VERUS INTERNATIONAL, INC. - Quarter Report: 2013 April (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Or

Commission File Number 0-53359

REALBIZ MEDIA GROUP, INC.

Formerly Webdigs, Inc.

(Exact name of registrant as specified in its charter)

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.  

x Yes    £ 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).

x Yes    o 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   o     Accelerated filer  o     Non-accelerated filer  o     Smaller reporting company   x

As of June 10, 2013 there were 23,161,489 shares of the issuer’s common stock, $0.001 par value, outstanding.

Realbiz Media Group, Inc.

Form 10-Q

Table of Contents

REALBIZ MEDIA GROUP, INC.

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE AND SIX MONTH

PERIODS ENDED APRIL 30, 2013 AND 2012

REALBIZ MEDIA GROUP, INC.

TABLE OF CONTENTS

Real Biz Media Group, Inc.

Consolidated Balance Sheets

See accompanying notes to unaudited consolidated financial statements.

(1) Derived from audited financial statements.

Real Biz Media Group, Inc.

Consolidated Statements of Operations

(unaudited)

See accompanying notes to unaudited consolidated financial statements.

Real Biz Media Group, Inc.

Consolidated Statements of Cash Flows

(unaudited)

See accompanying notes to unaudited consolidated financial statements.

REALBIZ MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended April 30, 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 United States Securities Act of 1933, as amended.  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 Three and Six Months Ended April 30, 2013 and 2012

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Nature of Business

Realbiz is a Real Estate Media Service company that has positioned itself in to be both a media specialist and a licensed operator. As such the Company is poised to emerge as a multi revenue streams from advertising revenues as well as commissions and referral fees. This new “Next Generation” media company is well positioned to capture revenues from the convergence of TV, Mobile devices and the Internet by providing video, search and purchase capabilities on multiple platform dynamics for web, mobile, interactivity on TV and Video On Demand. Realbiz Media currently operates an INTERACTIVE VOD Network for Real Estate in conjunction with its partner Realtor.com. The network is branded under the name of Home Tour Network and is carried on Cox Communications and Comcast stations. In late May 2012, RealBiz Media signed a significant multiyear partnership with Realtor.com that included agreements to rebrand the network to “Realtor.com channel” and expand the network into 55 million households. Additionally the Company has been commissioned to develop a major real estate web portal and enhanced Widget/Microvideo app platforms to work in conjunction with Realtor.com and other major real estate brokerage groups.

RealBiz is a leader in digital media and marketing for the real estate Industry. The Company includes a fully licensed real estate division (formerly known as Webdigs) , certain key TV media contracts ( Extraordinary Vacation Homes/ Third home) and a Virtual Tour and Media group (Realbiz 360) which enjoys significant real estate industry servicing contracts. As a combined group, the key driver for all is the Company’s proprietary technology which allows for an automated conversion of data (text and pictures of home listings) to a video with voice and music.

Once created, these home listing videos are automatically distributed to multiple media platforms (Television, broadband, web and mobile) for consumer viewing. From this core technology the Company has expanded its operations to encompass the following 3 areas:

With the move to automate creation processes in combination with emerging video adoption, Realbiz Media now develops custom Enterprise solutions to support our existing and new Franchise partners. Though photos and virtual tours are listed as highly important on the home buyer’s lists, the astonishing growth of YouTube and Social Media fueled by the change in consumer demographics has left the Real Estate Industry scrambling to keep up. Realbiz Media`s direct feed services into listing databases provides for the automated creation and syndication of Virtual Tours and YouTube Videos posted directly to YouTube Channels and promoted on Social Networks. These solutions continue to support our Agent/Broker revenue base through setup and monthly recurring fees. These capabilities and forward thinking were key elements in the establishment of a multiyear contract with Move.com/Realtor.com.

Basis of Consolidation

The consolidated financial statements for the three and six months ended April 30, 2013 and 2012 include the operations of Webdigs, Inc., 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 Three and Six Months Ended April 30, 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:

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.

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 Three and Six Months Ended April 30, 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 three and six months ended April 30, 2013 and 2012, the accumulated comprehensive gain was $19,947 and $14,362, 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: 

All of the common shares underlying the stock options and warrants above were excluded from diluted weighted average shares outstanding for the three and six months ended April 30, 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 Three and Six Months Ended April 30, 2013 and 2012

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements

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 $841,969 and $400,381 for the six months ended April 30, 2013 and 2012 respectively. At April 30, 2013, the Company had a working capital deficit of $2,281,396 and an accumulated deficit of $7,491,393. 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 Three and Six Months Ended April 30, 2013 and 2012

NOTE 4: INTANGIBLE ASSETS

At April 30, 2013 and October 31, 2012, the Company’s intangible assets, related to a sales/marketing agreement, are as follows:

On October 3, 2012, Next 1 Interactive, Inc. (“Next 1”) entered a securities exchange agreement and exercised the option purchase agreement to purchase 664.1 common shares of Real Biz Holdings, Inc. Next 1 applied $300,000 of cash, issued a Series D Preferred stock subscription agreement for 380,000 shares and agreed to a $50,000 thirty day (30) day post closing final buyout bringing the total value of the agreement to $2,250,000.

Next 1 accounted for the acquisition utilizing the purchase method of accounting in accordance with ASC 805 "Business Combinations". Next 1 is the acquirer for accounting purposes and Real Biz Holdings, Inc. is the acquired Company. Accordingly, Next 1 applied push-down accounting and adjusted to fair value all of the assets and liabilities directly on the financial statements of the subsidiary, Real Biz Holdings, Inc.

The net purchase price, including acquisition costs paid by Next 1, was allocated to assets acquired and liabilities assume on the records of the Next 1 as follows:

For the six months ended April 30, 2013, the Company recorded amortization of $766,293. For the six months ended April 30, 2012, no amortization was recorded.

NOTE 5: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

At April 30, 2013, the Company’s accounts payable and accrued liabilities are as follows:

NOTE 6: ADVANCES FROM NEXT 1 INTERACTIVE, INC.

During the normal course of business, Next 1 makes operating advances for operating expenses to RealBiz. As of April 30, 2013, advances to RealBiz owed $813,857.

NOTE 7: NOTES PAYABLE

As of April 30, 2013, as part of the Acknew Purchase Agreement, the remaining obligation to Acknew totaled $-0-. This payment obligation of $50,000 was satisfied on March 22, 2013 resulting in a gain on forgiveness of notes and loans payable of $374,040.

As of April 30, 2013, the Company has a Convertible Note Payable of $605,000 outstanding. This Note is Convertible into the Company’s common stock at $0.15 per share and bears no interest.

REALBIZ MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended April 30, 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 April 30, 2013, are 1,000 options at $50 per share and the weighted average remaining term is 1.5 years. The aggregate intrinsic value represents the difference between the closing stock price on April 30, 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 April 30, 2013.  There were no options exercised during the three and six months ended April 30, 2013.

NOTE 9: SHAREHOLDERS’ EQUITY

As of April 30, 2013, the Company had 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.

During the six months ended April 30, 2013, the Company:

Preferred Stock Series A

As of April 30, 2013, the Company had 94,009,762 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 originally recorded $5,016,506 of additional paid-in-capital.

Accrued but unpaid preferred stock dividends on the outstanding preferred shares totaled $765,493 as of April 30, 2013 and is included in accrued liabilities.

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.

REALBIZ MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended April 30, 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. The two principals of this advertising company were also minority stockholders in the Company - holding approximately 1.6% of the Company’s outstanding shares. During the three months ended April 30, 2012, this note was sold to a different outside person and is now reported as a Convertible Note Payable of $605,000 after a $10,264 gain was recorded.

Advance from Affiliate

As of April 30, 2013, the Company was advanced $1,344,157 from Next 1 Interactive, Inc. and $813,857 remains due.

NOTE 11: SUBSEQUENT EVENTS

Between May 28, 2013 and June 7, 2013, the Company issued 139,000 common shares at $0.50 per share for proceeds of $69,500.

On May 28, 2013, an investor in Next 1 Interactive, Inc., the parent company, converted 3,000 Next 1 Series D Dual Convertible Preferred Shares into 100,000 common shares of Realbiz.

On June 7, 2013, Acknew Investments, Inc., former owners of Realbiz, converted their 380,000 Next 1 Series D Dual Convertible Preferred Shares and were issued 12,666,667 common shares of Realbiz.

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

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 three months ended April 30, 2013 compared to the three months ended April 30, 2012 

Revenues

Our total revenues increased 10% to $319,174 for the three months ended April 30, 2013, compared to $290,873 for the three months ended April 30, 2012, an increase of $28,301. The increase is due to increased real estate revenue from virtual tours as the real estate environment slowly improves.

Revenues from real estate increased 2% to $297,907 for the three months ended April 30, 2013, compared to $272,674 for the three months ended April 30, 2012, an increase of $25,233. The increase is due to increased real estate revenue from virtual tours.

Revenues from other sources, increased 17% to $21,267 for the three months ended April 30, 2013, compared to $18,199 for the three months ended April 30, 2012, an increase of $3,068. This increase was due to the real estate environment slowly improving in bulk sales.

Cost of Revenue

Cost of revenues decreased 46% to $13,414 for three months ended April 30, 2013, compared to $24,831 for the three months ended April 30, 2012, a decrease of $11,417. 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.

Operating Expenses

Our total operating expenses increased 174% or $796,720 to $1,253,606 for the three months ended April 30, 2013, compared to $456,886 for the three months ended April 30, 2012. The increase was primarily due to an increase of $819,054 in general and administrative expenses due to the amoritization of intangible assets.

Other Income (Expense)

Gain on forgiveness of notes payable and accrued liabilities increased to $384,304 to account for expenses related to previous officers for the three months ended April 30, 2013, compared to a loss of $895 for three months ended April 30, 2012.

Net Loss

Net loss increased 219% to $563,333 for the three months ended April 30, 2013, compared to net loss of $176,740 for the three months end April 30, 2012, a decrease of $386,593 primarily due to the increased costs.

For the six months ended April 30, 2013 compared to the six months ended April 30, 2012 

Revenues

Our total revenues decreased 4% to $591,169 for the six months ended April 30, 2013, compared to $617,620 for the six months ended April 30, 2012, a decrease of $26,451. The decrease is due to reduced real estate revenue from virtual tours due to drop in available listings.

Revenues from real estate decreased 0% to $556,235 for the six months ended April 30, 2013, compared to $557,100 for the six months ended April 30, 2012, a decrease of $865. The decrease is due to reduced real estate revenue from a drop in available listings.

Revenues from other sources, decreased 42% to $34,934 for the six months ended April 30, 2013, compared to $60,520 for the six months ended April 30, 2012, a decrease of $25,586. This decrease was due to reduced real estate revenue from a drop in available listings 

Cost of Revenue

Cost of revenues decreased 33% to $35,619 for six months ended April 30, 2013, compared to $53,477 for the six months ended April 30, 2012, a decrease of $17,858. 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 82% or $800,679 to $1,779,242 for the six months ended April 30, 2013, compared to $978,564 for the six months ended April 30, 2012. The increase was primarily due to an increase of $819,054 in general and administrative expenses due to the amoritization of intangible assets.

Other Income (Expense)

Gain on forgiveness of notes payable and accrued liabilities increased to $384,304 to account for expenses related to previous officers for the three months ended April 30, 2013, compared to a loss of $960 for six months ended April 30, 2012.

Net Loss

Net loss increased 110% to $841,969 for the six months ended April 30, 2013, compared to net loss of $400,381 for the six months end April 30, 2012, an increase in loss of $441,588 primarily due to increased 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 April 30, 2013, the Company had $25,674 cash on-hand, a decrease of $10,734 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 $238,234 for the six months ended April 30, 2013, a decrease of $135,166 from $103,068 used during the six months ended April 30, 2012. This decrease was due to additional amortization offset by gain on forgiveness of liabilities and additional net loss.

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 six monthss ended April 30, 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 April 30, 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

We do not hold any derivative instruments and do not engage in any hedging activities.

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 rules and forms of the Securities and Exchange Commission (the “SEC”), 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 April 30, 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 April 30, 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 April 30, 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.

We believe there are no changes that constitute material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 31, 2012, filed with the SEC on February 20, 2013.

Item 2.  Unregistered Sales of Equity Securities

There were no unregistered sales of the Company’s equity securities during the three months ended April 30, 2013 that were not exempt from registration under Rule 144.

Item 3.  Defaults Upon Senior Securities

There were no defaults upon senior securities during the quarter ended April 30, 2013.

Item 4.  Mine Safety Disclosures

Not applicable

Item 5.  Other Information

There is no other information required to be disclosed under this item which was not previously disclosed.

Item 6.  Exhibits.

* filed 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.

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.