NextTrip, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Forward-looking statements This Quarterly Report contains “Forward-Looking Statements.” All statements other than statements of historical fact are “Forward-Looking Statements” including but not limited to, statements regarding our expectations about development and commercialization of our technology, any projections of revenues or statements regarding our anticipated revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All Forward-Looking Statements included in this Quarterly Report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any Forward-Looking Statement. In some cases, Forward-Looking Statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the Forward-Looking Statements contained herein are reasonable, there can be no assurance that such expectations or any of the Forward-Looking Statements will prove to be correct, and actual results could differ materially from those projected or assumed in the Forward-Looking Statements. Future financial condition and results of operations, as well as any Forward-Looking Statements are subject to inherent risks and uncertainties, including factors referred to in our press releases and reports filed with the Securities and Exchange Commission (“SEC”). All subsequent Forward-Looking Statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional factors that may have a direct bearing on our operating results are described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended February 29, 2024 and elsewhere in this Quarterly Report. Corporation Information The Company 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. (“Sigma”). On March 11, 2024, Sigma filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation, as amended to date, 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”). Our principal executive offices are located at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, and our telephone number is (954) 526-9688. Our website address is www.nexttrip.com . The Company’s annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other information related to the Company, are available, free of charge, on our website. The Company’s website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Quarterly Report. 25 Prior to the reverse acquisition transaction with the Company under that certain Share Exchange Agreement dated October 12, 2023, NextTrip Holdings, Inc. (“NTH”) was a wholly owned subsidiary of NextTrip Group, LLC (“NTG”), which in turn, was previously a wholly owned subsidiary of NextPlay Technologies, Inc. (“NextPlay”). All of the business operations of NTG were conducted through its subsidiaries. On January 25, 2023, NextPlay and NTG entered into an Amended and Restated Separation Agreement (“Separation Agreement”), Amended and Restated Operating Agreement (“Operating Agreement”), and Exchange Agreement (“Exchange Agreement”), together the Agreements (“Agreements”), whereby NextPlay transferred their interest in the travel business to NTG and its principals. Pursuant to the Exchange Agreement, NextPlay exchanged 1,000,000 Membership Units of NTG for 400,000 Preferred Units of NTG, with a value of $10 per unit. Prior to the exchange for Preferred Units, NTG had an intercompany payable due to NextPlay of $17,295,873, representing cash advances and payment of expenses by NextPlay on behalf of NTG, while NextPlay had offsetting obligations to provide ongoing support to NTG. Such liability was settled by the issuance of the NTG 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 NTG recorded the payable as contributed capital. As a result of the consummation of the Share Exchange Agreement by and between the Company, NTG, NTH and the NTH Representative, the 400,000 Preferred Units held by NextPlay in NTG were exchanged for up to 500,000 shares of common stock in the Company, as follows: (i) 13,001 shares of Company common stock, or Closing Shares, were issued to NextPlay on December 29, 2023, and (ii) NextPlay has the right to receive up to 486,999 Contingent Shares when and if the business milestones are achieved in the Share Exchange Agreement. NTH completed the reverse acquisition with the Company on December 29, 2023. The Company previously traded on Nasdaq as SASI which has had a name change to NextTrip, Inc. and now trades as NTRP on Nasdaq. 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 2024 or 2023 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, the Company (f/k/a Sigma) entered into a Share Exchange Agreement (as amended, the “Exchange Agreement”) with NTH, NTG, and William Kerby (the “NextTrip Representative”). Under the terms of the Exchange Agreement, the parties agreed that NTG would sell and transfer to the Company all of the issued and outstanding shares of NTH in exchange for 156,007 restricted shares of the Company’s common stock (the “Closing Shares”), issuable at closing, and the right to receive up to an additional 5,843,993 restricted shares of the Company’s 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 NTG, 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, NTH became a wholly owned subsidiary of the Company. The Contingent Shares, together with the Closing Shares, will not exceed 6,000,000 shares of the Company’s 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 NTG 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 NTH by the Company, whereby the Company is treated as the legal acquirer and NTH is treated as the accounting acquirer. As a result, the historical financial information presented is that of NTH. 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 (NTH), 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. 26 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 under ASC 805 as described in NOTE 4– Goodwill. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported assets, liabilities, sales and expenses in the accompanying financial statements. Critical accounting policies are those that require the most subjective and complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. By their nature, changes in these assumptions and estimates could significantly affect our financial position or results of operations. Significant accounting estimates that may materially change in the near future are revenue recognition, 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. Such critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 of the Notes to Financial Statements included in this Quarterly Report. However, we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial statements. The critical accounting policies and estimates addressed below reflect our most significant judgements and estimates used in the preparation of our financial statements. Revenue Recognition – The Company recognizes revenue in accordance with ASC 606 which involves identifying the contracts with customers, identifying performance obligations in the contracts, determining transactions price, allocating transaction price to the performance obligation and recognizing revenue when the performance obligation is satisfied. 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. 27 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). 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 nine months ended November 30, 2024 and 2023, there was no bad debt expense recorded related to the allowance account, and the allowance is unchanged as of November 30, 2024. As of November 30, 2023, no allowance for doubtful accounts was established. Business Overview NextTrip, Inc. (“NextTrip,” “we,” or “our”) is an early-stage, technology-driven travel company building next-generation solutions to power the travel industry. With a suite of brands, including NextTrip Vacations, Travel Magazine, and Compass.TV, we aim to inspire and empower travel while curating personalized experiences for both leisure and business travelers. Our proprietary NXT2.0 booking engine offers extensive inventory, supporting both travelers and distributors with a platform for efficient trip planning and booking. Our mission is to lead the travel industry forward by combining the digital innovation offered in Compass.TV and Travel Magazine with tailored travel services and booking capabilities of NextTrip. This fully integrated platform not only services traditional vacationers travel needs, but also provides users with a solution for more complex travel needs such as conferences, conventions and destination weddings through our groups widget, an under-served and emerging markets. Our growth will leverage interactive technology, immersive media, and our travel expertise to deliver impactful and personalized travel solutions. Strategy and Ecosystem NextTrip’s strategy focuses on integrating its Media and Travel divisions, offering users a comprehensive ecosystem designed to guide and support them throughout the travel experience. Presently, NextTrip generates revenue through two core methods: travel bookings and advertising revenue. Travel bookings currently generate the majority of the Company’s revenues. This includes the sale of travel products such as airline tickets and hotel rooms as well as travel services such as travel insurance and ground activities. In the future the Company plans to supplement its travel offerings by including travel technology products such as its Travel Agent and Business Travel platforms. The Company is in early-stage development but has been able to capitalize on former technology and relationships from its Bookit.com booking engine acquisition. This acquisition allowed the Company to reach out to past contracts and negotiate new travel product supplier agreements. The Company’s initial focus was to negotiate direct connectivity and fixed base pricing contracts allowing it to set its own pricing and margins for the leisure and vacation travel products. This flexibility affords the company the opportunity to run specials on travel offerings that are highly competitive, but will require additional funding to support comprehensive marketing and awareness campaigns to attract new customers. Until this happens, the Company is working to target customers with low dollar marketing campaigns in the leisure travel spaces, as well as pursuing strategic partnerships and specialized travel offerings (i.e. Groups), while maintaining competitiveness within its marketplace through adjustment of pricing. 28 To supplement the supply of inventory, the Company has also negotiated contracts and enacted API links with Expedia and other established suppliers to provide significant additional content and product into our booking engine. The Expedia contract along with other contracted groups has significantly increased our product offerings, allowing us to cover other parts of the world, adding hotel properties, as well as resorts, vacation rental homes and bed and breakfast accommodations. Through these API connections, we can gain access to roughly 3 million accommodation properties worldwide. By integrating the products into our booking engine, the Company has the ability to adjust pricing by reducing its margins. While sales of these supplemental products through the NXT 2.0 booking engine carry lower margins versus directly contracted products, they greatly increase the NextTrip global offerings. This expanded product offering will also help support the growth of specialty travel services like NextTrip’s Groups Bookings (i.e. destination weddings, conferences and conventions) and Business Travel platforms. These types of programs require both unique technology and concierge support and services, thus falling outside of the typical online travel agency (“OTA”) business model. However, this expanded supply of travel products from large OTA’s to support our platforms becomes one of mutual benefit to both parties. Key factors that affect revenues and profitability beyond access to inventory include competitive market pressures from other travel suppliers and distributors, as well as the funding needed to enact a large enough marketing budget to create awareness. To help minimize this significant marketing budget, the company is building its own ecosystem through Compass.TV and Travel Magazine. These media platforms are designed to allow users to explore and educate themselves on future travel. As the number of viewers/users grows, it not only determines the advertising rates the company can charge others to promote their travel products and services to our audience, but it should also provide additional opportunities for NextTrip to promote its own travel offerings to highly targeted viewers, thus lessening the need for spending significant marketing dollars through other mediums to attract consumers. To drive its advertising initiatives on Compass.TV, the Company has entered into a partnership with Leap Media Group, a respected leader with over 35 years in TV advertising, media planning and buying. Compass.TV is now equipped to deliver branded entertainment content and advertising seamlessly across its platform, supported by targeted media strategy designed to optimize revenue well delivering high quality content to travel enthusiasts. Though each division can independently drive revenue through its respective channel, we have created additional value by bringing the divisions together to create an engaging consumer-focused ecosystem. Today, we have created opportunities to seamlessly move customers from one portion of the ecosystem to the next, with the ultimate goal of influencing a travel purchase decision. As we move into the future, NextTrip will add additional revenue streams including more diversified exclusive product from around the world, niche travel segments, technology licensing and enhanced media advertising opportunities. 29 Organizational History Early Travel Business with Monaker Group NextTrip’s travel business began as the primary business of NextPlay Technologies, Inc. (formerly Monaker Group, Inc.) until June 2020, when Monaker acquired HotPlay Enterprise Limited, shifting its focus to digital entertainment. Prior to this, Monaker’s core business was travel, primarily offering vacation rentals and Alternative Lodging Rentals (ALRs) through its booking platform. To support its travel services, Monaker also launched TravelMagazine.com, providing travel content for destination research. In January 2023, NextPlay spun off the NextTrip business, returning it to its founders to focus exclusively on travel. This resulted in NextTrip Group, LLC (“NTG”) operating the NextTrip travel business which was held in its wholly-owned subsidiary NextTrip Holdings, Inc. (“NTH”). Impact of COVID and Technology Shift The COVID-19 pandemic severely impacted travel, leading to widespread travel restrictions, border closures, and a steep decline in bookings. With travel operations halted, NTH concentrated on technology development, enhancing NTH’s booking engines, and expanding NTH’s online media platform, TravelMagazine.com, to help travelers research future trips. NTH also developed new features, including a platform for packaged vacations, wellness programs, and business travel management. Acquisition of Bookit.com Asset After separating from NextPlay, NTH acquired the technology assets of Bookit.com in June 2022 to strengthen our NXT2.0 booking platform. Before the pandemic, Bookit.com was a popular online travel platform, generating over $400 million in sales, but ceased to operate during the pandemic. Through this acquisition, NTH not only gained a proven booking technology but also a database of millions of opt-in users, key staff and relationships with hotel groups anxious to reopen this distribution channel. Since 2022 and the acquisition of the Bookit.com assets, NTH has been focused on the integration of Bookit.com into the NXT2.0 technology platform, which serves as a base for current and future technology projects as well as proprietary system enhancements. Bookit.com had negotiated contracts and created API’s linking it to approximately 250 travel related companies, based on NTH’s diligence in connection with such Bookit.com acquisition. The travel product offerings included conglomerate travel suppliers such as Expedia as well as uniquely contracted rates with airlines, hotel chains, car rental companies, cruise lines, tour operators and travel marketing companies. The contracts were terminated upon the closure of Bookit.com; however, NextTrip was afforded access to the previously developed API’s that gave Bookit access to these significant travel products. The Company has begun the process of contacting these former suppliers in an effort to re-engage with them, and re-negotiate new contracts which were previously in place with Bookit.com. The reactivation of some of these contracts will both increase the Company’s travel product offerings and improve the current pricing, thereby increasing revenues through commissions on sales of product offerings. To-date, through its negotiations, the Company has strategically reactivated 12-15 of these contracts for Phase 1 of its product launch, ensuring top-tier rates and options in premier destinations in Mexico and the Caribbean. NextTrip has also secured a contract with Expedia which represents unique product inventory of more than 3 million lodging, air and tour product suppliers at exceptional rates to over 2,100 destinations in 200+ countries worldwide, based on information from Expedia. Additionally, the Company continues efforts to establish partnerships with additional hotel, air, cruise and excursion suppliers. which is the “supply” or “product” side of the NXT2.0 booking platform. Through this strategic offering, we will focus on key areas of opportunity in the travel sector and drive enhanced booking conversion rates. Our proprietary technology, when combined with media, product offerings and customer service, provides a unique lane to serve mid- to luxury travelers. Our strategy positions us to capitalize on key opportunities within the travel industry, combining proprietary technology with media, service offerings, and exceptional customer support to cater to mid- to luxury-level travelers. 30 Recent Developments Forbearance Agreement On December 9, 2024, the Company and NextTrip Holdings, Inc. (“NTH”), entered into a forbearance agreement (the “Forbearance Agreement) related to the issuance of certain contingent shares (the “Contingent Shares”) of Company common stock issuable upon NTH earning certain milestones as provided in that certain share exchange agreement (the “Share Exchange Agreement”) entered into by and among the Company, NTH and NextTrip Group, LLC (“NTG”), the sole stockholder of NTH, and the NTH shareholder representative, pursuant to which the Company acquired 100% of NTH (the “Acquisition”) in exchange for shares of Company common stock, (the “Exchange Shares”). As a result, NTH became a wholly owned subsidiary of the Company as of December 29, 2023 (the “Closing Date”). Upon the closing of the Acquisition, the members of NTG were issued a number of Exchange Shares equal to 19.99% of the Company’s issued and outstanding shares of common stock immediately prior to the Closing Date. Under the Share Exchange Agreement, the NTG Sellers are also entitled to receive additional Contingent Shares, subject to NTH’s achievement of future business milestones specified in the Share Exchange Agreement. Pursuant to the Share Exchange Agreement, whether a Milestone Event is met and the Contingent Shares are issuable is to be determined by the Company and NTH on a mutually agreeable date (each a “Milestone Payment Determination Date”) no later than thirty (30) days following notice by NTH to the Company that such Milestone Event has been met. If Contingent Shares are determined to be issuable, the Company is required to issue additional Contingent Shares within 60 days following each Milestone Payment Determination Date. To date, no Contingent Shares have been issued. NTH believes, and the Company does not dispute, that 3 of the 4 milestones have been met as of the date hereof but that, as a result of delays with the Company’s Form S-1 registration statement and the Company’s pending initial listing application with Nasdaq (the “Regulatory Delays”), NTH has not sent formal notice to the Company because doing so without the approval of Nasdaq’s initial listing application could trigger a delisting and suspension of trading of the Company’s common stock on Nasdaq. Due to the indefinite delays caused by regulatory matters and NTH desire to receive the Contingent Shares earned to date, NTH has expressed an intent to the Company to deliver formal notice that such Milestone Events have been met. However, due to the fact that such issuance could trigger consequences to all Parties involved, NTH and the Company have negotiated a Forbearance Agreement, whereby NTH agrees to forbear from issuing the Milestone Payment Determination Date notice until January 31, 2025 or earlier in the event of a default (the “Forbearance Expiration Date”) in exchange for an agreement by the Company that, if such Nasdaq initial listing application is not approved by such date that, (i) all such earned Contingent Shares will be issued withing five (5) business days of the Forbearance Expiration Date and (ii) all such board appointment rights will be exercised and such members will be approved within five (5) business days of the Forbearance Expiration Date. Non-binding Letter of Intent to Acquire Luxury Travel Company Five Star Alliance On November 5, 2024, we announced that we had signed a non-binding Letter of Intent (LOI) to acquire Five Star Alliance, an online luxury travel agency founded in 2004 and renowned for its curated collection of five-star luxury hotels and resorts worldwide. Five Star Alliance specializes in helping travelers discover and book the world’s top luxury hotels, offering personalized recommendations, competitive rates, and is known for world-class customer service. With a proprietary search engine that secures the best rates for thousands of 5-star hotels globally, the company also handles group travel bookings and high-end cruises. Negotiations and due diligence with Five Star Alliance are ongoing and while the transaction is progressing; however, the parties have not yet agreed on definitive terms and it is uncertain as to whether such agreement will occur. 31 Launch of Compass.TV On October 1, 2024, we announced the launch of our owned and operated Compass.TV travel discovery channel and app. The platform initially features over a thousand hours of travel video content designed to seamlessly convert into commerce opportunities, allowing viewers to book vacations directly through the channel using the NextTrip Booking Engine. In partnership with Dooya Media Group, the Company intends to expand Compass.TV’s offerings by collaborating with influencers who have millions of travel-focused followers, creating a unique and comprehensive travel hub. The platform showcases authentic experiences through popular social media influencers, appealing to viewers who prefer real, relatable content over polished productions. With influencer-promoted, destination-focused content, the Company believes that Compass.TV will serve as a premier travel discovery tool, inspiring viewers to plan their next adventure. Its Content Creator Program incentivizes influencers with a competitive revenue-sharing model, while integrating content-to-commerce funnels with targeted ads and affiliate travel offers. As part of the NextTrip ecosystem, Compass.TV works in tandem with NextTrip’s website, tools, and exclusive deals to drive bookings and set a new standard for advertiser engagement with a dynamic, travel-driven audience. Launch of Group Booking Technology Platform On July 30, 2024, we announced the launch of a new Group Booking Platform (“Platform”), a proprietary technology for its direct-to-consumer travel booking website offering travelers and facilitators a flexible and versatile solution for group travel. NextTrip’s Platform streamlines front-end booking flow for customers, empowering each traveler to book their own travel while still remaining part of a group. This versatility allows travelers to book travel when it is most convenient for them. For group leaders, our Platform reduces the workload by eliminating the need to follow up with travelers for details such as travel dates, flight information and room category. Guests can also easily include pre- and post-stays and book activities. Access to the Platform can be sent in email invitations and implemented on a variety of sites, such as conference and other customized websites. Future versions will include additional destination flexibility, customization, and white label capabilities. Launch of FlexPay Travel Payment Options On July 11, 2024, we announced the launch of FlexPay, a proprietary technology for our direct-to-consumer travel booking website giving customers new flexible payment options and exclusive deals. FlexPay is a flexible form of short-term financing that allows customers to pay for accommodations over time through interest-free installments. FlexPay differentiates itself from other travel booking sites with flexible payment and deposit options, exclusive deals, and does not run credit checks or charge interest. Offered as a payment option at checkout, travelers can now book their vacation for as little as $1.00 down at eligible properties. Acquisition by Sigma; Name Change In December 2023, we completed the Acquisition, which resulted in NextTrip becoming a wholly-owned subsidiary of a public company and the principal business of the Company moving forward. To align the new business with NextTrip’s travel-focused business model, the Company recently changed its name to “NextTrip, Inc.” Results of Operations Three Months Ended November 30, 2024 and November 30, 2023 During the three months ended November 30, 2024, we recognized revenue of $74,635, as compared to $205,789 in the same period in 2023, a decrease of $131,154, or 64%. The decrease was primarily due to reduced online marketing efforts, driven by limited funding, compared to the Black Friday campaign executed in the previous year, which significantly boosted visibility to our website. The Company’s initial focus was to negotiate direct connectivity and fixed base pricing contracts allowing it to set its own pricing and margins. This flexibility affords the company the opportunity to both run specials that are highly competitive or simply adjust pricing to maintain competitiveness within its market. To supplement the supply of inventory, the Company has also negotiated contracts and enacted API links with Expedia and other established suppliers to provide significant additional content and product into our booking engine. The Expedia contract significantly increased our product offering, allowing us to cover other parts of the world, adding hotel properties worldwide, alternative lodging accommodations and Bed and Breakfast facilities resulting in roughly 3 million lodging accommodations. By integrating the products into our booking engine, the Company has the ability to set its own pricing by reducing its margins. While sales of these supplemental products through the NXT 2.0 booking engine carry lower margins versus directly contracted products, they greatly increase the NextTrip global offerings. These products help support the growth of specialty travel services like NextTrip’s Groups Bookings (i.e. destination weddings, conferences and conventions) which require additional concierge support and services that fall outside of typical online travel offerings. 32 Our cost of revenue for the three months ended November 30, 2024 was $76,751, as compared to $162,072 for the same period in 2023, a decrease of $85,321, or 53%. The decrease was primarily driven by lower sales resulting from reduced marketing efforts in the third quarter of 2024 as compared to the third quarter of 2023. Our total operating expenses for the three months ended November 30, 2024 were $1,771,411, as compared to $1,274,820 for the same period in 2023, an increase of $496,591, or 39%. The increase was primarily attributable to the relaunch of the NXT 2.0 booking engine in March of 2024, as well as the integration of Sigma Additive Solutions, and the transition to public company status. Salary and benefits costs were $690,524 for the three months ended November 30, 2024, as compared to $441,102 for the same period in 2023, an increase of $249,422, or 57%. The increase was comprised of an increase in salaries of $177,289 resulting from the conversion of booking engine contractors to full-time employees, as well as the addition of new accounting and development staff. an increase in taxes and benefits of $48,831, and an increase in stock appreciation rights of $23,302. Stock-based compensation was $6,227 for the three months ended November 30, 2024, as compared to $0 for the same period in 2023, an increase of $6,227. This increase was a result of the assumption of employee stock options in connection with the reverse acquisition of Sigma Additive Solutions in December 2023. We incurred general and administrative costs of $31,533 during the three months ended November 30, 2024, as compared to $104,878 in the same period in 2023, a decrease of $73,345, or 70%. The decrease was primarily the result of a decrease in rent expense of $42,814, a decrease in broker fees of $27,387, and a decrease in licenses and permits of $2,920. We incurred marketing costs of $30,529 during the three months ended November 30, 2024, as compared to $141,618 during the same period in 2023. The decrease of $111,089, or 78%, was primarily due to a reduction of $113,004 in online marketing expenses during Black Friday, compared to the previous year, resulting from limited available funds in the current year, and a reduction of Travel Magazine costs of $19,100. Partially offsetting the decrease, was an increase of $21,015 in contract labor for operations and product management, email marketing and digital strategy, and hotel partner relations. We incurred technology costs of $227,845 during the three months ended November 30, 2024, as compared to $56,669 during the same period in 2023. The increase of $171,176, or 302%, was primarily attributable to an increase of $40,350 in dues and subscription services for external travel services used in connection with our booking engine, a cloud database and software expenses to host the booking engine of $28,837, an increase in information technology services of $6,989, and an increase of $95,000 due to a service contract with Dooya Media Group as we prepare for the launch of Compass.TV Professional service fees incurred during the three months ended November 30, 2024 were $517,760, as compared to $244,128 incurred during the same period in 2023, an increase of $273,632, or 112%. This increase was a result of: (a) an increase in investor relations expenses of $99,786 due to increased shareholder engagement initiatives; (b) an increase in accounting fees of $19,238 for audit and related financial services; (c) an increase in consultants contracted for services of $34,445 for management and administrative services related to the company’s media initiatives, special projects including establishing travel related partnerships, and maintenance and bug fixes with the booking engine; (d) an increase in legal fees of $44,163 related to our proposed capital raise; and (e) an increase in lending fees of $76,000 in connection with bridge loans. Organizational costs for the three months ended November 30, 2024 were $40,030, as compared to $0 for the same period in 2023, an increase of $40,030. The increase resulted primarily from directors’ compensation, and shareholder services expenses including transfer agent fees, and filing services. Depreciation and amortization expense for the three months ended November 30, 2024 was $148,803, as compared to $273,040 for the same period in 2023, a decrease of $124,237, or 46%. The decrease was primarily due to no new equipment purchases and an increase in fully amortized intangible assets as compared to the same period in 2023. Other operating expenses were $78,160 for the three months ended November 30, 2024, as compared to $13,385 for the same period in 2023. The $64,775 increase was primarily due to an increase in insurance expense of $66,770 and an increase in filing fees of $5,000; partially offset by a decrease in bank and merchant processing fees of $6,995. 33 In the three months ended November 30, 2024, we realized net other expense of $236,302, as compared to net other expense of $77,159 in the same period in 2023. The increase in net other expense of $159,143 was primarily due to an increase interest expense and the amortization of the debt discount associated with bridge loans obtained in the third quarter. Preferred dividends for the three months ended November 30, 2024 were $10,688, as compared to $0 for the same period in 2023. The increase was due to dividends associated with outstanding shares of Series E convertible preferred stock assumed in the reverse acquisition of Sigma. In the three months ended November 30, 2024, the net loss from continuing operations totaled $2,009,829 as compared to a net loss from continuing operations of $1,308,262 for the same period in 2023, an increase of $701,567 The net gain from discontinued operations of $566 for the three months ended November 30, 2024 was attributable to the settlement reached with a third party contractor related to an outstanding payable from Sigma Additive Solutions. Our net loss applicable to common stockholders for the three months ended November 30, 2024, was $2,019,951, as compared to $1,308,262 for the same period in 2023, an increase of $711,689, or 54%. The increase was primarily attributable to an increase in operating loss from continued operations of $542,424, an increase in preferred dividends of $10,688, and an increase in other expenses of $159,143, partially offset by a net gain on discontinued operations of $566. Nine Months Ended November 30, 2024 and November 30, 2023 During the nine months ended November 30, 2024, we recognized revenue of $417,926, as compared to $253,014 in the same period in 2023, an increase of $164,912, or 65%. The increase was primarily due to the implementation of the BookIt asset as well as the integration of Expedia into our booking engine, NXT 2.0. Expedia significantly increased our product offering from 12-15 hotel chains to over 250,000 properties worldwide, including hotels, resorts, and alternative accommodations. The Company’s initial focus was to negotiate direct connectivity and fixed base pricing contracts allowing it to set its own pricing and margins. This flexibility affords the company the opportunity to both run specials that are highly competitive or simply adjust pricing to maintain competitiveness within its market. To supplement the supply of inventory, the Company has also negotiated contracts and enacted API links with Expedia and other established suppliers to provide significant additional content and product into our booking engine. The Expedia contract significantly increased our product offering, allowing us to cover other parts of the world, adding hotel properties worldwide, alternative lodging accommodations and Bed and Breakfast facilities resulting in roughly 3 million lodging accommodations. By integrating the products into our booking engine, the Company has the ability to set its own pricing by reducing its margins. While sales of these supplemental products through the NXT 2.0 booking engine carry lower margins versus directly contracted products, they greatly increase the NextTrip global offerings. These products help support the growth of specialty travel services like NextTrip’s Groups Bookings (i.e. destination weddings, conferences and conventions) which require additional concierge support and services that fall outside of typical online travel offerings. Our cost of revenue for the nine months ended November 30, 2024 was $405,788, as compared to $203,524 for the same period in 2023, an increase of $202,264, or 99%. The increase was primarily attributable to the increase in sales from the launch of NXT 2.0 in the third quarter of 2024 as compared to the third quarter of 2023. Our total operating expenses for the nine months ended November 30, 2024 were $5,207,359, as compared to $3,397,576 for the same period in 2023, an increase of $1,809,783, or 55%. The increase was primarily attributable to the relaunch of the NXT 2.0 booking engine in March of 2024, as well as the integration of Sigma, and the transition to public company status. Salary and benefits costs were $1,946,035 for the nine months ended November 30, 2024, as compared to $1,209,658 for the same period in 2023, an increase of $736,377, or 61%. The increase was comprised of an increase in salaries of $600,736 due to the conversion of contractors to employees and new accounting and development staff, and an increase in taxes and benefits of $131,835 and an increase in SAR expense of $3,806. 34 Stock-based compensation was $36,463 for the nine months ended November 30, 2024, as compared to $0 for the same period in 2023, an increase of $36,463. This increase was a result of the assumption of employee stock options in connection with the reverse acquisition of Sigma in December 2023. We incurred general and administrative costs of $80,764 during the nine months ended November 30, 2024, as compared to $302,936 in the same period in 2023, a decrease of $222,172, or 73%. The decrease was primarily the result of (a) a decrease in rent expense of $111,735; (b) a decrease in broker fees of $64,133; (c) a decrease in administrative fees of $36,469; (d) a decrease in telephone expenses of $6,915; and,(e) a decrease travel expenses of $4,436. Partially offsetting the decrease was an increase in licenses and permit fees of $1,516. We incurred marketing costs of $238,065 during the nine months ended November 30, 2024, as compared to $232,157 during the same period in 2023. The increase of $5,908, or 3%, was primarily due to the ongoing maintenance for the relaunch of NXT 2.0Third party contracted marketing services increased by $95,605, partially offset by Travel Magazine costs that decreased by $17,563, and a decrease in marketing and advertising expenses of $72,954 due to absence of a Black Friday campaign this year We incurred technology costs of $553,536 during the nine months ended November 30, 2024, as compared to $176,349 during the same period in 2023. The increase of $377,187, or 214%, was primarily attributable to an increase in dues and subscription services of $197,972 for external travel services used in connection with our booking engine, an increase cloud database and software expenses of $77,626 to host the booking engine, an increase in information technology services of $6,589, and an increase for a service contract with Dooya Media Group for $95,000. Professional service fees incurred in the nine months ended November 30, 2024 were $1,413,660, as compared to $504,431 incurred during the same period in 2023, an increase of $909,229, or 180%. This increase was a result of: (a) an increase in investor relations expenses of $159,786 due to increased shareholder engagement initiatives; (b) an increase in legal expense of $207,659 related to our proposed public offering and bridge financings; (c) an increase in accounting fees of $129,748 for audit and related financial services; (d) an increase in consultants contracted for services of $336,036 for management and administrative services related to the company’s media initiatives, special projects including establishing travel related partnerships; and (e) an increase in lending fees of $76,000 in connection with bridge financings. Organizational costs for the nine months ended November 30, 2024, were $149,219, as compared to $0 for the same period in 2023, an increase of $149,219. The increase resulted primarily from directors compensation, and shareholder services expenses including transfer agent fees, and filing services. Depreciation and amortization expense for the nine months ended November 30, 2024 was $531,803, as compared to $940,930 for the same period in 2023, a decrease of $409,127, or 43%. The decrease was primarily due to no new equipment purchases and an increase in fully amortized intangible assets as compared to the same period in 2023. Other operating expenses were $257,814 for the nine months ended November 30, 2024, as compared to $31,115 for the same period in 2023. The $226,699 increase was primarily due to the additional cost for insurance of $190,850, an increase in merchant processing fees of $27,454, and an increase in filing and other fees of $8,395. In the nine months ended November 30, 2024, we realized net other expense of $335,754, as compared to net other expense of $216,310 in the same period in 2023. The increase in net other expense of $119,444 was primarily due to an increase in interest expense associated with bridge loans and the amortization of the debt discount in the third quarter of 2024. Preferred dividends for the nine months ended November 30, 2024 were $32,063, as compared to $0 for the same period in 2023. The increase was due to dividends associated with outstanding shares of Series E Preferred Stock assumed in the reverse acquisition of Sigma. In the nine months ended November 30, 2024, the net loss from continuing operations totaled $5,530,975, as compared to a net loss from continuing operations of $3,564,396 for the same period in 2023. an increase of $1,966,579 in 2024, 35 The net gain from discontinued operations of $8,344 for the nine months ended November 30, 2024 consisted primarily of revenue of $14,731 from legacy Sigma customers, and a gain of $6,576 from the settlement of a trade accounts payable at a discount, partially offset by expenses of $12,963 consisting of legal expenses, termination of a subscription contract, and Sigma’s legacy investor relations website. Our net loss applicable to common stockholders for the nine months ended November 30, 2024 was $5,554,694, as compared to $3,564,396 for the same period in 2023, an increase of $1,990,298, or 56%. The increase was primarily attributable to an increase in operating loss from continued operations of $1,847,135, an increase in other expense of $119,444, and an increase in preferred dividends of $32,063, partially offset by a gain from discontinued operations of $8,344. Liquidity and Capital Resources Due to uncertainties regarding our ability to meet our current and future operating and capital expenses, there is substantial doubt about our ability to continue as a going concern for 12 months from the date of the filing of this Quarterly Report, As of November 30, 2024, we had $15,385 in cash and a working capital deficit of $(4,869,586), as compared with $323,805 in cash and a working capital deficit of $(262,005) as of February 29, 2024. Additionally, at November 30, 2024, the amount due under our notes payable to related parties totaled $2,970,405. Between December 1, 2024 and January 10, 2025, additional net related party advances under promissory notes totaled $16,667, and the aggregate outstanding principal balance of related party promissory notes as of January 10, 2025 was $1,174,131 after giving effect to repayments of $62,940 and the $1,750,000 of debt conversions on December 31, 2024. 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. On September 19, 2024 the Company entered into a securities purchase agreement (the “Note & Warrant SPA”) with Alumni Capital LP (“Alumni Capital”) for the sale of a short-term promissory note (the “Alumni Note”) and warrants (“Warrants”) to Alumni Capital for total consideration of $250,000. After deducting commissions, net proceeds to the Company were $230,000. The Alumni Note is in the principal amount of $300,000 with an original issue discount of $50,000 and guaranteed interest on the principal amount of ten percent (10%) per annum which shall be due and payable on December 19, 2024. In the event of a failure to re-pay the Alumni Note on or before December 19, 2024, the interest rate will increase to the lesser of twenty-two percent (22%) per annum or the maximum amount permitted under law from the due date thereof until the same is paid. The Alumni Note is convertible into common stock of the Company only upon an event of default. On September 19, 2024, the Company also entered into a Common Stock Securities Purchase Agreement (the “Common Stock SPA”) with Alumni Capital. Pursuant to the Common Stock SPA, the Company has the right, but not the obligation to cause Alumni Capital to purchase up to $10 million shares of common stock (the “Commitment Amount”) at the Purchase Price (defined below) during the period beginning on the execution date of the Common Stock SPA and ending on the earlier of (i) the date on which Alumni Capital has purchased $10 million shares of common stock pursuant to the Common Stock SPA or (ii) December 31, 2025. Pursuant to the Common Stock SPA, the “Purchase Price” means the lowest traded price of Company common stock during the five (5) business days prior a closing date multiplied by eighty nine percent (89%). No Purchase Notice will be made without an effective registration statement and no Purchase Notice will be in an amount greater than $500,000. 36 On October 1, 2024, the Company entered into a securities purchase agreement with an investor for the sale of 66,225 shares of Series I Convertible Preferred Stock at $3.02 per share, for total consideration of $200,000. On December 3, 2024, the Company sold a short-term promissory note to an existing note holder for total consideration of $100,000. The note has an original issue discount of $15,000. The note is payable in full on May 29, 2025, and may be prepaid by the Company at any time without penalty. In the event of default, the entire unpaid balance is immediately due and payable. In connection with the sale of the note, the Company issued a warrant to the investor to purchase up to 40,000 shares of common stock with an exercise price of $3.25. The warrant has a three-year term and expires on December 3, 2027. On December 31, 2024, the Company entered into a securities purchase agreement with an investor for the sale of 231,788 shares of Series J Convertible Preferred Stock at $3.02 per share, for total consideration of $700,000. On December 31, 2024, the Company sold a short-term promissory note to an investor for total consideration of $1,000,000, with $500,000 funded to the Company on December 31, 2024, and $500,000 funded to the Company on or before January 15, 2025. The note bears 15% interest and such interest will be prepaid in the form of Series K Convertible Preferred shares with an exercise price of $3.02. Any unpaid principal is payable in full on the earlier of the date that the Company completes a financing of $5 million or more, or December 19, 2025. In the event of default, the remaining unpaid balance is due and payable immediately at the option of the investor. In connection with the initial funding of the note, the Company issued a warrant to the investor to purchase up to 500,000 shares of common stock with an exercise price of $4.00. The warrant is exercisable 50% on a cash basis and 50% on a cashless basis. The warrant has a three-year term and expires on December 31, 2027. Upon the second funding of the promissory note, the company will issue a second warrant to purchase up to 500,000 common shares on the same terms and conditions as the first warrant. Our major sources of funding have been proceeds from private offerings of our securities, advances from related parties, and issuance of convertible and non-convertible debt. We will need to raise additional amounts to fund our operations, maintain compliance with the Nasdaq continued listing requirements and implement our business plan. We currently have no arrangement to obtain any additional financing, and there is no assurance as to the amount and availability of any required future financing or the terms thereof. Any such financing, if in the form of equity, may be highly dilutive to our existing stockholders and may otherwise include onerous terms. If in the form of debt, such financing may include covenants and repayment obligations which may be difficult to meet and that could adversely affect our business and operations. To the extent that funds are not available to us, we may be required to delay, limit, or terminate our business and operations and/or lose our Nasdaq listing. Our existing cash on hand and anticipated revenues are not sufficient to fund our anticipated operating costs. We estimate that we will need to raise a minimum of $5.5 million in net proceeds to continue operation for the next twelve months. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect, or extend such resources longer than we expect. Because of the numerous risks and uncertainties associated with the research, development, and commercialization of our products, however, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements will depend on many factors, including without limitation: ● The cost of developing and maintaining our proprietary software and NXT 2.0 booking engine; ● The effect of competing technological and market developments; ● The revenue from the sales of our existing and future products; and ● The cost of operating as a public company. The effects of a U.S. or global recession, while difficult to predict, could result in some customers delaying or cancelling planned travel. 37 Net Cash Used in Operating Activities Net cash used in operating activities from continuing operations for the nine months ended November 30, 2024 totaled $3,143,697, as compared to $2,265,048 during the same period in 2023, an increase of $878,649, or 39%. Net cash provided from discontinued operations totaled $8,344 for the nine months ended November 30, 2024, as compared to $0 during the same period in 2023. During the nine months ended November 30, 2024, the net cash used in operating activities was the result of a net loss from continuing operations of $5,530,975 before preferred dividends, partially offset by changes in working capital of $1,661,732, and non-cash expenses of $725,546 related to depreciation and amortization of $531,803, amortization of debt discount of $157,280, and stock-based compensation of $36,463. Changes in working capital were driven by a decrease in accounts receivable of $18,329, a decrease in security deposits of $3,742 an increase in accounts payable and accrued expenses of $1,518,161, the issuance of preferred shares for third party services of $199,320, the issuance of common shares as commitment shares for the Company’s equity line of credit of $100,000, and the issuance of common shares as a deposit for a potential acquisition of $24,356, partially offset by increase in prepaid expenses of $152,452, and a decrease in deferred revenue of $49,724. During the nine months ended November 30, 2023, the net cash used in operating activities was the result of a net loss from continuing operations of $3,564,396, partially offset by changes in working capital of $244,932, and non-cash expenses of $1,054,416 related to depreciation and amortization. Changes in working capital were driven by an increase in accounts payable and accrued expenses of $172,847 and an increase in deferred revenue of $116,761, partially offset by an increase in accounts receivable of $25,790, and an increase of $18,886 in prepaid expenses. Net Cash Used in Investing Activities Net cash used in investing activities during the nine months ended November 30, 2024 was $468,751, which compares to $423,707 of cash used in investing activities during the same period of 2023, an increase of $45,044, or 11%. The increase resulted from an increase in capitalized software development costs during the period. Net Cash Provided by Financing Activities Net cash provided by financing activities for the nine months ended November 30, 2024 was $3,295,684, as compared to $2,952,029 for the same period in 2023. The increase of $343,655, or 12%, was due to an increase in advances from related parties of $1,807,850, the issuance of promissory notes for $863,556 to investors, and the issuance of preferred shares to investors for $290,000, partially offset by a decrease in the issuance of convertible notes of $2, 617,751. Our ability to continue to fund our working capital needs will be dependent upon the success of our efforts to generate revenues from our operations, and by obtaining additional capital from the sale of securities or by borrowing funds from lenders to fulfill our business plans. If we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. There is no assurance that we will be successful in obtaining additional funding. The Company is unable to predict the effect a global recession or geopolitical events, including the on-going conflicts in Ukraine and Israel/Palestine, may have on its access to the financing markets. If we fail to obtain sufficient funding when needed, we may be forced to delay, scale back or eliminate all or a portion of our commercialization efforts and operations. Other than the related party promissory notes as described in Notes 5, 6 and 9 to the financial statements included elsewhere in this Quarterly Report, we have no lines of credit or other financing arrangements. Inflation, changing prices and rising interest rates have had no material effect on our continuing operations over our two most recent fiscal years. However, continued unfavorable trends may affect the prices we pay for materials and other goods and services necessary to our business, thus increasing our use of cash. We have no off-balance sheet arrangements as defined in Item 303(a) of Regulation S-K. 38 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable.