UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



FORM 10-Q



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

For the quarterly period ended JULY 31,
2012



OR



 ̈ 
  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
 1934

For the transition period from _______ to
_______



Commission File Number 0-53359



WEBDIGS, INC.



(Exact name of registrant as specified in
its charter)



|Delaware                                         | 11-3820796                          
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     



3445 Zenith Ave So., Minneapolis, MN

(Address of Principal Executive Offices)



(612) 767-3854

(Registrant’s telephone number, including
area code)



(Former name, former address and former
fiscal year, if changed from last report)



Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.  Yes xNo  ̈



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



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  ̈ (Do not check if a smaller reporting company) | Smaller reporting company x



Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).  Yes  ̈ No x



As of September 15, 2012 there were 383,651 shares of the issuer’s
common stock, $0.001 par value, outstanding. This takes into account the 1 for 200 reverse stock split which occurred on May 17,
2012.











Table of Contents



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











PART I – FINANCIAL INFORMATION



Item 1.  Consolidated Financial Statements.



WEBDIGS, INC.



CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



FOR THE THREE AND NINE MONTH

PERIODS ENDED JULY 31, 2012 AND 2011



1







|WEBDIGS, INC.
|-------------



TABLE OF CONTENTS



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



F-1







|WEBDIGS, INC.              
|---------------------------
|CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                                                   |  | July 31     |            |   | October 31, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ---------- | - | ----------- | -
|                                                                                                                                                                                                                                                   |  | 2012        |            |   | 2011        |  
|                                                                                                                                                                                                                                                   |  | (Unaudited) |            |   |             |  
|ASSETS                                                                                                                                                                                                                                             |  |             |            |   |             |  
|Current assets:                                                                                                                                                                                                                                    |  |             |            |   |             |  
|Cash and cash equivalents                                                                                                                                                                                                                          |  | $           | 80         |   |             | $
|                                                                                                                                                                                                                                                   |  |             |            |   |             |  
|Total current assets                                                                                                                                                                                                                               |  |             | 80         |   |             |  
|                                                                                                                                                                                                                                                   |  |             |            |   |             |  
|Total assets                                                                                                                                                                                                                                       |  | $           | 80         |   |             | $
|                                                                                                                                                                                                                                                   |  |             |            |   |             |  
|LIABILITIES                                                                                                                                                                                                                                        |  |             |            |   |             |  
|Current liabilities:                                                                                                                                                                                                                               |  |             |            |   |             |  
|Accounts payable                                                                                                                                                                                                                                   |  | $           | 105,415    |   |             | $
|Accounts payable - minority stockholder                                                                                                                                                                                                            |  |             | 615,264    |   |             |  
|Due to officers                                                                                                                                                                                                                                    |  |             | -          |   |             |  
|Convertible notes payable to officer/stockholder                                                                                                                                                                                                   |  |             | 241,825    |   |             |  
|Convertible note payable, net of discount                                                                                                                                                                                                          |  |             | -          |   |             |  
|Accrued expenses:                                                                                                                                                                                                                                  |  |             |            |   |             |  
|Professional fees                                                                                                                                                                                                                                  |  |             | 30,000     |   |             |  
|Payroll and commissions                                                                                                                                                                                                                            |  |             | 344,089    |   |             |  
|Interest                                                                                                                                                                                                                                           |  |             | 113,071    |   |             |  
|Other liabilities                                                                                                                                                                                                                                  |  |             | 750        |   |             |  
|                                                                                                                                                                                                                                                   |  |             |            |   |             |  
|Total current liabilities                                                                                                                                                                                                                          |  |             | 1,450,414  |   |             |  
|                                                                                                                                                                                                                                                   |  |             |            |   |             |  
|Total liabilities                                                                                                                                                                                                                                  |  |             | 1,450,414  |   |             |  
|STOCKHOLDERS' DEFICIT                                                                                                                                                                                                                              |  |             |            |   |             |  
|Stockholders' deficit:                                                                                                                                                                                                                             |  |             |            |   |             |  
|Common stock - $.001 par value; 625,000 shares authorized as common stock and an additional 625,000 shares designated as common or preferred stock; 383,651 and 365,176 common shares issued and outstanding at July 31, 2012 and October 31, 2011 |  |             | 383        |   |             |  
|Treasury stock - $.001 par value: 4,818 shares held in treasury as of July 31, 2012 and October 31, 2011 at cost                                                                                                                                   |  |             | (240,907   | ) |             |  
|Additional paid-in capital                                                                                                                                                                                                                         |  |             | 6,124,352  |   |             |  
|Accumulated deficit                                                                                                                                                                                                                                |  |             | (7,334,162 | ) |             |  
|                                                                                                                                                                                                                                                   |  |             |            |   |             |  
|Total stockholders' deficit                                                                                                                                                                                                                        |  |             | (1,450,334 | ) |             |  
|                                                                                                                                                                                                                                                   |  |             |            |   |             |  
|Total liabilities and stockholders' deficit                                                                                                                                                                                                        |  | $           | 80         |   |             | $



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



F-2







|WEBDIGS, INC.                        
|-------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                         |  | For the Three Months Ended July 31, |         |   | For the Nine Months Ended July 31, |  
|-------------------------------------------------------- |  | ----------------------------------- | ------- | - | ---------------------------------- | -
|                                                         |  | 2012                                |         |   | 2011                               |  
|                                                         |  | (Unaudited)                         |         |   | (Unaudited)                        |  
|Revenue:                                                 |  |                                     |         |   |                                    |  
|Gross revenues                                           |  | $                                   | -       |   |                                    | $
|Less: customer rebates and third-party agent commissions |  |                                     | -       |   |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Net revenue                                              |  |                                     | -       |   |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Operating expenses:                                      |  |                                     |         |   |                                    |  
|Selling                                                  |  |                                     | (14,781 | ) |                                    |  
|General and administrative                               |  |                                     | (11,700 | ) |                                    |  
|Amortization of intangible assets                        |  |                                     | -       |   |                                    |  
|Gain on sale of Webdigs intangible assets                |  |                                     | (8,950  | ) |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Total operating expenses                                 |  |                                     | (35,431 | ) |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Operating income (loss)                                  |  |                                     | 35,431  |   |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Other expenses:                                          |  |                                     |         |   |                                    |  
|Other income (expense)                                   |  |                                     |         |   |                                    |  
|Interest expense                                         |  |                                     | (6,408  | ) |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Total other expense                                      |  |                                     | (6,408  | ) |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Net income (loss) before income taxes                    |  |                                     | 29,023  |   |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Income tax provision                                     |  |                                     | -       |   |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Net income (loss)                                        |  | $                                   | 29,023  |   |                                    | $
|                                                         |  |                                     |         |   |                                    |  
|Net income (loss) per common share - basic               |  | $                                   | 0.08    |   |                                    | $
|                                                         |  |                                     |         |   |                                    |  
|Net income (loss) per common share - diluted             |  | $                                   | 0.06    |   |                                    | $
|                                                         |  |                                     |         |   |                                    |  
|Weighted average common shares outstanding - basic       |  |                                     | 383,651 |   |                                    |  
|                                                         |  |                                     |         |   |                                    |  
|Weighted average common shares outstanding - diluted     |  |                                     | 561,099 |   |                                    |  



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



F-3







|WEBDIGS, INC.                        
|-------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                   |  | For The Nine Months Ended |        
|---------------------------------------------------------------------------------- |  | ------------------------- | -------
|                                                                                   |  | July 31                   |        
|                                                                                   |  | 2012                      |        
|                                                                                   |  | (Unaudited)               |        
|Cash flows from operating activities:                                              |  |                           |        
|Net loss                                                                           |  | $                         | (1,096 
|Adjustments to reconcile net loss to net cash flows  used in operating activities: |  |                           |        
|Depreciation                                                                       |  |                           | -      
|Amortization of intangible assets                                                  |  |                           | -      
|Amortization of discount for beneficial conversion feature on convertible debt     |  |                           | 12,632 
|Share-based compensation                                                           |  |                           | -      
|Gain on sale of royalty agreement to CEO                                           |  |                           | (5,000 
|Changes in operating assets and liabilities:                                       |  |                           |        
|Commissions and fees receivable                                                    |  |                           | -      
|Prepaid expenses and deposits                                                      |  |                           | -      
|Other current assets                                                               |  |                           | -      
|Accounts payable                                                                   |  |                           | (44,541
|Accounts payable - minority stockholder                                            |  |                           | -      
|Accrued expenses                                                                   |  |                           | 29,748 
|Other liabilities                                                                  |  |                           | -      
|Net cash flows used in operating activities                                        |  |                           | (8,257 
|                                                                                   |  |                           |        
|Cash flows from financing activities:                                              |  |                           |        
|Proceeds from (payments to) officer/stockholder convertible notes payable          |  |                           | 3,746  
|                                                                                   |  |                           |        
|Proceeds from issuance of convertible note payable - third party                   |  |                           | -      
|Increase (decrease) in due to officers                                             |  |                           | (3,578 
|Principal payments on capital lease obligations                                    |  |                           | -      
|Net cash flows provided by financing activities                                    |  |                           | 168    
|                                                                                   |  |                           |        
|Net change in cash and cash equivalents                                            |  |                           | (8,089 
|                                                                                   |  |                           |        
|Cash and cash equivalents, beginning of period                                     |  |                           | 8,169  
|                                                                                   |  |                           |        
|Cash and cash equivalents, end of period                                           |  | $                         | 80     
|                                                                                   |  |                           |        
|Supplemental cash flow information                                                 |  |                           |        
|                                                                                   |  |                           |        
|Cash paid for interest                                                             |  | $                         | -      
|                                                                                   |  |                           |        
|Supplemental disclosure of non-cash investing activities                           |  |                           |        
|                                                                                   |  |                           |        
|Beneficial conversion feature related to convertible note payable                  |  | $                         | -      
|                                                                                   |  |                           |        
|Conversion of accrued officer salary to common stock                               |  | $                         | -      
|                                                                                   |  |                           |        
|Conversion of convertible notes payable                                            |  | $                         | 30,000 
|                                                                                   |  |                           |        
|Conversion of accrued interest                                                     |  | $                         | 6,624  



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



F-4







|WEBDIGS, INC.                                             
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three and Nine Months Ended July 31, 2012 and 2011



| | 1 | BASIS OF PRESENTATION
| | - | ---------------------



The accompanying unaudited consolidated financial information
has been prepared by Webdigs, Inc. (the “Company”) in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of
the Securities and Exchange Commission (SEC).  Accordingly, it does not include all of the information and notes required
by accounting principles generally accepted in the 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, 2011.



| | 2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| | - | ------------------------------------------



Nature of Business



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.



After our sale of the Webdigs tradename on March 16, 2012 and
our sale of domain names connected with mlsdirect.com on May 7, 2012, all of the Company’s remaining real estate brokerage
operations, which are limited at this time, are operated under the name of Red Bear Realty. The Company 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 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.



Basis of Consolidation



The consolidated financial statements for the three and nine
month periods ended July 31, 2012 and 2011 include the accounts of Webdigs, Inc. and its wholly-owned subsidiary, Webdigs, LLC,
which includes the wholly-owned subsidiary of Iggyshouse.com, Inc which has no activity.  All significant intercompany
accounts and transactions have been eliminated in the consolidation.



Estimates



The preparation of consolidated financial statements in conformity
with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and reported amounts of revenues and expenses during the reporting period.  Actual
results could differ from those estimates.



F-5







|WEBDIGS, INC.                                             
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three and Nine months Ended July 31, 2012 and 2011



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 against its net deferred tax assets as of July 31, 2012 and October 31, 2011 because realization of
those assets is not more likely than not.



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 July 31, 2012 and October 31, 2011.



Recently Issued Accounting Pronouncements



There were no new accounting standards issued or effective during
the nine months ended July 31, 2012 that had or are expected to have a material impact on the Company’s results of operations,
financial condition, or cash flows.



|3 | GOING CONCERN
|- | -------------



The Company has continued to incur operating losses for the
nine months ended July 31, 2012. At July 31, 2012, the Company has limited, ongoing real estate operations, and reports
a negative working capital position of $1,450,334, and an accumulated deficit of $7,334,162. 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.



Operations have been drastically reduced. The Company has been
exploring other strategic alternatives and 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. Upon the closing of this transaction,
which has not occurred yet, 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 fully determined
at this time. This transaction has not closed at the time of this filing.



F-6







|WEBDIGS, INC.                                             
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three and Nine months Ended July 31, 2012 and 2011



|4 | CONVERTIBLE NOTES PAYABLE
|- | -------------------------



In November 2010, the Company entered into a $30,000 convertible
loan agreement with a private investor which had a maturity date of June 30, 2012. The loan accrued interest at a simple interest
rate of 12% per annum. For the nine months ended July 31, 2012 and 2011, the Company incurred $3,164 and $2,560 of interest expense
in connection with this note.



The lender had the option to convert the note into the Company’s
common stock at a price of $2.00 per share. Since the permitted conversion price was lower than the $4.00 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 amortized 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 $12,632 and $12,632 for the nine months ended July 31, 2012 and 2011, respectively.



On April 3, 2012, the $30,000 note and accrued interest of $6,624
was converted into 18,312 shares of common stock.



|5 | SHARE-BASED COMPENSATION
|- | ------------------------



| | Stock Options
| | -------------



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 months ended July 31, 2012 and 2011 was $0 and $1,560, respectively. This expense
is included in general and administrative expense. The compensation expense had less than a $0.01 per share impact on the basic
loss per common share for the nine months ended July 31, 2012 and 2011.



The following is a summary of stock option activity for the
nine months ended July 31, 2012:

|                                |  |           |       |  |                |   |       |           |  |   | Weighted average | 
|------------------------------- |  | --------- | ----- |  | -------------- | - | ----- | --------- |  | - | ---------------- | 
|                                |  |           |       |  | Weighted       |   |       | Aggregate |  |   | remaining        | 
|                                |  | Number of |       |  | average        |   |       | intrinsic |  |   | contractual term | 
|                                |  | options   |       |  | exercise price |   |       | value     |  |   | (years)          | 
|Outstanding at October 31, 2011 |  |           | 4,000 |  |                | $ | 50.00 |           |  | $ | -                | 
|Granted                         |  |           | -     |  |                |   | -     |           |  |   | -                | 
|Exercised                       |  |           | -     |  |                |   | -     |           |  |   | -                | 
|Forfeited or expired            |  |           | -     |  |                |   | -     |           |  |   | -                | 
|Outstanding at July 31, 2012    |  |           | 4,000 |  |                | $ | 50.00 |           |  | $ | -                | 
|Exercisable at July 31, 2012    |  |           | 4,000 |  |                | $ | 50.00 |           |  | $ | -                | 



The aggregate intrinsic value in the table above represents
the difference between the closing stock price on July 31, 2012 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, 2012.  There
were no options exercised during the nine months ended July 31, 2012 and 2011.



F-7







|WEBDIGS, INC.                                             
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three and Nine months Ended July 31, 2012 and 2011



|6 | RELATED PARTY TRANSACTIONS
|- | --------------------------



Accounts Payable – Minority Stockholder



The Company’s former principal advertising agency/website
developer was owed $615,264 at July 31, 2012 and October 31, 2011. The two principals of this advertising company are also minority
stockholders in the Company – holding approximately 1.6% of the Company’s outstanding shares at July 31, 2012. For
the nine months ended July 31, 2012 and 2011, the Company incurred $0 and $35,361 in services and rent from this related party,
respectively.



Due to Officers



As of July 31, 2012 and October 31, 2011, the Company was indebted
to its officers for amounts totaling $0 and $3,578, respectively, for unreimbursed business expenses. All of the indebtedness represented
non-interest bearing payables due on demand.



Convertible Note Payable – Officer/Stockholder



During the year ended October 31, 2010, the Company borrowed
$355,500 from its CEO under a convertible promissory note accruing interest at an annual rate of 12%. At July 31, 2012 and October
31, 2011, the balances due under this note were $241,825 and $243,079, respectively. The note is currently convertible into the
Company’s common stock at $2.00 per share. For the three and nine months ended July 31, 2012, the Company incurred $6,408
and $18,308 of interest expense in connection with this note. For the three and nine months ended July 31, 2011, the Company incurred
$7,025 and $48,005 of interest expense in connection with this note. Accrued interest included in accrued expenses due under the
note as of July 31, 2012 and October 31, 2011 was $113,071 and $91,962, respectively. The accrued interest is also convertible
into the Company’s common stock at $2.00 per share.



F-8







|WEBDIGS, INC.                                             
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three and Nine months Ended July 31, 2012 and 2011



|7 | BASIC AND DILUTED EARNINGS PER SHARE
|- | ------------------------------------



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



On May 17, 2012, the Company affected a
1 for 200 reverse stock split. The Company retrospectively restated the outstanding shares for the earnings per share calculation.
The balance sheet has not been restated and will be adjusted during the period the split occurred.



The following table provides a reconciliation of the numerators
and denominators used in calculating basic and diluted earnings per share for the three and nine months ended July 31, 2012 and
2011, respectively. The calculation has been retrospectively adjusted for the 1 for 200 reverse split which occurred on May 17,
2012.



|                                                      |  | Three months ended |         |  | Nine months ended |  
|----------------------------------------------------- |  | ------------------ | ------- |  | ----------------- | -
|                                                      |  | July 31            |         |  | July 31           |  
|                                                      |  | 2012               |         |  | 2011              |  
|Basic earnings per share calculation:                 |  |                    |         |  |                   |  
|Net loss to common shareholders                       |  | $                  | 29,023  |  |                   | $
|Weighted average of common shares outstanding         |  |                    | 383,651 |  |                   |  
|Basic net loss per share                              |  | $                  | 0.08    |  |                   | $
|                                                      |  |                    |         |  |                   |  
|Diluted earnings per share calculation:               |  |                    |         |  |                   |  
|Net loss to common shareholders                       |  | $                  | 35,431  |  |                   | $
|Weighted average of common shares outstanding         |  |                    | 383,651 |  |                   |  
|Stock options (1)                                     |  |                    | -       |  |                   |  
|Stock warrants (2)                                    |  |                    | -       |  |                   |  
|Convertible notes payable – officer / stockholder (3) |  |                    | 177,448 |  |                   |  
|Convertible note payable (4)                          |  |                    | -       |  |                   |  
|Diluted weighted average common shares outstanding    |  |                    | 561,099 |  |                   |  
|Diluted net loss per share                            |  | $                  | 0.06    |  |                   | $



F-9







|WEBDIGS, INC.                                             
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three and Nine months Ended July 31, 2012 and 2011



|7 | BASIC AND DILUTED EARNINGS
PER SHARE (continued)
|- | ------------------------------------------------



| | (1) | The dilutive effect of stock options in the above table excludes 4,000 of underlying options for the nine months ended July
31, 2012 and the three and nine months ended July 31, 2011, respectively, as they would be anti-dilutive to our net loss for those
periods. For the three months ended July 31, 2012, the 4,000 options would not be common stock equivalents under the treasury method.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The dilutive effect of stock warrants in the above table excludes 1,000 of underlying warrants for the three and nine months
ended July 31, 2011 as they would be anti-dilutive to our net loss for those periods.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | The dilutive effect of potential convertible notes and accrued interest equivalent to 177,448 for the nine months ended July
31, 2012 and 149,856 shares for the three and nine months ended July 31, 2011 related to the convertible promissory note from the
Company’s CEO have been excluded as they would be anti-dilutive to our net losses for each of the periods.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | The dilutive effect of a potential convertible note equivalent to 15,830 shares related to a
convertible promissory note as of for the three and nine months ended July 31, 2011, respectively, has been excluded as it would
be anti-dilutive to our net loss for those periods. This Note was converted during the three and nine months ended July 31, 2012
and the shares issued are included.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|8 | TRADEMARK SALE
|- | --------------



On March 16, 2012, the Company sold the
“Webdigs” domain, technology and certain trademarks to Fiontrai II, LLC for $15,000 in cash. These assets had a cost
basis of zero.  The assets included US Trademark No. 3,461,665 "Webdigs", along
with www.webdigs.comdomain 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. In connection with
this transaction, Robert Buntz, CEO purchased the royalty agreement from the Company in exchange for a principal reduction of
his loan to the Company of $5,000.



On May 7, 2012, we transferred ownership of TheMLSDirect.com
and associated domain names previously acquired from Tracy Johnson, back to Tracy Johnson in consideration of all monies owed to
Mr. Johnson by the company totaling $8,950.



F-10







Item 2.Management’s Discussion and Analysis of Financial
Condition and Results of Operations.



Our Management’s Discussion and Analysis of Financial
Condition and Results of Operation set forth below should be read in conjunction with our audited consolidated financial statement
contained in our Form 10K  filed with the SEC on June 5, 2012  relating to our fiscal year ended October 31, 2011.



Cautionary Note Regarding Forward-Looking Statements



Some of the statements made in this section of our report are
forward-looking statements. These forward-looking statements generally relate to and are based upon our current plans, expectations,
assumptions and projections about future events.  Our management currently believes that the various plans, expectations,
and assumptions reflected in or suggested by these forward-looking statements are reasonable.  Nevertheless, all forward-looking
statements involve risks and uncertainties and our actual future results may be materially different from the plans, objectives
or expectations, or our assumptions and projections underlying our present plans, objectives and expectations, which are expressed
in this section.



In light of the foregoing, prospective investors are cautioned
that the forward-looking statements included in this filing may ultimately prove to be inaccurate—even materially inaccurate. 
Because of the significant uncertainties inherent in such forward-looking statements, the inclusion of such information should
not be regarded as a representation or warranty by Webdigs, Inc. or any other person that our objectives, plans, expectations or
projections that are contained in this filing will be achieved in any specified time frame, if ever.  We undertake no obligation
to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
The risks discussed in the 10K filed with the SEC on June 5, 2012 should be considered in evaluating our prospects and future performance.



General Overview



During the period of these financial statements, we were a web-assisted
real estate services company primarily focused on residential home buyers and sellers. We utilized the Internet, proprietary technology
and efficient business processes to attempt to deliver significant savings to our home sellers and rewards to our home buyers over
the traditional “full commission” real estate brokerage model. We emphasized client service, when and as needed or
requested by our clients, to separate us from other real estate services and discount brokerage models; and we attempt to provide
efficiency and cost savings that will differentiate us from traditional brokerage models.



We operated under three brands. Webdigs.com, our first brand,
was our full-service discounted real estate brokerage. Webdigs offered a commission sharing program with buyers enabling them to
receive part of our commission totaling up to 1% of the sales price of the home they purchase through us. We also offered listing
services below the price of traditional full-service brokerages. We did 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.



Our second brand, IggysHouse.com, which launched in January
2010, was and remains a pay as you go listing service clearinghouse that allows home sellers to list their home on their local
MLS through a series of participating licensed real estate brokers 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.



2







Our third brand was theMLSDirect.com, which was offered for
a $299 fixed price six month MLS listing, utilizing our participating licensed real estate brokers, to consumers not wishing to
engage the services of a listing real estate agent charging a commission. On May 7, 2012, we transferred ownership of TheMLSDirect.com
and associated domain names previously acquired from Tracy Johnson, back to Tracy Johnson in consideration of all monies owed to
Mr. Johnson by the company totaling $8,950.



Our business continues to lack the revenue required to operate
with positive cash flow and thus, we ultimately sold our Webdigs brand name, technology and other certain assets on March 16, 2012
as well as our MLSdirect.com trade name on May 7, 2012.



On March 16, 2012, the Company sold the “Webdigs”
domain, technology and certain trademarks to Fiontrai II, LLC for $15,000. These assets 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). On
March 17, 2012, Robert Buntz, CEO, purchased the royalty agreement from the Company in exchange for a principal reduction of his
loan to the Company of $5,000.00.



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.
Upon the closing of this transaction, which has not occurred yet, 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 fully determined at this time. This transaction has not closed at the time of this filing.



On May 7, 2012, we transferred ownership
of TheMLSDirect.com and associated domain names previously acquired from Tracy Johnson, back to Tracy Johnson in consideration
of all monies owed to Mr. Johnson by the company totaling $8,950.



On May 17, 2012, the Company affected a
1 for 200 reverse stock split. The Company retrospectively restated the outstanding shares for the earnings per share calculation
and the balance sheet has not been restated as of October 31, 2011.



The Company has been offering limited real
estate brokerage services under the trade name “Red Bear Realty” since the sale of the Webdigs technology and brand.



Results of Operation



For the three month periods ended July 31, 2012 and 2011



For the quarter ended July 31, 2012 our net revenue decreased
to $0 from $117,247 for the same period in 2011.  The decrease in revenue is due to the fall off in business.  Our operating
income for the three months ended July 31, 2012 was $35,431 compared to a loss of $95,745 for the comparable three month period
ended July 31, 2011.  In that we reduced significantly reduced expenses in our operations, we did not expect to have significant
losses or profits for the current quarter except for the write-off of $43,040 of accounts payables which were not going to be paid
due to being legally relinquished by the vendors.



Selling expenses decreased from $56,372 for the three months
ended July 31, 2011 to $(14,781) for the same period this year.  The most significant selling expense decreases came from
the write-off of certain aged payables and a decrease in sales commissions due to no sales for the period.  During the three
months ended July 31, 2012, we reduced operations to one Broker and 2 real estate agents.



General and administrative spending was down by $113,639 (($11,700)
for the quarter ended July 31, 2012 versus $101,939 for the same period last year).   The primary factor in our general
and administrative expense reduction was the reduction of operating costs due to no longer paying salaries for our CEO and CFO. 
General and administrative expenses for the three months ended July 31, 2012 were reduced by accounts payables totaling $12,994
which were not going to be paid due to being legally relinquished by the vendors.



3







During the quarter ended July 31, 2012, the Company also recorded
a gain of $8,950 for the transferring of ownership of a website and associated domain names in consideration of accounts payable
owed to the purchaser.



Our intangible asset base has shrunk considerably during our
year ended October 31, 2011.  This accounts for the major decrease in amortization charges from $18,682 for the three months
ended July 31, 2011 to $0 for the current three months ended July 31, 2012. We had no remaining intangible assets as of October
31, 2011.



We incurred interest costs related to a convertible
note from our CEO of $6,408 in the quarter ended July 31, 2012 compared to $12,745 for the three months ended July 31,
2011.



For the nine month periods ended July 31, 2012 and 2011



For the nine months ended July 31, 2012 our net revenue decreased
by 74% to $90,561 from $347,392 for the same period in 2011.  The decrease in revenue is due to a significant fall off in
business.  Our operating income for the nine months ended July 31, 2012 was $35,810 compared to an operating loss of $321,871
for the comparable nine month period ended July 31, 2011.  In that we drastically reduced operations, we did not expect to
have significant losses or profits for the year to date except for the write-off of certain aged payables as previously noted and
the gain being recognized in the sale of Webdigs and TheMLSDirect.com websites.



Selling expenses decreased by 73% to $53,217 for the nine months
ended July 31, 2012 from $198,885 for the same period this year.  The most significant selling expense decreases come from
a decrease in sales commissions due to lower sales and write-offs of certain aged payables.  During the nine months ended
July 31, 2012, we drastically reduced operations and our CEO was the only remaining real estate agent.



General and administrative spending was down by $296,612 ($3,588
for the nine months ended July 31, 2012 versus $300,200 for the same period last year).   The primary factor in our general
and administrative expense reduction was the reduction of operating costs due to no longer paying salaries for our CEO and CFO. General
and administrative expenses for the nine months ended July 31, 2012 were reduced by expenses written off per Minnesota statutes.



During the nine months ended July 31, 2012, the Company recorded
a gain of $28,950 for the sale of the Webdigs website and associated domain names and assets related to TheMLSdirect.com.



Our intangible asset base has shrunk considerably during our
year ended October 31, 2011.  This accounts for the major decrease in amortization charges from $77,871 for the nine months
ended July 31, 2011 to $0 for the current nine months ended July 31, 2012. We had no remaining intangible assets as of October
31, 2011.



We incurred interest costs of $36,906 in the nine months ended
July 31, 2012 compared to $48,333 for the nine months ended July 31, 2011.  Of the interest expense, all relates to a convertible
note from our CEO and a $30,000 convertible note that was converted during the quarter ended April 30, 2012.



Assets and Employees; Research and Development



We do not anticipate purchasing any equipment or other assets
in the near term nor do we anticipate staffing changes at our corporate office.



Liquidity and Capital Resources; Anticipated Financing Needs



As of July 31, 2012, we had $80 of cash and cash equivalents
and current liabilities of $1,450,414.  There are no significant changes in liabilities versus October 31, 2011.



4







We used $8,257 of cash in operating activities during the nine
months ended July 31, 2012 compared to $31,360 for the nine months ended July 31, 2011.  Cash used in operations for the nine
months ended July 31, 2012 included a net loss of $1,096 which was offset by $12,632 of non-cash expenses for amortization of debt
discount related to a beneficial conversion feature.    For the nine months ended July 31, 2012, we were able to
defer payments of some expenses, write-off some aged payables and we had minimal operations.



For the nine months ended July 31, 2012 and 2011, we did not
use any cash flows in investing activities.



In total, financing activities provided $168 and $36,561
for the nine month periods ended July 31, 2012 and 2011, respectively. We received $30,000 in proceeds from a
convertible note in November 2010.  Additionally, we received $12,224 of cash proceeds from our CEO on his convertible
note during the nine month period ended July 31, 2011.



Critical Accounting Policies



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



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



Revenue Recognition. Real estate brokerage revenues are
recognized at the closing of a real estate transaction. Commissions and rebates 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 July 31, 2012 and October 31, 2011 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 July 31, 2012 and October 31, 2011.



Commissions and Fees Receivable. Real estate commissions
and fees receivable are recorded at the amount the Company expects to collect from real estate transactions closed. These receivables
represent brokerage commission balances due the Company from clients or listing real estate brokerages and usually are settled
within 1 to 10 days after closing.



5







Recently Issued Accounting Pronouncements



There were no new accounting standards issued or effective during
the nine months ended July 31, 2012 that had or are expected to have a material impact on the Company’s results of operations,
financial condition, or cash flows.



Going Concern



The Company has continued to incur operating losses for the
nine months ended July 31, 2012 and currently has very little operations. At July 31, 2012, the Company reports a negative working
capital position of $1,450,334, and an accumulated deficit of $7,334,162. 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.



Operations have been significantly reduced. The Company has
been exploring other strategic alternatives and on April 3, 2012, the Company entered into a share exchange agreement (See Note
3 for further information).



Item 3.  Quantitative and Qualitative Disclosures About
Market Risk



Not applicable.



Item 4.  Controls and Procedures.



Management’s Report on Internal Control Over Financial
Reporting



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



Based on this evaluation and taking into account that certain
material weaknesses existed as of October 31, 2011, our Chief Executive Officer and Chief Financial Officer have each concluded
that our disclosure controls and procedures were not effective.  As a result of this conclusion, the financial statements
for the period covered by this Quarterly Report on Form 10-Q were prepared with particular attention to the material weaknesses
previously disclosed. Notwithstanding the material weaknesses in internal controls that continue to exist as of July 31, 2012,
we have concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, the financial position,
results of operations and cash flows of the Company as required for interim financial statements.



Changes in Internal Control Over Financial Reporting



During the fiscal quarter ended July 31,
2012, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act)
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management
has concluded that the material weaknesses in internal control as described in Item 9A of the Company’s Form 10-K for the
year ended October 31, 2011 have not been remediated.  Due to the small number of employees dealing with general administrative
and financial matters and the expenses associated with increasing the number of employees to remediate the disclosure control and
procedure material weaknesses that have been identified, the Company continued to operate without changes to its internal controls
over financial reporting for the period covered by this Quarterly Report on Form 10-Q while continuing to seek the expertise its
needs to remediate the material weaknesses.



6







PART II – OTHER INFORMATION



Item 1.  Legal Proceedings



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



Item 1A.  Risk Factors.



None.



Item 2.  Unregistered Sales of Equity Securities

`

None.



Item 3.  Defaults Upon Senior Securities



None.



Item 4.  Mine Safety Disclosures



Not applicable



Item 5.  Other Information



None.



Item 6.  Exhibits.



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



7







SIGNATURES



In accordance with the requirements of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



| | WEBDIGS, INC.           
| | ------------------------
| |                         
| | /s/ Robert A. Buntz, Jr.
| | Robert A. Buntz, Jr.    
| | Chief Executive Officer 
| | September 14, 2012      
| |                         
| | /s/ Edward Wicker       
| | Edward Wicker           
| | Chief Financial Officer 
| | September 14, 2012      



INDEX TO EXHIBITS FILED WITH THIS REPORT



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



8