NextTrip, Inc 8-K/A, filed Jan 10, 2024
NextTrip, Inc. (NTRP)
About this 8-K/A
NextTrip, Inc filed this 8-K/A on January 10, 2024, reporting on events of December 29, 2023.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
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Explanatory Note
This Current Report on Form 8-K/A (this “First Amendment”) is being filed by Sigma Additive Solutions, Inc., a Nevada corporation (the “Company”), to amend that Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 3, 2024 (the “Original Report”), in which the Company reported, among other things, consummation of the acquisition (the “Acquisition”) of NextTrip Holdings, Inc. (“NextTrip”) pursuant to that Share Exchange Agreement entered into by and among the Company, NextTrip and certain other parties on October 12, 2023, as subsequently amended on November 19, 2023 (as amended, the “Exchange Agreement”).
This First Amendment amends and supplements the Original Report to provide the financial statements and pro forma financial information required by Items 9.01(a) and (b) of Form 8-K and a consent of auditors related thereto. No other amendments or modifications to the Original Report are being made by this First Amendment. This First Amendment should be read in connection with the Original Report, which provides a more complete description of the Acquisition, the Exchange Agreement, and transactions contemplated thereby.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The NextTrip audited consolidated financial statements as of and for the years ended February 28, 2023 and 2022, the accompanying notes and the independent auditor’s report related thereto are attached as Exhibit 99.1 hereto and are incorporated by reference herein.
The NextTrip unaudited consolidated financial statements as of and for the three and six months ended August 31, 2023 and 2022, along with the accompanying notes, are attached as Exhibit 99.2 hereto and are incorporated by reference herein.
(b) Pro Forma Financial Information
Certain unaudited pro forma condensed combined financial information of the Company, which give effect to the Acquisition, is filed as Exhibit 99.3 hereto and are incorporated herein by reference.
(d) Exhibits
See the accompanying Index to Exhibits, which information is hereby incorporated herein by reference.
INDEX TO EXHIBITS
| Exhibit Number | Description | |
| 23.1 | Consent of TPS Thayer, LLC | |
| 99.1 | NextTrip audited financial statements as of and for the years ended February 28, 2023 and 2022. | |
| 99.2 | NextTrip unaudited financial statements as of and for the three and six months ended August 31, 2023 and 2022. | |
| 99.3 | Unaudited pro forma condensed combined financial information of the Company. | |
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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 hereunto duly authorized.
| Date: January 10, 2024 | SIGMA ADDITIVE SOLUTIONS, INC. | |
| By: | /s/ William Kerby | |
| William Kerby | ||
| Chief Executive Officer | ||
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Form 8-K/A of Sigma Additive Solutions, Inc., of our report dated August 14, 2023, for the NextTrip Group, LLC. (“the Company”) consolidated financial statements, for the years ended February 28, 2023 and 2022. Our report dated August 14, 2023, contains an explanatory paragraph regarding the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
TPS Thayer LLC
Sugar Land, Texas
January 10, 2024
Exhibit 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Members of NextTrip Group, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NextTrip Group, LLC (the Company) as of February 28, 2023 and 2022, and the related consolidated statements of operations, changes in members’ equity, and cash flows for each of the years in the two-year period ended February 28, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended February 28, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has negative working capital and a stockholders’ deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
TPS Thayer, LLC
We have served as the Company’s auditor since 2020. Sugar Land, TX
August 14, 2023
CONSOLIDATED BALANCE SHEETS
As of February 28, 2023 and 2022
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 282,475 | $ | 231,050 | ||||
| Accounts receivables, net | - | 5,053 | ||||||
| Receivables – related party, net | 1,933,908 | - | ||||||
| Prepaid expenses and other current assets | 8,613 | 57,409 | ||||||
| Total Current Assets | 2,224,996 | 293,512 | ||||||
| Non-Current assets | ||||||||
| Property and equipment, net | 16,536 | 43,994 | ||||||
| Intangible assets, net | 2,768,360 | 1,190,763 | ||||||
| Security deposit | 15,000 | 15,000 | ||||||
| Right of Use Asset | 1,020,443 | - | ||||||
| Total Non-Current Assets | 3,820,339 | 1,249,757 | ||||||
| Total Assets | $ | 6,045,335 | $ | 1,543,269 | ||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 519,136 | $ | 302,059 | ||||
| Accrued expenses | 329,922 | 13,806 | ||||||
| Convertible Notes | 3,233,503 | - | ||||||
| Deferred revenue | 22,750 | 69,605 | ||||||
| Notes payable - related parties | 281,000 | 12,675,421 | ||||||
| Operating Lease Liability – Short Term | 149,339 | - | ||||||
| Total Current Liabilities | 4,535,650 | 13,060,891 | ||||||
Non- Current Liabilities | ||||||||
| Operating Lease Liability – Long Term | $ | 864,575 | $ | - | ||||
| Total Non-Current Liabilities | 864,575 | - | ||||||
| Total Liabilities | 5,400,225 | 13,060,891 | ||||||
| Commitments and Contingencies | - | - | ||||||
| Equity | ||||||||
| Preferred units: par value $10, 400,000 authorized, 400,000 and 0 issued and outstanding as of February 28, 2023 and 2022, respectively | 4,000,000 | - | ||||||
| Members’ interest; par value $0.0001, 0 and 1,000,000 authorized, 0 and 1,000,000 issued and outstanding as of February 28, 2023 and 2022, respectively. | - | 100 | ||||||
| Common units, par value $0.0001, 1,000,000 and 0 authorized, 915,000 and 0 issued and outstanding as of February 28, 2023 and 2022 respectively | 100 | - | ||||||
| Additional Paid in Capital | 13,295,773 | - | ||||||
| Accumulated deficit | (16,650,863 | ) | (11,517,722 | ) | ||||
| Total Members’ Equity | 645,110 | (11,517,622 | ) | |||||
| Total Liabilities and Members’ Equity | $ | 6,045,335 | $ | 1,543,269 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28, 2023 AND 2022
February 28, 2023 | February 28, 2022 | |||||||
| Revenue | $ | 382,832 | $ | 175,998 | ||||
| Cost of revenue | (354,921 | ) | (155,191 | ) | ||||
| Gross profit | 27,911 | 20,807 | ||||||
| Operating Expenses | ||||||||
| General and administrative | 3,574,251 | 2,940,826 | ||||||
| Sales and marketing | 708,047 | 1,370,889 | ||||||
| Depreciation and amortization | 806,883 | 1,060,587 | ||||||
| Total Operating Expenses | 5,089,181 | 5,372,302 | ||||||
| Operating loss | (5,061,270 | ) | (5,351,495 | ) | ||||
| Other (Income)/Expenses | ||||||||
| Other expenses | - | (1,129,468 | ) | |||||
| Impairment of intangible assets | - | 1,215,746 | ||||||
| Interest (income) expense, net | 71,871 | (8 | ) | |||||
| Foreign exchange (gain) loss | - | (1 | ) | |||||
| Total other (income) expense | 71,871 | 86,269 | ||||||
| Net loss before taxes | (5,133,141 | ) | (5,437,764 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net loss | $ | (5,133,141 | ) | $ | (5,437,764 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements
CONSOLIDATED STATEMENTS OF MEMBERS’ DEFICIT
FOR THE YEARS ENDED FEBRUARY 28, 2023 AND 2022
| Preferred | Common | Members | Additional Paid in | Accumulated Equity | Total Members’ | |||||||||||||||||||||||||||||||
| Units | Amount | Units | Amount | Interest | Amount | Capital | (Deficit) | (Deficit) | ||||||||||||||||||||||||||||
| Balance, February 28, 2021 | - | $ | - | - | $ | - | 1,000,000 | $ | 100 | $ | - | $ | (6,079,958 | ) | $ | (6,079,858 | ) | |||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (5,437,764 | ) | (5,437,764 | ) | |||||||||||||||||||||||||
| Balance, February 28, 2022 | - | - | - | - | 1,000,000 | 100 | - | (11,517,722 | ) | (11,517,622 | ) | |||||||||||||||||||||||||
| Conversion of member units | - | - | - | - | (1,000,000 | ) | (100 | ) | - | - | (100 | ) | ||||||||||||||||||||||||
| Issuance of preferred units | 400,000 | 4,000,000 | - | - | - | - | 13,295,873 | - | 17,295,873 | |||||||||||||||||||||||||||
| Issuance to of common units | - | - | 915,000 | 100 | - | - | - | - | 100 | |||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (5,133,141 | ) | (5,133,141 | ) | |||||||||||||||||||||||||
| Balance, February 28, 2023 | 400,000 | $ | 4,000,000 | 915,000 | $ | 100 | - | $ | - | $ | 13,295,773 | $ | (16,650,863 | ) | $ | 645,110 | ||||||||||||||||||||
The accompanying notes are an integral part of these financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 2023 AND 2022
February 28, 2023 | February 28, 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Loss | $ | (5,133,141 | ) | $ | (5,437,764 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 806,883 | 1,060,455 | ||||||
| Impairment of intangible assets | - | 1,215,746 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables – related party | - | (3,604 | ) | |||||
| Accounts receivable | 5,503 | - | ||||||
| Prepaid expenses | 48,796 | 45,170 | ||||||
| Security deposit | - | 14,234 | ||||||
| Right of use asset | 1,013,914 | - | ||||||
| Accounts payable and accrued expenses | 533,193 | (14,791 | ) | |||||
| Deferred revenue | (46,855 | ) | 13,171 | |||||
| Net cash used in operating activities | (2,772,157 | ) | (3,107,383 | ) | ||||
| Cash Flows from Investing activities: | ||||||||
| Purchase of equipment | (2,928 | ) | (26,772 | ) | ||||
| Lease liability | (1,020,443 | ) | - | |||||
| Purchase of intangible assets | (2,354,094 | ) | (1,717,087 | ) | ||||
| Net cash used in investing activities | (3,377,465 | ) | (1,743,859 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from notes payable - related party | 281,000 | - | ||||||
| Proceeds from issuance of convertible notes | 3,233,503 | - | ||||||
| Promissory note – related party | (1,933,908 | ) | - | |||||
| Advances from related party | 13,295,973 | 6,993,461 | ||||||
| Advances to related party | (8,675,521 | ) | (2,087,765 | ) | ||||
| Net cash provided by financing activities | 6,201,047 | 4,905,697 | ||||||
| Increase in cash | 51,425 | 54,455 | ||||||
| Cash - beginning of the period | 231,050 | 176,595 | ||||||
| Cash - end of the period | $ | 282,475 | $ | 231,050 | ||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | (1,769 | ) | $ | (8 | ) | ||
| Cash paid for taxes | $ | - | $ | - | ||||
| Non-Cash Financing Transactions | ||||||||
| Issuance of preferred units | $ | 4,000,000 | $ | - | ||||
| Related party advances settlement | $ | (4,000,000 | ) | $ | - | |||
The accompanying notes are an integral part of these financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 2023 AND 2022
1. Business Description and Going Concern
NextTrip Group, LLC (“NextTrip” or the “Company”) was incorporated on January 7, 2021 organized under the laws of the State of Florida. The operating agreement of NextTrip Group, LLC was entered into January 11, 2021 and made effective January 11, 2021. The Company’s head office is located at 1560 Sawgrass Corporate Pkwy, 4th Floor, Sunrise, FL, 33323. The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries, NextTrip Holdings Inc. incorporated October 22, 2015, and Extraordinary Vacations USA, Inc. incorporated June 24, 2002.
The Company provides travel technology solutions with sales originating in the United States, with a primary emphasis on alternative lodging rental (“ALR”) properties, hotel, air, cruise, and all-inclusive travel packages. Our proprietary booking engine, branded as NextTrip 2.0, provides travel distributors access to a sizeable inventory.
On January 25, 2023, NextPlay Technologies Inc. (“NextPlay”) and NextTrip Group, LLC (“NextTrip”) entered into an Amended and Restated Separation Agreement (“Separation Agreement”), Amended and Restated Operating Agreement (“Operating Agreement”), Exchange Agreement (“Exchange Agreement”), and together (“Agreements”) whereby NextPlay transferred their interest in the travel business to NextTrip. As per the Exchange Agreement, NextPlay exchanged 1,000,000 Membership Units of NextTrip for 400,000 Preferred Units in NextTrip. The Preferred Units have a value of $10.00 per Unit. NextTrip had a payable amount to NextPlay of $17,295,873. This was partial payment that was exchanged for the 400,000 Preferred Units in NextTrip as per the Exchange Agreement. Any intercompany amount owed after the separation date are to be considered a promissory note bearing 5% interest per annum. As per ASC 505-10-45-2 the reporting of the paid in capital is considered equity.
The Company has accounted for the business transfer on a retroactive basis. All assets, liabilities and results of operations assumed in this transaction are the basis of these financial statements.
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 and NextTrip Group, LLC does not have control on the company and therefore no minority interest was recorded.
Going Concern
As of February 28, 2023, and 2022, the Company had an accumulated deficit of $16,650,863 and $11,517,722 respectively, and working capital deficit of $1,112,788 and $12,721,563, respectively, and has incurred losses since incorporation. The Company will need to raise additional funds through equity or debt financings to support the on-going operations, increase market penetration of our products, expand the marketing and development of our travel and technology driven products, provide capital expenditures for additional equipment and development costs, payment obligations, and systems for managing the business including covering other operating costs until the planned revenue streams are fully implemented and begin to offset our operating costs. Failure to obtain additional capital to finance the Company’s working capital needs on acceptable terms, or at all, would negatively impact the Company’s financial condition and liquidity.
The Company has entered into a letter of intent, to vend into a public vehicle which if completed will provide the Company with sufficient resources to continue operations into the future (see note 16).
Recent Issues Surrounding the COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn.
The duration and severity of the COVID-19 pandemic impeded global economic activity for an extended period of time, even as restrictions have been lifted in many jurisdictions (including the United States) and vaccines are being made available, leading to decreased per capita income and disposable income, increased and sustained unemployment or a decline in consumer confidence, all of which significantly reduced discretionary spending by individuals and businesses on travel and may create a recession in the United States or globally. In turn, that could have a negative impact on demand for our services. We also cannot predict the long-term effects of the COVID-19 pandemic on our partners and their business and operations or the ways that the pandemic may fundamentally alter the travel industry. The aforementioned circumstances could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially for a prolonged period.
Although we currently cannot predict the full impact of the COVID-19 pandemic on our fiscal 2024 financial results relating to our operations, we anticipate an increase in year-over-year revenue as compared to fiscal year 2023. However, the ultimate extent of the COVID-19 pandemic and its impact on global travel and overall economic activity is constantly changing and impossible to predict currently. However, the Company is seeing the return to normal operations.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
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.
Functional and presentation currency
These financial statements are presented in United States dollars (“USD”), which is the Company’s functional and reporting currency. All financial information has been rounded to the nearest dollar except where otherwise indicated.
Limited Liability of Members
Limitations on Liability of Managers and Members. The liability of the Managers to the Company and the Members shall be limited to the extent, now or hereafter set forth in the Articles, this Operating Agreement and as provided under the Florida Act.
No Personal Liability. Except as otherwise provided in the Florida Act or by Applicable Law, no Members, Manager or Officer will be obligated personally for any debt, obligation or liability of the Company or of any Company Subsidiaries, whether arising in contract, tort or otherwise, solely by reason of being a Member, Manager and/or Officer.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include the carrying amounts of intangible assets, depreciation and amortization.
Information about key assumptions and estimation uncertainty that has a significant risk of resulting in a material adjustment to the carrying amounts of the Company’s assets and liabilities within the next financial year are referenced in the notes to the financial statements as follows:
| ● | The assessment of the Company to continue as a going concern; | |
| ● | The measurement and useful life of intangible assets and property and equipment | |
| ● | Recoverability of long lived assets |
Cash and Cash Equivalents
Cash consists of amounts denominated in US dollars. The Company has not experienced any losses on such accounts. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of February 28, 2023, or 2022.
Prepaids
The Company records cash paid in advance for goods and/or services to be received in the future as prepaid expenses. Prepaid expenses are expensed over time according to the terms of the purchase. Other current assets are recognized when it is probable that the future economic benefits will flow to the Company and the asset has a cost or value that can be measured reliably. It is then charged to expense over the expected number of periods during which economic benefits will be realized.
Accounts Receivable
Accounts receivables are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable.
The Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts become uncollectible, they will be charged to operations when that determination is made.
Accounts receivables balances as of February 28, 2023, and 2022, were 0 and $5,053, respectively. Receivables to a related party were $1,933,908 and $0 respectively. Management has determined that no allowance for credit losses is necessary as of February 28, 2023, or 2022.
Property and Equipment
Recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When parts of an item of property and equipment have different estimated useful lives, they are accounted for as separate items within property and equipment. The costs of the ongoing regular repairs and maintenance of property and equipment are recognized in the period in which they are incurred.
Depreciation
Depreciation is recognized in profit or loss over the estimated useful lives of each part of an item of property and equipment in a manner that most closely reflects management’s estimated future consumption of the future economic benefits embodied in the asset. The estimated useful lives for the Company’s property and equipment are as follows:
| Category | Method | Estimated useful life | ||||
| Furniture & Fixtures | Straight line | 5 years | ||||
| Computer & Equipment | Straight line | 3 years |
Intangible assets
The Company measures separately acquired intangible assets at cost less accumulated amortization and impairment losses. The Company recognizes internally developed intangible assets when it has determined that the completion of such is technically feasible, and the Company has sufficient resources to complete the development. Subsequent expenditures are capitalized when they increase the future economic benefits of the associated asset. All other expenditures are recorded in profit or loss as incurred.
The Company assesses whether the life of intangible asset is finite or indefinite. The Company reviews the amortization method and period of use of its intangible assets at least annually. Changes in the expected useful life or period of consumption of future economic benefits associated with the asset are accounted for prospectively by changing the amortization method or period as a change in accounting estimates in profit or loss. The Company has assessed the useful life of its trademarks as indefinite.
The estimated useful lives for the Company’s finite life intangible assets are as follows:
| Category | Method | Estimated useful life | ||||
| Software | Straight line | 3 years | ||||
| Software licenses | Straight line | 0.5 - 4 years |
Software Development Costs
The Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established by “ASC 985-20-25” Accounting for the Costs of Software to Be Sold, Leased, or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general release to customers. Capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of the product.
Impairment of Intangible Assets
In accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, the Company assesses the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review include the following:
| 1. Significant underperformance compared to historical or projected future operating results. | |
| 2. Significant changes in the manner or use of the acquired assets or the strategy for the overall business, and | |
| 3. Significant negative industry or economic trends. |
When the Company determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. Intangible assets that have finite useful lives are amortized over their useful lives.
Leases
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 determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
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 and financial position.
Concentration of Credit Risk
Financial instruments that potentially subject to concentrations of credit risk consist primarily of cash. All of the Company’s cash is held at high credit quality financial institutions. No credit risk in accounts receivable as deemed collectable.
Fair Value of Financial Instruments
The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:
| ● | Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. | |
| ● | Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. | |
| ● | Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation. |
Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires it to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.
The carrying amounts of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, convertible notes and notes payable are of approximately fair value due to the short-term maturities of these instruments.
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).
Sales and Marketing
Selling and administration expenses consist primarily of marketing and promotional expenses, expenses related to our participation in industry conferences, and public relations expenses.
Sales and marketing expenses are charged to expense as incurred and are included in selling and promotions expenses in the accompanying consolidated financial statements. Sales and marketing expense for the years ended February 28, 2023, and 2022, was $708,047 and $1,370,889, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented.
No provision for federal income taxes is necessary in the financial statements of the subsidiaries as they have elected to be treated as a partnership for tax purposes and therefore they are not subject to federal income tax and the tax effect of its activities accrues to the members.
In certain circumstances, partnerships may be held to be associations taxable as corporations. The IRS has issued regulations specifying circumstances under current law when such a finding may be made, and management, based on those regulations that the partnership is not an association taxable as a corporation. A finding that the partnership is an association taxable as a corporation could have a material adverse effect on the financial position and results of operations of the partnership.
Recently adopted accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). The FASB issued this ASU to address issues identified as a result of the complexity associated with GAAP for certain financial instruments with characteristics of liabilities and equity. Complexity associated with the accounting is a significant contributing factor to numerous financial statement restatements and results in complexity for users attempting to understand the results of applying the current guidance. In addressing the complexity, the FASB focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The FASB concluded that eliminating certain accounting models simplifies the accounting for convertible instruments, reduces complexity for preparers and practitioners, and improves the decision usefulness and relevance of the information provided to financial statement users. In addition to eliminating certain accounting models, the FASB also decided to enhance information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance on the basis of feedback from financial statement users. The FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance. The amendments in this ASU are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The FASB decided to allow entities to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company adopted ASU 2020-06 on April 1, 2022 on a prospective basis. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity- Classified Written Call Options. ASU 2021-04 requires accounting for modifications or exchanges of freestanding equity- classified written call options (for example, warrants) that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. The recognition of the modification depends on the nature of the transaction in which the equity-classified written call option is modified. If there is more than one element in a transaction (for example, if the modification involves both a debt modification and an equity issuance), then the guidance requires allocating the effect of the option modification to each element. ASU 2021-04 is effective for the Company beginning in the first quarter of 2022. ASU 2021-04 should be applied prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company adopted ASU 2021-04 on April 1, 2022 on a prospective basis. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.
In March 2022, the FASB issued ASU 2022-02, ASC Subtopic 326 “Credit Losses”: Troubled Debt Restructurings and Vintage Disclosures. Since the issuance of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Board has provided resources to monitor and assist stakeholders with the implementation of Topic 326. Post-Implementation Review (PIR) activities have included forming a Credit Losses Transition Resource Group, conducting outreach with stakeholders of all types, developing educational materials and staff question-and-answer guidance, conducting educational workshops, and performing an archival review of financial reports. ASU No. 2022-02 is effective for annual and interim periods beginning after December 15, 2022. The adoption of this standard did not have a significant impact on the Company’s unaudited condensed consolidated financial statements.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its consolidated financial statements.
3. Prepaid and Other Current Assets
Prepaid and other current assets consisted of the following as of February 28, 2023 and as of February 28, 2022:
February 28, 2023 | February 28, 2022 | |||||||
| Prepaid marketing expenses | $ | 100 | $ | - | ||||
| Prepaid other expenses | 8,513 | 3,424 | ||||||
| Prepaid cost of sales | - | 53,985 | ||||||
| Total | $ | 8,613 | $ | 57,409 | ||||
4. 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 following summarizes the right-of-use asset and lease information about the Company’s operating lease as of February 28, 2023:
| Year ended February 28 | 2023 | |||
| Lease cost | ||||
| Operating Lease Cost | $ | 12,168 | ||
| Amortization of right of use asset | 7,756 | |||
| Total lease cost | 19,924 | |||
| Cash paid from operating cash flows from operating leases | $ | 0 | ||
| Right-of-use assets | 1,020,443 | |||
| Weighted average remaining lease term - operating lease (years) | 5.42 | |||
| Weighted average discount rate - operating lease | 9.18 | % | ||
Future minimum lease payments under the operating lease liability has the following non-cancellable lease payments at February 28, 2023:
Future minimum lease payments under operating leases
| Year ended February 28, | ||||
| 2024 | $ | 228,801 | ||
| 2025 | 233,365 | |||
| 2026 | 238,056 | |||
| 2027 | 242,874 | |||
| 2028 | 247,818 | |||
| Thereafter | 105,397 | |||
| 1,296,311 | ||||
| Less: Imputed interest | (282,397 | ) | ||
| Operating lease liability | 1,013,914 | |||
| Operating lease liability - Current | 149,339 | |||
| Operating lease liability - Non-current | $ | 864,575 | ||
5. Property and Equipment
Property and equipment as of February 28, 2023, and 2022 consisted of the following:
February 28, 2023 | February 28, 2022 | |||||||
| Furniture and Fixtures | $ | 17,018 | $ | 17,018 | ||||
| Computer and Equipment | 73,548 | 70,621 | ||||||
| Total | 90,566 | 87,639 | ||||||
| Accumulated depreciation | (74,030 | ) | (43,645 | ) | ||||
| Property and Equipment, net of depreciation | $ | 16,536 | $ | 43,994 | ||||
Depreciation expense for the years ended February 28, 2023, and 2022, was $30,386 and $20,513, respectively, and is recorded in operating expenses.
During the years ended February 28, 2023, and 2022, the Company acquired property and equipment of $2,928 and $26,772, respectively.
During the year the Company entered into an asset purchase agreement to acquire Bookit. (see note 13)
6. Intangible Assets
Intangible assets as of February 28, 2023, and 2022 consisted of the following:
February 28, 2023 | February 28, 2022 | |||||||
| Software Development | $ | 6,268,044 | $ | 3,959,133 | ||||
| Software Licenses | 427,576 | 397,477 | ||||||
| Trademark | 6,283 | 6,283 | ||||||
| Total | 6,701,903 | 4,362,893 | ||||||
| Accumulated amortization | (3,933,543 | ) | (3,172,130 | ) | ||||
| Intangible assets, net of amortization | $ | 2,768,360 | $ | 1,190,763 | ||||
Amortization expense for the years ended February 28, 2023, and 2022, was $776,497 and $1,020,848, respectively, and recorded in operating expenses.
During the years ended February 28, 2023, and 2022, the Company recorded impairment loss of $0 and $1,215,746, respectively, associated with the carrying value exceeded its recoverable amount.
7. Accounts Payable and Accrued Liabilities
As of February 28, 2023, the Company had accounts payable of $519,136 and accrued expenses of $329,922, compared to $302,059 of accounts payable and $13,806 of accrued expenses for the year ended February 28, 2022.
8. Income Taxes
The Company shall file as a partnership for income tax purposes.
The income, gains, losses, deductions and expenses of the Company are allocated among the Members in accordance with the Members respective Memberships’ interest.
9. Convertible Notes
On July 27, 2022, the Company issued a $150,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $7,101 and $0, respectively related to the note. The note has a maturity date of December 31, 2023.
On July 27, 2022, the Company issued a $200,000 convertible note upon the receipt of such proceeds from the counterparty. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $9,468 and $0, respectively, related to the note. The note has a maturity date of December 31, 2023.
On August 5, 2022, the Company issued a $12,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $544 and $0 respectively, related to the note. The note has a maturity date of February 5, 2023, and the holder has no intention of calling the note.
On August 6, 2022, the Company issued a $500,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $22,575 and $0, respectively, related to the note. The note has a maturity date of February 6, 2023, and the holder has no intention of calling the note.
On September 14, 2022, the Company issued a $100,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company issued upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $3,660 and $0, respectively related to the note. The note has a maturity date of February 24, 2023, and the holder has no intention of calling the note.
On October 31, 2022, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party, with an option to increase the note to $500,000 up until November 8, 2022. In accordance with an amended agreement, the note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company issued upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $6,575 and $0, respectively, related to the note. The note has a maturity date of January 31, 2023, and the holder has no intention of calling the note.
On November 22, 2022, the Company a $150,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the year ended February 28, 2023, and 2022 the Company recorded accrued interest of $3,222 and $0, respectively related to the note. The note has a maturity date of February 28, 2023, and the holder has no intention of calling the note.
On December 1, 2022, the Company issued a $75,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023 and 2022, the Company recorded accrued interest of $1,479 and $0, respectively, related to the note. The note has a maturity date of February 28, 2023, and the holder has no intention of calling the note.
On December 1, 2022, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $975 and $0, respectively, related to the note. The note has a maturity date of July 31, 2023.
On December 12, 2022, the Company issued a $350,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023 and 2022, the Company recorded accrued interest of $5,984 and $0, respectively related to the note. . The note has a maturity date of April 30, 2023 and the holder has no intention of calling the note.
On December 12, 2022, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $4,274 and $0, respectively, related to the note. The note has a maturity date of February 28, 2023.
On January 25, 2023, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023 and 2022, the Company recorded accrued interest of $1,863 and $0, respectively, related to the note. The note has a maturity date of July 31, 2023.
On January 31, 2023, the Company issued a $600,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $3,682 and $0, respectively, related to the note. The note has a maturity date of April 30, 2023.
On February 21, 2023, the Company issued a $75,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $115 and $0, respectively, related to the note. The note has a maturity date of July 31, 2023.
On September 19, 2022, the Company entered into a Software as a Service Agreement with a prospective client in which the Company received a $150,000 down payment upon signing of the contract. On December 31, 2022, the Company entered into an amended agreement with the counterparty in which the down payment became a noninterest bearing share issuance obligation in which such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. As of February 28, 2023, the Company has classified the obligation to issue shares in accordance with the agreement within convertible debt.
10. Preferred Units
As a result of the Exchange Agreement (“Exchange Agreement”) entered on January 25, 2023, NextPlay Technologies Inc. (“NextPlay”) and NextTrip Group, LLC (“NextTrip”), NextPlay exchanged 1,000,000 Membership Interests of NextTrip for 400,000 Preferred Units in NextTrip (see note 1). In 2022 the Company did not issue any Preferred Units.
11. Membership Units
For the years ended February 28, 2023 and 2022, the Company had 0 and 1,000,000 Membership Interests authorized, issued and outstanding with a par value of $.0001 per unit. In 2023 1,000,000 Membership Interests outstanding were exchanged for Preferred Units (see note 10) and the Member Interests were cancelled accordingly.
12. Common Units
For the years ended February 28, 2023 and 2022, the Company has 915,000 and 0 Common Units, par value $.0001 authorized respectively. During the year ended February 28, 2023, the Company issued 915,000 Common Units to William Kerby and Donald Monaco (see note 1). No Common Units were issued and outstanding in 2022.
13. Related Party Transactions
| (i) | Travel Booking Engine Purchase: | |
| On February 28, 2023, the Company purchased the right, title and interest in Travel and Media Tech, LLC ‘s (“TMT”) “Bookit” or “NextTrip 2.0” booking engine, customer lists, inclusion of all current content associated to hotel and destination product in the booking engine (pictures, hotel descriptions, restaurant descriptions, room descriptions, amenity descriptions, and destination information.) and source code related thereto from TMT a related entity owned by Don Monaco and William Kerby. This was an asset purchase made by the Company as per the agreement between both entities. | ||
| (ii) | The Company’s related parties Messrs. William Kerby and Donald Monaco, have the authority and responsibility for planning, directing, and controlling the activities of the Company. | |
| (iii) | NextPlay and the Company entered into an agreement for NextPlay to transfer all of its Travel Business to the Company. This transaction was accounted for retroactively (see note 1). | |
| (iv) | Amounts due to related parties in 2023 was $281,000, 2022 $12,675,421. The amount due in 2023 relates directly to William Kerby and Donald Monaco. |
14. Deferred Revenue
Deferred revenue as of the years ended February 28, 2023, and 2022 was $22,750 and $69,605, respectively.
Deferred revenue consists of travel deposits received from users in advance of revenue recognition. The deferred revenue balance for the years ended February 28, 2023 and 2022, was driven by cash payments from customers in advance of satisfying our performance obligations.
15. Commitments and Contingencies
The Company is involved, from time to time, in litigation, other legal claims and proceedings involving matters associated with or incidental to our business, including, among other things, matters involving breach of contract claims, intellectual property, employment issues, and other related claims and vendor matters. The Company believes that the resolution of currently pending matters could, individually or in the aggregate, have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change considering the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
16. Subsequent Events
The Company has evaluated subsequent events through August 14, 2023 the date on which these financial statements were available to be issued. The Company did not identify any material subsequent events requiring adjustments to or disclosure in its financial statements, other than those noted below.
| (i.) | As previously reported in our February 28, 2022 audited financial statements we reported that on May 22, 2023 – Genesis Growth Tech Acquisition Corp. (“Genesis”), (NASDAQ: GGAA), a special purpose acquisition company, and NextTrip Group LLC., a travel technology incubator based in Sunrise, Florida (“NextTrip”), announced today that they have entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) that, upon closing, will provide the opportunity for NextTrip to become a publicly traded company on NASDAQ. NextTrip is a travel technology company that specializes in using proprietary technology, analytics, and strategic partnerships to provide specialized travel solutions in leisure, wellness, and business travel. |
| (ii.) | On July 25, 2023, NextTrip Holdings Inc., a Florida corporation (“NextTrip”) terminated the Agreement and Plan of Merger, dated as of May 22, 2023 (the “Merger Agreement”), with Genesis Growth Tech Acquisition Corp., a Cayman Islands exempted company (together with its successors, “Genesis”) because Genesis is in material breach of multiple provisions of the Merger Agreement. |
| (iii.) | On July 25, 2023, NextTrip Group LLC (NextTrip) a Florida corporation, and Sigma Additive Solutions (SASI), a Nevada corporation signed a letter of intent reflecting the mutual intention of both parties to merge. The consummation of the Proposed Transaction (the “Closing”) will take place at the offices of a location that is mutually acceptable to the Parties on the first business day after the day the last of the conditions set forth in the Definitive Agreements is satisfied or waived, or at such other place and date as is agreed between the Parties (the “Closing Date”). The Parties shall use commercially reasonable efforts to cause the Closing Date to occur on or before November 30th, 2023, unless otherwise agreed in writing by the parties. |
| (iv.) | The holders of Convertible Notes (see note 9), which have matured as of the issuance of the audit report have not called the note nor have, they provided notice on intention of calling the note. |
Exhibit 99.2
CONDENSED CONSOLIDATED BALANCE SHEETS
As of August 31, 2023 and February 28, 2023
(Unaudited)
August 31, 2023 | February 28, 2023 | |||||||
| ASSETS: | ||||||||
| Cash | $ | 105,902 | $ | 282,475 | ||||
| Receivables | 5,000 | - | ||||||
| Receivables – related party, net | 1,992,630 | 1,933,908 | ||||||
| Prepaid expenses and other current assets | 42,727 | 8,613 | ||||||
| Total Current Assets | 2,146,259 | 2,224,996 | ||||||
| Non-Current assets | ||||||||
| Property and equipment, net | 5,986 | 16,536 | ||||||
| Intangible assets, net | 2,480,161 | 2,768,360 | ||||||
| Security deposit | 15,000 | 15,000 | ||||||
| Right of use asset | 945,595 | 1,020,443 | ||||||
| Total Non-Current Assets | 3,446,742 | 3,820,339 | ||||||
| Total Assets | $ | 5,593,001 | $ | 6,045,335 | ||||
| LIABILITIES: | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 582,121 | $ | 519,136 | ||||
| Accrued expenses | 377,896 | 329,922 | ||||||
| Convertible notes | 4,303,345 | 3,233,503 | ||||||
| Convertible notes – related parties | 200,010 | - | ||||||
| Deferred revenue | 79,906 | 22,750 | ||||||
| Notes payable - related parties | 573,500 | 281,000 | ||||||
| Operating Lease Liability – current | 219,706 | 149,339 | ||||||
| Total Current Liabilities | 6,336,484 | 4,535,650 | ||||||
Non- Current Liabilities: | ||||||||
| Operating Lease Liability – non-current | 794,208 | 864,575 | ||||||
| Total Non-Current Liabilities | 794,208 | 864,575 | ||||||
| Total Liabilities | 7,130,692 | 5,400,225 | ||||||
| Commitments and Contingencies | - | - | ||||||
| Equity: | ||||||||
| Preferred units: par value $10, 400,000 authorized, 400,000 issued and outstanding | 4,000,000 | 4,000,000 | ||||||
| Common units: par value $0.0001, 1,000,000 authorized, 915,000 issued and outstanding | 100 | 100 | ||||||
| Additional Paid in Capital | 13,295,873 | 13,295,873 | ||||||
| Accumulated deficit | (18,833,664 | ) | (16,650,863 | ) | ||||
| Total Members’ (Deficit)/Equity | (1,537,691 | ) | 645,110 | |||||
| Total Liabilities and Members’ Equity | $ | 5,593,001 | $ | 6,045,335 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2023 AND 2022
(Unaudited)
| For the six months ended | For the three months ended | |||||||||||||||
| August 31, | August 31, | August 31, | August 31, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | 47,225 | $ | 312,388 | $ | 27,663 | $ | 140,638 | ||||||||
| Cost of revenue | (39,836 | ) | (252,200 | ) | (22,118 | ) | (116,159 | ) | ||||||||
| Gross profit | 7,389 | 60,189 | 5,545 | 24,479 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 1,365,945 | 1,757,190 | 711,239 | 801,516 | ||||||||||||
| Sales and marketing | 90,539 | 506,208 | 49,758 | 263,254 | ||||||||||||
| Depreciation and amortization | 594,555 | 213,356 | 331,549 | 10,044 | ||||||||||||
| Total Operating Expenses | 2,051,039 | 2,476,755 | 1,092,546 | 1,074,814 | ||||||||||||
| Operating loss | (2,043,650 | ) | (2,416,566 | ) | (1,087,001 | ) | (1,050,335 | ) | ||||||||
| Other (Income)/Expenses | ||||||||||||||||
| Other expenses/(income) | - | 3,138 | - | (29,707 | ) | |||||||||||
| Interest (income) expense, net | 139,151 | 396 | 73,762 | 396 | ||||||||||||
| Total other (income) expense | 139,151 | 3,534 | 73,762 | (29,311 | ) | |||||||||||
| Net loss before taxes | (2,182,801 | ) | (2,420,100 | ) | (1,160,763 | ) | (1,021,024 | ) | ||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| Net loss | $ | (2,182,801 | ) | $ | (2,420,100 | ) | $ | (1,160,763 | ) | $ | (1,021,024 | ) | ||||
| Basic and diluted income/(loss) per common units | $ | (2.39 | ) | $ | - | $ | (1.27 | ) | $ | - | ||||||
| Basic and diluted income/(loss) per member interests | $ | - | $ | (2.42 | ) | $ | - | $ | (0.9 | ) | ||||||
| Basic and diluted weighted average number of common units | 915,000 | - | 915,000 | - | ||||||||||||
Basic and diluted weighted average number of member interests | - | 1,000,000 | - | 1,000,000 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2023 AND 2022
(Unaudited)
For the six months ended August 31, 2023
| Preferred | Members | Common | Additional Paid in | Accumulated Equity | Total Members’ | |||||||||||||||||||||||||||||||
| Units | Amount | Interest | Amount | Units | Amount | Capital | (Deficit) | (Deficit) | ||||||||||||||||||||||||||||
| Balance, February 28, 2023 | 400,000 | $ | 4,000,000 | - | $ | 915,000 | $ | 100 | $ | 13,295,873 | $ | (16,650,863 | ) | $ | 645,110 | |||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (2,182,801 | ) | (2,182,801 | ) | |||||||||||||||||||||||||
| Balance, August 31, 2023 | 400,000 | $ | 4,000,000 | - | $ | - | 915,000 | $ | 100 | $ | 13,295,873 | (18,833,664 | ) | (1,537,691 | ) | |||||||||||||||||||||
For the three months ended August 31, 2023
| Preferred | Members | Common | Additional Paid in | Accumulated Equity | Total Members’ | |||||||||||||||||||||||||||||||
| Units | Amount | Interest | Amount | Units | Amount | Capital | (Deficit) | (Deficit) | ||||||||||||||||||||||||||||
| Balance, May 31, 2023 | 400,000 | $ | 4,000,000 | - | $ | 915,000 | $ | 100 | $ | 13,295,873 | $ | (17,672,901 | ) | $ | (376,928 | ) | ||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (1,160,763 | ) | (1,160,763 | ) | |||||||||||||||||||||||||
| Balance, August 31, 2023 | 400,000 | $ | 4,000,000 | - | $ | - | 915,000 | $ | 100 | $ | 13,295,873 | $ | (18,833,664 | ) | $ | (1,537,691 | ) | |||||||||||||||||||
For the six months ended August 31, 2022
| Preferred | Members | Common | Additional Paid in | Accumulated Equity | Total Members’ | |||||||||||||||||||||||||||||||
| Units | Amount | Interest | Amount | Units | Amount | Capital | (Deficit) | (Deficit) | ||||||||||||||||||||||||||||
| Balance, February 28, 2022 | - | $ | - | 1,000,000 | $ | 100 | - | $ | - | $ | - | $ | (11,517,722 | ) | $ | (11,517,722 | ) | |||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (2,420,100 | ) | (2,420,100 | ) | |||||||||||||||||||||||||
| Balance, August 31, 2022 | - | $ | - | 1,000,000 | $ | 100 | - | $ | - | $ | - | $ | (13,937,822 | ) | $ | (13,937,822 | ) | |||||||||||||||||||
For the three months ended August 31, 2022
| Preferred | Members | Common | Additional Paid in | Accumulated Equity | Total Members’ | |||||||||||||||||||||||||||||||
| Units | Amount | Interest | Amount | Units | Amount | Capital | (Deficit) | (Deficit) | ||||||||||||||||||||||||||||
| Balance, May 31, 2022 | - | $ | - | 1,000,000 | $ | 100 | - | $ | - | $ | - | $ | (13,040,966 | ) | $ | (13,040,966 | ) | |||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (1,021,024 | ) | (1,021,024 | ) | |||||||||||||||||||||||||
| Balance, August 31, 2022 | - | $ | - | 1,000,000 | $ | 100 | - | $ | - | $ | - | $ | (14,061,990 | ) | $ | (14,061,990 | ) | |||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 2023 AND 2022
(Unaudited)
| August 31, 2023 | August 31, 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Loss | $ | (2,182,801 | ) | $ | (2,420,100 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 594,555 | 213,356 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | (5,000 | ) | (292,277 | ) | ||||
| Prepaid expenses and other current assets | (18,896 | ) | (300,261 | ) | ||||
| Accounts payable and accrued expenses | 95,741 | 811,832 | ||||||
| Deferred revenue | 57,156 | 245,752 | ||||||
| Right of use asset | 74,848 | 36,153 | ||||||
| Net cash used in operating activities | (1,384,397 | ) | (1,705,545 | ) | ||||
Cash Flows from Investing activities: | ||||||||
| Purchase of equipment | - | (123,084 | ) | |||||
| Purchase of intangible assets | (345,806 | ) | (2,030,422 | ) | ||||
| Net cash used in investing activities | (345,806 | ) | (2,153,506 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
| Proceeds from convertible notes issued | 1,069,842 | - | ||||||
| Proceeds from convertible notes – related parties | 200,010 | - | ||||||
| Advances from related party | 283,778 | 3,731,635 | ||||||
| Net cash provided by financing activities | 1,553,630 | 3,731,635 | ||||||
Decrease in cash | (176,573 | ) | (127,416 | ) | ||||
| Cash balance, beginning of the period | 272,475 | 231,050 | ||||||
| Cash balance, end of the period | $ | 95,902 | $ | 103,634 | ||||
Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | - | $ | 395.63 | ||||
| Cash paid for taxes | $ | - | $ | - | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Business Description and Going Concern
NextTrip Group, LLC (“NextTrip” or the “Company”) was incorporated on January 7, 2021 organized under the laws of the State of Florida. The operating agreement of NextTrip Group, LLC was entered into January 11, 2021 and made effective January 11, 2021. The Company’s head office is located at 1560 Sawgrass Corporate Pkwy, 4th Floor, Sunrise, FL, 33323. The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries, NextTrip Holdings Inc. incorporated October 22, 2015, and Extraordinary Vacations USA, Inc. incorporated June 24, 2002.
The Company provides travel technology solutions with sales originating in the United States, with a primary emphasis on alternative lodging rental (“ALR”) properties, hotel, air, cruise, and all-inclusive travel packages. Our proprietary booking engine, branded as NextTrip 2.0, provides travel distributors access to a sizeable inventory.
On January 25, 2023, NextPlay Technologies Inc. (“NextPlay”) and NextTrip Group, LLC (“NextTrip”) entered into an Amended and Restated Separation Agreement (“Separation Agreement”), on Amended and Restated Operating Agreement (“Operating Agreement”), Exchange Agreement (“Exchange Agreement”), and together (“Agreements”) whereby NextPlay transferred their interest in the travel business to NextTrip. As per the Exchange Agreement, NextPlay exchanged 1,000,000 Membership Units of NextTrip for 400,000 Preferred Units in NextTrip. The Preferred Units have a value of $10.00 per Unit, NextTrip had a payable amount to NextPlay of $17,295,873. This was partial payment that was exchanged for the 400,000 Preferred Units in NextTrip as per the Exchange Agreement. Any intercompany amount owed after the separation date are to be considered a promissory note bearing 5% interest per annum. NextPlay has a balance owing to NextTrip of $1,942,630 as of August 31, 2023. As per ASC 505-10-45-2 the reporting of the paid in capital is considered equity.
The Company has accounted for the business transfer on a retroactive basis. All assets, liabilities and results of operations assumed in this transaction are the basis of these financial statements.
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 and NextTrip Group, LLC does not have control on the company and therefore no minority interest was recorded.
On August 3, 2023, NextTrip Group LLC (NextTrip) a Florida corporation, and Sigma Additive Solutions (SASI), a Nevada corporation signed a letter of intent reflecting the mutual intention of both parties to merge. The consummation of the Proposed Transaction (the “Closing”) will take place at the offices of a location that is mutually acceptable to the Parties on the first business day after the day the last of the conditions set forth in the Definitive Agreements is satisfied or waived, or at such other place and date as is agreed between the Parties (the “Closing Date”). The Parties shall use commercially reasonable efforts to cause the Closing Date to occur on or before November 30, 2023, unless otherwise agreed in writing by the parties.
Going Concern
As of August 31, 2023, the Company had an accumulated deficit of $18,833,664, working capital deficit of $4,190,225 and has incurred losses since incorporation. The Company will need to raise additional funds through equity or debt financings to support the on-going operations, increase market penetration of our products, expand the marketing and development of our travel and technology driven products, provide capital expenditures for additional equipment and development costs, payment obligations, and systems for managing the business including covering other operating costs until the planned revenue streams are fully implemented and begin to offset our operating costs. Failure to obtain additional capital to finance the Company’s working capital needs on acceptable terms, or at all, would negatively impact the Company’s financial condition and liquidity.
Recent Issues Surrounding the COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn.
The duration and severity of the COVID-19 pandemic impeded global economic activity for an extended period of time, even as restrictions have been lifted in many jurisdictions (including the United States) and vaccines are being made available, leading to decreased per capita income and disposable income, increased and sustained unemployment or a decline in consumer confidence, all of which significantly reduced discretionary spending by individuals and businesses on travel and may create a recession in the United States or globally. In turn, that could have a negative impact on demand for our services. We also cannot predict the long-term effects of the COVID-19 pandemic on our partners and their business and operations or the ways that the pandemic may fundamentally alter the travel industry. The aforementioned circumstances could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially for a prolonged period.
Although we currently cannot predict the full impact of the COVID-19 pandemic on our fiscal 2024 financial results relating to our operations, we anticipate an increase in year-over-year revenue as compared to fiscal year 2023. However, the ultimate extent of the COVID-19 pandemic and its impact on global travel and overall economic activity is constantly changing and impossible to predict currently. However, the Company is seeing the return to normal operations.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
The financial statements have been prepared on a condensed consolidated basis with those of the Company’s wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
These unaudited condensed consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, we have included all adjustments considered necessary for a fair presentation and such adjustments are of a normal recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended February 28, 2023 and notes thereto and other pertinent information contained in our annual audited report dated August 14, 2023. The results of operations for the three months ended August 31, 2023, are not necessarily indicative of the results to be expected for the full fiscal year ending February 28, 2024.
Limited Liability of Members
Limitations on Liability of Managers and Members. The liability of the Managers to the Company and the Members shall be limited to the extent, now or hereafter set forth in the Articles, this Operating Agreement and as provided under the Florida Act.
No Personal Liability, except as otherwise provided in the Florida Act or by Applicable Law, no Members, Manager or Officer will be obligated personally for any debt, obligation or liability of the Company or of any Company Subsidiaries, whether arising in contract, tort or otherwise, solely by reason of being a Member, Manager and/or Officer.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include the carrying amounts of intangible assets, depreciation and amortization.
Information about key assumptions and estimation uncertainty that has a significant risk of resulting in a material adjustment to the carrying amounts of the Company’s assets and liabilities within the next financial year are referenced in the notes to the financial statements as follows:
| ● | The assessment of the Company to continue as a going concern; | |
| ● | The measurement and useful life of intangible assets and property and equipment | |
| ● | Recoverability of long lived assets |
Cash
Cash consists of amounts denominated in US dollars. The Company has not experienced any losses on such accounts. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. This includes a letter of credit for $10,000. There were no cash equivalents as of August 31, 2023, or 2022.
Prepaids
The Company records cash paid in advance for goods and/or services to be received in the future as prepaid expenses. Prepaid expenses are expensed over time according to the terms of the purchase. Other current assets are recognized when it is probable that the future economic benefits will flow to the Company and the asset has a cost or value that can be measured reliably. It is then charged to expense over the expected number of periods during which economic benefits will be realized.
Receivables
Receivables are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing receivable.
The Company considers receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts become uncollectible, they will be charged to operations when that determination is made.
Receivables balances as of August 31, 2023, and February 28, 2023, were $5,000 and $0, respectively. Receivables to a related party were $1,992,630 and $1,933,908, respectively. The August 31, 2023 balance includes a receivable from TGS Esports Inc. for $50,000 which is expected to be collected by October 15, 2023. The remaining amount of $1,942,630 due from NextPlay. Management has determined that no allowance for credit losses is necessary as of August 31, 2023, or February 28, 2023.
Property and Equipment
Recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When parts of an item of property and equipment have different estimated useful lives, they are accounted for as separate items within property and equipment. The costs of the ongoing regular repairs and maintenance of property and equipment are recognized in the period in which they are incurred.
Depreciation
Depreciation is recognized in profit or loss over the estimated useful lives of each part of an item of property and equipment in a manner that most closely reflects management’s estimated future consumption of the future economic benefits embodied in the asset. The estimated useful lives for the Company’s property and equipment are as follows:
| Category | Method | Estimated useful life | ||||
| Furniture & Fixtures | Straight line | 5 years | ||||
| Computer & Equipment | Straight line | 3 years |
Intangible assets
The Company measures separately acquired intangible assets at cost less accumulated amortization and impairment losses. The Company recognizes internally developed intangible assets when it has determined that the completion of such is technically feasible, and the Company has sufficient resources to complete the development. Subsequent expenditures are capitalized when they increase the future economic benefits of the associated asset. All other expenditures are recorded in profit or loss as incurred.
The Company assesses whether the life of intangible asset is finite or indefinite. The Company reviews the amortization method and period of use of its intangible assets at least annually. Changes in the expected useful life or period of consumption of future economic benefits associated with the asset are accounted for prospectively by changing the amortization method or period as a change in accounting estimates in profit or loss. The Company has assessed the useful life of its trademarks as indefinite.
The estimated useful lives for the Company’s finite life intangible assets are as follows:
| Category | Method | Estimated useful life | ||||
| Software | Straight line | 3 years | ||||
| Software licenses | Straight line | 0.5 - 4 years |
Software Development Costs
The Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established by “ASC 985-20-25” Accounting for the Costs of Software to Be Sold, Leased, or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general release to customers. Capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of the product.
Impairment of Intangible Assets
In accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, the Company assesses the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review include the following:
1. Significant underperformance compared to historical or projected future operating results.
2. Significant changes in the manner or use of the acquired assets or the strategy for the overall business, and
3. Significant negative industry or economic trends.
When the Company determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. Intangible assets that have finite useful lives are amortized over their useful lives.
Leases
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 determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Concentration of Credit Risk
Financial instruments that potentially subject to concentrations of credit risk consist primarily of cash. All of the Company’s cash is held at high credit quality financial institutions. No credit risk in accounts receivable as deemed collectable.
Fair Value of Financial Instruments
The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:
| ● | Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. | |
| ● | Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. | |
| ● | Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation. |
Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires it to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.
The carrying amounts of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, convertible notes and notes payable are of approximately fair value due to the short-term maturities of these instruments.
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, include but not limited to, the following:
| ● | The Company is primarily responsible for fulling the promise to provide such travel product. | |
| ● | The Company has inventory risk before the specified travel product has been transferred to a customer or after transfer of control to a customer. | |
| ● | The Company has discretion in establishing the price for the specified travel product. |
Payments for tours or activities received in advance of services being rendered are recorded as deferred revenue and recognized as revenue at the earlier of the date of travel or the last date of cancellation (i.e., the customer’s refund privileges lapse).
From time to time, payments are made to suppliers in advance of customer bookings as required by hotels. These payments are recognized as costs of goods at the earlier of the date of travel or the last date of cancellation.
Loss Per Member Interests/Common Units
Basic loss per member interests/common units is computed by dividing net loss by the weighted average number of member interest/common units outstanding during the period. Diluted loss per member interests/common units is computed considering the dilutive effect of preferred stock and convertible debt using the treasury stock method. However, no diluted loss per member interests/common units can be computed for the period as; 1) the conversion price and units for preferred units is undeterminable due to the unpredictability of future events, and 2) convertible debt is not expected to be converted as the conversion price is substantially higher than the current value of the member interests/common units.
Sales and Marketing
Selling and administration expenses consist primarily of marketing and promotional expenses, expenses related to our participation in industry conferences, and public relations expenses.
Sales and marketing expenses are charged to expenses as incurred and are included in selling and promotions expenses in the accompanying consolidated financial statements. Sales and marketing expenses for the three months ended August 31, 2023, and 2022, was $49,758 and $263,254, respectively. Sales and marketing expenses for the six months ended August 31, 2023 and 2022 was $90,539 and $506,208 respectively.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented.
No provision for federal income taxes is necessary in the financial statements of the subsidiaries as they have elected to be treated as a partnership for tax purposes and therefore they are not subject to federal income tax and the tax effect of its activities accrues to the members.
In certain circumstances, partnerships may be held to be associations taxable as corporations. The IRS has issued regulations specifying circumstances under current law when such a finding may be made, and management, based on those regulations that the partnership is not an association taxable as a corporation. A finding that the partnership is an association taxable as a corporation could have a material adverse effect on the financial position and results of operations of the partnership.
Recently adopted accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). The FASB issued this ASU to address issues identified as a result of the complexity associated with GAAP for certain financial instruments with characteristics of liabilities and equity. Complexity associated with the accounting is a significant contributing factor to numerous financial statement restatements and results in complexity for users attempting to understand the results of applying the current guidance. In addressing the complexity, the FASB focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The FASB concluded that eliminating certain accounting models simplifies the accounting for convertible instruments, reduces complexity for preparers and practitioners, and improves the decision usefulness and relevance of the information provided to financial statement users. In addition to eliminating certain accounting models, the FASB also decided to enhance information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance on the basis of feedback from financial statement users. The FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance. The amendments in this ASU are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The FASB decided to allow entities to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company adopted ASU 2020-06 on April 1, 2022, on a prospective basis. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity- Classified Written Call Options. ASU 2021-04 requires accounting for modifications or exchanges of freestanding equity- classified written call options (for example, warrants) that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. The recognition of the modification depends on the nature of the transaction in which the equity-classified written call option is modified. If there is more than one element in a transaction (for example, if the modification involves both a debt modification and an equity issuance), then the guidance requires allocating the effect of the option modification to each element. ASU 2021-04 is effective for the Company beginning in the first quarter of 2022. ASU 2021-04 should be applied prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company adopted ASU 2021-04 on April 1, 2022, on a prospective basis. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.
In March 2022, the FASB issued ASU 2022-02, ASC Subtopic 326 “Credit Losses”: Troubled Debt Restructurings and Vintage Disclosures. Since the issuance of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Board has provided resources to monitor and assist stakeholders with the implementation of Topic 326. Post-Implementation Review (PIR) activities have included forming a Credit Losses Transition Resource Group, conducting outreach with stakeholders of all types, developing educational materials and staff question-and-answer guidance, conducting educational workshops, and performing an archival review of financial reports. ASU No. 2022-02 is effective for annual and interim periods beginning after December 15, 2022. The adoption of this standard did not have a significant impact on the Company’s unaudited condensed consolidated financial statements.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its consolidated financial statements.
3. Prepaid and Other Current Assets
Prepaid and other current assets consisted of the following as of August 31, 2023, and February 28, 2023:
| August 31, 2023 | February 28, 2023 | |||||||
| Prepaid marketing expenses | $ | 100 | $ | 100 | ||||
| Prepaid legal expenses | 15,218 | - | ||||||
| Prepaid other expenses | 27,409 | 8,513 | ||||||
| Total | $ | 42,727 | $ | 8,613 | ||||
4. 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 following summarizes the right-of-use asset and lease information about the Company’s operating lease as of August 31, 2023:
| Period ended August 31 | 2023 | |||
| Lease cost | ||||
| Operating lease cost | $ | 18,697 | ||
| Amortization of right of use asset | 74,848 | |||
| Total lease cost | 93,545 | |||
| Other information | ||||
| Cash paid from operating cash flows from operating leases | $ | 0 | ||
| Right-of-use assets | 945,595 | |||
| Weighted average remaining lease term - operating lease (years) | 4.8 | |||
| Weighted average discount rate - operating lease | 9.18 | % | ||
Future minimum lease payments under the operating lease liability has the following non-cancellable lease payments at August 31, 2023:
| Future minimum lease payments under operating leases | ||||
| Year ended February 28, | ||||
| 2024 | $ | 228,801 | ||
| 2025 | 233,365 | |||
| 2026 | 238,056 | |||
| 2027 | 242,874 | |||
| 2028 | 247,818 | |||
| Thereafter | 105,397 | |||
| 1,296,311 | ||||
| Less: Imputed interest | (282,397 | ) | ||
| Operating lease liability | 1,013,914 | |||
| Operating lease liability - Current | 219,706 | |||
| Operating lease liability - Non-current | $ | 794,208 | ||
As of August 31, 2023, the Company is in payment default on their operating lease cost to a total of $219,706 which is included in the current portion of operating lease liability.
5. Property and Equipment
Property and equipment as of August 31, 2023 and February 28, 2023, consisted of the following:
| August 31, 2023 | February 28, 2023 | |||||||
| Furniture and Fixtures | $ | 17,018 | $ | 17,018 | ||||
| Computer and Equipment | 73,548 | 73,548 | ||||||
| Total | 90,566 | 90,566 | ||||||
| Accumulated depreciation | (84,580 | ) | (74,030 | ) | ||||
| Property and Equipment, net of depreciation | $ | 5,986 | $ | 16,536 | ||||
Depreciation for the three months ended August 31, 2023 and 2022 was $5,790 and $6,706 respectively, and depreciation expense for the six months ended August 31, 2023 and 2022 was $10,550 and $13,442, respectively, and for the year ended February 28, 2023, was $30,386, recorded in operating expenses.
During the period ended August 31, 2023, and the year ended February 28, 2023, the Company acquired property and equipment of $0 and $2,928, respectively.
6. Intangible Assets
Intangible assets as of August 31, 2023 and year ended February 28, 2023 consisted of the following:
| August 31, 2023 | February 28, 2023 | |||||||
| Software Development | $ | 6,214,161 | $ | 6,218,044 | ||||
| Software Licenses | 777,576 | 477,576 | ||||||
| Trademark | 6,283 | 6,283 | ||||||
| Total | 6,998,020 | 6,701,903 | ||||||
| Accumulated amortization | (4,517,859 | ) | (3,933,543 | ) | ||||
| Intangible assets, net of amortization | $ | 2,480,161 | $ | 2,768,360 | ||||
Amortization expense for the three months ended August 31, 2023 and 2022 was $255,700 and $328,306 respectively. Amortization expense for the six months ended August 31, 2023 and 2022 was $584,005 and $199,914 respectively, and for the year ended February 28, 2023, was $776,497, and recorded in operating expenses. Amortization for the next two years on the ending balance as of August 31, 2024, and 2025 will be $1,023,901 and $700,984 respectively.
7. Accounts Payable and Accrued Liabilities
As of August 31, 2023, the Company had accounts payable of $582,121 and accrued liabilities of $377,896, compared to $519,136 of accounts payable and $329,922 of accrued expenses for the year ended February 28, 2023.
8. Convertible Notes
On July 27, 2022, the Company issued a $150,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023 and 2022 the Company recorded accrued interest of $3,025 and $1,150, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $6,049 and $1,150, respectively, (for the year ended February 28, 2023, $7,101) related to the note. The note has a maturity date of December 31, 2023.
On July 27, 2022, the Company issued a $200,000 convertible note upon the receipt of such proceeds from the counterparty. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023 and 2022 the Company recorded accrued interest of $4,033 and $1,534, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $8,066 and $1,534, respectively, (for the year ended February 28, 2023, $9,468) related to the note. The note has a maturity date of December 31, 2023.
On August 5, 2022, the Company issued a $12,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023 and 2022 the Company recorded accrued interest of $242 and $68, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $484 and $68, respectively, (for the year ended February 28, 2023, $544) related to the note. The note has a maturity date of February 5, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On August 6, 2022, the Company issued a $500,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $10,082 and $2,740, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $20,164 and $2,740, respectively, (for the year ended February 28, 2023, $22,575) related to the note. The note has a maturity date of February 6, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On September 14, 2022, the Company issued a $100,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company issued upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $2,016 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $4,033 and $0 respectively, (for the year ended February 28, 2023, $3,660) related to the note. The note has a maturity date of February 24, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On October 31, 2022, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party, with an option to increase the note to $500,000 up until November 8, 2022. In accordance with an amended agreement, the note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company issued upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $5,042 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $10,082 and $0, respectively, (for the year ended February 28, 2023, $6,575) related to the note. The note has a maturity date of January 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On November 22, 2022, the Company a $150,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $3,025 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $6,049 and $0, respectively, (for the year ended February 28, 2023, $3,222) related to the note. The note has a maturity date of February 28, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On December 1, 2022, the Company issued a $75,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,512 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $3,025 and $0, respectively, (for the year ended February 28, 2023, $1,463) related to the note. The note has a maturity date of February 28, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On December 1, 2022, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,008 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $2,016 and $0, respectively, (for the year ended February 28, 2023, $975) related to the note. The note has a maturity date of July 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On December 12, 2022, the Company issued a $350,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $7,048 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $14,115 and $0, respectively, (for the year ended February 28, 2023, $5,984) related to the note. The note has a maturity date of April 30, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On December 12, 2022, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023 and 2022 the Company recorded accrued interest of $5,042 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $10,082 and $0, respectively, (for the year ended February 28, 2023, $4,274) related to the note. The note has a maturity date of February 28, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On January 25, 2023, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $5,042 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $10,082 and $0, respectively, (for the year ended February 28, 2023, $1,863) related to the note. The note has a maturity date of July 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On January 31, 2023, the Company issued a $600,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $12,099 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $24,197 and $0, respectively, (for the year ended February 28, 2023, $3,682) related to the note. The note has a maturity date of July 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On February 21, 2023, the Company issued a $75,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,512 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $3,025 and $0, respectively, (for the year ended February 28, 2023, $115) related to the note. The note has a maturity date of July 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On March 13, 2023, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,008 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $1,874 and $0 respectively, (for the year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 28, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On April 4, 2023, the Company issued a $200,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $4,033 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $6,532 and $0 respectively, (for the year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On April 24, 2023, the Company issued a $100,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $2,017 and $0 respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $2,740 and $0 respectively, (for the year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On May 12, 2023, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,008 and $0 respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $1,216 and $0 respectively, (for the year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On May 12, 2023, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,008 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $1,216 and $0, respectively, (for the year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On May 30, 2023, the Company issued a $25,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $505 and $0 respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $510 and $0, respectively, (for the year ended February 28, 2023, $0) related to the note. The note has a maturity date of August 31, 2023, and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On June 9, 2023, the Company issued a $175,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments of conversion price. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023 and 2022 the Company recorded accrued interest of $3,184 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $3,184 and $0, respectively, (for the year ended February 28, 2023, $0) related to the note. The note has a maturity date of August 31, 2023, and the holder has no intention of calling the note.
On September 19, 2022, the Company entered into a Software as a Service Agreement with a prospective client in which the Company received a $150,000 down payment upon signing of the contract. On December 31, 2022, the Company entered into an amended agreement with the counterparty in which the down payment became a noninterest bearing share issuance obligation in which such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments of conversion price. Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. As of August 31, 2023, and as of February 28, 2023, the Company has classified the obligation to issue shares in accordance with the agreement as a current liability.
On August 10, 2023, the Company issued a $100,050 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified the obligation to issue shares in accordance with the agreement as a current liability.
On August 10, 2023, the Company issued a $100,050 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified the obligation to issue shares in accordance with the agreement as a current liability.
On August 10, 2023, the Company issued a $200,010 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified the obligation to issue shares in accordance with the agreement as a current liability.
On August 10, 2023, the Company issued a $30,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified the obligation to issue shares in accordance with the agreement as a current liability.
On August 14, 2023, the Company issued a $25,500 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified the obligation to issue shares in accordance with the agreement as a current liability.
On August 14, 2023, the Company issued a $25,500 convertible note upon the receipt of such proceeds from a third party. The note bears interest at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified the obligation to issue shares in accordance with the agreement as a current liability.
9. Preferred Units
As a result of the Exchange Agreement (“Exchange Agreement”) entered on January 25, 2023, NextPlay Technologies Inc. (“NextPlay”) and NextTrip Group, LLC (“NextTrip”), NextPlay exchanged 1,000,000 Membership Interests of NextTrip for 400,000 Preferred Units in NextTrip (see note 1). The preferred units have no voting rights and earn no dividends, and can be converted into common stock, equal to one common unit for each preferred unit, through optional conversion, upon (i) mutual consent of such preferred holder and the company or (ii) if, after 12 months from the initial date of issuance of the preferred units the preferred holder is required to convert any preferred units to be compliant under the US Investment Company Act of 1940 or per automatic conversion (i) the completion of a qualified listing or (ii) the date that is (48) months from the last issuance date of the preferred units, provided, however, that the preferred holders shall have option to require the Company to redeem, any remaining units prior to such automatic conversion. In fiscal year 2022 the Company did not issue any Preferred Units.
10. Membership Units
For the period ended August 31, 2023, and 2022, the Company had 1,000,000 Membership Interests authorized, and 915,000 and 1,000,000 issued and outstanding respectively with a par value of $.0001 per unit. In 2023 1,000,000 Membership Interests outstanding were exchanged for Preferred Units (see note 9) and the Member Interests were cancelled accordingly.
11. Common Units
For the period ended August 31, 2023, and 2022, the Company has 1,000,000 Common Units, par value $.0001 authorized. During the year ended February 28, 2023, the Company issued 915,000 Common Units to William Kerby and Donald Monaco (see note 1). All shares have equal voting rights, are non-assessable, and have one vote per unit. 100 common units were issued and outstanding in the fiscal year 2022.
12. Related Party Transactions
| (i) | Travel Booking Engine Purchase: | |
| On February 28, 2023, the Company purchased the right, title and interest in Travel and Media Tech, LLC ‘s (“TMT”) “Bookit” or “NextTrip 2.0” booking engine, customer lists, inclusion of all current content associated to hotel and destination product in the booking engine (pictures, hotel descriptions, restaurant descriptions, room descriptions, amenity descriptions, and destination information.)and source code related thereto from TMT a related entity owned by Don Monaco and William Kerby. This was an asset purchase made by the Company as per the agreement between both parties. | ||
| (ii) | The Company’s related parties Messrs. William Kerby and Donald Monaco, have the authority and responsibility for planning, directing, and controlling the activities of the Company. | |
| (iii) | NextPlay and the Company entered into an agreement for NextPlay to transfer all of its Travel Business to the Company. This transaction was accounted for retroactively (see note 1). | |
| (iv) | Amounts due to related parties as of August 31, 2023, was $573,500 and $281,000 as at February 28, 2023. The amount due in 2023 relates directly to William Kerby and Donald Monaco. |
13. Deferred Revenue
Deferred revenue as of August 31, 2023, and year ended February 28, 2023, was $79,906 and $22,750, respectively.
Deferred revenue consists of travel deposits received from users in advance of revenue recognition. The deferred revenue balance for the periods ended August 31, 2023, and February 28, 2023, was driven by cash payments from customers in advance of satisfying our performance obligations.
14. Commitments and Contingencies
The Company is involved, from time to time, in litigation, other legal claims and proceedings involving matters associated with or incidental to our business, including, among other things, matters involving breach of contract claims, intellectual property, employment issues, and other related claims and vendor matters. The Company believes that the resolution of currently pending matters could, individually or in the aggregate, have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change considering the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
15. Subsequent Event
The Company has evaluated subsequent events through October 2, 2023, the date on which these financial statements were available to be issued. The Company did not identify any material subsequent events requiring adjustments to or disclosure in its financial statements, other than those noted below.
| 1. | The holders of Convertible Notes (see note 8), which have matured as of the issuance of the quarter review have not called the notes, nor have they provided notice on intention of calling the note. |
Exhibit 99.3
UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION
We are providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Acquisition. The following unaudited pro forma condensed combined financial information presents the combination of the financial information of Sigma and NextTrip adjusted to give effect to the Acquisition, as well as the Asset Sale. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosure about Acquired and Disposed Businesses.”
The unaudited pro forma combined condensed financial information was derived from and should be read in conjunction with the following historical financial statements and accompanying notes, which are included or incorporated by reference in this proxy statement and incorporated herein by reference in this section:
| ● | The audited financial statements of Sigma as of and for the fiscal years ended December 31, 2022 and 2021; | |
| ● | The unaudited financial statements of Sigma as of and for the three and nine months ended September 30, 2023 and 2022; | |
| ● | The audited financial statements of NextTrip as of and for the fiscal years ended on February 28, 2023 and 2022; and | |
| ● | The historical interim financial statements of NextTrip as of and for the three and six months ended August 31, 2023 and 2022. |
The unaudited pro forma combined condensed financial information should be read together with the historical financial statements of Sigma and NextTrip incorporated by reference or included in this proxy statement along with the information in Sigma’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference in this proxy statement and “NextTrip’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included in this Proxy Statement and incorporated herein by reference.
On October 12, 2023, Sigma, NextTrip, and Parent, entered into a Share Exchange Agreement (the “Exchange Agreement”). Under the terms of the Exchange Agreement, the parties agreed that the Parent will sell and transfer to Sigma all of the NextTrip Shares in exchange for the Restricted Sigma Shares to be issued to the Parent Members Pro Rata under the terms of the Exchange Agreement, subject to certain closing conditions (the “Merger”). Upon the closing of the Merger NextTrip will become a wholly owned subsidiary of Sigma.
The Contingent Shares, together with the Closing Shares issued at the closing, will not exceed 6,000,000 shares of Sigma common stock, or approximately 88.5% of our issued and outstanding shares of common stock immediately following the issuance of the Exchange Shares assuming no other change in our outstanding shares as of September 30, 2023. Assuming the issuance of all the Exchange Shares, including the Contingent Shares, the Acquisition would result in an eventual change of control of Sigma, with the NextTrip Sellers as a group receiving an aggregate number of shares that exceeds the number of shares that will be held by the legacy stockholders of Sigma. As a result, the Acquisition will be accounted for as a reverse acquisition of Sigma by NextTrip. Sigma is expected to change its corporate name to “NextTrip, Inc.” following the Acquisition.
On October 6, 2023, Sigma entered into an Asset Purchase Agreement with Divergent, pursuant to which Sigma has agreed to sell to Divergent certain assets consisting primarily of patents, software code and other intellectual property for a purchase price of $1,626,242, including a $37,000 earnest-money deposit previously paid to us by Divergent. The closing under the Asset Purchase Agreement is expected to occur subsequent to the closing of the reverse acquisition with NextTrip. The parties’ respective obligations to close are subject to the accuracy of the parties’ respective representations and warranties and performance of their respective covenants and satisfaction or waiver of other customary conditions specified in the Asset Purchase Agreement. In the interim, between the signing date and closing date or termination of the Asset Purchase Agreement, Sigma has granted Divergent a non-exclusive, nontransferable, non-sublicensable (except to Divergent customers and affiliates), limited, irrevocable (except in connection with the termination of the Asset Purchase Agreement), worldwide, royalty-free license to the “Licensed IP” (as defined) for testing, evaluation, and commercialization purposes.
Sigma and NextTrip have fiscal years ending on December 31 and February 28, respectively. The unaudited pro forma condensed combined balance sheet as of September 30, 2023 combines the historical unaudited balance sheet of Sigma as of September 30, 2023 and the historical unaudited balance sheet of NextTrip as of August 31, 2023, and is adjusted for the pro forma effects of the Acquisition and Asset Sale.
The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2023 combines the historical unaudited statement of operations of Sigma for the nine months ended September 30, 2023 and the historical unaudited statement of operations of NextTrip for the nine months ended August 31, 2023, and is adjusted on a pro forma basis as if the Acquisition had occurred on January 1, 2022 including the issuance of all contingent shares as of that date and for the pro forma effects of the Asset Sale .
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022 combines the historical unaudited statement of operations of Sigma for the year ended December 31, 2022 and the historical unaudited statement of operations of NextTrip for the year ended February 28, 2023, and is adjusted on a pro forma basis as if the Acquisition occurred on January 1, 2022 including the issuance of all contingent shares as of that date and for the pro forma effects of the Asset Sale.
On September 22, 2023, Sigma effected the Reverse Split of the issued and outstanding shares of our common stock and the number of shares of common stock that we are authorized to issue. The Reverse Split combined each 20 shares of the issued and outstanding common stock into one share of common stock. No fractional shares were issued in connection with the Reverse Split, and any fractional shares resulting from the Reverse Split were rounded up to the nearest whole share. All stock options, warrants, shares issuable upon conversion of the Company’s preferred stock and stock awards of the Company outstanding immediately prior to the Reverse Split were adjusted in accordance with their terms. All share and earnings per share information in the unaudited pro forma condensed combined financial information has been adjusted for the Reverse Split.
The unaudited pro forma condensed combined financial information is for informational purposes only. It does not purport to indicate the results that would have been obtained had the Acquisition and the Asset Sale actually been completed on the assumed date or for the periods presented, or which may be realized in the future. The pro forma adjustments are based on the information currently available and the assumptions and estimates underlying the pro forma adjustments described in the accompanying notes. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information.
Sigma Additive Solutions, Inc.
Unaudited Pro forma Condensed Combined Balance Sheet
September 30, 2023
(in thousands)
| NextTrip Group | Sigma Additive Solutions | Adjustments | Pro forma Combined Company | ||||||||||||||||
| ASSETS | |||||||||||||||||||
| Current assets | |||||||||||||||||||
| Cash | 106 | 556 | 1,589 | (H) | 2,251 | ||||||||||||||
| Accounts Receivable, net | 5 | 59 | - | 64 | |||||||||||||||
| Receivables - related party, net | 1,993 | - | - | 1,993 | |||||||||||||||
| Inventory | - | 775 | (325 | ) | (H) | 450 | |||||||||||||
| Prepaid expenses and other current assets | 42 | 38 | - | 80 | |||||||||||||||
| Total current assets | 2,146 | 1,428 | 1,264 | 4,838 | |||||||||||||||
| Property and equipment | 6 | 162 | (57 | ) | (H) | 111 | |||||||||||||
| Intangible assets | 2,480 | 1,248 | (1,248 | ) | (H) | 2,480 | |||||||||||||
| Goodwill | - | - | 1,657 | (C),(H) | 1,657 | ||||||||||||||
| Security Deposit | 15 | - | - | 15 | |||||||||||||||
| Right of use asset | 946 | - | - | 946 | |||||||||||||||
| Total assets | 5,593 | 2,838 | 1,616 | 10,047 | |||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||
| Current liabilities | |||||||||||||||||||
| Accounts payable | 582 | 607 | - | 1,189 | |||||||||||||||
| Accrued expenses | 378 | 146 | 1,308 | (G),(H) | 1,832 | ||||||||||||||
| Convertible notes | 4,303 | - | (4,303 | ) | (D) | - | |||||||||||||
| Convertible notes - related parties | 200 | - | (200 | ) | (D) | - | |||||||||||||
| Deferred revenue | 80 | 111 | (111 | ) | (H) | 80 | |||||||||||||
| Notes payable - related parties | 574 | - | - | 574 | |||||||||||||||
| Operating lease liability - current | 220 | - | - | 220 | |||||||||||||||
| Total current liabilities | 6,337 | 864 | (3,306 | ) | 3,895 | ||||||||||||||
| Long-term liabilities | |||||||||||||||||||
| Operating lease liability - non-current | 794 | - | - | 794 | |||||||||||||||
| Total Long-term liabilities | 794 | - | - | 794 | |||||||||||||||
| Total liabilities | 7,131 | 864 | (3,306 | ) | 4,689 | ||||||||||||||
| Stockholders’ equity | |||||||||||||||||||
| Preferred units / Preferred stock | 4,000 | - | (4,000 | ) | (E) | - | |||||||||||||
| Common units / Common stock | - | 1 | 7 | (A),(B),(D),(E),(F) | 8 | ||||||||||||||
| Additional paid-in-capital | 13,296 | 55,380 | (10,635 | ) | (A),(B),(D),(E),(F) | 58,041 | |||||||||||||
| Accumulated deficit | (18,834 | ) | (53,407 | ) | 19,550 | (A),(F),(G) | (52,691 | ) | |||||||||||
| Total Stockholders’ equity | (1,538 | ) | 1,974 | 4,922 | 5,358 | ||||||||||||||
| Total Liabilities and Stockholders’ equity | 5,593 | 2,838 | 1,616 | 10,047 | |||||||||||||||
Sigma Additive Solutions, Inc.
Unaudited Pro forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 2023
(in thousands)
| NextTrip Group | Sigma Additive Solutions | Adjustments | Pro forma Combined Company | ||||||||||||||||
| Revenue | 47 | 369 | (369 | ) | (I) | 47 | |||||||||||||
| Cost of revenue | 40 | 276 | (276 | ) | (I) | 40 | |||||||||||||
| Gross Profit | 7 | 93 | (93 | ) | 7 | ||||||||||||||
| Operating expenses | |||||||||||||||||||
| General and administrative | 2,299 | - | - | 2,299 | |||||||||||||||
| Sales and marketing | 186 | - | - | 186 | |||||||||||||||
| Salaries & Benefits | - | 1,775 | (1,775 | ) | (I) | - | |||||||||||||
| Stock-Based Compensation | - | 447 | (447 | ) | (I) | - | |||||||||||||
| Operations and R&D Costs | - | 232 | (232 | ) | (I) | - | |||||||||||||
| Investor, Public Relations and Marketing | - | 129 | (129 | ) | (I) | - | |||||||||||||
| Organizational Costs | - | 137 | (137 | ) | (I) | - | |||||||||||||
| Legal & Professional Service Fees | - | 587 | (587 | ) | (I) | - | |||||||||||||
| Office Expenses | - | 310 | (310 | ) | (I) | - | |||||||||||||
| Depreciation and amortization | 1,192 | 74 | (74 | ) | (I) | 1,192 | |||||||||||||
| Other Operating Expenses | - | 388 | (388 | ) | (I) | - | |||||||||||||
| Total Operating expenses | 3,677 | 4,079 | (4,079 | ) | 3,677 | ||||||||||||||
| Income (loss) from operations | (3,670 | ) | (3,986 | ) | 3,986 | (3,670 | ) | ||||||||||||
| Other (income) expense | |||||||||||||||||||
| Interest (income) expense, net | 215 | 10 | (225 | ) | (I), (J) | - | |||||||||||||
| State Incentives | - | - | - | - | |||||||||||||||
| Exchange Rate Loss | - | 3 | (3 | ) | (I) | - | |||||||||||||
| Other (income) | - | (68 | ) | 68 | (I) | - | |||||||||||||
| Total other (income) expense | 215 | (55 | ) | (160 | ) | - | |||||||||||||
| Income (loss) before income taxes | (3,885 | ) | (3,931 | ) | 4,146 | (3,670 | ) | ||||||||||||
| Income tax expense | - | - | - | - | |||||||||||||||
| Net Income (loss) | (3,885 | ) | (3,931 | ) | 4,146 | (3,670 | ) | ||||||||||||
| Preferred Dividends | - | 33 | (33 | ) | (I) | - | |||||||||||||
| Net Income (loss) applicable to Common Stockholders | (3,885 | ) | (3,964 | ) | 4,179 | (3,670 | ) | ||||||||||||
| Net income (loss) per common share - basic and diluted | (4.25 | ) | (7.28 | ) | (0.58 | ) | |||||||||||||
| Weighted average shares outstanding - basic and diluted | 915,000 | 544,587 | 6,368,672 | ||||||||||||||||
Sigma Additive Solutions, Inc.
Unaudited Pro forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2022
(in thousands)
| NextTrip Group | Sigma Additive Solutions | Adjustments | Pro forma Combined Company | ||||||||||||||||
| Revenue | 383 | 630 | (630 | ) | (I) | 383 | |||||||||||||
| Cost of revenue | 355 | 350 | (350 | ) | (I) | 355 | |||||||||||||
| Gross Profit | 28 | 280 | (280 | ) | 28 | ||||||||||||||
| Operating expenses | |||||||||||||||||||
| General and administrative | 3,574 | - | - | 3,574 | |||||||||||||||
| Sales and marketing | 708 | - | - | 708 | |||||||||||||||
| Salaries & Benefits | - | 4,740 | (4,740 | ) | (I) | - | |||||||||||||
| Stock-Based Compensation | - | 793 | (793 | ) | (I) | - | |||||||||||||
| Operations and R&D Costs | - | 653 | (653 | ) | (I) | - | |||||||||||||
| Investor, Public Relations and Marketing | - | 423 | (423 | ) | (I) | - | |||||||||||||
| Organizational Costs | - | 312 | (312 | ) | (I) | - | |||||||||||||
| Legal & Professional Service Fees | - | 725 | (725 | ) | (I) | - | |||||||||||||
| Office Expenses | - | 915 | (915 | ) | (I) | - | |||||||||||||
| Depreciation and amortization | 807 | 116 | (116 | ) | (I) | 807 | |||||||||||||
| Other Operating Expenses | - | 352 | (352 | ) | (I) | - | |||||||||||||
| Total Operating expenses | 5,089 | 9,029 | (9,029 | ) | 5,089 | ||||||||||||||
| Income (loss) from operations | (5,061 | ) | (8,749 | ) | 8,749 | (5,061 | ) | ||||||||||||
| Other (income) expense | |||||||||||||||||||
| Interest (income) expense, net | 72 | 4 | (76 | ) | (I), (J) | - | |||||||||||||
| State Incentives | - | (77 | ) | 77 | (I) | - | |||||||||||||
| Exchange Rate Loss | - | 16 | (16 | ) | (I) | - | |||||||||||||
| Other (income) | - | - | - | - | |||||||||||||||
| Total other (income) expense | 72 | (57 | ) | (15 | ) | - | |||||||||||||
| Income (loss) before income taxes | (5,133 | ) | (8,692 | ) | 8,764 | (5,061 | ) | ||||||||||||
| Income tax expense | - | - | - | - | |||||||||||||||
| Net Income (loss) | (5,133 | ) | (8,692 | ) | 8,764 | (5,061 | ) | ||||||||||||
| Preferred Dividends | - | 57 | (57 | ) | (I) | - | |||||||||||||
| Net Income (loss) applicable to Common Stockholders | (5,133 | ) | (8,749 | ) | 8,821 | (5,061 | ) | ||||||||||||
| Net income (loss) per common share - basic and diluted | (0.88 | ) | (16.56 | ) | (0.80 | ) | |||||||||||||
| Weighted average shares outstanding - basic and diluted | 5,824,085 | 524,940 | 6,349,025 | ||||||||||||||||
See accompanying notes to unaudited condensed combined pro forma financial information.
NOTES TO THE UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION
(1) Basis of Presentation
The unaudited pro forma condensed combined balance sheet as of September 30, 2023 and the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2023 and for the year ended December 31, 2022 are presented on a pro forma basis as if the Acquisition had occurred on January 1, 2022 and gives pro forma effect to the Asset Sale. These periods are presented on the basis of NextTrip as the accounting acquirer.
The pro forma adjustments are based on certain currently available information and certain assumptions and methodologies that we believe are reasonable under the circumstances. The unaudited pro forma adjustments may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the difference may be material. We believe that our assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Acquisition and the Asset Sale based on information available to management and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited proforma condensed combined financial information.
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Acquisition.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Acquisition and the Asset Sale taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of NextTrip, Inc., as the post-Acquisition company. This information should be read in conjunction with the historical financial statements and notes thereto of Sigma and NextTrip.
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”), operations and financial position of the registrant as an autonomous entity (“Autonomous Entity Adjustments”) and an option to present the reasonably estimable synergies and dis-synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). We have elected not to present any Management’s Adjustments in the unaudited pro forma condensed combined financial information.
(2) Accounting Policies
Management is performing a comprehensive review of the accounting policies of Sigma and NextTrip. As a result of the review, management may identify differences between the accounting policies of the entities which, when confirmed, could have a material impact on the financial statements of the post-Acquisition company. Based on its initial analysis, management has not identified any differences that would have an impact on the unaudited pro forma condensed combined financial information and has not recorded any adjustments.
The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-Acquisition company filed consolidated income tax returns during the periods presented.
The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2023 and for the year ended December 31, 2022 are based upon the number of the post-Acquisition company’s shares outstanding, assuming the Acquisition occurred on January 1, 2022 and the issuance of all the Exchange Shares, including the Contingent Shares, on that date.
(3) Purchase Consideration and Purchase Price Allocation
The Acquisition will be accounted for as a reverse acquisition, with NextTrip as the accounting acquirer, using the acquisition method 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. In the Asset Sale, the assets sold are derecognized at their carrying value at the disposition date.
The following table presents the preliminary allocation of the $3.7 million consideration for the Acquisition and summarizes the estimated fair values of the Sigma (the accounting acquiree) assets acquired and liabilities assumed for NextTrip (the accounting acquirer). The estimated consideration of approximately $3.7 million is based on Sigma’s weighted average closing share price as reported on Nasdaq for the period from October 6, 2023 through November 3, 2023 multiplied by the 651,536 shares outstanding as of September 30, 2023 and the assumed conversion of Series E Preferred Stock into 3,069 common shares. The value of the purchase price consideration will change based on fluctuations in the share price of Sigma’s common stock and the number of common shares of Sigma outstanding on the closing date of the Acquisition. As described above, fair values assigned to certain assets acquired and liabilities assumed are provisional and thus subject to change:
Sigma Additive Solutions, Inc.
Provisional Table of Assets Acquired and Liabilities Assumed
as of the Reverse Acquisition Date
(in thousands)
| Value | ||||
| Fair Value of Net Assets Acquired: | ||||
| Cash | 556 | |||
| Accounts Receivable, net | 59 | |||
| Inventory | 775 | |||
| Prepaid expenses and other current assets | 38 | |||
| Property and equipment | 162 | |||
| Intangible assets | 1,248 | |||
| Accounts payable | (607 | ) | ||
| Accrued expenses | (146 | ) | ||
| Deferred revenue | (111 | ) | ||
| Total identifiable net assets acquired | 1,974 | |||
| Goodwill | 1,764 | |||
| Total Fair Value of Net Assets Acquired | 3,738 | |||
Other considerations in the preliminary allocation of the estimated acquisition purchase consideration include the following:
| 1) | Our preliminary valuation used to allocate the purchase price uses a third-party market participant view and assumes there are no synergies unique to the Acquisition. If there were synergies unique to the Acquisition, a higher portion of the purchase consideration would be allocatable to goodwill. |
| 2) | Accounts receivable and other current assets and liabilities carrying values approximate fair value. |
| 3) | We have estimated the acquired intangibles based including goodwill on preliminary valuation analysis subject to finalization; |
| 4) | The Exchange Shares include the Contingent Shares to be potentially issued to the NextTrip Sellers. Contingent equity to be issued to the shareholders of the accounting acquirer in a reverse acquisition are accounted for in a manner similar to a stock dividend which capitalizes the fair value of the shares from retained earnings (accumulated deficit) as of the issuance of the shares. Consequently, we have estimated that approximately $32.5 million will be transferred from accumulated deficit to additional paid-in-capital as a result of the assumed issuance of the Contingent Shares. |
| 5) | The post-Acquisition company will consist of two reporting units, Sigma and NextTrip. We allocated $1,626,000 of the purchase consideration to the fair value of Sigma reporting unit based on the sale price of the assets in the Asset Sale and $2,112,000 to the fair value of the net assets assigned to the NextTrip reporting unit in the reverse acquisition. As the fair value attributable to the Sigma reporting unit was determined by the Asset Sale price, no gain or loss was recognized in the disposition transaction. |
(4) Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Acquisition and Asset Sale and has been prepared for informational purposes only.
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of September 30, 2023:
| A. | Eliminate the historical equity of Sigma. The equity of Sigma is revalued to the reverse acquisition purchase consideration in Adjustment B. |
| B. | Record the reverse acquisition purchase consideration measured by the estimated fair value of the Sigma stock as of the acquisition date. |
| C. | Reflect the estimated residual goodwill in the reverse acquisition. The residual goodwill of $1,764,000 was allocated to the Sigma and NextTrip reporting units at $107,000 and $1,657,000, respectively. |
| D. | Reflect the conversion of the NextTrip convertible debt to equity of NextTrip. |
| E. | Reflect the conversion of 400,000 NextTrip preferred units to equity of NextTrip. |
| F. | Reflect the issuance of the Exchange Shares, including the Contingent Shares in the Acquisition accounted for as a reverse acquisition. As discussed above, the issuance of the Contingent Shares is accounted for as a stock dividend in a business combination accounted for as a reverse acquisition. |
| G. | Reflect the accrual of transaction costs for Sigma and NextTrip that were not included in the historical financial statements for the periods presented. The Company included an accrual of $1,345,000 for unrecorded transaction costs in the pro forma balance sheet as of September 30, 2023. The Company had included $35,000 in the historical statements of operations. Total estimated transaction costs of $1,380,000 include $500,000 for investment banking fees payable on closing of the Acquisition and $170,000 in estimated legal and transaction costs for NextTrip. |
| H. | Reflect the derecognition of the assets sold and the purchase price received in the Asset Sale. |
Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations
The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2023 and for the year ended December 31, 2022:
| I. | Reflect the derecognition of the Sigma operating results due to the Asset Sale to conform to the pro forma presentation which assumes that the Asset Sale took place on January 1, 2022. |
| J. | Remove the interest expense on the NextTrip convertible debt to conform to the pro forma assumption that the NextTrip convertible debt was converted to NextTrip equity on January 1, 2022. |
(5) Income (Loss) Per Share
Represents the net income (loss) per share calculated using the historical weighted average shares outstanding and assuming the Exchange Shares, including the Contingent Shares, were issued and outstanding since January 1, 2022.
The unaudited pro forma condensed combined financial information has been prepared based on the following weighted average shares outstanding:
| Weighted Average Shares | ||||||||
| Share Issuance Component | September 30, 2023 | December 31, 2022 | ||||||
| Sigma Additive Weighted Average Shares | 544,587 | 524,940 | ||||||
| Closing Shares | 130,242 | 130,242 | ||||||
| Tranche 1 Contingent Shares (A) | 1,305,000 | 1,305,000 | ||||||
| Tranche 2 Contingent Shares (A) | 1,305,000 | 1,305,000 | ||||||
| Tranche 3 Contingent Shares (A) | 1,305,000 | 1,305,000 | ||||||
| Tranche 4 Contingent Shares (A) | 1,367,782 | 1,367,782 | ||||||
| Alternative Calculation Contingency (A) | 411,061 | 411,061 | ||||||
| Total weighted average shares | 6,368,672 | 6,349,025 | ||||||
(A) Contingent Shares issuance is calculated on a 90% probability of the shares being issued.
As a result of the pro forma net loss for the nine-months ended September 30, 2023 and the year ended December 31, 2022, the earnings per share amounts exclude the anti-dilutive impact from the following common stock equivalents:
| September 30, 2023 | December 31, 2022 | |||||||
| Potential Shares | Potential Shares | |||||||
| Warrants | 222,043 | 191,164 | ||||||
| Stock Options | - | - | ||||||
| Preferred Stock | - | - | ||||||
| Total anti-dilutive securities | 222,043 | 191,164 | ||||||
The number of potentially dilutive shares is based on the maximum number of shares issuable on exercise or conversion of the related securities as of the period end. Such amounts have not been adjusted for the treasury stock method or weighted average outstanding calculations as required if the securities were dilutive. The Preferred Stock is reflected at zero as the Series E Preferred Stock is expected to be converted into 3,069 shares of common stock in connection with the Acquisition. The Stock Options have been reflected at zero due to the likely cancellation or expiration of the outstanding stock options at the closing of the Exchange Agreement transaction due to the change of control transaction.