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

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 May 31, 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)

2400 N Commerce Parkway, Suite 105

Weston, FL. 33326

(Address of principal executive offices)

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

Copies to:

Anslow & Jaclin, LLP

Joseph M. Lucosky

195 Route 9 South, Suite 204

Manalapan, New Jersey 07726

Tel.: (732) 409-1212

Fax.: (732) 577-1188

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

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).

o Yes þ No

As of July 15, 2010, there were 35,951,698 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	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	(Removed and Reserved)	21
Item 5.	Other Information	21
Item 6.	Exhibits	22

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

Next 1 Interactive, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	May 31, 2010			February 28, 2010

Assets
Current Assets
Cash	$	245,880		$	211,905
Accounts receivable, net of allowance for doubtful accounts		177,885			166,059
Prepaid expenses and other current assets		1,926,733			2,378,450
Security deposits		211,846			206,346
Total current assets		2,562,344			2,962,760

Development costs, net		417,824			343,333
Amortizable intangible assets, net		11,601,985			12,099,652
Total assets	$	14,582,153		$	15,405,745

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable and accrued expenses	$	1,656,491		$	1,429,591
Other current liabilities		1,602,365			817,199
Related party notes payable		4,883,769			1,900,710
Capital lease payable - current portion		59,385			51,928
Notes payable - current portion		1,263,140			900,963
Total current liabilities		9,465,150			5,100,391

Capital lease payable - long-term portion		-			19,552
Notes payable - long-term portion		440,764			6,477,469

Total liabilities		9,905,914			11,597,412

Stockholders' Equity (Deficit)
Series A Preferred stock, $.01 par value; 3,000,000 authorized; and 663,243 and 579,763 shares issued and outstanding at May 31, 2010 and May 31, 2009 respectively		6,632			5,798
Series B Preferred stock, $1 par value; 3,000,000 authorized; 0 shares issued and outstanding at May 31, 2010 and May 31, 2009 respectively		-			-
Series C Preferred stock, $.01 par value; 1,750,000 authorized; 0 shares issued and outstanding at May 31, 2010 and May 31, 2009 respectively		-			-
Common stock, $.00001 par value; 200,000,000 shares authorized; 33,368,518 and 32,756,045 shares issued and outstanding at May 31, 2010 and May 31, 2009 respectively		334			328
Additional paid-in-capital		34,405,693			33,763,778
Accumulated deficit		(29,736,419	)		(29,961,571	)
Total stockholders' equity (deficit)		4,676,240			3,808,333

Total liabilities and stockholders' equity (deficit)	$	14,582,153		$	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

For the three months ended May 31, 2010 and 2009

	May 31
	2010			2009

Revenues
Travel and commission revenues	$	344,807		$	165,104
Advertising revenues		335,986			26,311
Total revenues		680,792			191,415

Cost of revenues		2,464,082			112,388

Gross (loss) profit		(1,783,290	)		79,027

Operating expenses
Salaries & benefits		401,546			366,870
Selling and promotions expense		263,304			24,025
General & administrative		2,031,452			852,202
Total operating expenses		2,696,303			1,243,097

Operating loss		(4,479,593	)		(1,164,070	)

Other income/(expense)
Interest expense		(106,061	)		(62,728	)
Loss on forgiveness of debt		-			(10,213	)
Gain on legal settlement		4,903,427			-
Other expense		(7,692	)		88
Total other income (expense)		4,789,674			(72,853	)

Net income (loss)	$	310,081		$	(1,236,923	)

Weighted average number of shares outstanding		33,051,299			25,109,083

Basic and diluted net income (loss) per share	$	0.01		$	(0.05	)

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 three months ended May 31, 2010 and 2009

	May 31
	2010			2009
Cash flow from operating activities:
Net income (loss)	$	310,081		$	(1,236,923	)
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		540,585			270,528
Amortization of discount on notes payable		36,226			36,226
Amortization of finance fees		602,314			-
Stock and warrants issued for services		193,783			281,195
Changes in operating assets and liabilities:
Decrease in accounts receivable		(11,826	)		20,315
(Increase)/decrease in prepaid expenses and other current assets		(11,742	)		7,142
Increase in accounts payable and accrued expenses		417,266			39,510
(Decrease)/increase in other current liabilities		(138,334	)		80,358
Net cash (used in) operating activities		(2,965,075	)		(491,436	)

Cash flows from investing activities:
Technology development costs		(117,410	)		-
(Increase)/decrease in security deposits		(5,500	)		25,922
Net cash provided by (used in) investing activities		(122,910	)		25,922

Cash flows from financing activities:
Bank overdraft		-			56,391
Net proceeds from (payments of) related party loans		3,134,056			(30,407	)
Proceeds from note payable		-			30,000
Payments of capital lease payable		(12,095	)		(10,046	)
Proceeds from the sale of common stock, preferred stock and warrants		-			414,150
Net cash provided by financing activities		3,121,961			460,088

Net increase (decrease) in cash		33,976			(5,425	)

Cash at beginning of period		211,905			18,801

Cash at end of period	$	245,880		$	13,376

Supplemental disclosure:
Cash paid for interest	$	3,141		$	6,878

Supplemental disclosure of non-cash investing and financing activity:

During the three months ended May 31, 2010 the Company converted notes payable in the amount of $163,833 for 280,000 shares of common stock
During the three months ended May 31, 2010 the Company converted accounts payable of $40,000 for 70,000 shares of common stock
During the three months ended May 31, 2010 the Company issued 83,480 shares of preferred stock in settlement of cumulative dividends in the amount of $83,480.

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

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2010

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 month period ended May 31, 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 second 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

May 31, 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

May 31, 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 $84,400 and $nil has been recognized for the three months ended May 31, 2010 and 2009, respectively, and barter expenses of $248,000 and $nil has been recognized for the three months ended May 31, 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 three months ended May 31, 2010 and 2009 was approximately $263,000 and $24,000, 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.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2010

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.

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

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.

NOTE 3 – GOING CONCERN

As reflected in the accompanying consolidated financial statements, the Company had net income for the three months ended May 31, 2010, of $310,081, which includes a gain from a legal settlement in the amount of $4,903,427. The Company also had an accumulated deficit of $29,736,419 and a working capital deficit of $6,902,806 at May 31, 2010. In addition, the Company reported cash used in operations during the three months ended May 31, 2010, of $2,965,075. While the Company is attempting to increase sales, the growth has yet to achieve significant levels to fully support its daily operations.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2010

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 May 31, 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 three months ended May 31, 2010 and 2009 was $nil and $18,636, respectively

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). In addition, 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 Company recorded debt in the amount of $957,550 ($1,000,000 net of imputed interest of $42,450) per this provision as of May 31, 2010. The Company also recorded a debt reduction in the amount of $6,631,659. As of May 31, 2010, the 1,750,000 shares of common stock were not issued. Accordingly, the Company has recorded a liability of $927,500 to Other Current Liabilities at May 31, 2010. This amount represents the total market value of the shares on the date of the agreement.

The Company has a note payable with an unrelated third party for $500,000. The note bears interest at 7% per year and matures in March 2011 payable in quarterly installments of $25,000. The balance of the note was approximately $309,000 at May 31, 2010.

In February 2009, the Company restructured note agreements with three existing note-holders. The collective balance at the time of the restructuring was $250,000 plus accrued interest payable of $158,000 which was consolidated into three new notes payable totaling $408,000. The notes bear interest at 10% per year and matured on May 31, 2010, at which time the total amount of principle and accrued interest was due. These agreements were settled and obligations met on July 11, 2010.

In connection with the restructure of these notes the Company issued 150,000 detachable warrants to purchase common stock at an exercise price of $3.00 per share. The warrant issuance was recorded as a discount and is amortized monthly over the term of the note. As of May 31, 2010, the discount was fully amortized. The Company amortized $36,000 as interest expense for the three months ended May 31, 2010.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 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 May 31, 2010, the Company has not made any installment payments on this obligation.

Interest expense on the notes payable was $53,000 and $20,000 for the three months ended May 31, 2010 and 2009, respectively.

NOTE 6 – CAPITAL LEASE PAYABLE

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

Interest expense on the lease was $3,141 and $6,878 for the three months ended May 31, 2010 and 2009, respectively.

NOTE 7 – RELATED PARTY TRANSACTIONS

On March 5, 2010, the Company entered into a promissory note with a director (“holder”) of the Company. Pursuant to the note, the holder has 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 will advance the funds under the terms of the note in tranches through April 15, 2010. The holder has continued to advance funds to the Company through May 31, 2010 and has verbally agreed to fund up to a total of $7,000,000. The balance of the note payable is $4,117,475 at May 31, 2010.

As consideration for the loan, the Company 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 $575,000 in expense during the three months ended May 31, 2010. In addition, interest expense in the amount of $42,000 was recorded on the note for the three months ended May 31, 2010.

On April 30, 2010, the Company entered into a promissory note with a director (“holder”) of the Company. Pursuant to the note, the holder loaned the Company $600,000. The note has an effective date of April 6, 2010, and a maturity date of April 6, 2011. The note bears interest at 6% per annum.

As consideration for the loan, the Company 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

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2010

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 $27,000 in expense during the three months ended May 31, 2010. In addition, interest expense in the amount of $6,000 was recorded on the note for the three months ended May 31, 2010.

The Company has a $100,000 note payable with a shareholder which is past due at May 31, 2010. The note is secured by the Company’s accounts receivable. In lieu of interest, warrants with a fair value in the amount of $16,000 were issued as a one-time interest payment upon origination during the year ended February 28, 2010.

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

The Company has notes payable with a director and officer for approximately $18,000. The loans bear interest at 18% compounded daily and have no stated maturity date. Interest expense on the loans was approximately $1,600 and $7,200 for the three months ended May 31, 2010 and May 31, 2009 respectively.

The Company has a loan payable with a director and officer for approximately $10,000. The loan bears interest at 4% per annum and has no stated maturity date. Interest expense on the loan was approximately $100 and $100 for the three months ended May 31, 2010 and May 31, 2009 respectively.

The Company also has a loan payable to an existing shareholder for approximately $30,000. The loan bears interest at 10% per year and has no stated maturity date. Interest expense on the loan was approximately $800 and $nil for the three months ended May 31, 2010 and May 31, 2009 respectively.

The Company also has a loan payable to an existing shareholder for approximately $8,000. The loan bears interest at 4% per year and has no stated maturity date. Interest expense on the loan was approximately $120 and $nil for the three months ended May 31, 2010 and May 31, 2009 respectively.

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

NOTE 8 – EQUITY

Common Stock

During the three months ended May 31, 2010, the Company issued approximately 242,000 shares of common stock in exchange for services rendered valued at approximately $171,000. 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 three months ended May 31, 2010, the company issued 70,000 shares of common stock in exchange for settlement of accounts payable valued at $40,000 per a settlement agreement with a service provider. The value of the common stock issued was based on the fair value of the stock at the time of issuance.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2010

During the three months ended May 31, 2010, the Company issued 330,000 units consisting of 1 share of common stock and 1 warrant with an exercise price of $2.00 and three year life, in exchange for the conversion of loans in the amount of $200,000.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.

The Company also issued approximately 21,000 shares as replacements for prior EXVG shares not converted in the original share exchange at the time of the reverse merger with Maximus.

Preferred Stock

In May, 2010, the Company issued 83,480 shares of Series A Preferred Stock in exchange for $83,480 of cumulative dividends on existing Series A Preferred shares through April 30, 2010. 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, elect to convert all or part of any unpaid cumulative dividend into additional shares of Series A Preferred Stock. From the date of issuance thereof, all Series A Preferred Stock issued as a result of conversion of unpaid dividends shall have the same terms, rights and privileges as other shares of Series A Preferred Stock.

Warrants

During the three months ended May 31, 2010, the company issued 987,500 warrants valued at approximately $193,783 in exchange for services rendered, consisting of financing and consulting fees incurred in raising capital.

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		1.28%-1.51	%
Dividend yield		0	%
Volatility factor		124.7%-122.8	%
Expected life	1.5 years

At May 31, 2010 there were 12,972,362 warrants outstanding with a weighted average exercise price of $1.35 and weighted average life of 2.9 years. No warrants were exercised during three months ended May 31, 2010.

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.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2010

The tables below present information about reportable segments for the three months ended May 31, 2010 and 2009 respectively:

	Three Months Ended
	May 31
	2010		2009

Revenues
Media	$	335,986	$	26,311
Travel		344,807		165,104
Consolidated revenues	$	680,792	$	191,415

Operating Expense
Media	$	1,817,451	$	403,556
Travel		90,389		207,150
Segment Expense		1,907,840		610,706
Corporate		247,878		361,863
Consolidated operating expense	$	2,155,718	$	972,569

Depreciation and Amortization
Media	$	-	$	8,766
Travel		-		9,870
Segment Total		-		18,636
Corporate		540,585		251,892
Consolidated depreciation and amortization	$	540,585	$	270,528

The Company did not generate any revenue outside the United States for the three months ended May 31, 2010 and 2009.

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.

NEXT 1 INTERACTIVE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2010

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. Since the shares were not issued until after May 31, 2010, this amount has been recorded in Other Current Liabilities at May 31, 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.

NOTE 11 – INTANGIBLE ASSETS

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

	May 31, 2010
	Weighted Avg
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value

Supplier Relationships	6.1 years	$	7,938,935	$	1,011,215	$	6,927,720
Technology	5.4 years		5,703,829		1,290,152		4,413,677
Web Site	2.1 years		632,409		214,585		417,824
Trade Name	6.3 years		291,859		31,271		260,588
		$	14,567,032	$	2,547,223	$	12,019,809

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 $540,585 and $251,892 for the three months ended May 31, 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 a 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.

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, 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

Revenues. Our total revenues increased 256% to $680,792 for the three months ended May 31, 2010, compared to $191,415 for the three months ended May 31, 2009, an increase of $489,377. 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 109% to $344,807 for the three months ended May 31, 2010, compared to $165,104 for the three months ended May 31, 2009, an increase of $179,703. Travel revenue is generated from its 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 1,177% to $335,986 for the three months ended May 31, 2010, compared to $26,311 for the three months ended May 31, 2009, an increase of $309,675. 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 2,092% to $2,464,082 for the three months ended May 31, 2010, compared to $112,388 for the same year ago period, an increase of $2,351,694. 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 117% from $1,243,097 for the three months ended May 31, 2009, to $2,696,303 for the three months ended May 31, 2010, an increase of $1,453,206. The increase was due primarily to an increase in amortization of deferred finance fees of $675,957, amortization of intangibles of $288,693, payroll and benefits of $268,480, barter advertising of $248,000 and legal and professional fees of $74,178, offset by reductions in consulting fees incurred in raising capital and various other operating expenses of $102,102.

Gain on legal settlement. During the period ended May 31, 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 increased 69% to $106,061 for the three months ended May 31, 2010, compared to $62,728 for the same year ago period, an increase of $43,333 due primarily to increased related-party debt.

Net income/loss. We had net income of $310,081 for the three months ended May 31, 2010, compared to a net loss $1,236,923 for the same year ago period, an increase in net income of $1,547,004. 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 $3,315,523, interest expense of 43,333 and reductions in other expenses of $2,433.

Assets. Our total assets were $14,582,153 at May 31, 2010, compared to $15,405,745 at February 28, 2010. The decrease of $823,592 was primarily due to the amortization of intangible assets and deferred finance fees.

Liabilities. Our total liabilities were $9,905,914 at May 31, 2010, compared to $11,597,412 at February 28, 2010, a decrease of $1,691,498 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 $2,983,059 due to additional loans from director/shareholders. Accrued expenses increased by $248,000 from barter advertising received but not yet provided in the form of advertising spots. The remaining increase in liabilities of $751,552 was due to a liability recorded for the value of common stock included in the Televisual Media settlement agreement of $927,500 issued in June, 2010, offset by reductions in contingent liabilities and customer deposits of $175,948.

Total Stockholders’ Equity. Our stockholders’ equity was $4,676,240 at May 31, 2010, compared to $3,808,333 at February 28, 2010.

Liquidity and Capital Resources; Going Concern

At May 31, 2010, the Company had $245,880 of cash on-hand, an increase of $33,975 from $211,905 at the start of fiscal 2011. The increase in cash was due primarily to cash provided by debt and equity financing.

Net cash used by operations was $2,965,075 for the three months ended May 31, 2010, an increase of $2,473,639 from $491,436 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 $148,832 to $122,910 for the three months ended May 31, 2010, compared to cash provided of $25,922 during the same year ago period consisting of web site development costs of $117,410 and increased security deposits of $31,422.

During the three months ended May 31, 2010, net cash provided by financing activities increased $2,661,873 consisting of net proceeds from related party loans of $3,134,056, offset by reductions in proceeds from the sale of equity instruments of $414,150 and other net reductions of $58,033.

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 thereunder 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 thereunder.

Currently, revenues provide approximately 17% of the Company’s cash requirements. The remaining cash need is derived from raising additional capital. The current monthly cash burn rate is approximately $1.0 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, with the expectation of profitability by the fourth quarter of fiscal 2011.

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 May 31, 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 Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Our Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of May 31, 2010. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer has 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 represent 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 May 31, 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 STRANDARDS 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 that strategy. We would also face operational risks, such as failing to assimilate the operations and personnel of the acquired businesses, disrupting their ongoing businesses, increased complexity of our business, impairing management resources and their relationships with employees and travelers as a result of changes in their ownership and management. Further, the evaluation and negotiation of potential acquisitions, as well as the integration of an acquired business, may divert management time and other resources. Some acquisitions may not be successful and their performance may result in the impairment of their carrying value.

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

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

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

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

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

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

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

Failure to generate adequate returns on our acquisitions and investments;

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

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

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

Other than previously disclosed on Form 8-K, there were no unregistered sales of equity securities during the period ended May 31, 2010.

Item 3. Defaults upon Senior Securities.

There were no defaults upon senior securities during the period ended May 31, 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 Richard Sokolowski, the Principal Financial and Accounting Officer of Next 1 Interactive, Inc., pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

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

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

SIGNATURES

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 July 15, 2010

	NEXT 1 INTERACTIVE, INC.

	/s/ William Kerby
	William Kerby
	Chief Executive Officer and Vice-Chairman
	(Principal Executive Officer)

	/s/ Richard Sokolowski
	Richard Sokolowski,
	Chief Financial Officer
	(Principal Financial and Accounting Officer)