an additional 125,000,000 shares designated as common or
preferred stock; 32,293,184 and 22,308,711 common shares issued and
outstanding at July 31, 2009 and October 31, 2008, respectively		32,294			22,309
Treasury stock - $.001 par value; 1,063,628 shares and 0 shares held in
treasury as of July 31, 2009 and October 31, 2008, respectively		(265,907	)		-
Additional paid-in-capital		4,901,116			2,002,226
Accumulated deficit		(3,548,092	)		(2,692,948	)

Total stockholders' deficit		1,119,411			(668,413	)

Total liabilities and stockholders' deficit	$	2,318,473		$	454,219

The accompanying notes are an integral part of these unaudited consolidated financial statements.

WEBDIGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenue:
Gross revenues	$	451,841		$	272,882		$	631,033		$	462,387
Less: commissions, rebates and third
party agent commissions		(204,515	)		(131,849	)		(285,839	)		(198,452	)

Net revenues		247,326			141,033			345,194			263,935

Operating expenses:
Selling		243,192			353,252			563,036			1,339,366
General and administrative		225,793			278,243			573,421			545,851

Total operating expenses		468,985			631,495			1,136,457			1,885,217

Operating loss		(221,659	)		(490,462	)		(791,263	)		(1,621,282	)

Other income (expense):

Equity in income from Marketplace Home Mortgage
Webdigs, LLC		117			-			18,902			-
Interest expense		(210,630	)		(462	)		(303,484	)		(504	)
Loss on change in fair value of derivatives and warrants		-			-			(63,708	)		-

Total other income (expense)		(210,513	)		(462	)		(348,290	)		(504	)

Net loss from continuing operations before
income taxes		(432,172	)		(490,924	)		(1,139,553	)		(1,621,786	)

Income tax provision		-			-			-			-

Net loss from continuing operations		(432,172	)		(490,924	)		(1,139,553	)		(1,621,786	)

Discontinued operations (Note 7):
Income (loss) from operations of Marquest Financial, Inc.
(including gain on disposal of $297,412 during the three months ended July 31, 2009)		292,686			(63,499	)		284,409			(124,708	)

Income tax effect		-			-			-			-

Income (loss) from discontinued operations		292,686			(63,499	)		284,409			(124,708	)

Net loss	$	(139,486	)	$	(554,423	)	$	(855,144	)	$	(1,746,494	)

Net loss per common share - basic and diluted
Loss from continuing operations		(0.01	)		(0.03	)		(0.04	)		(0.08	)
Income (loss) from discontinued operations		0.01			-			0.01			-
Net income (loss)	$	-		$	(0.03	)	$	(0.03	)	$	(0.08	)

Weighted average common shares outstanding -
basic and diluted		28,417,170			21,789,275			24,553,883			20,689,797

The accompanying notes are an integral part of these unaudited consolidated financial statements.

WEBDIGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended July 31, 2009 and 2008

	Nine Months Ended
	July 31,
	2009			2008
	(unaudited)			(unaudited)

Cash flows from operating activities:
Net loss	$	(855,144	)	$	(1,746,494	)
Adjustments to reconcile net loss to net cash flows
used in operating activities:
Depreciation		10,948			23,939
Stock warrant expense to debt holders for agreement modification		138,010			-
Amortization of intangible assets		145,331			146,372
Amortization of convertible/promissory note payable discount		129,873			-
Amortization or debt issuance costs		3,520			-
Loss on change in fair value of derivatives and warrants		63,708			-
Loss on disposal of fixed assets		-			580
Equity in the income of Marketplace Home Mortgage -
Webdigs, LLC		(18,902	)		-
Share-based compensation		179,447			166,791
Gain on sale of subsidiary		(297,412	)		-
Common stock issued for services		7,000			-
Changes in operating assets and liabilities:
Commissions and fees receivable		(19,145	)		(28,735	)
Prepaid expenses and deposits		119,109			14,005
Other current assets		(7,955	)		(8,744	)
Accounts payable		(25,893	)		309,162
Accounts payable - minority stockholder		76,580			216,052
Accrued expenses and other liabilities		52,209			18,158
Net cash flows used in operating activities		(298,716	)		(888,914	)

Cash flows from investing activities:
Purchase of equipment and fixtures		-			(18,216	)
Purchase of equipment and intangible assets		(157,733	)		-
Cash paid for business acquistion		(5,000	)		-
Net cash flows used in investing activities		(162,733	)		(18,216	)

Cash flows from financing activities:
Proceeds from issuance of common stock		335,500			841,500
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 payment on convertible/promissory note		(100,000	)		-
Increase (decrease) in due to officers		11,294			(17,601	)
Principal payments on capital lease obligations		(2,838	)		(5,861	)
Net cash flows provided by financing activities		469,956			818,038

Net change in cash and cash equivalents		8,507			(89,092	)

Cash and cash equivalents, beginning of period		37,802			113,280

Cash and cash equivalents, end of period	$	46,309		$	24,188

The accompanying notes are an integral part of these unaudited consolidated financial statements.

WEBDIGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended July 31, 2009 and 2008

	Nine Months Ended
	July 31,
	2009		2008
	(unaudited)		(unaudited)

Supplemental cash flow information
Cash paid for interest	$	16,958	$	6,987

Supplemental disclosure of non-cash investing and
financing activities

Issuance of common stock to convertible debt holder as a discount on
the debt	$	20,000	$	-

Discount on convertible debt due to detachable warrant and embedded
conversion options	$	127,583	$	-

Accrued legal fees paid by withholding from debt proceeds	$	20,000	$	-

Related party contribution to consultant for prepaid consulting fees	$	40,000	$	-

Common stock issued for prepaid consulting fees	$	80,000	$	-

Sell Marquest Financial, Inc subsidiary to its founder for a return of
Webdigs common stock	$	265,907	$	-

Issuance of common stock to acquire Iggy's assets	$	1,815,625	$	-

Issuance of common stock to acquire theMLSDirect.com	$	47,000	$	-

Convert accrued officer salary to common stock	$	55,000	$	-

Void forfeted balance of unearned compensation	$	41,098	$	-

The accompanying notes are an integral part of these unaudited consolidated financial statements.

WEBDIGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Nine Month Periods Ended July 31, 2009 and 2008

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, 2008.

2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Webdigs, Inc. (“the Company”) was incorporated on May 25, 1994 under the name of Select Video, Inc. The Company changed to its current name on October 23, 2007. Select Video, Inc. was an inactive shell from February 29, 2000 to October 24, 2007 when they entered into a Share Exchange and Acquisition Agreement whereby it agreed to issue 15,818,251 shares of its common stock to its subsidiary Select Video Acquisition, LLC which in-turn used those shares to acquire all of the outstanding units of Webdigs, LLC, a private company organized in the state of Minnesota resulting in Webdigs, LLC as the surviving entity. Webdigs, LLC, based in Minneapolis, MN, was organized on May 1, 2007. All of the Company’s real estate brokerage operations are operated under Webdigs, LLC. Our two main real estate brokerage brands are Webdigs and Iggys House. Webdigs.com is a web-assisted real estate website and broker, offering a similar customer experience as a full service broker utilizing a discounted flat-rate percentage fee structure for listing services to their selling customers and a graduated fee structure for their buying customers by rebating up to one-half of its broker commissions. IggysHouse.com is a web-assisted real-estate listing service which enables the customer to pay a monthly discounted fee to list their homes on their local real estate multiple listing service but for which there is no additional fee upon the closing of the transaction.

Upon completion of the transaction on October 24, 2007, Webdigs, LLC became a wholly owned subsidiary of Webdigs, Inc. Since the transaction resulted in the existing members of Webdigs, LLC acquiring control of Webdigs, Inc., for financial statement purposes, the merger has been accounted for as a recapitalization of Webdigs, Inc. (a reverse merger with Webdigs, LLC as the accounting acquirer).

WEBDIGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the Three and Nine Month Periods Ended July 31, 2009 and 2008

Consolidation Policies

The consolidated financial statements for the nine month periods ended July 31, 2009 and 2008, 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 investment in Marketplace Home Mortgage - Webdigs, LLC (49% ownership) is recorded on the equity method.