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NEXT 1 INTERACTIVE, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.
[October 20, 2014]

NEXT 1 INTERACTIVE, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.


(Edgar Glimpses Via Acquire Media NewsEdge) Forward Looking Statements The following discussion should be read in conjunction with the attached consolidated unaudited financial statements and notes thereto, and our consolidated audited financial statements and related notes for our fiscal year ended February 28, 2014 found in our Annual Report on Form 10-K. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Where possible, we have tried to identify these forward looking statements by using words such as "anticipate," "believe," "intends," or similar expressions. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including, but not limited to, those set forth in our Annual Report on Form 10-K.



This Report contains statements that we believe are, or may be considered to be, "forward-looking statements". All statements other than statements of historical fact included in this Report regarding the prospects of our industry or our prospects, plans, financial position or business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as "may," "will," "expect," "intend," "estimate," "foresee," "project," "anticipate," "believe," "plans," "forecasts," "continue" or "could" or the negatives of these terms or variations of them or similar terms. Furthermore, such forward-looking statements may be included in various filings that we make with the SEC or press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which reflect management's opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Report.

Critical Accounting Policies and Estimates The discussion and analysis of the Company's financial condition and results of operations are based upon its consolidated unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, management evaluates past judgments and estimates, including those related to bad debts, accrued liabilities, convertible promissory notes and contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies and related risks described in the Company's annual report on Form 10-K as filed with the Securities and Exchange Commission on June 13, 2014 are those that depend most heavily on these judgments and estimates. As of August 31, 2014, there had been no material changes to any of the critical accounting policies contained therein.


Overview Next 1 Interactive, Inc. ("Next 1" or the "Company") is a media based company focusing directly on the travel segment and indirectly through our 55% ownership interest in RealBiz Media Group, Inc. a publicly traded real estate media company ("RealBiz"), on the real estate segment. The Company's and RealBiz's mission has been to both create and acquire travel and real estate video content that can be delivered on any screen (Television, web and mobile), all with interactive advertising and transactional shopping components that engage and enable viewers to request information, make purchases and get an in-depth look at products and services all through their device of choice.

Next 1 is a multi-faceted interactive media company whose key focus is around what we believe to be two of the most universal, yet powerful consumer-passion categories - real estate and travel. We are engaged in the business of providing digital media and marketing services directly for the travel industry and, indirectly through RealBiz, for the real estate industry. We plan to deliver targeted content via digital platforms including satellite, cable, broadcast, Broadband, Web, Print and Mobile. We currently generate revenue from commissions from (i) traditional sales of our travel products as well as advertising revenue from preferred suppliers and sponsors and referral fees; (ii) travel media services which include video monthly sponsorship packages, pre-roll advertising, commissions and referral fees; and (iii) revenue derived from the real estate operations of RealBiz. We have three divisions: (x) our Maupintour Extraordinary Vacations, which is one of the oldest luxury tour operator in the United States; (y) NextTrip.com/Voyage.tv a video and media website with thousands of hours of travel footage(z) TripProfessionals.com, a trip professional membership program which is an at home agency program allowing the consumer to customize and book travel while earning commission. In addition, RealBiz generates revenue from advertising revenues, real estate broker commissions and referral fees. RealBiz also has four divisions: (i) its fully licensed real estate division (formerly known as Webdigs, Inc.); (ii) Nestbuilder.com /Nestbuilder Agent its consumer and agent websites with over 1.6 million video listings and agent marketing platforms (iii) its Real Estate Virtual Tour, MicroVideo App and Media group and (iv) ReachFactor - its agent social media marketing division. The cornerstone of all four divisions is the proprietary technology which allows for an automated conversion of data (text and pictures of home listings) to a video with voice and music. At present the Company operates travel companies and travel media services, RealBiz Media Group Inc., operates the Home Tour Network. The Home Tour Network owns technology that allows it to create video from real estate agents home listings which can be featured on hundreds of relevant real estate related websites, You Tube and VOD Television Networks in 2 cities on the Cox Communications Network and Comcast Cable Network 26 We currently focus our travel segment on the following travel operations and travel media services.

Maupintour Extraordinary Vacations 1.Maupintour Extraordinary Vacations ("Maupintour") is the oldest tour operator in North America having a history of over 65 years of creating and booking tours and activity-focused trips, from private tours of the Vatican to bicycling in the Alps to wine tasting in Italy. Maupintour books these trips and serves thousands of travel agents around the world. The Company has an active alumni that desires luxury vacations that includes private sightseeing, fine dining and 4 and 5 star accommodations. The Company previously ran group tours ranging from 10 to 25; however it has moved its model to customization of high end tours for families, small groups and individuals. The Company's most popular destinations are Egypt, Israel, Europe, Africa, Asia and Peru. The Company's peak season for this division is from February to July. Maupintour's website is www.Maupintour.com.

2. NextTrip.com is being repositioned as an all-purpose travel site that includes 24/7 customer support, relevant social networking, and travel business showcases, with a primary emphasis on Video to targeted web users and a secondary promotion to TV viewers via VOD promotion. The site is scheduled for launch in the 2nd quarter of this fiscal year and will provide users with a diverse video experience that entertains, informs, and offers utility and savings. The travel information website offers users, free of charge, hundreds of destination videos and promotes worldwide vacation destinations. NextTrip.com plans to generate revenues through advertising, travel commission, referral fees, and its affiliate program. The travel fulfillment and services for the site are handled by Mark Travel. Mark Travel is the largest wholesaler of travel products in the United States. NextTrip.com, in conjunction with its Connext1 program and key media partners (including RealBiz Media, M80, WAYN and Fareportal) will look to serve relevant videos to travelers via four key elements: (i) television ads (ii) travel video on demand for web and TV (iii) broadband telecast (with the web player surrounded by interactive banner ads and/or discount travel coupons) and (iv) wireless access to the network on smart phones/devices. The Company is continuing to build out a targeted travel video with interactive advertising and transactional shopping components that engage and enable viewers to request information, make reservations and get an in-depth look at products and services all through their device of choice. The Company believes this approach will allow for multiple revenue streams and integrated media platforms that deliver measurable return on investment to its advertisers, sponsors and business partners.

Additionally, "on demand" travel solution allows users to access travel content via digital platforms including Web, Cable, Broadband and mobile. This delivery of travel information, services and entertainment to consumers will help the Company to capture multiple revenue streams including transactional commissions, referral fees, advertising and sponsorship. NextTrip.com was originally launched in July of 2008 as Nexttrip.com. Media and travel booking solutions are being restructured with fulfillment of Travel bookings being handled by Mark Travel.

The Company is targeting completion of new booking engines and video content by July 2014. The website is www.NextTrip.com.

3. Trip Professionals.com. The Company operates a Trip Professional Membership Program. The program allows members to join for a $199 annual fee and earn 80% of the commissions on travel products purchased though the member. At present the Company is working on a new booking engine whereby members can access wholesale pricing and set commissions and is currently being redesigned to allow its members access to vacations at wholesale pricing, view destination video and adjust commissions within acceptable limits.

Our subsidiary focuses on real estate media advertising.

RealBiz Media is a publicly traded real estate media company that is engaged in the business of providing digital media and marketing services for the real estate industry. RealBiz Media currently generates revenue from advertising revenues and through real estate agent and broker service fees. RealBiz has positioned itself in the following three areas summarized here and explained in more detail below: 1. Real Estate "Turn Key" social media and marketing services - RealBiz Media earns fees from creating agent personalized websites as well as offering ongoing services for marketing the agent though both our and other social media platforms like Facebook. Services include site design, site optimization, ad placements, key words, SEO strategies that cause awareness and lead generation for the agent. We charge between $100 and $10,000 per month dependent upon the level of marketing.

2. Website and Mobile Applications - RealBiz Media is developing a real estate web portal. This site is expected to be unique to the world of real estate search sites on multiple levels, from a consumer perspective the user experience is being designed to be completely visual and video centric, secondly, the site will provide local neighborhood information and allow for social interaction between home seekers and current residents who can provide an unbiased view of the selected neighborhood, and the content on the site will focus on the entire home ownership lifecycle from purchase through maintenance to home sale therefore giving the site a much deeper and more loyal audience over time.

27 3. Agent to Agent Interaction-From an industry perspective we believe the site will be revolutionary because it includes an agent only platform that is being designed to allow for agent to agent interaction, and "App Store" for relevant video content, community events, discount coupons, industry news and agent share programs. This site will completely empower the agent with content and assets that they can use to pursue prospects and generate leads at a fraction of the cost they're currently paying. This agent only site will interact with our Microvideo App (MVA) platform. The MVA was developed and implemented to allow agents to access specific video based product strategies that are designed specifically to increase the SEO rank and traffic credit to real estate franchise systems and/or their brokers. This solution gives those franchises and brokers a much needed tool to lower their cost of prospect acquisition.

28 Sufficiency of Cash Flows Because current cash balances and our projected cash generated from operations are not sufficient to meet our cash needs for working capital and capital expenditures, management intends to seek additional equity or obtain additional credit facilities. However, there can be no assurance that we will be able to issue additional capital upon terms acceptable to us. The sale of additional equity could result in additional dilution to our shareholders. A portion of our cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we evaluate potential acquisitions of such businesses, products or technologies.

RESULTS OF OPERATIONS For the Three Months Ended August 31, 2014 Compared to the Three Months Ended August 31, 2013 Revenues Our total revenues increased 6% to $406,345 for the three months ended August 31, 2014, compared to $383,851 for the three months ended August 31, 2013, an increase of $22,494. The increase in sales is the reflection of additional revenue reported and collected from Realtor.com listing uploads through our subsidiary, RealBiz, real estate division.

Revenues from the travel segment decreased 21% to $116,130 for the three months ended August 31, 2014, compared to $147,060 for the three months ended August 31, 2013, a decrease of $30,930. The decrease is attributable to a decline in tour and cruises booked by our luxury tour operation which provides escorted and independent tours worldwide to upscale travelers.

Revenues from the RealBiz real estate media increased 23% to $290,215 for the three months ended August 31, 2014, compared to $236,791 for the three months ended August 31, 2013, an increase of $53,424. The increase in sales is the reflection of additional revenue reported and collected from Realtor.com listing uploads.

Cost of Revenue Cost of revenues increased 214% to $398,483 for three months ended August 31, 2014, compared to $126,947 for the three months ended August 31, 2013, an increase of $271,536. This is predominately due to the $194,028 amortization of the cost of the Nestbuilder website placed in service in March 2014 which has been classified as a cost of sale as the website is considered a revenue producing tool for the RealBiz.

Operating Expenses Our operating expenses include salaries and benefits, selling and promotion and general and administrative expenses. Our operating expenses increased 5% to $1,632,889 for the three months ended August 31, 2014, compared to $1,550,458 for the three months ended August 31, 2013, an increase of $82,431. This increase was mainly attributable to: an increase in director's fees due to the issuance of 40,000 shares of Series D Preferred stock valued at $200,000, an increase in salaries and benefits (including stock compensation) of $181,342 and to a lesser extent an increase in selling and promotion of $18,432 and investor relations of $11,686. This was offset primarily by a decrease in amortization of intangibles of $107,642, a decrease in technology and internet of $107,006 and to a lesser extent office expense of $34,963, rent and utilities of $34,481, travel and entertainment of $27,564, dues and subscriptions of $11,119 and miscellaneous operating expenses of $6,254.

Other Income (Expenses) Interest expense increased 72% to $291,315 for three months ended August 31, 2014, compared to $169,737 for three months ended August 31, 2013, an increase of $121,578 is due primarily to the amortization of the embedded beneficial conversion feature present in the convertible debts. There was no debt or legal settlement during the three months ended August 31, 2014 as there was for the three months ended August 31, 2013. Loss on the change in fair value of derivatives decreased 101% to a gain of 27,770 for the three months August 31, 2014, compared to a loss of $3,918,728 for the three months ended August 31, 2013, a decrease of $3,946,498 primarily due to the changes in the terms of the Company's Preferred Series A shares' ratchet provision. Other income increased 338% to $5,748 of other income, compared to other income of $1,311 for the three months ended August 31, 2013, an increase of $4,437.

Net Loss We had a net loss of $1,882,824 for the three months ended August 31, 2014, compared to net loss of $5,379,338 for the three months ended August 31, 2013, a decrease of $3,496,514. The decrease in loss from 2013 to 2014 was primarily due to a decrease of $3,946,498 in the loss in the change in the fair value of derivatives offset by an increase of director's fees of $200,000, an increase in salaries and benefits of $181,342 and interest expense of $121,578. Included in the net loss for the three months ended August 31, 2014, is $429,016 of net loss attributable to the noncontrolling interest in subsidiary.

29 For the Six months Ended August 31, 2014 Compared to the Six Months Ended August 31, 2013 Revenues Our total revenues decreased 15% to $751,302 for the six months ended August 31, 2014, compared to $879,292 for the six months ended August 31, 2013, a decrease of $127,990. This is due to a decrease in the marketing and sales efforts of the travel division and the shifting of paying customers in the virtual tour business to a free trial of new technology products being released by our subsidiary, RealBiz, real estate division.

Revenues from the travel segment decreased 36% to $206,286 for the six months ended August 31, 2014, compared to $321,993 for the six months ended August 31, 2013, a decrease of $115,707. The travel revenue decrease is attributable to a decline in tour and cruises booked by our luxury tour operation which provides escorted and independent tours worldwide to upscale travelers Revenues from real estate media decreased 2% to $545,016 for the six months ended August 31, 2014, compared to $557,299 for the six months ended August 31, 2013, a decrease of $12,283. The Company is shifting from the legacy virtual tour business and focused on the rollout of its new technology products and is offering agents a free trial period before charging fees for the use of new products.

Cost of Revenue Cost of revenues increased 61% to $460,106 for six months ended August 31, 2014, compared to $285,861 for the six months ended August 31, 2013, an increase of $174,245. This is predominately due to the $194,028 amortization of the cost of the Nestbuilder website placed in service in March 2014 which has been classified as a cost of sale as the website is considered a revenue producing tool for RealBiz.

Operating Expenses Our operating expenses include salaries and benefits, selling and promotion and general and administrative expenses. Our operating expenses increased 4% to $3,497,109 for the six months ended August 31, 2014, compared to $3,348,132 for the six months ended August 31, 2013, an increase of $148,977. This increase was mainly attributable to: an increase in director's fees due to the issuance of 40,000 shares of Series D Preferred stock valued at $200,000 and to a lesser extent an increase in consulting fees of $121,486, legal and professional fees of $84,006, technology and internet expense of $81,293, selling and promotion of $68,712, salaries and benefits of $29,833, depreciation of $10,621 and miscellaneous operating expenses of $3,018. This was offset by a decrease in investor relations of $357,828 and to a lesser extent a decrease in amortization of intangibles of $28,492, travel and entertainment of $23,158, office expense of $22,619 and rent and utilities of $17,895 Other Expenses Interest expense increased 57% to $532,850 for six months ended August 31, 2014, compared to $339,187 for six months ended August 31, 2013, an increase of $193,663 due primarily to the amortization of the embedded beneficial conversion feature present in the convertible debts. There was no debt or legal settlement during the six months ended August 31, 2014 as there was for the six months ended August 31, 2013. Gain on the change in fair value of derivatives increased 131% to $1,143,567 for the six months ended August 31, 2014, compared to a loss of $3,723,595 for the six months ended August 31, 2013, an increase of $4,867,162 primarily due to the changes in the terms of the Company's Preferred Series A shares' ratchet provision. Other income increased to $166,084, compared to $1,071 for the six months ended August 31, 2013, an increase of $165,013, primarily due to a net grant received from a grant program in Canada to encourage research and development.

Net Loss We had a net loss of $2,429,112 for the six months ended August 31, 2014, compared to net loss of $6,780,339 for the six months ended August 31, 2013, a decrease of $4,351,227. The decrease in loss from 2013 to 2014 was primarily due to a decrease of $4,867,162 in the loss in the change in the fair value of derivatives and to a lesser extent an increase in other income of $165,013 and a decrease in investor relations of $357,828 offset by an increase of director's fees of $200,000, an increase in interest expense of $193,663 and to a lesser extent an increase technology and internet of $84,006 and travel and entertainment of $81,293. Included in the net loss for the three months ended August 31, 2014, is $805,653 of net loss attributable to the noncontrolling interest in subsidiary.

30 Contractual Obligations The following schedule represents obligations under written commitments on the part of the Company that are not included in liabilities: Current Long Term FY 2017 and FY2015 FY2016 thereafter TotalsLeases $ 75,886 $ 148,638 $ -0- $ 224,523 Other 106,866 192,888 385,776 685,530 Totals $ 182,752 $ 341,526 $ 385,776 $ 910,053 Liquidity and Capital Resources At August 31, 2014, we had $72,977 cash on-hand, a decrease of $44,841 from $117,818 at the start of fiscal 2015. The decrease in cash was due primarily to operating expenses and advances to affiliates.

Net cash used in operating activities was $1,680,887 for the six months ended August 31, 2014, a decrease of $397,757 from $2,078,644 used during the six months ended August 31, 2013. This decrease was primarily due to an increase in the gain on change in fair value of derivatives and to a lesser extent a decrease in stock based compensation and consulting fees, increase in loss of non-controlling interest of consolidated subsidiaries offset by increases in amortization of intangibles and debt discount, directors fees and accounts payable and accrued expenses.

Net cash used in investing activities increased to $433,639 for the six months ended August 31, 2014, compared to $327,193 for the six months ended August 31, 2013, an increase of $106,446 primarily due to incurring website development costs and to a lesser extent the purchase of computer equipment.

Net cash provided by financing activities decreased by $382,685 to $2,068,007, for the six months ended August 31, 2014, compared to $2,450,692 for the six months ended August 31, 2013. This decrease was primarily due to the net decrease of proceeds of the issuance of shares of preferred stock of $951,000, offset by increases in proceeds, net of payments, of $389,479 received for convertible promissory notes, loans and shareholder advances and an increase in proceeds of $178,836 for common stock issuances and the exercise of common stock warrants for cash.

The growth and development of our business will require a significant amount of additional working capital. We currently have limited financial resources and based on our current operating plan, we will need to raise additional capital in order to continue as a going concern. However, there can be no assurance that we will be able to raise additional capital upon terms that are acceptable to us.

We currently do not have adequate cash to meet our short or long-term objectives. In the event additional capital is raised, it may have a dilutive effect on our existing stockholders.

We are a media company focusing on travel and real estate by utilizing multiple media platforms including the Internet, radio and television. As a company that has recently changed our business model and emerged from the development phase with a limited operating history, we are subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive industry. We cannot assure you that the business will continue as a going concern or ever achieve profitability. Due to the absence of an operating history under the new business model and the emerging nature of the markets in which we compete, we anticipate operating losses until we can successfully implement our business strategy, which includes all associated revenue streams.

We will need to raise substantial additional capital to support the on-going operation and increased market penetration of our real estate and travel business including the development of national sales representation for national and global advertising and sponsorships, increases in operating costs resulting from additional staff and office space until such time as we generate revenues sufficient to support the business. We believe that in the aggregate, we will need approximately $750,000 to $1.5 million to repay debt obligations, provide capital expenditures for additional equipment and satisfy payment obligations, office space and systems required to manage the business, and cover other operating costs until our planned revenue streams from advertising, sponsorships, e-commerce, travel and real estate are fully- implemented and begin to offset our operating costs. There can be no assurances that we will be successful in raising the required capital to complete this portion of our business plan.

Since our inception, we have funded our operations with the proceeds from the private equity financings. We have issued these shares without registration under the Securities Act of 1933, as amended, afforded the Company under Section 4(a)(2) and Regulation D promulgated thereunder because the issuance did not involve a public offering of securities. The shares were sold solely to "accredited investors" as that term is defined in the Securities Act of 1933, as amended, and pursuant to the exemptions from the registration requirements of the Securities Act under Section 4(a)(2) and Regulation D thereunder. Currently, revenues provide less than 20% of our cash requirements. The remaining cash need is derived from raising additional capital. The current monthly cash burn rate is approximately $400,000, with the expectation of profitability by the end of fiscal 2015.

31 Our multi-platform media revenue model is new and evolving, and we cannot be certain that it will be successful. The potential profitability of this business model is unproven and there can be no assurance that we can achieve profitable operations. Our ability to generate revenues depends, among other things, on our ability to create enough viewership to provide advertisers, sponsors, travelers and homebuyers value. Accordingly, we cannot assure you that our business model will be successful or that we can sustain revenue growth, or achieve or sustain profitability.

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