NextPlay Technologies Inc. - Quarter Report: 2009 August (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2009

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _________________

Commission File No. 000-52669

NEXT 1 INTERACTIVE, INC.

(Exact name of Registrant in its charter)

Nevada		26-3509845
(State or other jurisdiction of		(I.R.S. employer
incorporation or formation)		identification number)

2400 N Commerce Parkway, Suite 105

Weston, FL. 33326

(Address of principal executive offices)

Registrant’s telephone number: (954) 888-9779

N/A

(Former name, former address and former

fiscal year, if changed since last report)

Copies to:

Anslow & Jaclin, LLP

Joseph M. Lucosky

195 Route 9 South, Suite 204

Manalapan, New Jersey 07726

Tel.: (732) 409-1212

Fax.: (732) 577-1188

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes x No

As of October 20, 2009, there were 29,202,369 shares of common stock, par value $0.00001 per share, of the Registrant issued and outstanding.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14

Item 4.	Controls and Procedures	15

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	18

Item 3.	Defaults Upon Senior Securities	18

Item 4.	Submission of Matters to a Vote of Security Holders	18

Item 5.	Other Information	18

Item 6.	Exhibits	18

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Next 1 Interactive, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	August 31, 2009			February 28, 2009

Assets
Current Assets
Cash	$	65,364		$	18,801
Accounts receivable, net of allowance for doubtful accounts		123,863			125,783
Prepaid expenses and other current assets		10,258			15,612
Security deposits		89,683			128,239
Total current assets		289,168			288,435

Property and equipment, net		153,673			190,765
Other assets		124,822			181,130
Development costs		514,998			514,998
Intellectual property		6,881,659			-
Goodwill		7,052,964			7,052,964
Total assets	$	15,017,284		$	8,228,292

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Bank overdrafts	$	69,724		$	-
Accounts payable and accrued expenses		1,068,458			968,452
Other current liabilities		673,788			550,291
Related party notes payable		158,127			221,513
Capital lease payable - current portion		47,340			43,163
Notes payable - current portion		802,963			87,966
Total current liabilities		2,820,400			1,871,385

Capital lease payable - long-term portion		46,717			71,470
Notes payable - long-term portion		4,366,773			628,807

Total liabilities		7,233,890			2,571,662

Preferred stock to be issued in connection with Resort and Residence TV Asset Acquisition		2,418,696			-

Stockholders' Equity (Deficit)
Series A Preferred stock, $.01 par value; 3,000,000 authorized; and 873,625 and 504,763 shares issued and outstanding at August 31, 2009 and February 28, 2009 respectively		8,736			5,048
Series B Preferred stock, $1 par value; 100,000,000 authorized; 0 shares issued and outstanding at August 31, 2009 and February 28, 2009 respectively		-			-
Series C Preferred stock, $.01 par value; 10,000,000 authorized; 0 shares issued and outstanding at August 31, 2009 and February 28, 2009 respectively		-			-
Common stock, $.00001 par value; 200,000,000 shares authorized; 28,731,229 and 24,668,231 shares issued and outstanding at August 31, 2009 and February 28, 2009 respectively		287			247
Additional paid-in-capital		14,518,195			11,732,549
Accumulated deficit		(9,162,520	)		(6,081,214	)
Total stockholders' equity (deficit)		5,364,698			5,656,630

Total liabilities and stockholders' equity (deficit)	$	15,017,284		$	8,228,292

The accompanying notes are an integral part of these condensed consolidated financial statements.

Next 1 Interactive, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Six Months Ended
	August 31						August 31
	2009			2008			2009			2008

Revenues
Travel and commission revenues	$	263,791		$	785,703		$	428,895		$	1,566,145
Advertising revenues		64,595			-			90,906			-
Total revenues		328,386			785,703			519,801			1,566,145

Cost of revenues		485,942			706,287			598,330			1,282,861

Gross profit		(157,556	)		79,416			(78,529	)		283,284

Operating expenses
Salaries & benefits		625,580			414,571			992,450			815,233
Selling and promotions expense		25,660			17,271			49,685			41,296
General & administrative		1,159,793			527,452			1,760,103			853,299
Total operating expenses		1,811,033			959,294			2,802,238			1,709,828

Operating income (loss)		(1,968,588	)		(879,878	)		(2,880,766	)		(1,426,544	)

Other income/(expense)
Interest expense		(128,687	)		(13,936	)		(191,415	)		(36,925	)
Loss on forgiveness of debt		0			-			(10,213	)		-
Other expenses		1,001			(288,489	)		1,089			(295,330	)
Total other income (expense)		(127,686	)		(302,425	)		(200,539	)		(332,255	)

Net loss	$	(2,096,274	)	$	(1,182,303	)	$	(3,081,305	)	$	(1,758,799	)

Weighted average number of shares outstanding		26,500,557			10,787,252			25,804,820			10,774,780

Basic and diluted net loss per share	$	(0.08	)	$	(0.11	)	$	(0.12	)	$	(0.16	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Next 1 Interactive, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	August 31
	2009			2008
Cash flow from operating activities:
Net loss	$	(3,081,305	)	$	(1,758,799	)
Adjustments to reconcile net loss to net cash from operating activities:
Loss on forgiveness of debt		10,213			-
Depreciation and amortization		37,272			-
Amortization of discount on notes payable		72,452			-
Stock based compensation and extinguishment of debt		1,102,228			-

Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		1,920			(130,015	)
(Increase) decrease in prepaid expenses and other current assets		5,354			-
Increase (decrease) in accounts payable and accrued expenses		295,314			(228,156	)
Increase in other current liabilities		123,497			-
Net cash (used in) operating activities		(1,433,055	)		(2,116,970	)

Cash flows from investing activities:
Purchase of furniture, software and equipment		-			10,391
Cash paid in connection with purchase of assets of Resorts and Residence TV		(175,000	)		-
Technology development costs		-			(270,000	)
Decrease (increase) in security deposits		38,556			(208,189	)
Net cash provided by (used in) investing activities		(136,444	)		(467,798	)

Cash flows from financing activities:
Bank overdraft		69,724			-
Net payments of related party loans		(69,489	)		(199,381	)
Proceeds from note payable		165,000			(20,385	)
Payments of capital lease payable		(20,724	)		-
Proceeds from the sale of common stock and preferred stock		1,471,550			2,883,292
Net cash provided by financing activities		1,616,061			2,663,526

Net increase (decrease) in cash		46,563			78,759

Cash at beginning of period		18,801			64,369

Cash at end of period	$	65,364		$	143,127

Supplemental disclosure:
Cash paid for interest	$	9,185		$	11,000

Supplemental disclosure of non-cash investing and financing activities:
During the six months ended August 31, 2009, the Company acquired intangible and tangible assets of approximately $6,800,000 in exchange for debt of approximately $4,250,000 and preferred stock of $3,500,000.

During the six months ended August 31, 2009, the Company issued preferred stock to two officers as payment in lieu of salary accrued of approximately $230,000.

The accompanying notes are an integral part of these condensed consolidated financial statements.

NEXT 1 INTERACTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2009

NOTE 1- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions of Form 10-Q and Article 310 of Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended February 28, 2009 included in the Company’s Annual Report on Form 10K and 10-K/A (Amendment No. 2) filed subsequent with the United States Securities and Exchange. The unaudited interim consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-K and 10-K/A (Amendment No. 2) filed subsequent. The preparation requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results may differ from these estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended August 31, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2010.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material inter-company transactions and accounts have been eliminated in consolidation.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all interest-bearing deposits or investments with original maturities of three months or less.

ACCOUNTS RECEIVABLE

The Company extends credit to its customers in the normal course of business. Further, the Company regularly reviews outstanding receivables, and provides estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company also performs ongoing credit evaluations of customers’ financial condition. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its expectations

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Machinery and equipment are depreciated over 3 to 10 years. Furniture and fixtures are depreciated over 7 years. Equipment leased under a capital lease is amortized over the term of that lease. The Company performs ongoing evaluations of the estimated useful lives of the property and equipment for depreciation purposes. The estimated useful lives are determined and continually evaluated based on the period over which services are expected to be rendered by the asset. Maintenance and repairs are expensed as incurred.

IMPAIRMENT OF LONG LIVED ASSETS

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

GOODWILL AND INTANGIBLE ASSETS

In June 2001, the Financial Accounting Standards Board approved the issuance of SFAS 142, “Goodwill and Other Intangible Assets”, which established accounting and reporting requirements for goodwill and other intangible assets. The standard requires that all intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented or exchanged must be recognized as an asset apart from goodwill. Intellectual properties obtained through acquisition, with indefinite lives, are not amortized, but are subject to an annual assessment for impairment by applying a fair value based test.

WEBSITE DEVELOPMENT COSTS

The Company accounts for website development costs in accordance with Emerging Issues Task Force (EITF) No. 00-2. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage are accounted for in accordance with Statement of Position (SOP) 98-1 which requires the capitalization of certain costs that meet specific criteria, and costs incurred in the day to day operation of the website are expensed as incurred.

Management expects the website to be placed into service during the fiscal year ended February 28, 2010 at which time it will be subject to straight-line amortization over a five year period.

REVENUE RECOGNITION

We recognize revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition." and related interpretations, revenue is recognized when the services have been rendered and collection is reasonably assured.

Travel: Gross travel tour revenues represent the total retail value of transactions booked for both agency and merchant transactions recorded at the time of booking, reflecting the total price due for travel by travelers, including taxes, fees and other charges, and are generally reduced for cancellations and refunds. We also generate revenue from paid cruise ship bookings in the form of commissions. Commission revenue is recognized at the date the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

The Travel Magazine: Subscription revenue is unearned revenue and is recognized on a net proportionate basis over the life of the subscription.

Advertising: We recognize advertising revenues in the period in which the advertisement is displayed, provided that evidence of an arrangement exists, the fees are fixed or determinable and collection of the resulting receivable is reasonably assured. If fixed-fee advertising is displayed over a term greater than one month, revenues are recognized ratably over the period as described below. The majority of insertion orders have terms that begin and end in a quarterly reporting period. In the cases where at the end of a quarterly reporting period the term of an insertion order is not complete, the Company recognizes revenue for the period by pro-rating the total arrangement fee to revenue and deferred revenue based on a measure of proportionate performance of its obligation under the insertion order. The Company measures proportionate performance by the number of placements delivered and undelivered as of the reporting date. The Company uses prices stated on its internal rate card for measuring the value of delivered and undelivered placements. Fees for variable-fee advertising arrangements are recognized based on the number of impressions displayed or clicks delivered during the period.

Under these policies, no revenue is recognized unless persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collection is deemed reasonably assured. The Company considers an insertion order signed by the client or its agency to be evidence of an arrangement.

INCOME TAXES

The Company accounts for income taxes under the liability method in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under this method, deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Had income taxes been determined based on an effective tax rate of 37.6% consistent with the method of SFAS 109, the Company's net losses for all periods presented would not materially change.

EARNINGS (LOSS) PER SHARE

The Company computes earnings per share in accordance with the provisions of SFAS No. 128, Earnings per share, which establishes standards for computing and presenting basic and diluted earnings per share. Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed assuming the exercise of stock options under the treasury stock method and the related income taxes effects, if not anti-dilutive. For loss periods common share equivalents are excluded from the calculation, as their effect would be anti-dilutive.

ACCOUNTING FOR STOCK-BASED COMPENSATION

Effective October 1, 2006, we adopted the provisions of SFAS No. 123(R) (as amended), “Share Based Payment,” using the modified prospective method, which results in the provisions of SFAS No. 123(R) being applied to the consolidated financial statements on a going forward basis. SFAS No. 123(R) revises SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion 25, “Accounting for Stock Issued to Employees.” SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services at fair value, focusing primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. It also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

Stock-based compensation awarded to non-employees is accounted for under the provisions of EITF 96-18, “Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods and Services” and Staff Accounting Bulletin No. 107.

RECENT ACCOUNTING PRONOUNCEMENT

The FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, on June 29, 2009 and, in doing so, authorized the Codification as the sole source for authoritative U.S. GAAP. SFAS No. 168 will be effective for financial statements issued for reporting periods that end after September 15, 2009. Once it's effective, it will supersede all accounting standards in U.S. GAAP, aside from those issued by the SEC. SFAS No. 168 replaces SFAS No. 162 to establish a new hierarchy of GAAP sources for non-governmental entities under the FASB Accounting Standards Codification.

NOTE 3 – GOING CONCERN

As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $9,162,520 and $6,081,214 and a working capital deficit of $2,531,231 and $1,582,950 at August 31, 2009 and February 28, 2009, respectively, net losses for the six months ended August 31, 2009 and August 31, 2008 of $3,081,305 and $1,758,799, respectively and cash used in operations during the six months ended August 31, 2009 and August 31, 2008 of $1,628,363 and $2,116,970, respectively. While the Company is attempting to increase sales, the growth has not been significant enough to support the Company’s daily operations. The Company has continued to raise funds through private placements with third party. Management may attempt to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to improve sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The Company's limited financial resources have prevented the Company from aggressively advertising its products and services to achieve consumer recognition.

The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan and generate increased revenues. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company.

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at August 31, 2009:

Leased equipment	$	177,754
Furniture and equipment		21,250
Software		92,557
		291,561
Less: Accumulated depreciation		( 137,888	)
Net property and equipment	$	153,673

Depreciation expense for the six months ended August 31, 2009 and 2008 was $37,272 and $17,250, respectively

NOTE 5 – NOTES AND LOANS PAYABLE

On August 17, 2009, Next 1 Interactive, Inc. (the “Company”) and Televisual Media Works, LLC (“Televisual Media”) closed on an Asset Purchase Agreement (the “Agreement”) whereby the Company purchased certain rights, trademarks and other intangible property of Resort and Residence TV (“RRTV”), a wholly owned subsidiary of Televisual Media. (See Note 10).

Pursuant to the Agreement, the Company is required to pay to Televisual Media $500,000 on the first anniversary of the closing and $750,000 plus interest accrued at 8% annually on the second anniversary of the closing. The Company also issued a $3,000,000 zero coupon debenture (the “Debenture”) to Televisual Media payable on June 9, 2012. The Debenture bears interest at 5% per annum payable in full upon maturity.

The Company has a note payable with an unrelated third party for $500,000. The note bears interest at 7% per year and matures in March 2011 payable in quarterly installments of $25,000. The balance of the note was approximately $309,000 of which approximately $100,000 was current at August 31, 2009.

In February 2009, the Company restructured note agreements with three existing note-holders. The collective balance at the time of the restructuring was $250,000 plus accrued interest payable of $158,000 which was consolidated into three new notes payable totaling $408,000. The notes bear interest at 10% per year and mature on August 31, 2010 at which time the total amount of principle and accrued interest is due.

In connection with the restructure of these notes the Company issued 150,000 detachable warrants to purchase common stock at an exercise price of $3.00 per share. The warrant issuance is considered a discount and is included in other assets at August 31, 2009 and is amortized monthly over the term of the note. Approximately $72,000 was amortized as interest expense for the six months ended August 31, 2009.

Interest expense on the notes payable was $39,583 and $36,925 for the six months ended August 31, 2009 and 2008 respectively.

NOTE 6 – CAPITAL LEASE PAYABLE

The Company leases certain telephone and communications equipment through a lease agreement with a related party. The lease requires monthly payments of $5,078 including interest at approximately 18% per year. The lease expires on June 30, 2011.

Interest expense on the lease was $9,896 and $12,604 for the six months ended August 31, 2009 and 2008, respectively.

NOTE 7 – RELATED PARTY TRANSACTIONS

The Company has three notes payable with directors and officers for approximately $115,330. Two of the three notes bear interest at 18% annually, and the third note at an annual rate of 4%. The notes have no stated maturity date.

On August 17, 2009, the Company executed a note payable in the amount of $135,000 with an investment firm associated with a Company stockholder.

The Company also has loans payable to two existing shareholders for approximately $46,000. The loans have no stated interest rate and no stated maturity date.

As discussed further in Note 5, the Company leases equipment under a capital lease from an existing shareholder.

Interest expense on the related party debt was approximately $38,000 and $4,000 for the six months ended August 31, 2009 and 2008 respectively.

NOTE 8 – EQUITY

During the six months ended August 31, 2009, the Company issued 1,516,000 shares of common stock for cash proceeds of $1,472,000.

The Company also issued 883,000 shares of common stock for services valued at approximately $1,102,000 during the six months ended August 31, 2009.

In May and July, 2009, the Company cancelled approximately 1,067,000 shares of common stock primarily from former employees.

In August, 2009, the Company issued 368,862 shares of Series A preferred stock to executives in exchange for deferred salary, accrued interest on loans and conversion of EXVG common stock.

During the period ended August 31, 2009, the Company issued 1,687,867 shares of common stock in connection with an addendum to the purchase agreement with Maximus executed in October 2008. The agreement identifies additional assets that were to be included in the acquisition. The agreement calls for the issuance of common stock of the Company in exchange for certain tangible and intangible assets. As of August 31, 2009, the Company has not finalized the agreement and has not recognized the value of any assets acquired.

NOTE 9 – SEGMENT REPORTING

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, established standards for reporting information about operating segments in annual financial statements and required selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products, services, and geographic areas. Operating segments are defined as components of the enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

The Company has two reportable operating segments: Media and Travel. The accounting policies of each segment are the same as those described in the summary of significant accounting policies. Each segment has its own product manager but the overall operations are managed and evaluated by the Company’s chief operating decision makers for the purpose of allocating the Company’s resources. The Company also has a corporate headquarters function which does not meet the criteria of a reportable operating segment. Interest expense and corporate expenses are not allocated to the operating segments.

	Three Months Ended				Six Months Ended
	August 31				August 31
	2009		2008		2009		2008

Revenues
Media	$	64,595	$	-	$	90,906	$	-
Travel		263,791		785,703		428,895		1,566,145
Consolidated revenues	$	328,386	$	785,703	$	519,801	$	1,566,145

Operating Expense
Media	$	807,412	$	-	$	1,210,968	$	-
Travel		158,288		414,592		365,438		839,279
Segment Expense		965,700		414,592		1,576,406		839,279
Corporate		826,696		527,452		1,188,559		853,299
Consolidated operating expense	$	1,792,397	$	942,044	$	2,764,966	$	1,692,578

Depreciation and Amortization
Media	$	8,766	$	-	$	17,532	$	-
Travel		9,870		17,250		19,740		17,250
Segment Total		18,636		17,250		37,272		17,250
Corporate		-		-		-		-
Consolidated operating expense	$	18,636	$	17,250	$	37,272	$	17,250

The Company did not generate any revenues outside the United States for quarters ended August 31, 2009 and 2008, and the Company did not have any assets located outside the United States.

NOTE 10 – ACQUISITION

Tradename of the Company of Resort & Residence;

Trademark of Resort & Residence;

Domain names of “resortandresidence.tv”, resortandresidencechannel.net; resortandresidencechannel.tv and resortandresidencechannel.info;

Licenses and permits necessary for the conduct of the business of the Company;

Interactive application design;

Network promotional video clip.

Certain assets acquired will be amortized over their contractual life or estimated useful life. Amortization of those assets will begin when the network is launched during the third quarter of this fiscal year.

Pursuant to the Agreement, the Company made a $250,000 initial payment for the assets of RRTV, $175,000 of which was paid at closing and the remaining $75,000 paid October, 2009. In addition, the Company is required to pay to Televisual Media $500,000 on the first anniversary of the closing and $750,000 plus interest accrued at 8% annually on the second anniversary of the closing. The Company also issued a $3,000,000 zero coupon debenture (the “Debenture”) to Televisual Media payable on June 9, 2012. The Debenture bears interest at 5% per annum payable in full upon maturity. The Debenture also entitles Televisual Media to receive 20% of all profits earned from the RRTV assets through maturity, with such proceeds being used towards the retirement of the Debenture.

In connection with the Agreement, Televisual Media also receives $3,500,000 of Secured Series Convertible Preferred Stock (the “Preferred Stock”) of the Company. The Preferred Stock has a mandatory redemption date of June 9, 2019. Televisual Media has the right to convert the Preferred Stock into 3.5 million common shares should the network reach a minimum of 17 million households during the term of the Preferred Stock. The Company has the right to redeem or force conversion of the Preferred Stock after the first year of operation of the network. The Preferred Stock is secured by all of the assets of RRTV.

As of August 31, 2009, the Company has not authorized or issued the Secured Series Convertible Preferred Stock.

Except for the Agreement, there is no material relationship between the Company or its affiliates and any of the parties to the Agreement.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

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.

Next 1 plans to launch a TV Network known as Resort & Residence (R&R) during the second half of this year. The R&R Network will deploy both Interactive and Video on Demand capabilities and will allow Next 1 access to roughly 25 million households in the United States. The R&R TV Network will be supported by Next Ones digital media assets and expertise in the Travel and Real Estate arenas. During the first quarter of the year management has focused its efforts on the realignment of the company’s existing assets in both the travel and real estate arenas so they might compliment the planned introduction of the R&R National television network.

In order to accomplish this goal the company has and will continue to incur a number of expenditures throughout the balance of the year. New expenditures have included the purchase of the Resort and Residence Network, upgrades to existing technology solutions, outsourcing of interactive technology solutions, elimination of certain staff and the hiring of key consultants and/or full time management with significant expertise in the set up and operations of an Interactive Network such as Resort and Residence. Additionally management has looked to use its limited financial resources to either reconfigure existing operations so they will integrate with R&R or alternatively discontinue operations of certain non performing assets. Key examples of this include the closure of the Brands on Demand offices in Philadelphia with all web sales and travel solutions being realigned to be integrated into the R&R interactive sales programs. Additionally the company ceased real estate listings operations of the Home Preview Channel in Houston and Detroit pending the launch of the R&R Network and its new format.

In managements view these expenditures are a key investment to allow the company to secure a foothold in the new interactive platforms for TV. The acquisition of the R&R Network as well as the elimination or realignment of non conforming operations has resulted in both a significant drop in revenue from traditional operations while at the same time showing a marked increase in operational costs. These steps are deemed to be essential by management as they should reposition the company’s travel and real estate programs to capture potentially very significant new revenue once the R&R Network is launched.

The Company’s targeted focus of its TV Network in the Travel and Real Estate industries combined with its On-Demand and Interactive services for both television and the Internet puts the Company in position to address advertisers’ evolving need to focus on exploiting video opportunities on multiple platforms with the convergence of internet, television and mobile. The Company has developed and assembled key assets that allow it to provide media and technology solutions for consumers in the Home and Travel arenas across multiple media platforms. These two verticals (Home and Travel) hold significant appeal to advertisers as they continuously remain in the top five advertising spend categories in the North American market. Management believes the steps it is taking now will create a ‘clear differentiation’ in the cable TV space and provides the company’s shareholders and its clients with a unique and cutting edge solution to both traditional and non linear platforms to advertise their products.

Results of Operations

At August 31, 2009, our cash on hand was $65,364 compared to $18,801 at February 28, 2009. This increase was primarily attributable to private investor equity funding.

At August 31, 2009,our accounts receivable level was relatively consistent at $123,863 when compared to $125,783 at February 28, 2009.

At August 31, 2009, our total assets were $15,017,284, compared to $8,228,292 at February 28, 2009. This increase was due to the acquisition of the assets of Resort and Residence TV (“RRTV”), a wholly owned subsidiary of Televisual Media. See Note 10 of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for discussion of the asset purchase.

At August 31, 2009, our total current liabilities were $2,820,400, compared to $1,871,385 at February 28, 2009. This increase was due primarily to liabilities incurred in the acquisition of the assets of Resort and Residence TV (“RRTV”), a wholly owned subsidiary of Televisual Media. See Note 10 of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for discussion of the asset purchase.

Three Months Ended August 31, 2009 Compared to Three Months Ended August 31, 2008

Revenues. Our total revenues decreased 58% to $328,386 for the three months ended August 31, 2009, compared to $785,703 for the three months ended August 31, 2008, a decrease of $457,317. In addition to general economic environment resulting in a decline in the travel and leisure industry, the decrease was due primarily to a shift in the Company’s strategy away from its traditional business model of providing recreational travel services, to that of a media business with a focus on travel and residential real estate utilizing the internet, internet radio and cable television.

Operating expenses. Our operating expenses include website maintenance fees, general and administrative expenses, salaries and benefits, advertising and promotion, legal and professional fees. Our total operating expenses increased 89% from $959,294 for the three months ended August 31, 2008 to $1,811,033 for the three months ended August 31, 2009, an increase of $851,739. The increase was primarily due to fees incurred in raising capital, paid primarily through equity awards.

Net Loss. Our net loss increased 77% to $2,096,274 for the three months ended August 31, 2009 compared to a net loss of $1,182,303 for the three months ended August 31, 2008, an increase of $913,971. In addition to fees incurred in raising capital, the loss increase was due to the reduction in revenues while positioning the Company for a change in its business model from that of providing recreational travel services to that of a media business with a focus on travel and residential real estate utilizing the internet, internet radio and cable television.

Six Months Ended August 31, 2009 Compared to Six Months Ended August 31, 2008

Revenues. Our total revenues decreased 68% to $519,801 for the six months ended August 31, 2009, compared to $1,566,145 for the six months ended August 31, 2008, a decrease of $1,046,344. In addition to general economic environment resulting in a decline in the travel and leisure industry, the decrease was due primarily to a shift in the Company’s strategy away from its traditional business model of providing recreational travel services, to that of a media business with a focus on travel and residential real estate utilizing the internet, internet radio and cable television.

Operating expenses. Our operating expenses include website maintenance fees, general and administrative expenses, salaries and benefits, advertising and promotion, legal and professional fees. Our total operating expenses increased 64% from $1,709,828 for the six months ended August 31, 2008 to $2,802,238 for the six months ended August 31, 2009, an increase of $1,092,410. The increase was primarily due to fees incurred in raising capital, paid primarily through equity awards.

Net Loss. Our net loss increased 75% to $3,081,305 for the six months ended August 31, 2009 compared to a net loss of $1,758,799 for the six months ended August 31, 2008, an increase of $1,322,506. In addition to fees incurred in raising capital, the loss increase was due to the reduction in revenues while positioning the Company for a change in its business model from that of providing recreational travel services to that of a media business with a focus on travel and residential real estate utilizing the internet, internet radio and cable television.

Liquidity and Capital Resources

At August 31, 2009, we had total current assets of $289,168, consisting primarily of accounts receivable and security deposits. Current liabilities of $2,820,400 consisting primarily of accounts payable, accrued expenses and current portion of note payable as a result of the asset purchase of Resort and Residence TV (“RRTV”), a wholly owned subsidiary of Televisual Media, as discussed in Note 10 of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. The Company has accumulated a net loss from inception through August 31, 2009 of $9,162,520. The Company has recorded gross revenues of $519,801 for the six months ended August 31, 2009.

While the Company is attempting to increase sales, the growth has not been significant enough to support the Company’s daily operations and the Company cannot currently fund its operations for the next 12 months. To date, we have funded our operations primarily from private equity financings. Until the Company becomes profitable, if ever, management will attempt to raise additional funds by way of one or more public or private equity or debt offerings. Several funding sources have been identified and discussions are underway. While we believe in the viability of our strategy to improve sales volume and in our ability to raise additional funds, there can be no assurances to that effect. The availability of funds depends in large measure on capital markets over which we exert no control and liquidity factors. We can provide no assurance that sufficient financing will be available on desirable terms to fund investments, acquisitions, stock repurchases or extraordinary actions. General weakening in the credit markets could increase our cost of capital.

Currently, revenues provide approximately 20% of the company’s cash requirements. The remaining cash need is derived from raising additional capital. The current monthly cash burn rate is approximately $300,000. It is projected that with the launch of the television network in October, 2009, the monthly cash burn rate will gradually increase to approximately $500,000, with the expectation of profitability by March, 2010.

Our 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 launch our television network and sign advertising, sponsorship, programming, infomercial and other revenue contracts. Accordingly, we cannot assure you that our business model will be successful or that we can sustain revenue growth, or achieve or sustain profitability.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk generally represents the risk of loss that may result from the potential change in value of a financial instrument as a result of fluctuations in interest rates and market prices. We do not currently have any trading derivatives nor do we expect to have any in the future. We have established policies and internal processes related to the management of market risks, which we use in the normal course of our business operations.

Intangible Asset Risk. We have a substantial amount of intangible assets. We are required to perform goodwill impairment tests whenever events or circumstances indicate that the carrying value may not be recoverable from estimated future cash flows. As a result of our periodic evaluations, we may determine that the intangible asset values need to be written down to their fair values, which could result in material changes that could be adverse to our operating results and financial position. Although at August 31, 2009, we believed our intangible assets were recoverable, changes in the economy, the business in which we operate and our own relative performance could change the assumptions used to evaluate intangible asset recoverability. We continue to monitor those assumptions and their effect on the estimated recoverability of our intangible assets.

Item 4. Controls and Procedures.

a) Evaluation of Disclosure Controls and Procedures

Our Principal Executive Officer and Principal Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Our Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of as of August 31, 2009. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer has determined that the lack of an independent audit committee or audit committee financial expert represents a material weakness. Due to liquidity issues, we have not been able to immediately take any action to remediate this material weakness. However, when conditions allow, we will expand our board of directors and establish an independent audit committee consisting of a minimum of three individuals with industry experience including a qualified financial expert. Notwithstanding the assessment that our ICFR was not effective and that there was a material weakness as identified herein, we believe that our consolidated financial statements contained herein fairly present our financial position, results of operations and cash flows for the periods covered thereby in all material respects.

b) Changes in Internal Control over Financial Reporting.

During the quarter ended August 31, 2009, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors.

In addition to the risk factors enumerated in our Form 10-K filed on June 16, 2009, we are subject to various additional risks that could have a negative effect on the Company and its financial condition. You should understand that these risks could cause results to differ materially from those expressed in forward-looking statements contained in this report and in other Company communications. Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to each of the following:

The current worldwide recession and declines or disruptions in the travel industry could adversely affect our business or financial performance.

Our business and financial performance is affected by the health of the worldwide travel industry. Travel expenditures are sensitive to business and personal discretionary spending levels and tend to decline or grow more slowly during economic downturns, including downturns in any of our major markets. Events or weaknesses specific to the air travel industry that could negatively affect our business include continued fare increases, travel-related strikes or labor unrest, consolidations, bankruptcies or liquidations and further fuel price escalation. Additionally, our business is sensitive to safety concerns, and thus our business has in the past and may in the future decline after incidents of actual or threatened terrorism, during periods of political instability or geopolitical conflict in which travelers become concerned about safety issues, as a result of natural disasters such as hurricanes or earthquakes or when travel might involve health-related risks, such as avian flu. Such concerns could result in a protracted decrease in demand for our travel services. This decrease in demand, depending on its scope and duration, together with any future issues affecting travel safety, could significantly and adversely affect our business and financial performance over the short and long-term. In addition, the disruption of the existing travel plans of a significant number of travelers upon the occurrence of certain events, such as actual or threatened terrorist activity or war, could result in the incurrence of significant additional costs and constrained liquidity if we provide relief to affected travelers by not charging cancellation fees and/or by refunding the price of airline tickets, hotel reservations and other travel products and services.

We operate in an increasingly competitive global environment which may affect our competitive advantage.

The market for the services we offer is increasingly and intensely competitive. We compete with both established and emerging online and traditional sellers of travel services with respect to each of the services we offer. Some of our competitors, particularly travel suppliers such as airlines and hotels, may offer products and services on more favorable terms, including lower prices, no fees or unique access to proprietary loyalty programs, such as points and miles. Many of these competitors, such as airlines, hotel and rental car companies, have been steadily focusing on increasing online demand on their own websites in lieu of third-party distributors such as our Company. For instance, some low cost airlines, which are having increasing success in the marketplace, distribute their online inventory exclusively through their own websites. Suppliers who sell on their own websites typically do not charge a processing fee, and, in some instances, offer advantages such as increased or exclusive product availability and their own bonus miles or loyalty points, which could make their offerings more attractive to consumers than offerings like ours. In addition, we face increasing competition from other travel agencies, which in some cases may have favorable offerings for both travelers and suppliers, including pricing, connectivity and supply breadth. We also compete with other travel agencies for both travelers and the acquisition and retention of supply. The introduction of new technologies and the expansion of existing technologies, such as Metasearch and other search engine technologies, may increase competitive pressures or lead to changes in our business model. Increased competition has resulted in and may continue to result in reduced margins, as well as loss of travelers, transactions and brand recognition. We cannot assure you that we will be able to compete successfully against current, emerging and future competitors or provide differentiated products and services to our traveler base.

Evolving industry standards and rapid technological changes may render our technology obsolete.

Our success will depend in part upon our continued ability to enhance our existing products and services, to introduce new products and services quickly and cost effectively, meet evolving customer needs, achieve market acceptance for new product and service offerings, and to respond to emerging industry standards and other technological changes. There can be no assurance that we will be able to respond effectively to technological changes or new industry standards. Moreover, there can be no assurance that our competitors will not develop competitive products, or that any such competitive products will not have an adverse effect upon our operating results.

Moreover, we intend to continue to implement "best practices" and other established process improvements in its operations going forward. There can be no assurance that we will be successful in refining, enhancing and developing our operating strategies and systems going forward, that the costs associated with refining, enhancing and developing such strategies and systems will not increase significantly in future periods or that our existing software and technology will not become obsolete as a result of ongoing technological developments in the marketplace.

Integration of certain acquisitions could result in operating and financial difficulties.

We plan on entering into new web 2.0 business in the future. Our growth may depend, in part, on acquisitions. To the extent that we grow through acquisitions, we will face the operational and financial risks that commonly accompany that strategy. We would also face operational risks, such as failing to assimilate the operations and personnel of the acquired businesses, disrupting their ongoing businesses, increased complexity of our business, impairing management resources and their relationships with employees and travelers as a result of changes in their ownership and management. Further, the evaluation and negotiation of potential acquisitions, as well as the integration of an acquired business, may divert management time and other resources. Some acquisitions may not be successful and their performance may result in the impairment of their carrying value.

Certain financial and operational risks related to acquisitions that may have a material impact on our business are:

	•	Use of cash resources and incurrence of debt and contingent liabilities in funding acquisitions;

	•	Amortization expenses related to acquired intangible assets and other adverse accounting consequences;

	•	Costs incurred in identifying and performing due diligence on potential acquisition targets that may or may not be successful;

	•	Difficulties and expenses in assimilating the operations, products, technology, information systems or personnel of the acquired company;

	•	Impairment of relationships with employees, suppliers and affiliates of our business and the acquired business;

	•	The assumption of known and unknown debt and liabilities of the acquired company;

	•	Failure to generate adequate returns on our acquisitions and investments;

	•	Entrance into markets in which we have no direct prior experience; and

•

Impairment of goodwill or other intangible assets arising from our acquisitions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of Equity Securities and during the period ended August 31, 2009.

Item 3. Defaults upon Senior Securities.

There were no defaults upon senior securities during the period ended August 31, 2009.

Item 4. Submission of Matters to a Vote of Security Holders.

There were no matters submitted for a vote of our security holders during the period ended August 31, 2009.

Item 5. Other Information.

There is no other information required to be disclosed under this item which was not previously disclosed.

Item 6. Exhibits.

Exhibit No.		Description

31.1		Certification by William Kerby, the Principal Executive Officer of Next 1 Interactive, Inc., pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2		Certification by Richard Sokolowski, the Principal Financial and Accounting Officer of Next 1 Interactive, Inc., pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1		Certification by William Kerby, the Principal Executive Officer of Next 1 Interactive, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification by Richard Sokolowski, the Principal Financial and Accounting Officer of Next 1 Interactive, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

Dated: October 20, 2009

NEXT 1 INTERACTIVE, INC.

/s/ William Kerby

William Kerby

Chief Executive Officer and Vice-Chairman

(Principal Executive Officer)

/s/ Richard Sokolowski

Richard Sokolowski,

Chief Financial Officer

(Principal Financial and Accounting Officer)