NextTrip, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. You should read the following discussion of our financial condition and results of operations in conjunction with the “Risk Factors” included in Part I, Item 1A, “Risk Factors” of this Report and our Consolidated Financial Statements and related Notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Report. See also the discussion of “Forward-Looking Statements” immediately preceding Part I of this Report. Business Overview NextTrip is an early-stage, technology-driven travel company developing an integrated travel booking and media platform designed to connect leisure, group and business travelers to the world. Our travel booking platform is powered by our proprietary NXT2.0 booking engine, which offers extensive inventory, supporting both travelers and distributors with a platform for curating personalized experiences and efficient trip planning and booking. We market our travel services through several core brands including NextTrip Vacations (direct-to-consumer leisure travel), Five Star Alliance (luxury and cruise bookings) and NextTrip Business (small-to-mid-sized corporate travel) and differentiate our platform through specialty features, including specialized widgets for our Groups Platform and Travel Agent Platform, as well PayDlay, a delayed payment booking option. Complementing our booking engine are our media properties, including Journy.tv, Compass.tv and Travel Magazine, which provide destination content that we believe will drive high-intention traffic into our booking funnel and, over time, constitute a separate high-margin advertising revenue stream. Our offerings include a mixture of direct contracts and third-party API content which span leisure and business travel, alternative lodging, wellness travel, and media solutions, engaging customers throughout their travel journey with both individual and packaged options. One of the key pillars of the NextTrip ecosystem is NextTrip Vacations, which is our core platform, powered by NXT2.0, delivering seamless booking and customizable travel options across airlines, hotels, cruise, ground activities, and more. We have enhanced our offerings to include luxury travel products and services with our recent acquisition of Five Star Alliance, providing travelers with curated packages and detailed trip planning information through an intuitive booking system and/or its concierge help desk. Such additional product offering highlights include: ● NextTrip Leisure – A robust booking engine providing customized vacation packages, flights, hotels, tours, wellness vacations, cruise and group travel options. ● NextTrip Luxury & Business – Five Star Alliance provides access to over 5,000 luxury hotel properties worldwide featuring booking, expense reporting, concierge services, and 24/7 support. ● NextTrip Cruises – a fully integrated cruise booking engine providing access to over 10,000 sailings and 35 cruise partners. Travelers benefit from exclusive pricing, concierge service, and bundled packages that include transfers, pre- and post-cruise stays, and expert travel support. ● NextTrip Solutions – A suite for product management and white-label solutions, including property management, vacation rentals, and a portal to support travel agents – the Travel Agent Platform. ● NextTrip Media – Travel Magazine, Journy.tv and Compass.tv offering travelers inspiration and information through articles, videos, and immersive digital experiences. This will include personalized travel content for users to explore and share with friends and family. Our ambition is to build a next-generation travel solution for consumers, allowing them to better research and explore desired travel destinations. Our revenue strategy and business model focuses on integrating our Media and Travel divisions, offering users a comprehensive ecosystem designed to guide and support them throughout the travel experience. Presently, we generate revenue through two core methods: travel bookings and advertising revenue. Leisure travel bookings currently generate the majority of our nominal revenues. This includes the sale of travel products such as airline tickets, hotel rooms, and cruises as well as travel services such as travel insurance and ground activities. We also currently generate nominal advertising revenues through our media and advertising ecosystem. Our advertising revenue strategy is two-pronged: (1) as the number of viewers/users of Travel Magazine, Journy.tv and Compass.tv grows, it drives the advertising rates we can charge third-parties to promote travel products and services to our audience and (2) outside of the direct advertising dollars generated from our media platforms, which are expected to become a key driver of higher margin revenue than those earned from travel product sales, growth in our audience will provide additional opportunities for us to promote our own travel offerings to highly targeted viewers, thus lessening the need for spending significant marketing dollars through other mediums to attract consumers. We are in the early stages of development and roll out of our comprehensive travel and media model. While the products we have introduced to date (See above “ NXT2.0 Platform Features – Existing Features ”) are now functional and responsible for the current, nominal revenue generation of the Company, the corresponding revenue streams are currently both small and unpredictable relative to the established travel industry leaders. Our ability to capitalize on our existing travel technology platforms is severely restricted due to the lack of funding to drive marketing programs. Enhancements to the existing platforms along with the introduction of new programs under development (See above “ NXT2.0 Platform Features – Features in Development ”) are needed to complete the model. Because we are at an early stage of commercial development and have only nominal revenues to date, our ability to implement our business plan depends on our ability to successfully expand our supplier relationships, attract customers, and secure adequate capital to fund marketing and future product development. There can be no assurance that we will be able to do so. 33 Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Such critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 – Business Description and Going Concern in the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this 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. Basis of Presentation and Principles of Consolidation The Company’s financial statements and related disclosures are prepared pursuant to the rules and regulations of the SEC for annual financial statements, as applicable. The Financial Statements have been prepared using the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial statements of the Company have been prepared on a consolidated basis with those of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These differences could have a material effect on our future results of operations and financial position. Significant items subject to estimates and assumptions include the carrying amounts of intangible assets, depreciation and amortization. 34 Information about key assumptions and estimation uncertainty that has a significant risk of resulting in a material adjustment to the carrying amounts of our assets and liabilities within the next financial year is referenced in the notes to the financial statements as follows: ● The assessment of our ability to continue as a going concern; ● The measurement and useful life of intangible assets and property and equipment; and ● Recoverability of long-lived assets Receivables Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for credit losses is the Company’s best estimate of the amount of probable losses in its existing accounts receivable. The Company considers trade accounts receivable to be fully collectible; accordingly, no allowance for credit losses is required. If amounts become uncollectible, they will be charged to operations when that determination is made. Trade accounts receivable balances as of February 28, 2025 and February 29, 2024, were $22,567 and $34,082, respectively. Receivables from NextPlay under the promissory note, as described in Note 1 – Business Description and Going Concern in the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Report, were $0 and $1,000,000 at February 28, 2025 and February 29, 2024, respectively. Management has determined that, since NextPlay is in involuntary bankruptcy proceedings and is in default under the terms of the promissory note, collectability of the entire related party receivable as of February 28, 2025 is uncertain, and has therefore established an allowance for credit losses of $2,567,665. Intangible Assets The Company measures separately acquired intangible assets at cost less accumulated amortization and impairment losses. The Company recognizes internally developed intangible assets when it has determined that the completion of such is technically feasible, and it has sufficient resources to complete the development. Subsequent expenditures are capitalized when they increase the future economic benefits of the associated asset. All other expenditures are recorded in profit or loss as incurred. The Company assesses whether the life of intangible assets is finite or indefinite. The Company reviews the amortization method and period of use of its intangible assets at least annually. Changes in the expected useful life or period of consumption of future economic benefits associated with the asset are accounted for prospectively by changing the amortization method or period as a change in accounting estimates in profit or loss. The Company has assessed the useful life of its trademarks as indefinite. The estimated useful lives for the Company’s finite life intangible assets are as follows: Category Method Estimated useful life Software Straight line 3 years Software licenses Straight line 0.5 - 4 years Software Development Costs The Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established by “ASC 985-20-25” Accounting for the Costs of Software to Be Sold, Leased, or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general release to customers. Capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of the product. Investments in Equity Method Investees The Company holds investments in certain entities that are accounted for under the equity method of accounting, as well as investments that are accounted for under the fair value method pursuant to ASC 321, “Investments - Equity Securities.” Under the equity method, investments in entities in which the Company has significant influence, but not control, are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the investees’ earnings or losses and other comprehensive income. 35 The Company determines the existence of significant influence based on various factors, including representation on the investees’ board of directors, participation in policy-making processes, and material intercompany transactions. The Company’s equity method investments are evaluated periodically for impairment by assessing whether events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. When such indicators exist, the Company performs an impairment test and recognizes an impairment loss to the extent that the carrying amount of the investment exceeds its fair value. Distributions received from equity method investees that exceed cumulative earnings recognized by the Company are considered a return of investment and are recorded as a reduction in the carrying amount of the investment. Adjustments resulting from changes in the Company’s ownership interest in equity method investees that do not result in a loss of significant influence are accounted for prospectively. Basis Difference In accordance with ASC 323, “Investments - Equity Method and Joint Ventures,” the Company records a basis difference when the carrying value of its equity method investment differs from its share of the investee’s fair value of net assets at the acquisition date. This basis difference is allocated to the investee’s identifiable assets and liabilities based on their fair values. The amortization of any basis difference related to depreciable assets, such as property, plant, and equipment, is recognized in the Company’s share of the investee’s earnings or losses. Any basis difference related to non-depreciable assets, including goodwill, is generally not amortized, but is subject to impairment testing as necessary. The Company assesses the impact of any basis differences on its earnings and the carrying value of its equity method investments. If a basis difference is determined to exist, the appropriate adjustments are made to reflect the amortization of such differences in the consolidated financial statements. Investments in Equity Securities without Readily Determinable Fair Value In accordance with ASC 321-10-35-2, the Company holds certain investments in equity securities in which the Company does not have significant influence or control, and for which fair value is not readily determinable. These investments are primarily accounted for at cost, less any impairment. The carrying amount is periodically evaluated for impairment, and if necessary, an impairment loss is recognized in the statement of operations. These investments are not adjusted for unrealized gains or losses unless an impairment is identified. For investments in non-public entities where fair value is not determinable, the Company does not adjust the carrying value for changes in fair value, except for impairment losses. The fair value of these investments is disclosed when it is practicable to determine. Equity in Earnings of Equity Method Investees The Company’s share of earnings or losses from equity method investees is recognized in the consolidated statement of operations within “Equity in earnings of equity method investees,” net of any related income taxes. Fair Value Measurements The fair value of equity method investments is disclosed when available and practical to determine. However, for investments that are not readily marketable, such as non-public entities, fair value is not typically recognized in the financial statements unless the investment is impaired. Impairment of Intangible Assets In accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, the Company assesses the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors it considers important, which could trigger an impairment review include the following: 1. Significant underperformance compared to historical or projected future operating results; 2. Significant changes in the manner or use of the acquired assets or the strategy for the overall business; and 3. Significant negative industry or economic trends. 36 When the Company determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. Intangible assets that have finite useful lives are amortized over their useful lives. Revenue Recognition The Company recognizes revenue in accordance with ASC 606 “Revenue from Contracts with Customers,” 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 is 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. The Company controls the specified travel product before it is transferred to the customer and is therefore a principal, including 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). From time to time, payments are made to suppliers in advance of customer bookings as required by hotels. These payments are recognized as costs of goods at the earlier of the date of travel or the last date of cancellation. Stock-Based Compensation We measure the compensation costs of stock-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Stock-based compensation arrangements may include stock options, grants of shares of common stock with and without restrictions, performance-based awards, share appreciation rights and employee share purchase plans. Stock-based compensation is measured on the date of grant at its fair value. Equity instruments issued to non-employees are recorded on the basis of the grant date fair value of the instruments. In general, the measurement date is either (a) when a performance commitment, as defined, is reached or (b) the earlier of the date that (i) the non-employee performance requirement is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant. The grant date fair value of stock-based compensation and other equity instruments is calculated using the Black Scholes valuation model, and requires estimates of several inputs to the model, including risk-free interest rates, dividends, and expected volatility of our stock price. 37 Results of Operations Year Ended February 28, 2025 Compared to the Year Ended February 29, 2024 Revenue During the year ended February 28, 2025, we recognized revenue of $501,423 as compared to $ 458,752 in the same period in 2024, an increase of $42,671, or 9%. The increase was a result of the continued implementation of our booking engine and expanded product offerings. Cost of Revenue Cost of revenue for the year ended February 28, 2025, was $498,121 as compared to $ 397,532 for the same period in 2024, an increase of $100,589, or 25%. The increase was attributable to the increase in revenue in the year ended February 28, 2025, as compared to the same period in 2024. Operating Expenses Operating expenses totaled $7,416,731 for the year ended February 28, 2025, versus $5,740,577 for the year ended February 29, 2024. The increase of $1,676,154, or 29%, was due to an increase in Salaries and Benefits of $1,026,176, an increase in technology expenses of $531,866, an increase in professional service fees of $809,973, an increase in organization costs of $188,613, and an increase in other operating expenses of $160,539. Partially offsetting these increases were a decrease in stock based compensation expenses of $48,638, a decrease in general and administrative expenses of $56,765, a decrease in sales and marketing expenses of $177,084, and a decrease in depreciation and amortization of $755,526. Salaries and Benefits Salaries and benefits expenses were $2,630,663 for the year ended February 28, 2025, as compared to $1,604,487 for the same period in 2024. The increase of $1,026,176 or 64% was the result of an increase in salary expense of $762,052 and payroll taxes of $138,669 due to an increase in headcount, and increased benefits costs of $82,125 due to higher insurance premiums and an increase in the employer contribution toward employee health plans, an increase in bonus expense of $40,000, and an increase in severance expense of $38,141. Partially offsetting these increases was a decrease in SARs compensation of $34,926. Stock Based Compensation Stock based compensation totaled $67,874 for the year ended February 28, 2025, versus $116,512 for the year ended February 29, 2024, a decrease of 48,638, or 42%. The decrease of $75,368 was attributable to the accelerated vesting of employee stock options in connection with the reverse acquisition in fiscal 2024; partially offset by $26,760 in stock granted to a former employee as part of a separation agreement. Loss on Promissory Note Receivable The loss of $1,000,000 on the NextPlay promissory note receivable for the year ended February 28, 2025 is attributable to reserving the remaining balance on the outstanding promissory note receivable from NextPlay. Management has determined that, since NextPlay is in involuntary bankruptcy proceedings and is also in default on the note repayment, collectability of the related party receivable as of February 28, 2025 is uncertain. General and Administrative Expense General and administrative expense for the year ended February 28, 2025 was $95,341, as compared to $152,106 for the year ended February 29, 2024, a decrease of $56,765. The decrease was primarily attributable to a reduction in travel expenses of $10,141, a decrease in rent and utilities expenses of $4,257, a decrease in payroll expense of $24,925, and a decrease in office and other general expenses of $21,878. Partially offsetting the decrease was an increase in license fees of $4,436. Sales and Marketing Expense Sales and marketing expenses were $307,166 for the year ended February 28, 2025, as compared to $484,250 for the same period in 2024. The decrease of $177,084, or 37%, was primarily due to cost-cutting measures, including the absence of a Black Friday campaign in fiscal year 2025 38 Professional Service Fees Professional service fees were $2,228,481 for the year ended February 28, 2025, as compared to $1,421,508 for the same period in 2024. The increase of $806,973, or 57%, was the result of an increase in investor relations expenses of $343,655, an increase in legal fees of $130,463, an increase in accounting and audit fees of $158,744, and an increase in financial advisory fees of $299,289. Partially offsetting these increases was a decrease in consulting fees of $125,178 due to the capitalization of development work related to Compass.tv. Technology Technology expenses for the year ended February 28, 2025 were $843,296, as compared to $311,430 for the year ended February 29, 2024. The increase of $531,866, or 171%, was primarily attributable to an increase in dues and subscription expenses of $37,598 for external travel services used in connection with our booking engine, an increase of $207,333 in cloud database and networking expenses related to hosting our booking engine, an increase in Compass.tv expenses of $281,500 due to third party contracted services related to hosting and maintenance, and an increase in information technology expenses of $5,435. Organization Costs Organization costs were $213,613 for the year ended February 28, 2025, as compared to $25,000 for the year ended February 29, 2024. The increase was primarily attributable to directors’ compensation and shareholder services expenses, including transfer agent fees. Depreciation and Amortization Depreciation and amortization expense for the year ended February 28, 2025, was $713,236 as compared to $1,468,762 for the same period in 2024, a decrease of $755,526, or 51%. The decrease was primarily the result of no new equipment purchases and an increase in fully amortized intangible assets as compared to the same period in 2024. Other Expenses Other expenses totaled $317,061 for the year ended February 28, 2025, as compared to $156,522 for the year ended February 29, 2024. The increase of $160,539, or 103%, was primarily due to an increase in D&O insurance premiums of $170,924, partially offset by a $10,386 decrease in bank service charges as a result of a change in our merchant processor and lower processing rates. Other Expense Other expense was $2,707,609 for the year ended February 28, 2025, as compared to other expense of $977,480 for the same period in 2024. The increase of $1,730,129 was primarily due to an increase of loss on extinguishment of debt related to equity conversions of $1,301,469, an increase in interest expense, primarily associated with bridge loans and the amortization of the debt discount of $540,419, and a decrease in other income of $470,534, partially offset by a decrease in loss on disposal of assets of $14,628, and a decrease in the loss on related party receivable of $567,665. Net Loss from Continuing Operations During the year ended February 28, 2025, the net loss from continuing operations totaled $10,121,038 as compared to a net loss from continuing operations of $6,656,837 for the year ended February 29, 2024. The operating loss component increased by $1,734,072 in 2025, and the other loss component increased by $1,730,129. Net Gain from Discontinued Operations The net gain from discontinued operations of $8,344 for the year ended February 28, 2025 consisted primarily of the collection of an outstanding receivable that was written off in the prior year and the reversal of an outstanding payable that was settled for a lower amount. Net Loss Applicable to Common Shareholders The net loss applicable to common shareholders totaled $10,198,684 for the year ended February 28, 2025, as compared to $7,339,276 for the year ended February 29, 2024. Preferred dividends were $78,600 in 2025 and $7,125 in 2024. 39 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 filing of Annual Report, and the report of our registered independent public accounting firm on our financial statements as of and for the year ended February 28, 2025 included in Item 15 of this Report contains a going concern qualification. As of February 28, 2025, we had $1,062,367 in cash, an accumulated deficit of $34,349,823 and a working capital deficit of $105,577, compared to $323,805 in cash, an accumulated deficit of $24,151,139 and a working capital deficit of $262,005 as of February 29, 2024. Given the lack of significant revenue since inception, NextTrip has financed its operations primarily through the issuance of short-term promissory notes, advances from related parties, and private placements of its securities. On April 1, 2025, we entered into a securities purchase agreement (the “Alumni Purchase Agreement”) with Alumni for the sale of a short-term promissory note (the “Alumni Note”) and warrants to purchase 80,000 shares of common stock to Alumni for total consideration of $300,000. The Alumni Note is in the principal amount of $360,000 with an original issue discount of $60,000 and guaranteed interest on the principal amount of ten percent (10%) per annum, which shall be due and payable on July 1, 2025. In the event of a failure to re-pay the Alumni Note on or before the maturity date, 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 shares of common stock of the Company only upon an event of default. On April 9, 2025, we entered into two promissory notes (together, the “Trust Notes”) with Donald P. Monaco Insurance Trust (the “Trust”) under our $2.0 million line of credit. Donald Monaco, chairman of our Board, is the trustee of the Trust. The first note had a principal balance of $500,000 and was issued in exchange for a new cash payment provided my Mr. Monaco. The second note had a principal balance of $145,000 and was issued in exchange for cash advances previously made by Mr. Monaco to the Company. On May 6, 2025, we entered into a Line of Credit Agreement (the “MIP Line of Credit”) with Monaco Investment Partners II, LP (“MIP”) providing the Company with a $3,000,000 revolving line of credit. The MIP Line of Credit allows the Company to request advances thereunder from time to time until May 31, 2027, the maturity date. Advances made under the MIP Line of Credit bear simple interest at a rate of 12% per annum, calculated from the date of each respective advance. Accrued interest shall be payable on a monthly basis, no later than the 10th day of the subsequent month. The full outstanding principal balance, together with any accrued and unpaid interest, shall be due and payable in full by the Company on the maturity date. The Company may, at its option, prepay any borrowings under the MIP Line of Credit, in whole or in part, at any time prior to the maturity date, without penalty. Mr. Monaco controls MIP. We received an initial advance of $1,045,000 under the MIP Line of Credit, which was used to repay (i) a $400,000 cash advance previously made by the Trust to the Company (ii) and all outstanding indebtedness under the terms of the Trust Notes, totaling $645,000. We will need to raise additional funds through equity or debt financings or other means to support our on-going operations, increase market penetration of our products, expand the marketing and development of our travel and technology driven products, provide capital expenditures for additional equipment and development costs, payment obligations, and systems for managing the business including covering other operating costs and maintaining compliance with Nasdaq listing requirements until planned revenue streams are fully implemented and begin to offset the our operating costs. The Company estimates that it will require a minimum of $5.5 million to continue operations for the next twelve months. There is no assurance as to the amount and availability of any required future financing or the terms thereof. 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 lose our Nasdaq listing. Net Cash Used in Operating Activities Net cash used in operating activities from continuing operations during the year ended February 28, 2025, was $5,088,498 as compared to $5,056,095 during the same period in 2024, an increase of $32,403, or 0.6%. 40 During the year ended February 28, 2025, the net cash used in operating activities from continuing operations was the result of a net loss of $10,128,428, partially offset by changes in working capital of $1,537,714 and non-cash expenses of $3,502,216. The non-cash expenses were primarily comprised of depreciation and amortization of $713,236, stock-based compensation of $67,874, amortization of prepaid expenses of $236,112, amortization of debt discount of $342,935, a loss on debt extinguishment of $1,134,579, and the loss of $1,000,000 on the NextPlay promissory note receivable. Changes in working capital were driven by a decrease in accounts receivable of $11,515, a decrease in prepaid expenses of $159,343, a decrease in security deposits of $12,000, and an increase in accounts payable and accrued expenses of $1,397,007, partially offset by a decrease in deferred revenue of $42,151. Net cash provided by operating activities from discontinued operations during the year ended February 28, 2025, was $8,344 as compared to net cash used of $675,314 during the same period in 2024, which was primarily related to payments received on legacy Sigma contracts. As a result, total net cash used in operating activities decreased by $651,255 during the year ended February 28, 2025, to $5,080,154 as compared to $5,731,409 during the same period in 2024, a decrease of 11.4%. During the year ended February 29, 2024, the net cash used in operating activities from continuing operations was the result of a net loss of $6,656,837, partially offset by changes in working capital of $1,400,025 and non-cash expenses of $3,000,767. The non-cash expenses were primarily comprised of depreciation and amortization of $1,468,762 and the loss of $1,567,665 on the NextPlay promissory note receivable. Changes in working capital were driven by an increase in accounts receivable of $662,939, an increase in prepaid expenses of $281,506, an increase in security deposits of $27,167, and a decrease in accounts payable and accrued expenses of $531,367, partially offset by an increase in deferred revenue of $102,954. Net Cash Provided by/(Used in) Investing Activities Net cash used in investing activities during the year ended February 28, 2025, was $(1,033,751), which compares to net cash provided by investing activities of $980,936 during the same period of 2024, an increase of $2,014,687. The primary uses of cash in investing activities for the twelve months ended February 28, 2025 were $500,000 used to purchase the 49% interest in FSA, and capitalized software development costs of $534,751. For the twelve months ended February 29, 2024, cash provided by investing activities was primarily a result of the reverse acquisition, which provided cash of $417,122, and the subsequent sale of Sigma’s legacy assets to a third party, which generated an additional $1,589,241 in cash, partially offset by capitalized software development costs of $1,016,175. Net Cash Provided by Financing Activities We raised $6,852,467 in net proceeds during the year ended February 28, 2025, consisting of $1,967,224 from the issuance of short-term promissory notes, $2,450,000 from the issuance of preferred shares, $2,118,249 from related party advances, and $316,994 from the exercise of warrants. We raised $4,791,804 in net proceeds during the year ended February 29, 2024, consisting of $735,0 5 7 from the issuance of convertible notes, $1,905,970 from the issuance of common shares, $1,603,500 from the issuance of preferred shares, and $547,277 from related party advances. Inflation, changing prices and rising interest rates have had no material effect on NextTrip’s continuing operations over our two most recent fiscal years. We have no off-balance sheet arrangements as defined in Item 303(a) of Regulation S-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Consolidated Financial Statements, the report thereon, the Notes thereto, and the supplementary data commencing on page F-1 of this Report are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 41