"Form 10-K for NEXT 1 INTERACTIVE, INC. ".

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

Resort and Residence TV

On August 17, 2009, the Company and Televisual closed on the Agreement") whereby the Company purchased certain rights, trademarks and other intangible property of Resort and Residence TV, a wholly owned subsidiary of Televisual, consisting of the following:

(1) Trade name of the company of Resort & Residence;

(2) Trademark of Resort & Residence;

(3) Domain names of "resortandresidence.tv", resortandresidencechannel.net; resortandresidencechannel.tv and resortandresidencechannel.info;

(4) Interactive application design;

(5) Interactive application design;

(6) Network promotional video clip.

The previously listed intangibles, in conjunction with the industry contacts of the seller, resulted in the execution of a BSA with a major satellite service provider. The achievement of this relationship in a timely manner was critical to launching R&R TV.

The cost of the R&R TV acquisition is $6.88 million, of which a $250,000 deposit has been paid. See Note 6 to the consolidated financial statements for discussion of future debt payments.

The acquired assets are amortized over their contractual life or estimated useful life. Amortization of those assets has begun during the third quarter of this fiscal year.

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

In connection with the Agreement, Televisual also receives $3,500,000 of Secured Series Convertible Preferred Stock (the "Preferred Stock") of the Company which collateralizes the final loan payment of $3,500,000 due June 9, 2019. Accordingly, the Preferred Stock is classified as a long-term liability on the balance sheet and has a mandatory redemption date of June 9, 2019. Televisual has the right to convert the Preferred Stock into 3.5 million common shares should the network reach a minimum of 17 million households during the term of the Preferred Stock. The Company has the right to redeem or force conversion of the Preferred Stock after the first year of operation of the network. Should the Company fail to repay the $3,500,000 loan on June 9, 2019, interest thereafter will be fixed at 1% per year until such time as the loan is repaid or the Preferred shares are converted. The Preferred Stock is secured by all of the assets of Resort and Residence TV.

On May 28, 2010, the Company entered into the Settlement Agreement by and among the Company and Televisual, 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 Settlement Agreement, (i) all obligations
(including remaining debt in the amount of $6,631,659 and accrued interest)
under the Agreement and Commercial Agreements are foreclosed and have no further force or effect; (ii) the Company shall retain all property transferred pursuant to the Agreement; (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 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 on the first day of each month, commencing on August 1, 2010. The first eight monthly payment installments must be in cash by wire transfer with the remaining twelve payments, at the election of the Company, paid in either cash or common stock. The following table illustrates the calculation of the gain recognized:

                                       Payments         Imputed        Principal
                                          Due          Interest         Balance
        Total debt                    $ 8,000,000     $ 1,118,341     $ 6,881,659

        Less: deposit paid                                               (250,000 )

        Remaining debt settled                                          6,631,659

        Less:

        Value of shares issued                                           (927,500 )

        Cash payments to be made                                         (957,550 )

        Initial payment                                                   (42,500 )

        Add: accrued interest                                             199,318

        Gain on forgiveness of debt                                   $ 4,903,427

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

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

As of February 28, 2011, the Company has not issued the Secured Series Convertible Preferred Stock.

HPC

On October 29, 2008, we purchased an aggregate of approximately 115,114 shares of HPC, which represented 100% of the issued and outstanding shares of common stock of HPC, in exchange for an aggregate of 677,999 of our shares of the Company's common stock. All of the assets were included in the sale, free of clear of any and all liens, encumbrances, charges, securities interests and claims of others.

Loop Networks, LLC

On October 29, 2008, we purchased 102,179 membership interests from the Loop, representing 100% of the issued and outstanding membership interests of Loop, in exchange for an aggregate of 5,345,000 shares of our common stock. Loop is a technology company for TV and Internet interface.

Brands on Demand

On April 11, 2008, we acquired Brands on Demand ("BOD"), a media company engaged in interactive media sales, pursuant to a Stock Purchase Agreement between EVUSA and James Bradford Heureux, representing all of the shareholders of BOD. Pursuant to the agreement, EVUSA acquired 50,000 shares of common stock of BOD, representing 100% off the issued and standing shares of BOD, for an aggregate purchase price of $140,000 by way of a payment of $70,000 and 50,000,000 shares of EXVG common stock (which was held by the Company pending certain fulfillment and earn out conditions being achieved). EVUSA paid Mr. Heureux $70,000 of the $140,000 purchase price and issued 50,000,000 shares of EVUSA in trust for 100% of his shares (20,000 shares representing 40% of the issued and outstanding shares of BOD). EVUSA paid the other stockholders of BOD $70,000 for 100% of their shares of BOD which represented 60% of the total issued and outstanding stock of BOD (30,000 shares). As a part of the stock purchase agreement we entered into an employment agreement with Mr. Heureux pursuant to which Mr. Heureux served as the Chief Marketing Officer of the Company and as a Director of the Board of Directors. On January 15, 2009, the employment agreement was terminated and all common stock issued under the agreement was cancelled and returned to treasury. Mr. Heureux is no longer employed by Company nor is he a director of Next 1 Interactive, Inc.

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 28, 2011 Compared to the Fiscal Year Ended February 28, 2010

Revenues. Our total revenues increased 93% to $2,543,000 for the fiscal year ended February 28, 2011, compared to $1,320,225 for the fiscal year ended February 28, 2010, an increase of $1,222,775. In addition to the general increase in travel related revenue due to enhances sales efforts, the increase in television advertising is due to enhanced programming and distribution of the R&R television network.

Revenues from the travel segment increased 41% to $1,023,366 for the fiscal year ended February 28, 2011, compared to $724,734 for the fiscal year ended February 28, 2010, an increase of $298,632. Travel revenue is generated from its luxury tour operation which provides escorted and independent tours worldwide to upscale travelers. Although the Company directed virtually all of its limited resources to launching the R&R TV network, traditional travel business revenue continued to improve from enhanced sales efforts.

Revenues from advertising increased 155% to $1,519,634 for the fiscal year ended February 28, 2011, compared to $595,491 for the fiscal year ended February 28, 2010, an increase of $924,143. 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 increased 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.

Cost of revenues. Cost of revenues increased 188% to $9,964,619 for fiscal year ended February 28, 2011, compared to $3,456,658 for the fiscal year ended February 28, 2010, an increase of $6,507,961. The costs associated with higher travel revenue in fiscal 2010 were replaced and increased in fiscal 2011 by costs, primarily significant broadcast carriage fees and production, directly associated with the launch of the R&R TV network.

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 43% from $8,955,569 for the fiscal year ended February 28, 2010 to $12,788,514 for the fiscal year ended February 28, 2011, an increase of $3,832,945. The increase was due primarily to an increase in amortization of intangibles of $531,191, finance and consulting fees incurred in raising capital of $1,311,087, payroll and benefits of $41,576, legal and accounting fees of $131,391 and consulting fees of $640,990. Various other operating expenses account for the remaining difference of $1,176,710.

Other expenses. Interest expense decreased 14% to $553,893 for fiscal year ended February 28, 2011, compared to $642,164 for fiscal year ended February 28, 2010, a decrease of $88,271 due primarily to the interest reduced due to the forgiveness of debt of $6,631,659 relating to the acquisition of Resort and Residence TV. Loss on disposal of fixed assets was $-0- for the fiscal year ended February 28, 2011, compared to $128,704 for fiscal year ended February 28, 2010 due to the write off of leased equipment which is no longer used and abandoned furniture and software acquired with the acquisition of the HPC. For the fiscal year ended February 28, 2011, the company recorded a loss on impairment of intangible assets of $7,269,830 by partially reducing the value of its intangible asset for the R&R TV network and fully reducing the value of its intangible asset for its HPC and Loop acquisitions.

Net Loss. We had a net loss of $23,170,343 for the fiscal year ended February 28, 2011 compared to a net loss of $11,864,232 for the fiscal year ended February 28, 2010. The increase from 2010 to 2011 was primarily due to the cost incurred to launch and operate a television network as well as the amortization and loss on impairment of significant intangible assets and equity issued in raising capital. 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 $4,544,825 at February 28, 2011 compared to $15,405,745 at February 28, 2010. The decrease from 2010 to 2011 was primarily due to a decrease in amortizable intangible assets from $12,442,985 to $3,175,506, net of amortization, resulting from recording an impairment in the amount of $7,269,830 for RRTV, HPC and Loop assets.

Liabilities. Our total liabilities were $14,810,964 at February 28, 2011 compared to $11,597,412 at February 28, 2010.

The increase from 2010 to 2011 was primarily due to a decrease in Notes Payable from $7,378,432 for the fiscal year ended February 28, 2010 to $1,274,384 for the fiscal year ended February 28, 2011. This decrease of $6,104,048, is due primarily to the forgiveness of debt involving the Settlement Agreement on May 28, 2010.

Contributing to the increase in liabilities was an increase in Related Party Notes Payable from $1,900,710 for the fiscal year ended February 28, 2010 to $6,927,870 for the fiscal year ended February 28, 2011. This increase of $5,027,160 is due primarily to proceeds received from various related party shareholders, through various promissory notes, payments against the outstanding principal balances of the promissory notes and through conversion of these promissory notes to equity.

There was an increase in convertible promissory notes from $-0- for the fiscal year ended February 28, 2010 to $650,863 for the fiscal year ended February 28, 2011. This increase of $650,683 is due primarily to proceeds received from various related party shareholders and non-related party individuals, through various convertible promissory notes.

An increase in shareholder loans and related party advances ("bridge loans") from $-0- for the fiscal year ended February 28, 2010 to $1,299,393 for the fiscal year ended February 28, 2011. This increase of $1,299,393 is due primarily to proceeds received as bridge loans from shareholders and related parties and payments to third party vendors made by related party shareholders for the benefit of Next One Interactive, Inc.

Accounts payable and accrued expenses increased from $1,429,591 for the fiscal year ended February 28, 2010 to $2,884,838 for the fiscal year ended February 28, 2011. The increase was due primarily to increased accrued interest of $26,182, increase in accrued expenses of $85,355, and increased accounts payable of $1,426,581 offset by a reduction in Deferred Salaries of $82,871.

Other Current Liabilities increased from $817,199 for the fiscal year ended February 28, 2010 to $1,023,476 for the fiscal year ended February 28, 2011. The increase was due primarily to increases in customer deposits of $11,972 for tours to be taken in the future, decreases in contingent liabilities of $185,636, increase in deferred revenue of $85,940 and an increase in barter-deferred revenue in the amount of $294,000.

Total Stockholders' (Deficit) Equity. Our stockholders' deficit was $10,266,139 at February 28, 2011, compared to stockholders' equity of $3,808,333 at February 28, 2010.

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
                             FY2012         FY2013        FY 2014        Totals
           Carriage Fees   $ 1,200,550     $ 411,600     $ 369,600     $ 1,981,750
           Consulting          223,000             -             -         223,000
           Leases              225,540       219,107       180,288         624,935
           Other               177,600         3,000             -         180,600

           Totals          $ 1,826,690     $ 633,707     $ 549,888     $ 3,010,285

Liquidity and Capital Resources; Going Concern

At February 28, 2011, the Company had $419,817 cash on-hand, an increase of $207,912 from $211,905 at the start of fiscal 2010. The increase in cash was due primarily to cash provided by debt and equity financing.

Net cash used by operations was $9,613,440 for the year ended February 28, 2011, an increase of $3,941,156 from $5,672,284 used during fiscal 2010. This increase was due to costs, primarily carriage fees, incurred to launch and operate a television network, plus an impairment of intangible assets and offset of a gain on legal settlement.

Net cash used in investing activities increased $72,446 to $322,446 for the year ended February 28, 2011 compared to $250,000 for fiscal 2010. Investments in web site development in the prior year were greater than deposit payments on acquisitions and additional security deposits made in the current year.

Net cash provided by financing activities increased $4,028,409 to $10,143,798, for the year ended February 28, 2011, compared to $6,115,389. This increase was primarily due to the net increase of $4,009,174 from related party and shareholder loans, increase of $130,377 in net proceeds from loans payable and a decrease in the sale of equity investments in the amount of $111,142.

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. While we expected this market penetration to generate a substantial increase in operating, marketing, promotion and other expenses, we also expected 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 2012 will not begin to improve until the fourth quarter until we improve distribution which will drive revenue improvement.

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 . . .