NextPlay Technologies Inc. - Quarter Report: 2010 November (Form 10-Q)

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended November 30, 2010

o 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)

2690 Weston Road, Suite 200

Weston, FL 33331

(Address of principal executive offices)

(954) 888-9779

(Registrant’s telephone number)

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.

þ Yes o 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).

o Yes o 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	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes þ No

As of January 10, 2011, there were 46,677,149 shares outstanding of the registrant’s common stock.

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	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	27
Item 4.	(Removed and Reserved)	27
Item 5.	Other Information	27
Item 6.	Exhibits	27

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

Next 1 Interactive, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	November 30, 2010			February 28, 2010

Assets
Current Assets
Cash	$	67,464		$	211,905
Accounts receivable, net of allowance for doubtful accounts		258,029			166,059
Prepaid expenses and other current assets		556,432			2,378,450
Security deposits		253,902			206,346
Total current assets		1,135,827			2,962,760

Development costs, net		395,525			343,333
Amortizable intangible assets, net		10,606,651			12,099,652
Total assets	$	12,138,003		$	15,405,745

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses	$	1,753,602		$	1,429,591
Other current liabilities		1,279,688			817,199
Related party notes payable		6,956,411			1,900,710
Capital lease payable - current portion		39,086			51,928
Notes payable - current portion		1,002,484			900,963
Total current liabilities		11,031,271			5,100,391

Capital lease payable - long-term portion		49,001			19,552
Notes payable - long-term portion		246,899			6,477,469

Total liabilities		11,327,171			11,597,412

Stockholders' Equity
Series A Preferred stock, $.01 par value; 3,000,000 authorized; and 663,243 and 579,763 shares issued and outstanding at November 30, 2010 and February 28, 2010 respectively		6,632			5,798
Series B Preferred stock, $1 par value; 3,000,000 authorized; 0 shares issued and outstanding at November 30, 2010 and February 28, 2010 respectively		-			-
Series C Preferred stock, $.01 par value; 1,750,000 authorized; 0 shares issued and outstanding at November 30, 2010 and February 28, 2010 respectively		-			-
Common stock, $.00001 par value; 200,000,000 shares authorized; 45,281,388 and 32,756,045 shares issued and 45,166,388 and 32,756,045 shares outstanding at November 30, 2010 and February 28, 2010 respectively		451			328
Additional paid-in-capital		41,131,613			33,763,778
Accumulated deficit		(40,228,304	)		(29,961,571	)
Treasury stock, at cost 115,000 shares		(99,560	)		-
Total stockholders' equity		810,832			3,808,333

Total liabilities and stockholders' equity	$	12,138,003		$	15,405,745

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

Next 1 Interactive, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

	Three Months Ended						Nine Months Ended
	November 30						November 30
	2010			2009			2010			2009

Revenues
Travel and commission revenues	$	198,024		$	253,297		$	839,730		$	682,192
Advertising revenues		375,102			255,952			1,086,643			346,858
Total revenues		573,126			509,249			1,926,373			1,029,050

Cost of revenues		2,588,210			896,637			7,540,374			1,494,967

Gross (loss) profit		(2,015,084	)		(387,388	)		(5,614,001	)		(465,917	)

Operating expenses
Salaries and benefits		537,615			483,494			1,430,685			1,475,944
Selling and promotions expense		101,614			21,575			377,550			71,260
General and administrative		2,674,379			1,517,633			7,314,662			3,781,520
Total operating expenses		3,313,608			2,022,702			9,122,897			5,328,724

Operating loss		(5,328,692	)		(2,410,090	)		(14,736,898	)		(5,794,641	)

Other income/(expense)
Interest expense		(197,304	)		(179,882	)		(353,944	)		(371,297	)
Loss on forgiveness of debt		-			-			-			(10,213	)
Gain on legal settlement		-			-			4,903,427			-
Other expense		(52	)		(87	)		5,820			1,002
Total other income (expense)		(197,356	)		(179,969	)		4,555,303			(380,508	)

Net loss	$	(5,526,048	)	$	(2,590,058	)	$	(10,181,595	)	$	(6,175,148	)

Weighted average number of shares outstanding		43,026,330			29,420,892			37,758,516			27,016,912

Basic and diluted net loss per share	$	(0.13	)	$	(0.09	)	$	(0.27	)	$	(0.23	)

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

For the nine months ended November 30, 2010 and 2009

	November 30
	2010			2009
Cash flow from operating activities:
Net loss	$	(10,181,595	)	$	(6,175,148	)
Adjustments to reconcile net loss to net cash from operating activities:
Loss on forgiveness of debt		-			10,213
Gain on legal settlement		(4,903,427	)		-
Depreciation and amortization		1,644,363			1,057,357
Amortization of discount on notes payable		1,867,196			108,678
Stock based compensation and consulting fees		2,110,058			1,813,468
Changes in operating assets and liabilities:
Increase in accounts receivable		(91,970	)		(142,269	)
Decrease in prepaid expenses and other current assets		219,129			1,747
Decrease in other assets		-			10,713
Increase in security deposits		(47,556	)		(22,766	)
Increase in accounts payable and accrued expenses		833,504			364,355
Increase in other current liabilities		462,489			137,952
Net cash used in operating activities		(8,087,809	)		(2,835,700	)

Cash flows from investing activities:
Technology development costs		(203,554	)		-
Purchase of treasury stock		(99,560	)		-
Payment in connection with asset acquisition		-			(250,000	)
Net cash used in investing activities		(303,114	)		(250,000	)

Cash flows from financing activities:
Bank overdraft		-			15,635
Proceeds from related party loans		5,639,529			-
Principal payments of related party loans		(397,714	)		(76,683	)
Proceeds from note issued		100,000			135,000
Principal payments on notes payable		(227,940	)		-
Proceeds from capital lease		56,671			-
Principal payments on capital lease		(40,064	)		(31,604	)
Proceeds from the sale of common stock, preferred stock and warrants		3,116,000			3,024,550
Net cash provided by financing activities		8,246,482			3,066,898

Net decrease in cash		(144,441	)		(18,802	)

Cash at beginning of period		211,905			18,802

Cash at end of period	$	67,464		$	-

Supplemental disclosure:
Cash paid for interest	$	134,876		$	14,094

Supplemental disclosure of non-cash investing and financing activity:
During the nine months ended November 30, 2010 the Company issued 3,426,301 shares for consulting services valued at $2,092,827.
During the nine months ended November 30, 2010 the Company converted notes payable in the amount of $683,131 for 1,015,000 shares of common stock.
During the nine months ended November 30, 2010 the Company issued 1,850,000 warrants in connection with notes payable.
During the nine months ended November 30, 2010 the Company issued 25,000 shares to employees valued at $17,227.
During the nine months ended November 30, 2010 the Company converted accounts payable of $184,308 for 302,469 shares of common stock
During the nine months ended November 30, 2010 the Company issued 83,480 shares of preferred stock in settlement of cumulative dividends in the amount of $83,480.
During the nine months ended November 30, 2010 the Company issued 1,750,000 shares of common stock as part of the TVMW asset purchase agreement in the amount of $927,500.
During the nine months ended November 30, 2009, the Company acquired intangible and tangible assets of approximately $6,800,000 in exchange for debt.
During the nine months ended November 30, 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.

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, 2010 included in the Company’s Annual Report on Form 10K and 10-K/A (Amendment No. 1) 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. 1) 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 nine month period ended November 30, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2011.

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 - SUMMARY OF BUSINESS OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Business Organization

Next 1 Interactive, Inc. (“Next 1” or the “Company”), an interactive media company, focuses on video and media advertising over Internet, Mobile and Television platforms. Historically, the Company operated through two divisions, Media and Travel. A third (Real Estate) division is expected to launch during the fourth quarter of fiscal 2011.

The Media division targets real estate and travel. The Company broadcasts a 24/7 digital television network called “R&R TV” via satellite and cable carriers. In addition, the Company delivers other digital targeted content via Broadband, Web, Print and Mobile. The Company’s other media platforms include a real estate Video-On-Demand (“VOD”) channel called Home TV on Demand (“Home TV”) , a web radio network called “R&R Radio” and multiple websites including “RRTV.com” which features live streaming of its television network over the web. Revenues from the Media division include advertising fees from advertisements and programming aired on the R&R TV network and production services.

The Travel division operates NextTrip.com, a travel site that includes user-generated content, social networking, a directory of travel affiliate links, and travel business video showcases. In addition, this division operates as a luxury tour operator offering escorted and independent tours worldwide to upscale travelers and a cruise consortium offering marketing and technology solutions for independent cruise agencies. Revenues from the Travel division include the sale of escorted and independent tours.

The Company was initially incorporated as Extraordinary Vacations Group, Inc., in the state of Delaware on June 24, 2002, and focused on the travel industry solely through the Internet.

On October 9, 2008, the Company acquired the majority of the outstanding shares of Maximus Exploration Corporation, a reporting shell company, pursuant to a share exchange agreement (the “Share Exchange”). The Share Exchange provided for the exchange rate of 1 share of Maximus common stock for 60 shares Extraordinary Vacations USA common stock. The financial statements of Next 1, Interactive, Inc. reflects the retroactive effect of the Share Exchange as if it had occurred at the beginning of the reporting period. All loss per share amounts are reflected based on Next 1 shares outstanding, basic and dilutive.

Principles of Consolidation

The accompanying consolidated audited 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.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

Use of Estimates

The Company’s significant estimates include allowance for doubtful accounts and accrued expenses. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While the Company believes that such estimates are fair when considered in conjunction with the financial statements taken as a whole, the actual amounts of such estimates, when known, will vary from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.

Accounts Receivable

The Company extends credit to its customers in the normal course of business. Further, the Company regularly reviews outstanding receivables, and provides for 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 Accounting Standards Codification 360-10, “Property, Plant and Equipment”, 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.

Website Development Costs

The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as incurred.

Goodwill and Intangible Assets

The Company applies Accounting Standards Codification 350-20 “Goodwill and Other”, 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. Intellectual properties that have finite useful lives are amortized over their useful lives.

Earnings per Share

Earnings per share are reported pursuant to the provisions of FASB ASC 210. Accordingly, basic earnings per share reflects the weighted average number of shares outstanding during the year, and diluted shares adjusts that figure by the additional hypothetical shares that would be outstanding if all exercisable outstanding common stock equivalents with an exercise price below the current market value of the underlying stock were exercised. Common stock equivalents consist of stock options and warrants. Basic earnings per share are computed by dividing net earnings available to common shareholders by the weighted average number of shares outstanding during the period. Diluted earnings per share are 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 the effect would be anti-dilutive.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

Revenue Recognition

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.

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.

Barter Transactions

Barter transactions represent the exchange of advertising or programming for advertising, merchandise or services. Barter transactions which exchange advertising for advertising are accounted for in accordance with EITF Issue No. 99-17 “Accounting for Advertising Barter Transactions” (ASC Topic 605-20-25), which are recorded at the fair value of the advertising provided based on the Company’s own historical practice of receiving cash for similar advertising from buyers unrelated to the counterparty in the barter transactions.

Barter transactions which exchange advertising or programming for merchandise or services are recorded at the monetary value of the revenue expected to be realized from the ultimate disposition of merchandise or services. Expenses incurred in broadcasting barter provided are recorded when the program, merchandise or service is utilized.

Barter revenue of approximately $323,000 and $0 has been recognized for the nine months ended November 30, 2010 and 2009, respectively, and barter expenses of approximately $340,000 and $0 has been recognized for the nine months ended November 30, 2010 and 2009, respectively.

Cost of Revenues

Cost of revenues includes costs directly attributable to services sold and delivered. These costs include such items as broadcast carriage fees, costs to produce television content, sales commission to business partners, hotel and airfare, cruises and membership fees.

Advertising Expense

Advertising costs are charged to expense as incurred and are included in selling and promotions expense in the accompanying financial statements. Advertising expense for the nine months ended November 30, 2010 and 2009 was approximately $285,000 and $71,000, respectively. Expenses incurred in barter advertising received are recorded when the advertising is utilized.

Share-Based Compensation

The Company computes share-based payments in accordance with Accounting Standards Codification 718-10 “Compensation” (ASC 718-10). ASC 718-10 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 employees 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 an entity’s equity instruments or that may be settled by the issuance of those equity instruments.

In March 2005 the SEC issued SAB No. 107, Share-Based Payment (“SAB 107”) which provides guidance regarding the interaction of ASC 718-10 and certain SEC rules and regulations. The Company has applied the provisions of SAB 107 in its adoption of ASC 718-10.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.

ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Fair Value of Financial Instruments

The Company adopted ASC topic 820, “Fair Value Measurements and Disclosures” (ASC 820), formerly SFAS No. 157 “Fair Value Measurements,” effective January 1, 2009. ASC 820 defines “fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There was no impact relating to the adoption of ASC 820 to the Company’s financial statements.

ASC 820 also describes three levels of inputs that may be used to measure fair value:

•

Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

•

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•

Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Financial instruments consist principally of cash, accounts receivable, prepaid expenses, accounts payable, accrued liabilities and other current liabilities. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term nature. The fair value of long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities. The carrying amounts approximate fair value. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

Recent Accounting Pronouncements

In August 2010, FASB issued ASU 2010-22 "Accounting for Various Topics-Technical Corrections to SEC paragraphs (SEC Update)". ASU 2010-22 amends various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics. The Company expects the adoption of ASU 2010-22 will not have a material impact on the Company's results of operations or financial statements.

In August 2010, FASB issued ASU 2010-21 "Accounting for Technical Amendments to Various SEC Rules and Schedules. Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies". ASU 2010-21 amends various SEC paragraphs pursuant to the issuance of Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies. The Company expects the adoption of ASU 2010-21 will not have a material impact on the Company's results of operations or financial statements.

In July 2010, the FASB issued ASU 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses,” (ASU 2010-20) which amends ASC 310, “Receivables,” to require further disaggregated disclosures that improve financial statement users’ understanding of (1) the nature of an entity’s credit risk associated with its financing receivables and (2) the entity’s assessment of that risk in estimating its allowance for credit losses as well as changes in the allowance and the reasons for those changes. The new and amended disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The adoption of ASU 2010-20 will only impact disclosures and is not expected to have a material impact on the Company’s consolidated financial statements.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

Recent Accounting Pronouncements (continued)

In April 2010, the FASB issued ASU No. 2010–18, “Receivables (Topic 310) Effect of a Loan Modification When the Loan is Part of a Pool That is Accounted for as a Single Asset”, a consensus of the FASB Emerging Issues Task Force and is effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. This ASU was issued to provide guidance on accounting for acquired loans that have evidence of credit deterioration upon acquisition. The issuance determines whether a loan that is part of a pool of loans accounted for as a single asset should be removed from that pool upon a modification that would constitute a troubled debt restructuring. The objective of the amendments in this Update is to address the diversity in practice regarding such modifications. Any entity that acquires loans subject to Subtopic 310-30, that accounts for some or all of those loans within pools, and that subsequently modifies one or more of those loans after acquisition is affected by this ASU. The adoption of ASU 2010-20 will only impact disclosures and is not expected to have a material impact on the Company’s consolidated financial statements

In April 2010, the FASB issued Accounting Standard Updates (“ASUs”) 2010-17, Revenue Recognition - Milestone Method (Topic 605): Milestone Method of Revenue Recognition. This ASU codifies the consensus reached in EITF Issue No. 08-9, “Milestone Method of Revenue Recognition.” The amendments to the Codification provide guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Consideration that is contingent on achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone is judged to meet certain criteria to be considered substantive. Milestones should be considered substantive in their entirety and may not be bifurcated. An arrangement may contain both substantive and non-substantive milestones, and each milestone should be evaluated individually to determine if it is substantive. ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The adoption of ASU 2010-20 will only impact disclosures and is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 3 – GOING CONCERN

As reflected in the accompanying consolidated financial statements, the Company had net loss for the nine months ended November 30, 2010, of $10,181,595, which includes a gain from a legal settlement in the amount of $4,903,427. The Company also had an accumulated deficit of $40,228,304 and a working capital deficit of $9,895,444 at November 30, 2010. In addition, the Company reported cash used in operations during the nine months ended November 30, 2010, of $8,087,809. While the Company is attempting to increase sales, the growth has yet to achieve significant levels to fully support its daily operations.

Management’s plans with regard to this going concern are as follows: The Company will continue to raise funds through private placements with third parties by way of a public or private offering. In addition, the Board of Directors has agreed to make available, to the extent possible, the necessary capital required to allow management to aggressively expand the R&R TV Linear Network, as well as its planned Interactive and Video on Demand solutions. Management and Board members are working aggressively to increase the viewership of our network by promoting it across other mediums as well as other networks which will increase value to advertisers and result in higher advertising rates and revenues.

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 raise funds, further implement its business plan and generate greater revenues. The 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 to continue as a going concern.

NOTE 4 – PROPERTY AND EQUIPMENT

There was no property and equipment recorded at November 30, 2010 or February 28, 2010.

The property, plant and equipment previously reported consisted of leased equipment which was no longer used. The Company abandoned furniture and software received in the acquisition of the Home Preview Channel during the year ended February 28, 2010.

Depreciation expense for the nine months ended November 30, 2010 and 2009 was $0 and $55,908, respectively

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

NOTE 5 – NOTES AND LOANS PAYABLE

On May 28, 2010, the Company entered into a settlement agreement (the “Agreement”) with the sellers in order to resolve certain disputed claims regarding existing service agreements. The final settlement agreement stipulates that the settlement shall not be construed as an admission or denial of liability by any Party hereto. (See Note 10 – Legal/Arbitration Settlement).

Pursuant to the terms of the Agreement, all obligations (including remaining debt in the amount of $6,631,659 and accrued interest) under the APA and Commercial Agreements are foreclosed and have no further force or effect and the Company shall retain all property transferred pursuant to the APA. The Company is required to issued to TVMW 1,750,000 shares of its common stock and pay one hundred thousand dollars ($100,000). As of November 30, 2010, the 1,750,000 shares of common stock were issued (see Note 8). Accordingly, the Company has recorded a liability of $911,500 to Other Current Liabilities at November 30, 2010. This amount represents the total market value of the shares on the date of the agreement.

The Company also recorded a debt reduction in the amount of $6,631,659 and recognized a gain on legal settlement in the amount of $4,903,427 for the nine months ended November 30, 2010. Additionally, the Company recorded debt in the amount of $957,550 ($1,000,000 net of imputed interest of $42,450) per this provision as of November 30, 2010. The Company shall make twenty monthly payment installments of fifty thousand dollars ($50,000) each, totaling one million dollars ($1,000,000), payable to Televisual Media Works, LLC on the first day of each month, commencing on August 1, 2010. The first eight monthly payment installments must be in cash by wire transfer with the remaining twelve payments, at the election of the Company, paid in either cash or common stock. The balance of the note is $818,943 as of November 30, 2010 of which $246,899 is the current portion and $572,044 is long term. See Note 10.

On August 16, 2004, the Company entered into a promissory note 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 is $300,440 as of November 30, 2010.

In February 2009, the Company restructured note agreements with three existing noteholders. 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 matured on May 31, 2010, at which time the total amount of principle and accrued interest was due. In connection with the restructure of these notes the Company issued 150,000 detachable 3 year warrants to purchase common stock at an exercise price of $3.00 per share. The warrant issuance was recorded as a discount and amortized monthly over the terms of the note. On July 30, 2010, the Company issued 535,000 shares of common stock to settle and fully satisfy these agreements. As of November 30, 2010, the discount was fully amortized and the Company recognized $72,000 as interest expense for the nine months ended November 30, 2010.

In connection with the acquisition of Brands on Demand, a five year lease agreement was entered into by an officer of the Company. Subsequent to terminating the officer, the Company entered into an early termination agreement with the Lessor in the amount of $30,000 secured by a promissory note to be paid in monthly installments of $2,500. As of November 30, 2010, the Company has not made any installment payments on this obligation.

On November 17, 2010, the Company entered into a demand note for the principal sum of $100,000. The terms of the loan is set for three weeks with the loan due and payable as of December 8, 2010. The lender has the option to receive payment of the loan in the amount of $100,000 plus 100,000 warrants for Next One Interactive common stock at $0.50 per share for a 3 year term or an alternative form of repayment. The alternative form of repayment give the lender the right to have the loan amalgamated into an existing subscription agreement with The Rider Group, under the same terms of $0.50 per share with 2 warrants per share exercisable at $1.00 per share with a three year term. As of November 30, 2010, the Company has not issued the warrants to the lender and the balance of the note is $100,000.

Interest expense on the notes payable was $199,318 and $371,297 for the nine months ended November 30, 2010 and 2009, respectively.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

NOTE 6 – CAPITAL LEASE PAYABLE

On June 1, 2006, the Company entered into a five year lease agreement for the purchase, installation, maintenance and training costs of certain telephone, communications and computer hardware equipment with a related party. The lease requires monthly payments of $5,078 including interest at approximately 18% per year and expires on June 1, 2011. On September 3, 2010, the Company amended the original agreement and secured additional financing in the amount of $56,671 to procure additional equipment for our real estate VOD operations as part of joint venture agreement with an un-related entity Real Biz, Inc. The purpose is to provide the funding necessary for Real Biz, Inc. to purchase and install “Solution Hardware” that will be owned by Real Biz, Inc. The lease agreement remained unchanged with the exception of the terms being extended to September 1, 2012.

Interest expense on the lease was $9,807 and $14,094 for the nine months ended November 30, 2010 and 2009, respectively.

NOTE 7 – RELATED PARTY TRANSACTIONS

During the nine months ending November 30, 2010, a shareholder of the Company loaned $210,000 to finance operations. Additionally, the shareholder made a payment of approximately $64,000 to a vendor on behalf of the Company. The Company has repaid approximately $140,000 and as of November 30, 2010 owes approximately $134,000. The loan, due on demand, has no maturity date nor does it bear any interest.

During the nine months ending November 30, 2010, the Company repaid $10,000 of the balance owed to a director and officer of the Company as of February 28, 2010. Additionally, the director/officer loaned the Company approximately $29,000 of which the Company repaid approximately $4,000 against this advance. As of November 30, 2010 the Company owes approximately $25,000. The loan bears interest at 18% per annum, compounded daily, on the unpaid balance and has no stated maturity date. Interest expense on the note was approximately $500 and $12,000, respectively for the nine months ended November 30, 2010 and 2009.

During the nine months ending November 30, 2010, the Company repaid approximately $36,000 against an outstanding loan balance of $41,000 with an unrelated entity where the same director/officer is president and as of November 30, 2010 the Company owes approximately $5,000. The loan bears interest at 18% per annum ,compounded daily, on the unpaid balance and has no stated maturity date. Interest expense on the note was approximately $2,500 and $7,600, respectively for the nine months ended November 30, 2010 and 2009.

During the nine months ending November 30, 2010, the Company repaid, in full, approximately $17,000 against an outstanding loan balance due to an existing shareholder. The loan bore interest at 4% per annum, compounded daily, on the unpaid balance and had no stated maturity date. Interest expense on the note was approximately $150 and $600, respectively for the nine months ended November 30, 2010 and 2009.

As of November 30, 2010, the Company has a loan payable with a director and officer for approximately $10,000. The loan bears interest at 4% per annum, compounded daily, on the unpaid balance and has no stated maturity date. Interest expense recorded on the loan was approximately $300 and $300, respectively for the nine months ended November 30, 2010 and 2009.

As of November 30, 2010, the Company has a loan payable to an existing shareholder for approximately $30,000. The loan bears interest at 10% per annum, compounded daily, on the unpaid balance and has no stated maturity date. Interest expense on the loan was approximately $2,500 and $2,800 for the nine months ended November 30, 2010 and 2009 respectively.

On July 23, 2010, the Company entered into promissory note with an existing shareholder in the amount of $100,000. The note is due and payable on July 23, 2011 and bears interest at rate of 6% per annum. As consideration for the loan, the Company issued 100,000 warrants to the holder with a three-year life and a fair value of approximately $33,000 to purchase shares of the Company’s common stock, $0.00001 par value, per share, at an exercise price of $1.00 per share.

The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate		0.94	%
Dividend yield		0	%
Volatility factor		115.05	%
Expected life	0.5 years

The fair value of warrants is amortized as finance fees over the term of the loan. The Company recorded approximately $33,000 in prepaid finance fees upon origination and amortized approximately $12,000 and $-0-, respectively, in expense during the nine months ended November 30, 2010 and 2009.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

NOTE 7 – RELATED PARTY TRANSACTIONS (continued)

On March 5, 2010, the Company entered into a promissory note with a director (“holder”) of the Company. Pursuant to the note, the holder agreed to loan the Company $3,500,000. The note has an effective date of January 25, 2010 and a maturity date of January 25, 2011. The note bears interest at 6% per annum. The holder has advanced $4,425,129 during the nine months ended November 30, 2010 during which the Company made principal payments of $190,000 against the outstanding balance and has verbally agreed to fund up to a total of $7,000,000. The balance of the note payable as of November 30, 2010 is $5,727,475. Previous to entering into this agreement and as a incentive, the Company, on January 27, 2010, issued 7,000,000 warrants to the holder with a three-year life and a fair value of $2.3 million to purchase shares of the Company’s common stock, $0.00001 par value, per share, at an exercise price of $1.00 per share.

The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate		1.46	%
Dividend yield		0	%
Volatility factor		136.1	%
Expected life	1.5 years

The fair value of warrants is amortized as finance fees over the term of the loan. The Company recorded approximately $2.283 million in prepaid finance fees upon origination and amortized approximately $1,720,000 and -0-, respectively, in expense during the nine months ended November 30, 2010 and 2009.

On March 5, 2010, the Company entered into a promissory note with a director (“holder”) of the Company. Pursuant to the note, the holder agreed to loan the Company $3,500,000. The note has an effective date of January 25, 2010 and a maturity date of January 25, 2011. The note bears interest at 6% per annum. The holder has advanced $875,000 during the nine months ended November 30, 2010. The balance of the note payable as of November 30, 2010 is $925,000. As an incentive, the Company, on April 30, 2010, issued 850,000 warrants to the holder with a three-year life and a fair value of approximately $175,000 to purchase shares of the Company’s common stock, $0.00001 par value, per share, at an exercise price of $1.00 per share.

The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate		1.51	%
Dividend yield		0	%
Volatility factor		124.7	%
Expected life	1.5 years

The fair value of warrants is amortized as finance fees over the term of the loan. The Company recorded approximately $175,000 in prepaid finance fees upon origination and amortized approximately $114,000 and $-0-, respectively, in expense during the nine months ended November 30, 2010 and 2009.

On December 20, 2009, the Company entered into multiple promissory note agreements with existing shareholders totaling $200,000. The terms of the promissory notes expired between twenty one and twenty six days from the original date. In lieu of interest, 100,000 three year warrants with an exercise price of $2.00 per share and 100,000 three year warrants with an exercise price of $1.00 per shares were issued as a one-time interest payment with a fair value of approximately $74,000. The Company issued common stock in full satisfaction of the outstanding promissory notes on the following dates:

March 23, 2010	50,000 shares w/50,000 warrants	$	50,000
April 3, 2010	100,000 shares	$	50,000
April 15, 2010	100,000 shares	$	50,000
April 23, 2010	100,000 shares	$	50,000

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

NOTE 7 – RELATED PARTY TRANSACTIONS (continued)

The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate	1.42 to 1.57		%
Dividend yield		0	%
Volatility factor	138.84 to 140.31		%
Expected life

On December 14, 2009, the Company entered into promissory note with an existing shareholder in the amount of $100,000. The note was due and payable on December 29, 2009 and in lieu of interest 100,000 three year warrants with an exercise price of $1.00 per share were issued as a one-time interest payment with a fair value of approximately $16,000. On June 1, 2010, the Company issued 200,000 shares of it’s common stock in full satisfaction of this agreement.

The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following range of assumptions:

Risk-free interest rate		1.63	%
Dividend yield		0	%
Volatility factor		139.7	%
Expected life	0.5 years

As discussed in Note 6, the Company leases equipment under a capital lease from an existing shareholder.

NOTE 8 – EQUITY

Common Stock

During the nine months ended November 30, 2010, the Company issued approximately 3,426,301 shares of common stock in exchange for services rendered valued at approximately $1,752,123. The value of the common stock issued was based on the fair value of the stock at the time of issuance or the fair value of the services provided, whichever was more readily determinable.

During the nine months ended November 30, 2010, the company issued 302,469 shares of common stock in exchange for settlement of accounts payable valued at $184,308 per a settlement agreement with various service providers. The value of the common stock issued was based on the fair value of the stock at the time of issuance.

During the nine months ended November 30, 2010, the Company issued 1,015,000 shares of common stock and 480,000 warrants with an exercise price of $2.00 and three year life, in exchange for the conversion of loans in the amount of $ 683,142. The Company also reinstated debt in the amount of $50,000 due to a shareholder by cancelling 50,000 shares of common stock and 50,000 warrants. The reinstatement was made to correct an excess amount of debt converted to stock in the prior year.

On June 15, 2010, the Company issued 1,750,000 shares of its common stock, par value $0.00001 per share per a settlement agreement. See Notes 5 and 10.

During the nine months ended November 30, 2010, the Company issued approximately 87,573 shares as replacements for prior EXVG shares not converted in the original share exchange at the time of the reverse merger with Maximus.

From July 13, 2010 to August 6, 2010, the Company issued 1,629,000 shares of common stock at a purchase price of $0.50 per share, for an aggregate purchase price of $814,500. Additionally, the Company issued to these Investors two year warrants to purchase 1,029,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

On August 16, 2010, the Company issued 200,000 shares of common stock at a purchase price of $1.00 per share, for an aggregate purchase price of $200,000. Additionally, the Company issued to this Investor three year warrants to purchase 200,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

On August 26, 2010, the Company issued 250,000 shares of common stock at a purchase price of $250,000. Additionally, the Company issued to the Investor three-year warrants to purchase 500,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

NOTE 8 – EQUITY(continued)

Common Stock(continued)

On August 29, 2010, the Company entered into a strategic media agreement. The Company is required to provide 2,000,000 shares of the Company’s common stock and a five-year cashless warrant to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $1.00 per share. Pursuant to this Agreement, the Company is obligated to file a registration statement on Form S-1 covering the resale of 667,000 shares of common stock no later than sixty (60) days following the closing date. As of January 13, 2011 the Company has not filed Form S-1.

On October 26, 2010, the Company issued 400,000 shares of common stock at a purchase price of $0.50 per share, resulting in receipts, net of transaction fees, of $175,000. Additionally, the Company issued 800,000 five year warrants to purchase shares of the Company’s common stock at an exercise price of $1.00 per share.

On September 9, 2010, the Company issued 100,000 shares of common stock at a purchase price of $0.50 per share, resulting in receipts, net of transaction fees, of $50,000.

From September 15, 2010 to October 22, 2010, the Company issued 1,790,000 shares of common stock at a purchase price of $0.50 per share, resulting in receipts, net of transaction fees, of $895,000. Additionally, the Company issued 2,980,000 two year warrants to purchase shares of the Company’s common stock at an exercise price of $1.00 per share.

From September 23, 2010 to November 22, 2010, the Company issued 1,550,000 shares of common stock at a purchase price of $0.50 per share, resulting in receipts, net of transaction fees, of $825,000. Additionally, the Company issued 2,266,267 three year warrants to purchase shares of the Company’s common stock at an exercise price of $1.00 per share.

During the nine months ended November 30, 2010, the Company issued 25,000 shares valued at $17,227 to an employee for services rendered.

Preferred Stock

The Company has authorized 3,000,000 shares of Series A 10% Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”). The holders of record of shares of Series A Preferred Stock shall be entitled to vote on all matters submitted to a vote of the shareholders of the Corporation and shall be entitled to one hundred (100) votes for each share of Series A Preferred Stock. Per the terms of the Amended and Restated Certificate of Designations, subject to the availability of authorized and unissued shares of Series A Preferred Stock, the holders of Series A Preferred Stock may, by written notice to the Corporation, may elect to convert all or any part of such holder’s shares of Series A Preferred Stock into Common Stock at a conversion rate of the lower of (a) $0.50 per share or (b) at the lowest price the Company has issued stock as part of a financing. Additionally, the holders of Series A Preferred Stock, may by written notice to the Corporation, may convert all or part of such holder’s shares (excluding any shares issued pursuant to conversion of unpaid dividends) into debt obligations of the Corporation, secured by a security interest in all of the Corporation and its’ subsidiaries, at a rate of $0.50 of debt for each share of Series A Preferred Stock.

During the nine months ended November 30, 2010, the Company issued 83,480 shares of Series A Preferred Stock to the directors of the Company in exchange for $83,480 of cumulative dividends on existing Series A Preferred shares through April 30, 2010. Dividends in arrears on the outstanding preferred shares total $19,113 as of November 30, 2010.

Warrants

During the nine months ended November 30, 2010, the company issued 3,426,333 warrants valued at approximately $340,704 in exchange for services rendered, consisting of financing and consulting fees incurred in raising capital. Additionally, the Company issued 1,150,000 warrants valued at approximately $264,307 in connection with the issuance of promissory notes.

The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate		0.2% - 1.66	%
Dividend yield		0	%
Volatility factor		101.0% - 118.82	%
Expected life	1.5 years

At November 30, 2010 there were 24,536,862 warrants outstanding with a weighted average exercise price of $1.20 and weighted average life of 2.3 years. No warrants were exercised during nine months ended November 30, 2010.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

Treasury Stock

The Board of Directors of the Company has authorized the purchase of the Company’s common stock. From August 3, 2010 through August 5, 2010 the Company purchased treasury stock on the open market at an average price of $0.87 cents per share. The Company has adopted the cost method of recording treasury stock and records the amounts paid to repurchase stock as an increase to treasury stock with no distinction made between the par value of the stock and the premium paid by the Company and is presented on the balance sheet as a reduction in stockholder’s equity.

NOTE 9 – SEGMENT REPORTING

Accounting Standards Codification 280-16 “Segment Reporting”, 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.

The tables below present information about reportable segments for the three and nine months ended November 30, 2010 and 2009 respectively:

	Three Months Ended					Nine months ended
	November 30,					November 30,
	2010		2009			2010		2009

Revenues
Media	$	375,102	$	255,952		$	1,086,643	$	346,858
Travel		198,024		253,297			839,730		682,192
Consolidated revenues	$	573,126	$	509,249		$	1,926,373	$	1,029,050

Operating Expense
Media	$	2,670,738	$	753,826		$	6,199,530	$	1,964,794
Travel		24,673		(69,274	)		143,455		296,164
Segment Expense		2,695,411		684,552			6,342,985		2,260,958
Corporate		42,044		821,849			1,135,177		2,010,408
Consolidated operating expense	$	2,737,455	$	1,506,401		$	7,478,162	$	4,271,367

Depreciation and Amortization
Media	$	-	$	8,765		$	-	$	26,297
Travel		372		9,870			372		29,610
Segment Total		372		18,635			372		55,907
Corporate		553,410		497,666			1,644,363		1,001,450
Consolidated depreciation and amortization	$	553,782	$	516,301		$	1,644,735	$	1,057,357

The Company did not generate any revenue outside the United States for the nine months ended November 30, 2010 and 2009.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

NOTE 10 – LEGAL/ARBITRATION SETTLEMENT

On August 17, 2009, Next 1 Interactive, Inc. (the “Company”) and Televisual Media Works, LLC (“Televisual Media”) closed on an asset purchase agreement (the “APA”) whereby the Company purchased certain rights, trademarks and other intangible property of Resort and Residence TV (“RRTV”), a wholly owned subsidiary of Televisual Media. The primary purpose of the APA was the acquisition of rights to a broadcast service agreement with a satellite television carrier. However, in conjunction with the acquisition of the assets, the Agreement stipulated that the sellers were to provide certain additional services to the Company as defined in an Advertising Sales Representation Agreement, an Affiliate Sales Representative Agreement and an Interactive Service Agreement among other agreements.

On May 28, 2010, the Company entered into a settlement agreement (the “Agreement”) by and among the Company and Televisual Media, a Colorado limited liability company, TV Ad Works, LLC, a Colorado limited liability company, TV Net Works, a Colorado limited liability company, TV iWorks, a Colorado limited liability and Mr. Gary Turner and Mrs. Staci Turner, individuals residing in the State of Colorado (individually and collectively “TVMW,” and together with the Company, the “Parties”), in order to resolve certain disputed claims regarding the service agreements referred to above. The final settlement agreement stipulates that the settlement shall not be construed as an admission or denial of liability by any Party hereto.

Pursuant to the terms of the Agreement, (i) all obligations (including remaining debt in the amount of $6,631,659 and accrued interest) under the APA and Commercial Agreements are foreclosed and have no further force or effect; (ii) the Company shall retain all property transferred pursuant to the APA; (iii) TVMW shall retain all compensation paid for by the Company; (iv) the Company shall issue TVMW 1,750,000 shares of its common stock, par value $0.00001 per share; (v) the Company shall pay to Televisual Media one hundred thousand dollars ($100,000); and (vi) the Company shall make twenty monthly payment installments of fifty thousand dollars ($50,000) each, totaling one million dollars ($1,000,000), payable to Televisual Media Works, LLC on the first day of each month, commencing on August 1, 2010. The first eight monthly payment installments must be in cash by wire transfer with the remaining twelve payments, at the election of the Company, paid in either cash or common stock.

The following table illustrates the calculation of the gain recognized:

	Payments		Imputed		Principal
	Due		Interest		Balance

Total Debt	$	8,000,000	$	1,118,341	$	6,881,659
Less: Deposit paid						(250,000	)
Remaining debt settled						6,631,659
Less: Value of shares issued						(927,500	)
Cash payments to be made						(957,550	)
Initial payment						(42,500	)
Add: Accrued interest						199,318

Gain on forgiveness of debt					$	4,903,427

Accrued interest represents interest accrued through February 28, 2010 on total debt.

The common stock was valued at $0.53 per share which was the market value of the stock on the date the shares were issued, June 15, 2010, resulting in total consideration of $927,500. The Company issued 1,750,000 shares on June 15, 2010. Per the agreement, $57,500 of the $100,000 cash payment was applied to a payable due to Televisual Media and the remainder was applied to satisfy the terms of the settlement agreement.

As a result of this agreement, the Company performed an evaluation under FASB ASC 350-30-35 “Intangibles – Goodwill and Other: Subsequent Measurement, General”. Management’s conclusion upon completion of the evaluation was that there was no impairment of the intangible assets acquired in the original Asset Purchase Agreement.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

NOTE 11 – INTANGIBLE ASSETS

The following table sets forth intangible assets, including accumulated amortization:

	November 30, 2010
	Weighted Average
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value

Supplier Relationships	5.6 years	$	7,938,935	$	1,578,275	$	6,360,660
Technology	4.9 years		5,703,829		1,697,575		4,006,254
Web Site	1.5 years		718,553		323,028		395,525
Trade Name	5.7 years		291,859		52,125		239,734
		$	14,653,176	$	3,651,003	$	11,002,173

Intangible assets are amortized on a straight-line basis over their expected useful lives, estimated to be 7 years, except for the web site which is 3 years. Amortization expense related to intangible assets was $1,644,363 and $1,001,450 for the nine months ended November 30, 2010 and 2009 respectively.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

The Company currently has agreements in place with several major satellite and cable providers to carry the R&R TV network. Carriage fees paid to these providers are significant. The Company is heavily reliant on these providers in order to continue broadcasting and if this commitment is not met it could seriously impede the Company’s ability to generate revenues.

NOTE 13 - SUBSEQUENT EVENTS

The Company evaluated subsequent events for the period from November 30, 2010, the date of these consolidated financial statements, through January 13, 2011, which represents the date these consolidated financial statements are being filed with the Commission. With respect to this disclosure, the Company has not evaluated subsequent events occurring after January 13, 2011.

Convertible Promissory Notes

On December 14, 2010, the Company entered into a convertible promissory note in the amount of $50,000. The terms of the note are set for ninety days at an interest rate of 10% per annum, maturing on March 14, 2011. The Company agrees to issue to the noteholder 100,000 Series 1 five year warrants and 100,000 Series 2 five year warrants. The Series 1 warrants will allow the noteholder to purchase shares of the Company’s common stock, par value $0.00001 per share, at an exercise price of $0.50 per share. The Series 2 warrants will allow the noteholder to purchase shares of the Company’s common stock, par value $0.00001 per share, at an exercise price of $0.75 per share. The noteholder, at their sole option, may convert the current loan balance at any time until the loan balance is repaid into shares of the Company at $0.50 per share. The Company may force a conversion in the event of the common share price trading for a two day period at or above a 50 percent premium to the lenders conversion price (i.e. greater than 75 cents per share) then the Company may force the conversion of the note plus accrued interest into common shares.

On December 17, 2010, the Company entered into one convertible promissory note in the amount of $250,000. The terms of each note are set for ninety days at an interest rate of 10% per annum, maturing on March 20, 2011. For each convertible promissory note, the Company agrees to issue to the noteholder 1,000,000 Series 1 five year warrants. The Series 1 warrants will allow the noteholder to purchase shares of the Company’s common stock, par value $0.00001 per share, at an exercise price of $0.50 per share. The noteholder, at their sole option, may convert the current loan balance at any time until the loan balance is repaid into shares of the Company at $0.50 per share.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2010

NOTE 13 - SUBSEQUENT EVENTS (continued)

Stockholders’ Equity

From December 1, 2010 to December 9, 2010, the Company issued 937,500 shares for consulting services valued at $468,730.

On December 8, 2010, the Company issued 100,000 warrants to extend a promissory note agreement (promissory note had no stated interest rate) with an unrelated noteholder until December 15, 2010. The original promissory note was dated November 17, 2010 and was due was due December 8, 2010. As of the filing of this 10-Q, the Company has not repaid the note.

On December 14, 2010, the Company issued 300,000 shares of common stock upon the exercise of 300,000 warrants at the request of a shareholder.

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.

Overview

Next 1 Interactive, Inc. (the “Company”) is a media based company focusing on two segments; travel and real estate. This has been made possible through acquisitions, the most notable of which is the acquisition of Resort and Residence TV (“R&R” or the “Network”) in August of 2009. The R&R network was launched on November 6, 2009, into roughly 21 million households with DirecTV and Comcast. The Company has plans to expand R&R’s 24/7 full time lifestyle programming network, as well as the introduction of interactive and transactional capabilities. Additionally, the Network has plans to include two distinct video on demand “channels” called R&R Vacation Travel and R&R Homes TV on Demand supported by websites and call centers. This new model will allow consumers their choice of platforms (TV, web, and mobile) to view and transact in both the travel and real estate arenas. The Company believes this new model will provide multiple sources of revenue, mainly from production, interactive applications, advertising, referral/lead generation fees and commissions due to the Company’s existing licenses and expertise in travel and real estate arenas. During our last difficult transition year, the Company saw a dramatic drop in revenues accompanied by significant increases in expenditures to put the model in place. Management believes the Company has reached significant milestones including the launch of the network and that the process is well underway to allow the Company to achieve profitability by the fourth quarter of this year.

The R&R Network plans to expand its number of households and deploy both Interactive and Video on Demand capabilities over the next three quarters allowing Next 1 access to roughly 60 million households in the United States. The R&R Network will be supported by Next One’s digital media relationships and platforms and expertise in the Travel and Real Estate arenas.

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: (1) the purchase of the Resort and Residence Network, modification of the business model to work in conjunction with television broadcasting, (2) programming, and (3) outsourcing of key interactive technology solutions to complement our in-house expertise in maximizing the efficiency of the operation. Additionally, management has looked to use its limited financial resources to reconfigure existing operations so they will integrate with R&R.

In management’s 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 showed 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 provide 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

Three Months Ended November 30, 2010 Compared to Three Months Ended November 30, 2009

Revenues. Our total revenues increased 13% to $573,126 for the three months ended November 30, 2010, compared to $509,249 for the three months ended November 30, 2009, an increase of $63,877. The increase in revenue is a result of the Company executing its business strategy, which includes increased advertising revenues from its R&R TV network as well as increased travel revenue from the Company’s renewed focus on providing recreational travel services.

Revenues from the travel segment decreased 22% to $198,024 for the three months ended November 30, 2010, compared to $253,297 for the three months ended November 30, 2009, a decrease of $55,273. Travel revenue is generated from our luxury tour operation, which provides escorted and independent tours worldwide to upscale travelers. The Company has redirected some of its limited resources towards improving the performance of this business segment.

Revenues from advertising increased 47% to $375,102 for the three months ended November 30, 2010, compared to $255,952 for the three months ended November 30, 2009, an increase of $119,150. Advertising revenue in the current quarter was generated from the sale of advertising time on R&R TV including advertisements shown during a program (also known as short-form advertising) and infomercials in which the advertisement is the program itself (also known as long-form advertising). The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand for time on our network. Advertising revenues in the prior year quarter was generated from showcase and print advertising revenues.

Cost of revenues. Cost of revenues increased 189% to $2,588,210 for the three months ended November 30, 2010, compared to $896,637 for the same year ago period, an increase of $1,691,573. The significant increase is due to the cost of operating a television network, substantially all of which consists of broadcast carriage fees and production costs which did not exist during the prior fiscal period.

Operating expenses. Our operating expenses include website maintenance fees, general and administrative expenses, salaries and benefits, advertising and promotion, legal and professional fees, consulting and finance fees incurred in raising capital and amortization of intangibles. Our total operating expenses increased 64% from $2,022,702 for the three months ended November 30, 2009, to $3,313,608 for the three months ended November 30, 2010, an increase of $1,290,906. The increase was due primarily to an increase in amortization of deferred finance fees of $164,748, amortization of intangibles of $55,744, salaries and benefits of $54,121, legal and professional fees of $27,953, and consulting fees incurred in raising capital of $1,169,040 and various other operating expenses of $67,301.

Interest expense. Interest expense decreased 10% to $197,304 for the three months ended November 30, 2010, compared to $179,882 for the same year ago period, an increase of $17,422 due primarily to an increase of related-party debt.

Net income/loss. We had net loss of $5,526,048 for the three months ended November 30, 2010, compared to a net loss $2,590,058 for the same year ago period, an increase in net loss of $2,935,990. The increase from 2009 to 2010 was primarily due to an increase in operating losses of $2,918,602, interest expense of $17,422, and an increase in other expenses of $34,809.

Nine months ended November 30, 2010 Compared to Nine months ended November 30, 2009

Revenues. Our total revenues increased 87% to $1,926,373 for the nine months ended November 30, 2010, compared to $1,029,050 for the nine months ended November 30, 2009, an increase of $897,323. The increase in revenue is a result of the Company executing its business strategy, which includes increased advertising revenues from its R&R TV network as well as increased travel revenue from the Company’s renewed focus on providing recreational travel services.

Revenues from the travel segment increased 23% to $839,730 for the nine months ended November 30, 2010, compared to $682,192 for the nine months ended November 30, 2009, an increase of $157,538. Travel revenue is generated from our luxury tour operation, which provides escorted and independent tours worldwide to upscale travelers. The Company has redirected some of its limited resources towards improving the performance of this business segment.

Revenues from advertising increased 213% to $1,086,643 for the nine months ended November 30, 2010, compared to $346,858 for the nine months ended November 30, 2009, an increase of $739,785. Advertising revenue in the current quarter was generated from the sale of advertising time on R&R TV including advertisements shown during a program (also known as short-form advertising) and infomercials in which the advertisement is the program itself (also known as long-form advertising). The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand for time on our network. Advertising revenues in the prior year quarter was generated from showcase and print advertising revenues.

Cost of revenues. Cost of revenues increased 404% to $7,540,374 for the nine months ended November 30, 2010, compared to $1,494,967 for the same year ago period, an increase of $6,045,407. The significant increase is due to the cost of operating a television network, substantially all of which consists of broadcast carriage fees and production costs which did not exist during the prior fiscal period.

Operating expenses. Our operating expenses include website maintenance fees, general and administrative expenses, salaries and benefits, advertising and promotion, legal and professional fees, consulting and finance fees incurred in raising capital and amortization of intangibles. Our total operating expenses increased 71% from $9,122,897 for the nine months ended November 30, 2009, to $5,328,724 the nine months ended November 30, 2010, an increase of $3,794,173. The increase was due primarily to an increase in amortization of deferred finance fees of $1,592,703, amortization of intangibles of $642,913, legal and professional fees of $138,914, consulting fees incurred in raising capital of $1,076,168, other operating expenses of $388,734 and offset by reductions in payroll and benefits of $45,259.

Gain on legal settlement. During the period ended November 30, 2010, the Company recognized a gain from a legal settlement with a creditor in the amount of $4,903,427 as follows:

On August 17, 2009, Next 1 and Televisual Media Works, LLC (“Televisual Media”) closed on an asset purchase agreement (the “APA”), whereby the Company purchased certain rights, trademarks and other intangible property of Resort and Residence TV (“RRTV”), a wholly owned subsidiary of Televisual Media.

On May 28, 2010, the Company entered into a settlement agreement (the “Agreement”) by and among the Company and Televisual Media, a Colorado limited liability company, TV Ad Works, LLC, a Colorado limited liability company, TV Net Works, a Colorado limited liability company, TV iWorks, a Colorado limited liability and Mr. Gary Turner and Mrs. Staci Turner, individuals residing in the State of Colorado (individually and collectively “TVMW,” and together with the Company, the “Parties”), in order to resolve certain disputed claims including, but not limited to, the Advertising Sales Representation Agreement, the Affiliate Sales Representative Agreement and the Interactive Service Agreement.

Interest expense. Interest expense decreased 5% to $353,944 for the nine months ended November 30, 2010, compared to $371,297 for the same year ago period, a decrease of $17,353 due primarily to a reduction in related-party debt.

Net income/loss. We had net loss of $10,181,595 for the nine months ended November 30, 2010, compared to a net loss $6,175,148 for the same year ago period, an increase in net loss of $4,006,447. The increase from 2009 to 2010 was primarily due to the gain on legal settlement in the amount of $4,903,427 as previously discussed, offset by increases in operating losses of $8,942,257, a reduction in interest expense of $17,353 and reductions in other expenses of $15,030.

Assets. Our total assets were $12,138,003 at November 30, 2010, compared to $15,405,745 at February 28, 2010. The decrease of $3,267,742 was primarily due to the amortization of intangible assets and deferred finance fees.

Liabilities. Our total liabilities were $11,327,171 at November 30, 2010, compared to $11,597,412 at February 28, 2010, a decrease of $270,241 due to net debt reductions in settlement of a legal dispute previously discussed in the amount of $5,674,109 consisting of debt forgiven in the amount $6,631,659 and new debt incurred in the amount of $957,550, net of imputed interest. In addition, related-party notes payable increased $5,055,702 due to additional loans from director/shareholders. Accounts payable and accrued expenses increased by $324,011, primarily due from barter advertising received but not yet provided in the form of advertising spots. The remaining increase in liabilities of $479,096 was due to an increase in contingent liabilities of $462,489 and capital lease incurred of $16,607.

Total Stockholders’ Equity. Our stockholders’ equity was $810,832 at November 30, 2010, compared to $3,808,333 at February 28, 2010. The reduction was due to net loss incurred for the nine months ended November 30, 2010, offset by additions to paid in capital.

Liquidity and Capital Resources; Going Concern

At November 30, 2010, the Company had $67,464 of cash on-hand, a decrease of $144,441 from $211,905 at the start of fiscal 2011. The decrease in cash was due primarily to cash used for daily operations.

Net cash used in operations was $8,087,809 for the nine months ended November 30, 2010, an increase of $5,252,109 from $2,835,700 used in the same year ago period. This increase was due to costs, primarily carriage fees, incurred to launch and operate a television network.

Net cash used in investing activities increased $53,114 to $303,114 for the nine months ended November 30, 2010, compared to $250,000 during the same year ago period consisting of web site development costs of $203,554 and purchase of treasury stock in the amount of $99,560.

During the nine months ended November 30, 2010, net cash provided by financing activities increased $5,179,584 to $8,246,482 from $3,066,898 during the same year ago period. This increase was due to an increase in net proceeds from related party loans of $5,639,529, an increase in the net proceeds from the sale of equity instruments of $3,116,000 and other net reductions of $111,364.

The R&R network was launched on November 6, 2009, with Comcast and DIRECTV bringing it into roughly 21 million households. In March 2010, the Company announced a further expansion to 28 million homes with Capital Broadcasting Corporation. In June 2010, the Company announced still further expansion to 44 million homes with Edison Broadcasting and is planning to reach 60 million households by the end of fiscal 2011. While we expect this market penetration to generate a substantial increase in operating, marketing, promotion and other expenses, we also expect that our revenues will ultimately increase sufficiently enough to cover these increases. Although carriage fees, our largest operating cost, begin immediately, brand recognition, which will result in greater revenues, takes time to develop. Accordingly, we believe that our results of operations in fiscal 2011 will not begin to improve until the fourth quarter.

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. 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.

Since our inception in June 2002, we have been focused on the travel industry solely through the internet. We have recently changed our business model from a company that generates nearly all revenues from its travel divisions to 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 such time as we can successfully implement our business strategy, which includes all associated revenue streams.

Since our inception, we have financed our operations through numerous debt and equity issuances.

The Company will need to raise substantial additional capital to support the on-going operation and increased market penetration of R&RTV 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 $10 million to $15 million to support and expand the network reach, repay debt obligations, provide capital expenditures for additional equipment and satisfy payment obligations under carriage/distribution agreements, office space and systems required to manage the business, and cover other operating costs until our planned revenue streams from media advertising, sponsorships, e-commerce, travel and real estate are fully-implemented and begin to offset our operating costs. There can be no assurances that the Company will be successful in raising the required capital to complete this portion of its business plan.

To date, we have funded our operations with the proceeds from private equity financings. The Company issued these shares without registration under the Securities Act of 1933, as amended, afforded the Company under Section 4(2) promulgated there under due to the fact that 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(2) and Regulation D there under.

Currently, revenues provide a small percentage of the Company’s cash requirements. The remaining cash need is derived from raising additional capital. The current monthly cash burn rate is approximately $1.2 million. With the successful launch of the television network in November, 2009, virtually all of the associated expenses began immediately. However, it will take several months to drive viewers to the network, which will subsequently improve visibility and increase our advertising client base and advertising and sponsorship rates. We expect the monthly cash burn rate will gradually increase to approximately $1.4 million.

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 operate our television network and create enough viewership to provide advertisers, sponsors, travelers and home buyers 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk

This 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 asset 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 November 30, 2010, 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 Accounting 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 Accounting Officer evaluated the effectiveness of our disclosure controls and procedures as of November 30, 2010. Based on that evaluation, our Principal Executive Officer and Principal Accounting Officer have determined that our disclosure controls and procedures were not effective at the reasonable assurance level due to the lack of an independent audit committee or audit committee financial expert which represents a material weakness as reported in the February 28, 2010, Annual Report on Form 10-K. 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 November 30, 2010, 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

OTHER INFORMATION

Item 1. Legal Proceedings.

There is currently a case pending whereby the Company’s Chief Executive Officer (“defendant”) is being sued for allegedly breaching a contract which he signed in his role as Chief Executive Officer of Extraordinary Vacations Group, Inc. The case is being strongly contested. The defendant’s motion to dismiss plaintiff’s amended complaint with prejudice has been argued before the judge in the case. We are awaiting a ruling at this time.

Other than the litigation matters listed above, we are currently not involved in any litigation that we believe could have a materially 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 company’s or our company’s 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 amended Form 10-K filed with the SEC on June 10, 2010, 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.

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 such a 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, and 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.

On September 9, 2010, the Company issued 100,000 shares of common stock at a purchase price of $0.50 per share, resulting in receipts, net of transaction fees, of $50,000.

All equity security sale proceeds were used to fund normal operating costs.

Item 3. Defaults upon Senior Securities.

There were no defaults upon senior securities during the period ended November 30, 2010.

Item 4. (Removed and Reserved).

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 Adam Friedman, the Principal 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 Adam Friedman, the Principal 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

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated January 13, 2011

	NEXT 1 INTERACTIVE, INC.

	/s/ William Kerby
	William Kerby
	Chief Executive Officer
	(Principal Executive Officer)

	/s/ Adam Friedman
	Adam Friedman
	Chief Financial Officer
	(Principal Accounting Officer)