THE FOLLOWING DISCUSSION OF OUR RESULTS OF OPERATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER "FORWARD-LOOKING STATEMENTS" AND "RISK FACTORS" AND THOSE INCLUDED ELSEWHERE IN THIS ANNUAL REPORT.

Forward Looking Statements

Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. You should read statements that contain these words carefully because they:

· discuss our future expectations;

· contain projections of our future results of operations or of our financial condition; and

· state other "forward-looking" information.

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors," "Business" and elsewhere in this Annual Report. See "Risk Factors."

Unless stated otherwise, the words "we," "us," "our," "the Company," "Next 1 Interactive, Inc.," or "Next 1" in this Annual Report collectively refers to the Company.

Recent Acquisitions

None.

Evolving Industry Standards; Rapid Technological Changes

The technologies used in the pay television industry are rapidly evolving. Many technologies and technological standards are in development and have the potential to significantly transform the ways in which programming is created and transmitted. We cannot accurately predict the effects that implementing new technologies will have on our programming and broadcasting operations. We may be required to incur substantial capital expenditures to implement new technologies, or, if we fail to do so, may face significant new challenges due to technological advances adopted by competitors, which in turn could result in harming our business and operating results.

The Company's success in its business will depend in part upon its continued ability to enhance its existing products and services, to introduce new products and services quickly and cost effectively to meet evolving customer needs, to 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 the Company will be able to respond effectively to technological changes or new industry standards. Moreover, there can be no assurance that competitors of the Company will not develop competitive products, or that any such competitive products will not have an adverse effect upon the Company's operating results.

Moreover, management intends to continue to implement "best practices" and other established process improvements in its operations going forward. There can be no assurance that the Company will be successful in refining, enhancing and developing its 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 the Company's existing software and technology will not become obsolete as a result of ongoing technological developments in the marketplace.

Travel Industry Trends

Our current revenue is primarily derived from customers accessing our travel websites: NextTrip.com, Maupintour and Cruise Shoppes. According to PhoCusWright, 2007 is the first year in which more than half of all travel in the U.S. was purchased online. The remainder of travel in the U.S. was booked through traditional offline channels. Suppliers, including airlines, hotels and car rental companies, have continued to focus their efforts on direct sale of their products through their own websites, further promoting the migration of customers to online booking. In the current environment, suppliers' websites are believed to be taking market share domestically from both online travel companies ("OTCs") and traditional offline travel companies.

In the U.S., the booking of air travel has become increasingly driven by price. As a result, we believe that OTCs will continue to focus on differentiating themselves from supplier websites by offering customers the ability to selectively combine travel products such as air, car, hotel and destination services into one-stop shopping vacation packages.

Despite the increase in online marketing costs, the continued growth of search and meta-search sites as well as Web 2.0 features creates new opportunities for travel websites to add value to the customer experience and generate advertising revenue. Web 2.0 is a term used to describe content features such as social networks, blogs, user reviews, videos and podcasts such as our NextTrip.com, NetTripRadio.com, Maupitour.Com, and CruiseShoppes.com websites. We believe that the ability of Web 2.0 websites will add value for customers, suppliers and third-party partners while simultaneously creating new revenue streams.

Sufficiency of Cash Flows

Because current cash balances and projected cash generation from operations are not sufficient to meet the Company's cash needs for working capital and capital expenditures, management intends to seek additional equity or obtain additional credit facilities. The sale of additional equity could result in additional dilution to the Company's shareholders. A portion of the Company's cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, the Company evaluates potential acquisitions of such businesses, products or technologies.

RESULTS OF OPERATIONS

Results of Operations for the Fiscal Year Ended February 29, 2012 Compared to the Fiscal Year Ended February 28, 2011

Revenues. Our total revenues decreased 49% to $1,292,517 for the fiscal year ended February 29, 2012, compared to $2,543,000 for the fiscal year ended February 28, 2011, a decrease of $1,250,483. The decrease is due to the R & R television network being off of Direct TV.

Revenues from the travel segment decreased 15% to $865,878 for the fiscal year ended February 29, 2012, compared to $1,023,366 for the fiscal year ended February 28, 2011, a decrease of $157,488. Travel revenue is generated from its luxury tour operation which provides escorted and independent tours worldwide to upscale travelers. The decrease is due to the decline in tours and cruises sold.

Revenues from advertising decreased 72% to $426,639 for the fiscal year ended February 29, 2012, compared to $1,519,634 for the fiscal year ended February 28, 2011, a decrease of $1,092,995. Advertising revenue is 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 decreased primarily to the television network being off of Direct TV.

Cost of revenues.Cost of revenues decreased 64% to $3,558,714 for fiscal year ended February 29, 2012, compared to $9,964,619 for the fiscal year ended February 28, 2011, a decrease of $6,405,905. The decrease in cost is primarily due to the network being off Direct TV.

Operating expenses. Our operating expenses include salaries and benefits, selling and promotion, general and administrative: finance fees incurred in raising capital, amortization of intangibles, legal and accounting fees, consulting fees and miscellaneous operating expenses. Our total operating expenses decreased 9% from $12,788,514 for the fiscal year ended February 28, 2011 to $11,691,200 for the fiscal year ended February 29, 2012, a decrease of $1,097,314.

The decrease was primarily due to a decrease in finance fees of $1,912,684, salaries and benefits of $512,150, legal and accounting of $90,864, consulting fees of $2,929,855 and bank and other finance charges of $443,587; offset by an increase in amortization of intangibles of $876,939 and of debt discount of $3,718,808 and miscellaneous operating expenses of $196,079.

Other expense. Interest expense increased 122% to $1,231,199 for the fiscal year ended February 29, 2012, compared to $553,893 for the fiscal year ended February 28, 2011, an increase of $667,306 primarily due to the $7,121,776 increase in amount of convertible promissory notes. Loss on settlement of debt conversions increased 100% to 258,443 for the fiscal year ended February 29, 2012, compared to $-0- for the fiscal year ended February 28, 2011 primarily due to the settlement of advances and shareholder loans through stock issuances. Gain in the change in fair value of derivatives increased 8,287% to $2,223,649 for the fiscal year ended February 29, 2012, compared to $26,514 for the fiscal year ended February 28, 2011, an increase of $2,197,135 primarily due to the increase of convertible promissory notes with embedded variable conversion features. A loss on impairment of intangible assets in the amount of $1,856,054 was recorded in the fiscal year ended February 29, 2012, representing a decrease of $5,413,776 or 74% compared to $7,269,830 recorded in the fiscal year end February 28, 2011 reducing the value of the intangible asset for the R&R TV network to zero. A gain on legal settlement in the amount of $1,520,529 was recorded in the fiscal year ended February 29, 2012, representing a decrease of $3,382,898 or 69% compared to $4,903,427 recorded in the fiscal year end February 28, 2011 as the Company incurred legal settlement(s) of outstanding accounts payable in the current fiscal year. Other expense increased 39% to $92,151 for the fiscal year ended February 29, 2012, compared to $66,428 for the fiscal year ended February 28, 2011 primarily due to the modification in terms of various outstanding warrant agreements.

Net Loss. We had a net loss of $13,651,066 for the fiscal year ended February 29, 2012 compared to a net loss of $23,170,343 for the fiscal year ended February 28, 2011. The decrease from 2011 to 2012 was primarily due to the television network being off during the year, reducing labor and production costs. See following discussions on cost of revenues and operating expenses and the notes to the consolidated financial statements included in this Annual Report.

Assets. Our total assets were $462,647 at February 29, 2012 compared to $4,544,825 at February 28, 2011. The decrease from 2011 to 2012 was primarily due to a decrease in amortizable intangible assets from $3,175,506 to $96,591, net of amortization, resulting from recording the impairment of R&RTV assets in the amount of $1,856,054.

Liabilities. Our total liabilities were $14,696,097 at February 29, 2012 compared to $14,810,964 at February 28, 2011.

Accounts payable and accrued expenses decreased from $2,884,838 for the fiscal year ended February 28, 2011 to $2,012,489 for the fiscal year ended February 29, 2012. The decrease was due primarily to the decrease in accounts payable of $1,125,457, deferred salaries of $18,688, accrued expenses of $21,626 and offset by an increase in accrued interest of $293,422.

Other Current Liabilities decreased from $1,023,476 for the fiscal year ended February 28, 2011 to $603,953 for the fiscal year ended February 29, 2012. The decrease was due primarily to decrease in customer deposits of $68,162 for tours to be taken in the future, deferred revenue of $122,788 and barter-deferred revenue of $294,000, offset by an increase in contingent liabilities of $65,427.

Derivative liabilities - convertible promissory notes increased from $135,348 for the fiscal year ended February 28, 2011 to $916,202 for the fiscal year ended February 29, 2012. The increase was primarily due to the increase in the issuance of convertible promissory notes with variable conversion features embedded within the debt instrument.

Derivative liabilities - preferred series A increased from $538,328 for the fiscal year ended February 28, 2011 to $1,338,017 for the fiscal year ended February 29, 2012. The increase was primarily due to the issuance of 1,000,000 shares of preferred series A stock with variable conversion features embedded within the equity instrument.

Convertible promissory notes, related party and non-related party, increased from $650,683 for the fiscal year ended February 28, 2011 to $7,772,459 for the fiscal year ended February 29, 2012, net of debt discount. The increase was primarily due to the issuance of new convertible promissory notes through proceeds received from third party investors, conversions of bridge loans to convertible promissory notes and assignment of principal from current noteholders to new third party investors.

Other advances decreased from $257,000 for the fiscal year ended February 28, 2011 to $68,000 for the fiscal year ended February 29, 2012. The decrease was primarily due to the conversion of advances into shares of common stock and convertible promissory notes.

Other notes payable decreased from $6,927,870 for the fiscal year ended February 28, 2011 to $70,000 for the fiscal year ended February 29, 2012. The decrease was primarily due to principal payments, conversions into shares of common stock and convertible promissory notes.

Shareholder loans decreased from $1,042,393 for the fiscal year ended February 28, 2011 to $840,000 for the fiscal year ended February 29, 2012. The decrease was primarily due to the excess of the conversion of advances into shares of common stock and convertible promissory notes over the proceeds received from advances.

Capital lease payable decreased from $76,644 for the fiscal year ended February 28, 2011 to $25,405 for the fiscal year ended February 29, 2012. The decrease was primarily due to the principal payments applied against the outstanding balance.

Notes payable decreased from $1,274,384 for the fiscal year ended February 28, 2011 to $1,049,572 for the fiscal year ended February 29, 2012. The decrease was primarily due to the excess of principal payments and conversions to convertible promissory notes over proceeds received from third party investors.

Total Stockholders' Deficit. Stockholders' deficit increased from $10,266,139 for the fiscal year ended February 28, 2011 to $14,233,450 for the fiscal year ended February 29, 2012. The increase was primarily due to the increase of net loss over stock issuances, common and preferred, resulting from conversion of promissory notes from debt to equity.

Contractual Obligations.The following schedule represents obligations under written commitments on the part of the Company that are not included in liabilities:

                            Current             Long-Term
                            FY2013        FY2014        FY 2015        Totals
              Consulting   $  53,500     $  70,500     $ 106,500     $   230,500
              Leases         152,745       158,872       357,132         668,749
              Other           35,406        95,224        95,544         226,174
              Totals       $ 241,651     $ 324,596     $ 559,176     $ 1,125,423

Liquidity and Capital Resources; Going Concern

At February 29, 2012, the Company had $12,989 cash on-hand, a decrease of $406,828 from $419,817 at the start of fiscal 2011. The decrease in cash was primarily due to the Company meeting day to day operating expenses, promissory note obligations and compliance with terms under an option agreement.

Net cash used by operations was $4,822,423 for the year ended February 29, 2012, decrease of $4,791,014 from $9,613,440 used during fiscal 2011. The decrease was primarily due to the television network being offline during most of the fiscal year resulting in a reduction of operating costs.

Net cash used in investing activities decreased $17,446 to $305,000 for the year ended February 29, 2012 compared to $322,446 for fiscal 2011. The decrease is attributable to the excess of technology development costs and investment in treasury stock over the investment in an option agreement.

Net cash provided by financing activities decreased $5,423,203 to $4,720,595 for the year ended February 29, 2012, compared to $10,143,798 during fiscal 2011. The decrease is attributable to the decrease in net proceeds from other advances, shareholder loans, promissory notes and stock issuances, offset by increase in net proceeds from promissory notes.

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 our Video on Demand real estate and travel business and 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 $1 million to $5 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 the 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 less than 10% of the company's cash requirements. The remaining cash need is derived from raising additional capital. The current monthly cash burn rate is approximately $300,000. We expect the monthly cash burn rate will gradually increase to approximately $1.0 million, with the expectation of profitability by the fourth quarter of fiscal 2013.

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.

Significant Accounting Policies

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 consolidated 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 consolidated 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.

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.

During the year ended February 29, 2012 and February 28, 2011, the Company identified and recognized impaired losses of $1,856,054 and $7,269,830, respectively, on long-lived assets.

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.

Management placed the website into service during the fiscal year ended February 29, 2012, subject to straight-line amortization over a three year period.

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. Amortization expense for the years ended February 29, 2012 and February 28, 2011 was $1,222,861 and $2,201,973, respectively. Additionally, an impairment loss in the amount of $1,856,054 and $7,269,830 has been recognized for the year ended February 29, 2012 and February 28, 2011, respectively.

Convertible Debt Instruments

The Company records debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the FASB Accounting Standards Codification. The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest expense over the life of the debt.

Earnings per Share

Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Diluted loss per common share is not presented because it is anti-dilutive. The Company's common stock equivalents include the following:

                                                            February 29,       February 28,
                                                                2012               2011
Series A convertible preferred stock                            1,645,101              6,632
Series B convertible preferred stock                                  -0-                -0-
Series C convertible preferred stock                                  -0-                -0-
Warrants to purchase common stock issued, outstanding
and exercisable                                                   180,590             70,299
Stock options issued, outstanding and exercisable                   4,050                -0-
Shares on convertible promissory notes                          1,819,560              5,546
                                                                3,649,301             82,477

Revenue Recognition

Barter

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 . . .