Nexttrip, Inc. annual report, FY2024

Business context and reporting period

NextTrip, Inc. (Nasdaq: NTRP) filed this Form 10-K for the fiscal year ended February 29, 2024, with fiscal 2023 as the comparable year. Although the filing metadata refers to 2023 Q4, the filing reports annual results, not standalone fourth-quarter results. The financial statements present NextTrip as the accounting acquirer in its December 29, 2023 reverse acquisition of Sigma Additive Solutions; comparative operating results principally reflect NextTrip’s travel business.

NextTrip is developing a travel booking and technology business, including the NXT2.0 platform, travel content and planned ad-supported streaming services. The company said the leisure website fully launched in May 2024; Compass.TV and MyBucketList were planned for fall 2024.

Key financial metrics

Revenue increased 19.8%; gross margin improved, but remained low. Operating expenses rose 15.3%, with higher professional fees and depreciation and amortization partly offset by lower salaries, marketing and technology expense. The year’s losses also included a $1,567,665 reserve against a defaulted related-party receivable and $675,314 of discontinued-operation costs, primarily legacy Sigma retention bonuses and wind-down expenses. No income tax provision was recorded.

At year-end, total assets were $5,088,842, total liabilities $1,960,813 and stockholders’ equity $3,128,029. The balance sheet reports $1,000,000 net for the NextPlay promissory note receivable; management disclosed a $2,567,665 gross balance and a $1,567,665 allowance because NextPlay was in default and collection was uncertain. Current liabilities included $828,277 of related-party notes payable. The company raised $4,791,804 in financing proceeds during the year, including common and preferred stock, convertible notes and related-party advances.

Liquidity note: The filing gives two working-capital deficit figures for February 29, 2024: $245,005 in the risk factors and MD&A, and $262,005 in the financial-statement note. The latter matches reported current assets of $1,698,808 less current liabilities of $1,960,813. The filing text does not reconcile the difference.

Material changes versus the prior year

• Revenue rose by $75,920, while operating expenses increased by $760,811 and net loss applicable to common shareholders widened by $2,305,780.
• Operating cash use increased by $1,938,809, including cash used by discontinued operations. Investing activities provided $980,935, compared with $4,290,930 used in the prior year, reflecting the reverse acquisition and asset sale as well as changes in software-development spending.
• Convertible notes were converted in connection with the reverse acquisition; no convertible notes remained on the February 29, 2024 balance sheet. The company also recorded a $1,567,665 allowance against the NextPlay note receivable.
• The reverse acquisition and Sigma legacy-asset sale changed the company’s business and capital structure. The filing reports 936,430 common shares outstanding at fiscal year-end and 1,388,641 at August 31, 2024.

Outlook, risks and unusual items

There is substantial doubt about the company’s ability to continue as a going concern. The auditor’s report highlights this uncertainty, and management estimates it needs at least $5.5 million in net proceeds to fund operations for the next 12 months. Year-end cash was $323,805, and operating cash use was $5.7 million for the year. After year-end, the company disclosed borrowing from related parties and other investors; the filing reports $1,416,553 advanced under one group of notes by August 31, 2024, as well as a separate $500,000 line of credit fully advanced. Additional financing is not assured and could be dilutive or carry restrictive terms.

The company provided no quantified revenue or profitability guidance. It anticipated higher year-over-year revenue compared with fiscal 2023, while emphasizing that planned revenue streams are not yet sufficient to cover operating costs. Key execution risks include the need to convert website traffic and supplier inventory into bookings, intense competition, marketing costs, dependence on third-party technology and payment providers, cybersecurity and privacy exposure, and sensitivity to travel demand and disruption.

Nasdaq notified the company in June and July 2024 that it was not compliant with timely-filing requirements because the 10-K and the quarter ended May 31, 2024 10-Q had not been filed on time. The company submitted a compliance plan on August 16, 2024; the 10-K was signed and filed September 4, 2024. The filing says there was no immediate effect on the listing, but continued compliance and the status of the delinquent 10-Q remained risks as of the disclosures included.

Management identified a material weakness in disclosure controls and internal control over financial reporting due to insufficient personnel with GAAP expertise, and concluded both were ineffective at February 29, 2024. It said remediation steps—including hiring GAAP-experienced staff, engaging consultants and improving closing and reconciliation processes—were completed by the filing date. The company also disclosed significant potential dilution, including up to 5,843,993 contingent acquisition shares, 486,165 warrants, preferred securities and a 7,000,000-share equity incentive plan.

The filing’s legal disclosures are not fully aligned: Item 3 says the company was not then party to legal proceedings, while the financial-statement note says it was involved in pending matters that could individually or collectively materially adversely affect financial condition or results. The filing does not identify those matters or quantify potential exposure in the provided text.

Most important facts for investors to verify

• Whether the company can raise the stated minimum $5.5 million, meet debt and operating obligations, and address the auditor’s going-concern warning.
• The actual current status and terms of post-year-end related-party and other borrowings, including amounts outstanding, maturities and interest.
• Collection prospects for the defaulted NextPlay receivable and support for the $1,567,665 allowance.
• Current Nasdaq filing compliance, particularly the status of the May 31, 2024 Form 10-Q, and continued listing compliance.
• Progress and measurable commercial results from the May 2024 leisure-site launch and planned media products, compared with the company’s cash needs.
• The reconciliation of the $245,005 versus $262,005 working-capital deficit, and clarification of the differing legal-proceedings disclosures.
• Potential dilution from contingent acquisition consideration, preferred securities, warrants, options and the equity incentive plan, against the latest share count.
• Whether management’s stated control remediation has been implemented effectively and independently validated in subsequent reporting.