UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year ended October 31, 2014

 

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 001-34106

 

 

 

REALBIZ MEDIA GROUP, 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

 

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:   Common stock, $.001 par value

 

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨ Yes    x No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  

¨ Yes    x No

 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ( § 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ¨  

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act).

¨ Yes    x No

 

The aggregate market value of the voting stock and non-voting common equity held by non-affiliates was approximately $11,561,600 as of April 30, 2014 when the last reported sales price was $0.19 per share. As of February 6, 2015, 89,633,377 shares of common stock were outstanding.

 

 
 

 

Realbiz Media Group, Inc.

 

Form 10-K

 

Table of Contents

 

        Page  
           
PART I            
Item 1.   Business     1  
Item 1A.   Risk Factors     5  
Item 2.   Properties     9  
Item 3.   Legal Proceedings     9  
Item 4.   Mine Safety Disclosures     9  
             
PART II            
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     9  
Item 6.   Selected Financial Data     12  
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations     12  
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk     17  
Item 8.   Financial Statements and Supplementary Data     17  
Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure     17  
Item 9A.   Controls and Procedures     17  
Item 9B.   Other Information     18  
             
PART III            
Item 10.   Directors, Executive Officers and Corporate Governance     19  
Item 11.   Executive Compensation     23  
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     25  
Item 13.   Certain Relationships and Related Transactions, and Director Independence     27  
Item 14.   Principal Accountant Fees and Services     27  
             
PART IV            
Item 15.   Exhibits and Financial Statement Schedules     27  
    Signatures     29  

 

 
 

 

PART I

ITEM 1. BUSINESS

 

Overview of our Business and its History

 

We are engaged in the business of providing digital media and marketing services for the real estate industry. We currently generate revenue from service fees, product sales, membership fees and advertising revenues. The company was formed through the merging of three divisions: (i) our fully licensed real estate division (formerly known as Webdigs); (ii) our TV media contracts (Home Preview Channel /Extraordinary Vacation Homes/) division; and (iii) our Real Estate Virtual Tour and Media group (Realbiz 360). The assets of these divisions were used to create a new suite of real estate products and services that create stickiness through the utilization of video, social media and loyalty programs. At the core of the company’s programs is our proprietary video creation technology which allows for an automated conversion of data (text and pictures of home listings) to a video with voice and music. We provide video search, storage and marketing capabilities on multiple platform dynamics for web, mobile, and TV. Once a home, personal or community video is created using our proprietary technology, it can be published to social media, email or distributed to multiple real estate websites, broadband or television for consumer viewing.

 

We are engaged in the business of providing digital media and marketing services for the real estate industry. We currently generate revenue from service fees, product sales, membership fees and advertising revenues. RealBiz has positioned itself in the following areas summarized here and explained in more detail below:

 

1. Nestbuilder Agent:  This platform allows agents to claim and customize their own web page to be used as a video marketing platform. The site interacts with nestbuilder.com, ezflix and the HAAC allowing agents to create customized video of homes, themselves or community as well as being able to pull other MLS property listings to create specialized marketing messages. Additionally, the agent can view the effectiveness of their marketing efforts through a dashboard that shows multiple statistics including number of views, time spent, origination and lead generation. Additionally the agent can earn points for their marketing actions that can be converted to Home & Away Club rewards dollars. This site will completely empower the real estate agent with content and assets that they can use to pursue prospects and generate leads at a fraction of the cost they are currently paying.  
   
2. Ezflix Mobile App : The ezflix app is the only mobile/web video editor that pre-integrates with an agent’s listing data, allowing them to edit all of their listing’s data, and convert them into video with live video interstitial capabilities, audio recording and music.   Ezflix can then share videos to all social media, email, and multiple other real estate portals including NestBuilder – giving agents a way to personalize their listing videos with entertaining local relevant content.  This application, both Web and Mobile, was initially launched in both the Android and iOS versions in January and February 2015. This platform as it evolves will combine our VT (Virtual Tour) and MVA (Microvideo App) platform into one solution and distribute to multiple partners and resellers including Photographer and Videographer service providers’ network. This product integration is expected to be complete by Q2 of 2015.
   
3. The Virtual Tour (VT) and Microvideo App (MVA): was developed and implemented to allow agents to access specific video based product strategies that are designed specifically to increase the SEO rank and traffic credit to real estate franchise systems and/or their brokers. This solution gives those franchises and brokers a much needed tool to lower their cost of prospect acquisition.  Currently, the strategy is to migrate our current client base of VT users to MVA’s and combine the total core offering into our EzFlix Mobile and Web based application during the second quarter of 2015.
   
4. NestBuilder: The world’s largest real estate video portal with over 1.5 million listings and is targeted to grow to over 3 million listings by mid 2015.  Unlike other leaders in the space that agents are seeking alternatives to, NestBuilder focuses on building agent’s brands and delivering high-quality leads. They achieve this by offering fully customizable webpages in NestBuilder Agent that will follow their homebuyer throughout the home search, ultimately turning NestBuilder.com into each agent’s very own national portal.
   
5. NestBuilder Mobile Search App : The app is currently available in the Google Play Store and should be available in the iOS version by March 2015.  The  app not only allows consumers to search and view homes in video but additionally  allows consumers to enter in their agent’s name, and effectively turn the NestBuilder app into the agent’s very own application where their branding follows the consumer along their home search journey, everywhere they go.
   
6. ReachFactor: A recently acquired full-marketing agency that specializes in real estate. ReachFactor offers a variety of solutions to agents and brokers such as web design, digital ad campaigns, blogging, social media management, reputation management, search engine optimization and much more.
   
7.

Enterprise Video Production : We service some of the largest and well known Franchisor accounts in the North America Real Estate Market in compiling listings into a Video format and distributing to those franchisors websites, brokers and agents and lead generation platforms 24/7. Some of these multiyear contracts produced over 10 million video listings from 2012-2014 and will be eclipsing that production in 2015 alone. This core area significantly contributes to the Company’s growth not only in this core service but continues to allow us access to national databases and directly agents and brokers to allow the Company access to upgrades and upsell other core products and services. 

   
8. Home and Away Club: RealBiz excels at beginning and closing the agent-buyer relationship, but the reality of real estate is that the average homebuyer looks for a new home once every 8 years. As a result the majority of consumers have lost touch with their agent by the time their next home purchase happens. That’s why RealBiz has created the Home and Away Club so they can offer agents a means to stay in contact once the house is sold with a rewards program. With the Home and Away club, agents can earn rewards dollars for completing actions as well as purchasing club memberships that can be gifted to their clients. Additionally agents can predetermine times and special events that they wish to have their client accounts topped up. All of the Home & Away Club members introduced by the agent remain part of the agents “circle of clients” with personalized messaging on all gifting of rewards. The rewards dollars   allows members to purchase a broad cross section of lifestyle, travel, merchandise and home products at   greatly discounted pricing – thereby giving customers real values on products they want.

 

1
 

 

Background and Industry Trends

 

We believe that the real estate market is undergoing a dramatic change not dissimilar to that previously experienced by traditional stock brokerages. We believe that the most critical aspect driving this change is the advent of the Internet as a tool for searching for and researching real estate, eliminating the commitments of time and expense involved with visiting multiple properties in person. According to the National Association of Realtors’ 2014 “Member Profile,” 89% of home buyers use the internet to search for a home, up from 74% in 2010. This mirrors the 69% who use a realtor for their search. Note: many buyers use both the internet and a realtor in their search. In addition, home sellers can use the Internet to check home valuations, track the housing market and research comparable sales information. The majority of consumers used the Internet frequently to search for homes (81%), with consumers aged 33 or younger being higher than average (92%) and 59-67 year olds below (although still high at 69%). Searches are often conducted on mobile devices such as iPhones (47%), iPads (40%) or Androids (24%). One of the most significant trends for our business is that 70% of homebuyers search for and watch video home tours. Also, real estate searches on Google have grown 253% over the past four years.

 

The increased use of technology throughout the entire process of a typical residential real estate transaction is an important development in the real estate market. For instance, electronic communication and electronic data storage permits a real estate brokerage to quickly reproduce standard real estate transaction documents, store such documents and store other important information about customers and properties, and communicate quickly with other parties involved in real estate transactions (e.g., title companies, insurers, surveyors, inspectors and governmental agencies), all of which permits increased efficiencies in the process of buying and selling a home. The technological changes and developments generally make it possible to effect a greater volume of transactions with less effort and expense.

 

We believe the technological developments in the real estate market and the increased amount of information available to and used by ordinary consumers appear to be circumstances that are similar to those developments that eventually gave rise to the non-traditional stock brokerages which have intruded upon the market dominance of traditional stock brokerages over the past two decades. For example, we note that the non-traditional stock brokerages developed their services and products to compete primarily on the bases of price, consumer effort and technology. Their websites, such as TD Ameritrade or e-Trade, provide not only trading capacity for the average consumer, but also a tremendous amount of information about companies. In this regard, we note that there has recently been a proliferation of various Internet-related real estate businesses that seek to provide either specific and limited services or information relating to residential real estate transactions (e.g., ForSaleByOwner.com, BuyOwner.com, Realtor.com, Trulia.com and Zillow.com). Like the non-traditional stock brokerages, these businesses typically rely on consumer effort, technology and price as the bases for competition. This is the model RealBiz has based its business plan on.

  

2
 

 

Website and Mobile Applications

 

Realbiz is utilizing its proprietary technological Intellectual Property along with its industry contracts to create two separate and very important critical paths for real estate professionals and their organizations to follow. By using its video processing capabilities combined with micro-site and website building techniques Realbiz has created an agent/broker micro-site product that leverages best practices in SEO (search engine optimization) on the agent/brokers behalf and delivers a web and mobile friendly rich media experience to consumers. This solution provides the broker a significant increase in organic ranking in local searches, increased site traffic and by doing so, reduces the agent/broker dependency on traditional listing aggregators. Secondly, by leveraging its relationship within the industry, Realbiz has access to a database of over 1.5 million homes. These homes are being converted into video assets and will be part of a real estate portal that unlike other listing aggregators will empower the agents with tools to push information in the form of video (their listings, other listings and useful home buyer/home owner information) to their prospect base. This solution provides the “zero listing” agent (about 70% of the agents in the U.S.) the opportunity to position themselves as a local community expert with listings and information that make him/her an asset to their prospect base. This portal and its tools are designed to provide a much needed sense of control to the agent community while providing a significant decrease in their cost of lead acquisition.

 

Market and Competition

 

The National Association of Realtors has approximately 1.2 million members, of which we estimate roughly half are active and associated with at least one real estate brokerage firm.

 

Presently, Zillow is the largest independent real estate market site, as measured by homes in its database and unique visitors to its website. Zillow at present is the market leader in terms of unique visitors to its website however no one company has yet been able to establish a clearly dominant position. Additionally Zillow is looking to complete its takeover of Trulia. Trulia.com has about 60% of Zillow's traffic and is growing faster year after year. As part of the industry consolidation, NewsCorp recently acquired the 3rd largest real estate portal, Realtor.com. Additionally there are a variety of other websites which have meaningful market share and listing information. We believe that we can carve out a piece of this lucrative market utilizing our innovative agent partnership platform and significant video assets.

 

3
 

 

Industry Segments

 

We currently operate in one primary operating segment, real estate, mainly through web-assisted services.

 

Seasonality of Business

 

The residential real estate market has traditionally experienced seasonality, with a peak in the spring and summer seasons and a decrease in activity during the fall and winter seasons. Revenues in each quarter can be significantly affected by activity during the prior quarter, given the time lag between contract execution and closing. A typical real estate transaction has a 30 day lag between contract signing and closing of the transaction.

 

Environmental Regulation

 

We are not subject to environmental regulations that have a material effect upon our capital expenditures or otherwise.

 

Other Regulation

 

We are subject to governmental regulation by federal, state and local regulatory authorities with respect to our operations. We operate several Internet websites that we use to distribute information about and provide our services and content. Internet services are now subject to regulation in the United States relating to the privacy and security of personally identifiable user information and acquisition of personal information from children under the age of 13, including the federal Child Online Protection Act (COPA) and the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM). In addition, a majority of states have enacted laws that impose data security and security breach obligations. Additional federal and state laws and regulations may be adopted with respect to the Internet or other online services, covering such issues as user privacy, child safety, data security, advertising, pricing, content, copyrights and trademarks, access by persons with disabilities, distribution, taxation and characteristics and quality of products and services. In addition, to the extent we offer products and services to online consumers outside the United States, the laws and regulations of foreign jurisdictions, including, without limitation, consumer protection, privacy, advertising, data retention, intellectual property, and content limitations, may impose additional compliance obligations on us.

 

RESEARCH AND DEVELOPMENT

 

The Company spends a significant amount of time and resources in developing new software and improving its current products. The Company has spent $743,000 and $835,000, respectively in research and development in each of the fiscal years ending 2014 and 2013. We believe that 2015 will be a transition year for RealBiz as many of the key products are now complete and are expected to be brought to market by March 2015.

 

INTELLECTUAL PROPERTY

 

The Company has been granted perpetual licenses of patents which the Company uses for imaging and streaming tiled images as well as 3D image and warping technologies.

 

Employees

 

The Company currently has 20 full-time and three part-time employees.

 

Corporate Structure and Information

 

Our principal offices are located at 2690 Weston Road, Suite 200, Weston, FL 33331, and our telephone number at that office is (954) 888-9779. Our website address is www.realbizmedia.com . The information contained on our website or that can be accessed through our website does not constitute part of this document.

 

On October 9, 2012, we completed a share exchange (the “Exchange Transaction” ) with Next 1 Interactive, Inc., a Nevada corporation (“Next 1”), that was contemplated by that certain Share Exchange Agreement entered into on April 4, 2012 (the “Exchange Agreement”) pursuant to which we received all of the outstanding equity in Attaché Travel International, Inc., a Florida corporation and wholly owned subsidiary of Next 1 (“Attaché”) in consideration of our issuance to Next 1 of 93 million shares of our newly designated Series A Convertible Preferred Stock (our “Series A Stock). Attaché owns approximately 80% of a corporation named RealBiz Holdings Inc. which is the parent corporation of RealBiz 360, Inc. (“RealBiz”). As a condition to the closing of the Exchange Transaction, on October 3, 2012, we changed our name from “Webdigs, Inc.” to “RealBiz Media Group, Inc.”, by engaging in a short-form parent-subsidiary merger in the State of Delaware. Bill Kerby, our Chief Executive Officer is also the Chief Executive Officer of Next 1 and our Chief Financial Officer, Adam Friedman is also the Chief Financial Officer of Next 1.

 

4
 

 

ITEM 1A. RISK FACTORS

 

An investment in our common stock involves significant risks. Before deciding to invest in our common stock, you should carefully consider each of the following risk factors and all of the other information set forth in this document. The following risks could materially harm our business, financial condition or future results. If any such risks materialize, the value of our common stock could decline, and you could lose all or part of your investment.

 

We are a recently formed company with no history of profitability.

 

Our former entity, Webdigs, began operations in July 2007 and to date has not generated a yearly profit. In addition, consolidated annual revenues remain around $1 million. As a young company, we are subject to all of the risks associated with a new business enterprise. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development, especially in challenging and competitive industries such as residential real estate and mortgage brokerage and particularly in light of current general economic, real estate and credit market conditions.

 

We do not yet have a significant operating history which would provide you with meaningful information about our past or future operations. The Company has not yet achieved positive cash flow on a monthly basis during any fiscal year including the current fiscal year ending October 31, 2014 and there is significant risk to the survival of the enterprise.

 

There is substantial doubt about our ability to continue as a going concern.

 

We have had net losses for the years ended October 31, 2014 and 2013 of $4,605,327 and $3,764,089 respectively. Furthermore, we had a working capital deficit as of October 31, 2014 of $2,319,305. Since the financial statements were prepared assuming that we would continue as a going concern, these conditions coupled with our current liquidity position raise substantial doubt about our ability to continue as a going concern. Furthermore, since we are pursuing new products and services, this diminishes our ability to accurately forecast our revenues and expenses. We expect that our ability to continue as a going concern depends, in large part, on our ability to generate sufficient revenues, limit our expenses without sacrificing customer service, and obtain necessary financing. If we are unable to raise additional capital, we may be forced to discontinue our business.

 

We will require additional financing in the future, but such financing may not be available to us.

 

If adequate funds are not available on acceptable terms, we may be unable to fund the operation of our business. As a result, we would likely be forced to dramatically alter or cease operations. To date, our revenues from operations have not generated cash flow sufficient to finance our operations and growth. We will require as a result significant additional capital to continue our operations. There can be no assurance given that we will be able to secure additional financing in the future.

 

We critically rely on our executive management, and the loss of certain members of management would materially and negatively affect us.

 

Our success materially depends upon the efforts of our management and other key personnel, including but not limited to Bill Kerby, CEO and Chairman, Arun Srinivasan, Chief Marketing Officer and Chief Technology Officer, Steven Marques, Acting President/Chief Revenue Officer, and Adam Friedman, Chief Financial Officer. If we lose the services of any of these members of management, our business would be materially and adversely affected. We have entered into a formal services and non-competition agreements with Mr. Srinivasan, however we have not yet completed employment agreements with other management. Nevertheless, agreements do not ensure the continued availability to us of Mr. Srinivasan or any other manager or employee. Furthermore, we do not have “key person” life insurance, and we do not presently intend to purchase such insurance.

 

Our future success also depends upon our ability to attract and retain highly qualified management personnel and other employees. Any difficulties in obtaining, retaining and training qualified employees could have a material adverse effect on our results of operation or financial condition. The process of identifying such personnel with the combination of skills and attributes required to carry out our strategy is often lengthy. Any difficulties in obtaining and retaining qualified managers and employees could have a material adverse effect on our results of operation or financial condition.

 

We may be unable to obtain sufficient market acceptance of our services.

 

The market for residential real estate sales is well-established. However, the market for non-traditional residential real estate sales is relatively new, developing and even more uncertain. As is typical in the case of a new and rapidly evolving industry, demand and market acceptance for products and services are subject to tremendous uncertainty. Our future growth and financial performance will almost entirely depend upon consumers’ acceptance of our products and services. In this regard, the failure of advertisers to accept our model or the inability of our services to satisfy consumer expectations, would have a material adverse effect on our business, and could cause us to cease operations.

 

5
 

 

We rely on third parties for key aspects of the process of providing services to our customers, and any failure or interruption in the services provided by these third parties could harm our ability to operate our business and damage our reputation.

 

We rely on third-party vendors, including website providers and information technology vendors. Any disruption in access to the websites developed and hosted by these third-party providers or any failure of these third-party providers to handle current or higher volumes of use could significantly harm our business. Any financial or other difficulties our providers face may have negative effects on our business, the nature and extent of which we cannot predict. We exercise little or no control over all of these third-party vendors, which increases our vulnerability to problems with the services they provide.

 

In addition, we license technology and related databases from third parties to facilitate aspects of our website and connectivity operations. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies and information services could materially and negatively impact our relationship with our customers and adversely affect our brand and our business. It is possible that such errors, failures, interruptions or delays could even expose us to liabilities to our customers or other third parties.

 

Interruption or failure of our information technology and communications systems would impair our ability to effectively provide our services, which could in turn damage our reputation and harm our business.

 

Our ability to provide our services critically depends on the continuing operation of our information technology and communications systems. Any damage to or failure of our systems would likely result in interruptions in our service to customers and the closings of real estate transactions from which we principally derive revenue. Accordingly, interruptions in our service would likely reduce our revenues and profits, and our brand could be damaged, perhaps irreparably, if people believe our system and services are unreliable.

 

To our knowledge, our systems are vulnerable to damage or interruption from terrorist or malicious attacks, floods, tornados, fires, power loss, telecommunications failures, computer viruses and other attempts to harm our systems, and similar types of events. Our data centers are subject to break-ins, sabotage and intentional acts of vandalism, and to other potential disruptions. Some of our systems are not fully redundant (i.e., backed up), and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, or a decision to close a facility we are using without adequate notice for financial reasons or other unanticipated problems at our data centers, could result in lengthy interruptions in our service. Any unscheduled interruption in our service would likely place a burden on our entire organization and result in an immediate loss of revenue. The steps we have taken to increase the reliability and redundancy of our systems are expensive, reduce our operating margin and even then may not be successful in reducing the frequency or duration of unscheduled downtime.

 

Our operations are dependent upon our ability to protect our intellectual property, which could be costly.

 

Our technology is the cornerstone of our business and our success will depend in part upon protecting any technology we use or may develop from infringement, misappropriation, duplication and discovery, and avoiding infringement and misappropriation of third party rights. Our intellectual property is essential to our business, and our ability to compete effectively with other companies depends on the proprietary nature of our technologies. We do not have patent protection for our proprietary video on demand technology. We rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop, maintain, and strengthen its competitive position. Although we have confidentiality provisions in the agreements with our employees and independent contractors, there can be no assurance that such agreements can fully protect our intellectual property, be enforced in a timely manner or that any such employees or consultants will not violate their agreements with us.

 

Furthermore, we may have to take legal action in the future to protect our trade secrets or know-how, or to defend them against claimed infringement of the rights of others. Any legal action of that type could be costly and time-consuming to us, and there can be no assurance that such actions will be successful. The invalidation of key proprietary rights which we own or unsuccessful outcomes in lawsuits to protect our intellectual property may have a material adverse effect on our business, financial condition and results of operations.

 

If we cannot adequately protect our intellectual property rights, our competitors may be able to compete more directly with us, which could adversely affect our competitive position and, as a result, our business, financial condition and results of operations.

 

Our certificate of incorporation grants our Board of Directors, without any action or approval by our stockholders, the power to issue additional shares of capital stock, including the power to designate additional classes of common and preferred stock.

 

On July 31, 2014, the Board and the holders of a majority of the voting power of our shareholders approved an amendment to our articles of incorporation to increase our authorized shares of common stock to 250,000,000 from 125,000,000 and increased the Company's Series A Convertible Preferred Stock to 120,000,000 from 100,000,000. Additionally, on July 31, 2014, the Board designated the terms of 1,00,000 Series B Convertible Preferred Stock.

 

The total number of shares of all classes of stock that the Company shall have the authority to issue is 376,000,000 shares consisting of: 250,000,000 shares of common stock with a $0.001 par value per shares; 120,000,000 shares of Series A Convertible Preferred with a $0.001 par value per share; and 1,000,000 shares of Series B Convertible Preferred. We currently have 89,633,377 shares of common stock outstanding and 66,801,653 shares of Series A Preferred Stock outstanding.

 

6
 

 

Pursuant to authority granted by our certificate of incorporation and applicable state law, our Board of Directors, without any action or approval by our stockholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock) as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. The rights of holders of other classes or series of capital stock, including preferred stock that may be issued could be superior to the rights of the shares of common stock offered hereby. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to the shares of our common stock. Finally, any issuances of additional capital stock (common or preferred) will dilute the percentage of ownership interest of our stockholders and may dilute the per-share book value of the Company.

 

There is limited public market for our common stock.

 

There is currently a limited trading market for our securities on the OTCQB over-the-counter-market. Consequently, we cannot assure you when and if an active-trading market in our shares will be established, or whether any such market will be sustained or sufficiently liquid to enable holders of shares of our common stock to liquidate their investment in our company. If an active public market should develop in the future, the sale of unregistered and restricted securities by current shareholders may have a substantial impact on any such market.

 

We are required to comply with governmental regulations, which will increase our costs and could prohibit us from conducting business in certain jurisdictions.

 

We are subject to governmental regulation by federal, state and local regulatory authorities with respect to our real estate business. Governmental bodies may change the regulatory framework within which we intend to operate, without providing any recourse for adverse effects that the change may have on our business.

 

We can give no assurance that we will be able to comply with existing laws and regulations, that additional regulations that harm our business will not be adopted, or that we will continue to maintain our licenses, approvals or authorizations. Our failure to comply with applicable laws and regulations, or the adoption of new laws and regulations restricting our intended operations, could have a material adverse effect on our business and could cause us to cease operations.

 

The efforts of the National Association of Realtors or other organizations could prevent us from operating our business, and could lead to the imposition of significant restrictions on our operations.

 

The National Association of Realtors, which represents real estate brokerages, has issued rules that attempt to block access of web-assisted real estate companies to the Multiple Listing System (MLS) and may adopt additional rules intended to reduce or eliminate competition from web-assisted (online) discount real estate businesses such as Realbiz. Our business is dependent upon the ability to access the MLS to be competitive. We can give no assurance that the National Association of Realtors will not be successful in preventing our access to the MLS, or that it or another organization will not be successful in adopting rules or imposing other restrictions on web-assisted real estate businesses such as Realbiz. Such adoption or imposition of regulations or restrictions would have a material adverse effect on our business.

 

Competition in the traditional and online residential real estate industry is intense.

 

The residential real estate industry is highly competitive. We believe that important competitive factors in this industry include (but are not limited to) price, service, and ease of use. We presently face competition from numerous companies engaged in traditional residential real estate marketing services and we expect online competition to increase in the future from existing and new competitors. Most of our current and potential competitors have substantially greater financial, marketing and technical resources than us, as well as significant operating histories. Accordingly, we may not be able to compete successfully against new or existing competitors. Furthermore, competition may reduce the prices we are able to charge for our services, thereby potentially lowering revenues and margins, which would likely have a material adverse effect on our results of operation and financial condition.

 

The online residential real estate industry is subject to significant and rapid technological change.

 

The online residential real estate industry is subject to rapid innovation and technological change, shifting customer preferences, new service introductions and competition from traditional real estate brokerage firms. Competitors in this market have frequently taken different strategic approaches and have launched substantially different products or services in order to exploit the same perceived market opportunity. Although we believe that we are offering a unique solution, there can be no assurance that our services will be competitive technologically or otherwise, or that any other services developed by us will be competitive.

 

Our ability to compete in this industry will depend upon, among other things, broad acceptance of our services and on our ability to continually improve current and future services we may develop to meet changing customer requirements. There can be no assurance that we will successfully identify new service or product opportunities and develop and bring to the market new and enhanced solutions in a timely manner, that such products or services will be commercially successful, that we will benefit from such development, or that products and services developed by others will not render our products and services noncompetitive or obsolete. If we are unable to penetrate markets in a timely manner in response to changing market conditions or customer requirements, or if new or enhanced products or services do not achieve a significant degree of market acceptance, our business would be materially and adversely affected.

 

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We may be impacted by general economic conditions within the United States residential real estate market.

 

The residential real estate market has experienced vast fluctuations in recent times. In some years, real estate home sales are brisk, while in other years the residential real estate market has been stagnant. Our ability to attract home sellers and buyers to use our website will, in part, depend upon consumers’ willingness in general to buy or sell a home. When consumers sense that the overall economy is not doing well, they are less likely to make an expensive purchase such as a home.

 

In addition, unemployment remains at the high levels by historical standards. There also remains an enormous inventory of unsold and vacant homes. In the first quarter of 2010, the US Census Bureau reported there were 19 million vacant homes in the United States.

 

We have identified material weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future. If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

 

Our most recent evaluation of our internal controls resulted in our conclusion that our disclosure controls and procedures and that our internal control over financial reporting were not effective .Effective internal controls are necessary for us to provide reliable financial reports. All internal control systems, no matter how well designed, have inherent limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. In our case, our failure to achieve and maintain an effective internal control environment could cause us to be unable to produce reliable financial reports or prevent fraud. This may cause investors to lose confidence in our reported financial information, which could in turn have a material adverse effect on our stock price.

 

Our lack of an independent audit committee and audit committee financial expert at this time may hinder our board of directors’ effectiveness in fulfilling the functions of the audit committee without undue influence from management and until we establish such committee will prevent us from obtaining a listing on a national securities exchange.

 

Although our common stock is not listed on any national securities exchange, for purposes of independence we use the definition of independence applied by NASDAQ. Currently, we have no independent audit committee. Our full board of directors functions as our audit committee and is comprised of seven directors, four of whom are considered to be "independent" in accordance with the requirements set forth in NASDAQ Listing Rule 5605(a)(2). An independent audit committee plays a crucial role in the corporate governance process, assessing our Company's processes relating to our risks and control environment, overseeing financial reporting, and evaluating internal and independent audit processes. The lack of an independent audit committee may prevent the board of directors from being independent from management in its judgments and decisions and its ability to pursue the responsibilities of an audit committee without undue influence. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified, independent directors, the management of our business could be compromised. An independent audit committee is required for listing on any national securities exchange, therefore until such time as we meet the audit committee independence requirements of a national securities exchange we will be ineligible for listing on any national securities exchange.

 

Our board of directors act as our compensation committee, which presents the risk that compensation and benefits paid to those executive officers who are board members and other officers may not be commensurate with our financial performance.

 

A compensation committee consisting of independent directors is a safeguard against self-dealing by company executives. Our board of directors acts as the compensation committee and determines the compensation and benefits of our executive officers, administers our employee stock and benefit plans, and reviews policies relating to the compensation and benefits of our employees. Our lack of an independent compensation committee presents the risk that our executive officer on the board may have influence over his personal compensation and benefits levels that may not be commensurate with our financial performance.

 

Certain provisions of the General Corporation Law of the State of Delaware, our Amended and Restated Certificate of Incorporation, as amended, and our bylaws may have anti-takeover effects which may make an acquisition of our company by another company more difficult.

 

We are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in any business combination, including mergers and asset sales, with an interested stockholder (generally, a 15% or greater stockholder) for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The operation of Section 203 may have anti-takeover effects, which could delay, defer or prevent a takeover attempt that a holder of our common stock might consider in its best interest.

 

Our Amended and Restated Certificate of Incorporation and bylaws contain provisions that permit us to issue, without any further vote or action by the stockholders, up to 125,000,000 shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares constituting the series and the designation of the series, the voting powers, if any, of the shares of the series, and the preferences and relative, participating, optional and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of such series.

 

Our bylaws provide that special meetings of stockholders may be called only by the chairman or by our board. Stockholders are not permitted to call a special meeting of stockholders, to require that the board call such a special meeting, or to require that our board request the calling of a special meeting of stockholders.

 

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These provisions on our Amended and Restated Certificate of Incorporation and Bylaw may have anti-takeover effects, which could delay, defer or prevent a takeover attempt that a holder of our common stock might consider in its best interest

 

We have never paid dividends and have no plans to pay dividends in the future.

 

Holders of shares of our common stock are entitled to receive such dividends as may be declared by our board of directors. To date, we have paid no cash dividends on our shares of our preferred or common stock and we do not expect to pay cash dividends in the foreseeable future. We intend to retain future earnings, if any, to provide funds for operations of our business. Therefore, any return investors in our preferred or common stock may have will be in the form of appreciation, if any, in the market value of their shares of common stock.

 

Certain of our officers may have a conflict of interest.

 

Some of our officers, including our Chief Executive Officer and our Chief Financial Officer are currently working for the Company on a part-time basis. Several of the part-time employees also work at other jobs and have discretion to decide what time they devote to our activities, which may result in a lack of availability when needed due to responsibilities at other jobs. We expect that some of these officers may join the Company on a full-time basis, but there can be no assurance given that any or all of our officers will be so employed.

 

ITEM 2. PROPERTIES

 

We maintain our principal executive offices at 2690 Weston Road, Suite 200, Weston, FL 33331. The Company’s parent Company, Next 1 Interactive, Inc. leases approximately 6,500 square feet of office space in Weston, Florida pursuant to a lease agreement with Bedner Farms, Inc. of the building located at 2690 Weston Road, Weston, Florida 33331. In accordance with the terms of the lease agreement, the Company is renting the commercial office space, for a term of five years commencing on January 1, 2011 through December 31, 2015. The Company does not currently pay rent to Next 1 Interactive, Inc.

 

ITEM 3. LEGAL PROCEEDINGS

 

We are not currently party to any material legal proceedings. From time to time, we (or our principal operating subsidiary, RealBiz) may be named as a defendant in legal actions arising from our normal business activities.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

PART II

 

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

General

 

Our common stock is listed on the OTCQB under the symbol RBIZ. Our stock began trading under the symbol “WBDG” on December 19, 2008 and changed to “RBIZ” on October 5, 2012. The following table shows our high and low closing prices of our common stock at the end of each quarter for the fiscal years 2014 and 2013.

 

Period   High Price     Low Price  
                 
January 31, 2015   $ 0.37     $ 0.11  
                 
Fiscal Year Ended October 31, 2014                
First Quarter   $ 2.60     $ 0.92  
Second Quarter   $ 1.00     $ 0.13  
Third Quarter   $ 0.27     $ 0.11  
Fourth Quarter   $ 0.18     $ 0.07  
                 
Fiscal Year Ended October 31, 2013                
First Quarter   $ 3.00     $ 1.50  
Second Quarter   $ 3.90     $ 1.13  
Third Quarter   $ 2.46     $ 0.34  
Fourth Quarter   $ 4.65     $ 1.10  

 

Our closing stock price on February 4, 2015 was $0.35. As of the date of this filing, we had approximately 440 holders of record of our common stock.

 

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Dividends

 

We have not paid any dividends on our common stock and do not anticipate paying any such dividends in the near future. Instead, we intend to use any earnings for future acquisitions and expanding our business. Nevertheless, at this time there are not any restrictions on our ability to pay dividends on our common stock.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

The table below sets forth certain information, as of the close of business on October 31, 2014, regarding equity compensation plans (including individual compensation arrangements) under which our securities were then authorized for issuance.

 

      Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(a)
    Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
  (b)
    Number of Securities
Remaining Available for
 Issuance Under Equity
Compensation Plans
 (excluding securities reflected
in column a)
(c)
 
Equity compensation plans approved by shareholders     -     N/A     -  
                     
Restricted Stock Plan and Stock Option equity compensation plans not approved by shareholders (1)     -     N/A     -  

 

(1)    See Note 10 to the financial statements for more information on restricted stock grants.

 

Presently, we are not required by applicable state law or the listing standards of any self-regulatory agency (e.g., the OTCQB, NASD, AMEX or NYSE) to obtain the approval of our security holders prior to issuing any such compensatory options, warrants or other rights to purchase our securities.

 

Potential Anti-Takeover Effects

 

Certain provisions set forth in our Amended and Restated Certificate of Incorporation, as amended, in our bylaws and in Delaware law, which are summarized below, may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price for the shares held by stockholders.

 

Blank Check Preferred Stock . Our Certificate of Incorporation and bylaws contain provisions that permit us to issue, without any further vote or action by the stockholders, up to 125,000,000 shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares constituting the series and the designation of the series, the voting powers, if any, of the shares of the series, and the preferences and relative, participating, optional and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of such series.

 

Special Meetings of Stockholders . Our bylaws provide that special meetings of stockholders may be called only by the chairman or by our board. Stockholders are not permitted to call a special meeting of stockholders, to require that the board call such a special meeting, or to require that our board request the calling of a special meeting of stockholders.

 

While the foregoing provisions of our certificate of incorporation, bylaws and Delaware law may have an anti-takeover effect, these provisions are intended to enhance the likelihood of continuity and stability in the composition of the Board of Directors and in the policies formulated by the Board of Directors and to discourage certain types of transactions that may involve an actual or threatened change of control. In that regard, these provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our common stock that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in our management.

 

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Delaware Takeover Statute

 

In general, Section 203 of the Delaware General Corporation Law prohibits a Delaware corporation that is a public company from engaging in any “business combination” (as defined below) with any “interested stockholder” (defined generally as an entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with such entity or person) for a period of three years following the date that such stockholder became an interested stockholder, unless: (1) prior to such date, the Board of Directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (2) on consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (x) by persons who are directors and also officers and (y) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (3) on or subsequent to such date, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

 

Section 203 of the Delaware General Corporation Law defines “business combination” to include: (1) any merger or consolidation involving the corporation and the interested stockholder; (2) any sale, transfer, pledge or other disposition of ten percent or more of the assets of the corporation involving the interested stockholder; (3) subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; (4) any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or (5) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

 

Transfer Agent and Registrar

 

Our transfer agent is American Stock Transfer & Trust Company, LLC, located at 6201 15th Avenue, Brooklyn, NY 11219. The transfer agent’s telephone number is (718) 921-8200. The transfer agent is registered under the Securities and Exchange Act of 1934.

 

Listing

 

Our common stock is currently traded on the OTCQB (a market tier on the over-the-counter Pink Sheets market) under the symbol RBIZ.PK.

 

Sales of Unregistered Securities

 

For these issuances of common stock, we relied on the exemption from federal registration under Section 4(a)(2) of the Securities Act of 1933 and, in those instances where the issuances were made to affiliates or accredited investors, upon Rule 506 promulgated thereunder. In that regard, we relied on Rule 506 based on the fact that the investors who purchased these securities qualified as an “accredited investors” under Rule 501 of the Securities Act of 1933. In all cases, investors had knowledge and experience in financial and business matters such that they were capable of evaluating the risks of the investment. The securities offered and sold in the transactions were not registered under the Securities Act of 1933 and therefore may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

 

Set forth below is information regarding securities sold by us during the three months ended October 31, 2014 that were not registered under the Securities Act:

 

· Issued 1,513,600 shares of our common stock for a total value of $197,040 for consulting fees rendered.  The value of the common stock issued was based on the fair value of the stock at the time of issuance.

 

· Issued 5,700,00 shares of our common stock valued at $285,000 upon the conversion of the holders of convertible Series B preferred shares held in its parent company Next 1 Interactive, Inc.

 

  ·

Issued 1,300,000 shares of our common stock valued at $130,000 upon the conversion of the holders of convertible Series C preferred shares held in its parent company Next 1 Interactive, Inc.

 

· Issued 1,049,895 shares of our common stock valued at $157,500 upon the conversion of the holders of convertible Series D preferred shares held in its parent company Next 1 Interactive, Inc.

 

· issued 1,500,000 shares at the conversion rate of $0.05 per share, upon request of Next 1 Interactive Inc. noteholders, to convert $75,000 in principal.

 

Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D promulgated there under), as transactions by an issuer not involving any public offering. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.

 

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ITEM 6. SELECTED FINANCIAL DATA

 

As a smaller reporting company, we are not required to provide the information required by this item.

 

ITEM 7. 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

 

We are engaged in the business of providing digital media and marketing services for the real estate industry. We currently generate revenue from service fees, product sales, membership fees and advertising revenues. The company was formed through the merging of three divisions: (i) our fully licensed real estate division (formerly known as Webdigs); (ii) our TV media contracts (Home Preview Channel /Extraordinary Vacation Homes/) division; and (iii) our Real Estate Virtual Tour and Media group (Realbiz 360). The assets of these divisions were used to create a new suite of real estate products and services that create stickiness through the utilization of video, social media and loyalty programs. At the core of the company’s programs is our proprietary video creation technology which allows for an automated conversion of data (text and pictures of home listings) to a video with voice and music. We provide video search, storage and marketing capabilities on multiple platform dynamics for web, mobile, and TV. Once a home, personal or community video is created using our proprietary technology, it can be published to social media, email or distributed to multiple real estate websites, broadband or television for consumer viewing.

 

We are engaged in the business of providing digital media and marketing services for the real estate industry. We currently generate revenue from service fees, product sales, membership fees and advertising revenues. RealBiz has positioned itself in the following areas summarized here and explained in more detail below:

 

1. Nestbuilder Agent:  This platform allows agents to claim and customize their own web page to be used as a video marketing platform. The site interacts with nestbuilder.com, ezflix and the HAAC allowing agents to create customized video of homes, themselves or community as well as being able to pull other MLS property listings to create specialized marketing messages. Additionally, the agent can view the effectiveness of their marketing efforts through a dashboard that shows multiple statistics including number of views, time spent, origination and lead generation. Additionally the agent can earn points for their marketing actions that can be converted to Home & Away Club rewards dollars. This site will completely empower the real estate agent with content and assets that they can use to pursue prospects and generate leads at a fraction of the cost they are currently paying.  
   
2. Ezflix Mobile App : The ezflix app is the only mobile/web video editor that pre-integrates with an agent’s listing data, allowing them to edit all of their listing’s data, and convert them into video with live video interstitial capabilities, audio recording and music.   Ezflix can then share videos to all social media, email, and multiple other real estate portals including NestBuilder – giving agents a way to personalize their listing videos with entertaining local relevant content.  This application, both Web and Mobile, was initially launched in both the Android and iOS versions in January and February 2015. This platform as it evolves will combine our VT (Virtual Tour) and MVA (Microvideo App) platform into one solution and distribute to multiple partners and resellers including Photographer and Videographer service providers’ network. This product integration is expected to be complete by Q2 of 2015.
   
3. The Virtual Tour (VT) and Microvideo App (MVA): was developed and implemented to allow agents to access specific video based product strategies that are designed specifically to increase the SEO rank and traffic credit to real estate franchise systems and/or their brokers. This solution gives those franchises and brokers a much needed tool to lower their cost of prospect acquisition.  Currently, the strategy is to migrate our current client base of VT users to MVA’s and combine the total core offering into our EzFlix Mobile and Web based application during the second quarter of 2015.
   
4. NestBuilder: The world’s largest real estate video portal with over 1.5 million listings and is targeted to grow to over 3 million listings by mid 2015.  Unlike other leaders in the space that agents are seeking legitimate alternatives to, NestBuilder focuses on building agent’s brands and delivering high-quality leads. They achieve this by offering fully customizable webpages in NestBuilder Agent that will follow their homebuyer throughout the home search, ultimately turning NestBuilder.com into each agent’s very own national portal.
   
5. NestBuilder Mobile Search App : The app is currently available in the Google Play Store and should be available in the iOS version by March 2015.  The  app not only allows consumers to search and view homes in video but additionally  allows consumers to enter in their agent’s name, and effectively turn the NestBuilder app into the agent’s very own application where their branding follows the consumer along their home search journey, everywhere they go.

 

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6. ReachFactor: A recently acquired full-marketing agency that specializes in real estate. ReachFactor offers a variety of solutions to agents and brokers such as web design, digital ad campaigns, blogging, social media management, reputation management, search engine optimization and much more.
   
7.

Enterprise Video Production : We service some of the largest and well known Franchisor accounts in the North America Real Estate Market in compiling listings into a Video format and distributing to those franchisors websites, brokers and agents and lead generation platforms 24/7. Some of these multiyear contracts have the Company producing over 10 million video listings from 2012-2014 and will be eclipsing that production in 2015 alone. This core area significantly contributes to the Company’s growth not only in this core service but continues to allow us access to national databases and directly agents and brokers to allow the Company access to upgrades and upsell other core products and services. 

   
8. Home and Away Club: RealBiz excels at beginning and closing the agent-buyer relationship, but the reality of real estate is that the average homebuyer looks for a new home once every 8 years. As a result the majority of consumers have lost touch with their agent by the time their next home purchase happens. That’s why RealBiz has created the Home and Away Club so they can offer agents a means to stay in contact once the house is sold with a rewards program. With the Home and Away club, agents can earn rewards dollars for completing actions as well as purchasing club memberships that can be gifted to their clients. Additionally agents can predetermine times and special events that they wish to have their client accounts topped up. All of the Home & Away Club members introduced by the agent remain part of the agents “circle of clients” with personalized messaging on all gifting of rewards. The rewards dollars   allows members to purchase a broad cross section of lifestyle, travel, merchandise and home products at   greatly discounted pricing – thereby giving customers real values on products they want.

 

The Share Exchange

 

On October 9, 2012, we completed a share exchange (the “Exchange Transaction” ) with Next 1 Interactive, Inc., a Nevada corporation (“Next 1”),that was contemplated by that certain Share Exchange Agreement entered into on April 4, 2012 (the “Exchange Agreement”) pursuant to which we received all of the outstanding equity in Attaché Travel International, Inc., a Florida corporation and wholly owned subsidiary of Next 1 (“Attaché”) in consideration of our issuance to Next 1 of 93 million shares of our newly designated Series A Convertible Preferred Stock (our “Series A Stock). Attaché owns approximately 80% of a corporation named RealBiz Holdings Inc. which is the parent corporation of RealBiz 360, Inc. (“RealBiz”). As a condition to the closing of the Exchange Transaction, on October 3, 2012, we changed our name from “Webdigs, Inc.” to “RealBiz Media Group, Inc.”, by engaging in a short-form parent-subsidiary merger in the State of Delaware. Bill Kerby, our Chief Executive Officer is also the Chief Executive Officer of Next 1 and our Chief Financial Officer, Adam Friedman is also the Chief Financial Officer of Next 1.

 

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, Mr. 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. Mr. Buntz was a director of our Company until his resignation of March 31, 2014. At the closing of the Exchange Transaction, Mr. Wicker resigned his position as a director of our Company and as our Chief Financial Officer. The Preferred A Shares for Mr. Buntz were converted to 5,990,238 Common Shares on February 27, 2013.

 

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.

 

On March 16, 2012, we 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 $1,000.00 (part of the total $15,000). Mr. Buntz purchased the royalty agreement from us in exchange for a principal reduction of his loan to the Company of $5,000.

 

Subsequent Events .

 

The Company has evaluated subsequent events occurring after the balance sheet date and has identified the following:

During December 2014 and January 2015, the Company:

 

· received $460,000 in proceeds and issued convertible promissory notes with interest rates of 12% per annum, maturity dates of December 31, 2016 and with a range of fixed rate conversion features.

 

· received $75,000 in proceeds and issued 750,000 common shares and 750,000 one year warrants with an exercise price of $0.18.

  

· signed a joint venture agreement on January 23, 2015 with Harmon Media Group This co-syndication agreement is to provide enhanced listing data for parties to increase site traffic, enhanced products and services, agent usage, agent subscriptions, expecting associated fees and advertising revenues to both parties.

 

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· on December 23, 2014, the board of directors determined that it is in the best interests of the Company to declare the $915,447 of dividends which currently have been accrued on the books of the Corporation, but not declared, in respect of the Corporation's Preferred Series A shares, to holders of record date on August 31, 2014.

 

Results of Operations

 

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

 

Revenues

 

Despite a 15.5% increase in total revenue in the fourth quarter 2014 from the third quarter of 2014, our total revenues decreased 5% to $1,090,674 for the year ended October 31, 2014, compared to $1,145,540 for the year ended October 31, 2013, a decrease of $54,866. The decrease is the result of the Company's shifting away from the legacy virtual tour business towards its rollout of its new technology products and its offer to agents of a free trial period before charging fees for the use of new products.

 

Cost of Revenue

 

Cost of revenues increased 588% to $414,652 for year ended October 31, 2014, compared to $60,297 for the year ended October 31, 2013, an increase of $354,355. This is predominately due to the amortization of the cost of the Nestbuilder website placed in service in March 2014 which has been classified as a cost of sale as the website is considered a revenue producing tool for the Company.

 

Operating Expenses

 

Our operating expenses, include salaries and benefits, selling and promotion, general and administrative expenses, increased 9% to $5,230,209 for the year ended October 31, 2014, compared to $4,791,247 for the year ended October 31, 2013, an increase of $438,962.This increase was substantially due to an increase in consulting fees of $228,831 and to a lesser extent due an increase in investor relations of $136,472, impairment to ReachFactor intangible assets of $125,000, amortization of intangible assets of $99,996, audit and accounting fees of $84,059, webhosting of $41,230, legal and professional fees of $26,982, depreciation of $13,576 and bank charges of $11,853. This was partially offset by a decrease in salaries and benefits of $78,825, bad debt of $76,823, office expense of $73,109, filing fees of $66,520 and to a lesser extent a decrease in rent of $16,081, telephone of $13,436 and miscellaneous operating expense of $4,243.

 

Other Income (Expenses)

 

Our other expenses decreased 12% to $51,140 for year ended October 31, 2014, compared to $58,085 of other expenses for year ended October 31, 2013, a decrease of $6,945. This decrease was substantially due to a decrease in interest expense to $3,919 for the year ended October 31, 2014, compared to $442,341for the year ended October 31, 2013, a decrease of $ 438,422 due to the lack of amortization of the beneficial conversion feature in the current fiscal year as compared to the prior fiscal year; and to a lesser extent an increase in other income to $176,100 for the year ended October 31, 2014, compared to other expense of $640 for the year ended October 31, 2013, an increase of $176,740 primarily consisting of proceeds received from a grant program in Canada to encourage research and development, and a gain on change of fair value of derivatives of $9,323 not existing in the prior fiscal year. This was partially offset by no gain on forgiveness of notes payable and accrued liabilities in the current fiscal year versus $384,304 in the prior fiscal year and to a lesser extent initial derivative liability expense of $234,303 due to the existence of an embedded derivative liability from a convertible promissory note executed during the current fiscal year end.

 

Net Loss

 

We had a net loss of $4,605,327 for the year ended October 31, 2014, compared to net loss of $3,764,089 for the year ended October 31, 2013, an increase of $841,238. The increase in loss from 2013 to 2014 was primarily due to an increase of $519,835 in the amortization of intangible assets, consulting fees of $228,831 and impairment of ReachFactor intangible assets of $125,000.

 

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 October 31, 2014, we had $20,066 cash on-hand, a decrease of $1,284,308 from $1,304,374 at the start of fiscal 2014. The decrease in cash was due primarily to operating expenses, website development costs and advances to affiliates. The Company continues to raise capital through equity financings and has raised an additional $1.0 million since October 31, 2014.

 

Net cash used in operating activities was $2,306,959 for the year ended October 31, 2014, an increase of $148,083 from $2,158,876 used during the year ended October 31, 2013. This increase was primarily due to an increase in amortization of intangibles, impairment of ReachFactor intangible assets, initial derivative liability expense and stock based compensation and consulting fees.

 

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Net cash used in investing activities increased to $749,580 for the year ended October 31, 2014, compared to $470,506 for the year ended October 31, 2013, an increase of $279,074 primarily due to incurring website and software development costs and to a lesser extent the purchase of computer equipment.

 

Net cash provided by financing activities decreased by $2,197,740 to $1,712,974, for the year ended October 31, 2014, compared to $3,910,714 for the year ended October 31, 2013. This decrease was primarily due to the net decrease of proceeds in the issuance of common stock and the exercise of warrants of $2,366,812 offset by increases in proceeds, net of payments, of $169,072 received for convertible promissory notes, loans and subscription advances.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We have identified the policies below as critical to our understanding of the results of our business operations. We discuss the impact and any associated risks related to these policies on our business operations throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results.

 

In the ordinary course of business, we have made a number of estimates and assumptions in preparing our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates and assumptions. The following critical accounting policies are those that are most important to the portrayal of our consolidated financial statements. These policies require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a summary of all of our significant accounting policies, including the critical accounting policies discussed below, refer to Note 1 ― “Summary of Significant Accounting Policies” included in the “Notes to Consolidated Financial Statements”,

 

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.

 

Income Taxes . The Company accounts for income taxes using an asset and liability approach to financial accounting and reporting for income taxes. Accordingly, deferred tax assets and liabilities arise from the difference between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. Deferred tax amounts are determined using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided under currently enacted tax law. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable, respectively, for the period plus or minus the change in deferred tax assets and liabilities during the period. The Company has recorded a full valuation allowance for its net deferred tax assets as of October 31, 2014 and 2013 because realization of those assets is not reasonably assured.

 

The Company will recognize a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

The Company believes its income tax filing positions and deductions will be sustained upon examination and, accordingly, no reserves, or related accruals for interest and penalties has been recorded at October 31, 2014 and 2013.

 

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 years ended October 31, 2014 and 2013 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 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. For the years ended October 31, 2014 and 2013, the Company determined the allowance for doubtful accounts to be $-0- and $76,823, respectively.

 

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Office Equipment and Fixtures . Office equipment and fixtures are recorded at cost. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property or equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in operating income.

 

Depreciation is provided on the straight-line method over the estimated useful lives of the respective assets as follows:

 

Office equipment 2 to 5 years
Furniture and fixtures 3 to 7 years

 

Intangible Assets .

 

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 assumed on the records of the Next 1 as follows:

 

Cash   $ 34,366  
Other current assets     40,696  
Intangible asset     4,796,178  
      4,871,240  
         
Accounts payable, accrued expenses and other miscellaneous payables     2,330,846  
Deferred revenue     48,569  
Convertible notes payable to officer     241,825  
      2,621,240  
Net purchase price   $ 2,250,000  

 

Recently Issued Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the codification. Additionally, this ASU supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. The guidance's core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue principles, an entity will identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue when the performance obligation is satisfied. The ASU further states that an entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this ASU are effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016, for public companies. Early adoption is not permitted. The Company is still evaluating the provisions of ASU 2014-09 and its impact on the Company's consolidated financial position, results of operations or cash flows.

 

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements and Property, Plant, and Equipment,” (ASU 2014-08). This ASU changes the threshold for reporting discontinued operations and adds new disclosures. The new guidance defines a discontinued operation as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on our operations and financial results.” For disposals of individually significant components that do not qualify as discontinued operations, the Company must disclose pre-tax earnings of the disposed component. This guidance is effective for us prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The Company does not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

 

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Seasonality of Business

 

The residential real estate market has traditionally experienced seasonality, with a peak in the spring and summer seasons and a decrease in activity during the fall and winter seasons. Revenues in each quarter can be significantly affected by activity during the prior quarter, given the time lag between contract execution and closing. A typical real estate transaction has a 30 day lag between contract signing and closing of the transaction.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

See financial statements starting on page 29.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain a system of disclosure controls and procedures that is designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow timely decisions regarding required disclosures.

 

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 October 31, 2014 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.

 

Management’s Annual Report On Internal Control Over Financial Reporting

 

Based on this evaluation and taking into account that certain material weaknesses existed as of October 31, 2014, our Chief Executive Officer and Chief Financial Officer have 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 Annual Report on Form 10-K were prepared with particular attention to the material weaknesses previously disclosed. Notwithstanding the material weaknesses in internal controls that continue to exist as of October 31, 2014, we have concluded that the consolidated financial statements included in this Annual Report on Form 10-K present fairly, the financial position, results of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States of America (GAAP). 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

  •  Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
     
  •  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
     
  •  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of our assets that could have a material effect on the consolidated financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

  

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Our management assessed the effectiveness of our internal control over financial reporting as of October 31, 2014. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

 

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected.  In connection with the assessment described above, management has re-evaluated the control deficiencies identified in the prior fiscal year.

 

We conclude that, as of October 31, 2014, our internal control over financial reporting was not effective based on the criteria in “Internal Control-Integrated Framework” issued by COSO.  We intend to further improve our internal controls in our current fiscal year and add additional measures to further mitigate our material internal control weaknesses as the Company grows assuming our operating funds are sufficient.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the SEC to provide only management’s report in this annual report.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended October 31, 2014, that have materially affected, or are 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, 2013 have not been fully remediated. 

 

ITEM 9B. OTHER INFORMATION

 

None  

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 

Directors, Executive Officers and Other Key Employees

 

Name   Age   Position(s)   Independent Director
Bill Kerby   57   Director (Chairman), Chief Executive Officer   No
             
Adam Friedman   50   Chief Financial Officer   N/A
             
Donald Monaco   62   Director   Yes
             
Steven Marques   54   Chief Revenue Officer   N/A
             
Pat LaVecchia   48   Director   Yes
             
Doug Checkeris   58   Director , Former Chief Marketing Officer   No
             
Keith A. White   53   Director   Yes
             
Arun Srinivasan   43  

Director, Former Chief Marketing Officer, Chief Technology Officer

  No
             
Mike Craig   63   Director   Yes

 

Biographies for the members of our Board of Directors and our management team are set forth below:

 

William Kerby – Chief Executive Officer and Chairman:

 

On December 21, 2012, the board of directors of the Company appointed William Kerby, age 57, to the position of Chief Executive Officer and Chairman of the Board of the Company. Mr. Kerby is the founder of Next 1, Interactive, Inc. From 2008 to present, he has been the architect of the Next 1 model, overseeing the development and operations of the Travel, Real Estate and Media divisions of the company. From 2004 to 2008, Mr. Kerby served as the Chairman and CEO of Extraordinary Vacations Group whose operations included Cruise & Vacation Shoppes, Maupintour Extraordinary Vacations and the Travel Magazine - a TV series of 160 travel shows. From 2002 to 2004 Mr. Kerby was Chairman of Cruise & Vacation Shoppes after it was acquired by a small group of investors and management from Travelbyus. Mr. Kerby was given the mandate to expand the operations focusing on a “marketing driven travel model.” In June 2004 Cruise & Vacation Shoppe was merged into Extraordinary Vacations Group. From 1999 to 2002 Mr. Kerby founded and managed Travelbyus, a publicly traded company on the TSX and NASD Small Cap. The launch included an intellectually patented travel model that utilized technology-based marketing to promote its travel services and products. Mr. Kerby negotiated the acquisition and financing of 21Companies encompassing multiple tour operators, 2,100 travel agencies, media that included print, television, outdoor billboard and wireless applications and leading edge technology in order to build and complete the Travelbyus model. The company had over 500 employees, gross revenues exceeding $3 billion and a Market Cap over $900 million. Prior to this Mr. Kerby founded Leisure Canada – a company that included a nationwide Travel Agency, international tour operations, travel magazines and the Master Franchise for Thrifty Car Rental British Columbia .

 

The Board believes that Mr. Kerby’s vast knowledge of the industry and extensive experience in senior corporate positions make him ideally qualified to help lead the Company. His executive leadership and operational experience provide him with a broad understanding of the operational, financial and strategic issues facing public companies. His service with other public companies provides him with extensive corporate governance knowledge.

 

Adam Friedman - Chief Financial Officer:

 

On December 21, 2012, the board of directors of the Company appointed Adam Friedman, age 50, to the position of Chief Financial Officer of the Company. Mr. Friedman has served as the Chief Financial Officer of Next 1 Interactive, Inc. since 2010. From 2006 to 2010, Mr. Friedman had previously served as Chief Financial Officer, Corporate Secretary, and Controller for MDwerks, Inc. (“MDwerks”) where his responsibilities included overseeing the company’s finances, human resources department, U.S. Securities & Exchange Commission compliance, and Sarbanes-Oxley compliance. Prior to joining MDwerks, Mr. Friedman served as the Vice President of Finance for CSA Marketing, Inc. from 2005 to 2006. For the eleven years prior to 2005, Mr. Friedman served as the Business Manager/Controller and Director of Financial Planning at the GE/NBC/Telemundo Group, Inc. Mr. Friedman also worked as a Senior Financial Analyst for Knight-Ridder, Inc and as an Audit Senior Accountant for KPMG Peat Marwick. Mr. Friedman received his MBA from St. Thomas University and his BSM from Tulane University.

 

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Don Monaco - Director:

 

On December 21, 2012, the Company appointed Don Monaco, 62, as a member of its Board of Directors. Since 2005, Mr. Monaco has been the principal owner of Monaco Air Duluth, LLC, a full service, fixed-base operator aviation services business at Duluth International Airport serving airline, military and general aviation customers. Mr. Monaco spent over 18 years as a Partner and Senior Executive and 28 years as an international information technology and business management consultant with Accenture in Chicago, Illinois. Mr. Monaco also serves as a Commissioner on the Metropolitan Airports Commission in Minneapolis-St. Paul and as a Commissioner of the Duluth Economic Development Authority. Mr. Monaco is also the President of the Monaco Air Foundation, Chairman of the Miller-Dwan Foundation, Treasurer of Honor Flight Northland, Treasurer of the Duluth Aviation Institute, Co-Chair of the Northern Aero Alliance, a Director for the Destination Duluth nonprofit corporation, a member of the Duluth Chamber of Commerce Military Affairs Committee, and a member of Lake Superior College's Center for Advanced Aviation Advisory Committee .

 

The Company believes that Mr. Monaco’s senior management and information technology experience qualifies him to be a member of the Board.

 

Doug Checkeris - Director:

 

On December 21, 2012, the Company appointed Doug Checkeris, 58, as a member of its Board of Directors. Mr. Checkeris is currently a Director of Cieslok Outdoor, a privately held digital outdoor media company, a Partner/Founder of Unreal Gaming Inc., a Pennsylvania based company that is building a platform to serve the online business for money gaming operators and casinos, and a Partner at GNR8R Media Group, a Toronto based marketing company that envisions, designs and orchestrates 21st Century operating systems.  Mr. Checkeris is a Senior Media and Advertising Executive with nearly three decades of hands-on management in all facets of interactive media. Doug’s work experience includes 14 years of service with Mediacom where he rose through the ranks to become the CEO for Mediacom North America.  With close to $18 billion in global billings, 4,600 employees, and 116 offices in 89 countries, Mediacom provides and specializes in business-building media solutions for some of the world’s largest, well-known advertisers. Previous to Mediacom, Doug started his career in a media company in Toronto, Canada, and was a partner when the company was acquired by Grey Worldwide and the WPP.

 

Mr. Checkeris’ media and advertising experience qualifies him to be a member of the Board. His executive leadership experience provides him with valuable experience.

 

Arun Srinivasan – Chief Marketing Officer, Chief Technology Officer and Director:

 

On May 27, 2014, the board of directors of the Company appointed Arun Srinivasan, to the position of Chief Marketing Officer and Chief Technology Officer as well as a Director of the Company. In 2008, Mr. Srinivasan co-founded ReachFactor Inc., an award-winning social media and reputation marketing platform for real estate agents and brokerages.  From 2008 to present, he served as Chief Operating Officer of ReachFactor, overseeing all aspects of its operations as it grew to serve thousands of agents and brokerages across the country. From 1998 to 2008, he was the co-founder and Chief Technology Officer of BroadSpire Inc., one of the largest private website hosting and online marketing companies with over 250,000 clients internationally. In this role, he oversaw service delivery for all clients which included companies such as Paramount Pictures, Boston Beer Company, HBO, Dreamworks, and many of the Fortune 500. Mr. Srinivasan received his Bachelor's Degree in Economics from Yale University.

 

Mr. Srinivasan’s marketing and technology experience make him uniquely qualified to act as a director.

 

Pat LaVecchia - Director:

 

On March 31, 2014, the Company appointed Pat LaVecchia as a member of its board of directors. Mr. LaVecchia has been a founding principal and Managing Member of LaVecchia Capital LLC (“LaVecchia Capital”), a merchant banking and investment firm, since 2007 and has over 20 years of experience in the financial industry. Mr. LaVecchia has built and run several major Wall Street groups and has extensive expertise in capital markets, including initial public offerings, secondary offerings, raising capital for private companies and PIPEs as well as playing the leading role in numerous mergers, acquisitions, private placements and high yield transactions. Prior to forming LaVecchia Capital, Mr. LaVecchia ran several groups at major firms including: Managing Director and Head of the Private Equity Placement Group at Bear, Stearns & Company (1994 to 1997); Group Head of Global Private Corporate Equity Placements at Credit Suisse First Boston (1997 to 2000); Managing Director and Group Head of the Private Finance and Sponsors Group at Legg Mason Wood Walker, Inc (2001 to 2003); co-founder and Managing Partner of Viant Group (2003-2005) and Managing Director and Head of Capital Markets at FTN Midwest Securities Corp. (2005 to 2007). Mr. LaVecchia received his B.A., magna cum laude (and elected to Phi Beta Kappa), from Clark University and an M.B.A. from The Wharton School of the University of Pennsylvania with a major in Finance and a concentration in Strategic Planning. In the past, Mr. LaVecchia has served on several public company boards, including as Vice Chairman of InfuSystems, Inc. (INFU).   Mr. LaVecchia is also currently a Managing Member of Sapphire Capital Partners. Mr. LaVecchia also sits on several advisory boards and non-profit boards.

 

The Company believes that Mr. LaVecchia’s investment banking and business experience allows him to contribute business and financing expertise and qualifies him to be a member of the Board.

 

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Michael Craig - Director:

 

On May 1, 2014, the Company appointed Michael Craig, as a member of its board of directors. Since August 2012, Mr. Craig has been the President of MaasPros, a company in Canada that assists businesses in implementing profitable and measurable digital marketing solutions to converts visitors into qualified leads. From April 2011 to August 2012, Mr. Craig was Chief Operating Officer of Winmar Franchise Corporation, a property restoration company in Canada. From 2009 through 2010, Mr. Craig was a consultant for the Pizzaiolo Gourmet Pizza company. Prior to these positions, Mr. Craig had various positions in many varied industries.

 

Mr. Craig’s technology and vast business experience qualifies him to be a member of the Board. His executive leadership experience provides him with valuable experience.

 

Steven Marques – Chief Revenue Officer/Acting President:

 

On December 21, 2012, the Board of Directors of the Company appointed Steven Marques, 54, to the position of Chief Revenue Officer. Mr. Marques is Acting President and was previously President/Chief Operations Officer of RealBiz360 Inc. d/b/a RealBiz Media Inc which began in early 2004 prior to the merger into RealbizMedia Group. He led the company to become one of top 5 leading Virtual Tour companies in North America. Steve was instrumental in overseeing the Company’s current operating plan to include the move to Video On Demand television with its partner Next 1 Interactive, which then led the company’s expansion into Video Content Syndication which is the base of its business plan today. Under his management he was instrumental for the Company’s strategic alliances and key partnerships with companies like Realogy, specifically C21, ERA, Keller Williams, Move-Realtor.com, Prudential, Coldwell Banker NRT franchises and more. Mr. Marques’ prior leadership roles include; Vice President of Global Sales for iseemedia; Sr. Vice President of Marketing for Omnigon, a San Diego based Bio-tech Company, and MGI software, leaders in consumer based photo and video software. Mr. Marques has been in the Computer and Internet industry since 1983 where he was part of the start-up management teams of Egghead Discount Software which was one of America’s first Retail Computer software chains with over 200 locations at its peak.

 

Mr. Marques’ direct involvement in overseeing and applying our operating plan and expanding its business into Video Content Syndication, as well as prior position as our Acting President, makes him uniquely qualified to act as our Chief Revenue Officer,

 

Keith A White-Director

 

Keith A. White, age 52, combines over 25 years of management experience in the real estate industry. Since 1995, Mr. White has been the principal owner of Marketplace Home Mortgage, LLC (“MHM”), a full service correspondence residential mortgage lender based in Edina, MN. Mr. White also owns and manages Alliance Title, LLC, Marketplace Insurance Services and various commercial office buildings. In addition, in 1999, Mr. White founded Marketline Constructions Capital, LLC, a construction lender, and operated the company through 2008. In 2000, Mr. White founded Maribella Mortgage, LLC, a wholesale mortgage lender, and managed the company until 2007. Prior to finding MHM in 1995, Mr. White culminated his nine year career with GMAC Mortgage as the Minnesota-Wisconsin Area Manager.

 

Mr. White has an undergraduate degree from St. Cloud State University with a major in finance, real estate, and economics.

 

Mr. White’s extensive experience in operating successful business ventures related to the real estate industry give Mr. White a wide ranging and diverse, entrepreneurial view of potential business opportunities that make him well- qualified to help lead the Company to becoming an even greater force in the fast-growing, high resolution, digital media arena for the real estate industry.

 

Corporate Governance

 

Leadership Structure

 

Our Chief Executive Officer also serves as our Chairman of the Board.  Our Board of Directors does not have a lead independent director.   Our Board of Directors has determined its leadership structure was appropriate and effective for us given our stage of development.

 

Board Committees

 

We presently do not have an audit committee, compensation committee or nominating committee or committee performing similar functions, as our management believes that until this point it has been premature at the early stage of our management and business development to form an audit, compensation or nominating committee.

 

Director Independence

 

Although our common stock is not listed on any national securities exchange, for purposes of independence we use the definition of independence applied by The NASDAQ Stock Market.  The Board has determined that four of its seven directors (Messrs. Monaco, LaVecchia, Craig and White) are “independent” in accordance with such definition.

 

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Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons who beneficially own more than 10 percent of a registered class of the Realbiz Media’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock.  Such officers, directors and persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file with the SEC.

 

Based solely on a review of the copies of such forms that were received by us, or written representations from certain reporting persons that no Form 5s were required for those persons, we are not aware of any failures to file reports or report transactions in a timely manner during the year ended October 31, 2014 other than the late filing on a Form 4s by Robert Buntz, one of our former directors, a Form 3 by Mr. Kerby, a Form 4 by Mr. Friedman, a Form 3 and Form 4 by Mr. Checkeris, two Form 4s by Mr. LaVecchia, a Form 3 by Mr. Marques, a Form 4 by Mr. White, a Form 3 by Mr. Craig, a Form 3 by Mr. Srinivasan and a Form 4 by Mr. Monaco.

   

Code of Ethics

 

We have long maintained a Code of Conduct which is applicable to all of our directors, officers and employees.  The code of ethics can be obtained without charge by contacting our Chief Financial Officer at our principal offices located at 2690 Weston Road, Suite 200, Weston, Florida 33331.

  

22
 

 

ITEM 11. EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following table sets forth the cash and non-cash compensation for the years ended October 31, 2014 and 2013 which was awarded to or earned by (i) our Chief Executive Officer during fiscal year 2014 and (ii) our other executive officers (other than the Chief Executive Officer) who served the Company and who received in excess of $100,000 in total compensation for a year (collectively, the “named executive officers”).

 

Name and Principal Position  

Fiscal
Year

Ended

    All
Other
Salary
      Bonus       Stock
Awards
      Stock
Compensation
      Total  
William Kerby (1)   2014   $ 96,000     $ -0-     $ -0-     $ -0-     $ 96,000  
CEO and Chairmen of the Board   2013   $ 104,000     $ -0-     $ -0-     $ -0-     $ 104,000  
                                             
Adam Friedman (2)   2014   $ 48,000     $ -0-     $ -0-     $ -0-     $ 48,000  
CFO   2013   $ 52,000     $ -0-     $ -0-     $ -0-     $ 52,000  
                                             
Steven Marques (3)   2014   $ 145,416     $ -0-     $ -0-     $ -0-     $ 145,416  
CRO/Acting President   2013   $ 138,958     $ -0-     $ -0-     $ -0-     $ 138,958  
                                             
Arun Srinivasan (4)   2014   $ 60,487     $ -0-     $ -0-     $ 150,000     $ 210,487  
CTO/CMO   2013   $ -0-     $ -0-     $ -0-     $ -0-     $ -0-  
                                             
Douglas Checkeris (5)   2014   $ -0-     $ -0-     $ -0-     $ 190,000     $ 190,000  
Former CMO   2013   $ 120,000     $ -0-     $ -0-     $ 60,000     $ 180,000  
                                             
Suresh Srinivasan (6)   2014   $ 50,974     $ -0-     $ -0-     $ 37,500     $ 88,474  
Former COO   2013   $ -0-     $ -0-     $ -0-     $ -0-     $ -0-  

 

(1) Mr. Kerby's salary has been accrued but not paid.
   
(2) Mr. Friedman's salary has been accrued but not paid.
   
(3)

Mr. Marques salary includes $19,160 in 2014 and $30,833 in 2013 that has been accrued but not paid.

   
(4) Mr. Srinivasan, a senior level executive employee, has been issued 1,000,000 RBIZ common shares as per his contract dated May 23, 2014.
   
(5) Mr. Checkeris was paid 38,000 Preferred C's(valued at $190,000) and 1,900,000 warrants on Next 1 as final payment for amounts owed to him through May 31, 2014 as the Company's former CMO.
   
(6) Mr. Srinivasan, a senior level executive employee, has been issued 1,000,000 RBIZ common shares as per his contract dated May 23, 2014. Due to Mr. Srinivasan's resignation, 750,000 shares have been returned. Mr. Srinivasan resigned from his position effective September 30, 2014.

 

Currently, the Company does not offer any executive bonus or incentive compensation plan and there are no current plans to put one in place for fiscal year 2015.

 

23
 

 

Employment Agreements with Executives and Key Personnel

 

On May 24, 2014, Realbiz Media Group, Inc. (the “Company”) entered into an Asset Sale Agreement with ReachFactor, Inc. (“ReachFactor”) and its two principals, Suresh Srinivasan and Arun Srinivasan pursuant to which the Company acquired substantially all of the assets of ReachFactor and the Company assumed certain liabilities of ReachFactor not to exceed $25,000 in consideration of the Company’s issuance to ReachFactor of 2,000,000 shares of the Company’s common stock.  The acquisition of the assets is subject to an unwind at the option of Suresh Srinivasan and Arun Srinivasan if on or prior to the date that is six months after the closing of the Asset Sale Agreement, the Company terminates the employment of either of Suresh Srinivasan and/ or Arun Srinivasan (each referred to as an “Executive”) without cause or either Executive terminates his employment for Good Reason. In the event of an unwind the assets revert back to ReachFactor and the 2,000,000 shares of stock revert back to the Company.

 

As a condition to the closing of the Asset Sale Agreement, the Company also entered into an employment agreement with each of Suresh Srinivasan (the “Suresh Employment Agreement”) and Arun Srinivasan (the “Arun Employment Agreement”).  Under the terms of the Suresh Employment Agreement, Suresh Srinivasan has been retained to serve as Chief Operating Officer of the Company for a term of 36 months commencing May 27, 2014.  Under the terms of the Arun Employment Agreement, Arun Srinivasan has been retained to serve as Chief Marketing Officer and Chief Technology Officer of the Company for a term of 36 months commencing May 27, 2014. Each Executive will receive the following compensation: a base salary of $140,000 per year with an automatic increase to $200,000 per year on the earlier to occur of (1) the one year anniversary of his employment or (2) satisfaction of any of certain specified conditions set forth in the agreement.   Additionally, each Executive will receive healthcare for himself and his dependent family members with 100% of the premiums paid by the Company, and be eligible for bonus programs commensurate with other senior executives of the Company. Each Executive will be issued 1,000,000 shares of the Company’s common stock which shares will be held in escrow to be released to each of them as follows:  ¼ of the shares every three (3) calendar months (on the final business day of the calendar month) and all of the shares immediately upon certain  triggering events described in the agreement. If the employment of either Executive is terminated for any reason, the terminated Executive, will be entitled to receive the accrued base salary, vacation pay, expense reimbursement and any other entitlements accrued by him to the extent not previously paid (the “Accrued Obligations”); provided , however , that if their employment is terminated (1) by the Company without Just Cause (as defined in the Employment Agreement) or by the Executive  for Good Reason (as defined in the Suresh and Arun Employment Agreement) then in addition to paying the Accrued Obligations, the vesting of the shares of stock held in escrow shall be accelerated and the shares held in escrow shall be released to the Executive. In the event such a termination occurs within six (6) months of the Closing Date of the Asset Sales Agreement, the Executive may elect (at its sole discretion) to initiate an “unwind event” as described above.  Arun Srinivasan was also granted the right to serve as a Board member and to be listed as a Board candidate at the Company’s next annual meeting of shareholders. The Suresh and Arun Employment Agreements also include confidentiality obligations and inventions assignments by each Executive On September 18, 2014, the Company received Suresh Srinivasan's written resignation as the Chief Operating Officer of the Company effective September 30, 2014.

 

Outstanding Equity Awards at Fiscal Year End

 

There were no outstanding equity awards for the executives as of October 31, 2014.

 

Director Compensation  

 

Our non-employee directors have elected to forego any cash compensation for participating in Board of Directors and committee meetings telephonically until such time as we become profitable over the course of an entire fiscal year, at which time the Board of Directors may reconsider the structure of its director compensation. In general, director compensation will be subject to review and adjustment from time to time at the discretion of our Board of Directors.

 

The following table sets forth the compensation of our non-employee directors for fiscal year ending October 31, 2014:

 

    Fees                       Nonqualified              
    Earned                 Non-Equity     Deferred              
    or Paid     Stock     Option     Incentive Plan     Compensation     All other        
    in Cash     Awards     Awards     Compensation     Plan     Compensation     Total  
Name   $     $     $     $     $     $     $  
Don Monaco     -       -       -       -       -       -     $ -  
Keith A. White     -       -       -       -       -       -     $ -  
Mike Craig     -       -       -       -       -       -     $ -  
Pat LaVecchia     -       -       -       -       -       -     $ -  
Doug Checkeris     -       -       -       -       -       -     $ -  

  

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information with respect to the beneficial ownership of our issued and outstanding common stock as of January 31, 2015 after giving effect to the Exchange Transaction, by (i) each of our named executive officers; (ii) each of our directors; and (iii) all of our executive officers, directors and director nominees as a group. Ownership percentages are based on 88,298,077 shares of common stock issued and outstanding as of the close of business on January 31, 2015 and 66,801,653 shares of Series A Stock issued and outstanding as of that date which converts into 66,801,653 shares of common stock. Based on that information available to us, as of that date, no person is a beneficial owner of more than 5% of our common stock other than Next 1 Interactive, Inc.

 

Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge and subject to applicable community property laws, each of the holders of stock listed below has sole voting and investment power as to the stock owned unless otherwise noted. Except as otherwise noted below, the address for each director or officer listed in the table is c/o RealBiz Media Group, Inc., 2690 Weston Road, Suite 200, Weston, FL 33331.

 

Name of Beneficial Owner   Common
Shares Beneficially
Owned
    Percentage of Common
Shares Beneficially Owned
    Percentage of Voting Power
(1)
 
                   
Next 1 Interactive, Inc. (2)
    65,791,891       42.7 %     42.4 %
Acknew Investments, Inc. (3)     11,736,750       13.3 %     7.6 %
F. Berdon & Co., LLC (4)     7,718,948       8.7 %     5.0 %
Robert A. Buntz, Jr. (5)     5,284,369       6.0 %     3.4 %
William Kerby (6)     8,096,110       8.4 %     5.2 %
Don Monaco (7)     32,750,000       27.1 %     21.1 %
Adam Friedman (8)     500,000       0.6 %     0.3 %
Michael Craig (9)     3,374,660       3.8 %     2.2 %
Doug Checkeris (10)     2,500,000       2.8 %     1.6 %
Keith White (11)     1,700,000       1.9 %     1.1 %
Arun Srinivasan (12)     3,000,000       3.4 %     1.9 %
Pat LaVecchia (13)     2,093,333       2.3 %     1.3 %
Steve Marques     -       - %     - %
All current directors and officers as a group (9 individuals) (14)
    54,014,103       39.8 %     34.8 %

  

(1) Percentage of Total Voting Power is based on 155,099,730 votes and includes voting rights attached to all Common Shares Outstanding and all Preferred Shares Outstanding that can convert to Common Shares. As of January 31, 2015, there were 88,298,077 shares of Common Stock Outstanding and 66,801,653 shares of Series A stock issued and outstanding and convertible into 66,801,653 shares of common stock. Each shares of Series A stock is entitled to one vote for each share of common stock that would be issuable upon conversion of such share. The total voting power excludes warrants, accrued salaries of the Company, outstanding debt of the Company, outstanding debt of Company’s Parent Company, Next 1 Interactive, Inc., and Preferred Shares of Next 1 Interactive, Inc. each of which can be converted into Common Shares of the Company.
   
(2) Next 1 Interactive, Inc. holds 65,791,891 shares of Series A Stock that was issued in the Exchange Transaction which represents 98.5% of the issued and outstanding shares of Series A Stock and convertible into 65,791,891. Each shares of Series A stock is entitled to one vote for each share of common stock that would be issuable upon conversion of such share.  Next 1 is deemed to beneficially own 42.7% of the common stock which represents a right to vote 42.4% of the aggregate outstanding voting shares.

 

25
 

(3) Acknew Investments, Inc., an entity controlled by Harry Hart, were former controlling owners of the Company. Acknew Investments, Inc.’s is deemed to beneficially own 13.3% of the common stock which represents a right to vote 7.6% of the aggregate outstanding voting shares.
   
(4) As reported in a Schedule 13G filed by F. Berdon & Co., LLC on January 23, 2015, F. Berdon & Co., LLC beneficially owns 7,718,948 shares of the Company’s Common Stock. The 7,718,948 shares of Common Stock beneficially owned by F. Berdon & Co., LLC includes (i) 3,300,000 shares of the Company’s Common Stock and (ii) 4,418,948 shares of the Company’s Common Stock issuable upon partial conversion of a convertible debenture originally issued by Next 1 Interactive, Inc. (the “ Next 1 Note ”). Additionally, the Next 1 Note is convertible into additional shares of the Company’s Common Stock and F. Berdon & Co., LLC owns a Common Stock purchase warrant to purchase up to an additional 1 million shares of Common Stock (the “ Warrants ”), however, the aggregate number of shares of Common Stock into which the Next 1 Note is convertible and the Warrants are exercisable and which F. Berdon & Co., LLC  has the right to acquire beneficial ownership, is limited to the number of shares of Common Stock that, together with all other shares of the Company’s Common Stock beneficially owned by F. Berdon & Co., LLC , does not exceed 9.99% of the total outstanding shares of Common Stock. Accordingly, the balance of the Next 1 Note and the Warrants are not currently convertible or exercisable, respectively, into the Company’s Common Stock and are not included in the beneficial ownership calculation. Rick Berdon is the manager of F. Berdon & Co., LLC. By virtue of such relationship, Mr. Berdon may be deemed to have dispositive power over the shares owned by F. Berdon & Co., LLC. Mr. Berdon disclaims beneficial ownership of such shares.
   
(5)

Mr. Buntz is a former Chief Executive Officer and a former Director of the Company.

 

(6) Mr. Kerby is our Chairman of the Board and Chief Executive Officer, and has held such position since the closing of the Exchange Transaction. Mr. Kerby owns 709,611 shares of Next 1 Series A Preferred Stock which can be converted into 7,096,110 shares of the Company’s Common Stock.  Mr. Kerby, through a company that he controls, owns 100,000 shares of Next 1 Series A Preferred Stock which can be converted into 1,000,000 shares of the Company’s Common Stock. Mr. Kerby's beneficial ownership does not include shares of Next 1 Series C Preferred Stock into which he has a right to convert his accrued salary.  As of January 31, 2015, Mr. Kerby has $224,000 of unpaid and accrued salary that can be converted into shares of Next 1 Series C Preferred Stock which can be converted into 2,240,000 shares of the Company’s Common Stock.  Mr. Kerby also serves as the Chief Executive Officer of Next 1.
   
(7) Mr. Monaco is a director of the Company, and has held such position since the closing of the Exchange Transaction. Mr. Monaco owns 1,075,000 shares of Next 1 Series A Preferred Stock which can be converted into 10,750,000 shares of the Company’s Common Stock.  Mr. Monaco also has debt of $1,100,000 with Next 1 which can be converted into 22,000,000 shares of the Company’s Common Stock.  Mr. Monaco also serves as a director of Next 1.
   
(8) Mr. Friedman is our Chief Financial Officer, and has held such position since the closing of the Exchange Transaction. Mr. Friedman owns 15,000 shares of Next 1 Series D Preferred Stock which can be converted into 500,000 shares of the Company’s Common Stock. Mr. Friedman's beneficial ownership does not include shares of Next 1 Series C Preferred Stock into which he has a right to convert his accrued salary.  As of January 31, 2015, Mr. Friedman has $112,000 of unpaid and accrued salary that can be converted into shares of Next 1 Series C Preferred Stock which can be converted into 1,120,000 shares of the Company’s Common Stock. Mr. Friedman also serves as the Chief Financial Officer of Next 1.
   
(9) Mr. Craig is a director of the Company. Mr. Craig beneficially owns 3,341,330 shares of the Company’s Common Stock and warrants to purchase an additional 33,330 shares. Mr. Craig also serves as a Director of Next 1.
   
(10) Mr. Checkeris is a director of the Company, and has held such position since the closing of the Exchange Transaction. Mr. Checkeris owns 50,000 shares of Next 1 Series C Preferred Stock which can be converted into 2,500,000 shares of the Company’s Common Stock.  Mr. Checkeris also serves as a Director of Next 1.
   
(11) Mr. White is a director of the Company and is the principal owner of Marketplace Home Mortgage, LLC, which owns 200,000 shares of the Company’s Common Stock and owns 15,0000 Series B Preferred Stock which can convert into 1,500,000 shares of the Company’s Common Stock.
   
(12) Mr. Srinivasan is our Chief Marketing Officer, Chief Technology Officer and a Director of the Company.  Mr. Srinivasan owns 1,000,000 Common shares and is an indirect owner of 2,000,000 shares held by ReachFactor, Inc., a company in which he is an owner.
   
(13) Mr. LaVecchia is a director of the Company.  Mr. LaVecchia beneficially owns 62,800 shares of Next 1 Series B Preferred Stock which can be converted into 2,093,333 shares of the Company’s Common Stock. Mr. LaVecchia also serves as a Director of Next 1.
   
(14) Consists of Messrs. Kerby, Monaco, Friedman, Craig, Checkeris, White, Srinivasan, Marques and LaVecchia.

26
 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; DIRECTOR INDEPENDENCE

 

Related-Party Transaction Policy

 

Our Board of Directors has no formal written policy regarding transactions with related persons, but we do plan to abide by conflict-of-interest statutes under Delaware law and approve any related-party transactions by a majority of disinterested directors. In general, applicable law exhorts any director proposing to enter into a related-party transaction must disclose to our Board of Directors the proposed transaction and all material facts with respect thereto. In reviewing such a proposed transaction, our board expects to consider all relevant facts and circumstances, including (1) the commercial reasonableness of the terms, (2) the benefit and perceived benefits, or lack thereof, to us, (3) the opportunity costs of alternate transactions, (4) the materiality and character of the related party’s interest, and (5) the actual or apparent conflict of interest of the related party. We expect to apply this analysis with respect to related party transactions that may involve our officers or greater-than-five-percent shareholders.

 

We do expect to adopt a formal written policy respecting related-party transactions in which our directors, officers and greater-than-five-percent shareholders may engage, consistent with Sarbanes-Oxley related internal control requirements and best practices.

 

In connection with the closing of the Exchange Transaction on October 9, 2012, Messrs. Buntz and Wicker converted all of their outstanding notes, unpaid salary and all other obligations and liabilities to them owed by the Company into 5,990,238 and 1,016,400 shares of Series A Stock, respectively. The Preferred A Shares for Mr. Buntz were converted to 5,990,238 Common Shares on February 27, 2013. Mr. Buntz was the former CEO who resigned on March 31, 2014.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Aggregate fees billed by our principal independent registered public accounting firm for audits of the consolidated financial statements for the fiscal years indicated:

  

 

    2014     2013  
Audit fees   $ 30,000     $ 30,000  
Audit related fees     15,000     $ 18,000  
Tax fees     -       -  
All other fees     -       -  
Total   $ 45,000     $ 48,000  

 

Audit Fees . The fees identified under this caption were for professional services rendered by D’Arelli Pruzansky (DP) for fiscal years 2014 and 2013 in connection with the audit of our annual financial statements. The amounts also include fees for services that are normally provided by the independent public registered accounting firm in connection with statutory and regulatory filings and engagements for the years identified.

 

Audit-Related Fees . The fees identified under this caption were for review of our financial statements included in our quarterly reports on Form 10-Q and were not reported under the caption “Audit Fees.” This category may include fees related to the performance of audits and attestation services not required by statute or regulations, and accounting consultations about the application of generally accepted accounting principles to proposed transactions.

 

Tax Fees . The fees identified under this caption were for tax compliance, tax planning, tax advice and corporate tax services. Corporate tax services encompass a variety of permissible services, including technical tax advice related to tax matters; assistance with withholding-tax matters; assistance with state and local taxes; preparation of reports to comply with local tax authority transfer pricing documentation requirements; and assistance with tax audits.

 

Approval Policy . Our Audit Committee approves in advance all services provided by our independent registered public accounting firm. All engagements of our independent registered public accounting firm in fiscal years 2014 and 2013 were pre-approved by the Board of Directors.

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

Financial Statements

 

Description   Page
Report of Independent Registered Public Accounting Firm  
Consolidated Balance Sheets    F-1
Consolidated Statements of Operations    F-2
Consolidated Statement of Stockholders’ Deficit    F-3
Consolidated Statements of Cash Flows    F-4
Notes to Consolidated Financial Statements    F-7

  

27
 

 

ITEM 16. EXHIBITS

 

3.1 Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 10-12b filed with the Securities and Exchange Commission on June 20, 2008, File No. 001-34106)
   
3.2 Amendment to Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.2 of the Registrant’s Form 10-12b filed with the Securities and Exchange Commission on June 20, 2008, File No. 001-34106)
   
3.3 Bylaws. (Incorporated by reference to Exhibit 3.3 of the Registrant’s Form 10-12b filed with the Securities and Exchange Commission on June 20, 2008, File No. 001-34106)
   
3.4 Certificate of Ownership (Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on October 15, 2012, File No. 001-34106)
   
3.5 Certificate of Designations for Series A Convertible Preferred Stock(Incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 23, 2013, File No. 001-34106)
   
3.6 Amendment to the Amended and Restated Certificate of Incorporation (1)
   
3.7 Amendment to the Certificate of Designations for Series A Preferred Stock(1)
   
3.8 Certificate of Designations for Series B Preferred Stock(1)
   
4.1 Certificate of Designations for Next 1 Series B Convertible Preferred Stock(Incorporated by reference to Exhibit 4.1 of the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 23, 2013, File No. 001-34106)
   
4.2 Certificate of Designations for Next 1 Series C Convertible Preferred Stock(Incorporated by reference to Exhibit 4.2 of the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 23, 2013, File No. 001-34106)
   
4.3 Certificate of Designations for Next 1 Series D Convertible Preferred Stock(Incorporated by reference to Exhibit 4.3 of the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 23, 2013, File No. 001-34106)
   
   
10.1 Employment Agreement with Deborah Linden (Incorporated by reference to Exhibit 10.1 of the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 13, 2014, File No. 001-34106)*
   
10.2 Employment Agreement with  Patrick Scheltgen (Incorporated by reference to Exhibit 10.2 of the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 13, 2014, File No. 001-34106)*
   
10.3 Employment Agreement with Mark Lemon(Incorporated by reference to Exhibit 10.3 of the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 13, 2014, File No. 001-34106)*
   
10.5 Asset Purchase Agreement with ReachFactor (Incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2014, File No. 001-34106)*
   
10.6 Employment Agreement with Suresh Srinivasan (Incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2014, File No. 001-34106)*
   
10.6 Employment Agreement with Suresh Srinivasan (Incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 30, 2014, File No. 001-34106)*
   
21 List of Subsidiaries (Incorporated by reference to Exhibit 10.21 of the Registrant’s Annual Report on Form 10-K filed February 13, 2014, File No. 001-34106)
   
31.1 Certification of CEO pursuant to Section 302 (1)
   
31.2 Certification of CFO pursuant to Section 302 (1)
   
32.1 Certification of CEO pursuant to 906 (1)
   
32.2 Certification of CEO pursuant to 906 (1)
   
101.INS XBRL Instance Document (1)
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1)
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1)
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document (1)
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1)
   
101.SCH XBRL Taxonomy Extension Schema Document (1)
   
(1) Filed herewith.

 

* Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report

 

28
 

 

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
  February 13, 2015 
   
  /s/ Adam Friedman
  Adam Friedman
  Chief Financial Officer
February 13, 2015

 

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   February 13, 2015
William Kerby   (Principal Executive Officer)     
         
/s/ Adam Friedman   Chief Financial Officer   February 13, 2015
Adam Friedman   (Principal Financial Officer)    
         
/s/ Don Monaco   Director   February 13, 2015
Don Monaco        
         
/s/ Doug Checkeris   Director   February 13, 2015
Doug Checkeris        
         
/s/ Arun Srinivasan   Director   February 13, 2015
Arun Srinivasan        
         
/s/ Keith A White   Director   February 13, 2015
Keith A. White        
         
/s/ Mike Craig   Director   February 13, 2015
Mike Craig        
         
/s/ Pat LaVecchia   Director   February 13, 2015
Pat LaVecchia        

 

29
 

   

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Stockholders and Board of Directors

RealBiz Media Group, Inc.

 

 

We have audited the accompanying consolidated balance sheets of RealBiz Media Group, Inc. as of October 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the two years in the period ended October 31, 2014. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RealBiz Media Group, Inc. as of October 31, 2014 and 2013 and the results of its operations and its cash flows for each of the two years in the period ended October 31, 2014 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has incurred net losses of $4,605,327 and $3,764,089 for the years ended October 31, 2014 and 2013, respectively and the Company had an accumulated deficit of $15,376,638 and a working capital deficit of $2,319,305 at October 31, 2014. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ D’Arelli Pruzansky, P.A.

Certified Public Accountants

 

Boca Raton, Florida

February 12, 2015

 

 

 

 

 

 
 

  

RealBiz Media Group, Inc.

Consolidated Balance Sheets

 

    October 31,  
    2014     2013  
             
Assets                
Current Assets                
Cash   $ 20,066     $ 1,304,374  
Accounts receivable, net of allowance for doubtful accounts     118,408       76,047  
Prepaid expenses     3,300       272  
Security deposits     -       345  
Total current assets     141,774       1,381,038  
                 
Property and equipment, net     45,778       56,357  
Website development costs and intangible assets, net     3,701,144       4,254,582  
Due from affiliates     131,086       4,199  
Total assets   $ 4,019,782     $ 5,696,176  
                 
Liabilities and Stockholders' Equity                
Current Liabilities                
Accounts payable and accrued expenses   $ 1,880,294     $ 1,257,032  
Deferred revenue     45,565       31,310  
Derivative liabilities     305,220       -  
Convertible notes payable, net of discount of $-0- and $-0-, respectively     60,000       280,000  
Loans payable     170,000       191,214  
Total current liabilities     2,461,079       1,759,556  
                 
Convertible notes payable - long term, net of discount of $147,395 and $-0-, respectively     2,605       -  
                 
Total liabilities     2,463,684       1,759,556  
                 
Stockholders' Equity                
Series A convertible preferred stock, $.001 par value; 120,000,000 authorized and 66,801,653 shares issued and outstanding at October 31,2014; 100,000,000 authorized and 94,009,762 shares issued and outstanding at October 31, 2013.     66,802       94,010  
                 
Series B convertible preferred stock, $.001 par value; 1,000,000 authorized and -0- shares issued and outstanding at October 31,2014 and 2013, respectively.     -       -  
                 
Common stock, $.001 par value; 250,000,000 authorized and 84,980,282 shares issued and outstanding at October 31,2014; 125,000,000 authorized and 49,039,511 shares issued and outstanding at October 31, 2013.     84,980       49,040  
                 
Additional paid-in-capital     16,610,912       14,179,044  
Subscription advances     130,000       13,500  
Accumulated other comprehensive income (loss)     40,042       (19,215 )
Accumulated deficit     (15,376,638 )     (10,379,759 )
Total stockholders' equity     1,556,098       3,936,620  
Total liabilities and stockholders' equity   $ 4,019,782     $ 5,696,176  

 

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

 

F- 1
 

 

RealBiz Media Group, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

 

    For the years ended  
    October 31,  
    2014     2013  
             
Revenues                
Real estate media revenue   $ 1,090,674     $ 1,145,540  
                 
Cost of revenues     414,652       60,297  
                 
Gross profit     676,022       1,085,243  
                 
Operating expenses                
Salaries and benefits     1,152,600       1,231,425  
Selling and promotions expense     254,575       253,628  
Impairment of intangible assets     125,000       -  
General and administrative     3,698,034       3,306,194  
Total operating expenses     5,230,209       4,791,247  
                 
Operating loss     (4,554,187 )     (3,706,004 )
                 
Other income (expense)                
Interest expense     (3,919 )     (442,341 )
Derivative liability expense     (234,303 )     -  
Gain on change on fair value of derivative liabilities     9,323       -  
Gain on forgiveness of notes payable and accrued expenses     -       384,304  
Exchange gain (loss)     1,659       592  
Other income (expense)     176,100       (640 )
Total other income (expense)     (51,140 )     (58,085 )
                 
Net loss   $ (4,605,327 )   $ (3,764,089 )
                 
Preferred Stock Dividend     (391,552 )     (523,895 )
                 
Net loss attributable to common stockholders   $ (4,996,879 )   $ (4,287,984 )
                 
Weighted average number of shares outstanding     65,628,920       16,258,725  
                 
Basic and diluted net loss per share   $ (0.08 )   $ (0.26 )
                 
Comprehensive income (loss):                
Unrealized gain (loss) on currency translation adjustment     59,257       (13,366 )
Comprehensive loss   $ (4,937,622 )   $ (4,301,350 )

 

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

 

F- 2
 

 

RealBiz Media Group, Inc.

Consolidated Statement of Changes in Stockholders' Equity

For the years ending October 31, 2014 and 2013

 

    Preferred Stock A     Common Stock                                
    # of shares     Par     # of shares     Par     Additional
Paid-In
Capital
    Subscription
Advances
    Other
Comprehensive
Income
    Accumulated
Deficit
    Total
Stockholders'
Equity
 
Balance, October 31, 2012     100,000,000     $ 100,000       383,651     $ 383     $ 8,482,483     $ -     $ (5,849 )   $ (6,091,775 )   $ 2,485,242  
                                                                         
Shares issued for cash proceeds                     7,646,000       7,646       3,818,354                               3,826,000  
Exercise of warrants for cash proceeds                     50,000       50       49,950                               50,000  
Shares issued for consulting                     607,600       608       645,422                               646,030  
Shares issued for conversion of Series A Preferred shares     (5,990,238 )     (5,990 )     5,990,238       5,990                                       -  
Shares issued for conversion of Next 1 Interactive, Inc. Preferred stock:                                                                        
Series B                     10,495,000       10,495       514,255                               524,750  
Series C                     1,500,000       1,500       148,500                               150,000  
Series D                     19,122,624       19,123       2,850,250                               2,869,373  
Shares issued upon conversion of promissory notes issued by the parent                     977,732       978       3,752,171                               3,753,149  
Constructive distributions related to the conversion of preferred shares and debt issued by the parent into shares of the Company's common stock                                     (7,263,074 )                             (7,263,074 )
Shares issued for conversion of convertible promissory notes                     2,166,666       2,167       322,833                               325,000  
Beneficial conversion feature of convertible promissory notes                                     440,000                               440,000  
Shares issued for  website development costs                     100,000       100       417,900                               418,000  
Preferred stock dividend(s)                                                             (523,895 )     (523,895 )
Other comprehensive loss                                                     (13,366 )             (13,366 )
Advances                                             13,500                       13,500  
Net Income (Loss)                                                             (3,764,089 )     (3,764,089 )
Balance, October 31, 2013     94,009,762     $ 94,010       49,039,511     $ 49,040     $ 14,179,044     $ 13,500     $ (19,215 )   $ (10,379,759 )   $ 3,936,620  
                                                                         
Shares issued for cash proceeds                     4,163,712       4,164       838,504                               842,668  
Exercise of warrants for cash proceeds                     2,975,111       2,975       663,545                               666,520  
Shares issued for consulting                     2,134,430       2,134       967,931                               970,065  
Shares issued for ReachFactor assets                     2,000,000       2,000       298,000                               300,000  
Shares issued to ReachFactor executives as part of assets purchase price                     2,000,000       2,000       298,000                               300,000  
Shares issued for conversion of Next 1 Interactive, Inc. Preferred stock:                                                                        
Series B                     14,765,000       14,765       723,485                               738,250  
Series C                     1,300,000       1,300       128,700                               130,000  
Series D                     1,937,973       1,939       288,786                               290,725  
Shares issued upon conversion of promissory notes issued by the parent                     3,100,000       3,100       151,900                               155,000  
Constructive distributions related to the conversion of preferred shares and debt issued by the parent into shares of the Company's common stock                                     (10,932,591 )                             (10,932,591 )
Shares issued for conversion of convertible promissory notes                     1,466,666       1,467       218,533                               220,000  
Warrants exercised in lieu of consulting fees                     70,879       71       12,686                               12,757  
Issuance of Series A Preferred shares based upon the "top up" provision in the certificate of designation     25,990,238       25,990                       5,170,730                               5,196,720  
Reduction of Series A Preferred for conversion of Next 1 Interactive, Inc. Preferred stock and convertible debt     (53,198,347 )     (53,198 )                     (1,233,884 )                             (1,287,082 )
Warrants issued for debt modification of Next 1 Interactive, Inc. convertible promissory note                                     4,809,308                               4,809,308  
Warrants issued with convertible promissory note                                     14,760                               14,760  
Preferred stock dividend(s)                                                             (391,552 )     (391,552 )
Other comprehensive income (loss)                                                     59,257               59,257  
Settlement of prior year advances by issuance of common shares                     27,000       27       13,473       (13,500 )                     -  
Advances                                             130,000                       130,000  
Net Income (Loss)                                                             (4,605,327 )     (4,605,327 )
Balance, October 31, 2014     66,801,653     $ 66,802       84,980,282     $ 84,892     $ 16,610,910     $ 130,000     $ 40,042     $ (15,376,638 )   $ 1,556,098  

 

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

 

F- 3
 

 

RealBiz Media Group, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

    For the years ended  
    October 31,  
    2014     2013  
Cash flows from operating activities:                
Net loss   $ (4,605,327 )   $ (3,764,089 )
Adjustments to reconcile net loss to net cash from operating activities:                
Gain on forgiveness of notes payable and accrued expenses     -       (384,304 )
Amortization and depreciation     1,791,202       1,380,186  
Amortization of beneficial conversion feature     -       440,000  
Impairment of intangible assets     125,000       -  
Gain on change in fair value of derivative liabilities     (9,323 )     -  
Initital derivative liability expense     234,303       -  
Bad debt expense     -       76,823  
Consulting fees incurred from loans payable     -       120,000  
Stock based compensation and consulting fees     982,823       646,030  
Changes in operating assets and liabilities:                
Increase in accounts receivable     (42,361 )     (120,401 )
Increase in prepaid expenses     (3,028 )     (272 )
Decrease (increase) in security deposits     345       (345 )
Increase  in accounts payable and accrued expenses     231,708       263,776  
Decrease in due to/from affiliates     (1,026,556 )     (805,731 )
Increase (decrease) in deferred revenue     14,255       (10,549 )
Net cash used in operating activities     (2,306,959 )     (2,158,876 )
                 
Cash flows from investing activities:                
Purchase of computer equipment     (5,835 )     (59,195 )
Payments towards software developments costs     (52,190 )     -  
Payments towards website development costs     (691,555 )     (411,311 )
Net cash used in investing activities     (749,580 )     (470,506 )
                 
Cash flows from financing activities:                
Proceeds from loans payable     -       85,000  
Proceeds from convertible promissory notes     95,000       -  
Payments applied to loans payable     (21,214 )     (63,786 )
Proceeds from subscription advances     130,000       13,500  
Proceeds from the sale of common stock and warrants     842,668       3,826,000  
Proceeds from the exercise of outstanding warrants     666,520       50,000  
Net cash provided by financing activities     1,712,974       3,910,714  
                 
Effect of exchange rate changes on cash     59,257       (13,366 )
                 
Net decrease in cash     (1,284,308 )     1,267,966  
                 
Cash at beginning of period     1,304,374       36,408  
                 
Cash at end of period   $ 20,066     $ 1,304,374  
                 
Supplemental disclosure:                
Cash paid for interest   $ 1,314     $ 2,341  

 

F- 4
 

 

    For the years ended  
    October 31,  
    2014     2013  
             
Supplemental disclosure of non-cash investing and financing activity:                
Series A Preferred shares converted to common stock                
Value   $ -     $ 299,512  
Shares     -       5,990,238  
                 
Shares issued for the conversion of convertible promissory notes                
Value   $ 220,000     $ 325,000  
Shares     1,466,666       2,166,666  
                 
Shares issued for the ReachFactor agreement:                
Value   $ 600,000     $ -  
Shares     4,000,000       -  
                 
Preferred stock dividends accrued:                
Value   $ 391,552     $ 523,895  
                 
Common shares issued for website development costs:                
Value   $ -     $ 418,000  
Shares     -       100,000  
                 
Settlment of prior year advances for subscriptions of common stock:                
Value   $ 13,500     $ -  
Shares     27,000       -  
Warrants     9,000       -  
                 
Next 1 Interactive, Inc. Preferred Series B shares converted to common stock:                
Value   $ 738,250     $ 524,750  
Shares     14,765,000       10,495,000  
                 
Next 1 Interactive, Inc. Preferred Series C shares converted to common stock:                
Value   $ 130,000     $ 150,000  
Shares     1,300,000       1,500,000  
                 
Next 1 Interactive, Inc. Preferred Series D shares converted to common stock:                
Value   $ 290,725     $ 3,753,149  
Shares     1,937,973       19,122,624  
                 
Next 1 Interactive, Inc. convertible promissory notes converted to common stock:                
Value   $ 155,000     $ 3,753,149  
Shares     3,100,000       977,732  
                 
Warrants issued for Next 1, Interactive Inc. debt modifications:                
Value   $ 4,809,308     $ -  
Warrants     12,000,000       -  

 

F- 5
 

 

    For the years ended  
    October 31,  
    2014     2013  
             
Supplemental disclosure of non-cash investing and financing activity (continued):                
Series A Preferred shares issued for "top up" provision:                
Value   $ 5,196,720     $ -  
Shares     25,990,238       -  
                 
Reduction of Series A Preferred shares for conversion of Next 1 Interactive, Inc.'s Preferred Shares and Debt:                
Value   $ 1,287,082     $ -  
Shares     53,198,347       -  
                 
Costs associated with convertible promissory notes:                
Derivative liability expense   $ 234,303     $ -  
                 
Loan origination fees   $ 55,000     $ -  

 

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

 

F- 6
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 1: ORGANIZATION AND NATURE OF BUSINESS

 

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 shares of its common stock were 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 RealBiz entered 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 had 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 Attaché Travel International, Inc. (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 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 the Series A Stock of Webdigs is referred to as the “Exchange Transaction.”

  

As a condition to the closing of the Exchange Transaction, the 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.

 

Nature of Business

 

We are engaged in the business of providing digital media and marketing services for the real estate industry. We currently generate revenue from service fees, product sales, membership fees and advertising revenues. The company was formed through the merging of three divisions: (i) our fully licensed real estate division (formerly known as Webdigs); (ii) our TV media contracts (Home Preview Channel /Extraordinary Vacation Homes/) division; and (iii) our Real Estate Virtual Tour and Media group (Realbiz 360). The assets of these divisions were used to create a new suite of real estate products and services that create stickiness through the utilization of video, social media and loyalty programs. At the core of the company’s programs is our proprietary video creation technology which allows for an automated conversion of data (text and pictures of home listings) to a video with voice and music. We provide video search, storage and marketing capabilities on multiple platform dynamics for web, mobile, and TV. Once a home, personal or community video is created using our proprietary technology, it can be published to social media, email or distributed to multiple real estate websites, broadband or television for consumer viewing.

 

We are engaged in the business of providing digital media and marketing services for the real estate industry. We currently generate revenue from service fees, product sales, membership fees and advertising revenues. RealBiz has positioned itself in the following areas summarized here and explained in more detail below:

 

1. Nestbuilder Agent:  This platform allows agents to claim and customize their own web page to be used as a video marketing platform. The site interacts with nestbuilder.com, ezflix and the HAAC allowing agents to create customized video of homes, themselves or community as well as being able to pull other MLS property listings to create specialized marketing messages. Additionally, the agent can view the effectiveness of their marketing efforts through a dashboard that shows multiple statistics including number of views, time spent, origination and lead generation. Additionally the agent can earn points for their marketing actions that can be converted to Home & Away Club rewards dollars. This site will completely empower the real estate agent with content and assets that they can use to pursue prospects and generate leads at a fraction of the cost they are currently paying.  
   
2. Ezflix Mobile App : The ezflix app is the only mobile/web video editor that pre-integrates with an agent’s listing data, allowing them to edit all of their listing’s data, and convert them into video with live video interstitial capabilities, audio recording and music.   Ezflix can then share videos to all social media, email, and multiple other real estate portals including NestBuilder – giving agents a way to personalize their listing videos with entertaining local relevant content.  This application, both Web and Mobile, was initially launched in both the Android and iOS versions in January and February 2015. This platform as it evolves will combine our VT (Virtual Tour) and MVA (Microvideo App) platform into one solution and distribute to multiple partners and resellers including Photographer and Videographer service providers’ network. This product integration is expected to be complete by Q2 of 2015.

  

F- 7
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 1: ORGANIZATION AND NATURE OF BUSINESS (continued)

 

Nature of Business (continued)

  

3. The Virtual Tour (VT) and Microvideo App (MVA): was developed and implemented to allow agents to access specific video based product strategies that are designed specifically to increase the SEO rank and traffic credit to real estate franchise systems and/or their brokers. This solution gives those franchises and brokers a much needed tool to lower their cost of prospect acquisition.  Currently, the strategy is to migrate our current client base of VT users to MVA’s and combine the total core offering into our EzFlix Mobile and Web based application during the second quarter of 2015.
   
4. NestBuilder: The world’s largest real estate video portal with over 1.5 million listings and is targeted to grow to over 3 million listings by mid 2015.  Unlike other leaders in the space that agents are seeking legitimate alternatives to, NestBuilder focuses on building agent’s brands and delivering high-quality leads. They achieve this by offering fully customizable webpages in NestBuilder Agent that will follow their homebuyer throughout the home search, ultimately turning NestBuilder.com into each agent’s very own national portal.
   
5. NestBuilder Mobile Search App : The app is currently available in the Google Play Store and should be available in the iOS version by March 2015.  The  app not only allows consumers to search and view homes in video but additionally  allows consumers to enter in their agent’s name, and effectively turn the NestBuilder app into the agent’s very own application where their branding follows the consumer along their home search journey, everywhere they go.
   

6. ReachFactor: A recently acquired full-marketing agency that specializes in real estate. ReachFactor offers a variety of solutions to agents and brokers such as web design, digital ad campaigns, blogging, social media management, reputation management, search engine optimization and much more.
   
7.

Enterprise Video Production : We service some of the largest and well known Franchisor accounts in the North America Real Estate Market in compiling listings into a Video format and distributing to those franchisors websites, brokers and agents and lead generation platforms 24/7. Some of these multiyear contracts have the Company producing over 10 million video listings from 2012-2014 and will be eclipsing that production in 2015 alone. This core area significantly contributes to the Company’s growth not only in this core service but continues to allow us access to national databases and directly agents and brokers to allow the Company access to upgrades and upsell other core products and services.

   
8. Home and Away Club: RealBiz excels at beginning and closing the agent-buyer relationship, but the reality of real estate is that the average homebuyer looks for a new home once every 8 years. As a result the majority of consumers have lost touch with their agent by the time their next home purchase happens. That’s why RealBiz has created the Home and Away Club so they can offer agents a means to stay in contact once the house is sold with a rewards program. With the Home and Away club, agents can earn rewards dollars for completing actions as well as purchasing club memberships that can be gifted to their clients. Additionally agents can predetermine times and special events that they wish to have their client accounts topped up. All of the Home & Away Club members introduced by the agent remain part of the agents “circle of clients” with personalized messaging on all gifting of rewards. The rewards dollars   allows members to purchase a broad cross section of lifestyle, travel, merchandise and home products at   greatly discounted pricing – thereby giving customers real values on products they want.

  

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Consolidation

 

The consolidated financial statements for the years ended October 31, 2014 and 2013 include the operations of RealBiz Media Group, 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.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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. There were no cash equivalents for the years ended October 31, 2014 and 2013.

 

F- 8
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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. For the years ended October 31, 2014 and 2013, the Company determined the allowance for doubtful accounts to be $-0- and $76,823, respectively.

 

Property and Equipment

 

All expenditures on the acquisition for property and equipment are recorded at cost and capitalized as incurred, provided the asset benefits the Company for a period of more than one year. Expenditures on routine repairs and maintenance of property and equipment are charged directly to operating expense. The property and equipment is depreciated based upon its estimated useful life after being placed in service. The estimated useful life of computer equipment is 3 years. When equipment is retired, sold or impaired, the resulting gain or loss is reflected in earnings. The Company incurred depreciation expense of $16,414 and $2,838 for the years ended October 31, 2014 and 2013, respectively.

 

Impairment of Long-Lived Assets

 

In accordance with Accounting Standards Codification 360-10, “Property, Plant and Equipment”, the Company periodically reviews its long- lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. For the years ended October 31, 2014 and 2013, the Company did not impair any long-lived assets.

 

Website Development Costs

 

The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred.

 

Software Development Costs

 

The Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established by "ASC 985-20-25" Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general release to customers. Capitalized costs are amortized based on the greater of (a) the ratio of current gross revenues to the total current and anticipated future gross revenues, or (b) the straight-line method over the remaining estimated economic life of the product. For the year ended October 31, 2014, the Company has capitalized of costs associated with the development of a mobile app that has not been placed into service.

 

Goodwill and Other 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 compared to 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.

 

F- 9
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Goodwill and Other Intangible Assets (continued)

 

When the Company determines that the carrying value of an intangible may 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 that the 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 record an impairment charge of $125,000 and $-0- on its intangible assets during the years ended October 31, 2014 and 2013, respectively.

 

Intellectual properties that have finite useful lives are amortized over their useful lives. The Company incurred amortization expense of $1,772,183 and $1,377,348 for the years ended October 31, 2014 and 2013, respectively.

 

Derivative Instruments

 

The Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.

 

The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding warrants, the Company generally uses the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes. Under the terms of the new accounting standard, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.

 

Based upon ASC 815-25 the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible debentures. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date. 

 

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 adopted ASC topic 820, “Fair Value Measurements and Disclosures” (ASC 820), formerly SFAS No. 157 “Fair Value Measurements,” effective January 1, 2009. ASC 820 defines “fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There was no impact relating to the adoption of ASC 820 to the Company’s consolidated financial statements.

 

F- 10
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Fair Value of Financial Instruments (continued)

 

ASC 820 also describes three levels of inputs that may be used to measure fair value:

 

Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

 

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

 

Financial instruments consist principally of cash, accounts receivable, prepaid expenses, due from affiliates, accounts payable, accrued liabilities and other current liabilities. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short- term nature. The fair value of long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities. The carrying amounts approximate fair value. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

 

Revenue Recognition

 

The Company recognizes revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exits; (2) delivery has occurred or services have been rendered; (3) the Company's price to its customer is fixed or determinable and (4) collectability is reasonably assured.

 

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.

 

Advertising Expense

 

Advertising costs are charged to expense as incurred and are included in selling and promotions expense in the accompanying unaudited consolidated financial statements. Advertising expense for the years ended October 31, 2014 and 2013 was $46,380 and $138,226, respectively.

 

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. 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. The Company accounts for non-employee share-based awards in accordance with ASC Topic 505-50, Equity Based Payments to Non-Employees. The Company estimates the fair value of stock options by using the Black-Scholes option pricing model.

 

Foreign Currency and Other Comprehensive Income (Loss)

 

The functional currency of our foreign subsidiaries is typically the applicable local currency. The translation from the respective foreign currencies to United States Dollars (U.S. Dollar) is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for income statement accounts using a weighted average exchange rate during the period. Gains or losses resulting from such translation are included as a separate component of accumulated other comprehensive income. Gains or losses resulting from foreign currency transactions are included in foreign currency income or loss except for the effect of exchange rates on long-term inter-company transactions considered to be a long-term investment, which are accumulated and credited or charged to other comprehensive income.

 

F- 11
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Foreign Currency and Other Comprehensive Income (Loss) (continued)

 

Transaction gains and losses are recognized in our results of operations based on the difference between the foreign exchange rates on the transaction date and on the reporting date. The Company recognized net foreign exchange gains of $1,659 and $592 for years ended October 31, 2014 and 2013, respectively. The foreign currency exchange gains and losses are included as a component of other (income) expense, net, in the accompanying Consolidated Statements of Operations. For the years ended October 31, 2014 and 2013, the increase in accumulated comprehensive gain was $59,257 and a loss of $19,215, respectively.

 

The exchange rate adopted for the foreign exchange transactions are the rates of exchange as quoted on an internet website. Translation of amount from Canadian dollars into United States dollars was made at the following exchange rates for the respective periods:

 

· As of October 31, 2014 - Canadian dollar $0.89330 to US $1.00

 

· For the year ended October 31, 2014 - Canadian dollar $0.92341 to US $1.00

 

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 and net operating loss and tax credit carryforwards 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. The Company's tax returns for its October 31, 2013, 2012 and 2011 tax years may be selected for examination by the taxing authorities as the statute of limitations remains open.

 

Earnings Per Share

 

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period.

 

Diluted earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Diluted loss per common share is considered to be equal to basic because it is anti-dilutive. The Company’s common stock equivalents include the following:

 

    October 31,
2014
    October 31,
2013
 
Series A convertible preferred stock issued and outstanding     66,801,653       94,009,762  
Warrants to purchase common stock issued, outstanding and exercisable     15,378,858       8,325,832  
Stock options issued, outstanding and exercisable     -       1,000  
Shares on convertible promissory notes     3,476,923       1,866,667  
      85,657,434       104,203,261  

 

F- 12
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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.

 

Reclassifications

 

Certain reclassifications have been made in the consolidated financial statements for comparative purposes.  These reclassifications have no effect on the results of operations or financial position of the Company.

 

Recently Issued Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09,   Revenue from Contracts with Customers   (Topic 606).   This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in Topic 605,   Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the codification. Additionally, this ASU supersedes some cost guidance included in Subtopic 605-35,   Revenue Recognition-Construction-Type and Production-Type Contracts. The guidance's core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue principles, an entity will identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue when the performance obligation is satisfied. The ASU further states that an entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this ASU are effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016, for public companies. Early adoption is not permitted. The Company is still evaluating the provisions of ASU 2014-09 and its impact on the Company's consolidated financial position, results of operations or cash flows.

 

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements and Property, Plant, and Equipment,” (ASU 2014-08). This ASU changes the threshold for reporting discontinued operations and adds new disclosures. The new guidance defines a discontinued operation as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on our operations and financial results.” For disposals of individually significant components that do not qualify as discontinued operations, the Company must disclose pre-tax earnings of the disposed component. This guidance is effective for us prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The Company does not expect the adoption of this guidance to have a material impact on our 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 a net losses of $4,605,327 and $3,764,089 for the years ended October 31, 2014 and 2013, respectively. At October 31, 2014, the Company had a working capital deficit of $2,319,305, and an accumulated deficit of $15,376,638. 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 or preferred stock and or through the issuance of debt instruments. Although the Company intends to obtain additional financing to meet our cash needs, the Company may be unable to secure any additional financing on terms that are favorable or acceptable to us, if at all.

 

F- 13
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

Note 4: Property and Equipment

 

At October 31, 2014 and 2013, the Company's property and equipment are as follows:

 

    October 31, 2014
    Remaining         Accumulated     Net Carrying  
    Useful Life   Cost     Depreciation     Value  
                       
Computer equipment - office   1.7 Years   $ 22,881     $ 9,892     $ 12,989  
Computer equipment - Nestbuilder website   2.3 Years     42,149       9,360       32,789  
        $ 65,030     $ 19,252     $ 45,778  

 

    October 31, 2013
    Remaining         Accumulated     Net Carrying  
    Useful Life   Cost     Depreciation     Value  
                       
Computer equipment - office   2.5 years   $ 17,046     $ 2,838     $ 14,208  
Computer equipment - Nestbuilder website   3.0 years     42,149       -0-       42,149  
        $ 59,195     $ 2,838     $ 56,357  

 

The Company has recorded $16,414 and $2,838 of depreciation expense for the years ended October 31, 2014 and 2013, respectively. There was no property and equipment impairment recorded for the years ended October 31, 2014 and 2013.

 

NOTE 5: INTANGIBLE ASSETS AND BUSINESS COMBINATION

 

The following table sets forth the intangible assets, both acquired and developed, including accumulated amortization:

 

    October 31, 2014
    Remaining         Accumulated     Net Carrying  
    Useful Life   Cost     Amortization     Value  
                       
Sales/Marketing agreement   1.5 Years   $ 4,796,178     $ 2,754,696     $ 2,041,482  
Website development costs   2.4 Years     1,527,307       294,839       1,232,468  
Web platform/customer relationships - ReachFactor acquisition   2.5 Years     600,000       224,996       375,004  
Software development costs (not placed in service)   3.0 Years     52,190       -0-       52,190  
        $ 6,975,675     $ 3,274,531     $ 3,701,144  

 

F- 14
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 5: INTANGIBLE ASSETS AND BUSINESS COMBINATION (continued)

 

    October 31, 2013
    Remaining         Accumulated     Net Carrying  
    Useful Life   Cost     Amortization     Value  
                       
Sales/Marketing agreement   2.5 years   $ 4,796,178     $ 1,377,348     $ 3,418,830  
Website development costs (not placed in service)   3.0 years     835,752       -0-       835,752  
        $ 5,631,930     $ 1,377,348     $ 4,254,582  

 

During the year ended October 31, 2014, the Company incurred expenditures of $691,555 for website development costs as a new development team was brought in to assess the quality of the website. Upon their recommendation, significant changes, upgrades and modifications were recommended and have been ongoing since the post launch date of March 4, 2014. This is being done to ensure that the site works capably as the Company's "revenue driver". This capitalization falls with the scope of ASC 350-50-25-15 wherein costs of upgrades and enhancements should be capitalized as they will result in added functionality of the website.

 

During the year ended October 31, 2014, the Company incurred expenditures of $52,190 for software development costs to develop a mobile app called "EZ FLIX" as a tool to assist users in converting still pictures to video. The Company capitalized internal software development costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established by "ASC 985-20-25" Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general release to customers anticipated to be available in the fourth quarter of the current fiscal year. Capitalized costs are amortized based on the greater of (a) the ratio of current gross revenues to the total current and anticipated future gross revenues, or (b) the straight-line method over the remaining estimated economic life of the product. As of October 31, 2014, the app has not been placed into service.

 

On May 24, 2014, RealBiz Media Group, Inc. (the “RBIZ”) entered into an Asset Purchase Agreement with ReachFactor, Inc. (“ReachFactor”) and its two principals, Suresh Srinivasan and Arun Srinivasan pursuant to which the Company acquired substantially all of the assets of ReachFactor and the Company assumed certain liabilities of ReachFactor not to exceed $25,000 in consideration of RBIZ's issuance to ReachFactor of 2,000,000 shares of RBIZ's common stock. The acquisition of the assets is subject to an unwind at the option of Suresh Srinivasan and Arun Srinivasan if on or prior to the date that is six months after the closing of the Asset Purchase Agreement, the Company terminates the employment of either of Suresh Srinivasan and/ or Arun Srinivasan (each referred to as an “Executive”) without cause or either Executive terminates his employment for good reason. In the event of an unwind the assets revert back to ReachFactor and the 2,000,000 shares of stock revert back to RBIZ. The purpose for this acquisition was for RealBiz to obtain ReachFactor's intellectual property consisting of a web platform, along with ReachFactor's customer relationships and to facilitate the addition of ReachFactor's principals to the management of RealBiz.

 

The value of the common stock of RealBiz was based on the fair value of the stock at the closing date which was $0.15 per share and RBIZ capitalized $600,000 as intangible assets consisting of a web platform and customer relationships, to be amortized over a three year period beginning June 1, 2014. The $600,000 included the capitalization of $300,000, related to the acquisition, representing the value of an additional 2,000,000 shares of RBIZ's common stock that were issued on the acquisition date to an escrow account and is considered as part of the purchase price consideration. These additional shares are to be released to Suresh Srinivasan and Arun Srinivasan at the rate of 500,000 shares every three months. The transaction represents an asset acquisition that is accounted for as a business combination under ASC 805 and noted in the tables below:

 

Purchase Price
Recipients   Value
per
share
    Number of
shares
issued
    Total
Value
 
ReachFactor, Inc   $ 0.15       2,000,000     $ 300,000  
Suresh Srinivasan   $ 0.15       1,000,000     $ 150,000  
Arun Srinivasan     $ 0.15       1,000,000     $ 150,000  
                  4,000,000     $ 600,000  

 

Assets Acquired
                    Total
Value
 
Web platform and customer relationships                   $ 600,000  
Purchase price                       $ 600,000  

 

F- 15
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 5: INTANGIBLE ASSETS AND BUSINESS COMBINATION (continued)

 

On September 18, 2014, the Company received Suresh Srinivasan’s written resignation as the Chief Operating Officer of the Company effective September 30, 2014 and the outstanding 750,000 shares of RealBiz common stock, held in escrow, were returned on December 5, 2014. The Company impaired the remaining un-amortized cost of $125,000 representing Suresh's interest in the ReachFactor intangible assets.

 

Intangible assets are amortized on a straight-line basis over their expected useful lives, estimated to be 4 years, except for the website(s), which is 3 years. Amortization expense related to website development costs and intangible assets was $1,772,183 and $1,109,873, for years ended October 31, 2014 and 2013, respectively.

 

NOTE 6: ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

For the years ended October 31, 2014 and 2013, the Company’s accounts payable and accrued expenses are as follows:

 

    October 31,  
    2014     2013  
Trade payables and accruals   $ 281,352     $ 161,847  
Accrued preferred stock dividends     915,447       523,895  
Payroll and commissions     456,875       352,266  
Other liabilities     226,620       219,024  
Total accounts payable and accrued expenses   $ 1,880,294     $ 1,257,032  

  

NOTE 7: DUE FROM/TO AFFILIATES

 

During the normal course of business, the Company receives and/or makes advances for operating expenses to/from our parent Company, Next 1 Interactive, Inc. As of October 31, 2014 and 2013, the Company is due $131,0 86 and $4,199, respectively as a result of such transactions.

 

F- 16
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 8: CONVERTIBLE NOTES PAYABLE

 

During the year ended October 31, 2014, the Company:

 

· issued 1,366,666 shares at the conversion rate of $0.15 per share, upon the noteholder's request, to convert $205,000 in principal.

 

· issued 100,000 shares at the conversion rate of $0.15 per share, upon the noteholder's request, to convert $15,000 in principal leaving a remaining principal balance of $60,000.

 

· On October 20, 2014, the Company issued a two (2) year, 7.5% convertible promissory note maturing on October 19, 2016 with a non-related third party investor valued at $150,000 and received $95,000 in cash proceeds net of $55,000 in loan origination fees included in the calculation of the debt discount. As an incentive, the Company issued 300,000 warrants to the holder with a two-year life and a fair value of approximately $14,760 to purchase shares of the Company’s common stock, $0.001 par value, per share, at an exercise price of $0.17 per share included as part of the debt discount. The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate between 0.94% and 1.51%, dividend yield of -0-%, volatility factor between 115.05% and 124.65% and an expected life of 1.5 years. The value of these warrants was charged to interest expense with the offset to additional paid-in-capital. The noteholder, at their option, has the right from time to time, and at any time on or prior to the later of (i) the Maturity Date and (ii) the date of payment of the Default Amount, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock at the Conversion Price. The conversion price means the lower of the fixed conversion price of $0.20 or the variable conversion price. The variable conversion price shall mean 65% multiplied by the lowest of the VWAP (volume weighted average price) of the common stock during the twelve (12) consecutive trading day period ending on and including the trading day immediately preceding the conversion date.

 

As required, the Company evaluated the conversion feature of the note, determined that there was no beneficial conversion feature (“BCF”) and assigned a value of $80,240 as additional derivative liability expense. Total debt discount of $150,000 is to be amortized to interest expense over the life of the note. Additionally, the Company accounted for the embedded conversion option liability in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretation of this standard.  In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. Additionally, the Company determined the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument.

 

The initial fair value of the embedded conversion option liability associated with the funds received on October 20, 2014, was valued using the Black-Scholes model, resulting in an initial fair value of $314,543 and recorded as a current liability. The assumptions used in the Black-Scholes option pricing model at the date the funds were received are as follows: (1) dividend yield of 0%; (2) expected volatility of 359.58%, (3) risk-free interest rate of 0.37%, and (4) expected life of 2.00 years. The value of the conversion option liability underlying the convertible promissory note at October 31, 2014 was $305,220 and the assumptions used in the Black-Scholes pricing model at October 31, 2014 are as follows: (1) dividend yield of 0%; (2) expected volatility of 356.68%, (3) risk-free interest rate of 0.50%, and (4) expected life of 2.00 years. The Company recognized a gain from the decrease in the fair value of the conversion option liability in the amount of $9,323 during the year ended October 31, 2014, representing the change in fair value. The Company recognized a derivative liability expense of $234,303. Interest charged to operations relating to this note for year ended October 31, 2014 and 2013 amounted to $2,605 and $0 respectively.

 

During the year end October 31, 2013:

 

· the $60,500 was satisfied and the $605,000 promissory note replaced the original debt of $615,264, resulting in a gain on settlement of debt of $10,264.

 

· $440,000 of principal was assigned to various non-related third party investors and the Company issued non-interest bearing convertible promissory notes that are due on demand. The conversion feature of $0.15 of these notes was evaluated and determined that $440,000 should be allocated to the beneficial conversion feature ("BCF") and amortized as interest expense over the life of the note. The convertible promissory notes are due on demand, therefore $440,000 of the BCF was charged to interest expense for the year ended October 31, 2013.

 

· various noteholders converted $325,000 of principal at a conversion rate of $0.15 per share and the Company issued 2,166,666 shares of its common stock and the remaining principal balance at October 31, 2013 is $280,000.

 

F- 17
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 9: LOANS PAYABLE

 

For the years ended October 31, 2014 and 2013, the Company’s loans payable is summarized follows:

 

    October 31,  
    2014     2013  
Promissory note   $ -0-     $ 21,214  
Non-related third party investors     170,000       170,000  
Total Loans payable   $ 170,000     $ 191,214  

 

During the year ended October 31, 2014:

 

· the Company made $21,214 in principal payments and incurred $1,314 in interest expense for the promissory note.

 

· there was no activity for the year ended October 31, 2014 for the non-related third party investors.

 

During the year ended October 31, 2013:

 

· the Company received $50,000 in proceeds from a non-related third party investor. The Company anticipates that this loan will be converted into either a formal debt or equity instrument. As of the date of this audit report its status has remained unchanged.

 

· the Company incurred consulting fees in the amount of $120,000 which were recorded as loans from a non-related third party investor. The Company anticipates that this loan will be converted into either a formal debt or equity instrument. As of the date of this audit report its status has remained unchanged.

 

NOTE 10: SHARE-BASED COMPENSATION

 

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

 

Stock Options consist of the following for the years ended October 31, 2014 and 2013, after taking into account a 200 for 1 reverse stock split:

 

                      Weighted  
          Weighted           average  
          average     Aggregate     remaining  
    Number of     exercise     intrinsic     contractual  
    options     price     value     term (years)  
                         
Outstanding at October 31, 2012     4,000     $ 50.00     $ -       0.94  
Granted     -       -       -       -  
Exercised     -       -       -       -  
Forfeited     3,000       -       -       -  
                                 
Outstanding at October 31, 2013     1,000       50.00       -       1.00  
Granted     -       -       -       -  
Exercised     -       -       -       -  
Forfeited     1,000       50.00       -       1.00  
                                 
Outstanding at October 31, 2014     -     $ -     $ -       -  

 

The aggregate intrinsic value in the table above represents the difference between the closing stock price on October 31, 2014 and the exercise price, multiplied by the number options at October 31, 2014.  There were no options exercised during the years ended October 31, 2014 and 2013 and as of October 31, 2014 all options have expired.

 

F- 18
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 11: STOCKHOLDERS’ EQUITY

 

On July 31, 2014, the Board and the holders of a majority of the voting power of our shareholders approved an amendment to our articles of incorporation to increase our authorized shares of common stock to 250,000,000 from 125,000,000 and increased the Company's Series A Convertible Preferred Stock to 120,000,000 from 100,000,000. Additionally, on July 31, 2014, the Board designated the terms of Series B Convertible Preferred Stock and 1,000,000 shares were authorized.

 

The total number of shares of all classes of stock that the Company shall have the authority to issue is 376,000,000 shares consisting of: 250,000,000 shares of common stock with a $0.001 par value per shares; and 125,000,000 shares which may be designated as Series A Convertible Preferred Stock with a $0.001 par value per share and 1,000,000 shares designated as Series B Preferred stock with a $0.001 par value per share.

 

Common Stock

 

During the year ended October 31, 2014, the Company:

 

· issued 4,163,712 shares of its common stock along with 3,532,389 one year warrants with an exercise price between a $0.18 to $1.25 for cash proceeds of $842,668 .

 

· issued 2,975,111 shares of its common stock upon exercise of 2,975,111 outstanding warrants for cash proceeds of $666,520 .

 

· issued 2,134,430 shares of its common stock along with 235,780 one year warrants with an exercise price between $0.05 to $1.00 for a total value of $970,065 for consulting fees rendered. The value of the common stock issued was based on the fair value of the stock at the time of issuance. The value of the warrants was estimated at the time of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate between 0.10% and 0.14%, dividend yield of -0-%, volatility factor between 318.89% to 611.08% and expected life of one year.

 

· On May 24, 2014, the Company issued 2,000,000 shares of common stock as part of employment agreements in place with executives valued at $300,000. This was part of the purchase price under the ReachFactor Asset Purchase Agreement. The value of the common stock was based on the fair value of the stock, representing its quoted trading price, at the time of issuance.

 

· On May 24, 2014, the Company issued 2,000,000 shares of common stock upon execution of an Asset Purchase Agreement with ReachFactor, Inc. pursuant to which the Company acquired substantially all of the assets of ReachFactor and the Company assumed certain liabilities of ReachFactor not to exceed $25,000. The value of the common stock was based on the fair value of the stock, representing its quoted trading price, at the time of issuance and totaled $300,000.

 

· issued 14,765,000 shares of its common stock valued at $738,250 upon the conversion of the holders of convertible Series B preferred shares held in its parent company Next 1 Interactive, Inc. These common shares were valued at the carrying value of the converted parent company Series B preferred shares.

 

· issued 1,300,000 shares of its common stock valued at $130,000 upon the conversion of the holders of convertible Series C preferred shares held in its parent company Next 1 Interactive, Inc. These common shares were valued at the carrying value of the converted parent company Series C preferred shares.

 

· issued 1,937,973 shares of its common stock valued at $290,725 upon the conversion of the holders of convertible Series D preferred shares held in its parent company Next 1 Interactive, Inc. These common shares were valued at the carrying value of the converted parent company Series D preferred shares.

 

· issued 3,100,000 shares of its common stock valued at $155,000 upon the conversion of the holders of convertible promissory notes held in its parent company Next 1 Interactive, Inc. These common shares were valued at the carrying value of the converted parent promissory notes.

 

· issued 12,000,000 one (1) year common stock warrants with an exercise price of $0.50 for a debt modification of convertible promissory notes held in its parent company Next 1 Interactive, Inc valued at $4,809,308. The value of the warrants was estimated at the time of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 0.35%, dividend yield of -0-%, volatility factor of 324.34% and expected life of one year.

  

· issued 1,466,666 shares of common stock upon conversion of convertible promissory notes of $220,000.

 

· issued 70,879 shares upon the exercise of 70,879 warrants in settlement of consulting fees valued at $12,758 at an exercise price of $1.

 

F- 19
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 11: STOCKHOLDERS’ EQUITY (continued)

 

Common Stock (continued)

 

During the year ended October 31, 2014, the Company (continued):

 

· issued 27,000 shares of its common stock along with 9,000 one year warrants with an exercise price between $0.18 to $1.00 as settlement of $13,500 of proceeds received in advance for prior fiscal year subscription agreements.

 

· On May 5, 2014, the Company's board of directors authorized a special warrant exercise pricing available to warrant holders of record as of May 5, 2014. The Board agreed to reduce the pricing on the warrants to $0.18 from their current level of $1.00 to $1.25 for the month of May 2014 only. The Company evaluated the incremental value of the modified warrants, as compared to the original warrant value, concluding that modification expense incurred was immaterial and the modification expense not recorded.

 

· All of the conversions of Next 1 Interactive, Inc. securities were accounted for as constructive distributions.

 

During the year ended October 31, 2013, the Company:

 

· issued 7,646,000 shares of its common stock along with 7,614,000 one year warrants with an exercise price between a $1.00 and $1.25 for cash proceeds of $3,826,000.

 

· issued 50,000 shares of its common stock upon execution of 50,000 outstanding warrants for cash proceeds of $50,000.

 

· received $13,500 in advance for subscription agreements totaling 27,000 shares of its common stock and as of October 31, 2013 the shares have not been issued.

 

· issued 607,600 shares of its common stock along with 71,600 one year warrants with an exercise price of $1 for a total value of $646,030 for consulting fees rendered. The value of the common stock was issued was based on the fair value of the stock at the time of issuance. The value of the warrants was estimated at the time of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate between 0.10% and 0.14%, dividend yield of -0-%, volatility factor between 177.07% and 353.06% and expected life of one year.

 

· issued 32,095,356 shares of its common stock and 690,232 one year warrants with an exercise price of $1 valued at $7,297,272 upon the conversion of the holders of convertible preferred shares and promissory notes held in its parent company Next 1 Interactive, Inc. The value of the warrants was estimated at the time of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate between 0.10% and 0.14%, dividend yield of -0-%, volatility factor between 315.81% and 356.43% and expected life of one year.

 

· issued 5,990,238 shares of its common stock valued at $299,512 upon the conversion of 5,990,238 shares of the Company's Convertible Series A Preferred stock.

 

· on October 3, 2013, contracted with an un-related entity and issued 100,000 shares of its common stock valued at $418,000 in website development costs. The value of the common stock was issued was based on the fair value of the stock at the time of issuance. Effective October 29, 2013, two shareholders of this entity became employees and executive officers of our Company.

 

· issued 2,166,666 shares of its common stock valued at $325,000 upon complying with conversion requests of various non-related third party convertible promissory note holders.

 

· evaluated the conversion feature of new issued convertible promissory note and recorded a $440,000 beneficial conversion feature.

 

F- 20
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 11: STOCKHOLDERS’ EQUITY (continued)

 

Common Stock Warrants

 

The following table sets forth common share purchase warrants outstanding as of October 31, 2014:

 

    Warrants     Weighted
Average
Exercise
Price
    Intrinsic
Value
 
Outstanding, October 31, 2013     8,325,832     $ 1.04     $ 1.56  
Warrants granted and issued     15,957,169     $ 0.47     $ 0.00  
Warrants exercised/forfeited     (8,904,143 )   $ (1.00 )   $ 0.00  
Outstanding, October 31, 2014     15,378,858     $ 0.48     $ 0.00  
                         
Common stock issuable upon exercise of warrants     15,378,858     $ 0.48     $ 0.00  

 

      Common Stock Issuable Upon Exercise of
Warrants Outstanding
    Common Stock Issuable 
Upon Warrants 
Exercisable
 
Range of
Exercise
Prices
Prices
    Number
Outstanding
at October
31, 2014
    Weighted
Average
Remaining
Contractual
Life (Years)
    Weighted
Average
Exercise
Price
    Number
Exercisable
at October
31, 2014
    Weighted
Average
Exercise
Price
 
$ 0.17       300,000       1.97     $ 0.17       300,000     $ 0.17  
$ 0.18       2,224,530       0.42     $ 0.18       2,224,530     $ 0.18  
$ 0.50       12,140,000       0.32     $ 0.50       12,140,000     $ 0.50  
$ 1.00       247,050       0.04     $ 1.00       247,050     $ 1.00  
$ 1.25       467,278       0.13     $ 1.25       467,278     $ 1.25  
                                             
          15,378,858       0.35     $ 0.48       15,378,858     $ 0.48  

 

The following table sets forth common share purchase warrants outstanding as of October 31, 2013:

 

    Warrants     Weighted
Average
Exercise
Price
    Intrinsic
Value
 
Outstanding, October 31, 2012     -0-     $ -0-     $ -0-  
Warrants granted and issued     8,375,832     $ 1.04     $ 1.56  
Warrants exercised/forfeited     (50,000 )   $ (1.00 )   $ (1.60 )
Outstanding, October 31, 2013     8,325,832     $ 1.04     $ 1.56  
                         
Common stock issuable upon exercise of warrants     8,325,832     $ 1.04     $ 1.56  

 

F- 21
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 11: STOCKHOLDERS’ EQUITY (continued)

 

Common Stock Warrants (continued)

 

      Common Stock Issuable Upon Exercise of
Warrants Outstanding
    Common Stock Issuable 
Upon Warrants 
Exercisable
 
Range of
Exercise
Prices
Prices
    Number
Outstanding
at October
31, 2013
   

Weighted

Average

Remaining

Contractual

Life (Years)

   

Weighted

Average

Exercise

Price

    Number
Exercisable
at October
31, 2013
    Weighted
Average
Exercise
Price
 
$ 1.00       6,917,832       0.78     $ 1.00       6,917,832     $ 1.00  
$ 1.25       1,408,000       1.00     $ 1.25       1,408,000     $ 1.25  
                                             
          8,325,832       0.82     $ 1.04       8,325,832     $ 1.04  

 

Convertible Preferred Stock Series A

 

On October 14, 2014, the Company filed a certificate of amendment pursuant to the July 31st, 2014 Board of Directors approval to increase the Preferred A shares from 100,000,000 shares to 120,000,000 shares. As of October 31, 2014, the Company had 66,801,653 shares of Convertible Preferred Stock Series A issued and outstanding. The preferred shares were issued at $.001 par and bear dividends at a rate of 10% per annum payable on a quarterly basis when declared by the board of directors. Dividends 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 delivers written notice to the holder. Each share of Series A Stock is 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 of a $1 per share by the Conversion Price then in effect. The conversion price for the Series A Stock is equal to $1.00 per share. Each holder of Series A stock shall be entitled to one vote for each whole share of common stock that would be issuable upon conversion of such share on the record date for determining eligibility to participate in the action being taken.

 

In the event of (a) the sale, conveyance, exchange, exclusive license, lease or other disposition of all or substantially all of the intellectual property or assets of the Company, (b) any acquisition of the Company by means of consolidation, stock exchange, stock sale, merger of other form of corporate reorganization of the Company with any other entity in which the Company's stockholders prior to the consolidation or merger own less than a majority of the voting securities of the surviving entity, or (c) the winding up or dissolution of the Company, whether voluntary or involuntary (each such event in clause (a), (b) or (c) a "liquidation event"), the Board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the distribution of assets among, or payment thereof over to, creditors of the Company (the "net assets available for distribution"). The holders of the Series A stock then outstanding shall be entitled to be paid out of the net assets available for Distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series A Stock or to the Common Stock, an amount for each share of Series A Stock equal to all accrued and unpaid Preferred Dividends plus the Stated Value, as adjusted (the "Series A Liquidation Amount").

 

Accrued and declared preferred stock dividends on the outstanding preferred shares as of October 31, 2014 and 2013 totaled $915,447 and $523,895, respectively and are included in accounts payable and accrued expenses in the accompanying balance sheet. These preferred stock dividends were declared on December 28, 2014, to holders of record on August 31, 2014. Additional preferred stock dividends accruing, but have not been declared, on the outstanding preferred shares as of October 31, 2014 were $73,753.

 

During the year ended October 31, 2014, the Company:

 

· issued 25,983,600 Series A Preferred Shares to Next 1 Interactive, Inc., based upon the "top up" provision in the certificates of designations, valued at $5,196,720 and approved by the Board of Directors on May 15, 2014 . The conversion price of $0.20 per common share was based upon the closing price of the Company's common stock on May 15, 2014.

 

· retired 53,198,347 Series Preferred Series A shares held by Next 1 Interactive, at the cost of $1,287,082, based upon the original securities and purchase agreement of October 2012 and retirement was approved by the Board of Directors on May 15, 2014. This was based upon the issuances of RealBiz common shares issued for conversion from Next 1 Interactive, Inc. preferred stock and convertible promissory notes.

 

F- 22
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 11: STOCKHOLDERS’ EQUITY (continued)

 

Convertible Preferred Stock Series A (continued)

 

During the year ended October 31, 2013, the Company:

 

· 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.

 

Convertible Preferred Stock Series B

 

On July 31, 2014, the Company's Board of Directors approved the creation of a new Series B Preferred stock and on October 14, 2014 a certificate of designation was filed with the state of Delaware designating 1,000,000 shares with a par value of $0.001, a stated value of $5.00 per share and convertible into the Company's common stock at $0.05 per share. As of October 31, 2014, the Company had -0- shares of Convertible Preferred Stock Series B issued and outstanding. The Series B Preferred stock will bear dividends at a rate of 10% per annum and shall accrue on the stated value of such shares of the Series B Stock. Dividends accrue whether or not they have been declared by the Board of Directors. At the election of the Company, it may satisfy its obligations hereunder to pay dividends on the Series B stock by issuing shares of common stock to the holders of Series B stock on a uniform and prorated basis. Each share of Series B Stock is 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 conversion price for the Series B Stock is equal to $0.05 per share. Each holder of Series B stock shall be entitled to the number of votes equal to two hundred (200) votes for each shares of Series B stock held by them.

 

In the event of (a) the sale, conveyance, exchange, exclusive license, lease or other disposition of all or substantially all of the intellectual property or assets of the Company, (b) any acquisition of the Company by means of consolidation, stock exchange, stock sale, merger of other form of corporate reorganization of the Company with any other entity in which the Company's stockholders prior to the consolidation or merger own less than a majority of the voting securities of the surviving entity, or (c) the winding up or dissolution of the Company, whether voluntary or involuntary (each such event in clause (a), (b) or (c) a "liquidation event"), the Board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the distribution of assets among, or payment thereof over to, creditors of the Company (the "net assets available for distribution"). The holders of the Series A stock then outstanding shall be entitled to be paid out of the net assets available for Distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series B Stock or to the Common Stock, an amount for each share of Series B Stock equal to all accrued and unpaid Preferred Dividends plus the Stated Value, as adjusted (the "Series B Liquidation Amount").

 

As of October 31, 2014 and 2013, there have been no shares issued or dividends accrued.

 

NOTE 12: OTHER INCOME

 

Other income for the year ended October 31, 2014 represents primarily the proceeds from a Canadian grant program encouraging research and development activities.

 

NOTE 13: RELATED PARTY TRANSACTIONS

 

In connection with the closing of the Exchange Transaction on October 9, 2012, Messrs. Buntz and Wicker converted all of their outstanding notes, unpaid salary and all other obligations and liabilities to them owed by the Company into 5,990,238 and 1,016,400 shares of Series A Stock, respectively. The Preferred A Shares for Mr. Buntz were converted to 5,990,238 Common Shares on February 27, 2013.

 

During the year ended October 31, 2013, the Company paid $800 a month in rent for office space on behalf of an officer of the Company.

 

Equity transactions with the Company's parent are described in Note 11.

 

F- 23
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 14: INCOME TAXES

 

The Company accounts for income taxes taking into account deferred tax assets and liabilities which represent the future tax consequences of the differences between financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year the change is enacted.

 

The provision (benefit) for income taxes consists of the following for the years ended October 31:

 

      2014       2013  
                 
Current   $ -     $ -  
Deferred     -       -  
                 
Provision for income taxes   $ -     $ -  

  

The provision for income taxes varies from the statutory rate applied to the net loss as follows for the years ended October 31:

 

    2014     2013  
             
Federal income tax benefit at statutory rate (35%)   $ (1,611,864 )   $ (1,317,431 )
State taxes, net of federal benefit     (208,584 )     (170,483 )
Effect of Canadian tax rates     19,318       66,704  
Nondeductible expenses     1,113,360       978,453  
Change in valuation allowance     687,770       442,757  
                 
Provision for income taxes   $ -     $ -  

 

Significant components of the Company’s estimated deferred tax balances at October 31, 2014 and 2013 consist of:

 

    2014     2013  
Deferred tax assets (liabilities)                
Net operating loss carryforwards (U.S.)   $ 893,020     $ 281,009  
Net operating loss carryforwards (Canada)     609,255       567,626  
Bad debt     -       30,368  
Accrued salaries     180,521       116,024  
                 
Net deferred tax assets     1,682,796       995,027  
Valuation allowance     (1,682,796 )     (995,027 )
                 
Provision for income taxes   $ -     $ -  

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences will become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company has recorded a full valuation allowance against its net deferred tax assets because it is not currently able to conclude that it is more likely than not that these assets will be realized. The amount of deferred tax assets considered to be realizable could be increased in the near term if estimates of future taxable income during the carryforward period are increased. The valuation allowance increased by $687,769 during the fiscal year ended October 31, 2014.

 

F- 24
 

 

REALBIZ MEDIA GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended October 31, 2014 and 2013

 

NOTE 14: INCOME TAXES (continued)

 

The Company has a total net operating loss carryforward of approximately $4,515,000, of which approximately $2,259,000 relates to domestic entities and $2,256,000 relates to wholly owned Canadian subsidiaries. Net operating loss carryforwards expire through 2033. Under the Internal Revenue Code Section 382 (IRC 382) and the Canadian Tax Act, certain stock transactions which significantly change ownership, including the sale of stock to new investors, the exercise of options to purchase stock, or other transactions between shareholders could limit the amount of net operating loss carryforwards that may be utilized on an annual basis to offset taxable income in future periods.

 

NOTE 15: FAIR VALUE MEASUREMENT AND DISCLOSURE

 

The Company has adopted ASC 820, Fair Market Measurement and Disclosures including the application of the statement to non-recurring, non-financial assets and liabilities. The adoption of ASC 820 did not have a material impact on the Company’s fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Fair Value Measurements at October 31, 2013 and 2014 respectively using:

 

Description   Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
   

Significant Other

Observable Inputs
(Level 2)

   

Significant

Unobservable Inputs
(Level 3)

    Total  
                         
Cash   $ 1,304,374     $ -     $ -     $ 1,304,374  
October 31, 2013   $ 1,304,374     $ -     $ -     $ 1,304,374  
                                 
Cash   $ 20,066     $ -     $ -     $ 20,066  
Convertible promissory note with embedded conversion option     -       -       305,220       305,220  
October 31, 2014   $ 20,066     $ -     $ 305,220     $ 325,286  

 

NOTE 16: SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events occurring after the balance sheet date and through February 12, 2015, the date that these financial statements were issued and has identified the following:

 

During December 2014 and January 2015, the Company:

 

· received $460,000 in proceeds and issued convertible promissory notes with interest rates of 12% per annum, maturity dates of December 31, 2016 and with a range of fixed rate conversion features.

 

· received $75,000 in proceeds and issued 750,000 common shares and 750,000 one year warrants with an exercise price of $0.18.

 

· the Company is currently analyzing the above transactions for proper accounting treatment.

 

· signed a joint venture agreement on January 23, 2015 with Harmon Media Group This co-syndication agreement is to provide enhanced listing data for parties to increase site traffic, enhanced products and services, agent usage, agent subscriptions, which causes associated fees and advertising revenues to both parties.

 

· on December 23, 2014, the board of directors determined that it is in the best interests of the Company to declare the $915,447 of dividends which currently have been accrued on the books of the Corporation, but not declared, in respect of the Corporation's Preferred Series A shares, to holders of record date on August 31, 2014.

 

F- 25

 

Exhibit 3.6

 

CERTIFICATE OF AMENDMENT

 

TO THE

 

CERTIFICATE OF INCORPORATION

 

OF

 

REALBIZ MEDIA GROUP, INC.

 

RealBiz Media Group, Inc. (the “Corporation”) organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:

 

FIRST : That at a meeting of the Board of Directors of the Corporation on July 31, 2014, resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:

 

RESOLVED , that Paragraphs A and B of Section 4 of the Certificate of Incorporation of this Corporation be amended as follows:

 

4. Number of Shares .

 

A. The total number of shares of all classes of stock that the Corporation shall have authority to issue is Three Hundred Seventy Five Million (375,000,000) shares consisting of: Two Hundred Fifty Million (250,000,000) shares of common stock, $.001 par value per share; and One Hundred Twenty-Five Million (125,000,000) which shall be designated as preferred stock, $.001 par value per share.

 

B. The preferred stock may be divided into, and may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “Board”) is authorized from time to time to establish and designate any such series of preferred stock, to fix and determine the variations in the relative rights, preferences, privileges and restrictions as between and among such series and any other class of capital stock of the Corporation and any series thereof, and to fix or alter the number of shares comprising any such series and the designation thereof. The authority of the Board from time to time with respect to each such series shall include, but not be limited to, determination of the following: (i) the designation of the series; (ii) the number of shares of the series and (except where otherwise provided in the creation of the series) any subsequent increase or decrease therein; (iii) the dividends, if any, for shares of the series and the rates, conditions, times and relative preferences thereof; (iv) the redemption rights, if any, and price or prices for shares of the series; (v) the terms and amounts of any sinking fund provided for the purchase or redemption of the series; (vi) the relative rights of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (vii) whether the shares of the series shall be convertible into shares of any other class or series of shares of the Corporation, and, if so, the specification of such other class or series, the conversion prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion may be made; (viii) the voting rights, if any, of the holders of such series; and (ix) such other designations, powers, preference and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof.

 

 
 

 

All other aspects of Article 4 shall remain unchanged.

 

SECOND : That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.

 

THIRD : That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

 

IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to the Certificate of Incorporation to be signed by William Kerby, its Chief Executive Officer, this 14 th day of October, 2014.

 

  /s/ William Kerby  
  William Kerby
  Chief Executive Officer

 

 

 

 

Exhibit 3.7

 

CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF DESIGNATIONS, NUMBER, VOTING POWERS,
PREFERENCES AND RIGHTS OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
REALBIZ MEDIA GROUP, INC.

 

Pursuant to Section 242 of the
General Corporation Law of the State of Delaware

 

The undersigned, for the purpose of amending the Certificate of Designations, Number, Voting Powers, Preferences and Rights of Series A Convertible Preferred Stock of RealBiz Media Group, Inc. (the “ Corporation ”), filed with the Secretary of State of the State of Delaware on October 10, 2012 (the “ Certificate of Designations ”), pursuant to Section 242 of the General Corporation Law of the State of Delaware (“ DGCL ”), DOES HEREBY CERTIFY, as follows:

 

FIRST: That the Certificate of Designations is hereby amended and restated in its entirety as follows:

 

1.           Designation and Amount . The shares of such series shall be designated as “ Series A Convertible Preferred Stock ” (the “ Series A Stock ”) and the number of shares constituting the Series A Stock shall be 120,000,000. Such number of shares may be decreased by resolution of the Board of Directors adopted and filed pursuant to the DGCL, Section 151(g), or any successor provision; provided , that no such decrease shall reduce the number of authorized shares of Series A Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, warrants, convertible or exchangeable securities or other rights to acquire shares of Series A Stock.

 

2.           Ranking . The Series A Stock shall rank, as to the payment of dividends and the distribution of the assets upon liquidation, dissolution or winding up of the Corporation: (a) senior to the Common Stock, and (b) senior to or on parity with all other classes and series of the Corporation’s preferred stock.

 

3.           Dividends . From and after the date of the issuance of any shares of Series A Stock, dividends at the rate of ten percent (10%) per annum shall accrue on the Stated Value of the Series A Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock) (the “ Accruing Dividends ”). The Stated Value of the Series A Stock shall be $0.05 per share and the par value shall be $.001 per share. The Accruing Dividends will be declared by the Board of Directors on a quarterly basis on January 31, April 30, July 31 and October 31 of each calendar year. Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. At the election of the Corporation, the Corporation may satisfy its obligations hereunder to pay dividends on the Series A Stock by issuing shares of Common Stock to the holders of Series A Stock on a uniform and prorated basis. In any such case, the number of shares required to satisfy dividend-payment obligations hereunder shall equal 120% of the quotient obtained by dividing the (i) the amount of dividend-payment obligations to be satisfied by (ii) the average Trading Price of the Common Stock on the ten (10) trading days immediately preceding the date on which the Corporation elects to satisfy dividend-payment obligations through the issuance of the shares of Common Stock, as reported by Bloomberg L.P. The Corporation shall notify the holders in writing within two days of any election by the Corporation to issue Common Stock in satisfaction of dividend-payment obligations hereunder.

 

 
 

 

4.            Liquidation Preference

 

(a)          In the event of (a) the sale, conveyance, exchange, exclusive license, lease or other disposition of all or substantially all of the intellectual property or assets of the Corporation, (b) any acquisition of the Corporation by means of a consolidation, stock exchange, stock sale, merger or other form of corporate reorganization of the Corporation with any other entity in which the Corporation’s stockholders prior to the consolidation or merger own less than a majority of the voting securities of the surviving entity, or (c) the winding up or dissolution of the Corporation, whether voluntary or involuntary (each such event in clause (a), (b) or (c), a “ Liquidation Event ”), the Board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the distribution of assets among, or payment thereof over to, creditors of the Corporation (the “ Net Assets Available for Distribution ”). The holders of the Series A Stock then outstanding shall be entitled to be paid out of the Net Assets Available for Distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series A Stock or to the Common Stock, an amount for each share of Series A Stock equal to all accrued and unpaid Preferred Dividends plus the Stated Value, as adjusted (the “ Series A Liquidation Amount ”). A transaction shall not constitute a Liquidation Event if its sole purpose is (y) to change the state of the Corporation’s incorporation or (z) to create a holding company that will have substantially similar series and classes of shares with the same terms as existed immediately prior to the transaction and be owned in the same proportions by the persons or entities who held this Corporation’s securities immediately prior to such transaction, provided such transaction is approved by the Board. The holders of a majority of the shares of Series A Stock, voting as a single class on an as-converted basis, may vote to determine that any transaction listed above as a Liquidation Event shall not constitute a Liquidation Event for purpose of this Section 4.

 

(b)          If the Net Assets Available for Distribution to holders of shares of the Series A Stock upon such Liquidation Event shall be insufficient to pay the Series A Liquidation Amount to the holders of shares of the Series A Stock, then such Net Assets Available for Distribution shall be distributed among the holders of shares of the Series A Stock ratably in proportion to the respective amounts to which they otherwise would be entitled.

 

(c)          After distribution, if any, of proceeds to the holders of shares of Series A Stock pursuant to the foregoing, all remaining funds or other property of the Corporation, if any, shall be distributed pro rata among the holders of the Common Stock and the holders of all preferred stock of the Corporation on an as-if-converted basis.

 

(d)          Whenever any distribution provided for in this Section 4 shall be payable in securities or property other than cash, then the value of such distribution shall be the fair market value of such distribution as determined in good faith by the Board of Directors, except that any publicly traded securities to be distributed to stockholders will be valued as follows:

 

(i)           Securities not subject to an investment letter or other similar restrictions on free marketability:

 

(1)     If traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the 30-day period ending three calendar days prior to the closing; and

 

2
 

 

(2)     If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever are applicable) over the 30-day period ending three calendar days prior to the closing.

 

(ii)     The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in Sections 4(d)(i)(A) and (B) to reflect the approximate fair market value thereof, as determined in good faith by the Board.

 

5.            Voting .

 

(a)           General . On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series A Stock shall be entitled to voting rights and powers equal to the number of whole shares of Common Stock into which the shares of Series A Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Each share of Series A Stock (including fractional shares) shall be entitled to one vote for each whole share of Common Stock that would be issuable upon conversion of such share on the record date for determining eligibility to participate in the action being taken. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series A Stock held by each holder could be converted) shall be rounded down to the nearest whole number. Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Series A Stock shall vote together with the holders of Common Stock as a single class.

 

(b)           Series A Stock Protective Provisions; Waivers . In addition to any other vote or consent required herein or by law, the vote or written consent of holders of at least a majority of the then-outstanding shares of Series A Stock, voting together as a single class on an as-converted basis, in the aggregate and given in writing or by vote at a meeting, shall be required for the Corporation to:

 

(i)   amend, modify, add, repeal or waive any provision of this Certificate of Designation or otherwise take any action that modifies any powers, rights, preferences, privileges or restrictions of the Series A Stock; provided , that the Corporation may amend or restate this Certificate of Designation to correct any typographical, clerical or scrivener’s error without any approval required from the holders of Series A Stock;

 

(ii)  authorize, create or issue shares of any class of stock having rights, preferences or privileges superior or senior to the Series A Stock;

 

(iii) issue additional shares of Preferred Stock after the closing of the transactions contemplated by that certain Share Exchange Agreement by and between the Corporation and Next 1 Interactive, Inc., dated as of April 3, 2012; provided , that issuances of additional shares of Preferred Stock that are specifically contemplated herein shall be permitted (including without limitation issuances pursuant to Section 11), and issuances of additional shares of Preferred Stock upon the conversion of debt of the Corporation shall also be permitted;

 

(iv) amend the Certificate of Incorporation of the Corporation in a manner that adversely and materially affects the rights of the Series A Stock; or

 

3
 

 

(v)   recapitalize, split, combine or reclassify any shares of capital stock of the Corporation.

 

In addition, the vote or written consent of holders of at least a majority of the then-outstanding shares of Series A Stock, voting together as a single class on an as-converted basis, in the aggregate and given in writing or by vote at a meeting, shall be required for any waiver of any of the protective provisions contained in subparagraphs (i) through (v) above.

 

6.            Conversion . 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 (i) the Stated Value by (ii) the Conversion Price then in effect. The initial conversion price for the Series A Stock (the “ Conversion Price ”) shall be equal to $1.00 per share. The Conversion Price from time to time in effect is subject to adjustment as hereinafter provided in Section 7 (the “ Adjustments ”).

 

7.            Adjustments .

 

(a)           Conversion Price . If at any time or from time to time after the date on which any Series A Stock is issued, the Corporation shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise), or in the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, then the Conversion Price in effect immediately prior to such event shall, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate.

 

(b)           Reorganization, Reclassification, Consolidation, Merger or Sale . If at any time after the date on which any Series A Stock is issued, there is any reorganization, reclassification, consolidation, merger or sale of all or substantially all of the assets of the Corporation (other than a Liquidation Event), as part of such capital reorganization, provision shall be made so that (i) the holders of Series A Stock shall thereafter have the right to receive, upon conversion of such Series A Stock, the number of shares of stock or securities or property of the Corporation to which a holder of the number of shares of Common Stock deliverable upon conversion of such Series A Stock would have been entitled in connection with such capital reorganization if such holder had converted its Series A Stock immediately prior to such transaction, subject to adjustment in respect of such stock or securities by the terms thereof.

 

8.            Mechanics of Conversion . In order to exercise the conversion privilege, a holder of Series A Stock shall surrender the certificate representing such Series A Stock to be converted, if any, to the Corporation at its principal office, accompanied by written notice to the Corporation that the holder elects to convert a specified portion or all of such shares. Series A Stock shall be deemed to have been converted on the day of surrender of the certificate representing such shares for conversion in accordance with the foregoing provisions, and at such time the rights of such holder of such shares of Series A Stock, as such holder, shall cease and such holder shall be treated for all purposes as the record holder of the Common Stock issuable upon conversion. As promptly as practicable on or after the conversion date, the Corporation shall issue and mail or deliver to such holder a certificate or certificates representing the number of shares of Common Stock issuable upon conversion, rounded down to the nearest full share, and a certificate or certificates for the balance of the Series A Stock surrendered, if any, not so converted into Common Stock. Notwithstanding the foregoing, in case of any Liquidation Event, unless the Corporation has received notice of election for conversion and the stock certificate or certificates prior to such time, such right of conversion for any holder of Series A Stock subject to such Liquidation Event shall cease and terminate at the close of business on the business day fixed for payment of the amount payable to such holders of the Series A Stock pursuant to this Certificate of Designation unless the Corporation shall thereafter default in the payment of the Series A Liquidation Amount, in which case the holder shall be entitled to conversion until such default is cured by the Corporation. No fractional shares of Common Stock will be issued by conversion of Series A Stock or payment of dividends. In lieu of any fractional shares to which the holder would be otherwise entitled, the Corporation will pay cash equal to such fraction multiplied by the then fair market value of a share of Common Stock as determined in good faith by the Board of Directors. For such purpose, all shares of Series A Stock held by each holder of Series A Stock shall be aggregated, and any resulting fractional share of Common Stock shall be paid in cash. To the extent permitted by law, the Board may in its discretion determine not to issue certificates representing Series A Stock.

 

4
 

 

9.            Reservation of Stock Issuable Upon Conversion . The Corporation shall use its commercially reasonable best efforts at all times to reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of shares of Series A Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Stock, and, if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Stock, the Corporation will use commercially reasonable best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

 

10.          Notice Regarding Conversion Price Adjustments . Upon any adjustment of the Conversion Price for the Series A Stock under Section 7, then and in each such case the Corporation shall give written notice thereof, by first-class mail, postage prepaid, addressed to the registered holders of the Series A Stock at the addresses of such holders as shown on the books of the Corporation, which notice shall state the Conversion Price resulting from such adjustment and the increase or decrease, if any, in the number of shares receivable at such price upon the conversion of the Series A Stock, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.

 

11.          Common Stock Defined . As used in this Amended and Restated Certificate of Designations, the term “ Common Stock ” shall mean and include the Corporation’s presently authorized Common Stock and shall also include any capital stock of any class of the Corporation hereafter authorized which shall have the right to vote on all matters submitted to the stockholders of the Corporation and shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution, or winding up of this Corporation; provided that the shares receivable pursuant to conversion of the Series A Stock shall include shares designated as Common Stock of this Corporation as of the date of issuance of such Series A Stock.

 

12.          Reacquired Shares . Any shares of Series A Stock converted, exchanged, redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock without designation as to series and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board of Directors as permitted by the Corporation’s Certificate of Incorporation or as otherwise permitted under Delaware law.

 

SECOND: That the foregoing amendment was duly authorized by the Board of Directors of the Corporation and by the written consent of the stockholders of the corporation in accordance with the provisions of Sections 228 and 242 of the DGCL.

 

5
 

  

IN WITNESS WHEREOF, RealBiz Media Group, Inc. has caused this Certificate of Amendment to the Certificate of Designations, Number, Voting Powers, Preferences and Rights of Series A Convertible Preferred Stock to be duly executed this 14 th day of October, 2014.

 

  /s/ William Kerby
  William Kerby
  Chief Executive Officer

 

6

 

 

Exhibit 3.8

 

CERTIFICATE OF DESIGNATION

 

of

 

SERIES B CONVERTIBLE PREFERRED STOCK

 

REALBIZ MEDIA GROUP, INC.

 

(Pursuant to Section 151(g) of the

 

Delaware General Corporation Law)

 

RealBiz Media Group, Inc., a corporation organized and existing under the laws of the State of Delaware (formerly known as “Webdigs, Inc.”) (the “Corporation”), hereby certifies, as of July 31, 2014, that the following resolution was duly adopted pursuant to a unanimous written consent of the Board of Directors of the Corporation, dated as of July 31, 2014, pursuant to Section 151(g) of the Delaware General Corporation Law:

 

RESOLVED , that pursuant to the authority vested in the Board of Directors (the “ Board of Directors ,” or the “ Board ”) of RealBiz Media Group, Inc. (the “ Corporation ”) by the Company’s Certificate of Incorporation, and in accordance with the Delaware General Corporation Law (the “ DGCL ”), Section 151, the Board of Directors hereby designates the terms of Series B Convertible Preferred Stock of the Corporation and hereby states the number of shares, and fixes the powers, designations, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions thereof, of such series of shares as follows:

 

1.           Designation and Amount . The shares of such series shall be designated as “ Series B Convertible Preferred Stock ” (the “ Series B Stock ”) and the number of shares constituting the Series B Stock shall be 1,000,000. Such number of shares may be decreased by resolution of the Board of Directors adopted and filed pursuant to the DGCL, Section 151(g), or any successor provision; provided , that no such decrease shall reduce the number of authorized shares of Series B Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, warrants, convertible or exchangeable securities or other rights to acquire shares of Series A Stock.

 

2.           Ranking . The Series B Stock shall rank, as to the payment of dividends and the distribution of the assets upon liquidation, dissolution or winding up of the Corporation: (a) senior to the Common Stock, (b) on parity with the Series A Convertible Preferred Stock and (c) senior to or on parity with all other classes and series of the Corporation’s preferred stock.

 

3.           Stated Value and Par Value . The amount to be represented in stated value at all times for each share of Series B Stock shall be $5.00 per share (the “ Stated Value ”) and the par value per share shall be $.001.

 

4.           Dividends . From and after the date of the issuance of any shares of Series B Stock, dividends at the rate of ten percent (10%) per annum shall accrue on the Stated Value of such shares of the Series B Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock) (the “ Accruing Dividends ”). The Accruing Dividends are only payable, when and if declared by the Board of Directors, on a quarterly basis on January 31, April 30, July 31 and October 31 of each calendar year. Accruing Dividends shall accrue from day to day, whether or not declared, or whether paid or not, and shall be cumulative. At the election of the Corporation, the Corporation may satisfy its obligations hereunder to pay dividends on the Series B Stock by issuing shares of Common Stock to the holders of Series B Stock on a uniform and prorated basis. In any such case, the number of shares required to satisfy dividend-payment obligations hereunder shall equal 120% of the quotient obtained by dividing the (i) the amount of dividend-payment obligations to be satisfied by (ii) the average trading price of the Common Stock on the ten (10) trading days immediately preceding the date on which the Corporation elects to satisfy dividend-payment obligations through the issuance of the shares of Common Stock, as reported by a nationally recognized organization. The Corporation shall notify the holders in writing within two days of any election by the Corporation to issue Common Stock in satisfaction of dividend-payment obligations hereunder.

 

5.           Liquidation Preference .

 

a.           In the event of (a) the sale, conveyance, exchange, exclusive license, lease or other disposition of all or substantially all of the intellectual property or assets of the Corporation, (b) any acquisition of the Corporation by means of a consolidation, stock exchange, stock sale, merger or other form of corporate reorganization of the Corporation with any other entity in which the Corporation’s stockholders prior to the consolidation or merger own less than a majority of the voting securities of the surviving entity, or (c) the winding up or dissolution of the Corporation, whether voluntary or involuntary (each such event in clause (a), (b) or (c), a “ Liquidation Event ”), the Board shall determine in good faith the amount legally available for distribution to stockholders after taking into account the distribution of assets among, or payment thereof over to, creditors of the Corporation (the “ Net Assets Available for Distribution ”). The holders of the Series B Stock then outstanding shall be entitled to be paid out of the Net Assets Available for Distribution (or the consideration received in such transaction) before any payment or distribution shall be made to the holders of any class of preferred stock ranking junior to the Series B Stock or to the Common Stock, an amount for each share of Series B Stock equal to all accrued and unpaid Preferred Dividends plus the Stated Value, as adjusted (the “ Series B Liquidation Amount ”). A transaction shall not constitute a Liquidation Event if its sole purpose is (y) to change the state of the Corporation’s incorporation or (z) to create a holding company that will have substantially similar series and classes of shares with the same terms as existed immediately prior to the transaction and be owned in the same proportions by the persons or entities who held this Corporation’s securities immediately prior to such transaction, provided such transaction is approved by the Board. The holders of a majority of the shares of Series B Stock, voting as a single class on an as-converted basis, may vote to determine that any transaction listed above as a Liquidation Event shall not constitute a Liquidation Event for purpose of this Section 5.

 

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b.           If the Net Assets Available for Distribution to holders of shares of the Series B Stock upon such Liquidation Event shall be insufficient to pay the Series B Liquidation Amount to the holders of shares of the Series B Stock, then such Net Assets Available for Distribution shall be distributed among the holders of shares of the Series B Stock ratably in proportion to the respective amounts to which they otherwise would be entitled.

 

c.           After distribution, if any, of proceeds to the holders of shares of Series B Stock pursuant to the foregoing, all remaining funds or other property of the Corporation, if any, shall be distributed pro rata among the holders of the Common Stock and the holders of all preferred stock of the Corporation on an as-if-converted basis.

 

d.           Whenever any distribution provided for in this Section 5 shall be payable in securities or property other than cash, then the value of such distribution shall be the fair market value of such distribution as determined in good faith by the Board of Directors.

 

6.           Voting .

 

a.            General . Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Series B Stock shall vote together with holders of the Common Stock of the Corporation as a single class on any matter presented to the holders of the Common Stock the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of the stockholders in lieu of a meeting), and each holder of Series B Stock shall be entitled to the number of votes equal to two hundred (200) votes for each share of Series B Stock held by them.

 

b.            Series A Stock Protective Provisions; Waivers . In addition to any other vote or consent required herein or by law, the vote or written consent of holders of at least a majority of the then-outstanding shares of Series A Stock, voting together as a single class on an as-converted basis, in the aggregate and given in writing or by vote at a meeting, shall be required for the Corporation to:

 

(i)          amend, modify, add, repeal or waive any provision of this Certificate of Designation or otherwise take any action that modifies any powers, rights, preferences, privileges or restrictions of the Series A Stock; provided , that the Corporation may amend or restate this Certificate of Designation to correct any typographical, clerical or scrivener’s error without any approval required from the holders of Series A Stock;

 

(ii)         authorize, create or issue shares of any class of stock having rights, preferences or privileges superior or senior to the Series B Stock;

 

(iii)        amend the Certificate of Incorporation of the Corporation in a manner that adversely and materially affects the rights of the Series B Stock; or

 

(iv)        recapitalize, split, combine or reclassify any shares of capital stock of the Corporation.

 

In addition, the vote or written consent of holders of at least a majority of the then-outstanding shares of Series B Stock, voting together as a single class on an as-converted basis, in the aggregate and given in writing or by vote at a meeting, shall be required for any waiver of any of the protective provisions contained in subparagraphs (i) through (iv) above.

 

7.           Conversion . Each share of Series B 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 (i) the Stated Value by (ii) the Conversion Price then in effect. The initial conversion price for the Series B Stock (the “ Conversion Price ”) shall be equal to $0.05 per share. The Conversion Price from time to time in effect is subject to adjustment as hereinafter provided in Section 8 (the “ Adjustments ”).

 

8.           Adjustments .

 

a.            Conversion Price . If at any time or from time to time after the date on which any Series B Stock is issued, the Corporation shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise), or in the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, then the Conversion Price in effect immediately prior to such event shall, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate.

 

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b.            Reorganization, Reclassification, Consolidation, Merger or Sale . If at any time after the date on which any Series B Stock is issued, there is any reorganization, reclassification, consolidation, merger or sale of all or substantially all of the assets of the Corporation (other than a Liquidation Event), as part of such capital reorganization, provision shall be made so that (i) the holders of Series B Stock shall thereafter have the right to receive, upon conversion of such Series B Stock, the number of shares of stock or securities or property of the Corporation to which a holder of the number of shares of Common Stock deliverable upon conversion of such Series B Stock would have been entitled in connection with such capital reorganization if such holder had converted its Series B Stock immediately prior to such transaction, subject to adjustment in respect of such stock or securities by the terms thereof.

 

9.           Mechanics of Conversion . In order to exercise the conversion privilege, a holder of Series B Stock shall surrender the certificate representing such Series B Stock to be converted, if any, to the Corporation at its principal office, accompanied by written notice to the Corporation that the holder elects to convert a specified portion or all of such shares. Series B Stock shall be deemed to have been converted on the day of surrender of the certificate representing such shares for conversion in accordance with the foregoing provisions, and at such time the rights of such holder of such shares of Series B Stock, as such holder, shall cease and such holder shall be treated for all purposes as the record holder of the Common Stock issuable upon conversion. As promptly as practicable on or after the conversion date, the Corporation shall issue and mail or deliver to such holder a certificate or certificates representing the number of shares of Common Stock issuable upon conversion, rounded down to the nearest full share, and a certificate or certificates for the balance of the Series B Stock surrendered, if any, not so converted into Common Stock. Notwithstanding the foregoing, in case of any Liquidation Event, unless the Corporation has received notice of election for conversion and the stock certificate or certificates prior to such time, such right of conversion for any holder of Series B Stock subject to such Liquidation Event shall cease and terminate at the close of business on the business day fixed for payment of the amount payable to such holders of the Series B Stock pursuant to this Certificate of Designation unless the Corporation shall thereafter default in the payment of the Series B Liquidation Amount, in which case the holder shall be entitled to conversion until such default is cured by the Corporation. No fractional shares of Common Stock will be issued by conversion of Series B Stock or payment of dividends. In lieu of any fractional shares to which the holder would be otherwise entitled, the Corporation will pay cash equal to such fraction multiplied by the then fair market value of a share of Common Stock as determined in good faith by the Board of Directors. For such purpose, all shares of Series B Stock held by each holder of Series B Stock shall be aggregated, and any resulting fractional share of Common Stock shall be paid in cash. To the extent permitted by law, the Board may in its discretion determine not to issue certificates representing Series B Stock.

 

10.          Reservation of Stock Issuable Upon Conversion . The Corporation shall use its commercially reasonable best efforts at all times to reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of shares of Series B Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series B Stock, and, if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series B Stock, the Corporation will use commercially reasonable best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

 

11.          Notice Regarding Conversion Price Adjustments . Upon any adjustment of the Conversion Price for the Series B Stock under Section 8, then and in each such case the Corporation shall give written notice thereof, by first-class mail, postage prepaid, addressed to the registered holders of the Series B Stock at the addresses of such holders as shown on the books of the Corporation, which notice shall state the Conversion Price resulting from such adjustment and the increase or decrease, if any, in the number of shares receivable at such price upon the conversion of the Series B Stock, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.

 

12.          Common Stock Defined . As used in this Certificate of Designations, the term “ Common Stock ” shall mean and include the Corporation’s presently authorized Common Stock and shall also include any capital stock of any class of the Corporation hereafter authorized which shall have the right to vote on all matters submitted to the stockholders of the Corporation and shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution, or winding up of this Corporation; provided that the shares receivable pursuant to conversion of the Series B Stock shall include shares designated as Common Stock of this Corporation as of the date of issuance of such Series B Stock.

 

13.          Reacquired Shares . Any shares of Series B Stock converted, exchanged, redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock without designation as to series and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board of Directors as permitted by the Corporation’s Certificate of Incorporation or as otherwise permitted under Delaware law.

 

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IN WITNESS WHEREOF , RealBiz Media Group, Inc. has caused this Certificate of Designation to be signed by the undersigned on this 14 th day of October, 2014.

 

  RealBiz Media Group, Inc .  
     
  By: /s/ William Kerby  
  Name: William Kerby  
  Title: Chief Executive Officer  

 

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EXHIBIT 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14 OR RULE 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, William Kerby, certify that:

 

  1. I have reviewed this annual report on Form 10-K of Realbiz Media Group, Inc.;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

  

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: February 13, 2015 By: /s/ William Kerby
    Name: William Kerby
    Title: Chief Executive Officer
    (Principal Executive Officer)

 

 

 

 

EXHIBIT 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13a-14 OR RULE 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Adam Friedman, certify that:

 

  1. I have reviewed this annual report on Form 10-K of Realbiz Media Group, Inc.;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

  

  5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: February 13, 2015 By: /s/ Adam Friedman
    Name: Adam Friedman
    Title: Chief Financial Officer
    (Principal Financial Officer)

 

 

 

 

EXHIBIT 32.1

 

CERTIFICATION PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Realbiz Media Group, Inc. (the “Registrant”) hereby certifies, to such officer’s knowledge, that:

 

  (1) the accompanying Annual Report on Form 10-K of the Registrant for the year ended October 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

  (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result