NextTrip, Inc.: Form 10-Q for the period ended May 31, 2024

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

Sigma Additive Solutions, Inc. (“Sigma”), the legal acquiror of NextTrip, was initially incorporated as Messidor Limited in Nevada on December 23, 1985, and changed its name to Framewaves Inc. in 2001. On September 27, 2010, the name was changed to Sigma Labs, Inc. On May 17, 2022, Sigma Labs, Inc. began doing business as Sigma Additive Solutions, and on August 9, 2022, changed its name to Sigma Additive Solutions, Inc.

On March 11, 2024, Sigma filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation, as amended 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.”

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 (http://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.

Prior to the Exchange Agreement, as described below, NextTrip Holdings, Inc. (“NextTrip”) was a wholly owned subsidiary of NextTrip Group, LLC (“Group”), which in turn, was a wholly owned subsidiary of NextPlay Technologies, Inc. (“NextPlay”). All of the business operations of Group were conducted through its subsidiaries. On January 25, 2023, NextPlay and Group entered into an Amended and Restated Separation Agreement (“Separation Agreement”), Amended and Restated Operating Agreement (“Operating Agreement”), and Exchange Agreement (“Exchange Agreement”, and together the “Agreements”), whereby NextPlay transferred their interest in the travel business to Group. Pursuant to the Exchange Agreement, NextPlay exchanged 1,000,000 Membership Units of Group for 400,000 Preferred Units of Group, with a value of $10 per unit. Prior to the exchange for Preferred Units, Group had a payable due to NextPlay of $17,295,873, representing cash advances and payment of expenses by NextPlay on behalf of Group, while NextPlay had obligations to provide ongoing support to NextTrip. Such liability was settled by the issuance of the Preferred Units and the waiver of all of NextPlay’s ongoing support obligations except for a $1.5 million advance remaining under a promissory note, and as such NextTrip recorded the payable as contributed capital.

The Company provides travel technology solutions with sales originating in the United States, with a primary emphasis on hotels, air, and all-inclusive travel packages. Our proprietary booking engine, branded as NextTrip 2.0, provides travel distributors access to a sizeable inventory.

The Company owns 50% of Next Innovation LLC (Joint Venture) and this entity is in the process of a first structure plan. No activities nor operations occurred in 2023 or 2024 for this entity and NextTrip, Inc. does not have control of the company and therefore no minority interest was recorded.

Reverse Acquisition

On October 12, 2023, Sigma entered into a Share Exchange Agreement (as amended, the “Exchange Agreement”) with NextTrip, Group, and William Kerby (the “NextTrip Representative”). Under the terms of the Exchange Agreement, the parties agreed that Group would sell and transfer to Sigma all of the issued and outstanding shares of NextTrip in exchange for 156,007 restricted shares of Sigma common stock (the “Closing Shares”), issuable at closing, and the right to receive up to an additional 5,843,993 restricted shares of Sigma common stock upon satisfaction of certain milestones set forth in the Exchange Agreement (the “Contingent Shares,” and together with the Closing Shares, the “Restricted Shares”), which Restricted Shares are issuable to the members of Group, on a pro rata basis, under the terms of the Exchange Agreement, subject to certain closing conditions (the “Acquisition”). Upon the closing of the Acquisition on December 29, 2023, NextTrip became a wholly owned subsidiary of Sigma.

The Contingent Shares, together with the Closing Shares, will not exceed 6,000,000 shares of Sigma common stock, or approximately 90.2% of the issued and outstanding shares of Sigma common stock immediately prior to the closing. The Acquisition will likely result in a change of control, with the members of Group receiving an aggregate number of shares that exceeds the number of shares that held by the legacy shareholders of Sigma. As a result, the Acquisition is accounted for as a reverse acquisition of NextTrip by Sigma, whereby Sigma is treated as the legal acquirer and NextTrip is treated as the accounting acquirer. As a result, the historical financial information presented is that of NextTrip.

In accordance with ASC 805-40-45-1, the consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (NextTrip, Inc., f/k/a Sigma Additive Solutions, Inc.) but described in the notes to the financial statements as a continuation of the financial statements of the legal subsidiary (NextTrip), with one adjustment, which is to retroactively adjust the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree. That adjustment is required to reflect the capital of the legal parent. Comparative information presented in the consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent.

Under ASC 805-40-45-2, the consolidated financial statements represent the continuation of the legal subsidiary except for the capital structure, as follows:

(a) The assets and liabilities of the legal subsidiary recognized and measured at their pre-combination carrying amounts;

(b) The assets and liabilities of the legal parent recognized and measured in accordance with the guidance in this topic applicable to business combinations (ASC 805);

(c) The retained earnings and other equity balances of the legal subsidiary before the business combination;

(d) The amount required to be recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary outstanding immediately before the business combination to the fair value of the legal parent determined in accordance with the guidance in ASC 805 applicable to business combinations. However, the equity structure reflects the equity structure of the legal parent, including the equity interests the legal parent issued to affect the combination. Accordingly, the equity structure of the legal subsidiary is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition.

The assets and liabilities of Sigma Additive Solutions, Inc. were recognized at fair value 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.

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 three months ended May 31, 2024 and 2023, there was no bad debt expense recorded related to the allowance account, and the allowance is unchanged as of May 31, 2024. As of May 31, 2023, no allowance for doubtful accounts was established.

Business Overview

NextTrip, Inc. (the “Company,” “NextTrip,” “we,” “us” and “our”) is an innovative technology company that is building next generation solutions to power the travel industry. NextTrip, through its subsidiaries, provides travel technology solutions with sales originating in the United States, leisure travel, business travel, groups travel, media and tech. We connect people to new places and discoveries by utilizing digital media engagement, seasoned planning expertise, and unique inventory to curate custom vacations and business travel across the globe. Our proprietary booking engine, branded as NXT2.0, provides travel distributors access to a sizeable inventory.

Our vision is to drive the evolution of the travel industry by merging advanced digital solutions with personalized travel services. Our core technology – a fully integrated travel booking platform – focuses on untapped and underserved sectors of the travel industry, intending to capture new markets. We expect that our future growth will be accelerated by interactive technology, immersive media and unparalleled travel industry expertise.

We believe NextTrip will revolutionize the travel industry by combining advanced digital technologies with personalized travel services. Our mission is to become the premier travel, media, and lifestyle brand, inspiring and empowering individuals to explore the world. Through our brands, including NextTrip Vacations, Travel Magazine, and Compass.TV, we aim to create a unique ecosystem that reduces dependency on traditional marketing methods, where major travel companies spend billions to attract customers.

Our strategy focuses on both the Media and Travel divisions working together to draw users into our ecosystem by offering the following benefits:

• Access to a wealth of highly relevant travel videos and articles for research.
• The ability to plan and save future travel destinations and activities on personalized profiles.
• Options to share travel ideas and communicate with others.
• Assistance from our concierge help desk and AI-powered solutions.
• The convenience of booking travel online or through a call center.
• Access to customer support before, during, and after travel.
• The opportunity to earn rewards that encourage repeat bookings.

Our ecosystem is built on four key pillars:

1. NextTrip: A comprehensive travel booking platform that offers curated, personalized, and seamless travel experiences for every budget and interest. Powered by the NXT2.0 booking platform, NextTrip serves as our direct-to-consumer transactional hub, providing users with detailed scheduling, pricing, and availability information for airlines, hotels, rental cars, and other travel products. We also offer dynamically assembled travel packages and provide valuable content, including destination information, maps, and travel details, all supported by our customer call center.

2. Travel Magazine: A trusted source of captivating travel inspiration, offering authentic stories, practical advice, and diverse perspectives to fuel wanderlust and create lasting vacation memories. Travel Magazine will soon launch MyBucketList, a platform designed for travelers to build and share their travel bucket lists with personalized suggestions, booking support, and local insights.

3. Compass.TV: Our Free Ad-supported Streaming TV (“FAST”) channel, slated for launch in fall 2024. Compass.TV will offer over 1,000 hours of travel shows and long-form travel content at launch. To draw users into the NextTrip ecosystem, the launch will be supported by travel influencers, promoted to our multi-million strong email list, and marketed to major streaming platforms like Roku and YouTube. Compass.TV plans to use artificial intelligence to personalize content, convert blogs and articles to video, and enable users to create custom videos. This platform will allow users to create fully customized FAST channels featuring vacation opportunities that can be explored and booked directly through the NextTrip booking engine.

4. PrometheanTV: A unique influencer-led platform that drives advertising revenue and content-to-commerce. We recently secured a perpetual license with Promethean TV, Inc., the developer of the Ignite TV interactive video platform. This technology will power Compass.TV and video content on Travel Magazine/MyBucketList, allowing for targeted advertising via video overlays, enabling viewers to purchase travel directly from their screens. This integration is designed to enhance customer engagement, drive ad-supported revenue, and increase travel transactions.

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By integrating the NextTrip booking platform across all our media platforms, we will enable users to research and book travel seamlessly from any of our offerings. Our ecosystem will encompass leisure travel, wellness travel, business travel, alternative lodging, and innovative technology and media solutions. We will engage with consumers throughout the entire travel planning journey, from initial research to post-travel, offering robust product options and preferred rates in top global destinations. We believe that NextTrip stands apart from other travel companies, providing users with the tools to create personalized vacation packages and travel solutions, resulting in a more rewarding experience than traditional pre-packaged offerings. This ensures a thriving and growing ecosystem that drives both travel transactions and targeted advertising revenue while supporting consumers on their travel journeys—truly a next-generation travel company.

Organizational History

Historical Monaker Group Business

NextTrip’s travel business was the principal business of NextPlay (then, Monaker Group, Inc. (“Monaker”)) until June 30, 2020, when Monaker entered into a share exchange transaction with HotPlay Enterprise Limited (“HotPlay”), resulting in HotPlay becoming a wholly owned subsidiary of Monaker and HotPlay’s business becoming the principal business of Monaker. Prior to this share exchange, the primary focus of Monaker had been its travel business, which included the sale of vacation rentals, and in particular, ALRs, to consumers through its proprietary booking engine. To support its travel offerings, Monaker introduced travelmagazine.com, featuring travel and lifestyle content to appeal to travelers researching destinations and planning future vacations. In January 2023, NextPlay spun the NextTrip business out to its founders to separate it from NextPlay’s primary business.

COVID-era Transition and Technology Development

The spread of the COVID-19 virus globally beginning in January 2020 severely impacted our business. Beginning in March 2020, many U.S. states and foreign countries began issuing “stay-at-home” orders and closed their borders to interstate and international travel. Such restrictions on travel, together with other measures implemented by governments around the world, severely restricted the level of economic activity around the world and had an unprecedented effect on the global travel industry. The public’s ability to travel was severely curtailed through border closures, mandated travel restrictions and limited operations of hotels, airlines, and additional voluntary or mandated closures of travel-related businesses from December 2019 through the beginning of 2022 (and beyond in some jurisdictions). Measures implemented during the COVID-19 pandemic led to unprecedented levels of temporary and permanent business closures, cancellations and limited new travel bookings, having a severe negative impact on our business, financial condition and results of operations.

Due to the significant decrease in demand for the travel related services provided by us during the peak of the COVID-19 pandemic, we shifted our focus to developing and enhancing our program offerings. For example, we began to develop our online media platform -TravelMagazine.com allowing consumers to research future travel options as well as enhancing the functionality of our booking engines, including developing a booking engine platform that allows customers to book packaged vacations and wellness programs along with the development of a platform to arrange and manage business travel.

Acquisition of Bookit.com Asset

Following NextTrip’s separation from NextPlay, our team focused on the continued technological development of its booking platform. As part of this development, we acquired a travel platform in June 2022 to help power our proprietary NXT2.0 booking technology. Previously, this technology powered the Bookit.com business, a well-established online leisure travel agent generating over $400 million in annual sales as recently as 2019 (pre-pandemic). As part of the acquisition of the assets of Bookit.com, we were not only able to acquire a proven technology platform that could be integrated with our core travel sectors, but we were also able to secure the Bookit.com database with millions of past travelers and opt-in consumers.

Since 2022, and the acquisition of the Bookit.com business, we have been focused on the holistic development and integration of the NXT2.0 technology platform, which serves as a base for current and future technology projects as well as proprietary system enhancements. This integration includes re-engaging with and re-negotiating more than 250 contracts with hotel, airline, and cruise suppliers, and securing 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.

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.

Recent Developments

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.”

Acquisition of Promethean FAST TV Exclusive License

We recently entered into a perpetual license agreement with Promethean TV, Inc. (“Promethean”), the owner and developer of the Ignite TV interactive video platform used for driving engagement and commerce. This license will form the basis for our FAST channel – Compasss.TV allowing for targeted advertising via video overlays, allowing the viewer to purchase travel from their screen. This integrated technology is intended to boost engagement with customers driving ad-supported revenue and travel transactions.

Our Fully Integrated Travel Booking Platform

We have established a direct-to-consumer presence though a number of websites, powered by the NXT2.0 booking platform. Today, the primary leisure platform is hosted on nexttrip.com and the media platform is hosted on travelmagazine.com.

NextTrip sells travel services to leisure and corporate customers across these websites. Our primary focus is our current offerings of scheduling, pricing and availability information for booking reservations for airlines, hotels, rental cars, as well as other travel products such as transfers, sightseeing tours, shows and event tickets. NextTrip sells these travel services both individually and as components of dynamically assembled packaged travel vacations and trips. In addition, we provide content that presents travelers with information about travel destinations, maps and other travel details.

Our online travel publication, travelmagazine.com, provides travelers around the world with inspiration for future vacation destinations and trips. The publication offers written articles, videos, and podcasts. The website is expected to be supported by advertising and allow for research and booking of vacation products.

Travel Products and Services

We are building an ecosystem with technology and product offerings that will include leisure travel, wellness travel, business travel, alternative lodging, technology and media solutions. We engage with consumers and distributors throughout the travel planning journey from planning through post-travel. Through direct relationships, we have established robust product offerings and preferred rates across the top destinations world-wide. Our primary product offerings are as follows:

• NextTrip Leisure brings travel solutions and a proprietary booking engine that allows customers to book customized travel, including vacation packages, airline tickets, hotel reservations, tours and activities, curated journeys, cruises, wellness and group travel.
• NextTrip Solutions offers technology solutions for product and inventory management as well as white label offerings including NextTrip products under their brand, and technology solutions. We are also developing a travel agent portal to drive bookings and travel agent brand loyalty.
• NextTrip Media includes Travel Magazine and the Compass.TV experience, which is currently in development. These digital solutions engage consumers at the initial phases of travel planning, offering relevant content, destination information and immersive online experiences as well as solutions for travel suppliers. This ecosystem, once fully developed, is expected to allow users to create their own fully customized FAST channel featuring vacation journey opportunities that customers can explore prior to booking the actual vacation.

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Products and Services for Travelers

Search Tools and Ability to Compare. Our online marketplace nexttrip.com provides travelers with the tools to search for and filter several travel products including air, car, accommodations (including ALRs) and activities based on various criteria, such as destination, travel dates, type of property, number of bedrooms, amenities, price, or keywords.

Traveler Login. Travelers are able to create accounts on our website(s) that give them access to their booking activity through the website. Members will also have access to special rates and discounts on the NextTrip product.

Travel Blog. Travel guides, videos and pictures as well as travel articles can be accessed through travelmagazine.com.

Security. We use a combination of technology and human review to evaluate the content of listings and to screen for inaccuracies or fraud with the goal of providing only accurate and trustworthy information to travelers. NextTrip is Payment Card Industry compliant to ensure the safety and security of its customer credit card data.

Communication. Travelers who create an account on our websites will receive regular communications, including notices about places of interest, special offers, new listings, and an email newsletter. The newsletter will be available to any traveler who agrees to receive it and offers introductions to new destinations and properties, as well as tips and useful information when traveling.

Since the COVID-19 pandemic arose, we have primarily focused on developing our booking engine and establishing relationships with suppliers to increase the size of our instantly bookable inventory. The booking engine has produced little revenue to date because of, among other reasons, the efforts that have been taken to integrate the NextTrip travel platforms with the Bookit.com technology since its acquisition in the summer of 2022. The new platform was launched in beta in May 2023 with a limited number of hotel properties in Mexico and the Caribbean. We have expanded our distribution since launch to include over one million hotel properties worldwide and have completed a full launch of the leisure travel website in May 2024.

Key Revenue Drivers

NextTrip’s fully integrated travel booking platform serves as the foundation of our revenue-generating business. The platform contains a robust booking engine with merchandising capabilities that drive increased conversions and higher per revenue transactions. We plan to leverage the bookit.com foundational travel database consisting of several million customers to further drive revenues. Those revenues consist primarily of commissions and bookings but are expanding to include affiliate commerce, advertising and sponsored content (via Compass.TV and Travel Magazine).

In addition, as the booking platform expands, it establishes an opportunity for product expansion and revenue from technology licensing, including white-labeling key technology. A monthly software-as-a-service (“SaaS”) model is being established around key technology developments and innovative platforms, including turn-key booking solutions, product management and targeted audience offerings.

Advancing Travel: Future Research & Development Driving Growth

As we expand the reach of our booking platforms, including to different underserved areas of the travel industry, we plan to focus on future technologies to drive growth by investing in research and development.

Compass.TV

As FAST gains momentum globally, we are in the process of developing Compass.TV, with a targeted launch in the fall of 2024. Our innovative travel channel is being developed in conjunction with our perpetual license with Promethean discussed above. With over 1,000 hours of relevant travel content secured, Compass.TV intends to utilize artificial intelligence (“AI”) to personalize content, convert blogs and articles to video, and empower users to create custom travel channels. Integration with the NextTrip Concierge desk will enable seamless booking and assistance.

NextTrip recognizes the pivotal role of video in promoting travel sales and engagement, hence our focus on incorporating video across platforms. To maximize effectiveness, NextTrip has entered into the license with Promethean enabling targeted advertising and transactional capabilities without interrupting content.

Travel Magazine

We are transforming our Travel Magazine website into a social media platform catering to all things travel. The site was re-launched mid-2024, and features enhanced media capabilities and targeted advertising using the Promethean solution. A private consumer section called “MyBucketList,” is targeted for release in the fall of 2024 and will feature connectivity to booking engines, AI travel planner assist and AI-driven content creation.

My Bucket List

With My Bucket List, NextTrip is building a technology solution catered to travelers to build and share their own travel bucket list with personalized suggestions, booking support and local insights.

Results of Operations

Three Months Ended May 31, 2024 and May 31, 2023

During the three months ended May 31, 2024, we recognized revenue of $188,793, as compared to $19,562 in the same period in 2023, an increase of $169,231, or 865%. 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.

Our cost of revenue for the three months ended May 31, 2024 was $173,581, as compared to $17,718 for the same period in 2023, an increase of $155,863, or 880%. The increase was primarily attributable to the increase in sales from the launch of NXT 2.0 in the first quarter of 2024 as compared to the first quarter of 2023.

Our total operating expenses for the three months ended May 31, 2024 were $1,967,613, as compared to $1,031,825 for the same period in 2023, an increase of $935,788, or 90.7%. 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 $626,752 for the three months ended May 31, 2024, as compared to $407,609 for the same period in 2023, an increase of $219,143, or 54%. The increase was comprised of: (a) an increase in salaries and benefits of 212,371 due to the conversion of booking engine contractors to employees and new accounting staff, and (b) an increase in taxes and benefits of $29,153. Partially offsetting the increase was a decrease in SAR expense of $22,381 due to revaluation in March of 2024.

Stock-based compensation was $16,394 for the three months ended May 31, 2024, as compared to $0 for the same period in 2023, an increase of $16,394. This increase was primarily a result of two employees that moved from Sigma Additive Solutions to NextTrip in 2024.

We incurred general and administrative costs of $27,555 during the three months ended May 31, 2024, as compared to $69,103 in the same period in 2023, a decrease of $41,548, or 60%. The decrease was primarily the result of an amortized lease expense in 2023 for $37,026 and $5,485 in penalties associated with the lease liability. Partially offsetting the decrease was an increase in filing fees of $1,796.

We incurred marketing costs of $156,188 during the three months ended May 31, 2024, as compared to $40,781 during the same period in 2023. The increase of $115,407, or 283%, was primarily due to the relaunch of NXT 2.0 booking engine in March of 2024 and ongoing maintenance with Travel Magazine. Marketing and advertising expenses increased by $50,525, contracted marketing services increased by $49,115, and Travel Magazine costs increased by $15,767. During the same period in 2023, the priority was the development of the booking engine, and the product was not ready to market.

We incurred technology costs of $184,669 during the three months ended May 31, 2024, as compared to $35,893 during the same period in 2023. The increase of $148,776, or 414.5% was primarily attributable to an increase in dues and subscription services of $99,649 for external travel services used in connection with our booking engine, and an increase cloud database and software expenses of $49,127 to host the booking engine.

Professional service fees incurred in the three months ended May 31, 2024 were $523,873, as compared to $134,370 incurred during the same period in 2023, an increase of $389,503, or 290%. This increase was a result of: (a) an increase in investor relations of $31,875; (b) an increase in legal expense of $173,911 due to the reverse acquisition and associated transactions; (c) an increase in accounting fees of $25,062 for audit and related financial services; (d) an increase in consulting fees of $89,613 due to a contract in connection with an independent financial advisory firm; (e) an increase in consultants contracted for services of $69,042 related to the FastTV channel, and maintenance and bug fixes with the booking engine.

Organizational costs for the three months ended May 31, 2024, were $28,737 as compared to $0 for the same period in 2023, an increase of $28,737. The increase resulted primarily from shareholder services expenses in connection with the Acquisition, transfer agent fees, and filing services.

Depreciation and amortization expense for the three months ended May 31, 2024 was $287,586, as compared to $336,339 for the same period in 2023, a decrease of $48,753, or 14.5%. The decrease was primarily due to no new equipment purchases and an increase in fully amortized intangible assets as of May 31, 2024.

Other operating expenses were $115,859 for the three months ended May 31, 2024, as compared to $ 7,730 for the same period in 2023. The $108,129 increase was primarily due to the additional cost of directors and officers insurance of $88,158 and an increase in merchant processing fees of $13,402.

In the three months ended May 31, 2024, we realized net other expense of $35,225, as compared to net other expense of $65,390 in the same period in 2023. The decrease in net other income of $30,165 was primarily due to a decrease in interest expense associated with convertible loans due to their conversion in connection with the Acquisition.

Preferred dividends for the three months ended May 31, 2024 were $10,668, 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 Acquisition.

In the three months ended May 31, 2024, the net loss from continuing operations totaled $1,987,626 as compared to a net loss from continuing operations of $1,095,371 for the same period in 2023. The operating loss component increased by $922,420 in 2024, partially offset by a decrease in the other loss component of $30,165.

The net gain from discontinued operations of $8,909 for the three months ended May 31, 2024 consisted primarily of revenue of $11,731 from legacy Sigma customers, and a gain of $5,961 from the settlement of a trade accounts payable at a discount, partially offset by expenses of $8,783 consisting of legal expenses and Sigma’s legacy investor relations website.

Our net loss applicable to common stockholders for the three months ended May 31, 2024, was $1,989,405, as compared to $1,095,371 for the same period in 2023, an increase of $894,034, or 81.6%. The increase was primarily attributable to an increase in operating loss from continued operations of $922,420 and an increase in preferred dividends of $10,688, partially offset by a gain from discontinued operations of $8,909, and a decrease in other expense of $30,165.

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 May 31, 2024, we had $36,679 in cash and a working capital deficit of $2,109,148, as compared with $323,805 in cash and a working capital deficit of $262,005 as of February 29, 2024. Additionally, at May 31, 2024, the amount due under our notes payable to related parties totaled $1,752,868.

Between June 1, 2024 and September 13, 2024, additional net related party advances totaled $978,822, and the aggregate outstanding principal balance of related party advances as of September 13 2024 was $2,731,690.

On September 13, 2024, the Company’s board of directors approved the conversion of up to 100% of the outstanding principal balance of the promissory notes held by Messrs. Kerby and Monaco into shares of a series of non-redeemable convertible preferred stock preferred stock yet to be designated. Messrs. Kerby and Monaco have agreed to initially convert $1,500,000, or 56.3% of their total outstanding principal balance of $2,666,790 into the new series of convertible preferred stock, and, at their discretion, may convert up to the remaining principal balance, or any portion thereof, into additional shares of such convertible preferred stock at a future date. The conversion remains subject to completion of final documentation for the transaction, including the filing of the certificate of designation for the new series of convertible preferred stock with the Nevada Secretary of State.

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:

• The cost of developing and maintaining our proprietary software and NXT2.0 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.

Net Cash Used in Operating Activities

Net cash used in operating activities from continuing operations totaled $1,151,220 as compared to $591,391 during the same period in 2023, an increase of $559,829, or 94.71%.

During the three months ended May 31, 2024, the net cash used in operating activities was the result of a net loss of $1,987,626 before preferred dividends, partially offset by changes in working capital of $532,426, and non-cash expenses of $303,980 related to depreciation and amortization of $287,586 and stock-based compensation of $16,394. Changes in working capital were driven by a decrease in accounts receivable of $6,322, an increase in deferred revenue of $14,280, and an increase in accounts payable and accrued expenses of $534,493, partially offset by an increase in prepaid expenses of $19,669.

During the three months ended May 31, 2023, the net cash used in operating activities was the result of a net loss of $1,095,371, partially offset by changes inworking capital of $130,615, and non-cash expenses of $373,365 related to depreciation and amortization. Changes in working capital were driven by an increase in accounts payable and accrued expenses of $147,231, partially offset by a decrease in accounts receivable of $5,000 and a decrease in deferred revenue of $11,616.

Net Cash Used in Investing Activities

Net cash used in investing activities during the three months ended May 31, 2024 was $169,406, which compares to $165,975 of cash used in investing activities during the same period of 2023, an increase of $3,431, or 2.1%. The decrease resulted from a slight decrease in capitalized software development costs during the first three months of 2024.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the three months ended May 31, 2024 was $1,024,591, as compared to $555,745 for the same period in 2023. The increase of $468,846, or 84.4% was due to an increase in advances from related parties of $909,091 and the issuance of a promissory note for $100,000 to an investor, partially offset by a decrease in the issuance of convertible notes of $540,245.

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 conflict in Ukraine, 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 NOTE 5 – Related Party Transactions 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.

Evaluation of disclosure controls and procedures and changes in internal controls over financial reporting.

Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), defines the term “disclosure controls and procedures” as those controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with the participation of our President and Chief Executive Officer, and our Chief Financial Officer and Treasurer, as of the end of the period covered by this quarterly report, management identified a material weakness in disclosure controls and procedures related to a lack of personnel with sufficient expertise in generally accepted accounting principles (“GAAP”). Specifically, the Company did not have individuals with extensive GAAP experience to adequately assess and apply GAAP requirements in the preparation and review of financial disclosures. As a result of this material weakness, management has concluded that, as of May 31, 2024 the Company’s disclosure controls and procedures were not effective.

During the three months ended May 31, 2024, management took steps to remediate the material weakness discussed above by hiring additional personnel with GAAP expertise, in particular the Company’s Controller, and engaging external consultants with subject matter expertise as necessary. Management also began implementing 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 remediation efforts were completed by the filing date of this Report.

As a result of these enhancements, management believes that the consolidated financial statements included in this Report fairly present, in all material respects, the financial condition, results of operations, and cash flows of the Company as of and for the periods presented.

PART II

OTHER INFORMATION

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 May 31, 2024, we had $36,679 in cash and a working capital deficit of $2,109,148. 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,