UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated Filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of January 10, 2025, the issuer had shares of common stock outstanding.
NEXTTRIP, INC.
FORM 10-Q
TABLE OF CONTENTS
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
NEXTTRIP, INC. (FORMERLY SIGMA ADDITIVE SOLUTIONS, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
| November
30, 2024 (unaudited) | February 29, 2024 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Promissory note receivable, net | ||||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Non-Current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Security deposit | ||||||||
| Goodwill | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Notes payable | ||||||||
| Notes payable - related parties | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholder’s Equity | ||||||||
| Preferred Stock, $ par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Common Stock, $ par value, and shares authorized, respectively; and shares issued and outstanding, respectively | ||||||||
| Additional Paid in Capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to condensed financial statements.
| 3 |
NEXTTRIP, INC. (FORMERLY SIGMA ADDITIVE SOLUTIONS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended November 30, | Nine Months Ended November 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue (exclusive of depreciation and amortization, shown separately below) | ||||||||||||||||
| Gross profit (loss) | ( | ) | ||||||||||||||
| Operating Expenses: | ||||||||||||||||
| Salaries and benefits | ||||||||||||||||
| Stock based compensation | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Professional service fees | ||||||||||||||||
| Technology | ||||||||||||||||
| Organization costs | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Other expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other Income (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from continuing operations before taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net gain (loss) from discontinued operations, net of taxes | $ | |||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Preferred dividends | ( | ) | ( | ) | ||||||||||||
| Net Loss Applicable to Common Stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per common share from continuing operations (*) | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Basic and diluted loss per common share from discontinued operations (*) | $ | $ | $ | $ | ||||||||||||
| Basic and diluted loss per common share (*) | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Basic and diluted weighted average number of common shares (*) | ||||||||||||||||
| * |
See accompanying notes to condensed financial statements.
| 4 |
NEXTTRIP, INC. (FORMERLY SIGMAADDITIVE SOLUTIONS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the Three Months and Nine Months Ended November 30, 2024, and November 30, 2023
(Unaudited)
For the Three Months Ended November 30, 2024, and November 30, 2023
| Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
Shares Outstanding | Preferred Stock | Shares Outstanding | Common Stock | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balances, August 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Preferred Stock Dividends | - | - | ( | ) | ||||||||||||||||||||||||
| Issuance of Convertible Preferred Shares | - | |||||||||||||||||||||||||||
| Common Shares Issued for Third party Services | - | |||||||||||||||||||||||||||
| Warrants Issued in Connection with Bridge Loan Financing | - | - | ||||||||||||||||||||||||||
| Stock Based Compensation | - | - | ||||||||||||||||||||||||||
| Balances, November 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
Shares Outstanding | Preferred Stock | Shares Outstanding | Common Stock | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balances, August 31, 2023(*) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances, November 30, 2023(*) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| * |
| 5 |
For the Nine Months Ended November 30, 2024, and November 30, 2023
| Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
Shares Outstanding | Preferred Stock | Shares Outstanding | Common Stock | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balances, February 29, 2024(*) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Preferred Stock Dividends | - | - | ( | ) | ||||||||||||||||||||||||
| Issuance of Convertible Preferred Shares | - | |||||||||||||||||||||||||||
| Common Shares Issued for Conversion of Preferred Stock | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of Common Shares for Third Party Services | - | |||||||||||||||||||||||||||
| Issuance of Common Shares as Commitment Shares | - | |||||||||||||||||||||||||||
| Warrants Issued in Connection with Bridge Loan Financing | - | - | ||||||||||||||||||||||||||
| Stock Based Compensation | - | - | ||||||||||||||||||||||||||
| Balances, November 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Preferred Stock | Common Stock | Additional | ||||||||||||||||||||||||||
Shares Outstanding | Preferred Stock | Shares Outstanding | Common Stock | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balances, February 28, 2023(*) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances, November 30, 2023(*) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| * |
See accompanying notes to condensed financial statements.
| 6 |
NEXTTRIP, INC. (FORMERLY SIGMA ADDITIVE SOLUTIONS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended | ||||||||
| November 30, 2024 | November 30, 2023 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net Loss – Continuing Operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||
| Noncash Expenses: | ||||||||
| Depreciation and amortization – property and equipment and intangibles | ||||||||
| Depreciation of right of use asset | ||||||||
| Amortization of debt discount | ||||||||
| Stock-based compensation | ||||||||
| Issuance of preferred stock for third party services | ||||||||
| Issuance of commitment shares | ||||||||
| Change in Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Promissory note receivable | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Deferred revenue | ( | ) | ||||||
| Security deposit | ||||||||
| NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ||||
| NET CASH PROVIDED IN OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS | ||||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Capitalized software development costs | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of convertible notes | ||||||||
| Proceeds from issuance of convertible preferred shares | ||||||||
| Notes payable | ||||||||
| Advances from related parties | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET CHANGE IN CASH FOR PERIOD | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| Supplemental Disclosures: | ||||||||
| Noncash Investing and Financing Activities Disclosure: | ||||||||
| Issuance of common shares for services | $ | $ | ||||||
| Issuance of common stock warrants in connection with bridge financing | ||||||||
| Preferred stock dividends | $ | $ | ||||||
| Disclosure of Cash Paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income Taxes | $ | $ | ||||||
See accompanying notes to condensed financial statements.
| 7 |
NEXTTRIP, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
November 30, 2024
NOTE 1 - Business Description and Going Concern
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, 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”).
The Company’s corporate office is located at 3900 Paseo del Sol, Santa Fe, NM 87507. The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries, NextTrip Holdings Inc. (“NTH”) incorporated October 22, 2015, and Extraordinary Vacations USA, Inc. incorporated on June 24, 2002.
Prior
to the Exchange Agreement as described below, NTH was a wholly owned subsidiary of NextTrip Group, LLC (“NTG”), which in
turn, was 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”, and together, the “Agreements”), whereby NextPlay transferred their interest in the travel business to
NTG. Pursuant to the Exchange Agreement, NextPlay exchanged Membership Units of NTG for Preferred Units of NTG, with
a value of $ per unit. Prior to the exchange for Preferred Units, NTG had a payable due to NextPlay of $, representing cash
advances and payment of expenses by NextPlay on behalf of NTG, while NextPlay had obligations to provide ongoing support to NTH. Such
liability was settled by the issuance of the Preferred Units and the waiver of all of NextPlay’s ongoing support obligations except
for a $
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 (“NXT2.0”), provides travel distributors access to a sizeable inventory.
The
Company owns
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 restricted shares of Sigma common stock (the “Closing Shares”), issuable at closing, and the right to receive up to an additional 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.
| 8 |
The Contingent Shares, together with the Closing Shares, will not exceed shares of the Company’s common stock, or approximately % 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.
As of November 30, 2024, three of the four business milestones had been achieved as further described in Note 2 under “Loss Per Share” below. As a result, of the contingent shares were eligible to be issued. The remaining contingent shares will be eligible for issue upon the launch of the Travel Agent platform.
Despite having achieved three of the four business milestones, the Company cannot issue the contingent shares without risk of the Company’s common stock being suspended from trading and delisted until Nasdaq approves the Company’s initial listing application, which is pending with Nasdaq. The Company has been advised by Nasdaq that issuing the contingent shares prior to approval of the application will result in the immediate delisting of the Company, as such issuance will trigger a change in control. The Company intends to issue said securities as soon as Nasdaq has cleared its application.
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.
Under ASC 805-40-45-2, the consolidated financial statements represent the continuation of the legal subsidiary except for the capital structure, as follows:
| (a) | The assets and liabilities of the legal subsidiary recognized and measured at their pre-combination carrying amounts; | |
| (b) | The assets and liabilities of the legal parent recognized and measured in accordance with the guidance in this topic applicable to business combinations (ASC 805); | |
| (c) | The retained earnings and other equity balances of the legal subsidiary before the business combination; | |
| (d) | The amount required to be recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary outstanding immediately before the business combination to the fair value of the legal parent determined in accordance with the guidance in ASC 805 applicable to business combinations. However, the equity structure reflects the equity structure of the legal parent, including the equity interests the legal parent issued to affect the combination. Accordingly, the equity structure of the legal subsidiary is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition. |
The assets and liabilities of Sigma Additive Solutions, Inc. were recognized at fair value pursuant to ASC 805.
Going Concern – The Company has sustained losses and had negative cash flows from operating activities since its inception.
The Company currently does not have sufficient cash and working capital to fund its operations and will require additional funding in the public or private markets in the near-term to be able to continue operations. The Company currently has no understanding or agreement to obtain such funding, and there is no assurance that we will be successful in obtaining additional funding. If we fail to obtain sufficient funding when needed, we will be forced to delay, scale back or eliminate all or a portion of our commercialization efforts and operations. As a result, there is substantial doubt about our ability to continue as a going concern.
| 9 |
NOTE 2 – Summary of Significant Accounting Policies
Basis of Presentation - The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. The financial statements have been prepared on a consolidated basis with those of the Company’s wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at November 30, 2024 and 2023 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The Company suggests these condensed financial statements be read in conjunction with the February 29, 2024 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 4, 2024. The results of operations for the period ended November 30, 2024 are not necessarily indicative of the operating results for the full year.
Reclassification
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on the net earnings (loss) or financial position.
Promissory Note Receivable
Pursuant
to the terms of the Promissory Note (the “NextPlay Note”) between NextTrip and NextPlay, the NextPlay Note was due and
payable in full on the earlier of September 1, 2023 or the date the Company completed a financing of $
The
Company has entered into a non-binding Memorandum of Understanding (“MOU”) with NextPlay, whereby the Company has agreed
to forgive the entire amount due under the NextPlay Note in exchange for the cancellation of the
Preferred Units of NTG issued to them as described in Note 1. The Preferred Units are convertible into
NextTrip, Inc. common shares, of which
such common shares were issued as Closing Shares on December 29, 2023. The Company has a commitment from a third party to purchase
all
shares at a price of $
per share. As a result, the since Company can realize a minimum of $
| November 30, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Stock Options | ||||||||
| Preferred Stock | ||||||||
| Total Underlying Common Shares | ||||||||
| 10 |
| Three
Months Ended November 30, | Nine
Months Ended November 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Preferred dividends | ( | ) | ( | ) | ||||||||||||
| Loss from continuing operations applicable to common stockholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain (loss) from discontinued operations applicable to common stockholders | ||||||||||||||||
| Net loss applicable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | ( | ) | |||||
| Weighted average number of common shares outstanding used in loss per share during the period (denominator) | ||||||||||||||||
On June 10, 2024, the Company determined that three of the four business milestones per the Share Exchange Agreement had been achieved. As a result, of the total contingent shares of became eligible for issuance. Pursuant to ASC 260, as there are no circumstances under which the shares will not be issued, such eligible contingent shares are included in the computation of basic earnings per share. The following table shows the business milestones and the issuable contingent shares:
| Business Milestones | Contingent Shares | |||
| Achieved | ||||
| Launch of leisure travel booking platform | ||||
| Launch of group travel booking platform | ||||
| Launch of FlexPay technology | ||||
| Total contingent shares issuable on June 10, 2024 | ||||
| Not Achieved | ||||
| Launch of travel agent platform | ||||
| Total contingent shares potentially issuable in future periods | ||||
| Total contingent shares | ||||
The following table shows the reconciliation of the weighted average common shares outstanding for the three and nine months ended November 30, 2024 to the weighted average common shares used in the computation of basic earnings per share:
| Weighted
Average Number of Common Shares | ||||||||
| Three
Months Ended November 30, 2024 | Nine
Months Ended November 30, 2024 | |||||||
| common shares outstanding | ||||||||
| issuable contingent shares | ||||||||
| Weighted average common shares outstanding | ||||||||
The issuable contingent shares are of the Company’s sole class of common stock, and as such have the same rights and privileges as existing common stock.
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Dilutive
loss per share was not presented, as the Company’s outstanding warrants, stock options and preferred stock common equivalent shares
for the periods presented would have had an anti-dilutive effect. At November 30, 2024, the Company had outstanding warrants to purchase
Accounting Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated by management. Significant accounting estimates that may materially change in the near future are impairment of long-lived assets, values of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory obsolescence.
Revenue Recognition – The Company recognizes revenue in accordance with ASC Topic No. 606. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior U.S. GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In general, we determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.
The Company recognizes revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of cancellation has expired, as satisfaction of the performance obligation, the sales price is fixed or determinable and collectability is reasonably assured. Revenue for customer travel packages purchased directly from the Company 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, 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).
| 12 |
NOTE 3 – Intangible Assets
Intangible assets as of November 30, 2024, and February 29, 2024 consisted of the following:
| November
30, 2024 | February
29, 2024 | |||||||
| Software Development | $ | $ | ||||||
| Software Licenses | ||||||||
| Trademark | ||||||||
| Total | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net of amortization | $ | $ | ||||||
Amortization
expense for the Nine months ended November 30, 2024, and 2023 was $
During
the three and Nine months ended November 30, 2024, and 2023, the Company recorded
The estimated aggregate amortization expense for years ending February 28 is as follows:
| 2025 (Remaining) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| $ |
NOTE 4 – Goodwill
The legal acquisition of NextTrip Holdings, Inc. by Sigma Additive Solutions, Inc. on December 29, 2023 was determined to be a reverse acquisition, with NextTrip as the accounting acquirer, using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under this method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of consummation of the transaction.
Pursuant
to ASC 350-20, the Company assigned its goodwill to reporting units and is required to test each reporting unit’s goodwill for
impairment at least on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying amount. The goodwill resulting from the reverse acquisition is primarily
attributable to NextTrip’s objective to obtain access to public markets to provide funding wherewithal to fund business growth.
NextTrip’s benefit in paying for these synergies in the reverse acquisition transaction are to avoid the time and expense of organizing
and executing an Initial Public Offering (“IPO”) transaction. In the reverse acquisition, $
NOTE 5 - Related Party Transactions
On
February 29, 2024, NextTrip Holdings, Inc., a wholly owned subsidiary of the Company, issued an unsecured promissory note, in the principal
amount of $
| 13 |
On
March 18, 2024, the Company’s wholly-owned subsidiary, NTH, entered into an unsecured promissory note for a line of credit with
Donald Monaco and William Kerby, the Company’s Chairman of the board of directors and Chief Executive Officer, respectively, for
the aggregate principal amount of $
On
April 23, 2024, the Company’s board of directors approved the Company’s wholly-owned subsidiary, NextTrip, to enter into
a series of unsecured promissory notes with certain related parties, including investors, directors, officers and employees, who may
individually provide funds for the aggregate principal amount of $
On
May 21, 2024, NextTrip issued an unsecured promissory note in the principal amount of $
The following table summarizes the principal amounts outstanding by promissory note date and related party as of November 30, 2024:
| Promissory Note Date | Name | Title | Principal
Amount Outstanding at November 30, 2024 | |||||
| February 29, 2024 | William Kerby | Chief Executive Officer | $ | |||||
| March 18, 2024 | William Kerby | Chief Executive Officer | $ | |||||
| Donald P. Monaco | Chairman | $ | ||||||
| $ | ||||||||
| April 23, 2024 | William Kerby | Chief Executive Officer | $ | |||||
| Donald P. Monaco | Chairman | $ | ||||||
| Gregory Miller | Executive Vice-President | $ | ||||||
| $ | ||||||||
| May 21, 2024 | Donald P. Monaco | Chairman | $ | |||||
| Total | $ | |||||||
The
total amounts due to related parties at November 30, 2024 and February 29, 2024 totaled $
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NOTE 6 – Notes Payable
On
May 24, 2024, the Company issued an unsecured promissory note for $
On
July 11, 2024, the Company issued an unsecured promissory note for $
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 $
The
Alumni Note is in the principal amount of $
On
October 18, 2024, the Company entered into a securities purchase agreement (the “Note SPA”) with 1800 Diagonal Lending, LLC
(“1800 Diagonal”) for the sale of a short-term promissory note (the “1800 Diagonal Note”) for total consideration
of $
The
1800 Diagonal Note is in the principal amount of $
On
November 8, 2024, the Company entered into a second securities purchase agreement (the “Note2 SPA”) with 1800 Diagonal for
the sale of a short-term promissory note (the “1800 Diagonal Note2”) for total consideration of $
The
1800 Diagonal Note2 is in the principal amount of $
On
November 1, 2024, the Company sold a short-term promissory note to an investor for total consideration of $
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NOTE 7 - Leases
On January 25, 2023, as part of the separation agreement with NextPlay Technologies Inc., the Company assumed control of a lease arrangement for office space in Florida.
The Company adopted ASU 2016-02 (Topic ASC 842) Leases, which requires a lessee to recognize a lease asset and a leases liability for operating leases arrangements greater than twelve (12) months.
We
determined that the arrangement was an operating lease at inception and included it in operating lease ROU assets, operating lease liabilities
- current, and operating lease liabilities - noncurrent on the balance sheet as of February 28, 2023. The office facility was occupied
by NextTrip employees through March 16, 2023, when the landlord informed NextTrip that it would not recognize NextTrip as the tenant.
The Company continued to negotiate the assumption of the lease with the landlord, but was ultimately unsuccessful, and as a result derecognized
the lease in the financial statements as of February 29, 2024. No restatement was made for fiscal year 2023 as the Company had use of
the offices at that time and was in negotiations to assume the lease from NextPlay Technologies, Inc. No payments have been made on the
lease and no expense has been recognized for the three and nine months ended November 30, 2024. Rent expense for the three and nine months
ended November 30, 2023 totaled $
The
Company leases approximately
NOTE 8 - Stockholders’ Equity
Common Stock
On March 8, 2024, at a special meeting of stockholders, the Company received approval to increase its authorized shares of common stock from to (the “Increase in Authorized”). On March 11, 2024, the Company filed a Certificate of Amendment to its amended and restated articles of incorporation, as amended, with the Secretary of State of the State of Nevada, pursuant to which, effective as of 12:01 a.m. Pacific time on March 13, 2024, the Increase in Authorized was implemented.
In the first fiscal quarter of 2025, the Company issued shares of common stock upon conversion of shares of Series G Convertible Preferred Stock, shares of common stock upon conversion of shares of Series H Convertible Preferred Stock, and shares of common stock upon conversion of shares of Series I Convertible Preferred Stock.
In the second fiscal quarter of 2025, the Company issued shares of common stock to a service provider as partial compensation for development work related to Compass.TV, the Company’s Free-Ad Supported TV (“FAST”) channel.
In
the third fiscal quarter of 2025, the Company issued shares of common stock as commitment shares for its $
Preferred Stock
Under our amended and restated articles of incorporation, as amended (“Articles”), our board of directors has the authority, without further action by stockholders, to designate one or more series of preferred stock and to fix the voting powers, designations, preferences, limitations, restrictions and relative rights granted to or imposed upon the preferred stock, including dividend rights, conversion rights, voting rights, rights and terms of redemption, liquidation preference and sinking fund terms, any or all of which may be preferential to or greater than the rights of the common stock.
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Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock.
The Company is authorized to issue shares of preferred stock, $ par value. An aggregate of and shares of preferred stock were issued and outstanding at November 30, 2024 and February 29, 2024, respectively.
Series E Convertible Preferred Stock
Under
the Certificate of Designations for the Series E Preferred Stock, the Series E Preferred Shares have an initial stated value of
per share (the “Stated Value”). Dividends at the initial rate of
At November 30, 2024, shares of the issued Series E Convertible Preferred Stock were outstanding, which if converted as of November 30, 2024, including the make-whole dividends, would have resulted in the issuance of shares of common stock.
Series F Convertible Preferred Stock
On January 4, 2024, the Company filed a Certificate of Designation of Series F Convertible Preferred Stock (the “Series F Certificate of Designation”) with the Secretary of State of the State of Nevada, designating shares of the Company’s preferred stock as Series F Convertible Preferred Stock, par value $ per share (the “Series F Preferred”). The Series F Preferred was designated by the Company in connection with its acquisition of NextTrip, and, in the event that the Company does not have sufficient shares of common stock available to fulfill its obligations pursuant to the Share Exchange Agreement governing the terms of the acquisition, shares of Series F Preferred shall be issued to the previous equity holders of NextTrip in lieu of shares of Company common stock.
The terms and conditions set forth in the Series F Certificate of Designation are summarized below:
Ranking. The Series F Preferred rank pari passu to the Company’s common stock.
Dividends. Holders of Series F Preferred will be entitled to dividends, on an as-converted basis, equal to dividends actually paid, if any, on shares of Company common stock.
Voting. Except as provided by the Articles, or as otherwise required by the Nevada Revised Statutes, holders of Series F Preferred are entitled to vote with the holders of outstanding shares of Company common stock, voting together as a single class, with respect to all matters presented to the Company’s stockholders for their action or consideration. In any such vote, each holder is entitled to a number of votes equal to the number of shares of common stock into which the Series F Preferred held by such holder is convertible. The Company may not, without the consent of holders of a majority of the outstanding shares of Series F Preferred, (i) alter or change adversely the powers, preferences or rights given to the Series F Preferred or alter or amend the Series F Certificate of Designation, (ii) amend its Articles or other charter documents in any manner that adversely effects any rights of the holders of the Series F Preferred, or (iii) enter into any agreement with respect to the foregoing.
| 17 |
Conversion. On such date that the Company amends its Articles to increase the number of shares of common stock authorized for issuance thereunder, to at least the extent required to convert all of the outstanding Series F Preferred, each outstanding share of Series F Preferred shall automatically be converted into one share of Company common stock (subject to adjustment under certain limited circumstances) (the “Conversion Ratio”).
Liquidation. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary (each, a “Liquidation”), holders of Series F Preferred will be entitled to participate, on an as-converted-to-common stock basis calculate based on the Conversion Ratio, with holders of Company common stock in any distribution of assets of the Company to holders of the Company’s common stock.
At November 30, 2024, shares of the Series F Convertible Preferred Stock were outstanding.
Series G Convertible Preferred Stock
On January 26, 2024, the Company filed a Certificate of Designation of Series G Convertible Preferred Stock (the “Series G Certificate of Designation”) with the Secretary of State of the State of Nevada, designating shares of the Company’s preferred stock as Series G Preferred Stock, par value $ per share (the “Series G Preferred”).
The terms and conditions set forth in the Series G Certificate of Designation are summarized below:
Ranking. The Series G Preferred rank pari passu to the Company’s common stock.
Dividends. Holders of Series G Preferred will be entitled to dividends, on an as-converted basis, equal to dividends actually paid, if any, on shares of Company common stock.
Voting. Except as provided by the Company’s Articles or as otherwise required by the Nevada Revised Statutes, holders of Series G Preferred are entitled to vote with the holders of outstanding shares of Company common stock, voting together as a single class, with respect to all matters presented to the Company’s stockholders for their action or consideration. In any such vote, each holder is entitled to a number of votes equal to the number of shares of common stock into which the Series G Preferred held by such holder is convertible. The Company may not, without the consent of holders of a majority of the outstanding shares of Series G Preferred, (i) alter or change adversely the powers, preferences or rights given to the Series G Preferred or alter or amend the Series G Certificate of Designation, (ii) amend its Articles or other charter documents in any manner that adversely effects any rights of the holders of the Series G Preferred, or (iii) enter into any agreement with respect to the foregoing.
Conversion. On such date that the Company amends its Articles to increase the number of shares of common stock authorized for issuance thereunder, to at least the extent required to convert all of the outstanding Series G Preferred, each outstanding share of Series G Preferred shall automatically be converted into one share of Company common stock (subject to adjustment under certain limited circumstances) (the “Series G Conversion Ratio”).
Liquidation. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, holders of Series G Preferred will be entitled to participate, on an as-converted-to-common stock basis calculate based on the Series G Conversion Ratio, with holders of Company common stock in any distribution of assets of the Company to holders of the Company’s common stock.
Redemption
Right.
At November 30, 2024, shares of the issued Series G Convertible Preferred Stock were outstanding.
Series H Convertible Preferred Stock
On January 26, 2024, the Company filed a Certificate of Designation of Series H Convertible Preferred Stock (the “Series H Certificate of Designation”) with the Secretary of State of the State of Nevada, designating shares of the Company’s preferred stock as Series H Preferred Stock, par value $ per share (the “Series H Preferred”).
| 18 |
The terms and conditions set forth in the Series H Certificate of Designation are summarized below:
Ranking. The Series H Preferred rank pari passu to the Company’s common stock.
Dividends. Holders of Series H Preferred will be entitled to dividends, on an as-converted basis, equal to dividends actually paid, if any, on shares of Company common stock.
Voting. Except as provided by the Company’s Articles or as otherwise required by the Nevada Revised Statutes, holders of Series H Preferred are entitled to vote with the holders of outstanding shares of Company common stock, voting together as a single class, with respect to all matters presented to the Company’s stockholders for their action or consideration. In any such vote, each holder is entitled to a number of votes equal to the number of shares of common stock into which the Series H Preferred held by such holder is convertible. The Company may not, without the consent of holders of a majority of the outstanding shares of Series H Preferred, (i) alter or change adversely the powers, preferences or rights given to the Series H Preferred or alter or amend the Series H Certificate of Designation, (ii) amend its Articles or other charter documents in any manner that adversely effects any rights of the holders of the Series H Preferred, or (iii) enter into any agreement with respect to the foregoing.
Conversion. On such date that the Company amends its Articles to increase the number of shares of common stock authorized for issuance thereunder, to at least the extent required to convert all of the outstanding Series H Preferred, each outstanding share of Series H Preferred shall automatically be converted into one share of Company common stock (subject to adjustment under certain limited circumstances) (the “Series H Conversion Ratio”).
Liquidation. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, holders of Series H Preferred will be entitled to participate, on an as-converted-to-common stock basis calculate based on the Series H Conversion Ratio, with holders of Company common stock in any distribution of assets of the Company to holders of the Company’s common stock.
At November 30, 2024, shares of the issued Series H Convertible Preferred Stock were outstanding, which if converted as of November 30, 2024, would have resulted in the issuance of shares of common stock.
Series I Convertible Preferred Stock
On February 22, 2024, the Company filed a Certificate of Designation of Series I Convertible Preferred Stock (the “Series I Certificate of Designation”) with the Secretary of State of the State of Nevada, designating shares of the Company’s preferred stock as Series I Convertible Preferred Stock, par value $ per share (the “Series I Preferred”).
The terms and conditions set forth in the Series I Certificate of Designation are summarized below:
Ranking. The Series I Preferred rank pari passu to the Company’s common stock.
Dividends. Holders of Series I Preferred will be entitled to dividends, on an as-converted basis, equal to dividends actually paid, if any, on shares of Company common stock.
Voting. Except as provided by the Articles, or as otherwise required by the Nevada Revised Statutes, holders of Series I Preferred are entitled to vote with the holders of outstanding shares of Company common stock, voting together as a single class, with respect to all matters presented to the Company’s stockholders for their action or consideration. In any such vote, each holder is entitled to a number of votes equal to the number of shares of common stock into which the Series I Preferred held by such holder is convertible. The Company may not, without the consent of holders of a majority of the outstanding shares of Series I Preferred, (i) alter or change adversely the powers, preferences or rights given to the Series I Preferred or alter or amend the Series I Certificate of Designation, (ii) amend its Articles or other charter documents in any manner that adversely effects any rights of the holders of the Series I Preferred, or (iii) enter into any agreement with respect to the foregoing.
| 19 |
Conversion. On such date that the Company amends its Articles to increase the number of shares of common stock authorized for issuance thereunder, to at least the extent required to convert all of the outstanding shares of Series I Preferred, each outstanding share of Series I Preferred shall automatically be converted into one share of Company common stock (subject to adjustment under certain limited circumstances) (the “Series I Conversion Ratio”).
Liquidation. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, holders of Series I Preferred will be entitled to participate, on an as-converted-to-common stock basis calculated based on the Series I Conversion Ratio, with holders of Company common stock in any distribution of assets of the Company to holders of the Company’s common stock.
On
August 15, 2024, the Company entered into a securities purchase agreement with an investor for the sale of shares of Series I Convertible
Preferred Stock, at $ per share, resulting in gross proceeds to the Company of $
On
August 31, 2024, the Company entered into a securities purchase agreement with an investor for the sale of shares of
Series I Convertible Preferred Stock at $ per share, resulting in gross proceeds to the Company of $
On
October 1, 2024, the Company entered into a securities purchase agreement with an investor for the sale of shares of
Series I Convertible Preferred Stock at $ per share, resulting in gross proceeds to the Company of $
Between October 30, 2024 and November 5, 2024, the Company issued shares of Series I Convertible Preferred Stock to third parties in connection with investor relations services.
At November 30, 2024, shares of the issued Series I Convertible Preferred Stock were outstanding, which if converted as of November 30, 2024, would have resulted in the issuance of shares of common stock.
Stock Options
On December 28, 2023, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved the adoption of the NextTrip 2023 Equity Incentive Plan (the “2023 Plan”). shares of common stock have been reserved for issuance under the 2023 Plan., and as of November 30, 2024, all of such shares are available for issuance.
The Company’s 2013 Equity Incentive Plan expired on March 15, 2023. As such, no new grants may be made under the 2013 Plan. At November 30, 2024, there were shares of common stock reserved for issuance upon exercise of outstanding stock options issued under the 2013 Plan prior to its expiration, and an additional shares reserved for issuance pursuant to outstanding inducement options.
There were issuances of stock options for the nine months ended November 30, 2024 or November 30, 2023.
The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s common stock on the grant date, but not less than 100% of the fair market value. Stock options are typically granted throughout the year and generally vest over a period from one to three years of service and expire five years from the grant date, unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the vesting period for each stock option award.
Total stock-based compensation expense included in the statements of operations for the three and nine months ended November 30, 2024 was $ and $, respectively, all of which was related to stock options. There was $ stock-based compensation included in the statements of operations for the three and nine months ended November 30, 2023.
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| Options | Weighted Average Exercise Price ($) |
Weighted Average Remaining Contractual Life (Yrs.) |
Aggregate Intrinsic Value ($) |
|||||||||||||
| Options outstanding at February 28, 2023 | - | |||||||||||||||
| Options assumed pursuant to reverse acquisition | ||||||||||||||||
| Exercised | - | |||||||||||||||
| Forfeited or cancelled | ( |
) | - | |||||||||||||
| Options outstanding at February 29, 2024 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | - | |||||||||||||||
| Forfeited or cancelled | ( |
) | - | |||||||||||||
| Options outstanding November 30, 2024 | ||||||||||||||||
| Options expected to vest in the future as of November 30, 2024 | ||||||||||||||||
| Options exercisable at November 30, 2024 | ||||||||||||||||
| Options vested, exercisable, and options expected to vest at November 30, 2024 | ||||||||||||||||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At November 30, 2024, no option had an exercise price below the $ closing price of our common stock as reported on the Nasdaq Capital Market.
At November 30, 2024, there was $ of unrecognized stock-based compensation expense related to unvested stock options with a weighted average remaining recognition period of years.
Stock Appreciation Rights
The purposes of the 2020 Stock Appreciation Rights Plan (the “SAR Plan”) are to: (i) enable the Company to attract and retain the types of employees, consultants, and directors (collectively, “Service Providers”) who will contribute to the Company’s long-range success; (ii) provide incentives that align the interests of Service Providers with those of the stockholders of the Company; and (iii) promote the success of the Company’s business. The SAR Plan provides for incentive awards only in the form of stock appreciation rights payable in cash (“SARs”) and no shares of common stock are reserved or will be issued pursuant to the SAR Plan.
SARs may be granted to any Service Provider. A SAR is the right to receive an amount equal to the Spread with respect to a share of the Company’s common stock (“Share”) upon the exercise of the SAR. The “Spread” is the difference between the exercise price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of exercise of the SAR. The exercise price per share will not be less than 100% of the fair market value of a share of common stock on the date of grant of the SAR. The administrator of the SAR Plan will have the authority to, among other things, prescribe the terms and conditions of each SAR, including, without limitation, the exercise price and vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant.
The Company did not grant any SAR’s during the nine months ended November 30, 2024 or November 30, 2023.
The Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the vesting period for each SAR award. The SARs are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock Compensation,” and any changes in fair value are reflected in the Statement of Operations as of the applicable reporting date.
| 21 |
| SARs | Weighted Average Exercise Price ($) |
Weighted Average Remaining Contractual Life (Yrs.) |
Aggregate Intrinsic Value ($) |
|||||||||||||
| SARs outstanding at February 28, 2023 | - | |||||||||||||||
| SARs assumed pursuant to reverse acquisition | ||||||||||||||||
| Exercised | - | |||||||||||||||
| Forfeited or cancelled | - | |||||||||||||||
| SARs outstanding at February 29, 2024 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | - | |||||||||||||||
| Forfeited or cancelled | ( |
) | - | |||||||||||||
| SARs outstanding November 30, 2024 | ||||||||||||||||
| SARs expected to vest in the future as of November 30, 2024 | ||||||||||||||||
| SARs exercisable at November 30, 2024 | ||||||||||||||||
| SARs vested, exercisable, and SARs expected to vest at November 30, 2024 | ||||||||||||||||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At November 30, 2024, no SAR had an exercise price below the $ closing price of our common stock as reported on the Nasdaq Capital Market.
At November 30, 2024, there was $ of unrecognized stock-based compensation expense related to unvested SARs with a weighted average remaining recognition period of years.
Warrants
Warrant activity for the nine months ended November 30, 2024 and the year ended February 29, 2024 was as follows:
| Warrants | Weighted Average Exercise Price ($) | Weighted Average Remaining Contractual Life (Yrs.) | ||||||||||
| Warrants outstanding at February 28, 2023 | - | |||||||||||
| Warrants assumed pursuant to reverse acquisition | ||||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Forfeited or cancelled | - | |||||||||||
| Warrants outstanding at February 29, 2024 | ||||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Forfeited or cancelled | ( | ) | - | |||||||||
| Warrants outstanding at November 30, 2024 | ||||||||||||
| 22 |
NOTE 9 - Subsequent Events
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
Upon
the closing of the Acquisition, the members of NTG were issued a number of Exchange Shares equal to
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.
Related Party Promissory Notes
Between
December 1, 2024 and January 10, 2025, additional net related party advances under promissory notes totaled $
On
September 13, 2024, the Company’s board of directors approved the conversion of up to
| 23 |
On
December 31, 2024, the Company entered into debt conversion agreements (the “Related Party Debt Conversion Agreements”) with
its chief executive officer William Kerby and chairman of the board Donald P. Monaco (the “Related Parties”) whereby the
Related Parties and the Company agreed to convert $
The Series L Preferred shall be convertible into the Company’s common stock (the “Common Stock”) on such date that the Company obtains stockholder approval to remove the Exchange Cap, subject to beneficial ownership limitations.
December 2024 Alumni Capital LLC Promissory Note Repayment
On December 19, 2024, pursuant to the terms of the Alumni Capital LLC short-term promissory note, the Company repaid the entire amount of the outstanding principal, including the discount, plus accrued interest thereon.
December 2024 Series J Preferred Stock Offering
On December 31, 2024, the Company entered into a securities purchase agreement (the “Series J Purchase Agreement”) with certain accredited investors (the “Purchasers”), pursuant to which the Company issued and sold an aggregate of restricted shares of newly designated Series J Nonvoting Convertible Preferred Stock of the Company (the “Series J Preferred”), (the “Series J Offering”) at a purchase price of $ per share.
The Series J Preferred shall be convertible into the Company’s common stock (the “Common Stock”) on such date that the Company obtains stockholder approval to remove the Exchange Cap
December 2024 Promissory Note and Warrant
On
December 3, 2024, the Company sold a short-term promissory note to an existing note holder for total consideration of $
December 2024 Series K Preferred Stock, Warrant and Unsecured Promissory Note Offering
On
December 31, 2024, the Company entered into a series of agreements whereby an investor agreed to loan the Company up to $
Concurrently,
on December 31, 2024, the Company entered into a series of agreements whereby additional investors agreed to loan the Company $
In
connection with the $220k Note, the investors also received fifteen percent (
Each Series K investor entered into a securities purchase agreement (the “Series K Purchase Agreement”) whereby an aggregate of restricted shares of Series K Preferred, (the “Series K Offering”) at a purchase price of $ per share.
The Series K Preferred shall be convertible into the Company’s common stock (the “Common Stock”) on such date that the Company obtains stockholder approval to remove the Exchange Cap.
Series M Preferred Stock Offering and Debt Conversion
On December 31, 2024, the Company entered into a securities purchase agreement (the “Series M Purchase Agreement,” and together with the Series J Purchase Agreement and Series K Purchase Agreement, the “Purchase Agreements”) with certain accredited investors (the “Purchasers”), pursuant to which the Company may issue and sell up to $ of restricted shares of newly designated Series M Nonvoting Convertible Preferred Stock of the Company (the “Series M Preferred”), (the “Series M Offering,” and together with the Series J Offering, Series K Offering and Series L Offering, the “Offerings”) at a purchase price of $ per share.
In
addition, as part of the Series M Offering, on December 31, 2024, the Company entered into a debt conversion agreement (the “Debt
Conversion Agreement,” and together with the Related Party Debt Conversion Agreements, the “Debt Conversion Agreements”)
with an existing lender whereby the lender and the Company agreed to convert $
The Series M Preferred shall be convertible into the Company’s Common Stock on such date that the Company obtains stockholder approval to remove the Exchange Cap.
| 24 |
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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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,
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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.
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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.
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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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of disclosure controls and procedures and changes in internal controls over financial reporting.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and our Chief Financial Officer, after evaluating our “disclosure controls and procedures” (as defined in Exchange Act Rules 13a 15(e) and 15d 15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, where appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Controls Over Financial Reporting
During the first six months of the year, management implemented several enhancements to its control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act), including, but not limited to, establishing a monthly financial closing process, implementing account reconciliations, ensuring proper segregation of duties, and implementing new financial control software. These enhancements were completed by August 31, 2024.
There were no other changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 1A. RISK FACTORS.
You should consider the “Risk Factors” included under Item 1A of our Annual Report on Form 10-K for the year ended February 29, 2024 filed with the SEC on September 4, 2024, as well as the following updated Risk Factor:
As of November 30, 2024, we had $15,385 in cash and a working capital deficit of $4,869,586. Our existing cash on hand and anticipated revenues are not sufficient to fund our anticipated operating costs. We will need to raise additional financing to fund our operations, maintain compliance with the Nasdaq continued listing requirements and implement our business plan. 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 operations. We have no current understanding or arrangement to obtain any additional financing. To the extent that funds are not available to us, we may be required to delay, limit, or terminate our business operations and may lose our Nasdaq listing.
In light of the foregoing, 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,
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On August 15, 2024, the Company entered into a securities purchase agreement with an investor for the sale of 4,967 shares of Series I Convertible Preferred Stock, at $3.02 per share, resulting in gross proceeds to the Company of $15,000.
On August 31, 2024, the Company entered into a securities purchase agreement with an investor for the sale of 24,834 shares of Series I Convertible Preferred Stock, at $3.02 per share, resulting in gross proceeds to the Company of $75,000.
In the second quarter of 2024, the Company issued 42,709 shares of common stock to a service provider as partial compensation for development work related to Compass.TV, the Company’s FAST channel.
On September 19, 2024, the Company issued 32,786 shares of common stock to Alumni Capital as commitment shares related to its $10 million equity line of credit.
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, resulting in gross proceeds to the Company of $200,000.
On October 25, 2024, the Company issued 8,065 shares of common stock to Five Star Alliance LLC in connection with executing a non-binding letter of intent as a deposit towards a potential acquisition.
On December 16, 2024, the Company issued 28,281 common shares to Out of the Box Capital Inc. in connection with investor relations services.
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On December 31, 2024, the Company entered into a securities purchase agreement (the “Series J Purchase Agreement”) with certain accredited investors (the “Purchasers”), pursuant to which the Company issued and sold an aggregate of 297,788 restricted shares of newly designated Series J Nonvoting Convertible Preferred Stock of the Company (the “Series J Preferred”), (the “Series J Offering”) at a purchase price of $3.02 per share.
On December 31, 2024, the Company issued 60,595 shares of its newly designated Series K Convertible Preferred Stock at $3.02 per share to investors as prepaid interest in connection with two bridge loans.
On December 31, 2024, the Company issued 165,562 and 413,907 shares of its newly designated Series L Convertible Preferred Stock at $3.02 per share to Messrs. Kerby and Monaco, respectively, in connection with their conversion of promissory notes.
On December 31, 2024, the Company issued 133,278 shares of its newly designated Series M Convertible Preferred Stock at $3.02 per share to an investor in connection with the conversion of promissory notes.
The aforementioned securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and were issued to the respective recipients in transactions exempt from registration under the Securities Act in reliance upon the exemption from registration provided by Section 4(a)(2) under the Securities Act and/or Regulation D promulgated thereunder. Accordingly, the securities constitute “restricted securities” within the meaning of Rule 144 under the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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ITEM 5. OTHER INFORMATION.
Rule 10b5-1 Trading Plans
During
the three months ended November 30, 2024, none of our directors or officers entered into,
ITEM 6. EXHIBITS.
* Filed herewith.
** Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NEXTTRIP, INC. | ||
| January 14, 2025 | By: | /s/ William Kerby |
| William Kerby | ||
Chief Executive Officer (Principal Executive Officer) | ||
| January 14, 2025 | By: | /s/ Frank Orzechowski |
| Frank Orzechowski | ||
Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | ||
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