**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, 2008





OR





o
            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 o  No
x





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 o
            Accelerated filer oNon-accelerated filer o
              (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 o   No
x





As
      of
      September 8, 2008 there were 22,112,840 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
              1Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Conditionand
                  Results of Operations
              13Item
                  4T.
              Controls
                  and Procedures
              21**PART
                  II –****OTHER
                  INFORMATION**Item
                  1.
              Legal
                  Proceedings
              21Item
                  1A.
              Risk
                  Factors
              21Item
                  2.
              Unregistered
                  Sales of Equity Securities
              21Item
                  6.
              Exhibits
              21**SIGNATURES**
              22**EXHIBIT
                  INDEX**
              23








**PART
      I – FINANCIAL
      INFORMATION**





**Item
      1. Consolidated Financial Statements.**





***WEBDIGS,
                INC.*****CONSOLIDATED
                BALANCE SHEETS**
              **(Unaudited)**
              
              **FOR
                THE THREE AND NINE MONTH**
              **PERIODS
                ENDED JULY 31, 2008**
              **AND
                FOR THE PERIOD FROM INCEPTION (MAY 1, 2007)**
              **THROUGH
                JULY 31, 2007**




**July
                31, 2008 (Unaudited)**
            
            **October
                31, 2007 (Audited)****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            24,188
            
            $
            113,280Commissions
                and fees receivable
            
            
            40,990
            
            
            12,255Prepaid
                expenses and deposits
            
            
            5,187
            
            
            19,192Other
                current assets
            
            
            8,744
            
            
            —Total
                current assets
            
            
            79,109
            
            
            144,727Office
                equipment and furniture, net
            
            
            49,396
            
            
            55,699Intangible
                assets, net
            
            
            410,496
            
            
            556,868Total
                assets
            
            $
            539,001
            
            $
            757,294


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


1




***WEBDIGS,
                INC.*****CONSOLIDATED
                BALANCE SHEETS (continued)**
              **(Unaudited)**
              
              **FOR
                THE THREE AND NINE MONTH**
              **PERIODS
                ENDED JULY 31, 2008**
              **AND
                FOR THE PERIOD FROM INCEPTION (MAY 1, 2007)**
              **THROUGH
                JULY 31, 2007****CONSOLIDATED
                BALANCE SHEETS (continued)****(Unaudited)**




**July
                31, 2008 (Unaudited)**
            
            **October
                31, 2007 (Audited)****LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)**Current
                liabilities:Current
                portion of capital lease obligations
            
            $
            9,483
            
            $
            8,929Accounts
                payable
            
            
            407,743
            
            
            98,581Accounts
                payable - minority shareholder
            
            
            490,465
            
            
            274,413Due
                to officer
            
            
            —
            
            
            17,601Other
                current liabilities
            
            
            91,243
            
            
            73,085Total
                current liabilities
            
            
            998,934
            
            
            472,609Long
                term liabilities:Capital
                lease obligation, less current portion
            
            
            30,055
            
            
            36,470Total
                long term liabilities
            
            
            30,055
            
            
            36,470Total
                liabilities
            
            
            1,028,989
            
            
            509,079Stockholders'
                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;
                21,808,840 and 18,442,840 common shares issued and outstanding at
                July 31,
                2008 and October 31, 2007, respectively
            
            
            21,809
            
            
            18,443Additional
                paid-in-capital
            
            
            1,837,413
            
            
            832,488Accumulated
                deficit
            
            
            (2,349,210
            )
            
            (602,716
            )Total
                stockholders' equity (deficit)
            
            
            (489,988
            )
            
            248,215Total
                liabilities and stockholders' equity (deficit)
            
            $
            539,001
            
            $
            757,294


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




2




***WEBDIGS,
                INC.*****CONSOLIDATED
                STATEMENTS OF OPERATIONS**
              **(Unaudited)**
              
              **FOR
                THE THREE AND NINE MONTH**
              **PERIODS
                ENDED JULY 31, 2008**
              **AND
                FOR THE PERIOD FROM INCEPTION (MAY 1, 2007)**
              **THROUGH
                JULY 31, 2007**




**Three
                Months Ended**
            
            
            
            **Inception****July
                31,**
            
            **Nine
                Months**
            
            **(May
                1, 2007)****Ended**
            
            **through****2008**
            
            **2007**
            
            **July
                31, 2008**
            
            **July
                31, 2007**Revenue:Gross
                revenues
            
            $
            367,771
            
            $
            20,914
            
            $
            933,735
            
            $
            20,914Less:
                commissions, rebates and third party agent commissions
            
            
            (131,849
            )
            
            —
            
            
            (198,452
            )
            
            —Net
                revenues
            
            
            235,922
            
            
            20,914
            
            
            735,283
            
            
            20,914Operating
                expenses:Selling
            
            
            523,208
            
            
            132,510
            
            
            1,854,864
            
            
            132,510General
                and administrative
            
            
            264,704
            
            
            156,055
            
            
            619,926
            
            
            156,055Total
                operating expenses
            
            
            787,912
            
            
            288,565
            
            
            2,474,790
            
            
            288,565Operating
                loss
            
            
            (551,990
            )
            
            (267,651
            )
            
            (1,739,507
            )
            
            (267,651
            )Interest
                expense
            
            
            2,433
            
            
            —
            
            
            6,987
            
            
            —Net
                loss before income taxes
            
            
            (554,423
            )
            
            (267,651
            )
            
            (1,746,494
            )
            
            (267,651
            )Income
                tax provision
            
            
            —
            
            
            —
            
            
            —
            
            
            —Net
                loss
            
            $
            (554,423
            )
            $
            (267,651
            )
            $
            (1,746,494
            )
            $
            (267,651
            )Net
                loss per common share -basic
                and diluted
            
            $
            (0.03
            )
            $
            (0.04
            )
            $
            (0.08
            )
            $
            (0.04
            )Weighted
                average common shares outstanding -basic and diluted
            
            
            21,789,275
            
            
            6,284,534
            
            
            20,689,797
            
            
            6,284,534


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


3




***WEBDIGS,
                INC.*****CONSOLIDATED
                STATEMENT OF CASH FLOWS**
              **(Unaudited)**
              **FOR
                THE NINE MONTHS**
              **ENDED
                JULY 31, 2008 AND FOR
                THE PERIOD FROM INCEPTION(MAY
                1, 2007) TO JULY 31,2007**




**2008**
            
            **2007**Cash
                flows from operating activities:Net
                loss
            
            $
            (1,746,494
            )
            $
            (267,651
            )Adjustments
                to reconcile net income to net cash flows provided by (used in) operating
                activities:Depreciation
            
            
            23,939
            
            
            —Amortization
            
            
            146,372
            
            
            —Loss
                on disposal of fixed assets
            
            
            580
            
            
            —Share
                based compensation
            
            
            166,791
            
            
            68,495Changes
                in operating assets and liabilities:Commissions
                and fees receivable
            
            
            (28,735
            )
            
            (6,370
            )Prepaid
                expenses and deposits
            
            
            14,005
            
            
            (13,750
            )Other
                current assets
            
            
            (8,744
            )
            
            —Accounts
                payable
            
            
            309,162
            
            
            9,640Accounts
                payable - minority stockholder
            
            
            216,052
            
            
            280,780Other
                current liabilities
            
            
            18,158
            
            
            57,952Net
                cash flows provided by (used in) operating activities
            
            
            (888,914
            )
            
            129,096Cash
                flows from investing activities:Payments
                for web-site development costs
            
            
            —
            
            
            (252,572
            )Purchases
                of computer equipment and fixtures
            
            
            (18,216
            )
            
            (8,582
            )Cash
                paid in connection with acquisition of HEA, net of cash acquired
                totaling
                $1,896
            
            
            —
            
            
            (92
            )Net
                cash flows used in investing activities
            
            
            (18,216
            )
            
            (261,246
            )Cash
                flows from financing activities:Issuance
                of common stock, net of issuance costs of $0 and $4,588,
                respectively
            
            
            841,500
            
            
            205,912Principal
                payments on capital lease obligations
            
            
            (5,861
            )
            
            —Increase
                (decrease) in due to officer
            
            
            (17,601
            )
            
            33,006Net
                cash flows provided by financing activities
            
            
            818,038
            
            
            238,918Net
                increase (decrease) in cash and cash equivalents
            
            
            (89,092
            )
            
            106,768Cash
                and cash equivalents, beginning of period
            
            
            113,280
            
            
            —Cash
                and cash equivalents, end of period
            
            $
            24,188
            
            $
            106,768**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION**Cash
                payments for interest
            
            $
            6,987
            
            $
            —Shares
                issued to acquire member units of Home Equity Advisors, LLC net of
                liabilities assumed and $1,988 in capitalized acquisition
                costs
            
            $
            —
            
            $
            32,000


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


4


**WEBDIGS,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





**FOR
      THE THREE AND NINE MONTH**


**PERIODS
      ENDED JULY 31, 2008**


**AND
      FOR THE PERIOD FROM INCEPTION (MAY 1, 2007)**


**THROUGH
      JULY 31, 2007**





**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 Untied 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
      for the period from inception (May 1, 2007) to October 31, 2007.





**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 and consists of two strategic
      operating segments; (1) mortgage broker, assisting homeowners in refinancing
      their home mortgages and assisting new home buyers in qualifying for home
      mortgages and brokering the financing, (2) online real estate broker, offering
      the same customer experience as a full service broker utilizing a flat fee
      structure for listing services to their selling customers and a graduated fee
      structure for their buying customers by rebating two-thirds of its broker
      commissions. The mortgage broker segment operates under the names of Home Equity
      Advisors, LLC (HEA) and Marquest Financial, Inc. (Marquest). The online real
      estate broker segment operates as Webdigs, LLC.





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).




5





The
      operations of Webdigs, LLC are the only continuing operations of the Company.
      In
      accounting for this transaction, Webdigs, LLC was deemed to be the purchaser
      and
      parent company for financial reporting purposes. Accordingly, its net assets
      were included in the consolidated balance sheet at their historical value.
      The
      accompanying consolidated financial statements as of July 31, 2008 and July
      31,
      2007 present the historical financial information of Webdigs, LLC. The
      outstanding member units of Webdigs, LLC from May 1, 2007 to October 24, 2007
      have been restated to reflect the shares issued upon the reorganization.





Consolidation
      Policies





The
      consolidated financial statements for the three and nine month periods ended
      July 31, 2008 and for the period from inception (May 1, 2007) to July 31, 2007,
      include the accounts of Webdigs, Inc. and its wholly-owned subsidiary, Webdigs,
      LLC, which has Marquest Financial, Inc., Home Equity Advisors, LLC, and Credit
      Garage, Inc. as wholly-owned subsidiaries, collectively the Company. All
      significant intercompany accounts and transactions have been eliminated in
      the
      consolidation.





Segment
      Information





SFAS
      No.
      131 *Disclosure
      About Segments of an Enterprise and Related Information* defines
      operating segments as components of a company about which separate financial
      information is evaluated regularly by the chief decision maker in deciding
      how
      to allocate resources and assess performance. The Company has identified two
      operating segments: mortgage brokerage and online real estate brokerage.





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.





Income
      Taxes





Subsequent
      to the reverse merger on October 24, 2007, the Company accounts for income
      taxes
      in accordance with SFAS No. 109, as clarified by FIN No. 48, which
      requires 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 for its net deferred tax assets as of July
      31, 2008 and October 31, 2007 because realization of those assets is not
      reasonably assured.





FIN
      No.
      48 requires the recognition of 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.




6





**3**
            **GOING
                CONCERN**





The
      Company has incurred significant operating losses for the nine month period
      ended July 31, 2008 and from inception (May 1, 2007) to July 31, 2007. At July
      31, 2008, the Company reports a negative working capital position of $919,825,
      accumulated deficit of $2,349,210 and a stockholders’ deficit of $489,988. 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.





In
      order
      to meet its working capital needs through the next twelve months, the Company
      plans to raise additional funds through the issuance of additional shares of
      common stock and debt through private placements. The Company is also looking
      to
      reduce operating expenditures and increase revenues through it existing customer
      base and website traffic.





**4**
            **RELATED
                PARTY TRANSACTIONS**





Accounts
      Payable - Minority Stockholder





The
      Company’s principal advertising agency/website developer was owed $490,465 at
      July 31, 2008 and $274,413 at October 31, 2007. The two principals of the
      website developer also are minority stockholders in the Company, holding
      approximately 3% of the Company’s outstanding shares at July 31, 2008. For the
      nine months ended July 31, 2008, and for the period from inception (May 1,
      2007)
      to July 31, 2007, respectively the Company incurred $546,800 and $360,781 in
      services from this minority stockholder.





Included
      in the $546,800 is $26,500 in office rent expense for the Company for the nine
      month period ended July 31, 2008. There was no office rent expense included
      in
      the $360,781 for the period from inception (May 1, 2007) to July 31, 2007.
      There
      is no ongoing commitment from the Company or the related party regarding rental
      office space for which the Company currently pays a market rate rent of $3,500
      per month.





Due
      to
      Officer





The
      Company was indebted to its CEO/President in the amount of $17,601 for business
      expenses that he had paid on the Company’s behalf as of October 31, 2007. This
      amount was repaid during the three months ended July 31, 2008.





**5**
            **STOCK
                BASED COMPENSATION**





For
      the
      three month period ended July 31, 2008, the Company granted stock options to
      three directors of the Company. Each of the three directors received 200,000
      stock options with an exercise price of $0.25 per share. The estimated fair
      value of these options was $73,978. Each of the director’s options were vested
      50% at the date the options were granted (May 7, 2008) with the remaining rights
      scheduled to vest in two equal annual installments on May 7, 2009 and 2010.
      The
      options will expire on May 7, 2013.




7





Effective
      May 1, 2007 (inception) the Company adopted FASB Statement No. 123 (R)
“Share-Based Payment” (SFAS 123 (R)), which requires an entity to reflect on its
      income statement, instead of pro forma disclosures in its financial footnotes,
      the cost of employee services received in exchange for an award of equity
      instruments based on the grant-date fair market value of the award. The
      Company’s consolidated financial statements as of and for nine months ended July
      31, 2008 and for the period from inception (May 1, 2007) to July 31, 2007
      reflect the impact of SFAS 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 on a straight line basis over the requisite service periods in the
      Company’s Consolidated Statements of Operations. The Company has recorded
      $41,610 of related compensation expense for the three and nine month periods
      ended July 31, 2008. The Company had no stock option compensation for the period
      from inception (May 1, 2007) to July 31, 2007. This expense is included in
      general and administrative expense. There was no tax benefit from recording
      this
      non-cash expense due to the Company having a full income tax valuation. The
      compensation expense impacted both basic and diluted loss per share by $0.00
      for
      the three and nine months ended July 31, 2008. As of July 31, 2008,
      $32,368 of total unrecognized compensation expense related to non-vested awards
      is expected to be recognized over a weighted average period of approximately
      1.75 years.





The
      Company uses the Black —Scholes-Merton (“Black Scholes”) option-pricing model as
      a method for determining the estimated fair market value for employee stock
      awards. 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 interpretative guidance of Staff
      Accounting Bulletin No. 107 was applied in connection with the
      implementation and adoption of SFAS 123 (R).





Information
      regarding outstanding stock options for the nine months ended July 31, 2008
      is
      as follows:


Number
                of options
            
            Weighted
                average exercise price
            
            Aggregate
                intrinsic value
            
            Weighted
                average remaining contractual term (years)Outstanding
                at October 31, 2007
            
            
            —
            
            $
            —
            
            $
            —
            
            
            —Granted
            
            
            600,000
            
            
            0.25
            
            
            —Exercised
            
            
            —
            
            
            —
            
            
            —Forfeited
                or expired
            
            
            —
            
            
            —
            
            
            —Outstanding
                at July 31, 2008
            
            
            600,000
            
            $
            0.25
            
            
            —
            
            
            4.75Exercisable
                at July 31, 2008
            
            
            300,000
            
            $
            0.25
            
            
            —
            
            
            4.75





The
      intrinsic value of a stock award is the amount by which the fair value of the
      underlying stock exceeds the exercise price of the award. The total aggregate
      intrinsic value of outstanding and exercisable options was $0.00 at July 31,
      2008.




8





The
      weighted-average assumptions associated with option awards issued during the
      nine months ended July 31, 2008 and for the period from inception (May 1, 2007)
      to July 31, 2007 are as follows:





2008
            2007Expected
                term
            2.9
                years
            —Expected
                volatility
            74.0%
            —Risk-free
                interest rate
            3.1%
            —Dividend
                yield
            —
            —





**6**
            **STOCKHOLDERS'
                EQUITY**





During
      the period from May 1, 2008 to July 31, 2008, the Company sold 60,000 shares
      of
      common stock to accredited investors for $15,000 ($0.25 per share) in cash
      proceeds.





During
      the period from February 1, 2008 to April 30, 2008, the Company sold 2,230,000
      shares of common stock to accredited investors for $557,500 ($0.25 per share)
      in
      cash proceeds.




During
      the period from November 1, 2007 to January 31, 2008, the Company sold 1,076,000
      shares of common stock to accredited investors for $269,000 ($0.25 per share)
      in
      cash proceeds.





During
      the period from October 24, 2007 to October 31, 2007, the Company sold 300,000
      shares of common stock to accredited investors for $75,000 ($0.25 per share)
      in
      cash proceeds.





On
      October 23, 2007, the Company (then operating as Webdigs, LLC) issued member
      units equivalent to 260,920 shares of common stock to acquire the outstanding
      common shares in Marquest Financial, Inc. at a valuation of
      $64,000.





During
      the period from August 1, 2007 to October 23, 2007 the Company (then operating
      as Webdigs, LLC) sold Class A member units equivalent to 1,121,137 shares of
      common stock for a price equivalent to $0.2453 per share. The Company raised
      $275,000 in capital from this sale to accredited investors. The Company incurred
      issuance costs of $1,975. Preferred dividends of $2,093 were declared and paid
      to these members prior to their recharacterization to common stock at the time
      of the reverse merger on October 24, 2007.





For
      the
      period from August 1, 2007 to October 23, 2007 a portion of the CEO compensation
      was paid in stock. In total, 346,534 shares of common stock were issued with
      a
      fair value of $85,000.





On
      July
      15, 2007, the Company (then operating as Webdigs, LLC) issued member units
      equivalent to 260,920 shares of common stock to acquire the outstanding member
      units in Home Equity Advisors, LLC at a valuation of $32,000.





During
      the period from July 1, 2007 to July 31, 2007 the Company (then operating as
      Webdigs, LLC) sold Class A member units equivalent to 815,373 shares of common
      stock for a price equivalent to $0.2453 per share. The Company raised $200,000
      in capital from this sale to accredited investors. The Company incurred issuance
      costs of $4,588. Preferred dividends of $3,764 were declared and paid to these
      members prior to their recharacterization to common stock at the time of the
      reverse merger on October 24, 2007.




9





At
      inception, on May 1, 2007, the Company (then operating as Webdigs, LLC) issued
      member units equivalent to 4,403,020 shares of common stock to the Company’s
      founders for $10,500 in cash.





Restricted
      Stock





For
      the
      period from inception (May 1, 2007) to October 31, 2007, the Company awarded
      8,610,347 of time-based restricted common stock (non-vested shares),
      respectively, to certain officers and employees of the Company. As a condition
      of the award, the officers and employees must be employed with the Company
      in
      order to continue to vest in their shares over a two year period. The fair
      value
      of the non-vested shares is equal to the fair market value on the date of grant
      and is amortized ratably over the vesting period. No additional awards were
      made
      during the nine months ended July 31, 2008.





The
      Company recorded $125,181 and $68,495 of compensation expense in the
      consolidated statement of operations related to vested shares (restricted stock)
      for the nine months ended July 31, 2008 and for the period from inception (May
      1, 2007) to July 31, 2007, respectively.





A
      summary
      of the status of non-vested shares and changes as of July 31, 2008 is set forth
      below:





Restricted
            
            UnearnedShares
            
            CompensationOutstanding,
                May 1, 2007
            
            
            —
            
            
            —Granted
            
            
            7,305,749
            
            $
            143,360Vested
            
            
            (1,631,751
            )
            
            (68,495
            )Forfeited/canceled
            
            
            —
            
            
            —Outstanding,
                July 31, 2007
            
            
            5,673,998
            
            
            74,865Granted
            
            
            1,304,598
            
            
            320,000Vested
            
            
            (663,956
            )
            
            (25,475
            )Forfeited/canceled
            
            
            (1,627,736
            )
            
            (3,992
            )Outstanding,
                October 31, 2007
            
            
            4,686,904
            
            
            365,398Granted
            
            
            —
            
            
            —Vested
            
            
            (577,806
            )
            
            (41,727
            )Forfeited/canceled
            
            
            —
            
            
            —Outstanding,
                January 31, 2008
            
            
            4,109,098
            
            
            323,671Granted
            
            
            —
            
            
            —Vested
            
            
            (577,806
            )
            
            (41,727
            )Forfeited/canceled
            
            
            —
            
            
            —Outstanding,
                April 30, 2008
            
            
            3,531,292
            
            
            281,944Vested
            
            
            (577,806
            )
            
            (41,727
            )Forfeited/canceled
            
            
            —
            
            
            —Outstanding,
                July 31, 2008
            
            
            2,953,486
            
            $
            240,217




10





Shares
      awarded as unearned compensation are scheduled to vest over periods ending
      October 31 as follows:




Shares
              
              Amount2008
                  - remaining
              
              
              577,807
              
              $
              41,7272009
              
              
              2,375,679
              
              
              198,4902,953,486
              
              $
              240,217





**7**
            **SEGMENT
                FINANCIAL INFORMATION**





The
      Company has two reporting segments that fall within two primary business groups:
      mortgage broker and online real estate broker.





The
      mortgage broker segment assists homeowners in refinancing their home mortgages
      and assists prospective home buyers in qualifying for a home mortgage and
      brokering the financing. This business segment operates as Marquest and HEA.
      Starting in August, 2008, the Company will begin operating in Minnesota as
      limited liability company under the name Marketplace Home Mortgage Webdigs,
      LLC
      (see subsequent events note 8 for further explanation). Marquest Financial
      will
      retain its Florida office at least for the present time. The Company’s principal
      market is the United States.





The
      online real estate broker segment offers a superior customer experience to
      a
      full service real estate broker. The main distinction offered by the Company’s
      real estate brokerage services is that of a flat fee structure for listing
      services and a graduated fee structure offering customers a rebate up to
      two-thirds of the Company’s broker commission for real estate buyers. This
      business segment operates as Webdigs, Inc. Its principal market is also the
      United States.





The
      corporate segment consists primarily of investments in fixed assets, personnel
      and other operating expenses associated with the Company’s corporate offices in
      Minneapolis, and certain technology initiatives.





Selected
      financial information about the Company’s operations by segment for the nine
      month period ended July 31, 2008 and for the period from inception (May 1,
      2007)
      to July 31, 2007 is as follows:





Online
                Real Estate Brokerage
            
            Retail
                Mortgage Brokerage
            
            Corporate
                and Other
            
            Total**Nine
                Months Ended July 31, 2008**Net
                revenues
            
            $
            206,365
            
            $
            528,918
            
            $
            —
            
            $
            735,283Operating
                loss
            
            
            (1,055,728
            )
            
            (146,471
            )
            
            (537,308
            )
            
            (1,739,507
            )Interest
                expense
            
            
            —
            
            
            6,483
            
            
            504
            
            
            6,987Depreciation
                and amortization
            
            
            109,948
            
            
            60,363
            
            
            —
            
            
            170,311Assets
            
            
            371,302
            
            
            143,511
            
            
            24,188
            
            
            539,001Capital
                expenditures and website development costs
            
            
            15
                ,938
            
            
            2,278
            
            
            —
            
            
            18,216




11




**SEGMENT
      FINANCIAL INFORMATION**





Online
                Real Estate Brokerage
            
            Retail
                Mortgage Brokerage
            
            Corporate
                and Other
            
            Total**For
                the Period from Inception (May 1, 2007) to July 31,
                2007**Net
                revenues
            
            $
            —
            
            $
            20,914
            
            $
            —
            
            $
            20,914Operating
                loss
            
            
            (104,250
            )
            
            (770
            )
            
            (162,631
            )
            
            (267,651
            )Interest
                expense
            
            
            —
            
            
            —
            
            
            —
            
            
            —Depreciation
                and amortization
            
            
            —
            
            
            —
            
            
            —
            
            
            —Assets
            
            
            274,904
            
            
            50,217
            
            
            106,768
            
            
            431,889Capital
                expenditures and website development costs
            
            
            261,154
            
            
            —
            
            
            —
            
            
            261,154**Three
                Months Ended July 31, 2008**Net
                revenues
            
            $
            141,032
            
            $
            94,890
            
            $
            —
            
            $
            235,922Operating
                loss
            
            
            (210,640
            )
            
            (66,569
            )
            
            (274,781
            )
            
            (551,990
            )Interest
                expense
            
            
            —
            
            
            1,971
            
            
            462
            
            
            2,433Depreciation
                and amortization
            
            
            36,556
            
            
            20,588
            
            
            —
            
            
            57,144Assets
            
            
            371,302
            
            
            143,511
            
            
            24,188
            
            
            539,001Capital
                expenditures and website development costs
            
            
            —
            
            
            —
            
            
            —
            
            
            18,216**Three
                Months Ended July 31, 2007**Net
                revenues
            
            $
            —
            
            $
            20,914
            
            $
            —
            
            $
            20,914Operating
                loss
            
            
            (104,250
            )
            
            (770
            )
            
            (162,631
            )
            
            (267,651
            )Interest
                expense
            
            
            —
            
            
            —
            
            
            —
            
            
            —Depreciation
                and amortization
            
            
            —
            
            
            —
            
            
            —
            
            
            —Assets
            
            
            274,904
            
            
            50,217
            
            
            106,768
            
            
            431,889Capital
                expenditures and website development costs
            
            
            261,154
            
            
            —
            
            
            —
            
            
            261,154





**8**
            **SUBSEQUENT
                EVENTS**





During
      the period from August 1, 2008 to August 18, 2008 the Company sold 44,000 shares
      of unregistered common stock to accredited investors for $11,000 ($0.25 per
      share) in cash proceeds.





The
      Company also sold 260,000 shares of common stock for $46,800 ($0.18 per share)
      on August 18, 2008.





On
      August
      1, 2008, the Company entered into a joint venture arrangement with a new retail
      mortgage partner: Marketplace Home Mortgage, LLC. The two companies jointly
      created Marketplace Home Mortgage Webdigs, LLC. Webdigs’ ownership stake in the
      new company is 49%. The new mortgage venture will allow Webdigs the opportunity
      to offer a broader array of mortgage products to its retail customers, obtain
      more favorable pricing for its customers, and provide better retail service.
      The
      Company anticipates that its minority interest in the new mortgage broker will
      be treated on the equity basis for accounting purposes starting in the quarter
      ending October 31, 2008.




12




**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 statements, and notes thereto, contained in our Form
      10
      Registration Statement, as amended, filed with the SEC on September 5, 2008
      and
      relating to our fiscal year ended October 31, 2007.*





**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 Form 10 filed with the SEC on September 5, 2008
      should be considered in evaluating our prospects and future
      performance.





**General
      Overview**





*Real
      Estate*





We
      are a web-based,
      full service real estate
      company that offers innovative services to home buyers and sellers. We share
      with each buyer two-thirds of the commission we receive from the seller or
      listing broker, with a minimum fee of $3,000 per transaction to the Company.
      Using a generally accepted industry average of 2.7% fee for buyer
      representation, any customer purchasing a home with a price greater than
      approximately $111,000 may benefit financially from using Webdigs as the broker.
      Using the same 2.7% buyer’s brokers fee, a customer purchasing a home with a
      final price greater than $333,000 will receive a commission rebate of
      approximately 1.8% of purchase price (or two-thirds of the 2.7% buyer’s brokers
      fee). Again using the same 2.7% buyers broker fee, a buyer purchasing a home
      with sales price between $111,000 and $333,000 will pay Webdigs a flat $3,000
      broker fee with the remainder of the buyers broker fee being returned to him
      as
      a non-taxable rebate. We believe this gives buyers a financial incentive to
      use
      our services. We primarily target those home buyers who are willing and able
      to
      independently begin their home search on the internet. As part of our website
      interface and personal service, we also offer home buyers tools to manage their
      purchase transactions from initial search to the closing of their
      purchase.




13





We
      provide our home sellers with Northstar MLS listings for a flat fee of $3,000
      at
      closing. A traditional listing (selling) broker charges 3.3% of final sale
      price
      as their fee for representing a seller. Assuming a home price of $300,000,
      a
      Webdigs listing customer may save approximately $6,900 on his or her home sale
      by using Webdigs as their broker. Instead of paying a broker 3.3% of the
      $300,000 sale price ($9,900), the seller would pay Webdigs $3,000. The savings
      of $6,900 belongs to the Webdigs customer. The Northstar MLS contains listings
      from Minnesota, portions of western Wisconsin, northern Iowa, and eastern North
      and South Dakota. Our listings also appear on Realtor.com and 14 other national
      home-listing websites. In addition to providing home sellers with a home
      listing, Webdigs arranges for virtual home tours of our sellers’ homes so that
      the resulting virtual tour may become a part of the listing on our website.
      To
      assist with the pricing of a seller’s home, we provide a comparative market
      analysis to the seller and individual consultation on pricing strategies.
      Finally, we also provide a range of individual strategies for readying a
      seller’s home for sale, including appropriately staging the home. All of these
      sell-side services are furthered by our marketing and advertising campaign
      designed to drive traffic to our website.





We
      currently offer our services in three states—Minnesota, Wisconsin and Florida.
      When we represent buyers, we share with them up to two-thirds of our buyer
      broker commission, which we receive from the seller or listing broker. Since
      inception (May 1, 2007) to July 31, 2008, our closed buy-side transaction gross
      revenue has exceeded $340,000, from which we have earned net commissions of
      $159,000, an average of about $3,300 per transaction. We have closed 50
      transactions in representation of buyers since inception and eleven transactions
      in representation of sellers. On average, the clients for whom we have
      acted as a buyer’s broker have received a commission rebate of $3,800. Including
      the $295 administrative fee that we charge at closing, we have averaged about
      $3,295 revenue for each of the eleven listings that have closed. Our aggregate
      net revenue from our listing (sellers) totals $38,000.





Although
      there are accepted norms, the amount of the commission that we receive on a
      transaction depends on the price of the home and percentage commission offered
      to the buyer’s broker by the seller or listing broker. Generally speaking, when
      choosing a percentage commission to offer to buyer brokers, a seller or listing
      broker may consider factors such as the general state of the local housing
      market, how long the home has been on the market and how much the seller or
      listing broker values the services of buyer’s brokers. As of July 31, 2008, we
      have received on average a net buyer’s broker commission equal to 1.2% of the
      average $275,000 purchase price our customers have paid for their new homes.
      For
      our listing clients, the $3,295 we charge (which includes a $295 administrative
      fee) represents an average of about 0.9% of the average price of the homes
      we
      have sold.





Currently,
      our revenues consist primarily of (i) mortgage broker business commissions
      received and loan fees earned at the time a mortgage transaction closes and
      (ii)
      online real estate brokerage commissions received, as agents in residential
      real
      estate transactions, at the time a real estate transaction closes. We record
      revenues as gross revenue. Consumer rebates and third-party agent commissions
      paid to buyer’s brokers (in those instances where we represent the seller of a
      home) are treated as offsetting reductions to gross revenue. Our net revenues
      are principally driven by the number of transactions we close and the average
      net revenue per transaction. Average net revenue per transaction is a function
      of (1) the home purchase price and percentage commission we receive on each
      transaction and (2) the fee income received from mortgage loan
      origination.





In
      addition to traditional financial measures, we use several tools to monitor
      the
      overall health of our real estate business. Some of the key performance
      indicators we use are the following: website traffic, daily number of contacts
      initiated by potential customers, number of new customers (i.e., both buyers
      and
      sellers) added weekly, weekly number of transactions closed, and overall
      customer pipeline of active customers. We also monitor daily cash flow, the
      average time it takes to close a transaction (i.e., time elapsed between the
      creation of a customer and the closing date for the transaction related to
      that
      customer).




14





As
      evidenced by the growth we have experienced, we remain optimistic about our
      ability to grow our real estate business profitably. We also believe our
      brokerage model, with the lower prices we offer, will be seen favorably by
      customers looking to save money when buying or selling a home in a difficult
      market.





*Mortgage
      and Insurance*





We
      generate mortgage income through our wholly owned mortgage subsidiary, Marquest
      Financial, Inc. Marquest has its own staff of mortgage loan officers who obtain
      mortgages for customers who are refinancing existing mortgages or obtaining
      new
      mortgages because of the purchase of a new home or the addition of a second
      mortgage to an already existing mortgage. Marquest bears no risk of loan default
      nor determines loan eligibility. All mortgage fee income is paid by the loan
      underwriter (typically a large bank) to Marquest for finding the customer and
      processing the paperwork for the loan.





There
      are
      two types of fees paid by banks to Marquest for its work as a mortgage broker.
      The first is loan origination fees, which may be considered as commissions.
      Typically, loan origination fees are a percentage of the total value of the
      loan. A second fee source is referred to as “yield spread premium.” In certain
      cases, a mortgage broker might find it possible to increase the interest rate
      charged on a mortgage above the rate considered acceptable by the bank. In
      those
      cases, the bank will pay a second fee “yield spread premium” to the mortgage
      broker for obtaining a more favorable interest rate for the bank. A 1% to 2%
      loan origination fee is considered average by the U.S. mortgage industry. Yield
      spread premiums are also frequently paid by mortgage underwriters. When they
      are
      earned, a typical yield spread would range from 0% to 2%.





Our
      mortgage business operates separately from real estate. Overall, it is presently
      a larger source of revenue than our real estate brokerage activities. Since
      inception, we have acted as a mortgage broker in about 124 mortgage transactions
      generating total mortgage fee revenue of $614,000 as of July 31, 2008. At times,
      a loan underwriter will group loan origination fees and yield spread premiums
      together in its paperwork with the mortgage broker fee, making it difficult
      to
      separate loan origination fee income and yield spread premium income. However,
      using data provided by our mortgage underwriters, we believe we received a
      total
      of $226,000 from loan origination and processing fees and a total of $388,000
      from yield spread premiums through July 31, 2008. Our yield spread premiums
      through July 31, 2008 averaged 0.84%.





Due
      to
      the highly publicized distress of the subprime mortgage lending industry and
      the
      turmoil facing the nation’s leading mortgage lending institutions, Freddie Mac,
      and Fannie Mae, all banks have tightened restrictions on new borrowers. This
      has
      noticeably affected our mortgage brokerage business even though we have not
      engaged in any subprime mortgage lending.





To
      combat
      the volatility the mortgage market currently faces, starting August 1, we have
      entered into a new mortgage brokerage business model. Together with a major
      Twin
      Cities mortgage broker, Marketplace Home Mortgage, we have formed a jointly
      owned entity to combine the powerful lead generation potential of real estate
      customers of our Webdigs real estate business with the mortgage brokerage
      capacity offered by Marketplace
      Home Mortgage. The entity carries the name Marketplace Home Mortgage Webdigs,
      LLC.





Through
      the 24 hour underwriting, full array of mortgage products, including FHA loans,
      and efficient well developed processing and administrative practices that our
      partner Marketplace Home Mortgage has to offer, we believe that our ability
      to
      attract Webdigs real estate clients will be vastly improved over our previous
      mortgage offerings.




15





For
      the
      time being, we will keep Marquest Financial operating in Florida separately
      from
      Marketplace Home Mortgage Webdigs. The new entity does not have a mortgage
      broker license in Florida.





To
      further enhance cash flow and provide convenience to our real estate customers,
      we have recently obtained approval from the Commissioner of Insurance in
      Minnesota to refer Webdigs customers to an unaffiliated insurance broker,
      Webdigs Insurance Agency, LLC, for quotes on their home and other personal
      insurance policies. Should a referred customer end up purchasing insurance
      through our referral, we will receive a commission for the
      referral.





**Trends
      and Uncertainties**





We
      are
      experiencing sales growth but do face significant liquidity constraints due
      to
      the costs associated with developing our real estate business. Since inception
      (May 1, 2007) to July 31, 2008, we have generated an accumulated net loss
      totaling $2,349,210. As mentioned in more detail below, we will require
      additional financing to maintain operations and to achieve our expansion goals.
      If our efforts to raise additional capital take longer than we expect or we
      are
      unsuccessful in securing capital, we expect to roll back our advertising and
      growth initiative, identify other areas to reduce current costs and concentrate
      on continuing to build market share and real estate revenue in the
      Minneapolis-St. Paul metropolitan area.




**Results
      of Operation**





**For
      the three month period ended July 31, 2008 compared to the three month period
      ended July 31, 2007.**





The
      Company incurred operating losses of $551,990 for the three months ended July
      31, 2008 compared to a loss of $267,651 for the three month period ended July
      31, 2007. Comparing these two quarters is not very useful since the Company
      commenced operations on May 1, 2007. For the three months ended July 31, 2007,
      the Company was creating its website, seeking investment capital and hiring
      employees. We did not engage in any efforts to obtain customers and had no
      real
      estate revenues. Nevertheless measured at the consolidated Company level, total
      net sales increased from $20,914 for the three month period from inception
      (May
      1, 2007) to July 31, 2007 to $235,922 for the three month period ended July,
      31,
      2008, an increase of approximately 1,028%. During the three months ended July
      31, 2008, we closed 40 real estate transactions for total net real estate
      brokerage revenues of $141,032. This represents 205% sequential growth over
      the
      $46,238 in real estate brokerage revenues we recorded for the three months
      ended
      April 30, 2008. The mortgage environment was more difficult in the quarter
      ended
      July 31, 2008 as mortgage brokerage revenue of $94,890 declined by 37%
      sequentially over the three months ended April 30, 2008 total of $150,286.
Selling,
      general administrative expenses increased to $787,912 for the three months
      ended
      July 31, 2008 from $288,565 for the three months ended July 31, 2007. This
      significant increase of $499,347 was due to the following: 1) $157,000 related
      to the Marquest operations which were not in operations for the comparable
      quarter, 2) $280,000 for additional marketing and web-site costs over the
      comparable quarter and 3) approximately $62,000 for additional costs related
      to
      going public and increased headcount in the office.The operating loss
      for the three months ended July 31, 2008 can be attributed to the fact that
      Webdigs remains a start-up company that is still developing its niche in the
      real estate brokerage market. We continued during the May-July 2008 quarter
      to
      add sales staff, improve the customer website and build company awareness
      through public relations, marketing and advertising and expect to continue
      to do
      more brand building in the coming months.




16




**For
      the nine month period ended July 31, 2008 compared to the period from inception
      (May 1, 2007) to July 31, 2007.**





The
      Company incurred operating losses of $1,739,507 for the nine months ended July
      31, 2008 compared to a loss of $267,651 for the period from inception (May
      1,
      2007) to July 31, 2007. As mentioned above, a year to year comparison is not
      yet
      very useful for Webdigs. So the comparison is really a nine month comparison
      to
      a three month comparison. Additionally, throughout the time period since
      inception, May 1, 2007 to July 31, 2008, we have been continually expanding
      our
      operations, hiring staff, developing operating processes and information
      systems, and developing marketing programs for our business. Of the $1,854,864
      in selling expenses incurred in the nine months ended July 31, 2008, we spent
      approximately $841,000 on advertising and maintaining/improving our www.
      webddigs.com consumer
      website.




For
      the
      nine months ended July 31, 2008 total net sales were $735,283 compared to
      $20,914 for the period from inception (May 1, 2007) to July 31, 2007, an
      increase of 3400%. Real estate broker revenue increased from $0 for the nine
      months ended July 31, 2007 to $206,365 for the nine months ended July 31, 2008.
      Due to the fact that we had our retail mortgage brokerage operating for the
      entire nine month period ended July 31, 2008, we had mortgage revenues of
      $528,918 as compared to $20,914 for the period from inception (May 1, 2007)
      to
      July 31, 2007.





Our
      general and administrative spending of $619,926 for the nine months ended July
      31, 2008 represents the fruits of our efforts to keep overhead low and staffing
      to a minimum. It compares to total G&A costs of $ 156,055 for the period
      from inception (May 1, 2007) to July 31, 2007. In the current fiscal year (nine
      months ended July 31, 2008) total G&A costs represent approximately 1/3 of
      our selling costs. With the exception of our Chief Financial Officer and
      part-time accountant, everyone employed by the Company is directly involved
      in
      sales efforts. In fact, all Webdigs real estate employees except our two
      transaction coordinators are licensed real estate agents. We will continue
      to
      keep a focus on holding administrative expenses low as we expand our
      operations.





**Assets
      and Employees; Research and Development**





Our
      primary assets are cash and intellectual-property rights, which are the
      foundation for our services. At this time, we do not anticipate purchasing
      or
      selling any significant equipment or other assets in the near term. Nor do
      we
      anticipate any imminent or significant changes in the number of our employees.
      We may, however, increase the number of independent contractor real estate
      agents upon whom we rely to provide personal services in the event that we
      expand into other markets or our business in our current markets significantly
      increases.





We
      expect
      that we will invest time, effort and expense in the continued refinement of
      our
      website and user interface. Currently, we expect to spend approximately $400,000
      in such improvement activities over the course of fiscal 2008. As of July 31,
      2008 we have spent approximately $365,000.





**Liquidity
      and Capital Resources; Anticipated Financing Needs**





As
      of
      July 31, 2008, we had $24,188 cash and cash equivalents, current assets of
      $79,109, and current liabilities of $998,934. From October 31, 2007 through
      July
      31, 2008 we raised a total of $841,500 through the sale of our common stock
      as
      part of the same private placement offering that started on November 1, 2007.
      In
      consideration of such proceeds, we issued a total of 3,366,000 shares of common
      stock.




We
      used
      $888,914 of cash in operating activities during the nine months ended July
      31,
      2008 compared to cash provided from operations totaling $129,096 for the period
      from inception (May 1, 2007) to July 31, 2007. Cash used in operations for
      the
      nine months ended July 31, 2008 included a net loss of $1,746,494, which was
      partially offset by $337,682 of non-cash expenses for depreciation,
      amortization, loss on disposal of fixed assets and share-based compensation.
      An
      increase in accounts payable of $525,214 partially mitigated the use of cash
      from operations. For the nine months ended July 31, 2008, cash flows used in
      investing activities included payments for computer equipment of $18,216
      compared to $261,246 for the period from inception (May 1, 2007) to July 31,
      2007 for payments of $8,582 for computer equipment and $252,572 for web-site
      development costs. For the nine months ended July 31, 2008, cash flows from
      financing activities included issuance of common stock for $841,500 and a
      decrease in capital lease obligations of $5,861 compared
      to $205,912 received from issuance of common stock for the period from inception
      (May 1, 2007) to July 31, 2007.




17





For
      the
      issuances of common stock in the private placement offering, we relied on the
      exemption from federal registration under Section 4(2) of the Securities Act
      of
      1933 and Rule 506 promulgated thereunder. We relied on this exemption and the
      safe harbor thereunder based on the fact that there are and will continue to
      be
      a limited number of investors, all of whom will be “accredited investors” under
      Rule 501 of the Securities Act of 1933 and all of whom have and will have
      knowledge and experience in financial and business matters such that the
      investors were capable of evaluating the risks of the investment. The securities
      offered and sold in these transactions were not (and, with respect to the
      aforementioned anticipated future sales, will not be) registered under the
      Securities Act of 1933 and therefore may not be offered or sold in the United
      States absent registration or an applicable exemption from registration
      requirements. The disclosure about the private placement offering contained
      in
      this quarterly report is not an offer to sell or a solicitation of an offer
      to
      buy any securities of the Company.





Over
      the
      course of the next few months, we expect to continue seeking additional
      financing. The total amount of financing we may seek may be significant, and
      may
      be as high as $5 to $6 million. If we succeed in raising such amount, we believe
      that we would have sufficient capital to fund our operations for the forseeable
      future. In the absence of such financing, we will have sufficient capital to
      fund our operations only through October 31, 2008, based in part on extended
      payment terms that we have negotiated and obtained with our vendors. On August
      18, 2008, we entered into subscription agreements with two investors for the
      purchase of an aggregate of 2,000,000 shares of common stock at the per-share
      price of $0.10 per share. As of the date of this filing, however, we have not
      received proceeds from these subscriptions and have not issued any shares.
      By
      virtue of solid relationships with all of our major vendors and a increasing
      sales trend, if we do obtain funds from these two subscriptions, then we believe
      that (in the absence of any additional financing) we will have capital
      sufficient to fund our operations through December 31, 2008 even after the
      satisfaction of our key vendors.





Additional
      financing may not be available on terms favorable to us, especially in light
      of
      current debt and equity markets. If additional funds are raised by the issuance
      of our equity securities, such as through the issuance and exercise of common
      stock, then existing stockholders will experience dilution of their ownership
      interest. If additional funds are raised by the issuance of debt or other types
      of (typically preferred) equity instruments, then we may be subject to certain
      limitations in our operations, and issuance of such securities may have rights
      senior to those of the then existing holders of our common stock. If adequate
      funds are not available or not available on acceptable terms, we may be unable
      to fund expansion, develop or enhance products or respond to competitive
      pressures.





Effective
      as of May 7, 2008, we granted options to three non-employee directors as a
      means
      of inducing them to join the Board of Directors, giving each of them the right
      to purchase up to 200,000 shares of common stock at the per-share price of
      $0.25. These options may be exercised, to the extent vested, at any time prior
      to May 7, 2013. Rights to purchase one-half of the shares issuable under the
      options vested immediately upon issuance, with the remaining rights scheduled
      to
      vest in two equal annual installments on each of May 7, 2009 and 2010. Under
      SFAS No. 123R, for stock-based awards granted after January 1, 2006, we
      recognize compensation expense based on estimated grant date fair value using
      the Black-Scholes option-pricing model. Black-Scholes is used to determine
      the
      fair value for options issued to both employees and non-employees. The estimated
      fair value of these stock option grants was $73,978, and will be recorded as
      stock compensation expense over the vesting period starting on May 7, 2008.
      We
      recorded third quarter charge of $41,610 as director’s compensation expense for
      337,500 vested and expected to vest options as of July 31, 2008.




18





**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.





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
      online 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. Our mortgage brokerage business recognizes commissions
      received and loan fees earned at the time a mortgage loan closes.





*Income
      Taxes* .
      Subsequent to the reverse merger on October 24, 2007, we account for income
      taxes in accordance with SFAS No. 109, as clarified by FIN No. 48, which
      requires 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.




FIN
      No.
      48 requires the recognition of 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* .
      The
      Company accounts for stock incentive plans under the recognition and measurement
      provisions of FASB Statement No. 123(R), Share-Based Payments, which requires
      the measurement and recognition of compensation expense for all stock-based
      awards based on estimated fair values, net of estimated forfeitures. Share-based
      compensation expense includes compensation cost for restricted stock
      awards.




19




*Intangible
      Assets* .
      We have
      two types of intangible assets: website development and customer
      lists.





Website
      Development





The
      primary interface with the customer in our online real estate broker operation
      is the Webdigs.com website. Certain costs incurred in development of this
      website have been capitalized according to provision in Emerging Issues Task
      Force Issue No. 00-2, Accounting for Website Development Costs (EITF 00-2),
      and
      AICPA Statement of Position 98-1, Accounting for the Costs of Computer Software
      Developed or Obtained for Internal Use. Amortization is on a straight-line
      basis
      over the estimated useful life of the website of 3 years.




Customer
      Lists





As
      part
      of our acquisitions of HEA and Marquest (See Note 2 to our audited financial
      statements for the period from date of inception, May 1, 2007, to October 31,
      2007), we recorded the fair value of pre-existing customer relationships of
      these two entities. The fair value estimated for each customer list was $27,404
      for HEA and $130,859 for Marquest, for a total of $158,263. The fair values
      of
      these relationships will be amortized on a straight-line basis (which
      approximates the anticipated revenue stream) over their estimated useful lives
      based on an estimated revenue period ranging from 2 to 3 years.




**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.





**Going
      Concern**





We
      have
      incurred operating losses, accumulated deficit and negative cash flows from
      operations since May 1, 2007 (inception). As of October 31, 2007, we had an
      accumulated deficit of $602,716, and as of July 31, 2008, we had an accumulated
      deficit of $2,349,210. These factors, among others, raise substantial doubt
      about our ability to continue as a going concern. In this regard, our current
      independent auditors have included an explanatory paragraph in opinions they
      have previously issued related to our annual audited financial statements as
      to
      the substantial doubt about our ability to continue as a going concern. 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.




20





**Off-Balance
      Sheet Arrangements**





As
      of July 31, 2008, the Company did not have any off-balance
      sheet arrangements.





**Item
              4T.**
            **Controls
                and Procedures.**





**Evaluation
      of Disclosure Controls and Procedures**





An
      evaluation of the effectiveness of our “disclosure controls and procedures” (as
      such term is defined in Rules 13(a)-15(e) of the Securities Exchange Act of
      1934) was carried out by the Company under the supervision and with the
      participation of our Chief Executive Officer and Chief Financial
      Officer.





Based
      on
      that evaluation, our Chief Executive Officer and Chief Financial Officer have
      concluded that these disclosure controls and procedures were not effective
      due
      to a lack of segregation of duties in our accounting and financial functions,
      including financial reporting and our quarterly close process. Due to our lack
      of sufficient capital, management has concluded that with certain oversight
      controls that are in place, the risks associated with the lack of segregation
      of
      duties are not sufficient to justify the costs of potential benefits to be
      gained by adding additional employees at this time. Management intends to
      periodically reevaluate this situation. If we secure sufficient capital, we
      expect to examine the possibility of increasing staffing to mitigate the current
      lack of segregation of duties within the accounting and financial
      functions.





**Changes
      in Internal Control Over Financial Reporting**





During
      the fiscal quarter ended July 31, 2008, no change in our internal control over
      financial reporting occurred which has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.








**PART
      II –
      OTHER INFORMATION**





**Item
              1.**
            **Legal
                Proceedings**




None.





**Item
              1A.**
            **Risk
                Factors.**





There
      have been no material changes to our risk factors and uncertainties. For a
      discussion of risk factors applicable to Webdigs and its business, please refer
      to the “Risk Factors” section of our Registration Statement on Form 10/A filed
      with the SEC on September 5, 2008.





**Item
              2.**
            **Unregistered
                Sales of Equity Securities and Use of
                Proceeds**




During
      the quarter ended July 31, 2008, we continued to raise operating capital through
      a private placement of our common stock at a price per share of $0.25. We sold
      60,000 shares of our restricted common stock for total proceeds of
      $15,000. These sales were made pursuant to private transactions that did not
      involve a public offering of securities and accordingly, we believe that these
      transactions were exempt from registration requirements of the Securities Act
      pursuant to Section 4(2) thereof and rules promulgated thereunder. Based on
      representations from the above-referenced investors, we have determined that
      such investors were “accredited investors” (as defined by Rule 501 under the
      Securities Act) and acquired the shares for investment and not distribution,
      they could bear the risks of the investment, and they could hold the securities
      for an indefinite period of time. The securities offered and sold in this
      offering were not registered under the Securities Act and therefore may not
      be
      offered or sold in the United States absent a registration or an available
      exemption from such registration.




**Item
              6.**
            **Exhibits.**





Exhibit
                No.
            
            Description31.1
            
            Certification
                of Chief Executive Officer31.2
            
            Certification
                of Chief Financial Officer32
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of
                2002





21





**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 22, 2008




/s/ Edward
                WickerEdward
                  Wicker
                *Chief
                  Financial Officer*
                
                Dated:
                  September 22, 2008






22




**INDEX
      TO EXHIBITS FILED WITH THIS REPORT**




Exhibit
                  No.
              
              Description31.1
              
              Certification
                  of Chief Executive Officer31.2
              
              Certification
                  of Chief Financial Officer32
              
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of
                  2002
  23