NextTrip, Inc. 10-Q

ITEM 1A. RISK FACTORS. You should consider the “Risk Factors” included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 30, 2023, as well as the following updated Risk Factor: We have ceased all but essential business and operations while we pursue a possible strategic transaction. We recently reduced our employee headcount via furloughs and layoffs to five employees, including our President and Chief Executive Officer and Chief Financial Officer and two key employees considered important to a possible sale of the company or all or a portion of its assets and support of current customers. We also have discontinued all product development activities and ceased to pursue new customers. As of July 31, 2023, we had cash on hand of approximately $365,489 including $135,000 of proceeds from the recent sale of equipment, which we believe will be sufficient to support our current customers and pay employee costs and other anticipated expenses through August 31, 2023. In the meantime, we continue to explore a possible reverse merger, sale of the company or all or a portion of its assets, and other alternatives. There is no assurance that we will be able to enter into a definitive agreement with respect to a possible transaction or sell the company or any of its assets or, if so, on what terms, or avoid our dissolution and liquidation or bankruptcy. We have received several written, non-binding proposals to purchase selected assets of the company or acquire the company in a merger or reverse merger and are in talks regarding the respective proposals. As of this date, we have not entered into a definitive agreement regarding a possible transaction and there is no assurance, that we will be able to enter into a definitive agreement with respect to a possible transaction or sell the company or any of its assets or, if so, when, or on what terms, or avoid our dissolution and liquidation or bankruptcy. If we are unable to sell the company or its assets through one or more transactions, we will require additional financing to continue our operations, and there is substantial doubt regarding our ability to continue as a going concern. We believe our cash on hand of approximately $365,489, including $135,000 of proceeds from the recent sale of equipment, and anticipated revenues, each as of July 31, 2023, are sufficient to fund our remaining anticipated operating costs and capital expenditure requirements only through August 31, 2023. If we are unable to sell the company or its assets through one or more transactions, we will need to raise additional financing to fund our operations, maintain compliance with NASDAQ listing requirements and continue our business operations. Except for the sales agreement with the sales agent in connection with our At-the Market offering, we have no current understanding or arrangement to obtain any additional financing. In light of the foregoing, there is substantial doubt our ability to continue as a going concern and the report of our registered independent public accounting firm on our financial statements as of and for the year ended December 31, 2022 contains a going concern qualification . We may be unable to protect our intellectual property rights. Our success depends in part on the ability to protect our intellectual property and proprietary technology, and t he enforcement of intellectual property rights is subject to considerable uncertainty and can be expensive and time-consuming. For example, we recently notified two companies that we believe their respective products use our patented technology and offered to discuss their licensing of our technology. We have received no constructive response to our offer, however, and no decision has been made with respect to any further action to address these matters. 25 There is no assurance that we will satisfy NASDAQ’s continued listing requirements, and our common stock could be delisted. On October 14, 2022, NASDAQ notified us that the closing bid price for our common stock had been below $1.00 per share for 30 consecutive business days, and that the Company therefore is not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notice indicated that the Company has 180 calendar days, or until April 12, 2023, to regain compliance with this requirement. Although our common stock had not regained compliance with the minimum $1.00 bid price per share requirement, on April 13, 2023, NASDAQ notified us that it had granted us an additional 180 days, or until October 9, 2023, to regain compliance with Nasdaq Listing Rule 550(a)(2), based on our meeting the continued listing requirements for market value of publicly held shares and all other applicable requirements for initial listing on NASDAQ, with the exception of the bid price requirement, and our written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. According to NASDAQ’s notice, if at any time during this additional time period the closing bid price of shares of our common stock is at least $1.00 for a minimum of 10 consecutive business days, NASDAQ will provide written confirmation of compliance with its listing requirements, and this matter will be closed. If we choose to implement a reverse stock split, it must be completed no later than ten business days prior to October 9, 2023 to timely regain compliance with NASDAQ’s listing requirements. If it appears to NASDAQ that we will not be able to cure our non-compliance with its listing standards, or if we are otherwise not eligible for listing on NASDAQ, NASDAQ will notify us that our common stock will be subject to delisting. Our stockholders’ equity as of June 30, 2023 was below NASDAQ’s $2.5 million minimum stockholders’ equity continued listing standard, and we anticipate receiving notice from NASDAQ to the effect that we will have 45 days to submit a plan for regaining compliance with this continued listing standard. If we are able to submit a plan acceptable to NASDAQ, we expect to be granted additional time to regain compliance with the minimum stockholders’ equity requirement for continued listing. If we fail to satisfy NASDAQ requirements for continued listing, NASDAQ could provide notice that shares of our common stock will become subject to delisting. In such an event, NASDAQ rules would permit us to appeal the decision to reject our proposed compliance plan or any delisting determination to a NASDAQ Hearings Panel. If our securities are de-listed from NASDAQ, our stockholders could incur material, adverse consequences such as difficulty selling their shares of our common stock and reduced market prices for their shares. De-listing is also likely to have a material, adverse effect on our ability to sell and issue shares of our common stock in order to fund our operations, if any. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable.