NextTrip, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. NEXTTRIP, INC. (FORMERLY SIGMA ADDITIVE SOLUTIONS, INC.) CONDENSED CONSOLIDATED BALANCE SHEETS May 31, 2024 (unaudited) February 29, 2024 ASSETS Cash and cash equivalents $ 36,679 $ 323,805 Promissory note receivable, net 1,000,000 1,000,000 Accounts receivable, net 27,760 34,082 Prepaid expenses and other current assets 360,590 340,921 Total Current Assets 1,425,029 1,698,808 Non-Current assets Property and equipment, net 5,294 6,642 Intangible assets, net 2,056,588 2,173,420 Security deposit 45,167 42,167 Goodwill 1,167,805 1,167,805 Total Non-Current Assets 3,274,854 3,390,034 Total Assets $ 4,699,883 $ 5,088,842 LIABILITIES Current Liabilities Accounts payable $ 972,868 $ 531,847 Accrued expenses 554,240 460,768 Deferred revenue 154,201 139,921 Note payable 100,000 - Notes payable - related parties 1,752,868 828,277 Total Current Liabilities 3,534,177 1,960,813 Total Liabilities 3,534,177 1,960,813 Commitments and Contingencies - - Stockholder’s Equity Preferred Stock, $ 0.001 par value; 10,000,000 shares authorized; 63,494 and 472,996 shares issued and outstanding, respectively 64 474 Common Stock, par value $ 0.001 , 250,000,000 and 1,200,000 shares authorized, respectively; 1,345,932 and 936,430 shares issued and outstanding, respectively 1,346 936 Additional Paid in Capital 27,304,840 27,277,758 Accumulated deficit ( 26,140,544 ) ( 24,151,139 ) Total Stockholders’ Equity 1,165,706 3,128,029 Total Liabilities and Stockholders’ Equity $ 4,699,883 $ 5,088,842 See accompanying notes to condensed financial statements. 3 NEXTTRIP, INC. (FORMERLY SIGMA ADDITIVE SOLUTIONS, INC.) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) 2024 2023 Three Months Ended May 31, 2024 2023 Revenue $ 188,793 $ 19,562 Cost of revenue (exclusive of depreciation and amortization, shown separately below) ( 173,581 ) ( 17,718 ) Gross profit 15,212 1,844 Operating Expenses Salaries and benefits 626,752 407,609 Stock based compensation 16,394 - General and administrative 27,555 69,103 Sales and marketing 156,188 40,781 Professional service fees 523,873 134,370 Technology 184,669 35,893 Organization costs 28,737 - Depreciation and amortization 287,586 336,339 Other expenses 115,859 7,730 Total Operating Expenses 1,967,613 1,031,825 Operating loss ( 1,952,401 ) ( 1,029,981 ) Other Income (Expenses) Interest income (expense), net ( 35,225 ) ( 65,390 ) Total other income (expense) ( 35,225 ) ( 65,390 ) Net loss from continuing operations before taxes ( 1,987,626 ) ( 1,095,371 ) Provision for income taxes - - Net loss from continuing operations $ ( 1,987,626 ) $ ( 1,095,371 ) Net gain from discontinued operations, net of taxes 8,909 - Net loss ( 1,978,717 ) ( 1,095,371 ) Preferred dividends ( 10,688 ) - Net Loss Applicable to Common Stockholders $ ( 1,989,405 ) $ ( 1,095,371 ) Basic and diluted loss per common share from continuing operations(*) $ ( 1.56 ) $ ( 13.14 ) Basic and diluted loss per common share from discontinued operations (*) $ 0.01 $ - Basic and diluted loss per common share (*) $ ( 1.55 ) $ ( 13.14 ) Basic and diluted weighted average number of common shares (*) 1,279,165 83,371 * On December 29, 2023, Sigma Additive Solutions, Inc. acquired NextTrip in a reverse acquisition. NextTrip Group, LLC was issued 83,371 shares of Sigma Additive Solutions, Inc. common stock in exchange for 100 % of the issued and outstanding capital stock of NextTrip at the time of the reverse acquisition. The Company has reflected this transaction retroactively in these financial statements . See accompanying notes to condensed financial statements. 4 NEXTTRIP, INC. (FORMERLY SIGMAADDITIVE SOLUTIONS, INC.) CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) For the Three Months Ended May 31, 2024, and May 31, 2023 Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, February 29, 2024 472,996 $ 474 936,430 $ 936 $ 27,277,758 $ ( 24,151,139 ) $ 3,128,029 Net Loss - - - - - ( 1,978,717 ) ( 1,978,717 ) Preferred Stock Dividends - - - - 10,688 ( 10,688 ) - Common Shares Issued for Conversion of Preferred Stock ( 409,502 ) ( 410 ) 409,502 410 - - - Stock Options Issued to Employees - - - - 16,394 - 16,394 Balances, May 31, 2024 63,494 64 1,345,932 1,346 27,304,840 ( 26,140,544 ) 1,165,706 Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, February 28, 2023( * ) - $ - 83,371 $ 83 $ 17,295,890 $ ( 16,811,863 ) $ 484,110 Balances - $ - 83,371 $ 83 $ 17,295,890 $ ( 16,811,863 ) $ 484,110 Net Loss - - - - - ( 1,095,371 ) ( 1,095,371 ) Balances, May 31, 2023( * ) - - 83,371 83 17,295,890 ( 17,907,234 ) ( 611,261 ) Balances - - 83,371 83 17,295,890 ( 17,907,234 ) ( 611,261 ) * On December 29, 2023, Sigma Additive Solutions, Inc. acquired NextTrip in a reverse acquisition. NextTrip Group, LLC was issued 83,371 shares of Sigma Additive Solutions, Inc. common stock in exchange for 100 % of the issued and outstanding capital stock of NextTrip at the time of the reverse acquisition. The Company has reflected this transaction retroactively in these financial statements . See accompanying notes to condensed financial statements. 5 NEXTTRIP, INC. (FORMERLY SIGMA ADDITIVE SOLUTIONS, INC.) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) May 31, 2024 May 31, 2023 Three Months Ended May 31, 2024 May 31, 2023 OPERATING ACTIVITIES Net Loss – Continuing Operations $ ( 1,987,626 ) $ ( 1,095,371 ) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Noncash Expenses: Depreciation and amortization – property and equipment and intangibles 287,586 336,339 Depreciation of right of use asset - 37,026 Stock-based compensation 16,394 - Change in Assets and Liabilities: Accounts receivable 6,322 ( 5,000 ) Prepaid expenses ( 19,669 ) - Accounts payable and accrued expenses 534,493 147,231 Deferred revenue 14,280 ( 11,616 ) Security deposit ( 3,000 ) - NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS ( 1,151,220 ) ( 591,391 ) NET CASH PROVIDED IN OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS 8,909 - NET CASH USED IN OPERATING ACTIVITIES ( 1,142,311 ) ( 591,391 ) INVESTING ACTIVITIES Capitalized software development costs ( 169,406 ) ( 165,975 ) NET CASH USED IN INVESTING ACTIVITIES ( 169,406 ) ( 165,975 ) FINANCING ACTIVITIES Proceeds from issuance of convertible securities - 540,245 Note Payable 100,000 - Advances from related parties 924,591 15,500 NET CASH PROVIDED BY FINANCING ACTIVITIES 1,024,591 555,745 NET CHANGE IN CASH FOR PERIOD ( 287,126 ) ( 201,621 ) CASH AT BEGINNING OF PERIOD 323,805 282,475 CASH AT END OF PERIOD $ 36,679 $ 80,854 Supplemental Disclosures: Noncash Investing and Financing Activities Disclosure: Preferred stock dividends $ 10,688 $ - Disclosure of Cash Paid for: Interest $ 4,371 $ 146 Income Taxes $ - $ - See accompanying notes to condensed financial statements. 6 NEXTTRIP, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS May 31, 2024 NOTE 1 - Business Description and Going Concern Sigma Additive Solutions, Inc. (“Sigma”), the legal acquiror of NextTrip, was initially incorporated as Messidor Limited in Nevada on December 23, 1985, and changed its name to Framewaves Inc. in 2001. On September 27, 2010, the name was changed to Sigma Labs, Inc. On May 17, 2022, Sigma Labs, Inc. began doing business as Sigma Additive Solutions, and on August 9, 2022, changed its name to Sigma Additive Solutions, Inc. On March 11, 2024, Sigma filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada, pursuant to which, effective as of 12:01 a.m. Pacific time on March 13, 2024, among other things, Sigma’s corporate name was changed from Sigma Additive Solutions, Inc. to “NextTrip, Inc.” The Company’s corporate office is located at 3900 Paseo del Sol, Santa Fe NM 87507 The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries, NextTrip Holdings Inc. incorporated October 22, 2015, and Extraordinary Vacations USA, Inc. incorporated on June 24, 2002. Prior to the Exchange Agreement as described below, NextTrip Holdings, Inc. (“NextTrip”) was a wholly owned subsidiary of NextTrip Group, LLC (“Group”), which in turn, was a wholly owned subsidiary of NextPlay Technologies, Inc. (“NextPlay”). All of the business operations of Group were conducted through its subsidiaries. On January 25, 2023, NextPlay and Group entered into an Amended and Restated Separation Agreement (“Separation Agreement”), Amended and Restated Operating Agreement (“Operating Agreement”), and Exchange Agreement (“Exchange Agreement”, and together, the “Agreements”), whereby NextPlay transferred their interest in the travel business to Group. Pursuant to the Exchange Agreement, NextPlay exchanged 1,000,000 Membership Units of Group for 400,000 Preferred Units of Group, with a value of $ 10 per unit. Prior to the exchange for Preferred Units, Group had a payable due to NextPlay of $ 17,295,873 , representing cash advances and payment of expenses by NextPlay on behalf of Group, while NextPlay had obligations to provide ongoing support to NextTrip. Such liability was settled by the issuance of the Preferred Units and the waiver of all of NextPlay’s ongoing support obligations except for a $ 1.5 million advance remaining under a promissory note and as such NextTrip recorded the payable as contributed capital. The Company provides travel technology solutions with sales originating in the United States, with a primary emphasis on hotels, air, and all-inclusive travel packages. Our proprietary booking engine, branded as NextTrip 2.0, provides travel distributors access to a sizeable inventory. The Company owns 50 % of Next Innovation LLC (Joint Venture) and this entity is in the process of a first structure plan. No activities nor operations occurred in 2023 or 2024 for this entity, and NextTrip, Inc. does not have control of the company and therefore no minority interest was recorded. Reverse Acquisition On October 12, 2023, Sigma entered into a Share Exchange Agreement (as amended, the “Exchange Agreement”) with NextTrip, Group, and William Kerby (the “NextTrip Representative”). Under the terms of the Exchange Agreement, the parties agreed that Group would sell and transfer to Sigma all of the issued and outstanding shares of NextTrip in exchange for 156,007 restricted shares of Sigma common stock (the “Closing Shares”), issuable at closing, and the right to receive up to an additional 5,843,993 restricted shares of Sigma common stock upon satisfaction of certain milestones set forth in the Exchange Agreement (the “Contingent Shares,” and together with the Closing Shares, the “Restricted Shares”), which Restricted Shares are issuable to the members of Group, on a pro rata basis, under the terms of the Exchange Agreement, subject to certain closing conditions (the “Acquisition”). Upon the closing of the Acquisition on December 29, 2023, NextTrip became a wholly owned subsidiary of Sigma. 7 The Contingent Shares, together with the Closing Shares, will not exceed 6,000,000 shares of Sigma common stock, or approximately 90.2 % of the issued and outstanding shares of Sigma common stock immediately prior to the closing. The Acquisition will likely result in a change of control, with the members of Group receiving an aggregate number of shares that exceeds the number of shares that held by the legacy shareholders of Sigma. As a result, the Acquisition is accounted for as a reverse acquisition of NextTrip by Sigma, whereby Sigma is treated as the legal acquirer and NextTrip is treated as the accounting acquirer. As a result, the historical financial information presented is that of NextTrip. In accordance with ASC 805 - 40 - 45 - 1, the consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (NextTrip, Inc., f/k/a Sigma Additive Solutions, Inc.) but described in the notes to the financial statements as a continuation of the financial statements of the legal subsidiary (NextTrip), with one adjustment, which is to retroactively adjust the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree. That adjustment is required to reflect the capital of the legal parent. Comparative information presented in the consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent. Under ASC 805 - 40 - 45 - 2, the consolidated financial statements represent the continuation of the legal subsidiary except for the capital structure, as follows: (a) The assets and liabilities of the legal subsidiary recognized and measured at their pre-combination carrying amounts; (b) The assets and liabilities of the legal parent recognized and measured in accordance with the guidance in this topic applicable to business combinations (ASC 805); (c) The retained earnings and other equity balances of the legal subsidiary before the business combination; (d) The amount required to be recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary outstanding immediately before the business combination to the fair value of the legal parent determined in accordance with the guidance in ASC 805 applicable to business combinations. However, the equity structure reflects the equity structure of the legal parent, including the equity interests the legal parent issued to affect the combination. Accordingly, the equity structure of the legal subsidiary is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition. The assets and liabilities of Sigma Additive Solutions, Inc. were recognized at fair value pursuant to ASC 805. Going Concern – The Company has sustained losses and had negative cash flows from operating activities since its inception. The Company currently does not have sufficient cash and working capital to fund its operations and will require additional funding in the public or private markets in the near-term to be able to continue operations. The Company currently has no understanding or agreement to obtain such funding, and there is no assurance that we will be successful in obtaining additional funding. If we fail to obtain sufficient funding when needed, we will be forced to delay, scale back or eliminate all or a portion of our commercialization efforts and operations. As a result, there is substantial doubt about our ability to continue as a going concern. NOTE 2 – Summary of Significant Accounting Policies Basis of Presentation - The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. The financial statements have been prepared on a consolidated basis with those of the Company’s wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at May 31, 2024 and 2023 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The Company suggests these condensed financial statements be read in conjunction with the February 29, 2024 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results of operations for the period ended May 31, 2024 are not necessarily indicative of the operating results for the full year. Reclassification Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on the net earnings (loss) or financial position. Promissory Note Receivable NextPlay is in default under the terms of its promissory note to NextTrip, and as a result, an allowance for doubtful accounts of $ 1,567,665 was established as of February 29, 2024 as collectability of the entire receivable is uncertain. During the three months ended May 31, 2024 and 2023, there was no bad debt expense recorded related to the allowance account, and the allowance is unchanged as of May 31, 2024. As of May 31, 2023, no allowance for doubtful accounts was established. 8 Loss Per Share – The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings Per Share.” Shares underlying the Company’s outstanding warrants, options and preferred stock were excluded due to the anti-dilutive effect they would have on the computation. At May 31, 2024 and 20223 the Company had the following common shares underlying these instruments: Schedule of Underlying Common Shares Excluded from Computation of Loss Per Share 2024 2023 May 31, 2024 2023 Warrants 484,063 - Stock Options 79,560 - Preferred Stock 66,385 - Total Underlying Common Shares 630,008 - The following table shows the amounts used in computing loss per share and the effect on net loss and the weighted average number of shares of dilutive potential common stock for the periods ended May 31, 2024 and 2023: Schedule of Amounts Used In Computing Loss Per Share and Effect On Net Loss and Weighted Average Number Of Shares 2024 2023 Three Months Ended May 31, 2024 2023 Loss from continuing operations $ ( 1,987,626 ) $ ( 1,095,371 ) Preferred dividends ( 10,688 ) - Loss from continuing operations applicable to common stockholders ( 1,998,314 ) ( 1,095,371 ) Gain from discontinued operations applicable to common stockholders 8,909 - Net loss applicable to common stockholders $ ( 1,989,405 ) $ ( 1,095,371 ) Weighted average number of common shares outstanding used in loss per share during the period (denominator) 1,279,165 83,371 Dilutive loss per share was not presented, as the Company’s outstanding common and preferred warrants, stock options and preferred stock common equivalent shares for the periods presented would have had an anti-dilutive effect. At May 31, 2024, the Company had outstanding warrants to purchase 484,063 shares of common stock, stock options exercisable for 79,560 shares of common stock, 316 shares of Series E Preferred Stock, which could be converted into 3,207 shares of common stock, 33,000 shares of Series H Preferred Stock, convertible into 33,000 shares of common stock, and 30,178 shares of Series I Preferred Stock, convertible into 30,178 shares of common stock, resulting in a potential total additional 630,008 shares of common stock outstanding in the future. At February 28, 2023, the Company had no outstanding potentially dilutive securities. Accounting Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated by management. Significant accounting estimates that may materially change in the near future are impairment of long-lived assets, values of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory obsolescence. Revenue Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite under perpetual licenses and from providing engineering services under contracts. The Company recognizes revenue in accordance with ASC Topic No. 606. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers . ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior U.S. GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In general, we determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services. The Company recognizes revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of cancellation has expired, as satisfaction of the performance obligation, the sales price is fixed or determinable and collectability is reasonably assured. Revenue for customer travel packages purchased directly from the Company are recorded gross (the amount paid to the Company by the customer is shown as revenue and the cost of providing the respective travel package is recorded to cost of revenues). The Company generates revenues from sales directly to customers as well as through other distribution channels of tours and activities at destinations throughout the world. 9 The Company controls the specified travel product before it is transferred to the customer and is therefore a principal, based on but not limited to, the following: ● The Company is primarily responsible for fulling the promise to provide such travel product. ● The Company has inventory risk before the specified travel product has been transferred to a customer or after transfer of control to a customer. ● The Company has discretion in establishing the price for the specified travel product. Payments for tours or activities received in advance of services being rendered are recorded as deferred revenue and recognized as revenue at the earlier of the date of travel or the last date of cancellation (i.e., the customer’s refund privileges lapse). NOTE 3 – Intangible Assets Intangible assets as of May 31, 2024, and February 29, 2024 consisted of the following: Schedule of Intangible Assets May 31, 2024 February 29, 2024 Software Development $ 6,771,433 $ 6,602,028 Software Licenses 789,576 789,576 Trademark 6,283 6,283 Total 7,567,292 7,397,887 Accumulated amortization ( 5,510,704 ) ( 5,224,467 ) Intangible assets, net of amortization $ 2,056,588 $ 2,173,420 Amortization expense for the three months ended May 31, 2024, and May 31, 2023 was $ 286,237 and $ 329,033 , respectively. During the three months ended May 31, 2024 and 2023, the Company recorded no impairment losses associated with the carrying value exceeding its recoverable amount. The estimated aggregate amortization expense for years ending February 28 is as follows: Schedule of Estimated Aggregate Amortization Expense 2025 (Remaining) $ 295,823 2026 313,329 2027 270,728 2028 2,958 Thereafter - Total $ 882,838 NOTE 4 – Goodwill The legal acquisition of NextTrip Holdings, Inc. by Sigma Additive Solutions, Inc. on December 29, 2023 was determined to be a reverse acquisition, with NextTrip as the accounting acquirer, using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under this method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of consummation of the transaction. Pursuant to ASC 350-20, the Company assigned its goodwill to reporting units and is required to test each reporting unit’s goodwill for impairment at least on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The goodwill resulting from the reverse acquisition is primarily attributable to NextTrip’s objective to obtain access to public markets to provide funding wherewithal to fund business growth. NextTrip’s benefit in paying for these synergies in the reverse acquisition transaction are to avoid the time and expense of organizing and executing an Initial Public Offering (“IPO”) transaction. In the reverse acquisition, $ 1,167,805 of goodwill was allocated to the NextTrip Reporting Unit under the acquisition method of accounting. 10 NOTE 5 - Related Party Transactions On March 18, 2024, the Company’s wholly-owned subsidiary, NextTrip, entered into an unsecured promissory note for a line of credit with Donald Monaco and William Kerby, the Company’s Chairman of the board of directors and Chief Executive Officer, respectively, for the aggregate principal amount of $ 500,000 with an initial advance of $ 125,000 , provided that the aggregate principal amount of the note does not exceed $ 500,000 at any time. Under the terms of the note, advances under the line of credit may be made at the Company’s request until May 31, 2024. The note bears an annual interest rate of 7.5 % and matures on February 28, 2025 , and may be prepaid by the Company at any time prior to maturity without penalty. As of May 31, 2024, the full principal amount of the note had been advanced to the Company. On April 23, 2024, the Company’s board of directors approved the Company’s wholly-owned subsidiary, NextTrip, to enter into a series of unsecured promissory notes with certain related parties, including investors, directors, officers and employees, who may individually provide funds for the aggregate principal amount of $ 1,000,000 . The notes bear an annual interest rate of 7.5 % and shall mature one year from the date of each note’s execution, and may be prepaid by the Company at any time prior to maturity without penalty. As of May 31, 2024, $ 424,592 had been advanced to the Company. On May 21, 2024, NextTrip issued an unsecured promissory note, in the principal amount of $ 455,000 (the “Promissory Note”), to Mr. Monaco to memorialize the terms and conditions of certain working capital advances made by Mr. Monaco to NextTrip. As of May 31, 2024, the outstanding principal balance of the Line of Credit Promissory Note was $ 405,000 . The Promissory Note accrues interest at a rate equal to 7.5 % simple interest per annum, and will automatically mature and become due and payable in full on February 28, 2025 , subject to certain limited exceptions. The Promissory Note, or any portion thereof, may be prepaid by NextTrip without any penalty. Mr. Monaco serves as Chairman of the Company’s board of directors. The Promissory Note was approved by the Company’s Board of Directors, including the independent members thereof. The total amounts due to related parties at May 31, 2024 and February 29, 2024 totaled $ 1,752,868 and $ 828,277 , respectively. NOTE 6 – Note Payable On May 24, 2024, the Company issued an unsecured promissory note for $ 100,000 to an investor upon receipt of proceeds. The note bears an annual interest rate of 7.5 % and will mature and be due and payable on the earlier date of the completion of a public financing or October 31, 2024, unless extended by the written consent of the investor. The note can be prepaid at any time by the Company without penalty. NOTE 7 - Leases On January 25, 2023, as part of the separation agreement with NextPlay Technologies Inc., the Company assumed control of a lease arrangement for office space in Florida. The Company adopted ASU 2016-02 (Topic ASC 842) Leases, which requires a lessee to recognize a lease asset and a leases liability for operating leases arrangements greater than twelve (12) months. We determined that the arrangement was an operating lease at inception and included it in operating lease ROU assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheet as of February 28, 2023. The office facility was occupied by NextTrip employees through March 16, 2023, when the landlord informed NextTrip that it would not recognize NextTrip as the tenant. The Company continued to negotiate the assumption of the lease with the landlord, but was ultimately unsuccessful, and as a result derecognized the lease in the financial statements as of February 29, 2024. No restatement was made for fiscal year 2023 as the Company had use of the offices at that time and was in negotiations to assume the lease from NextPlay Technologies, Inc. No payments have been made on the lease and no expense has been recognized for the three months ended May 31, 2024. Rent expense for the three months ended May 31, 2023 totaled $ 37,025 . NOTE 8 - Stockholders’ Equity Common Stock On March 8, 2024, at a special meeting of stockholders, the Company received approval to increase its authorized shares of common stock from 1,200,000 to 250,000,000 (the “Increase in Authorized”). On March 11, 2024, the Company filed a Certificate of Amendment to its amended and restated articles of incorporation, as amended, with the Secretary of State of the State of Nevada, pursuant to which, effective as of 12:01 a.m. Pacific time on March 13, 2024, the Increase in Authorized was implemented. In the first quarter of 2024, the Company issued 100,000 shares of common stock upon conversion of 100,000 shares of Series G Convertible Preferred Stock, 117,000 shares of common stock upon conversion of 117,000 shares of Series H Convertible Preferred Stock, and 192,502 shares of common stock upon conversion of 192,502 shares of Series I Convertible Preferred Stock. 11 Preferred Stock Under our articles of incorporation, our board of directors has the authority, without further action by stockholders, to designate one or more series of preferred stock and to fix the voting powers, designations, preferences, limitations, restrictions and relative rights granted to or imposed upon the preferred stock, including dividend rights, conversion rights, voting rights, rights and terms of redemption, liquidation preference and sinking fund terms, any or all of which may be preferential to or greater than the rights of the common stock. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. The Company is authorized to issue 10,000,000 shares of preferred stock, $ 0.001 par value. An aggregate of 63,494 and 472,996 shares of preferred stock were issued and outstanding at May 31, 2024 and February 29, 2024. respectively. Series E Convertible Preferred Stock Under the Certificate of Designations for the Series E Preferred Stock, the Series E Preferred Shares have an initial stated value of $ 1,500 per share (the “Stated Value”). Dividends at the initial rate of 9 % per annum will accrue and, on a monthly basis, shall be payable in kind by the increase of the Stated Value of the Series E Preferred Stock by said amount. The holders of the Series E Preferred Shares have the right at any time to convert all or a portion of the Preferred Shares (including, without limitation, accrued and unpaid dividends and make-whole dividends through the third anniversary of the closing date) into shares of the Company’s Common Stock at an initial conversion rate determined by dividing the Conversion Amount by the Conversion Price ($ 0.13 above the consolidated closing bid price for the trading day prior to the execution of the relates stock purchase agreement). The Conversion Amount is the sum of the Stated Value of the Series E Preferred Shares then being converted plus any other unpaid amounts payable with respect to the Series E Preferred Shares being converted plus the “Make Whole Amount” (the amount of any dividends that, but for the conversion, would have accrued at the dividend rate for the period through the third anniversary of the initial issuance date). The Conversion Rate is also subject to adjustment for stock splits, dividends recapitalizations and similar events. At May 31, 2024, 316 shares of the issued Series E Convertible Preferred Stock were outstanding, which if converted as of May 31, 2024, including the make-whole dividends, would have resulted in the issuance of 3,207 shares of common stock. Series F Convertible Preferred Stock On January 4, 2024, the Company filed a Certificate of Designation of Series F Convertible Preferred Stock (the “Series F Certificate of Designation”) with the Secretary of State of the State of Nevada, designating 5,843,993 shares of the Company’s preferred stock as Series F Convertible Preferred Stock, par value $ 0.001 per share (the “Series F Preferred”). The Series F Preferred was designated by the Company in connection with its recent acquisition of NextTrip, and, in the event that the Company does not have sufficient shares of common stock available to fulfill its obligations pursuant to the Share Exchange Agreement governing the terms of the acquisition, shares of Series F Preferred shall be issued to the previous equity holders of NextTrip in lieu of shares of Company common stock. The terms and conditions set forth in the Series F Certificate of Designation are summarized below: Ranking . The Series F Preferred rank pari passu to the Company’s common stock. Dividends . Holders of Series F Preferred will be entitled to dividends, on an as-converted basis, equal to dividends actually paid, if any, on shares of Company common stock. 12 Voting . Except as provided by the Company’s amended and restated articles of incorporation, as amended (“Articles”), or as otherwise required by the Nevada Revised Statutes, holders of Series F Preferred are entitled to vote with the holders of outstanding shares of Company common stock, voting together as a single class, with respect to all matters presented to the Company’s stockholders for their action or consideration. In any such vote, each holder is entitled to a number of votes equal to the number of shares of common stock into which the Series F Preferred held by such holder is convertible. The Company may not, without the consent of holders of a majority of the outstanding shares of Series F Preferred, (i) alter or change adversely the powers, preferences or rights given to the Series F Preferred or alter or amend the Series F Certificate of Designation, (ii) amend its Articles or other charter documents in any manner that adversely effects any rights of the holders of the Series F Preferred, or (c) enter into any agreement with respect to the foregoing. Conversion . On such date that the Company amends its Articles to increase the number of shares of common stock authorized for issuance thereunder, to at least the extent required to convert all of the outstanding Series F Preferred, each outstanding share of Series F Preferred shall automatically be converted into one share of Company common stock (subject to adjustment under certain limited circumstances) (the “Conversion Ratio”). Liquidation . In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary (each, a “Liquidation”), holders of Series F Preferred will be entitled to participate, on an as-converted-to-common stock basis calculate based on the Conversion Ratio, with holders of Company common stock in any distribution of assets of the Company to holders of the Company’s common stock. At May 31, 2024, no shares of the Series F Convertible Preferred Stock were outstanding. Series G Convertible Preferred Stock On January 26, 2024, the Company filed a Certificate of Designation of Series G Convertible Preferred Stock (the “Series G Certificate of Designation”) with the Secretary of State of the State of Nevada, designating 100,000 shares of the Company’s preferred stock as Series G Preferred Stock, par value $ 0.001 per share. The terms and conditions set forth in the Series G Certificate of Designation are summarized below: Ranking. The Series G Preferred rank pari passu to the Company’s common stock. Dividends. Holders of Series G Preferred will be entitled to dividends, on an as-converted basis, equal to dividends actually paid, if any, on shares of Company common stock. Voting . Except as provided by the Company’s Articles or as otherwise required by the Nevada Revised Statutes, holders of Series G Preferred are entitled to vote with the holders of outstanding shares of Company common stock, voting together as a single class, with respect to all matters presented to the Company’s stockholders for their action or consideration. In any such vote, each holder is entitled to a number of votes equal to the number of shares of common stock into which the Series G Preferred held by such holder is convertible. The Company may not, without the consent of holders of a majority of the outstanding shares of Series G Preferred, (i) alter or change adversely the powers, preferences or rights given to the Series G Preferred or alter or amend the Series G Certificate of Designation, (ii) amend its Articles or other charter documents in any manner that adversely effects any rights of the holders of the Series G Preferred, or (c) enter into any agreement with respect to the foregoing. Conversion . On such date that the Company amends its Articles to increase the number of shares of common stock authorized for issuance thereunder, to at least the extent required to convert all of the outstanding Series G Preferred, each outstanding share of Series G Preferred shall automatically be converted into one share of Company common stock (subject to adjustment under certain limited circumstances) (the “Series G Conversion Ratio”). Liquidation . In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, holders of Series G Preferred will be entitled to participate, on an as-converted-to-common stock basis calculate based on the Series G Conversion Ratio, with holders of Company common stock in any distribution of assets of the Company to holders of the Company’s common stock. 13 Redemption Right . The Company shall have the right to redeem up to 50% of the Series G Preferred Stock for an aggregate price of $1.00 in accordance with the terms of the Perpetual License Agreement . At May 31, 2024, no shares of the issued Series G Convertible Preferred Stock were outstanding. Series H Convertible Preferred Stock On January 26, 2024, the Company filed a Certificate of Designation of Series H Convertible Preferred Stock (the “Series H Certificate of Designation”) with the Secretary of State of the State of Nevada, designating 150,000 shares of the Company’s preferred stock as Series H Preferred Stock, par value $ 0.001 per share. The terms and conditions set forth in the Series H Certificate of Designation are summarized below: Ranking. The Series H Preferred rank pari passu to the Company’s common stock. Dividends. Holders of Series H Preferred will be entitled to dividends, on an as-converted basis, equal to dividends actually paid, if any, on shares of Company common stock. Voting . Except as provided by the Company’s Articles or as otherwise required by the Nevada Revised Statutes, holders of Series H Preferred are entitled to vote with the holders of outstanding shares of Company common stock, voting together as a single class, with respect to all matters presented to the Company’s stockholders for their action or consideration. In any such vote, each holder is entitled to a number of votes equal to the number of shares of common stock into which the Series H Preferred held by such holder is convertible. The Company may not, without the consent of holders of a majority of the outstanding shares of Series H Preferred, (i) alter or change adversely the powers, preferences or rights given to the Series H Preferred or alter or amend the Series H Certificate of Designation, (ii) amend its Articles or other charter documents in any manner that adversely effects any rights of the holders of the Series H Preferred, or (c) enter into any agreement with respect to the foregoing. Conversion . On such date that the Company amends its Articles to increase the number of shares of common stock authorized for issuance thereunder, to at least the extent required to convert all of the outstanding Series H Preferred, each outstanding share of Series H Preferred shall automatically be converted into one share of Company common stock (subject to adjustment under certain limited circumstances) (the “Series H Conversion Ratio”). Liquidation . In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, holders of Series H Preferred will be entitled to participate, on an as-converted-to-common stock basis calculate based on the Series H Conversion Ratio, with holders of Company common stock in any distribution of assets of the Company to holders of the Company’s common stock. At May 31, 2024, 33,000 shares of the issued Series H Convertible Preferred Stock were outstanding, which if converted as of May 31, 2024, would have resulted in the issuance of 33,000 shares of common stock. Series I Convertible Preferred Stock On February 22, 2024, the Company filed a Certificate of Designation of Series I Convertible Preferred Stock (the “Series I Certificate of Designation”) with the Secretary of State of the State of Nevada, designating 331,124 shares of the Company’s preferred stock as Series I Convertible Preferred Stock, par value $ 0.001 per share. The terms and conditions set forth in the Series I Certificate of Designation are summarized below: Ranking. The Series I Preferred rank pari passu to the Company’s common stock. Dividends. Holders of Series I Preferred will be entitled to dividends, on an as-converted basis, equal to dividends actually paid, if any, on shares of Company common stock. 14 Voting . Except as provided by the Articles, or as otherwise required by the Nevada Revised Statutes, holders of Series I Preferred are entitled to vote with the holders of outstanding shares of Company common stock, voting together as a single class, with respect to all matters presented to the Company’s stockholders for their action or consideration. In any such vote, each holder is entitled to a number of votes equal to the number of shares of common stock into which the Series I Preferred held by such holder is convertible. The Company may not, without the consent of holders of a majority of the outstanding shares of Series I Preferred, (i) alter or change adversely the powers, preferences or rights given to the Series I Preferred or alter or amend the Series I Certificate of Designation, (ii) amend its Articles or other charter documents in any manner that adversely effects any rights of the holders of the Series I Preferred, or (c) enter into any agreement with respect to the foregoing. Conversion . On such date that the Company amends its Articles to increase the number of shares of common stock authorized for issuance thereunder, to at least the extent required to convert all of the outstanding shares of Series I Preferred, each outstanding share of Series I Preferred shall automatically be converted into one share of Company common stock (subject to adjustment under certain limited circumstances) (the “Series I Conversion Ratio”). Liquidation . In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, holders of Series I Preferred will be entitled to participate, on an as-converted-to-common stock basis calculated based on the Series I Conversion Ratio, with holders of Company common stock in any distribution of assets of the Company to holders of the Company’s common stock. At May 31, 2024, 30,178 shares of the issued Series I Convertible Preferred Stock were outstanding, which if converted as of May 31, 2024, would have resulted in the issuance of 30,178 shares of common stock. Stock Options On December 28, 2023, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved the adoption of the NextTrip 2023 Equity Incentive Plan (the “2023 Plan”). 7,000,000 shares of common stock have been reserved for issuance under the 2023 Plan., and as of May 31, 2024, all of such shares are available for issuance. The Company’s 2013 Equity Incentive Plan expired on March 15, 2023. As such, there were no shares of common stock reserved for future issuance thereunder as of May 31, 2024. There were no issuances of options for the three months ended May 31, 2024 or May 31, 2023. The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s common stock on the grant date, but not less than 100% of the fair market value. Stock options are typically granted throughout the year and generally vest over a period from one to three years of service and expire five years from the grant date, unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the vesting period for each stock option award. Total stock-based compensation expense included in the statements of operations for the three months ended May 31, 2024 and 2023 was $ 16,394 and $ 0 respectively, all of which is related to stock options. 15 Option activity for the three months ended May 31, 2024 and the year ended February 29, 2024 was as follows: Schedule of Stock Option Activity Options Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Life (Yrs.) Aggregate Intrinsic Value ($) Options outstanding at February 28, 2023 - - - - Options assumed pursuant to reverse acquisition 86,642 61.43 2.68 - Granted - - - - Exercised - - - - Forfeited or cancelled ( 1,342 ) 120.87 - - Options outstanding at February 29, 2024 85,300 60.50 2.52 - Granted - - - - Exercised - - - - Forfeited or cancelled ( 5,740 ) 67.69 - - Options outstanding May 31, 2024 79,560 59.84 2.27 - Options expected to vest in the future as of May 31, 2024 2,572 33.82 3.3 - Options exercisable at May 31, 2024 76,988 60.71 2.23 - Options vested, exercisable, and options expected to vest at May 31, 2024 79,560 59.84 2.27 - The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At May 31, 2024, no option had an exercise price below the $ 2.37 closing price of our common stock as reported on The Nasdaq Capital Market. At May 31, 2024, there was $ 29,980 of unrecognized stock-based compensation expense related to unvested stock options with a weighted average remaining recognition period of 0.77 years. Stock Appreciation Rights The purposes of the 2020 Stock Appreciation Rights Plan (the “SAR Plan”) are to: (i) enable the Company to attract and retain the types of employees, consultants, and directors (collectively, “Service Providers”) who will contribute to the Company’s long-range success; (ii) provide incentives that align the interests of Service Providers with those of the stockholders of the Company; and (iii) promote the success of the Company’s business. The SAR Plan provides for incentive awards only in the form of stock appreciation rights payable in cash (“SARs”) and no shares of common stock are reserved or will be issued pursuant to the SAR Plan. SARs may be granted to any Service Provider. A SAR is the right to receive an amount equal to the Spread with respect to a share of the Company’s common stock (“Share”) upon the exercise of the SAR. The “Spread” is the difference between the exercise price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of exercise of the SAR. The exercise price per share will not be less than 100% of the fair market value of a share of common stock on the date of grant of the SAR. The administrator of the SAR Plan will have the authority to, among other things, prescribe the terms and conditions of each SAR, including, without limitation, the exercise price and vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant. The Company did not grant any SAR’s during the three months ended May 31, 2024 or May 31, 2023. The Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the vesting period for each SAR award. The SARs are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock Compensation,” and any changes in fair value are reflected in the Statement of Operations as of the applicable reporting date. 16 SARs activity for the three months ended May 31, 2024 and the year ended February 29, 2024 was as follows: Schedule of Stock Option Activity Options Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Life (Yrs.) Aggregate Intrinsic Value ($) SARs outstanding at February 28, 2023 - - - - SARs assumed pursuant to reverse acquisition 40,390 44.77 2.99 - Exercised - - - - Forfeited or cancelled - - - - SARs outstanding at February 29, 2024 40,390 44.77 2.99 - Granted - - - - Exercised - - - - Forfeited or cancelled ( 167 ) 37.40 - - SARs outstanding May 31, 2024 40,223 44.80 2.73 - SARs expected to vest in the future as of May 31, 2024 6,670 34.77 2.98 - SARs exercisable at May 31, 2024 33,553 46.79 2.69 - SARs vested, exercisable, and SARs expected to vest at May 31, 2024 40,223 44.80 2.73 - The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At May 31, 2024, no SAR had an exercise price below the $ 2.37 closing price of our common stock as reported on The Nasdaq Capital Market. At May 31, 2024, there was $ 1,122 of unrecognized stock-based compensation expense related to unvested SARs with a weighted average remaining recognition period of 0.85 years. Warrants Warrant activity for the three months ended May 31, 2024 and the year ended February 29, 2024 was as follows: Schedule of Warranty Activity Warrants Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Life (Yrs.) Warrants outstanding at February 28, 2023 - - - Warrants assumed pursuant to reverse acquisition 217,593 21,01 1.86 Granted 268,572 3.02 2.17 Exercised - - - Forfeited or cancelled - - - Warrants outstanding at February 29, 2024 486,165 9.94 1.96 Granted - - - Exercised - - - Forfeited or cancelled ( 2,102 ) 322.00 - Warrants outstanding at May 31, 2024 484,063 8.58 1.71 17 NOTE 9 - Subsequent Events 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 to regain compliance with the Rule, including the steps the Company will take to promptly file the Form 10-K and 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. On September 4, 2024, the Company filed its Annual Report on Form-10-K with the Securities and Exchange Commission. On August 14, 2024, at a joint meeting of the Audit Committee and the board of directors, the directors unanimously approved an increase in the principal amount of the related party line of credit to $ 2,000,000 on the same terms and conditions as previously approved. As of September 13, 2024, the total principal amount advanced under the line of credit was $ 1,441,414 . Between June 1, 2024 and September 13, 2024, additional net related party advances totaled $ 978,822 , and the aggregate outstanding principal balance of related party advances was $ 2,731,690 . On September 13, 2024, the Company’s board of directors approved the conversion of up to 100 % of the outstanding principal balance of the promissory notes held by Messrs. Kerby and Monaco into shares of a series of non-redeemable convertible preferred stock preferred stock yet to be designated. Messrs. Kerby and Monaco have agreed to initially convert $ 1,500,000 , or 56.3 % of their total outstanding principal balance of $ 2,666,790 into the new series of convertible preferred stock, and, at their discretion, may convert up to the remaining principal balance, or any portion thereof, into additional shares of such convertible preferred stock at a future date. The conversion remains subject to completion of final documentation for the transaction, including the filing of the certificate of designation for the new series of convertible preferred stock with the Nevada Secretary of State. 18