Item 1A. Risk Factors
ITEM
1A. RISK FACTORS.
Our
business is subject to numerous risks. We caution you that the following important factors, among others, could cause our actual results
to differ materially from those expressed in statements made by us or on our behalf in filings with the SEC, press releases or communications
with investors and others. Any or all of our statements in this Report and in any other public statements we make may turn out to be
wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. The factors mentioned in the discussion
below will be important in determining future results. Consequently, actual future results may vary materially from those anticipated
in this Report or our other public statements. The occurrence of any of the events or developments described below could harm our financial
condition, results of operations, business and prospects. In such an event, the market price of our securities could decline. Additional
risks and uncertainties not presently known to us or that we currently deem immaterial also may have similar adverse effects on us.
Risks
Related to Our Business
Our
revenue is derived from the global travel industry, and a prolonged or substantial decrease in global travel, particularly air travel,
could adversely affect our operating results.
Our
revenue is derived from the global travel industry and would be significantly impacted by declines in, or disruptions to, travel activity,
particularly air travel. Global factors over which we have no control, but which could impact our clients’ willingness to travel
and, depending on the scope and duration, cause a significant decline in travel volumes include, among other things:
●
widespread health concerns, epidemics or pandemics, such as the COVID-19 pandemic, the Zika virus, H1N1 influenza, the Ebola virus, avian
flu, SARS or any other serious contagious diseases;
●
global security concerns caused by terrorist attacks, the threat of terrorist attacks, or the precautions taken in anticipation of such
attacks, including elevated threat warnings or selective cancellation or redirection of travel;
●
cyber-terrorism, political unrest, the outbreak of hostilities or escalation or worsening of existing hostilities or war, such as Russia’s
invasion of Ukraine and the military conflict in Israel, resulting sanctions imposed by the U.S. and other countries and retaliatory
actions taken by sanctioned countries in response to such sanctions;
●
natural disasters or severe weather conditions, such as hurricanes, flooding and earthquakes;
●
climate change-related impact to travel destinations, such as extreme weather, natural disasters and disruptions, and actions taken by
governments, businesses and supplier partners to combat climate change;
●
the occurrence of travel-related accidents or the grounding of aircraft due to safety concerns;
●
the impact of macroeconomic conditions (including inflation) and labor shortages on the cost and availability of airline travel; and
●
adverse changes in visa and immigration policies or the imposition of travel restrictions or more restrictive security procedures.
Any
decrease in demand for consumer or business travel could materially and adversely affect our business, financial condition and results
of operations.
11
We
need additional capital, which may not be available on commercially acceptable terms, if at all, which raises questions about our ability
to continue as a going concern.
As
of February 29, 2024, we had $5,088,842 in total assets, $1,960,813 in total liabilities, negative working capital of $245,005 and a
total accumulated deficit of $24,151,139. We had a net loss of $7,339,276 for the fiscal year ended February 29, 2024 and $5,033,496
for the fiscal year ended February 28, 2023.
We
are subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive industry.
Due to the absence of a long-standing operating history and the emerging nature of the markets in which it competes, we anticipate operating
losses until we can successfully implement our business strategy, which includes all associated revenue streams. Our revenue model is
new and evolving, and we cannot be certain that it will be successful. The potential profitability of this business model is unproven.
We may never achieve profitable operations or generate significant revenues. Our future operating results depend on many factors, including
demand for our products, the level of competition, and the ability of our officers to manage our business and growth. Additional development
expenses may delay or negatively impact our ability to generate profits. Accordingly, we cannot assure you that our business model will
be successful or that we can sustain revenue growth, achieve or sustain profitability, or continue as a going concern.
The
Company believes that, in the aggregate, it could require several millions of dollars to support and expand the marketing and development
of its products, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations,
office space and systems for managing the business, and cover other operating costs until its planned revenue streams from all products
are fully implemented and begin to offset its operating costs. We estimate that we will need to raise a minimum of $5.5 million in net proceeds to continue operations for the next
twelve months.
In
the event the Company is unable to raise adequate funding in the future for its operations and to pay its outstanding debt obligations,
the Company may be forced to scale back its business plan and/or liquidate some or all of its assets or may be forced to seek bankruptcy
protection
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 February 29, 2024 contains a going concern qualification.
We
are not profitable and may never become profitable.
We
have incurred losses in every reporting period since we commenced business operations in 2010 and expect to continue to incur significant
losses for the foreseeable future. Our net loss applicable to common stockholders for the years ended February 29, 2024 and February
28, 2023 was $7,339,276 and $5,033,496, respectively. As of February 29, 2024, our accumulated deficit was $24,151,139. There is no assurance
that any revenues we generate will be sufficient for us to become profitable or to maintain profitability. Our revenues for the years
ended February 29, 2024 and February 28, 2023 were $458,752 and $382,832, respectively, and our operating expenses for those periods
were $5,740,577 and $4,979,766, respectively. Our current revenues are not sufficient to fund our operations. We cannot predict when,
if ever, we might achieve profitability and we are not certain that we will be able to sustain profitability, if achieved. If we fail
to achieve or maintain profitability, the market price of our securities is likely to be adversely affected.
We
have outstanding indebtedness, which could adversely affect our business and financial condition.
Risks
relating to its indebtedness include:
●
increasing
our vulnerability to general adverse economic and industry conditions;
●
requiring
us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby reducing
the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate
purposes;
●
making
it more difficult for us to optimally capitalize and manage the cash flow for our businesses;
●
limiting
our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;
●
possibly
placing us at a competitive disadvantage compared to our competitors that have less debt; and
●
limiting
our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable.
12
If
distributors are unable to drive customers to our websites and/or we are unable to drive visitors to our websites, from search engines
or otherwise, this could negatively impact transactions on the websites of our distributors as well as our own websites and consequently
cause our travel revenue to decrease.
Many
visitors find the distributors and NextTrip’s websites by searching for vacation information through Internet search engines. A
critical factor in attracting visitors to NextTrip’s websites, and those of our distributors, is how prominently our distributors
and NextTrip are displayed in response to search queries. Accordingly, we utilize search engine marketing, or SEM, as a means to provide
a significant portion of our visitor acquisition. SEM includes both paid visitor acquisition (on a cost-per-click basis) and unpaid visitor
acquisition, which is often referred to as organic search.
We
plan to employ search engine optimization, or SEO, to acquire visitors. SEO involves developing NextTrip’s websites in order to
rank highly in relevant search queries. In addition to SEM and SEO, we may also utilize other forms of marketing to drive visitors to
our websites, including branded search, display advertising and email marketing.
The
various search engine providers, such as Google and Bing, employ proprietary algorithms and other methods for determining which websites
are displayed for a given search query and how highly websites rank. Search engine providers may change these methods in a way that may
negatively affect the number of visitors to our distributors’ websites as well as our own websites and may do so without public
announcement or detailed explanation. Therefore, the success of our SEO and SEM strategy depends, in part, on our ability to anticipate
and respond to such changes in a timely and effective manner.
In
addition, websites must comply with search engine guidelines and policies. These guidelines and policies are complex and may change at
any time. If we or our distributors fail to follow such guidelines and policies properly, the search engine may cause our content to
rank lower in search results or could remove the content altogether. If we or our distributors fail to understand and comply with these
guidelines and policies and ensure their websites’ compliance, our SEO and SEM strategy may not be successful.
Unfavorable
changes in, or interpretations of, government regulations or taxation of the evolving product offerings, Internet and e-commerce industries
could harm our travel division operating results.
We
have contracted for products in markets throughout the world, in jurisdictions which have various regulatory and taxation requirements
that can affect our travel division operations or regulate the activity of travel suppliers.
Compliance
with laws and regulations of different jurisdictions imposing different standards and requirements is very burdensome because each region
has different regulations with respect to licensing and other requirements. Our online marketplaces are accessible by travelers in many
states and foreign jurisdictions. Compliance requirements that vary significantly from jurisdiction to jurisdiction impose added costs
and increased liabilities for compliance deficiencies. In addition, laws or regulations that may harm our business could be adopted,
or interpreted in a manner that affects our activities, including but not limited to the regulation of personal and consumer information
and real estate licensing requirements. Violations or new interpretations of these laws or regulations may result in penalties, negatively
impact our operations and damage our reputation and business.
In
addition, many of the fundamental statutes and regulations that impose taxes or other obligations on travel and lodging companies were
established before the growth of the Internet and e-commerce, which creates a risk of these laws being used, in ways not originally intended,
that could burden travel suppliers or otherwise harm our business. These and other similar new and newly interpreted regulations
could increase costs for, or otherwise discourage, suppliers from partnering with NextTrip, which could harm its
business and operating results.
Furthermore,
as we expand or change the products and services that we offer or the methods by which we offer them, we may become subject to additional
legal regulations, tax requirements or other risks. Regulators may seek to impose regulations and requirements on us even if we utilize
third parties to offer the products or services. These regulations and requirements may apply to payment processing, insurance products
or the various other products and services we may now or in the future offer or facilitate through our marketplace. Whether we comply
with or challenge these additional regulations, our costs may increase, and our business may otherwise be harmed.
13
If
we are not able to maintain and enhance our NextTrip brand and the brands associated with each of our websites, our reputation and business
may suffer .
It
is important for NextTrip to maintain and enhance its brand identity in order to attract and retain travel suppliers and customers. The successful promotion of our brands will depend largely on our marketing and public relations efforts. We expect that
the promotion of our brands will require us to make substantial investments, and, as its market becomes more competitive, these branding
initiatives may become increasingly difficult and expensive. In addition, we may not be able to successfully build our NextTrip brand
identity without losing value associated with, or decreasing the effectiveness of, our other brand identities. If we do not successfully
maintain and enhance our brands, we could lose traveler traffic, which could, in turn, cause suppliers to discontinue their distribution with us. In addition, our brand promotion activities may not be successful or may not yield revenue
sufficient to offset their cost, which could adversely affect our reputation and business.
Our
long-term success depends, in part, on our ability to expand traveler bases outside of the United States and, as a result, our business
is susceptible to risks associated with international operations.
We
have limited operating and e-commerce experience in many foreign jurisdictions and are making significant investments to build our international
operations. We plan to continue our efforts to expand globally, including potentially acquiring international businesses and conducting
business in jurisdictions where we do not currently operate. Managing a global organization is difficult, time-consuming and expensive
and any international expansion efforts that we undertake may not be profitable in the near or long term or otherwise be successful.
In addition, conducting international operations subjects the Company to risks that include:
●
the
cost and resources required to localize its services, which requires the translation of our websites and their adaptation for local
practices and legal and regulatory requirements;
●
adjusting
the products and services we provide in foreign jurisdictions, as needed, to better address the needs of local owners, managers,
distributors and travelers, and the threats of local competitors;
●
being
subject to foreign laws and regulations, including those laws governing Internet activities,
email messaging, collection and use of personal information, ownership of intellectual property,
taxation and other activities important to our online business practices, which may be less
developed, less predictable, more restrictive, and less familiar, and which may adversely
affect financial results in certain regions;
●
competition
with companies that understand the local market better than we do or who have pre-existing relationships with suppliers,
distributors and travelers in those markets;
●
legal
uncertainty regarding our liability for the transactions and content on our websites, including online bookings, property listings
and other content provided by suppliers, including uncertainty resulting from unique local laws or a lack of clear
precedent of applicable law;
●
lack
of familiarity with and the burden of complying with a wide variety of other foreign laws, legal standards and foreign regulatory
requirements, including invoicing, data collection and storage, financial reporting and tax compliance requirements, which are subject
to unexpected changes;
●
laws
and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses;
●
challenges
associated with joint venture relationships and minority investments;
●
adapting
to variations in foreign payment forms;
●
difficulties
in managing and staffing international operations and establishing or maintaining operational efficiencies;
●
difficulties
in establishing and maintaining adequate internal controls and security over our data and systems;
●
currency
exchange restrictions and fluctuations in currency exchange rates;
●
potentially
adverse tax consequences, which may be difficult to predict, including the complexities of foreign value added tax systems and restrictions
on the repatriation of earnings;
●
political,
social and economic instability abroad, war, terrorist attacks and security concerns in general;
●
the
potential failure of financial institutions internationally;
●
reduced
or varied protection for intellectual property rights in some countries; and
●
higher
telecommunications and Internet service provider costs.
Operating
in international markets also requires significant management attention and financial resources. We cannot guarantee that our international
expansion efforts in any or multiple territories will be successful. The investment and additional resources required to establish operations
and manage growth in other countries may not produce desired levels of revenue or profitability and could instead result in increased
costs.
14
The
market in which we participate is highly competitive, and we may be unable to compete successfully with our current or future competitors.
The
market to provide listing, search and marketing services for the travel industry is very competitive and dominated by key players, such
as Expedia and Booking.com. In addition, the barriers to entry are low and new competitors may enter. All of the services that we plan
to provide to travelers are provided separately or in combination by current or potential competitors. Our competitors may adopt aspects
of our business model, which could reduce our ability to differentiate our services. Additionally, current or new competitors may introduce
new business models or services that we may need to adopt or otherwise adapt to in order to compete, which could reduce our ability to
differentiate our business or services from those of our competitors.
In
addition, most of our current or potential competitors are larger and have more resources than we do. Many of our current and potential
competitors enjoy substantial competitive advantages, such as greater name recognition in their markets, longer operating histories and
larger marketing budgets, as well as substantially greater financial, technical and other resources. In addition, our current or potential
competitors may have access to larger traveler bases. As a result, our competitors may be able to respond more quickly and effectively
than we can to new or changing opportunities, technologies, standards or distribution or traveler requirements. For all of these reasons,
the Company may not be able to compete successfully against its current and future competitors.
If
we are unable to introduce new or upgraded products, services or features that distributors, travelers or agents recognize as valuable,
we may fail to: (i) drive additional travelers to our websites, (ii) retain existing distributors, and/or (iii) attract new distributors.
Our efforts to develop new and upgraded services and products could require us to incur significant costs.
In
order to attract travelers to our distributors, as well as our own online marketplace while retaining, and attracting new suppliers, we will need to continue to invest in the development of new products, services and features that both
add value for travelers and suppliers and differentiate us from our competitors. The success of new products, services and features depends
on several factors, including the timely completion, introduction and market acceptance of the product, service or feature. If travelers,
or suppliers do not recognize the value of our new services or features, they may choose not to utilize our products or make their inventory
available through our channels.
Attempting
to develop and deliver these new or upgraded products, services or features involves inherent hazards and difficulties, and is costly.
Efforts to enhance and improve the ease of use, responsiveness, functionality and features of our existing websites have inherent risks,
and we may not be able to manage these product developments and enhancements successfully. We may not succeed in developing new or upgraded
products, services or features or new or upgraded products, services or features may not work as intended or provide value. In addition,
some new or upgraded products, services or features may be difficult for us to market and may also involve unfavorable pricing. Even
if we succeed, we cannot guarantee that our suppliers will respond favorably.
In
addition to developing our own improvements, we may choose to license or otherwise integrate applications, content and data from third
parties. The introduction of these improvements imposes costs on the Company and creates a risk that it may be unable to continue to
access these technologies and content on commercially reasonable terms, or at all. In the event we fail to develop new or upgraded products,
services or features, the demand for our services and ultimately our results of operations may be adversely affected.
15
We
are exposed to fluctuations in currency exchange rates.
Because
we plan to conduct a significant portion of our business outside the United States, but report our results in U.S. dollars, we face exposure
to adverse movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations.
In addition, fluctuation in our mix of U.S. and foreign currency denominated transactions may contribute to this effect as exchange rates
vary. Moreover, as a result of these exchange rate fluctuations, revenue, cost of revenue, operating expenses and other operating results
may differ materially from expectations when translated from the local currency into U.S. dollars upon consolidation. For example, if
the U.S. dollar strengthens relative to foreign currencies our non-U.S. revenue would be adversely affected when translated into U.S.
dollars. Conversely, a decline in the U.S. dollar relative to foreign currencies would increase our non-U.S. revenue when translated
into U.S. dollars. We may enter into hedging arrangements in order to manage foreign currency exposure, but such activity may not completely
eliminate fluctuations in our operating results, and there are costs associated with such hedging activities.
If
we fail to protect confidential information against security breaches, or if distributors or travelers are reluctant to use our online
marketplace because of privacy or security concerns, we might face additional costs, and activity on our websites could decline .
We
collect and use personally identifiable information of distributors and travelers in the operation of our business. Our systems may be
vulnerable to computer viruses or physical or electronic break-ins that our security measures may not detect. Anyone that is able to
circumvent our security measures could misappropriate confidential or proprietary information, cause an interruption in our operations,
damage our computers or those of our users, or otherwise damage our reputation and business. We may need to expend significant resources
to protect against security breaches or to address problems caused by breaches. Security breaches of our systems, or the systems of third
parties we rely upon, such as credit card processors, could damage our reputation and expose us to litigation and possible liability
under various laws and regulations. Concern among distributors and travelers regarding our use of personal information collected on our
websites could keep them from using, or continuing to use, our online marketplace.
There
are risks of security breaches both on our systems and on third party systems which store our information as we increase the types of
technology that we use to operate our marketplace, such as mobile applications. New and evolving technology systems and platforms may
involve security risks that are difficult to predict and adequately guard against. In addition, third parties that process credit card
transactions between NextTrip and travelers maintain personal information collected from them. Such information could be stolen or misappropriated,
and we could be subject to liability as a result. Our distributors and travelers may be harmed by such breaches, and we may in turn be
subject to costly litigation or regulatory compliance costs, and harm to our reputation and brand. Moreover, some distributors and travelers
may cease using our marketplace altogether.
The
laws of some states and countries require businesses that maintain personal information about their residents in electronic databases
to implement reasonable measures to keep that information secure. Our practice is to encrypt all sensitive information, but we do not
know whether our current practice will be challenged under these laws. In addition, under certain of these laws, if there is a breach
of our computer systems and we know or suspect that unencrypted personal data has been stolen, we are required to inform any user whose
data was stolen, which could harm our reputation and business. Complying with the applicable notice requirements in the event of a security
breach could result in significant costs. We may also be subject to contractual claims, investigation and penalties by regulatory authorities,
and claims by persons whose information was disclosed.
Compounding
these legal risks, many states and countries have enacted different and often contradictory requirements for protecting personal information
collected and maintained electronically. Compliance with these numerous and contradictory requirements is particularly difficult for
us because we collect personal information from users in multiple jurisdictions. While we intend to comply fully with these laws, failure
to comply could result in legal liability, cause the Company to suffer adverse publicity and lose business, traffic and revenue. If we
were required to pay any significant amount of money in satisfaction of claims under these or similar laws, or if we were forced to cease
our business operations for any length of time as a result of our inability to comply fully, our business, operating results and financial
condition could be adversely affected.
16
Cyber-attacks
and system vulnerabilities could lead to sustained service outages, data loss, reduced revenue, increased costs, liability claims, or
harm to our competitive position.
We
may experience targeted and organized malware, phishing, and account takeover attacks and other forms of attack such as ransomware, SQL
injection (where a third-party attempts to insert malicious code into its software through data entry fields in its websites in order
to gain control of the system) and attempts to use our websites as a platform to launch a denial-of-service attack on another party.
Our existing security measures may not be successful in preventing attacks on our systems. Our existing IT business continuity and disaster
recovery practices are less effective against certain types of attacks such as ransomware, which could result in our services being unavailable
for an extended period of time, nullify our data, expose our payment card and personal data, or expose the Company to an extortion attempt.
Reductions
in the availability and response time of our online services could cause loss of substantial business volumes during the occurrence of
a cyber-attack on our systems and measures we may take to divert suspect traffic in the event of such an attack could result in the diversion
of bona fide customers. These issues are more difficult to manage during any expansion of the number of places where we operate and the
variety of services we offer, and as the tools and techniques used in such attacks become more advanced. We use sophisticated technology
to identify cybersecurity threats; however, a cyberattack may go undetected for a period of time resulting in harm to our computer systems
and the loss of data. This could result in financial penalties being imposed by the regulators and reputational harm. Our insurance policies
have coverage limits and may not be adequate to reimburse us for all losses caused by security breaches. Successful attacks could result
in significant interruptions in our operations, severe damage to our information technology infrastructure, negative publicity, damage
our reputation, and prevent consumers from using our services during the attack, any of which could cause consumers to use the services
of our competitors, which would have a negative effect on the value of our brands, market share, business, and results of operations.
If
our systems cannot cope with the level of demand required to service our consumers and accommodations, we could experience unanticipated
disruptions in service, slower response times, decreased customer service and customer satisfaction, and delays in the introduction of
new services.
As
an online business, we are dependent on the Internet and maintaining connectivity between itself and consumers, sources of Internet traffic,
such as Google, and our travel service providers and restaurants. As consumers increasingly turn to mobile and other smart devices, we
also depend on consumers’ access to the Internet through mobile carriers and their systems. Disruptions in internet access, especially
if widespread or prolonged, could materially adversely affect our business and results of operations. While we maintain redundant systems
and hosting services, it is possible that we could experience an interruption in our business, and we do not carry business interruption
insurance sufficient to compensate us for all losses that may occur. We have computer hardware for operating our services located in
hosting facilities around the world. We do not have a comprehensive disaster recovery plan in every geographic region in which we conduct
business, and these systems and operations are vulnerable to damage or interruption from human error, misconduct, or catastrophic events.
In the event of any disruption of service at such facilities or the failure by such facilities to provide our required data communications
capacity, we may not be able to switch to back-up systems immediately and it could result in lengthy interruptions or delays in our services.
We have taken and continue to take steps to increase the reliability and redundancy of our systems. These steps are expensive, may reduce
our margins, and may not be successful in reducing the frequency or duration of unscheduled downtime.
Loss
or material modification of our credit card acceptance privileges could have a material adverse effect on our business and operating
results.
The
loss of our credit card acceptance privileges could significantly limit the availability and desirability of our products and services.
Moreover, if we fail to fully perform our contractual obligations, we could be obligated to reimburse credit card companies for refunded
payments that have been contested by the cardholders. In addition, even when we are in compliance with these obligations, we bear other
expenses including those related to the acceptance of fraudulent credit cards. As a result of all of these risks, credit card companies
may require us to set aside additional cash reserves, may increase the transaction fees they charge us, or may even refuse to renew our
acceptance privileges.
In
addition, credit card networks, such as Visa, MasterCard and American Express, have adopted rules and regulations that apply to all merchants
who process and accept credit cards and include the Payment Card Industry Data Security Standards, or the PCI DSS. Under these rules,
we are required to adopt and implement internal controls over the use, storage and security of card data. We assess our compliance with
the PCI DSS rules on a periodic basis and makes necessary improvements to our internal controls. Failure to comply may subject us to
fines, penalties, damages and civil liability and could prevent us from processing or accepting credit cards. However, we cannot guarantee
that compliance with these rules will prevent illegal or improper use of our payment systems or the theft, loss or misuse of the credit
card data.
The
loss of, or the significant modification of, the terms under which we obtain credit card acceptance privileges could have a material
adverse effect on our business, revenue and operating results.
17
We
currently rely on a small number of third-party service providers to host and deliver a significant portion of our services, and any
interruptions or delays in services from these third parties could impair the delivery of our services and harm our business.
We
rely on third-party service providers for numerous products and services, including payment processing services, data center services,
web hosting services, insurance products for customers and travelers and some customer service functions. We rely on these companies
to provide uninterrupted services and to provide their services in accordance with all applicable laws, rules and regulations.
We
use a combination of third-party data centers to host our websites and core services. We do not control the operation of any of the third-party
data center facilities we use. These facilities may be subject to break-ins, computer viruses, denial-of-service attacks, sabotage, acts
of vandalism and other misconduct. They are also vulnerable to damage or interruption from power loss, telecommunications failures, fires,
floods, earthquakes, hurricanes, tornadoes and similar events. We currently do not have a comprehensive disaster recovery plan in place
nor do our systems provide complete redundancy of data storage or processing. As a result, the occurrence of any of these events, a decision
by our third-party service providers to close their data center facilities without adequate notice or other unanticipated problems could
result in loss of data as well as a significant interruption in our services and harm to our reputation and brand.
If
our third-party service providers experience difficulties and are not able to provide services in a reliable and secure manner, if they
do not operate in compliance with applicable laws, rules and regulations and, with respect to payment and card processing companies,
if they are unable to effectively combat the use of fraudulent payments on our websites, our results of operations and financial positions
could be materially and adversely affected. In addition, if such third-party service providers were to cease operations or face other
business disruption either temporarily or permanently, or otherwise face serious performance problems, we could suffer increased costs
and delays until we find or develop an equivalent replacement, any of which could have an adverse impact on our business and financial
performance.
If
we do not adequately protect our intellectual property, our ability to compete could be impaired.
Our
intellectual property includes the content of our websites, registered domain names, as well as registered and unregistered trademarks.
we believe that our intellectual property is an essential asset of our business and that our domain names and our technology infrastructure
currently give us a competitive advantage in the online market for travel. If we do not adequately protect our intellectual property,
our brand, reputation and perceived content value could be harmed, resulting in an impaired ability to compete effectively.
To
protect our intellectual property, we rely on a combination of copyright, trademark, patent and trade secret laws, contractual provisions
and our user policy and restrictions on disclosure. Upon discovery of potential infringement of our intellectual property, we promptly
take action we deem appropriate to protect our rights. We also enter into confidentiality agreements with our employees and consultants
and seek to control access to and distribution of our proprietary information in a commercially prudent manner. The efforts we have taken
to protect our intellectual property may not be sufficient or effective, and, despite these precautions, it may be possible for other
parties to copy or otherwise obtain and use the content of our websites without authorization. We may be unable to prevent competitors
from acquiring domain names or trademarks that are similar to, infringe upon or diminish the value of our domain names, service marks
and our other proprietary rights. Even if we do detect violations and decide to enforce our intellectual property rights, litigation
may be necessary to enforce our rights, and any enforcement efforts we undertake could be time-consuming, expensive, distracting and
result in unfavorable outcomes. A failure to protect our intellectual property in a cost-effective and meaningful manner could have a
material adverse effect on our ability to compete.
Effective
trademark, copyright and trade secret protection may not be available in every country in which our offerings are available over the
Internet. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property
rights are uncertain and still evolving.
18
We
may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require
us to pay significant damages and limit our ability to operate.
Companies
in the Internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with
grants of licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based
on allegations of infringement or other violations of intellectual property rights. There may be intellectual property rights held by
others, including issued or pending patents and trademarks, that cover significant aspects of our technologies, content, branding or
business methods. Any intellectual property claims against us, regardless of merit, could be time-consuming and expensive to settle or
litigate and could divert management’s attention and other resources. These claims also could subject us to significant liability
for damages and could result in the Company having to stop using technology, content, branding or business methods found to be in violation
of another party’s rights. We might be required or may opt to seek a license for rights to intellectual property held by others,
which may not be available on commercially reasonable terms, or at all. If we cannot license or develop technology, content, branding
or business methods for any allegedly infringing aspect of our business, we may be unable to compete effectively. Even if a license is
available, we could be required to pay significant royalties, which could increase our operating expenses. We may also be required to
develop alternative non-infringing technology, content, branding or business methods, which could require significant effort and expense
and be inferior. Any of these results could harm our operating results.
If
the businesses and/or assets that we have acquired or invested in do not perform as expected or we are unable to effectively integrate
acquired businesses, our operating results and prospects could be harmed .
Our
future mergers and acquisitions, if any, will involve numerous risks, including the following:
●
difficulties
in integrating and managing the combined operations, technologies, technology platforms and products of the acquired companies and
realizing the anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and
delays or other operational, technical or financial problems;
●
legal
or regulatory challenges or post-acquisition litigation, which could result in significant costs or require changes to the businesses
or unwinding of the transaction;
●
failure
of the acquired company or assets to achieve anticipated revenue, earnings or cash flow;
●
diversion
of management’s attention or other resources from our existing business;
●
our
inability to maintain key distributors and business relationships, and the reputations of acquired businesses;
●
uncertainty
resulting from entering markets in which we have limited or no prior experience or in which competitors have stronger market positions;
●
our
dependence on unfamiliar affiliates and partners of acquired businesses;
●
unanticipated
costs associated with pursuing acquisitions;
●
liabilities
of acquired businesses, which may not be disclosed to us or which may exceed our estimates, including liabilities relating to non-compliance
with applicable laws and regulations, such as data protection and privacy controls;
●
difficulties
in assigning or transferring to us or our subsidiaries intellectual property licensed to companies we acquired;
●
potential
loss of key employees of the acquired companies;
●
difficulties
in complying with antitrust and other government regulations;
●
challenges
in integrating and auditing the financial statements of acquired companies that have not historically prepared financial statements
in accordance with U.S. generally accepted accounting principles; and
●
potential
accounting charges to the extent intangibles recorded in connection with an acquisition, such as goodwill, trademarks, customer relationships
or intellectual property, are later determined to be impaired and written down in value.
Moreover,
we rely heavily on the representations and warranties provided to us by the sellers of acquired companies and assets, including as they
relate to creation, ownership and rights in intellectual property, existence of open-source software and compliance with laws and contractual
requirements. If any of these representations and warranties are inaccurate or breached, such inaccuracy or breach could result in costly
litigation and assessment of liability for which there may not be adequate recourse against such sellers, in part due to contractual
time limitations and limitations of liability.
19
Failure
to obtain adequate insurance coverage could put us at risk for uninsured losses.
Some
or all of our customers may require insurance as a requirement to conduct business with us. A lthough
we currently have product liability insurance, we may be unable to obtain or maintain adequate liability insurance on acceptable terms,
if at all, and there is a risk that our insurance will not provide adequate coverage against our potential losses. Additionally, there
are certain types of losses that may not be insurable at a cost that we can afford, and insurance may not be available at any cost with
respect to certain losses. Claims or losses in excess of any insurance coverage we may obtain, or the lack of insurance coverage, could
put us at risk of uninsured loss, which would have a material adverse effect on our business and financial condition.
We
are dependent on key personnel, and the loss of any of these individuals could harm our business.
We
depend on key industry and other personnel. The loss of any of these individuals could harm our business and significantly delay or prevent
the achievement of our business objectives. In addition, our delivery of services will be labor-intensive: when we are awarded a contract,
we may need to quickly hire project leaders and project management personnel. The additional staff may also create a concurrent demand
for increased administrative personnel. The success of our business will require that we attract, develop, motivate and retain:
●
experienced
and innovative executive officers;
●
senior
managers who have successfully managed or designed programs in the public sector; and
●
information
technology professionals who have designed or implemented complex information technology projects.
Innovative,
experienced and technically proficient individuals are in great demand and are likely to remain a limited resource. We may be unable
to continue to attract and retain desirable executive officers, senior managers, and technology professionals. Our inability to hire
sufficient personnel on a timely basis or the loss of significant numbers of executive officers and senior managers could adversely affect
our business.
Our
bylaws contain provisions for indemnifying our officers and directors.
Our
bylaws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses actually
and reasonably incurred by an officer or director paid to settle an action or satisfy a judgment in a civil, criminal or administrative
action or proceeding to which he or she is made a party by reason of being or having been one of our directors or officers. To the extent
that our directors’ and officers’ insurance policy does not provide reimbursement for such costs, charges, expenses and other
amounts, we may incur substantial expenses in satisfying our indemnification obligations.
Our
operating costs could be significantly higher than we expect, and this could reduce our future profitability.
In
addition to general economic conditions, market fluctuations and international risks, significant increases in operating, development
and implementation costs could adversely affect us due to numerous factors, many of which are beyond our control.
20
Risks
Related to Our Securities
The
price of our securities is subject to volatility related or unrelated to our operations, which could result in substantial losses for
our stockholders.
Between
March 1, 2023 and February 29, 2024, the trading price of our common stock has ranged from a low of $2.42 to a high of $12.40 and could
be subject to wide fluctuations in the future in response to various factors, some of which are beyond our control. These factors include
those discussed previously in this “Risk Factors” section and others, such as:
●
delays
or failures in the commercialization of our current or future products and services;
●
quarterly
variations in our results of operations or those of our competitors;
●
changes
in our earnings estimates or recommendations by securities analysts or adverse publicity about us or our products or services;
●
announcements
by us or our competitors of new products and services, significant contracts, commercial relationships, acquisitions or capital commitments;
●
adverse
developments with respect to our intellectual property rights;
●
commencement
of litigation involving us or our competitors;
●
any
major changes in our Board of Directors or management;
●
market
conditions in our industry; and
●
general
economic conditions in the United States and abroad.
In
addition, the stock market, in general, may experience broad market fluctuations, which may adversely affect the market price or liquidity
of our securities.
We
could be subject to securities class action litigation.
Any
sudden decline in the market price of our securities could trigger securities class action lawsuits against us. If any of our stockholders
were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the time and attention of our management
would be diverted from our business and operations. We also could be subject to damages claims if we are found to be at fault in connection
with a decline in our market price of our securities.
Historically,
there has been a limited trading market in our common stock, and you may therefore have difficulty selling your securities at a price
that you determine is satisfactory.
Our
common stock is listed on The Nasdaq Capital Market. Historically, there has been a limited trading market for our common stock. There
is no assurance that our common stock will actively trade in the public market at or above a price that you consider acceptable. If an
active market for our common stock is not maintained, it may be difficult for you to sell your shares of common stock when you wish to
sell them or at a price that you consider satisfactory. An inactive trading market may also impair our ability to raise capital to continue
to fund operations by selling securities and may impair our ability to acquire other companies or technologies by using our securities
as consideration.
There
is no assurance that we will satisfy the continued listing requirements of The Nasdaq Capital Market.
On
August 17, 2023, the Company received a letter from Nasdaq notifying the Company that it no longer complied with Nasdaq Listing Rule
5550(b)(1), which requires companies listed on the Nasdaq Capital Market to maintain minimum stockholders’ equity of $2,500,000
(the “Minimum Stockholder Equity Requirement”), and did not meet the alternatives of market value of listed securities or
net income from continuing operations. On October 2, 2023, the Company submitted its plan to regain compliance to Nasdaq and requested
an extension to February 13, 2024 to regain compliance with the Minimum Stockholder Equity Requirement. On October 23, 2023, Nasdaq granted
the requested extension and provided the Company until February 13, 2024 to demonstrate compliance.
Nasdaq further informed the Company
that if the Company fails to show compliance upon filing its next periodic report with the SEC and Nasdaq, the Company may be subject
to delisting.
21
Since
submitting its plan to Nasdaq, the Company has completed the following transactions, which the Company believes has resulted in the Company
regaining compliance with the Minimum Stockholder Equity Requirement:
●
On
December 29, 2023, the Company acquired 100% of the outstanding equity interests of NextTrip pursuant to a share exchange agreement by and among the Company, NextTrip and certain other parties (the “Acquisition”).
As consideration for the Acquisition, at closing the Company issued 156,007 restricted shares of its common stock, constituting 19.99%
of its issued and outstanding shares of common stock immediately prior to execution of the share exchange agreement, and agreed to
issue up to an aggregate of 5,843,993 shares as further consideration upon NextTrip’s achievement of certain milestones set
forth in the exchange agreement.
●
On
January 16, 2024, the Company completed the sale of certain assets, consisting primarily of patents, software code and other intellectual
property, to Divergent Technologies, Inc. for a purchase price of $1,626,242, resulting in net proceeds to the Company of $1,533,563.
●
In
October 2023, the Company sold an aggregate of 128,887 shares of its common stock under its existing at-the-market agreement, resulting
in net proceeds to the Company of approximately $772,468.
An
unaudited condensed combined pro-forma balance sheet of the Company as of September 30, 2023, which presents the combination of the financial
information of the Company and NextTrip adjusted to give effect to completion of the Acquisition and the Asset Sale, is filed as Exhibit
99.3 of a Current Report on Form 8-K filed by the Company with the SEC on January 10, 2024, and reflects total stockholders’ equity
of approximately $5.4 million.
On
February 12, 2024, the Company filed a Current Report on Form 8-K with the SEC disclosing that the Company believes it had regained compliance
with the Minimum Stockholder Equity Requirement based upon the specific transactions and events referenced above. Nasdaq will continue
to monitor the Company’s ongoing compliance with Minimum Stockholder Equity Requirement and, if at the time of its next periodic
report the Company does not show compliance, the Company may be subject to delisting.
On June 17, 2024, the Company received a notification
letter (the “Initial Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”)
advising the Company that it was not in compliance with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1)
(the “Rule”) as a result of its failure to timely file its Annual Report on Form 10-K for the fiscal year ended February 29,
2024 (the “Form 10-K”).
On July 17, 2024, the Company received an additional
notification letter (the “Additional Notice,” and together with the Initial Notice, the “Notices”) from Nasdaq
stating that, because the Company has not filed its Quarterly Report on Form 10-Q for the quarter ended May 31, 2024 (the “Form
10-Q”), and because the Company remains delinquent in filing the Form 10-K, the Company remains noncompliant with the Rule.
Neither of the Notices have an immediate effect on
the listing of the Company’s common stock on the Nasdaq Capital Market, and, therefore, the Company’s listing remains fully
effective.
The Notices require the Company to either file the
delinquent Form 10-K and Form 10-Q with the Commission or submit a plan to regain compliance with the Rule by August 16, 2024. If Nasdaq
accepts the Company’s plan, then Nasdaq may grant an exception of up to 180 calendar days from the Form 10-K’s due date, or
until December 10, 2024, to regain compliance. If Nasdaq does not accept the Company’s plan, then the Company will have the opportunity
to appeal that decision to a Nasdaq Hearings Panel under Nasdaq Listing Rule 5815.
On August 16, 2024, the Company submitted a plan to Nasdaq regain compliance with the Rule, including the steps the
Company will take to promptly file the Form 10-Q and regain compliance. The Company has requested an extension until September 30, 2024.
There can be no assurance that the Company will regain compliance with the Rule, secure an exception until September 30, 2024 to regain
compliance, or maintain compliance with other Nasdaq listing requirements.
If
we fail to satisfy a Nasdaq requirement for continued listing, Nasdaq could provide notice that our common stock will become subject
to delisting. In such 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 The Nasdaq Capital Market, our stockholders could incur
material adverse consequences such as reduced liquidity for their securities and reduced market prices for their securities. Following
such de-listing, we could encounter increased difficulty in issuing additional securities at an attractive price, or at all, in order
to fund our operations. See also “ Nasdaq Compliance ” on page 6.
You
may experience additional dilution as a result of future equity offerings.
In
order to raise additional capital, we may sell additional shares of our common stock or other securities convertible into or exchangeable
for our common stock. The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable
into common stock, in future transactions may be lower than the price per share that you paid for our common stock.
We
have broad discretion in the use of the net proceeds of our securities offerings and may not use them effectively.
We
intend to use our cash for the development of our products and services, and to pursue a possible strategic investment or other transaction.
Our management has broad discretion in the use of cash and will have the right to use our cash in ways that differ substantially from
our current plans. Management may spend our cash in ways that do not improve our results of operations or enhance the value of our securities.
The failure by management to apply funds effectively could result in financial losses that could have a material and adverse effect on
our business and cause the market price of our securities to decline.
22
Our
outstanding warrants may result in further dilution to our stockholders.
Certain
of our outstanding warrants to purchase a total of up to approximately 486,165 shares of our common stock contain so-called full-ratchet
anti-dilution adjustments in the event we sell or issue shares of common stock or common stock equivalents at an effective price less
than the exercise price of such warrants, subject to certain exceptions. Of these warrants, warrants with an aggregate exercise price
of $956,015 also provide for a ratable increase in the number of shares purchasable upon exercise of the warrants in the event the exercise
price per share of the warrants is reduced. The anti-dilution adjustments of our outstanding warrants would be triggered by future issuances
of shares of our common stock at a price per share below the then-exercise price of such warrants, which adjustments would have a further
dilutive effect on our stockholders.
We
do not intend to pay dividends on our common stock, and your ability to achieve a return on your investment will depend on appreciation
in the market price of our securities.
We
currently intend to invest our future earnings, if any, to fund our growth and not to pay any cash dividends on our common stock. Since
we do not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the
market price of our securities. There is no assurance that our securities will appreciate in price.
If
securities or industry analysts do not publish research or reports about us, or if they issue adverse or misleading opinions regarding
us or our securities, the market price of our securities and their trading volume could decline.
If
we do not obtain and maintain research coverage by securities and industry analysts, the market price for our securities may be adversely
affected. The market price of our securities also may decline if any analyst who covers us issues an adverse or erroneous opinion regarding
us, our business model, our intellectual property or our performance. If one or more analysts cease coverage of us or fail to regularly
publish reports on us, we could lose visibility in the financial markets, which could cause the market price of our securities and their
trading volume to decline and possibly adversely affect our ability to engage in future financings.
Sales
of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
As
of February 29, 2024, we had 936,430 outstanding shares of common stock. Future sales of a large number of our shares or shares issuable
upon exercise of our outstanding warrants and stock options, or the perception that a large number of shares may be sold, could have
a material adverse effect on the trading price of our common stock.
We
will incur significant costs to ensure compliance with U.S. and Nasdaq reporting and corporate governance requirements.
We
incur significant costs associated with compliance with our SEC public company reporting requirements and with applicable U.S. and Nasdaq
corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002. These rules and regulations may also
make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be
difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officers.
23
If
we fail to maintain effective internal control over financial reporting, the market price of our securities may be adversely affected.
As
a public reporting company, we are required to establish and maintain effective internal control over financial reporting. Failure to
establish such internal control, or any failure of such internal control once established, could adversely impact our public disclosures
regarding our business, financial condition or results of operations. Any failure of our internal control over financial reporting could
also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds.
Rules
adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial
reporting. The standards that must be met for management to assess the internal control over financial reporting as effective are complex,
and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or
delays in completing activities necessary to make an assessment of our internal control over financial reporting. If we cannot assess
our internal control over financial reporting as effective, investor confidence and share value may be negatively impacted. In addition,
management’s assessment of internal control over financial reporting may identify weaknesses and conditions that need to be addressed
in our internal control over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses
and conditions that need to be addressed in our internal control over financial reporting (including those weaknesses identified in our
periodic reports), or disclosure of management’s assessment of our internal control over financial reporting may have an adverse
impact on the price of our securities.
Provisions
in our articles of incorporation and bylaws could discourage a takeover that stockholders may consider favorable and may lead to entrenchment
of management.
Our
articles of incorporation and bylaws contain provisions that could delay or prevent changes in control or changes in our management without
the consent of our Board of Directors. These provisions include the following:
●
a
classified Board of Directors with three-year staggered terms, which may delay the ability of stockholders to change the membership
of a majority of our Board of Directors;
●
no
cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
●
the
exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors
or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of
Directors;
●
the
ability of our Board of Directors to alter our bylaws without obtaining stockholder approval;
●
the
required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend
or repeal our bylaws or repeal the provisions of our articles of incorporation and bylaws regarding the election and removal of directors;
●
a
prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting
of our stockholders;
●
the
requirement that a special meeting of stockholders may be called only by the chairman of the Board of Directors, the chief executive
officer, the president (in the absence of a chief executive officer) or the Board of Directors, which may delay the ability of our
stockholders to force consideration of a proposal or to take action, including the removal of directors; and
●
advance
notice procedures that stockholders must comply with in order to nominate candidates to our Board of Directors or to propose matters
to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation
of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These
provisions could inhibit or prevent possible transactions that some stockholders may consider attractive.
24
We
could issue one or more additional series of shares of preferred stock with the effect of diluting existing stockholders and impairing
their voting and other rights.
Our
Board of Directors is authorized to issue up to 10,000,000 shares of preferred stock and may determine the terms of future preferred
stock offerings without further action by our stockholders. If we issue preferred stock, it could affect your rights or reduce the value
of our outstanding common stock. In particular, specific rights granted to future holders of preferred stock may include voting rights,
preferences as to dividends and liquidation, conversion, and redemption rights, sinking fund provisions, and restrictions on our ability
to merge with or sell our assets to a third party. As of August 31, 2024, 63,494 shares of our preferred stock are outstanding, consisting
of 316 shares of Series E Preferred Stock, 33,000 shares of Series H Preferred Stock and 30,178 shares of Series I Preferred Stock. As
a result, there is a possible negative effect on the market price of our common shares resulting from the public sale or perceived sale
of common shares issuable upon conversion or exercise of these securities.