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WEBDIGS INC
0001430523
--10-31
Smaller Reporting Company
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2011-07-31
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<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 5%; font-weight: bold;">1</td>
<td style="width: 95%; font-weight: bold;">BASIS OF PRESENTATION</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The accompanying unaudited consolidated financial information has been prepared by Webdigs, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, it does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of this financial information have been included. Financial results for the interim period presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period. This financial information should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10K for the year ended October 31, 2010. See also Note 10, Subsequent Events.</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 5%; font-weight: bold;">2</td>
<td style="width: 95%; font-weight: bold;">SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Nature of Business</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Webdigs, Inc. (“the Company”), a Delaware corporation, became a public company in October 2007 after a reverse merger transaction with Select Video, Inc. which was incorporated in Delaware in 1994. Our business is dedicated to web-assisted residential real estate brokerage services. This is done through our wholly-owned subsidiaries Webdigs, LLC, and Iggyshouse.com, Inc.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">All of the Company’s real estate brokerage operations are operated under Webdigs, LLC. Webdigs offers rebates to its customers of up to 1% of the sales price of the home they purchase through us and offers listing services below the price of traditional full-service brokerages as well. We do not mandate that our Webdigs real estate agents charge a pre-determined price for listing a seller’s home, but believe that all of our agents offer listings to their customers for less than other traditional brokerages, who we believe most often charge 5-7% for listing services.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s second brand, Iggyshouse.com, which launched in January 2010, is a pay as you go listing service that allows home sellers to list their home on their local MLS through a series of participating licensed real estate brokerage partners in 16 different states (who, pursuant to the rules of the MLS, are the only parties eligible to submit listings on the MLS) and on Iggyshouse.com for a flat fee of $149.95 for three months, with various other time periods and ala carte services available for purchase.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The third brand, theMLSDirect.com, offers a $299 fixed price six month MLS listing, utilizing our participating licensed real estate brokerage partners, to consumers not wishing to engage the services of a listing real estate agent.</p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Basis of Consolidation</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The consolidated financial statements for the three and nine month periods ended July 31, 2011 and 2010 include the accounts of Webdigs, Inc. and its wholly-owned subsidiary, Webdigs, LLC, which includes the wholly-owned subsidiary of Iggyshouse.com, Inc. All significant intercompany accounts and transactions have been eliminated in the consolidation.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Estimates</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Intangible Assets</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has two types of intangible assets described below (see Note 10 for updates).</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Website Software</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The primary interface with the customer in our web-assisted real estate brokerage operation is the Webdigs.com website. Certain costs incurred in development of this website have been capitalized. Amortization is on a straight-line method over the estimated three year useful life of the website. The Company’s principal<u> www.webdigs.com</u> website has been fully amortized and the Iggyshouse.com website technology, which is not currently being used, is being amortized on a straight-line basis over its remaining estimated life of 17 months after its fair value was written down to $100,000 on July 31, 2010.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Website Domain Names</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company capitalizes the fair value of website domain names acquired through business combinations or asset acquisitions. The Company purchased 17 domain names in 17 states in May 2009 from theMLSDirect.com and was amortizing these names over a 2 year estimated useful life.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company reviews the carrying amounts of its intangible assets whenever facts and circumstances indicate the assets may be impaired. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment is measured by the amount by which the carrying amount of the assets exceeds its fair value.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Given the current
financial condition of the business and decreasing sales, the Company’s remaining Iggyshouse.com intangible asset may be impaired, however, there remains only $29,415 of cost at July 31, 2011 and this will be fully amortized by December 31, 2011.</p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> <u>Income Taxes</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">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 against its net deferred tax assets as of July 31, 2011 and 2010 because realization of those assets is not more likely than not.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">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.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">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 July 31, 2011 and December 31, 2010.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Recently Issued Accounting Pronouncements</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">There were no new accounting standards issued or effective during the three months ended July 31, 2011 that had or are expected to have a material impact on the Company’s results of operations, financial condition, or cash flows.</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 5%; font-weight: bold;">3</td>
<td style="width: 95%; font-weight: bold;">GOING CONCERN</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has incurred significant operating losses for the three and nine month periods ended July 31, 2011 and 2010. At July 31, 2011, the Company reports a negative working capital position of $1,432,547, and an accumulated deficit of $7,249,338. 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.</p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In order to meet its working capital needs through the next twelve months, the Company plans to raise additional funds through the issuance of additional shares of common stock, debt to its officers and through private placements. Although the Company intends to obtain additional financing to meet its cash needs, it may be unable to secure any additional financing on terms that are favorable or acceptable to it, if at all. The Company has reduced operating expenditures as much as it can during the nine months ended July 31, 2011. The Company has exhausted all potential options to reduce expenses and it needs to increase revenue soon in order to survive as an operating Company. The Company had been looking at other potential strategic alternatives and on April 3, 2012, the Company entered into a share exchange agreement (See Note 10 for further information).</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 5%; font-weight: bold;">4</td>
<td style="width: 95%; font-weight: bold;">FIXED ASSETS AND INTANGIBLE ASSETS</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">At July 31, 2011 and October 31, 2010, the Company’s fixed assets are as follows:</p>
<table style="width: 90%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">July 31, 2011</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">October 31, 2010</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Gross</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Net</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Gross</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Net</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Carrying</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Accumulated</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Carrying</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Carrying</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Accumulated</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Carrying</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amount</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Depreciation</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amount</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amount</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Depreciation</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amount</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Fixed Assets</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; width: 22%;">Furniture and Fixtures</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">9,981</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">(8,983</td>
<td style="text-align: left; width: 1%;">)</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">998</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">9,981</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">(7,187</td>
<td style="text-align: left; width: 1%;">)</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">2,794</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Computer hardware</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black
1pt solid; text-align: right;">33,324</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(33,324</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">50,972</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(44,074</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">6,898</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 0.25in;">Total Fixed Assets</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">43,305</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(42,307</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">998</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">60,953</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(51,261</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">9,692</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Depreciation expense amounted to $1,333 and $5,583 for the three month periods ended July 31, 2011 and 2010, respectively. For the nine month periods ended July 31, 2011 and 2010, depreciation expense was $8,694 and $16,746, respectively.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">At July 31, 2011 and October 31, 2010, the Company’s intangible assets are as follows:</p>
<table style="width: 90%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">July 31, 2011</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">October 31, 2010</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Gross</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Net</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Gross</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Net</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Carrying</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Accumulated</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Carrying</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Carrying</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Accumulated</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Carrying</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amount</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amortization</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amount</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td
style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amount</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amortization</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">Amount</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in;">Identifiable assets with  determinable lives:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-left: 27pt; width: 22%;">Website Software</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">100,000</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">(70,585</td>
<td style="text-align: left; width: 1%;">)</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">29,415</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">100,000</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">100,000</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 27pt;">Website domain names</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">25,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(25,000</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">25,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(17,714</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">7,286</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 0.5in;">Total Intangible Assets</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">125,000</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(95,585</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">29,415</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">125,000</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(17,714</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">107,286</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Amortization expense amounted to $18,682 and $291,188 for the three month periods ended July 31, 2011 and 2010, respectively. For the nine month periods ended July 31, 2011 and 2010, amortization expense was $77,871 and $728,913, respectively. The Iggyshouse website software is not currently in service. The Company is currently determining its
future course of action with this asset. The asset will be fully amortized by December 31, 2011.</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 5%; font-weight: bold;">5</td>
<td style="width: 95%; font-weight: bold;">CONVERTIBLE NOTE PAYABLE</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In November 2010, the Company entered into a $30,000 convertible loan agreement with a private investor which has a maturity date of June 30, 2012. The loan accrues interest at a simple interest rate of 12% per annum. For the three and nine month periods ended July 31, 2011, the Company incurred $900 and $2,560 of interest expense in connection with this note, respectively. Accrued interest totals $2,560 at July 31, 2011.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The lender can convert the note into the Company’s common stock at a price of $0.01 per share. Since the permitted conversion price is lower than the $.02 market price of the Company’s shares at the time of the loan agreement, the Company recognized and capitalized a beneficial conversion feature charge of $30,000 and is amortizing the charge over the life of the loan using the effective interest method. The Company recognized a beneficial conversion amortization charge to interest expense of $4,737 and $12,632 for the three and nine month periods ended July 31, 2011, respectively. The note balance at July 31, 2011, net of the remaining unamortized discount of $17,368, was $12,632.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On April 3, 2012, the $30,000 note and accrued interest of $6,624 was converted into 3,662,400 shares of common stock.</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 5%; font-weight: bold;">6</td>
<td style="width: 95%; font-weight: bold;">RELATED PARTY TRANSACTIONS</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Accounts Payable – Minority Stockholder</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s principal advertising agency/website developer was owed $615,264 at July 31, 2011 and $583,708 at October 31, 2010, respectively. The two principals of this advertising company are also minority stockholders in the Company – holding approximately 0.7% of the Company’s outstanding shares at July 31, 2011. For the nine month periods ended July 31, 2011 and 2010, the Company incurred $35,361 and $57,091 in services and rent from this related party, respectively.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Included in the $35,361 and $57,091 is $29,636 and $31,500 in office rent expense for the Company for each of the nine month periods ended July 31, 2011 and 2010, respectively. The Company informally rents office space for its headquarters and real estate operation in Minneapolis from the related party on a month to month basis.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Due to Officers</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">As of July 31, 2011 and October 31, 2010, the Company was indebted to its officers for amounts totaling $6,094 and $8,345 respectively, for unreimbursed business expenses. All of the indebtedness represents non-interest bearing payables due on demand.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Convertible Note Payable – Officer/Stockholder</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company borrowed cash from its CEO under a convertible promissory note that accrues interest at an annual rate of 12%. At July 31, 2011 and October 31, 2010, the balances due under this note were $240,724 and $528,500, respectively. On October 12, 2010, these notes were modified to allow the CEO to convert to the Company’s common stock at $0.01 per share instead of a previous conversion price of $0.11. This modification resulted in a beneficial conversion charge to interest expense of $580,424 for the year ended October 31, 2010 because the stock was trading at $0.03 on October 12, 2010. On March 15, 2011, the Company’s Chairman and CEO exercised his right to convert $300,000 of the Convertible Note Payable – Officer/Stockholder he held with the Company at a price of $0.01 per common share resulting in the issuance of an additional 30,000,000 common shares to him and concurrently reducing the balance of the Convertible Note Payable – Officer/Stockholder by $300,000. During the nine months ended July 31, 2011, the Company received a net of $12,224 of additional principal advances on the note. For the three and nine month periods ended July 31, 2011, the Company incurred $7,025 and $48,005 of interest expense in connection with this note, respectively. Accrued interest due under the note as of July 31, 2011 and October 31, 2010 was $84,737 and $51,924, respectively.</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 5%; font-weight: bold;">7</td>
<td style="width: 95%; font-weight: bold;">SHARE-BASED COMPENSATION</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Stock Options</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company recognizes compensation expense for stock option grants over the requisite service period for vesting of the award. Total stock-option compensation expense included in the Company's consolidated statements of operations for the nine month periods ended July 31, 2011 and 2010 was $1,560 and $8,243, respectively. Total stock compensation (benefit) for the three months ended July 31, 2011 and 2010 was $520 and ($551), respectively. This expense is included in general and administrative expense. The compensation expense had no impact on the basic loss per common share for the three and nine month periods ended July 31, 2011 and 2010. As of July 31, 2011, the Company had $0 of remaining unrecognized compensation expense related to the outstanding stock options.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following is a summary of stock option activity for the nine month period ended July 31, 2011:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 90%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Weighted<br />average<br />remaining</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Weighted</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Aggregate</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">contractual </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Number of</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">average</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">intrinsic</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">term</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">options</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">exercise price</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">value</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">(years)</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 48%;">Outstanding at October 31, 2010</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">800,000</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">0.25</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Granted</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Exercised</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white;
vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Forfeited or expired</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Outstanding at July 31, 2011</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">800,000</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.25</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2.06</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Exercisable at July 31, 2011</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">800,000</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.25</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2.06</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The aggregate intrinsic value in the table above represents the difference between the closing stock price on July 31, 2011 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their options on July 31, 2011. There were no options exercised during the nine month period ended July 31, 2011.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Stock Warrants</u></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following is a summary of stock warrant activity for the nine month period ended July 31, 2011:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 90%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Weighted</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">average</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Weighted</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Aggregate</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">remaining</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">Number of</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">average</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2"
nowrap="nowrap">intrinsic</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">contractual term</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">warrants</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">exercise price</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">value</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">(years)</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 48%;">Outstanding at October 31, 2010</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">200,000</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">0.30</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Granted</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Exercised</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Forfeited or expired</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Outstanding at July 31, 2011</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">200,000</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.30</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.37</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Exercisable at July 31, 2011</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">200,000</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.30</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.37</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0px;"></td>
<td style="width: 0.5in;"><b>8</b></td>
<td><b>STOCKHOLDERS’ EQUITY</b></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On March 11, 2011, the Company’s Board of Directors granted the Company’s CFO the right to convert up to $96,384 of accrued salary into shares of the Company’s common stock at a price of $0.01 per share. On March 11, 2011, the Company’s CFO exercised this right and converted $96,384 of his accrued but unpaid compensation owed to him by the Company, acquiring 9,638,400 shares of the Company’s common stock at a price per share of $0.01.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On March 15, 2011, the Company’s Chairman and CEO exercised his right to convert $300,000 of the Convertible Note Payable – Officer/Stockholder he held with the Company at a price of $0.01 per common share resulting in the issuance of an additional 30,000,000 common shares to him and concurrently reducing the balance of the Convertible Note Payable – Officer/Stockholder by $300,000.</p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0px;"></td>
<td style="width: 0.5in;"><b>9</b></td>
<td><b>BASIC AND DILUTED EARNINGS PER SHARE</b></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><font style="font-family: times new roman, times, serif;">The Company computes earnings per share under two different methods, basic and diluted, and presents per share data for all periods in which statements of operations are presented. Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding.</font> <font style="font-family: times new roman, times, serif;">Diluted loss per common share is not presented because it is anti-dilutive.</font></p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following table provides a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share for the three and six month periods ended July 31, 2011 and 2010, respectively. The calculation has been retrospectively adjusted for the 1 for 200 reverse split which occurred on May 17, 2012.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three months ended</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Nine months ended</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">July 31</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">July 31</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2010</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2010</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="font-weight: bold;">Basic earnings per share calculation:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; width: 52%;">Net loss to common shareholders</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">(108,190</td>
<td style="text-align: left; width: 1%;">)</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">(1,668,982</td>
<td style="text-align: left; width: 1%;">)</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">(369,904</td>
<td style="text-align: left; width: 1%;">)</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">(2,381,236</td>
<td style="text-align: left; width: 1%;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Weighted average of common shares outstanding</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">365,176</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">166,984</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">270,162</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">166,984</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Basic net
loss per share</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(0.30</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(9.99</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(1.37</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(14.26</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="font-weight: bold;">Diluted earnings per share calculation:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Net loss to common shareholders</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">(108,190</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">(1,668,982</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">(369,904</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">(2,381,236</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Weighted average of common shares outstanding</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">365,176</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">166,984</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">270,162</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">166,984</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Stock options (1)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Stock warrants (2)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Convertible notes payable - officer/stockholder (3)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Convertible note payable (4)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Diluted weighted average common shares outstanding</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">365,176</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom:
1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">166,984</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">270,162</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">166,984</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Diluted net loss per share</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(0.30</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(9.99</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(1.37</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(14.26</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"></td>
<td style="width: 0.25in;">(1)</td>
<td>The dilutive effect of stock options in the above table excludes 800,000 and 800,000 of underlying stock options for the three and nine month periods ended July 31, 2011 and 2010, respectively, as they would be anti-dilutive to our net loss for those periods.</td>
</tr>
</table>
<p style="text-indent: -0.25in; margin: 0pt 0px 0pt 0.75in; font: 10pt times new roman, times, serif;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"></td>
<td style="width: 0.25in;">(2)</td>
<td>The dilutive effect of stock warrants in the above table excludes 200,000 and 200,000 of underlying stock warrants for the three and six month periods ended July 31, 2011 and 2010, as they would be anti-dilutive to our net loss for those periods.</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"></td>
<td style="width: 0.25in;">(3)</td>
<td>The dilutive effect of potential convertible notes and accrued interest equivalent to 29,971,200 and 2,727,273 shares related to the convertible promissory note from the Company’s CEO as of July 31, 2011 and 2010, respectively, have been excluded as they would be anti-dilutive to our net loss for those periods.</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"></td>
<td style="width: 0.25in;">(4)</td>
<td>The dilutive effect of a potential convertible note equivalent to 3,166,000 shares related to a convertible promissory note as of July 31, 2011 has been excluded as it would be anti-dilutive to our net loss for that period.</td>
</tr>
</table>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"><b>10</b></td>
<td><b>SUBSEQUENT EVENTS</b></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On March 16, 2012, the Company sold the “Webdigs” domain, technology and certain trademarks to Fiontrai II, LLC for $15,000. These assets, which were held in Webdigs, LLC, included US Trademark No. 3,461,665 “Webdigs”, along with www.webdigs.com domain name and the original webdigs.com website software and technology developed by MoCo, Inc. Included in this transaction was a royalty agreement whereby Webdigs could receive royalty payments from Fiontrai upon its licensing the technology to other third parties. Robert Buntz, CEO then purchased the royalty agreement from the Company in exchange for a principal reduction of his loan to the Company of $5,000.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On April 3, 2012, the convertible note of $30,000 plus accrued interest of $6,624 was converted into 3,662,400 shares of common stock at a conversion price of $0.01 per share. See Note 5 for further information.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Additionally, on April 3, 2012, the Company entered into a share exchange agreement with Next 1 Interactive, Inc. (“Next 1”), a publicly traded company. The agreement calls for Next 1 to exchange 100% of the common shares (100,000,000) of their wholly-owned subsidiary Next One Realty, Inc., for newly issued Series A Convertible Preferred Stock of Webdigs. The Series A Convertible Preferred Stock has not yet been designated and is the subject of negotiation. At the closing of this transaction, Next 1 would own, on an as-converted basis, approximately 93% of the issued and outstanding shares of Webdigs, Inc. As a result, Next 1 would be in control of the Company and potential future operations have not been determined at this time.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On May 17, 2012, the Company effected a 1 for 200 reverse stock split. The Company retrospectively restated the outstanding shares for the earnings per share calculation. The balance sheet has not been restated and will be adjusted during the period the split occurred.</p>
125000000
125000000
963628
963628