U.S.
      SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





AMENDMENT
      NO.1


FORM
      10-Q/A





(Mark
      One)


|
                  X
                  |
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
  For
        the
        quarterly period ended: August 31, 2007
 
 |__|
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934


Commission
      file number: 000-27225





DigitalTown,
      Inc.


(formerly
      BDC Capital,
      Inc.)


(Name
      of
      small business issuer in its charter)





Minnesota
            41-1427445(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)11974
                Portland Avenue,
                Burnsville, Minnesota
            55337(Address
                of principal executive offices)
            (Zip
                Code)Registrant's
                telephone number: (952)
                890-2362





Securities
      registered under Section 12(g) of the Exchange Act:





Title
      of Each
      Class


Common
      Stock


Par
      Value
      $0.01 per share











Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the past 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, or a non-accelerated filer.  See definitions of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.   (check one):





Large
                Accelerated Filer [  ]
            Accelerated
                Filer [  ]
            Non-Accelerated
                Filer [X]








There
      were 25,723,750 shares of the registrant’s common stock outstanding as of
      October 10, 2007.

















PURPOSE
      OF AMENDMENT NO. 1








This
      Amendment No. 1 to the Company’s Quarterly Report on Form 10-Q for the quarter
      ended August 31, 2007, which amends the Company’s Form 10-Q originally filed on
      October 15, 2007, is being filed to record stock options originally granted
      during the three month period ending May 31, 2007 that were not previously
      recorded.  The stock options granted were for 150,000 shares of common
      stock with an exercise price of $2.25 per share and a total fair value of
      $307,658.  The financial statements and MD & A have been adjusted
      to reflect this amendment.

























ii


TABLE
        OF
        CONTENTS
    PART
                  IItem
                  1.
              Financial
                  Statements
              1-13Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and results of operations
              14-18Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              18Item 4.
              Controls
                  and Procedures
              18PART
                  IIItem
                  1.
              Legal
                  Proceedings
              19Item
                  1A
              Risk
                  Factors
              19Item
                  2.
              Unregistered
                  sales of Equity Securities and Use of Proceeds
              19Item
                  3.
              Defaults
                  Upon Senior Securities
              19Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              19Item
                  5.
              Other
                  Information
              19Item
                  6.
              Exhibits
              19





iii


PART
      I





ITEM
      1.  FINANCIAL STATEMENTS





PageFinancial
                Statements:Consolidated
                Balance Sheets
            1Consolidated
                Statements of Operations
            2Consolidated
                Statements of Cash Flows
            3Notes
                to Financial Statements
            4-12





DigitalTown,
                Inc.
 (formerly
                BDC Capital, Inc.)
  CONSOLIDATED
                BALANCE SHEETS
  ASSETSAugust
                          31,
                        2007
                      
                      
                      February
                          28,
                        2007(unaudited)
                      
                      
                      (audited)Current
                          assets:Cash
                      
                      $
                      19,205
                      
                      
                      $
                      8,933Other
                          receivable
                      
                      
                      28
                      
                      
                      
                      999Total current assets
                      
                      
                      19,233
                      
                      
                      
                      9,932Property
                          and equipment, net
                      
                      
                      4,747
                      
                      
                      
                      1,579Intangible
                          assets – domain names/website development
                      
                      
                      682,162
                      
                      
                      
                      441,558Total
                          assets
                      
                      $
                      706,142
                      
                      
                      $
                      453,069
 
 LIABILITIES
                          AND STOCKHOLDERS' EQUITYCurrent
                          liabilities:Accounts
                          payable
                      
                      $
                      323,541
                      
                      
                      $
                      137,144Advances
                          from stockholders
                      
                      
                      0
                      
                      
                      
                      16,354Accrued
                          expenses:Accrued
                          payroll
                      
                      
                      24,796
                      
                      
                      
                      32,169Accrued
                          interest
                      
                      
                      11,156
                      
                      
                      
                      9,476Deferred
                          officer compensation
                      
                      
                      25,750
                      
                      
                      
                      18,865Notes
                          payable – stockholder
                      
                      
                      0
                      
                      
                      
                      70,000Total current liabilities
                      
                      
                      385,243
                      
                      
                      
                      284,008Commitments
                          and contingenciesStockholders’
                          equity:Common
                          stock, $.01 par value, 2,000,000,000 shares authorized,
                          25,723,750 and
                          25,701,500 shares issued and outstanding at August 31,
                          2007
                          and  February 28, 2007, respectively
                      
                      
                      257,233
                      
                      
                      
                      257,010Additional
                          paid-in-capital
                      
                      
                      15,880,240
                      
                      
                      
                      14,521,673Subscription
                          receivable
                      
                      
                      (2,379,470
                      )
                      
                      
                      (2,947,470
                      )Accumulated
                          deficit
                      
                      
                      (13,437,104
                      )
                      
                      
                      (11,662,152
                      )Total stockholders’ equity
                      
                      
                      320,899
                      
                      
                      
                      169,061Total
                          liabilities and stockholders’ equity
                      
                      $
                      706,142
                      
                      
                      $
                      453,069
 The
                  accompanying notes are an integral part of these consolidated financial
                  statements.
 1
 DigitalTown,
                Inc


(formerly
      BDC Capital, Inc.)





CONSOLIDATED
      STATEMENTS OF OPERATIONS





Three
                Months
              Ended
              August
                31,2007
            
            
            Six
                Months
              Ended
              August
                31,2007(unaudited)
            
            
            (unaudited)Operating
                expenses:Selling,
                general and administrative expenses
            
            $
            1,236,532
            
            
            $
            1,777,465Loss
                from operations
            
            
            (1,236,532
            )
            
            
            (1,777,465
            )Other
                income (expense)Interest
                expense
            
            
            (280
            )
            
            
            (1,680
            )Other
                income
            
            
            1,219
            
            
            
            4,193Total
                other income (expense)
            
            
            939
            
            
            
            2,513Net
                loss
            
            $
            (1,235,593
            )
            
            $
            (1,774,952
            )Loss
                per common share – basic and diluted
            
            $
            (0.05
            )
            
            $
            (0.07
            )Weighted
                average common shares outstanding – basic and diluted
            
            
            25,723,750
            
            
            
            25,717,704

























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




2




DigitalTown,
      Inc.


(formerly
      BDC Capital, Inc.)





CONSOLIDATED
      STATEMENT OF CASH FLOWS





Six
                months ended
              August
                31, 2007(unaudited)CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (1,774,952
            )Adjustments
                to reconcile net loss to net cash flows used in operating
                activities:Depreciation
            
            
            788Stock
                based compensation expense
            
            
            1,308,727Non
                cash stock payment
            
            
            50,063Changes
                in operating assets and liabilities:Other
                receivables
            
            
            971Prepaid
                expenses
            
            
            -Accounts
                payable
            
            
            43,677Accrued
                expenses:Accrued
                payroll
            
            
            (7,373
            )Accrued
                interest
            
            
            1,680Deferred
                officer compensation
            
            
            6,885Net
                cash used in operating activities
            
            
            (369,534
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchases
                of fixed assets
            
            
            (3,956
            )Purchase
                of intangible asset-web site development
            
            
            (25,000
            )Purchases
                and  renewal of  intangible assets – domain
                names
            
            
            (72,884
            )Net
                cash used in investing activities
            
            
            (101,840
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Advances
                from officer/stockholder
            
            
            (16,354
            )Note
                payable-shareholder
            
            
            (70,000
            )Payments
                received on stockholder subscription receivables net of $20,000 in
                transaction costs for the subscription offering initiated in fiscal
                2006
            
            
            568,000Net
                cash provided by financing activities
            
            
            481,646Net
                change in cash and cash equivalents
            
            
            10,272Cash
                and cash equivalents, beginning of period
            
            
            8,933Cash
                and cash equivalents, end of period
            
            $
            19,205SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Cash
                payments for interest
            
            $
            -Non-cash
                investing and financing activities:Intangible
                assets-domain name renewals incurred with accounts payable
            
            $
            142,720







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


3


DigitalTown,
      Inc.


(formerly
      BDC Capital, Inc.)








NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)








Note
      1. Nature of Business and
      Summary of Significant Accounting Policies:





Nature
      of
      Business





DigitalTown,
      Inc. (formerly known as BDC Capital, Inc.) (“The Company”) is an operating
      company that develops online local communities and social networking
      portals.  It originally was formed as a Minnesota corporation on April
      7, 1982. It was incorporated under the name Command Small Computer Learning
      Center, Inc., a computer training company. In 1987, the Company changed its
      name
      to Command Electronics, Inc. In February 1995, the Company acquired CyberStar
      Computer Systems, a manufacturer and marketer of microcomputers and servers,
      and
      in 1997 changed its name to CyberStar Computer Corporation. In 2000, the Company
      changed its name to eNetpc, Inc. In November 2004, the Company changed its
      name
      to BDC Capital, Inc. BDC Capital, Inc. has engaged in the sale of computer
      components, development of software and resell of major computer brands. The
      names "BDC Capital, Inc." "we", "our" and "us" used in this report refer to
      DigitalTown, Inc.




On
      December 10, 2004, the Company’s Board of Directors elected to be regulated as a
      business development company (BDC) as outlined in the Investment Company Act
      of
      1940 by filing a Form NT-54A.  As a BDC, the Company planned to focus
      on current opportunities available to this attractive business model in the
      somewhat uncertain economic times.





On
      August
      31, 2006, the Company filed with the SEC to withdraw their “business development
      company” status as its business plan evolved into becoming an operating entity
      to develope a multiple-site online social-networking community portal through
      the internet.  As part of that plan, the Company changed its name to
      DigitalTown, Inc. effective March 1, 2007.  The Company is currently
      developing the DigitalTown portal which will connect 27,000 local online spirit
      sites formed around a town and its high school.  The Company owns the
      domains associated with all these communities.  This portal, when
      complete, will include features such as email, alumni communication and reunion
      tools, calendar and organizing tools for boosters, a wide range of high school
      activities such as music, drama and athletics, personal profiles, photo, video
      and music sharing and timely community news.  The Company is currently
      developing a revenue model associated with the use of the DigitalTown
      portal.





The
      Company has retained a web site development company to create beta sites for
      its
      DigitalTown portal and has selected the Minnesota Lake Conference high schools
      for its initial test.  The eleven high schools in the Lake Conference,
      ringing Minneapolis and St. Paul, represent more than 22,000 students and
      hundreds of thousands of alumni and boosters.  The sites will offer a
      rich menu of free features, from reunion planning and booster organizing tools
      to videos of school activities and athletics which will attract and connect
      alumni, boosters, students and administrators and deepen their relationships.
      The spirit sites will launch throughout the fall.





The
      company has sustained losses and negative cash flows from operations and expects
      these conditions to continue into the foreseeable future.  At August
      31, 2007, the company had an accumulated deficit of
      $13,437,104.  Subsequent to August 31, 2007, the company has received
      cash proceeds totaling approximately $454,250 from its stock subscription
      receivable.  The company anticipates existing cash, proceeds received
      to-date as well as expected future proceeds from its stock subscription
      receivable and any additional financing needed through the sale of its common
      stock or other equity based securities, will be sufficient to meet its working
      capital and capital expenditures needs through at least August 31,
      2008.





4


Principles
      of
      Consolidation





As
      a
      result of the Company’s Business Development Company withdrawal, the Company now
      files consolidated financial statements that include its controlled
      Subsidiaries. All material intercompany accounts and transactions have been
      eliminated in consolidation.





The
      election to withdraw the Company’s election as a Business Development Company
      under the 1940 Act has resulted in a significant change in the Company's
      required method of accounting.  Business Development Company financial
      statement presentation and accounting utilizes the fair value method of
      accounting used by investment companies, which allows Business Development
      Company’s to recognize income and value their investments at market value as
      opposed to historical cost.





In
      addition, majority-owned subsidiaries are not consolidated and instead,
      investments in those subsidiaries are reflected on the balance sheet as an
      investment in and advances to affiliates, at fair value.  As an
      operating company, the required financial statement presentation and accounting
      for securities held by the Company utilize either fair value or historical
      cost
      methods of accounting, depending on the classification of the investment and
      the
      Company's intent with respect to the period of time it intends to hold the
      investment, and the Company and its subsidiaries are reflected for financial
      accounting purposes as a consolidated entity.  The change in
      accounting due to the conversion to an operating company from a Business
      Development Company is considered a change in accounting principle.





Management
      has retroactively applied this change in accounting principle in accordance
      with
      Statement of Financial Accounting Standards No. 154, “Accounting for Changes and
      Error Corrections” for the Company’s balance sheet as of February 28,
      2006.  As a business development company, the Company’s investment in
      BDC Partners, Inc. was not previously audited prior to February 28,
      2006.  Management has determined that it is impractical and not cost
      effective to retroactively apply this change in accounting to the previously
      reported  interim financial statements of BDC Capital, Inc. for the
      three and six months ended August 31, 2006, per SFAS 154 par.
      11.  Therefore, the statements of operations for the three and six
      months ended August 31, 2006 and the statement of cash flows for the six months
      ended August 31, 2006 will not be comparative.  However, these prior
      period financial statements are included in Note 9 as originally filed for
      informational purposes.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted 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 financial statements and revenues and expenses during the reporting
      period.  Actual results could differ from those
      estimates.





Fair
      Value of Financial
      Instruments





The
      Company’s financial instruments consist of cash, other receivables, accounts
      payable, accrued expenses and notes payable.  Pursuant to SFAS No. 107
“Disclosures About Fair Value of Financial Instruments,” the Company is required
      to estimate the fair value of all financial instruments at the balance sheet
      date.  The company considers the carrying value of its financial
      instruments in the financial statements to approximate fair value.





5


Revenue
      Recognition





The
      Company does not currently generate revenue from its operations.





Cash
      and Cash
      Equivalents





The
      Company considers all highly liquid investments with original maturity of three
      months or less when purchased to be cash equivalents.





Intangible
      Assets – Domain
      Names/Web Site Development Costs





The
      Company is still in the development stage of its web site portal, and
      accordingly, all costs including license renewals, associated with domain names
      expected to be utilized in its web site portal and web site development costs
      have been capitalized.  Since the Company is still in the development
      stage of its web site portal and the ownership of these domain names can be
      renewed at a nominal fee prior to their expiration date, the useful life of
      the
      domain names are deemed to be indefinite and no amortization will be
      recorded.  Additionally, since the Company is still in the development
      stage of its web site portal, no amortization has been recorded for the web
      site
      development costs.





Property
      and
      Equipment





Property
      and equipment are stated at cost and depreciated on a straight-line basis over
      their estimated useful lives, ranging from two to five years. Leasehold
      improvements are amortized over the shorter of the useful life or the term
      of
      the related lease. Repairs and maintenance costs are expensed as incurred;
      major
      renewals and improvements are capitalized.  As items of property or
      equipment are sold or retired, the related cost and accumulated depreciation
      are
      removed from the accounts and any gain or loss is included in operating
      income.





Impairment
      of Long-Lived
      Assets









Income
      Taxes







6




Stock-Based
      Compensation





Effective
      March 1, 2006, the Company adopted Financial Accounting Standards Board (“FASB”)
      Statement No. 123(R), “Share-Based Payment,” applying the modified prospective
      method.  This standard requires the fair value of share-based
      payments, including grants of employee stock options and employee stock purchase
      plan shares, to be recognized in the income statement based on their grant
      date
      fair values unless a fair value is not reasonably estimable.  Prior to
      the Company’s adoption of SFAS No. 123(R), the Company followed the intrinsic
      value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25,
“Accounting for Stock Issued to Employees”, and its related interpretations, as
      permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123,
“Accounting for Stock-Based Compensation.”  The fair value of the
      Company’s stock options issued prior to and after the adoption of SFAS No.
      123(R) has been estimated using a Black-Scholes pricing model, which assumes
      no
      expected dividends and estimates the option expected life, volatility and
      risk-free interest rate at the time of the grant.





Comprehensive
      Income
      (Loss)





Comprehensive
      income (loss) includes net income (loss) and items defined as other
      comprehensive income (loss). Items defined as other comprehensive income (loss)
      include such items as foreign currency translation adjustments and unrealized
      gains (losses) on certain marketable securities. For the three months ended
      August 31, 2007, the Company had no items defined as other comprehensive income
      (loss).





Net
      Loss Per Common
      Share





Basic
      loss per share is computed using the weighted average number of shares
      outstanding for the period. Diluted loss per share is computed using the
      weighted average number of shares outstanding per share adjusted for the
      incremental shares attributed to outstanding stock options under the Company's
      stock option plans, convertible debt and convertible preferred
      stock.  Incremental shares attributable to the assumed exercise of
      stock options and conversion of debt and preferred stock for the three and
      six
      months ended August 31, 2007 and August 31, 2006 were excluded from the
      computation of diluted loss per share as their effect would be
      anti-dilutive.





Recently
      Issued Accounting
      Pronouncements





In
      September 2006, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS No.
      157"). This standard clarifies the principle that fair value should be based
      on
      the assumptions that market participants would use when pricing an asset or
      liability. Additionally, it establishes a fair value hierarchy that prioritizes
      the information used to develop those assumptions. This standard is effective
      for financial statements issued for fiscal years beginning after November 15,
      2007. We are currently evaluating the impact of this statement. We believe
      the
      adoption of SFAS No. 157 will not have a material impact on our consolidated
      financial position or results of operations.





Cash
      Deposits in Excess of
      Federally Insured Limits













7




Note
      2. Property and Equipment





Property
      and equipment are as follows:





August
                31,
              2007
            
            
            February
                28,
              2007Office
                equipment and furniture
            
            $
            477,176
            
            
            $
            473,220Less
                accumulated depreciation
            
            
            (457,791
            )
            
            
            (457,003
            )Less
                impairment of equipment
            
            
            (14,638
            )
            
            
            (14,638
            )$
            4,747
            
            
            $
            1,579





Depreciation
      expense for the three and six months ended August 31, 2007 was $407 and $788,
      respectively.





Note
      3. Notes Payable – Stockholder





On
      June
      18, 2007, the Company paid all interest bearing advances from a stockholder
      in
      the amount of $70,000.  The unsecured notes were due at various dates
      from June 21, 2007 to August 1, 2007 with an interest rate of
      8%.  Accrued interest at August 31, 2007 and February 28, 2007 totaled
      $11,156 and $9,476, respectively.





Note
      4. Stockholders Equity





On
      October 4, 2006, the Company initiated a reverse stock split of 75 to
      1.  Accordingly, all per share amounts reported in the financial
      statements for all periods have been retroactively restated to reflect the
      reverse stock split.





On
      April
      20, 2007, the Company issued 22,250 restricted common shares, valued at $50,063,
      to a Minneapolis area high school for their assistance in initially developing
      the portal revenue model.





Note
      5. Stock Options





The
      Company has one stock option plan called The 2006 Employee Stock and Option
      Plan. As of August 31, 2007, an aggregate of 5,000,000 shares of common stock
      may be granted under these plans determined by the Board of Directors. The
      stock
      options may be granted to directors, officers, employees, consultants and
      advisors of the Company.  Options granted under this plan are
      non-qualified stock options and have exercise prices and vesting terms
      established by the Board of Directors at the time of each
      grant.  Vesting terms of outstanding options range from immediate to
      two years of employment anniversary.  All options expire five years
      from the date of grant.





Effective
      March 1, 2006, the Company adopted Financial Accounting Standards Board (“FASB”)
      Statement No. 123(R), “Share-Based Payment,” which requires the fair value
      of share-based payments, including grants of employee stock options and employee
      stock purchase plan shares, to be recognized in the income statement based
      on
      their grant date fair values unless a fair value is not reasonably estimable.
      Prior to the Company’s adoption of SFAS No. 123(R), the Company followed
      the intrinsic value method prescribed in Accounting Principles Board (“APB”)
      Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related
      interpretations, as permitted by Statement of Financial Accounting Standards
      (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” The fair value
      of the Company’s stock options issued prior to and after the adoption of SFAS
      No. 123(R) has been estimated using a Black-Scholes Merton option pricing model,
      which assumes no expected dividends and estimates the option expected life,
      volatility and risk-free interest rate at the time of grant.





8


The
      Company elected to adopt the modified prospective transition method, under
      which
      prior periods have not been restated to reflect, and do not include, the impact
      of SFAS No. 123(R).  SFAS 123 (R) requires companies to estimate
      the fair value of share-based payment awards on the date of grant using an
      option-pricing model. The value of the portion of the award that is ultimately
      expected to vest is recognized as expense over the requisite service periods
      in
      the Company’s consolidated statements of operations. The Company uses the
      Black-Sholes-Merton (“Black Sholes”) option-pricing model as a method for
      determining the estimated fair market value for employee stock awards.
      Compensation expense for employee stock awards is recognized on a straight-line
      basis over the vesting period of the award. The adoption of SFAS 123 (R) also
      requires certain changes to the accounting for income taxes and the method
      used
      in determining diluted shares, as well as additional disclosure related to
      the
      cash flow effects resulting from share-based compensation. The relevant
      interpretive guidance of Staff Accounting Bulletin 107 was applied in connection
      with its implementation and adoption of SFAS 123 (R).  The valuation
      provisions of SFAS No. 123(R) apply to new grants and to grants that were
      outstanding as of the effective date and are subsequently modified. The Company
      had no remaining estimated compensation for grants that were outstanding as
      of
      the effective date that would need to be recognized over the remaining service
      period using the compensation cost estimated for the SFAS No. 123 pro forma
      disclosures.





The
      Company’s consolidated financial statements as of and for the three and six
      months ended August 31, 2007, reflect the impact of SFAS 123(R).  For
      the three months ended August 31, 2007, the Company granted 292,000 stock
      options with a per option fair value of $3.64 and recorded related compensation
      expense of $993,107.  For the six months ended August 31, 2007, the
      Company has recorded $1,308,727 in stock compensation expense.  This
      expense is included in selling, general and administrative expense. There was
      no
      tax benefit from recording this non-cash expense due to the Company having
      a
      full valuation allowance against its deferred tax assets. The compensation
      expense impacted the six months ended August 31, 2007 basic loss per common
      share by $0.05. There remains $131,090 of total unrecognized compensation
      expense, which is expected to be recognized over future periods.








The
      following table summarizes information about the Company’s stock
      options:





Number
                of Options
            
            
            Weighted
                Average Exercise Price
            
            
            Weighted
                Average Remaining Contract Life
            
            
            Aggregate
                Intrinsic Value (1)Options
                outstanding February 28, 2007
            
            
            3,125,000
            
            
            $
            1.725
            
            
            
            4.50
            
            
            
            -Granted
            
            
            442,000
            
            
            $
            3.101
            
            
            
            3.98
            
            
            
            -Canceled
                or expired
            
            
            (270,000
            )
            
            
            (1.725
            )
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Options
                outstanding - August 31,
                2007
            
            
            3,297,000
            
            
            $
            1.909
            
            
            
            4.00
            
            
            $
            4,421,277Exercisable
                at August 31,
                2007
            
            
            3,181,000
            
            
            $
            1.903
            
            
            
            4.00
            
            
            $
            4,284,807





(1)
      The
      intrinsic value of an option is the amount by which the fair value of the
      underlying stock exceeds its exercise price.





9


Note
      6. Related Party Transactions





The
      Company entered into a 5 year lease with a director of the Company for
      approximately 1,000 square feet of space used for offices and operations
      equipment storage at 11974 Portland Avenue, Burnsville,
      Minnesota.  The lease commenced on December 16, 2006 at a monthly rent
      of $2,650 for the 5 year term of the lease and contains an option to renew
      for
      an additional term of 1 year at a monthly rent of $3,650. The Company previously
      sub-leased from a director of the Company the same space at a monthly rent
      of
      $750 renewable monthly.  The Company incurred rent expense to the
      director for the three and six months ended August 31, 2007 totaling $7,950
      and
      $15,900, respectively.  The Company currently owes $22,525 to the
      director for rent payments due through August 31, 2007.  This amount
      is included in accounts payable.


Future
        payments for fiscal years ending:


2008
            
            $
            31,8002009
            
            
            31,8002010
            
            
            31,8002011
            
            
            31,8002012
            
            
            25,175$
            152,375





Note
      7. Commitments and Contingencies





The
      Company is exposed to asserted and unasserted claims encountered in the normal
      course of business. In the opinion of management, the resolution of these
      matters will not have a material adverse effect on the Company's financial
      position or results of operations.





Note
      8. Common Stock Subscriptions Receivable





During
      fiscal year ended February 28, 2006, the Company received subscriptions for
      4,811,709 restricted common shares at $0.75 per share.  Significant
      terms of the subscription agreement are as follows:




·
            Payment
                is due in full in 60 months


·
            At
                24 months, the Company can demand at its option, monthly 1/36 payments
                on
                the subscription agreement.


·
            The
                Company has the option to charge simple annual interest of up to
                4%.


·
            The
                Company will provide downside protection of up to 30% of the stock
                price
                upon conversion.





As
      of
      August 31, 2007 and February 28, 2007, the Company has outstanding subscription
      receivables of $2,379,470 and $2,947,470 respectively.  For the three
      months ended August 31, 2007, the Company collected $416,031 of outstanding
      subscription receivables.  No interest has been charged on these
      subscription agreements.  The Company has collected approximately
      $454,250 of additional outstanding subscription receivables subsequent to August
      31, 2007.




















10


Note
      9.  Prior Period Financial Statement Presentation





For
      informational purposes, the following financial statements prepared using the
      accounting principles for a “business development company”, have been
      provided:





·
            Statement
                of Operations for the three and six months ended August 31, 2006


·
            Statement
                of Cash Flows for the three months ended August 31, 2006
























































11


DigitalTown,
      Inc.


(formerly
      BDC Capital, Inc.)


STATEMENT
      OF OPERATIONS


(unaudited)





As
                a Business
              Development
              Company
            
            
            As
                a Business
              Development
              CompanyThree
                months ended
              August
                31,
              2006
            
            
            Six
                months ended
              August
                31,
              2006Investment
                income
            
            $
            3
            
            
            $
            5Operating
                Expenses:Professional
                fees
            
            
            12,611
            
            
            
            39,386Administrative
                expenses
            
            
            33,019
            
            
            
            80,038Rent
            
            
            1,125
            
            
            
            2,250Other
            
            
            1,664
            
            
            
            3,997Interest
                expense
            
            
            1,400
            
            
            
            2,800Total
                Operating expenses
            
            
            49,819
            
            
            
            128,471Net
                investment loss
            
            
            (49,816
            )
            
            
            (128,466
            )Net
                change in unrealized appreciation on investment
            
            
            -
            
            
            
            -Net
                decrease in net assets resulting from operation
            
            $
            (49,816
            )
            
            $
            (128,466
            )Loss
                per common share – basic and diluted
            
            $
            (0.00
            )
            
            $
            (0.02
            )Weighted
                average shares outstanding – basic and diluted as restated for the 1 for
                75 reverse stock split
            
            
            5,700,962
            
            
            
            5,700,962
























12


DigitalTown,
      Inc.


(formerly
      BDC Capital, Inc.)





STATEMENT
      OF CASH FLOWS


(Unaudited)




As a Business Development CompanySix
                  months ended
                August
                  31, 2006CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  decrease in net assets resulting from operations
              
              $
              (128,466
              )Changes
                  in operating assets and liabilities:Prepaid
                  expenses
              
              
              (2,096
              )Accounts
                  payable
              
              
              (1,239
              )Accrued
                  liabilities
              
              
              2,800Investment
                  in BDC Partners, Inc.
              
              
              (257,000
              )Net
                  cash used in operating activities
              
              
              (386,001
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESNet
                  advance to officer/stockholder
              
              
              (5,798
              )Payments
                  received on stockholder subscription receivable netof
                  $20,000 in transaction costs
              
              
              407,063Net
                  cash provided by financing activities
              
              
              401,265Net
                  change in cash and cash equivalents for the period
              
              
              15,246Cash
                  and cash equivalents at beginning of period
              
              
              15,346Cash
                  and cash equivalents at end of period
              
              $
              30,610












13


ITEM
      2.
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





The
      following is a discussion of the financial condition and results of operations
      of the Company for the three months and six ended August 31, 2007, which should
      be read in conjunction with, and is qualified in its entirety by, the financial
      statements and notes thereto included elsewhere in this report.





CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING INFORMATION





This
      Form
      10-Q for the quarter ended August 31, 2007, contains forward-looking statements
      within the meaning of Section 27A of Section 21E of the Securities Exchange
      Act
      of 1934, as amended (“Exchange Act”).  Forward-looking statements may
      be identified by the use of forward-looking terminology, such as “may,” “shall,”
“could,” “expect,” “estimate,” “anticipate,” “predict,” “probable,” “should,”
“continue,” or similar terms, variations of those terms or the negative of those
      terms.  The forward-looking statements specified in the following
      information have been compiled by our management and are considered by
      management to be reasonable.  Our future operating results, however,
      are impossible to predict and no representation, guaranty, or warranty is to
      be
      inferred from those forward-looking statements.





Withdrawal
      as a Business Development Company





The
      reader of this management discussion, the related financial statements and
      notes
      thereto, and other recent Company filings should understand that the portfolio
      company (BDC Partners), a company in which the Company invests, and the
      Company’s method of accounting upon its withdrawal of its election to be treated
      as a business development company (“BDC”) under the investment Company Act of
      1940 (“1940 Act”), have materially changed the Company’s financial
      reporting.





REASONS
      FOR CEASING TO BE A BUSINESS DEVELOPMENT COMPANY




We
      determined that many of the regulatory, financial reporting and other
      requirements imposed by the 1940 Act were too restrictive and prevented the
      Company from operating in the manner in which it desired. Among these
      restrictions are the following:





·
            BDCs
                are subject to restrictions in the 1940 Act on the type and amount
                of
                securities, other than common stock, that they can issue. We believe
                that
                the Company would be better served by greater flexibility in our
                capital
                structure.




·
            The
                closely regulated nature of BDCs causes them to be subject to greater
                legal and accounting expenses.





The
      Company’s Board of Directors agreed with our assessment and determined that it
      was no longer feasible for the Company to operate as a BDC. The appropriate
      course of action was to withdraw the Company’s election to be regulated as a BDC
      by filing a Form N-54C with the SEC. Following the withdrawal of the election,
      the Company continues to be a reporting company under the Exchange Act, but
      is
      managed so that it will not be subject to the provisions of the 1940
      Act.




EFFECT
      ON
      FINANCIAL STATEMENTS AND TAX STATUS





The
      election to withdraw the Company’s election as a Business Development Company
      under the 1940 Act has resulted in a significant change in the Company's
      required method of accounting.  Business Development Company financial
      statement presentation and accounting utilizes the fair value method of
      accounting used by investment companies, which allows Business Development
      Company’s to recognize income and value their investments at market value as
      opposed to historical cost.





14


In
      addition, majority-owned subsidiaries are not consolidated and instead,
      investments in those subsidiaries are reflected on the balance sheet as an
      investment in and advances to affiliates, at fair value.  As an
      operating company, the required financial statement presentation and accounting
      for securities held by the Company utilize either fair value or historical
      cost
      methods of accounting, depending on the classification of the investment and
      the
      Company's intent with respect to the period of time it intends to hold the
      investment, and the Company and its subsidiaries are reflected for financial
      accounting purposes as a consolidated entity.  The change in
      accounting due to the conversion to an operating company from a Business
      Development Company is considered a change in accounting principle.




We
      do not
      believe that the withdrawal of the Company’s election to be treated as a BDC
      will have any impact on its federal income tax status, since we never elected
      to
      be treated as a regulated investment company under Subchapter M of the Internal
      Revenue Code. (Electing treatment as a regulated investment company under
      Subchapter M generally allows a qualified investment company to avoid paying
      corporate level federal income tax on income it distributes to its
      shareholders.) Instead, we have always been subject to corporate level federal
      income tax on our income (without regard to any distributions we make to our
      shareholders) as a “regular” corporation under Subchapter C of the
      Code.




CHANGE
      IN
      ACCOUNTING PRINCIPLE




Management
      has retroactively applied this change in accounting principle in accordance
      with
      Statement of Financial Accounting Standards No. 154, “Accounting for Changes and
      Error Corrections” for the Company’s balance sheet as of February 28,
      2006.  The net effect, as of February 28, 2006, of the Company’s
      election to withdrawal its business development company status pursuant to
      the
      Investment Company Act of 1940 was ($797,056) net loss.  As a business
      development company, the Company’s investment in BDC Partners was not previously
      audited prior to February 28, 2006.  Management has determined that it
      is impractical and not cost effective to retroactively apply this change in
      accounting to the financial statements of BDC Partners prior to February 28,
      2006, or to the three interim quarterly financial statements ended May 31,
      2006,
      August 31, 2006 and November 30, 2006, respectively, as allowed per FAS 154
      par.
      11.  Therefore, the statements of operations and cash flows for the
      three and six months ended August 31, 2006 will not be
      comparative.  However, these prior period financial statements are
      included in Note 9 to the Company’s financial statements, as originally filed
      for informational purposes.




Company
      Overview





The
      Company has applied for membership with the American Stock Exchange and plans
      to
      be trading on the exchange by December 2007.  The Company also hired
      Integrated Corporate Relations (ICR), a leading investor relations and financial
      communications consultancy, to assist with all aspects of its investor relations
      program.





On
      August
      1, 2007, Gary Hall joined the DigitalTown Board of Directors.  Mr.
      Hall currently serves as President of Pringo Networks, a prominent Los Angeles
      based company fusing social networking and media sharing platforms into cohesive
      online communities.  Before joining Pringo, Hall was critical in
      developing Reunion.com into a top ten interface, building broad outreaches
      in
      both partnerships and users (currently 26 million) since the company’s
      inception.  He led all of the company’s online marketing and overall
      strategic development.  Mr. Hall is still an active owner in
      Reunion.com.








15


RESULTS
      OF OPERATIONS





THREE
      AND
      SIX MONTHS ENDED AUGUST 31, 2007





For
      the
      three months ended August 31, 2007, the Company incurred selling, general and
      administrative expenses of $1,236,532.  The Company incurred $14,500
      of administrative fees for the management of the Company and total salary and
      payroll expense of $78,713 of which $11,423 was deferred salary expense and
      stock option expense of $993,107.  The Company also incurred $72,988
      of professional fees which included $30,000 for investment advisory services
      and
      $7,575 for the analysis and design of 10-12 Beta sites for the DigitalTown
      portal.  The Company also incurred $24,476 of investor relations
      expense which included $23,250 for investor relations consulting
      services.  The Company’s overall net loss for the three months ended
      August 31, 2007 was $1,235,593.





For
      the
      six months ended August 31, 2007, the Company incurred selling, general and
      administrative expense of $1,777,465.  The main component of this
      expense related to $1,616,385 in stock-based compensation issued to officers,
      employees, directors and consultants.  Our net loss for the six months
      ended August 31, 2007 was $1,774,952.





LIQUIDITY
      AND CAPITAL RESOURCES





SIX
      MONTHS ENDED AUGUST 31, 2007





The
      Company’s cash position at August 31, 2007 was $19,205, an increase of $10,272
      from $8,933 at February 28, 2007.  During the six months ended August
      31, 2007, net cash used in operating activities was $369,534 which was primarily
      due to losses from operations, offset by increases in accounts payable, a non
      cash stock payment, stock based compensation expense and deferred officer
      compensation.  Net cash used in investing activities for the six
      months ended August 31, 2007 was $101,840 of which $72,884 was used for the
      renewal of existing and the purchase of additional domain names, $25,000 for
      web
      site development costs and $3,956 was used for fixed asset
      purchases.  Tiger Media, a wholly owned subsidiary of DigitalTown,
      Inc., entered into an installment agreement in May 2007 with an online services
      vendor for the renewal of existing domain names and assistance in purchasing
      additional domain names.  The total amount of the non-interest bearing
      installment agreement was $214,080.  For the six months ended August
      31, 2007, DigitalTown, Inc. made cash payments of $71,360 on the installment
      agreement. The remaining balance of $142,720 will be paid in 8 monthly payments
      of $17,840 for the period of September 2007 to April 2008 and is included in
      accounts payable on the consolidated balance sheet and non-cash investing and
      financing activities on the consolidated statement of cash flows. Net cash
      provided by financing activities was $481,646 which consisted of payments
      received on stockholder subscription receivables of $568,000 less the payoff
      of
      a $70,000 shareholder note payable and repayment of $16,354 in advances from
      officer/stockholder.





Our
      current monthly operating expenses for the three months ended August 31, 2007,
      adjusted for non cash stock based compensation of $993,107, was approximately
      $81,000 per month. We believe our
      current cash reservesand amounts we expect to collect on our outstanding
      stock subscription receivable should be sufficient to enable us to operate
      for
      the next 12 months. We
      anticipate that any additional financing would be through the sale of our common
      stock or other equity-based securities.




















16




Critical
      Accounting Policies





The
      discussion and analysis of DigitalTown, Inc.’s financial condition and results
      of operations are based on our financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the U.S. The
      preparation of these financial statements requires management to make estimates
      and judgments that affect the reported amounts of assets, liabilities and
      expenses and related disclosure of contingent assets and liabilities. Management
      reviews its estimates on an ongoing basis. Management bases its estimates on
      historical experience and on various other assumptions that it believes to
      be
      reasonable under the circumstances, the results of which form the basis for
      making judgments about the carrying values of assets and liabilities. Actual
      results may differ from these estimates under different assumptions or
      conditions. While DigitalTown Inc.’s significant accounting policies are
      described in more detail in Note 1 to its financial statements, management
      believes the following accounting policies to be critical to the judgments
      and
      estimates used in the preparation of its financial statements:





Intangible
      Assets- Domain Names/Web Site Development Costs





The
      Company is still in the development stage of its web site portal, and
      accordingly, all costs, including license renewals, associated with domain
      names
      expected to be utilized in its web site portal and web site development costs
      have been capitalized.  Since the Company is still in the development
      stage of its web site portal and the ownership of these domain names can be
      renewed at a nominal fee prior to their expiration date, the useful life of
      the
      domain names are deemed to be indefinite and no amortization will be
      recorded.  Additionally, since the Company is still in the development
      stage of its web site portal, no amortization has been recorded for the web
      site
      development costs.





Impairment
      of Long-Lived Assets





Long-lived
      assets, such as property and equipment and intangible assets – domain names/web
      site development costs are reviewed for impairment whenever changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable.  Recoverability of assets to be held and used is measured
      by comparison of the carrying amount of an asset to estimated undiscounted
      future cash flows expected to be generated by the asset. If the carrying amount
      of an asset exceeds its estimated future cash flows, an impairment charge is
      recognized in the amount by which the carrying amount of the asset exceeds
      the
      fair value of the asset.








Recently
      issued accounting pronouncements:





In
      September 2006, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS No.
      157"). This standard clarifies the principle that fair value should be based
      on
      the assumptions that market participants would use when pricing an asset or
      liability. Additionally, it establishes a fair value hierarchy that prioritizes
      the information used to develop those assumptions. This standard is effective
      for financial statements issued for fiscal years beginning after November 15,
      2007. We are currently evaluating the impact of this statement. We believe
      the
      adoption of SFAS No. 157 will not have a material impact on our consolidated
      financial position or results of operations.




















17


FORWARD-LOOKING
      INFORMATION





Any
      statements contained herein related to future events are forward-looking
      statements and are made pursuant to the safe harbor provisions of the Private
      Securities Litigation Reform Act of 1995. Readers are cautioned not to place
      undue reliance on forward-looking statements. DigitalTown, Inc. undertakes
      no
      obligation to update any such statements to reflect actual events.





ITEM
      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK.





We
      are
      exposed to market risk for the effect of interest rate
      changes.  Information relating to quantitative and qualitative
      disclosure about market risk is set forth below and in Management’s Discussion
      and Analysis of Financial Condition and Results of Operations – Liquidity and
      Capital Resources.





As
      of
      August 31, 2007, the Company did not have any off-balance sheet investments
      or
      hedging investments.




ITEM
      4.
      CONTROLS AND PROCEDURES





(a)
      Evaluation of Disclosure Controls and Procedures.





An
      evaluation made at the end of the period covered by this report was performed
      under the supervision and with the participation of the Company's president,
      chief executive officer ("CEO") and the chief financial officer ("CFO") of
      the
      effectiveness of the design and operation of the Company's disclosure controls
      and procedures to insure that the Company records, processes, summarizes and
      reports in a timely and effective manner the information required to be
      disclosed in reports filed with or submitted to the Securities and Exchange
      Commission. Based on that evaluation and in taking into account the limited
      number of employees noted in the following paragraph, the Company's management,
      including the CEO and CFO, concluded that the Company's disclosure controls
      and
      procedures were effective in timely bringing to their attention material
      information related to the Company required to be included in the Company's
      periodic Securities and Exchange Commission filings. Since the date of this
      evaluation, there have been no significant changes in the Company's internal
      controls or in other factors that could significantly affect those
      controls.





Due
      to
      the limited number of Company employees engaged in the authorization, recording,
      processing and reporting of transactions, there is inherently a lack of
      segregation of duties. The Company periodically assesses the cost versus benefit
      of adding the resources that would remedy or mitigate this situation, and
      currently does not consider the benefits to outweigh the costs of adding
      additional staff in light of the limited number of transactions related to
      the
      Company's operations.





(b)
      Changes in Internal Controls over Financial Reporting.





There
      have been no significant changes in internal control over financial reporting
      that occurred during the fiscal period covered by this report that have
      materially affected or are reasonably likely to materially affect the Company’s
      internal control over financial reporting.

















18


PART
      II





ITEM
                1.
            LEGAL
                PROCEEDINGS





DigitalTown,
      Inc. is, from time to time, a party to litigation arising in the normal course
      of its business.  The Company believes that none of these actions will
      have a material adverse effect on its financial condition or results of
      operations.




ITEM
                  1A.
              RISK
                  FACTORS





We
      are
      subject to various risks that may materially harm our business, financial
      condition and results of operations.  You should carefully consider
      the risks and uncertainties described below and the other information in this
      filing before deciding to purchase our common stock.  If any of these
      risks or uncertainties actually occurs, our business, financial condition or
      operating results could be materially harmed.  In that case, the
      trading price of our common stock could decline and you could lose all or part
      of your investment.





ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None.





ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES





None.




ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.




ITEM
                5.
            OTHER
                INFORMATION





(a)
            All
                information required to be disclosed on a report on Form 8-K during
                the
                period ended August 31, 2007 has previously been reported.


(b)
            There
                have been no material changes to the procedures by which security
                holders
                may recommend nominees to the registrant’s board of directors.





ITEM
                  6.
              EXHIBITS
                  AND REPORTS ON FORM 8-K




3.1
            Articles
                of Incorporation, as amended (1)
            Previously
                Filed3.2
            Bylaws
                (1)
            Previously
                Filed31
            Certifications
                of Chief Executive Officer and Chief Financial Officer under Rule
                13a-14(a)/15d-14(a)
            Included32
            Certifications
                under Section 1350
            Included





(1)
      Incorporated by reference to exhibit filed as a part of Registration Statement
      on Form 10-SB (Commission File No. 000-27225).









19


SIGNATURES





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


DigitalTown,
                  INC.(formerly
                  BDC Capitl,
                  Inc.)Dated:
                  January 14, 2008/s/
                  Richard A.
                  PomijeRichard
                  A. Pomije, CEO and CFO








































20