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Investment in Equity Method Investee
 12 Months Ended
Feb. 28, 2025
Equity Method Investments and Joint Ventures [Abstract]  
Investment in Equity Method Investee

NOTE 4 - Investment in Equity Method Investee

 

Membership Purchase Agreement with FSA Travel, LLC

 

On February 6, 2025, the Company entered into a Membership Purchase Agreement (the “FSA Purchase Agreement”) with FSA Travel, LLC (“FSA”). Under the terms of the FSA Purchase Agreement, the Company acquired an initial 49% membership interest in FSA for a total of $1,000,000. The acquisition consideration consisted of $500,000 in cash and $500,000 of Series O Preferred shares (161,291 shares at $3.10 per share). The investment in FSA is accounted for using the equity method of accounting in accordance with ASC 323 because the Company has significant influence over the investee due to its 49% ownership interest.

 

Pursuant to the FSA Purchase Agreement, NextTrip was granted an option to acquire the remaining 51% membership interest in FSA for an additional $1,000,000. The option is exercisable within 60 days from the execution of the FSA Purchase Agreement, subject to the satisfaction of certain conditions outlined in the FSA Purchase Agreement. The consideration for the remaining interest would consist of $500,000 in cash and $500,000 of Series O Preferred shares (161,291 shares at $3.10 per share).

 

Pursuant to the FSA Purchase Agreement, if the Company exercises its option to acquire the remaining 51% interest, incremental consideration would include four business milestone payments, payable upon achievement of such milestones. The achievement of each milestone would result in a payment of $200,000, consisting of $100,000 in cash and $100,000 in Series O Preferred shares (32,258 shares at $3.10 per share). These milestone payments are contingent upon the Company’s exercise of the option to acquire the remaining 51% of FSA, and are triggered only if the conditions necessary to exercise the option are satisfied. The total milestone payments are capped at $800,000 (four milestones at $200,000 per milestone). These milestone payments are considered performance-based contingent consideration and will be recognized in the future if and when the related milestones are satisfied, and the payments are made.

 

 

As of February 28, 2025, the Company recorded its initial 49% investment in FSA at $1,000,000. This amount includes $500,000 in cash and $500,000 in Series O Preferred shares. The carrying amount of the equity method investment will be adjusted based on the Company’s share of FSA’s earnings or losses, in accordance with the equity method of accounting. The milestones and contingent consideration payments, including the additional $1,000,000 to acquire the remaining 51% interest, will be recognized in the future if, as, and when the conditions for such payments are satisfied.

 

The total potential commitment for the Company under the FSA Purchase Agreement, assuming the satisfaction of all conditions and the exercise of the option to acquire the remaining 51% interest, is $2,800,000. This includes $1,000,000 already paid for the 49% interest in FSA, $1,000,000 payable by the Company in the event that it exercises its option to acquire the remaining 51% of interests in FSA, and $800,000 for the milestone payments associated with the acquisition of the remaining interests.

 

Summarized Financial Information for FSA Travel, LLC

 

FSA Travel’s fiscal year ends on December 31. As of and for the year ended December 31, 2024, unaudited summarized financial information for FSA is as follows:

 

  

December 31,

2024

 
Current assets  $13,629 
Non-current assets  $577,776 
Current liabilities  $12,452 
Non-current liabilities  $199,100 
Member’s equity  $379,852 
Net revenues  $374,143 
Gross profit  $374,143 
Net loss  $(252,381)