UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2013   

or

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________ to ___________________

     

 

Commission File Number 0-53359

 

 

REALBIZ MEDIA GROUP, INC.

Formerly Webdigs, Inc.

 

(Exact name of registrant as specified in its charter)

 

Delaware		11-3820796
(State of incorporation)		(I.R.S. Employer Identification No.)
2690 Weston Road, Suite 200 Weston, FL		33331
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (954) 888-9779

 

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 the filing requirements for the past 90 days.  

  ¨ Yes    x No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( §232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

¨ Yes    ¨ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer   ¨    Accelerated filer  ¨    Non-accelerated filer  ¨     Smaller reporting company   x

 

As of March 22, 2013 there were 6,478,889 shares of the issuer’s common stock, $0.001 par value, outstanding. This takes into account the 1 for 200 reverse stock split which occurred on May 17, 2012.

 

 

Realbiz Media Group, Inc.

 

Form 10-Q

  

Table of Contents

  

Page
PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6
Item 4.	Controls and Procedures	6
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	7
Item 1A.	Risk Factors	7
Item 2.	Unregistered Sales of Equity Securities	7
Item 3.	Defaults Upon Senior Securities	7
Item 4.	Mine Safety Disclosures	7
Item 5.	Other Information	7
Item 6.	Exhibits	7
SIGNATURES		8
EXHIBIT INDEX		8

  

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REALBIZ MEDIA GROUP, INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

FOR THE THREE MONTH

PERIOD ENDED JANUARY 31, 2013 AND 2012

 

 

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REALBIZ MEDIA GROUP, INC.

 

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TABLE OF CONTENTS

 

	PAGE
Consolidated Financial Statements:
Consolidated Balance Sheets	F-2
Consolidated Statements of Operations	F-3
Consolidated Statements of Cash Flows	F-4
Notes to Consolidated Financial Statements	F-5

 

 

Real Biz Media Group, Inc.

Consolidated Balance Sheets

 

		January 31, 2013			October 31, 2012(1)
ASSETS		(unaudited)
Current Assets:
Cash and cash equivalents		$	33,983		$	36,408
Accounts receivable, net			66,275			31,669
Total current assets			100,258			68,077
Intangible assets			4,796,978			4,796,978
Total Assets		$	4,897,236		$	4,865,055
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities		$	902,896		$	836,961
Deferred revenue			45,204			41,859
Advances from affiliate			1,230,938			835,729
Loans payable			50,000			50,000
Due to minority stockholder			615,264			615,264
Total current liabilities			2,844,302			2,379,813
Total liabilities			2,844,302			2,379,813
Shareholders' Equity :
Preferred series A shares $.001 par value 125,000,000 authorized, 100,000,000 and 100,000,000 issued and outstanding at January 31, 2013 and October 31, 2012 respectively.			100,000			100,000
Common stock $.001 par value, 125,000,000 authorized, 383,651 and 383,651 issued and outstanding at January 31, 2013 and October 31, 2012 respectively.			383			383
Additional paid in capital			8,482,483			8,482,483
Other comprehensive loss			(4,383	)		(5,849	)
Accumulated deficit			(6,525,549	)		(6,091,775	)
Total Shareholders' Equity			2,052,934			2,485,242
Total Liabilities and Shareholders' Equity		$	4,897,236		$	4,865,055

 

(1) Derived from audited financial statements

 

See accompanying notes to unaudited consolidated financial statements.

 

 

Real Biz Media Group, Inc.

Consolidated Statements of Operations 

(unaudited)

 

		For the Three Months ended January 31,
		2013				2012
Revenues
Real estate revenues		$	258,328			$	284,426
Other revenue			13,667				42,321
Total Revenue			271,995				326,747
Cost of revenues			22,205				28,646
Gross profit			249,790				298,101
Operating expenses
Salaries and benefits expenses			363,821				224,693
Selling and promotion expenses			56,381				189,054
General and administrative expenses			105,434				107,930
Total operating expenses			525,636				521,677
Operating loss			(275,846	)			(223,576	)
Other expense
Foreign exchange loss			(2,791	)			(65	)
Total other expense, net			(2,791	)			(65	)
Net loss		$	(278,637	)		$	(223,641	)
Preferred Stock Dividend			(155,137	)			-
Net loss applicable to common shareholders			(433,774	)			(223,641	)
Other comprehensive income (loss)
Unrealized gains on currency translation adjustments			1,466				13,403
Comprehensive loss		$	(432,308	)		$	(210,238	)
Weighted average numbers of shares outstanding			383,651				642
Basic and diluted net loss per share		$	(1.13	)		$	(348.35	)

 

See accompanying notes to unaudited consolidated financial statements.

 

 

Real Biz Media Group, Inc.

Consolidated Statements of Cash Flows

(unaudited)

           

		For The Three Months Ended January 31,
		2013				2012
Cash flows from operating activities:
Net loss		$	(278,637	)		$	(223,641	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Other comprehensive income			1,466				13,403
Changes in operating assets and liabilities:
Increase in accounts receivable			(34,606	)			(15,171	)
Increase in prepaid and other assets			-				(22,858	)
Decrease in accounts payable & accrued liabilities			(89,202	)			(11,954	)
Increase in deferred revenue			3,344				5,724
Net cash used in operating activities			(397,635	)			(254,497	)
Cash flows from financing activities
Proceeds from advances from affiliates			395,210				130,257
Proceeds from notes payable			-				70,511
Net cash provided by financing activities			395,210				200,768
Decrease in cash and cash equivalents			(2,425	)			(53,729	)
Cash and equivalents, at beginning of year			36,408				111,237
Cash and equivalents, at end of year		$	33,983			$	57,508

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

REALBIZ MEDIA GROUP, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended January 31, 2013 and 2012

  

NOTE 1: BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial information has been prepared by Realbiz Media Group, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC).  Accordingly, it does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of this financial information have been included.  Financial results for the interim period presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period.  This financial information should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10K for the year ended October 31, 2012.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

On October 9, 2012 RealBiz Holdings, Inc. (RealBiz) n.k.a. Realbiz Media Group, Inc., formerly a private entity, was party to two transactions. In the first transaction it was acquired by an unrelated public company, Next 1 Interactive, Inc. (the Parent). This transaction was accounted for by the Parent as a business combination using the acquisition method of accounting. Accordingly, the fair value adjustments were "pushed down" to RealBiz's books in accordance with the SEC Staff Accounting Bulletin Topic 5J "New Basis of Accounting Required in Certain Circumstances. In the second transaction the Parent, in order to make its new subsidiary, RealBiz, a public company, had RealBiz enter into a reverse acquisition transaction with another public company, Webdigs, Inc. (Webdigs) whereby Webdigs acquired 100% of RealBiz in exchange for Webdigs issuing a voting preferred stock to the Parent giving the Parent control over Webdigs. This transaction was accounted for as a recapitalization of RealBiz. Webdigs then changed its name to Realbiz Media Group, Inc.

 

The chronological historical events leading to the above transactions are as follows:

 

On August 8, 2012, Next 1 Interactive, Inc., a Nevada corporation (“Next 1”) together with its subsidiary Next One Realty (the trade name for Next 1’s wholly owned subsidiary Attaché Travel International, Inc.) entered into a Purchase Agreement (“Acknew Purchase Agreement”) with Acknew Investments Inc. (“Acknew”) and RealBiz Holdings Inc. Under the Acknew Purchase Agreement, Next 1 has agreed to acquire from Acknew common shares of RealBiz Holdings, Inc. representing approximately an 85% ownership interest in RealBiz Holdings, Inc. RealBiz Holdings Inc. is the parent corporation of RealBiz 360, Inc. and RealBiz 360 Enterprise (Canada), Inc. (together referred to as “RealBiz”).

 

Pursuant to the Acknew Purchase Agreement, Next 1 and Webdigs, Inc. (“Webdigs” or the “Company”) would consummate a share exchange transaction contemplated by a Share Exchange Agreement dated April 5, 2012 (“Share Exchange Agreement”) by and between Next 1 and Webdigs. In that contemplated share exchange transaction, Next 1 would receive a controlling interest in Webdigs through its receipt of approximately 93 million shares of newly designated preferred stock representing approximately 92% of the total outstanding capital stock of Webdigs immediately after the transaction. In exchange, Next 1 would transfer its entire share ownership in Next One Realty to Webdigs.

 

On October 9, 2012, Webdigs and Next 1 completed the transactions contemplated by the Share Exchange Agreement. Under the Share Exchange Agreement, Webdigs received all of the outstanding equity in Attaché Travel International, Inc. (“Attaché”). In exchange for our Webdigs’s receipt of the Attaché shares from Next 1, Webdigs issued to Next 1 a total of 93 million shares of our newly designated Series A Convertible Preferred Stock (our “Series A Stock”). The exchange of Attaché shares in exchange for our Series A Stock is referred to as the “Exchange Transaction.”

  

As a condition to the closing of the Exchange Transaction, our Company changed its name from “Webdigs, Inc.” to “RealBiz Media Group, Inc.” on October 9, 2012, by engaging in a short-form parent-subsidiary merger in the State of Delaware.

 

 

REALBIZ MEDIA GROUP, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended January 31, 2013 and 2012

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Nature of Business

 

RealBiz is a real estate media services company that provides marketing and promotional services to listing agents and brokers through its proprietary video processing technology or virtual home tours. RealBiz has positioned itself in the following three areas:

 

1.

Real Estate Video on Demand Channel - We earn commissions and fees on home sales, pre-roll/post-roll advertising, banner ads and cross-market advertising promotions. We charge a listing and marketing fee and earn revenue from web-based and mobile advertising.

 

2.

Website and Mobile Applications - We are developing a real estate web portal to work in conjunction with our national Video on Demand (VOD) Television Platform. This site will be unique to the world of real estate search sites on multiple levels, first the user experience will be completely visual and video centric, secondly, the site will focus on local neighborhood participation for social interaction between home seekers and current residents who can provide an unbiased view of the selected neighborhood and lastly the content on the site will focus on the entire home ownership lifecycle from purchase through maintenance to home sale therefore giving the site a much deeper and more loyal audience over time.

 

3.

Traditional Real Estate Sales - Our previous company, Webdigs, had a licensed real estate brokerage division with participating brokers in 19 states. We believe there may be potential opportunities to take advantage of an improving real estate market.

 

Basis of Consolidation

 

The consolidated financial statements for the quarters ended January 31, 2013 and 2012 include the operations of Webdigs, Inc. and its wholly-owned subsidiary, Webdigs, LLC, which includes the dormant wholly owned subsidiaries of Home Equity Advisors, LLC, and Credit Garage, LLC from the recapitalization date of October 9, 2012 and the historical operations of RealBiz Media Group, Inc, which includes its subsidiaries RealBiz 360 Enterprise (Canada), Inc. and RealBiz 360, Inc. All significant intercompany accounts and transactions have been eliminated in the consolidation.

 

On May 17, 2012, the Company affected a 1 for 200 reverse stock split. All share and per share information in the consolidated financial statements presented has been retrospectively adjusted for the split.

 

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. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.

 

Cash and Cash Equivalents

 

For purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents.

 

Accounts Receivable

 

The Company provides its marketing and promotional services to agents or brokers via a web-based portal that allows for credit card payments. The Company recognizes accounts receivable for amounts uncollected from the credit card service provider at the end of the accounting period. The Company regularly reviews outstanding receivables and provides for estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its expectations.

 

 

REALBIZ MEDIA GROUP, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended January 31, 2013 and 2012

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Intangible Assets

 

In accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets, the Company assesses the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

 

1.

Significant underperformance to expected historical or projected future operating results;

 

2.

Significant changes in the manner or use of the acquired assets or the strategy for the overall business; and

 

3.

Significant negative industry or economic trends.

 

When the Company determines that the carrying value of an intangible many not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flow, the Company records an impairment charge equal to the amount book value exceeds fair value. The Company measures fair value based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company did not consider it necessary to record an impairment charge on its intangible assets during the quarters ended January 31, 2013 and 2012.

 

Intangible assets that have finite useful lives are amortized over their useful lives.

 

Convertible Debt Instruments

 

The Company records debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the FASB Accounting Standards Codification. The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest expense over the life of the debt.

 

Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, notes payable, commissions and fees payable, and interest payable. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

 

Revenue Recognition

 

The Company provides its marketing and promotional services to agents or brokers via a web-based portal that allows for credit card payments. Customers may pay a monthly recurring fee or an annual fee. Some customers additionally pay a one-time set up fee. Monthly recurring fees are recognized in the month the service is rendered. Collection of one-time set up fees and annual services fees give rise to recognized monthly revenue in the then-current month as well as deferred revenue liabilities representing the collected fee for services yet to be delivered.

 

Cost of Revenues

 

Cost of revenues includes costs attributable to services sold and delivered. These costs include such items as credit card fees, sales commission to business partners, expenses related to our participation in industry conferences, and public relations expenses.

 

Share-Based Compensation

 

The Company computes share based payments in accordance with Accounting Standards Codification 718-10 “Compensation” (ASC 718-10). ASC 718-10 establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services at fair value, focusing primarily on accounting for transactions in which an entity obtains employees services in share-based payment transactions. It also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair value of an entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

 

REALBIZ MEDIA GROUP, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended January 31, 2013 and 2012

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

In March 2005, the SEC issued SAB No. 107, Share-Based Payment (“SAB 107”) which provides guidance regarding the interaction of ASC 718-10 and certain SEC rules and regulations. The Company has applied the provisions of SAB 107 in its adoption of ASC 718-10.

 

Other 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 items such as foreign currency translation adjustments and unrealized gains and losses on certain marketable securities. For the quarters ended January 31, 2013 and 2012, the accumulated comprehensive loss was ($277,171) and ($210,238), respectively.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.

 

ASC 740-10 requires that the Company recognize the 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 consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

Income (Loss) Per Share

 

Basic net income (loss) per common share is computed by dividing the net income (loss) attributable to common shareholders by the weighted average number of shares of common stock outstanding during the period.

 

Diluted net income (loss) per common share is computed in the same manner, but also considers the effect of common stock shares underlying the following: 

 

		January 31, 2013				January 31, 2012
Common stock options			4,000				4,000
Common stock warrants			-				1,000

 

All of the common shares underlying the stock options and warrants above were excluded from diluted weighted average shares outstanding for the quarters ended January 31, 2013 and 2012 respectively because their effects were considered anti-dilutive.

 

Concentrations, Risks and Uncertainties

 

The Company’s operations are related to the real estate industry and its prospects for success are tied indirectly to interest rates and the general housing and business climates in the United States.

 

 

REALBIZ MEDIA GROUP, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended January 31, 2013 and 2012

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Recently Issued Accounting Pronouncements

 

Effective January 1, 2012, the Company adopted ASU 2011-05,   Presentation of Comprehensive Income   (“ASU 2011-05”). ASU 2011-05 requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, and the second statement would include components of other comprehensive income. This ASU does not change the items that must be reported in other comprehensive income.   . The adoption of ASU 2011-05 did not have a material impact on the Company’s interim unaudited consolidated financial statements.

 

Effective January 1, 2012, the Company adopted ASU 2011-08,   Intangibles – Goodwill and Other   (“ASU 2011-08”). ASU 2011-08   permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test.   The adoption of ASU 2011-08 did not have a material impact on the Company’s interim unaudited consolidated financial statements.

 

In July 2012, the Financial Accounting Standards Board (FASB) amended ASC 350, “ Intangibles — Goodwill and Other”. This amendment is intended to simplify how an entity tests indefinite-lived assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. The amended provisions will be effective for the Company beginning in the first quarter of 2014, and early adoption is permitted. This amendment impacts impairment testing steps only, and therefore adoption will not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

 

In August 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on financial position or results of operations of the Company.

 

In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04 ("ASU 2012-04"). The amendments in this update cover a wide range of topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on financial position or results of operations of the Company.

 

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements.

  

NOTE 3: GOING CONCERN

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

The Company has incurred losses of $278,637 and $223,641 for the three months ended January 31, 2013 and 2012 respectively. At January 31, 2013, the Company had a working capital deficit of $2,744,044, and an accumulated deficit of $6,525,549. It is management’s opinion that these facts raise substantial doubt about the Company’s ability to continue as a going concern without additional debt or equity financing. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

In order to meet its working capital needs through the next twelve months, the Company may consider plans to raise additional funds through the issuance of additional shares of common stock and or through the issuance of debt instruments. 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.

 

 

REALBIZ MEDIA GROUP, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended January 31, 2013 and 2012

 

NOTE 4: INTANGIBLE ASSETS

 

At January 31, 2013 and October 31, 2012, the Company’s intangible assets are as follows:

 

		Gross								Net
		Carrying				Accumulated				Carrying
		Amount				Amortization				Amount
January 31, 2013		$	4,796,978			$	-			$	4,796,978
October 31, 2012		$	4,796,978			$	-			$	4,796,978	*

  

On October 9, 2012, the Company entered a Share Exchange Agreement (Note 1). The Company accounted for the acquisition utilizing the purchase method of accounting in accordance with ASC 805 "Business Combinations". The Company is the acquiree for accounting purposes. Accordingly, the Company applied push-down accounting and has recorded the intangible asset as described herein. In the accompanying consolidated balance sheet.

 

* The Company is in review of the facts and circumstances surrounding events to determine if the carrying amount of held-and-used identifiable intangibles acquired during the October 2012 acquisition may be reallocated under the provisions of ASC 350 and ASC 805. The Company has until October 2013 (12 months) to determine the final allocations and it is studying a reallocation between “customer relationships and customer lists” and “goodwill”. No amortization has been calculated based on the original allocations.

 

NOTE 5: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

At January 31, 2013, the Company’s accounts payable and accrued liabilities are as follows:

 

		January 31, 2013
Trade payables and accruals		$	271,031
Preferred stock dividend accrual			155,137
Professional Fees			30,000
Payroll and commissions (1)			446,728
Total accounts payable and accrued liabilities		$	902,896

 

(1)

Includes deferred payroll expenses payable to a related party. (See Note 10)

  

NOTE 6: ADVANCES FROM NEXT 1 INTERACTIVE, INC.

 

During the normal course of business, Next 1 makes operating advances for operating expenses to RealBiz 360 Enterprise (Canada), Inc. and Webdigs, Inc. As of January 31, 2013, advances to RealBiz 360 Enterprise (Canada), Inc. totaled $1,148,541 and $82,397 to Webdigs, Inc.

 

NOTE 7: LOANS PAYABLE

 

As of January 31, 2013, as part of the Acknew Purchase Agreement, the remaining obligation to Acknew totaled $50,000. This payment obligation was satisfied on March 22, 2013.

 

 

REALBIZ MEDIA GROUP, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended January 31, 2013 and 2012

 

NOTE 8: SHARE-BASED COMPENSATION

 

The Company recognizes compensation expense for stock option grants over the requisite service period for vesting of the award.

 

Stock Options outstanding, after taking into account a 200 for 1 reverse stock split on May 17, 2012, at January 31, 2013, are 4,000 options at $50 per share and the weighted average remaining term is 0.25 years. The aggregate intrinsic value represents the difference between the closing stock price on January 31, 2013 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their options on January 31, 2013.  There were no options exercised during the quarter ended January 31, 2013.

  

NOTE 9: SHAREHOLDERS’ EQUITY

 

As of January 31, 2013, the Company has 125,000,000 shares of common stock authorized with a par value of $0.001 and 125,000,000 shares of preferred stock authorized with a par value of $0.001.

 

Common Stock

 

On October 9, 2012 the Company recapitalized by being acquired by a public company which resulted in a deemed issuance of 383,009 shares of common stock to the original shareholders of the public entity, a deemed issuance of 7,000,000 Preferred Series A voting shares to the original shareholders of the public entity, and a new issuance of 93,000,000 Preferred Series A voting shares. Total net liabilities of $977,575 were assumed in the recapitalization.

  

Preferred Stock Series A

 

As of January 31, 2013, the Company had 100,000,000 shares of Series A Preferred stock issued and outstanding respectively. The Preferred shares were issued pursuant to the recapitalization and share exchange (Note1). The preferred shares were issued at $.001 par, bear dividends at an annual rate of 10% per annum payable on a quarterly basis when declared by the board of directors. Dividends shall accrue whether or not they have been declared by the board. At the election of the Company, Preferred Dividends may be converted into Series A Stock, with each converted share having a value equal to the Market Price per share, subject to adjustment for stock splits. In order to exercise such option, the Company shall deliver written notice to the holder. Each share of Series A Stock shall be convertible at the option of the holder thereof at any time into a number of shares of Common Stock determined by dividing the Stated Value by the Conversion Price then in effect. The initial conversion price for the Series A Stock shall be equal to $0.05 per share.

 

As a result of push-down accounting applied in October 2012 (See Note 1) the Company recorded $5,016,506 of additional paid-in-capital.

 

Accrued but unpaid preferred stock dividends on the outstanding preferred shares totaled $155,137 as of January 31, 2013.

 

 

REALBIZ MEDIA GROUP, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Quarter Ended January 31, 2013 and 2012

 

NOTE 10: RELATED PARTY TRANSACTIONS

 

Due to - Minority Stockholder

 

The Company’s former principal advertising agency/website developer was owed $615,264 at January 31, 2013. The two principals of this advertising company are also minority stockholders in the Company - holding approximately 1.6% of the Company’s outstanding shares at January 31, 2013.

 

Due to Officers

 

As of January 31, 2013, the Company was indebted to certain related parties for amounts totaling $69,327, for deferred salary and unreimbursed business expenses. All of the indebtedness represented non-interest bearing payables due on demand. These amounts have been included in Accounts Payable and Accrued Liabilities on our consolidated balance sheets.

 

Advance from Affiliate

 

As of January 31, 2013, the Company was advanced $1,230,938 from Next1 Interactive, Inc.

 

NOTE 11: BASIC AND DILUTED EARNINGS PER SHARE

 

The Company computes earnings per share under two different methods, basic and diluted, and presents per share data for all periods in which statements of operations are presented. Basic earnings per share are computed by dividing net loss by the weighted average number of shares of common stock outstanding. Diluted earnings per share are computed by dividing net loss by the weighted average number of common stock and common stock equivalent shares outstanding.

 

On May 17, 2012, the Company affected a 1 for 200 reverse stock split. The Company retrospectively restated the outstanding shares for the earnings per share calculation.

 

All of the common shares underlying the stock options and warrants were excluded from diluted weighted average shares outstanding for the quarters ended January 31, 2013 and 2012 respectively because their effects were considered anti-dilutive.

 

NOTE 12: SUBSEQUENT EVENTS

 

 On February 27, 2013, the former CEO of Webdigs converted 5,990,238 Series A Preferred Stock into 5,990,238 shares of Realbiz Common Stock.

 

 

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

 

The following discussion should be read in conjunction with our audited consolidated financial statements and related notes that appear elsewhere in this filing.

 

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 Realbiz Media Group, 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 Item 1A of this filing should be considered in evaluating our prospects and future performance.

 

General Overview

 

General Overview

 

On August 8, 2012, Next 1 Interactive, Inc., a Nevada corporation (“Next 1”) together with its subsidiary Next One Realty (the trade name for Next 1’s wholly owned subsidiary Attaché Travel International, Inc.) entered into a Purchase Agreement (“Acknew Purchase Agreement”) with Acknew Investments Inc. (“Acknew”) and RealBiz Holdings Inc. Under the Acknew Purchase Agreement, Next 1 has agreed to acquire from Acknew common shares of RealBiz Holdings, Inc. representing approximately an 85% ownership interest in RealBiz Holdings, Inc. RealBiz Holdings Inc. is the parent corporation of RealBiz 360, Inc. and RealBiz 360 Enterprise (Canada), Inc. (together referred to as “RealBiz”).

 

Pursuant to the Acknew Purchase Agreement, Next 1 and Webdigs, Inc. (“Webdigs” or the “Company”) would consummate a share exchange transaction contemplated by a Share Exchange Agreement dated April 5, 2012 (“Share Exchange Agreement”) by and between Next 1 and Webdigs. In that contemplated share exchange transaction, Next 1 would receive a controlling interest in Webdigs through its receipt of approximately 93 million shares of newly designated preferred stock representing approximately 92% of the total outstanding capital stock of Webdigs immediately after the transaction. In exchange, Next 1 would transfer its entire share ownership in Next One Realty to Webdigs.

 

On October 9, 2012, Webdigs and Next 1 completed the transactions contemplated by the Share Exchange Agreement. Under the Share Exchange Agreement, Webdigs received all of the outstanding equity in Attaché Travel International, Inc. (“Attaché”). In exchange for our Webdigs’s receipt of the Attaché shares from Next 1, Webdigs issued to Next 1 a total of 93 million shares of our newly designated Series A Convertible Preferred Stock (our “Series A Stock”). The exchange of Attaché shares in exchange for our Series A Stock is referred to as the “Exchange Transaction.”

  

As a condition to the closing of the Exchange Transaction, our Company changed its name from “Webdigs, Inc.” to “RealBiz Media Group, Inc.” on October 9, 2012, by engaging in a short-form parent-subsidiary merger in the State of Delaware. 

  

 

Coincident with the closing of the Exchange Transaction, we converted all of our outstanding debt, payables and liabilities owed to Robert A. Buntz, Jr. (“Buntz”) and Edward Wicker (“Wicker”) into an aggregate of 7 million shares of Series A Stock. Specifically, Buntz received 5,983,600 shares of Series A Stock upon his conversion of approximately $401,498 in liabilities we owed him, and Wicker received 1,016,400 shares of Series A Stock upon his conversion of approximately $53,356 in liabilities we owed him. Buntz was, and remains after the Exchange Transaction, a director of our Company. At the closing of the Exchange Transaction, Wicker resigned his position as a director of our Company and as our Chief Financial Officer.

 

As a condition to the closing of the Exchange Transaction, our Company changed its name from “Webdigs, Inc.” to “RealBiz Media Group, Inc.” on October 3, 2012, by engaging in a short-form parent-subsidiary merger in the State of Delaware.

 

As a result of the Exchange Transaction and the conversion of liabilities referred to above, the shareholders of our Company before the Exchange Transaction retained approximately 365,176 shares of common stock (after giving effect to a reverse split effected as of May 3, 2012), representing approximately .364% of our issued and outstanding shares of capital stock (both common and preferred) immediately after the Exchange Transaction. Unless otherwise indicated, all common share figures set forth in this Current Report are on a post-split basis.

 

On March 16, 2012, the Company sold the “Webdigs” domain, technology and certain trademarks to Fiontrai II, LLC for $15,000. These assets, which were held in Webdigs, LLC, included US Trademark No. 3,461,665 "Webdigs", along with www.webdigs.com domain name and the original webdigs.com website software and technology developed by MoCo, Inc. Included in this transaction was a royalty agreement whereby Webdigs could receive royalty payments from Fiontrai upon its licensing the technology to other third parties. Also included in this transaction was a royalty agreement for which Fiontrai II paid $1,000 (part of the total $15,000). Robert Buntz, CEO purchased the royalty agreement from the Company in exchange for a principal reduction of his loan to the Company of $5,000.

  

Results of Operations

 

The following information should be read in conjunction with the unaudited financial statements and notes thereto appearing elsewhere in this Annual Report.

 

For the fiscal quarter ended January 31, 2013 compared to the fiscal quarter ended January 31, 2012.

 

Revenues

 

Our total revenues decreased 17% to $271,995 for the three months ended January 31, 2013, compared to $326,747 for the three months ended January 31, 2012, a decrease of $54,752. The decrease is due to reduced real estate revenue from virtual tours due to drop in available listings in a tough real estate environment.

 

Revenues from real estate decreased 9% to $258,328 for the three months ended January 31, 2013, compared to $284,426 for the three months ended January 31, 2012, a decrease of $26,098. The decrease is due to the decline of virtual tours due to drop in available listings in a tough real estate environment.

 

Revenues from other sources, consulting, decreased 68% to $13,667 for the three months ended January 31, 2013, compared to $42,321 for the three months ended January 31, 2012, a decrease of $28,654. This decrease was due to reduced real estate revenue from virtual tours due to drop in available listings in a tough real estate environment.

 

Cost of Revenue

 

Cost of revenues decreased 22% to $22,205 for three months ended January 31, 2013, compared to $28,646 for the three months ended January 31, 2012, a decrease of $6,441. The decrease in costs was primarily associated with the Company’s decrease in costs associated with the decrease in virtual tours due to drop in available listings in a tough real estate environment.

 

Operating Expenses

 

Our total operating expenses increased 1% or $3,959 to $525,636 for the three months ended January 31, 2013, compared to $521,677 for the three months ended January 31, 2012. The increase was primarily due to an increase of $139,128 in salaries and benefits partially offset by a decrease of $132,673 in selling and promotion expenses.

 

 

Other Income (Expense)

 

Foreign exchange loss increased to $2,791 for the three months ended January 31, 2013, compared to a loss of $65 for three months ended January 31, 2012, an increase of $2,726 primarily due to fluctuations in the exchange rates.

 

Net Loss

 

Net loss increased 25% to $278,637 for the three months ended January 31, 2013, compared to net loss of $223,641 for the three months end January 31, 2012, a decrease of $54,996 primarily due to the reduced revenue offset by reduced costs.

 

Assets and Employees; Research and Development

 

We do not currently anticipate purchasing any equipment or other assets in the near term, however, as we expand operations, we will need additional equipment and employees to create and market our products.

 

Liquidity and Capital Resources; Anticipated Financing Needs

 

At January 31, 2013, the Company had $33,983 cash on-hand, a decrease of $2,425 from $36,408 at the end of fiscal 2012. The decrease in cash was due primarily to operating expenses.

 

Net cash used in operating activities was $2,425 for the three months ended January 31, 2013, a decrease of $121,815 from $124,240 used during the three months ended January 31, 2012. This decrease was due to a decrease in accounts payable and accrued liabilities offset by advances from affiliates.

  

Net cash provided by financing activities decreased $70,511 to $0, for the three months ended January 31, 2013, compared to $70,511 for the three months ended January 31, 2012.  This decrease was primarily due to the decrease in proceeds from notes payable.

 

Critical Accounting Policies

 

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. We evaluate these estimates on an on-going basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant estimates are determining some of the inputs for our stock option fair value calculation and assessing the valuation allowance for income taxes.

 

We consider the following accounting policies to be those most important to the portrayal of our results of operations and financial condition:

 

Revenue Recognition . Real estate brokerage revenues were recognized at the closing of a real estate transaction. Fees due to third party real estate agents or clients are accrued at the time of closing and treated as an offset to gross revenues.

 

Share-Based Compensation. The Company accounts for stock incentive plans by measurement and recognition of compensation expense for all stock-based awards based on estimated fair values, net of estimated forfeitures. Share-based compensation expense recognized for the three monthss ended January 31, 2013 and 2012 includes compensation cost for restricted stock awards and stock options. The Company uses the Black- Scholes option-pricing model to determine the fair value of options granted as of the grant date.

 

Accounts Receivable. The Company reviews the outstanding receivables on a monthly basis and receivables are considered past due when payment has not been received 30 days after a transaction closes. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to receivables. Historically, the Company has not experienced significant losses related to receivables from individual customers. At January 31, 2013 and 2012, the Company considers its accounts receivable to be fully collectible and therefore, has not recorded an allowance for doubtful accounts.

 

 

Intangible Assets.

 

On October 9, 2012, the Company entered a Share Exchange Agreement (Note 1). The Company accounted for the acquisition utilizing the purchase method of accounting in accordance with ASC 805 “Business Combinations”. The Company is the acquiree for accounting purposes. Accordingly, the Company applied push-down accounting and has recorded the intangible asset as described herein.

 

The Company is in review of the facts and circumstances surrounding events to determine if the carrying amount of held-and-used identifiable amortized intangibles acquired during the October 2012 acquisition may be reallocated under the provisions of ASC 350 and ASC 805. The Company has until October 2013 (12 months) to determine the final allocations and it is studying a reallocation with more emphasis on “customer relationships and customer lists”. No amortization has been calculated based on the original allocations.

 

Recently Issued Accounting Pronouncements

 

ASU 2011-05 – Presentation of comprehensive income

 

ASU 2011-05 was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now requires entities to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements.

 

All entities that report OCI items will be impacted by the changes in this ASU. The components of OCI have not changed, nor has the guidance on when OCI items are reclassified to net income; however, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.

 

The amendments to ASC 220, Comprehensive Income, included in ASU 2011-05, Presentation of Comprehensive Income , are effective for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2011 (that is, the fiscal year beginning January 1, 2012 for calendar-year entities) for public entities and for interim and annual periods thereafter. The amended guidance must be applied retrospectively and early adoption is permitted. The Company does not expect the adoption of this recently issued accounting pronouncement to have a significant impact on its results of operations, financial position or cash flows.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

  

Management’s Report On Internal Control Over Financial Reporting

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

 

Based on this evaluation and taking into account that certain material weaknesses existed as of January 31, 2013, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures were not effective.  As a result of this conclusion, the financial statements for the period covered by this Quarterly Report on Form 10-Q were prepared with particular attention to the material weaknesses previously disclosed. Notwithstanding the material weaknesses in internal controls that continue to exist as of January 31, 2013, we have concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, the financial position, results of operations and cash flows of the Company as required for interim financial statements.

 

Changes in Internal Control Over Financial Reporting

 

During the fiscal quarter ended January 31, 2013, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management has concluded that the material weaknesses in internal control as described in Item 9A of the Company’s Form 10-K for the year ended October 31, 2012 have not been remediated.  Due to the small number of employees dealing with general administrative and financial matters and the expenses associated with increasing the number of employees to remediate the disclosure control and procedure material weaknesses that have been identified, the Company continued to operate without changes to its internal controls over financial reporting for the period covered by this Quarterly Report on Form 10-Q while continuing to seek the expertise its needs to remediate the material weaknesses.

 

 

 PART II – OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

We are not currently a party to any material litigation and are not aware of any threatened litigation that would have a material effect on our business.

 

Item 1A.  Risk Factors.

 

None.

 

Item 2.  Unregistered Sales of Equity Securities

 

None.

 

Item 3.  Defaults Upon Senior Securities

 

None.

 

Item 4.  Mine Safety Disclosures

 

Not applicable

 

Item 5.  Other Information

 

None.

 

 

Item 6.  Exhibits.

 

Exhibit No.		Description
31.1		Certification of Chief Executive Officer
31.2		Certification of Chief Financial Officer
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

Exhibits

 

Exhibit Number		Description
31.1		Certification of CEO pursuant to Section 302. *
31.2		Certification of CFO pursuant to Section 302. *
32.1		Certification of CEO pursuant to Section 906. *
32.2		Certification of CFO pursuant to Section 906. *

 

* Filed electronically herewith.

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Realbiz Media Group, Inc.
	/s/ William Kerby
	William Kerby
	President and Chief Executive Officer
	March 25, 2013
	/s/ Adam Friedman
	Adam Friedman
	Chief Financial Officer
	March 25, 2013

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name		Title		Date
/s/ William Kerby		Chairman and Chief Executive Officer		March 25, 2013
William Kerby		(Principal Executive Officer)
/s/ Adam Friedman		Chief Financial Officer		March 25, 2013
Adam Friedman		(Principal Financial Officer)