EXHIBIT 99.1
NXT ENERGY SOLUTIONS INC.
Unaudited Condensed Consolidated Interim Financial Statements
For the three months ended
March 31, 2023
[1] |
NXT ENERGY SOLUTIONS INC.
Condensed Consolidated Interim Balance Sheets
(Unaudited-expressed in Canadian dollars)
|
| March 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Assets |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 467,539 |
|
| $ | 263,437 |
|
Accounts receivable |
|
| 91,764 |
|
|
| 57,065 |
|
Prepaid expenses and deposits |
|
| 42,110 |
|
|
| 36,157 |
|
|
|
| 601,413 |
|
|
| 356,659 |
|
Long term assets |
|
|
|
|
|
|
|
|
Deposits |
|
| 246,138 |
|
|
| 246,589 |
|
Property and equipment |
|
| 529,206 |
|
|
| 544,446 |
|
Right of Use Assets (Note 3) |
|
| 1,116,286 |
|
|
| 1,259,092 |
|
Intellectual property (Note 4) |
|
| 12,743,880 |
|
|
| 13,168,509 |
|
|
| $ | 15,236,923 |
|
| $ | 15,575,295 |
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities (Notes 5, 14) |
| $ | 1,059,385 |
|
| $ | 1,276,236 |
|
Current portion of long-term debt |
|
| 111,111 |
|
|
| 111,111 |
|
Current portion of lease obligation (Note 6) |
|
| 605,154 |
|
|
| 650,315 |
|
|
|
| 1,775,650 |
|
|
| 2,037,662 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
Long-term debt |
|
| 796,296 |
|
|
| 824,074 |
|
Long-term lease obligations (Note 6) |
|
| 461,720 |
|
|
| 596,408 |
|
Asset retirement obligation |
|
| 25,089 |
|
|
| 24,574 |
|
|
|
| 1,283,105 |
|
|
| 1,445,056 |
|
|
|
| 3,058,755 |
|
|
| 3,482,718 |
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
|
|
Common shares (Note 8): - authorized unlimited Issued: 77,599,131 (2022 - 68,949,109) common shares |
|
| 98,077,636 |
|
|
| 96,423,648 |
|
Contributed capital |
|
| 9,450,768 |
|
|
| 9,404,518 |
|
Deficit |
|
| (95,350,236 | ) |
|
| (93,735,589 | ) |
|
|
| 12,178,168 |
|
|
| 12,092,577 |
|
|
| $ | 15,236,923 |
|
| $ | 15,575,295 |
|
Going Concern (Note 1)
Commitments (Note 7)
Subsequent event (Note 4)
Signed “John Tilson” |
| Signed “Bruce G. Wilcox” |
Director |
| Director |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
[2] |
NXT ENERGY SOLUTIONS INC.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
(Unaudited-expressed in Canadian dollars)
|
| For the three months ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Revenue |
|
|
|
|
|
| ||
SFD® related revenue (Note 13) |
| $ | - |
|
| $ | - |
|
Expenses |
|
|
|
|
|
|
|
|
SFD® related costs, net |
|
| 301,634 |
|
|
| 437,282 |
|
General and administrative expenses (Notes 10, 14) |
|
| 861,354 |
|
|
| 912,550 |
|
Amortization (Note 4) |
|
| 439,868 |
|
|
| 442,437 |
|
|
|
| 1,602,856 |
|
|
| 1,792,269 |
|
Other expenses (income) |
|
|
|
|
|
|
|
|
Interest expense, net |
|
| 9,754 |
|
|
| 8,188 |
|
Foreign exchange loss (gain) |
|
| (5,241 | ) |
|
| 20,265 |
|
Intellectual property and other |
|
| 7,278 |
|
|
| 20,146 |
|
|
|
| 11,791 |
|
|
| 48,599 |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| (1,614,647 | ) |
|
| (1,840,868 | ) |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss |
| $ | (1,614,647 | ) |
| $ | (1,840,868 | ) |
Net loss per share (Note 9) |
|
|
|
|
|
|
|
|
Basic |
| $ | (0.02 | ) |
| $ | (0.03 | ) |
Diluted |
| $ | (0.02 | ) |
| $ | (0.03 | ) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
[3] |
NXT ENERGY SOLUTIONS INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited-expressed in Canadian dollars)
For the three months ended March 31, |
| |||||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Cash from (used in): |
|
|
|
|
|
| ||
Operating activities |
|
|
|
|
|
| ||
Net loss |
| $ | (1,614,647 | ) |
| $ | (1,840,868 | ) |
Items not affecting cash: |
|
|
|
|
|
|
|
|
Stock based compensation expense (Note 10) |
|
| 72,242 |
|
|
| 56,516 |
|
Amortization (Note 4) |
|
| 439,868 |
|
|
| 442,439 |
|
Accretion expense |
|
| 516 |
|
|
| 517 |
|
Non-cash lease costs |
|
| (1,734 | ) |
|
| (3,023 | ) |
Change in carry amount of right of use assets & lease liabilities |
|
| (34,649 | ) |
|
| (13,787 | ) |
Unrealized foreign exchange loss |
|
| 1,288 |
|
|
| 19,877 |
|
Loss on disposal of assets and lease modifications |
|
| - |
|
|
| 11,921 |
|
Change in non-cash working capital balances (Note 12) |
|
| (262,903 | ) |
|
| 413,267 |
|
|
|
| 214,628 |
|
|
| 927,727 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (1,400,019 | ) |
|
| (913,141 | ) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from the Employee Share Purchase plan (Note 10) |
|
| 9,854 |
|
|
| 16,106 |
|
Repayment of long-term debt |
|
| (27,778 | ) |
|
| - |
|
Net proceeds from Private Placement (Note 8) |
|
| 1,622,057 |
|
|
| - |
|
Repayment of financial liability and lease obligation (Notes 3, 6) |
|
| - |
|
|
| (27,950 | ) |
Net cash from (used in) financing activities |
|
| 1,604,133 |
|
|
| (11,844 | ) |
|
|
|
|
|
|
|
|
|
Investing activity |
|
|
|
|
|
|
|
|
Proceeds used in short-term investments |
|
| - |
|
|
| (150,272 | ) |
Net cash used in investing activity |
|
| - |
|
|
| (150,272 | ) |
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash equivalents |
|
| (12 | ) |
|
| (13,877 | ) |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
| 204,102 |
|
|
| (1,089,134 | ) |
Cash and cash equivalents, beginning of the period |
|
| 263,437 |
|
|
| 2,257,855 |
|
Cash and cash equivalents, end of the period |
| $ | 467,539 |
|
| $ | 1,168,721 |
|
|
|
|
|
|
|
|
|
|
Supplemental information |
|
|
|
|
|
|
|
|
Cash interest paid (received) |
| $ | 9,738 |
|
| $ | (1,404 | ) |
Cash taxes paid |
|
| - |
|
|
| - |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
[4] |
NXT ENERGY SOLUTIONS INC.
Condensed Consolidated Interim Statements of Shareholders’ Equity
(Unaudited-expressed in Canadian dollars)
|
| For the three months ending March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Common Shares |
|
|
|
|
|
| ||
Balance at beginning of the period |
| $ | 96,423,648 |
|
| $ | 95,779,352 |
|
Issuance of common stock, net of share issuance costs for: |
|
|
|
|
|
|
|
|
Private placement (Note 8) |
|
| 1,622,057 |
|
|
| - |
|
Employee Share Purchase Plan (Note 10) |
|
| 17,458 |
|
|
| 28,837 |
|
Restricted Stock Unit Plan (Note 10) |
|
| 14,473 |
|
|
| - |
|
Balance at end of the period |
|
| 98,077,636 |
|
|
| 95,808,189 |
|
Contributed Capital |
|
|
|
|
|
|
|
|
Balance at beginning of the period |
|
| 9,404,518 |
|
|
| 9,381,966 |
|
Recognition of stock based compensation expense (Note 10) |
|
| 46,250 |
|
|
| 7,500 |
|
Balance at end of the period |
|
| 9,450,768 |
|
|
| 9,389,466 |
|
Deficit |
|
|
|
|
|
|
|
|
Balance at beginning of the period |
|
| (93,735,589 | ) |
|
| (87,002,515 | ) |
Net loss |
|
| (1,614,647 | ) |
|
| (1,840,868 | ) |
|
|
|
|
|
|
|
|
|
Balance at end of the period |
|
| (95,350,236 | ) |
|
| (88,843,383 | ) |
|
|
|
|
|
|
|
|
|
Total Shareholders’ Equity at end of the period |
| $ | 12,178,168 |
|
| $ | 16,354,272 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
[5] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
1. The Company and going concern
NXT Energy Solutions Inc. (the “Company” or “NXT”) is a publicly traded company based in Calgary, Alberta Canada.
NXT’s proprietary Stress Field Detection (“SFD®”) technology is an airborne survey system that utilizes quantum-scale sensors to detect gravity field perturbations in an airborne survey method which can be used both onshore and offshore to remotely identify traps and reservoirs with exploration potential in both the hydrocarbon and geothermal industries.
These condensed consolidated interim financial statements of NXT have been prepared by management in accordance with generally accepted accounting principles of the United States of America (“US GAAP”).
These condensed consolidated interim financial statements reflect adjustments, all of which are normal recurring adjustments that are, in the opinion of management, necessary to reflect fairly the financial position and results of operations for the respective periods.
These condensed consolidated interim financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that NXT will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.
The events described in the following paragraphs highlight that there is substantial doubt about NXT’s ability to continue as a going concern within one year after the date that these condensed consolidated interim financial statements have been issued. The Company’s current cash position is not expected to be sufficient to meet the Company’s obligations and planned operations for a year beyond the date that these condensed consolidated interim financial statements have been issued.
The Company has deferred payment of operating costs, including payroll and other general and administrative costs. Further financing options that may or may not be available to the Company include issuance of new equity, debentures or bank credit facilities. The need for any of these options will be dependent on the timing of securing new SFD® related revenues and obtaining financing on terms that are acceptable to both the Company and the financier.
NXT continues to develop its pipeline of opportunities to secure new revenue contracts. However, the Company’s longer-term success remains dependent upon its ability to convert these opportunities into successful contracts, to continue to attract new client projects, expand its revenue base to a level sufficient to exceed fixed operating costs, and generate consistent positive cash flow from operations. The occurrence and timing of these events cannot be predicted with sufficient certainty.
The condensed consolidated interim financial statements do not reflect adjustments that would be necessary if the going concern basis was not appropriate. If the going concern basis was not appropriate for these condensed consolidated interim financial statements, then adjustments would be necessary in the carrying value of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. These adjustments could be material.
[6] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
Use of Estimates and Judgements
In preparing these condensed consolidated interim financial statements, NXT is required to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. The Company uses the most current information available and exercises careful judgment in making these estimates and assumptions. In the opinion of management, these condensed consolidated interim financial statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies. The estimates and assumptions used are based upon management’s best estimate as at the date of the condensed consolidated interim financial statements. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period when determined. Actual results may differ from those estimates.
Certain estimates and judgments have a material impact where the assumptions underlying these accounting estimates relate to matters that are highly uncertain at the time the estimate or judgment is made or are subjective. In 2023 and 2022, the estimates and judgments included the assessment of impairment indicators of intellectual property.
The Company reviews intellectual property for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company considers both internal and external factors when assessing for potential indicators of impairment of its intellectual property, including the consideration of historical and forecasted SFD® related revenues, market capitalization, control premiums, and the SFD® related revenue multiples compared to industry peers. When indicators of impairment exist, the Company first compares the total of the estimated undiscounted future cash flows or the estimated sale price to the carrying value of an asset. If the carrying value exceeds these amounts, an impairment loss is recognized for the excess of the carrying value over the estimated fair value of the intellectual property.
Other accounting estimates and judgments that may have a material impact on the financial statements include: the forward looking assumptions related to the going concern assumption, the estimated useful lives of intellectual property and property and equipment, and the assumptions used to measure stock based compensation expense.
2. Significant Accounting Policies
Basis of Presentation
These condensed consolidated interim financial statements for the period ended March 31, 2023 have been prepared by management in accordance with US GAAP and by applying the same accounting policies and methods as used in preparing the consolidated financial statements for the fiscal year ended December 31, 2022. There are no new policies that were adopted on January 1, 2023.
[7] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
3. Right of use assets
|
| March 31, 2023 |
| |||||||||
|
| Cost |
|
| Accumulated |
|
| Right of |
| |||
|
| Base |
|
| Amortization |
|
| Use Assets |
| |||
Aircraft |
| $ | 1,847,617 |
|
| $ | 1,484,722 |
|
| $ | 362,895 |
|
Office Building |
|
| 1,725,414 |
|
|
| 981,169 |
|
|
| 744,245 |
|
Printer |
|
| 9,716 |
|
|
| 570 |
|
|
| 9,146 |
|
|
|
| 3,582,747 |
|
|
| 2,466,461 |
|
|
| 1,116,286 |
|
|
| December 31, 2022 |
| |||||||||
|
| Cost |
|
| Accumulated |
|
| Right of |
| |||
|
| Base |
|
| Amortization |
|
| Use Assets |
| |||
Aircraft |
| $ | 1,847,617 |
|
| $ | 1,407,743 |
|
| $ | 439,874 |
|
Office Building |
|
| 1,725,414 |
|
|
| 915,773 |
|
|
| 809,641 |
|
Printer |
|
| 9,716 |
|
|
| 139 |
|
|
| 9,577 |
|
|
|
| 3,582,747 |
|
|
| 2,323,655 |
|
|
| 1,259,092 |
|
Under the term of its Aircraft Leasing Agreement, should NXT want to repurchase the aircraft at the end of the extended term, the purchase price will be US$1.21 million.
4. Intellectual property
|
| March 31, 2023 |
| |||||||||
|
| Cost |
|
| Accumulated |
|
| Net book |
| |||
|
| Base |
|
| amortization |
|
| Value |
| |||
SFD® Hydrocarbon Right acquired |
| $ | 25,271,000 |
|
| $ | 12,776,317 |
|
| $ | 12,494,683 |
|
SFD® Geothermal Right acquired |
|
| 275,610 |
|
|
| 26,413 |
|
|
| 249,197 |
|
|
|
| 25,546,610 |
|
|
| 12,802,730 |
|
|
| 12,743,880 |
|
|
| December 31, 2022 |
| |||||||||
|
| Cost |
|
| Accumulated |
|
| Net book |
| |||
|
| Base |
|
| amortization |
|
| Value |
| |||
SFD® Hydrocarbon Right acquired |
| $ | 25,271,000 |
|
| $ | 12,355,134 |
|
| $ | 12,915,866 |
|
SFD® Geothermal Right acquired |
|
| 275,610 |
|
|
| 22,967 |
|
|
| 252,643 |
|
|
|
| 25,546,610 |
|
|
| 12,378,101 |
|
|
| 13,168,509 |
|
[8] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
SFD® Hydrocarbon Right
During 2015, NXT acquired the rights to the SFD® technology for use in the exploration of hydrocarbons (“Hydrocarbon Right”) from Mr. George Liszicasz, the former President and CEO of NXT (“CEO”), and recorded the acquisition as an intellectual property asset on the balance sheet. The asset was recorded at the fair value of the consideration transferred, including the related tax effect of approximately $25.3 million.
The Hydrocarbon Right is being amortized on a straight line basis over its estimated useful life of 15 years. The annual amortization expense expected to be recognized is approximately $1.7 million per year for a 5 year aggregate total of $8.5 million.
SFD® Geothermal Right
The Company acquired the SFD® technology rights for geothermal resources (“Geothermal Right”) from the CEO on April 18, 2021. The consideration deliverable by the Company in connection with the acquisition of the Geothermal Right is set forth below:
| 1. | US$40,000 (CAD$50,310) signature payment, which became due immediately and was paid on April 22, 2021; |
| 2. | 300,000 common shares, which were issued in December 2021; |
| 3. | CAD$15,000 signature milestone payment paid in August 2021; |
| 4. | US$200,000 milestone payment which will become due in the event that the Company’s cash balance exceeds CAD$5,000,000 due to receipt of specifically defined funds from operations; and |
| 5. | US$250,000 milestone payment would have become due in the event that the Company executed and completed and received full payment for an SFD® contract valued at US$10,000,000 or greater, provided such contract was entered into and completed and payment of at least US$5,000,000 was received by April 18, 2023. This milestone expired as of April 18, 2023. |
As of March 31, 2023, the Company has recognized $275,610 for the acquisition Geothermal Right which is the combination of the US$40,000 (CAD$50,310) and CAD$15,000 signature payments, the value of the 300,000 common shares of $207,300 and other costs of $3,000. The cost of the remaining milestone will be recognized when it is deemed probable that the milestone will be achieved by a special committee of the Board of Directors, comprised entirely of independent directors. The Board of Directors delegated authority to the special committee to determine when the milestones have been achieved. As of March 31, 2023 the remaining milestone is still deemed not probable of being achieved.
The current book value of the Geothermal Right is being amortized on a straight line basis over its estimated useful life of 20 years. The annual amortization expense expected to be recognized is approximately $13,781 per year for a 5 year aggregate total of approximately $68,902.
[9] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
5. Accounts payable and accrued liabilities
|
| March 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Accrued liabilities related to: |
|
|
|
|
|
| ||
Consultants and professional fees |
| $ | 204,192 |
|
| $ | 533,863 |
|
Payroll |
|
| 485,076 |
|
|
| 397,500 |
|
Board of director’s fees |
|
| 156,731 |
|
|
| 162,500 |
|
Vacation accrued |
|
| 67,922 |
|
|
| 62,413 |
|
|
|
| 913,921 |
|
|
| 1,156,276 |
|
Trade payables and other |
|
| 145,464 |
|
|
| 119,960 |
|
|
|
| 1,059,385 |
|
|
| 1,276,236 |
|
6. Lease obligation
|
| March 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Aircraft |
| $ | 296,479 |
|
| $ | 378,769 |
|
Office Building |
|
| 761,249 |
|
|
| 858,378 |
|
Printer |
|
| 9,146 |
|
|
| 9,576 |
|
|
|
| 1,066,874 |
|
|
| 1,246,723 |
|
Current portion of lease obligations |
|
| 605,154 |
|
|
| 650,315 |
|
Long-term lease obligations |
|
| 461,720 |
|
|
| 596,408 |
|
Maturity of lease liabilities: |
|
|
|
| Weighted Average Remaining Lease Term | |
2023 |
| $ | 532,491 |
|
| 2.1 years |
2024 |
|
| 382,758 |
|
| 1.7 years |
2025 |
|
| 259,528 |
|
| 0.8 years |
2026 |
|
| 3,139 |
|
| 0.9 years |
Total lease payments |
|
| 1,177,916 |
|
|
|
Less imputed interest |
|
| (111,042 | ) |
|
|
Total discounted lease payments |
|
| 1,066,874 |
|
|
|
Current portion of lease obligations |
|
| 605,154 |
|
|
|
Non-current portion of lease obligations |
|
| 461,720 |
|
|
|
|
| Lease Term Till |
| Option to Extend |
| Incremental Borrowing Rate |
| |
Aircraft |
| April 2024 |
| Executed |
|
| 11.2 | % |
Office Building |
| September 2025 |
| No |
|
| 6.1 | % |
Printer |
| November 2026 |
| No |
|
| 10.8 | % |
[10] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
The Company’s total lease expenditures for the period ended March 31, 2023 was $177,230 (2022 - $260,205).
7. Commitments
The table below is the non-lease operating cost components associated with the costs of the building lease.
For the fiscal period ending December 31, |
| Office Premises |
| |
2023 |
| $ | 168,941 |
|
2024 |
|
| 225,255 |
|
2025 |
|
| 168,941 |
|
|
|
| 563,137 |
|
8. Common shares
The Company is authorized to issue an unlimited number of common shares, of which the following are issued and outstanding:
|
| For the three months ended March 31, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||
|
| # of shares |
|
| $ amount |
|
| # of shares |
|
| $ amount |
| ||||
As at the beginning of the period |
|
| 68,949,109 |
|
| $ | 96,423,648 |
|
|
| 65,250,710 |
|
| $ | 95,779,352 |
|
Private placement, net of issuance costs |
|
| 8,510,000 |
|
|
| 1,622,057 |
|
|
| - |
|
|
| - |
|
Employee Share Purchase Plan |
|
| 87,849 |
|
|
| 17,458 |
|
|
| 51,262 |
|
|
| 28,837 |
|
Restricted Stock Units |
|
| 52,173 |
|
|
| 14,473 |
|
|
| - |
|
|
| - |
|
As at the end of the period |
|
| 77,599,131 |
|
|
| 98,077,636 |
|
|
| 65,301,972 |
|
|
| 95,808,189 |
|
On December 22, 2022 the Company announced a multi-tranche private placement (the “Private Placement”) at $0.195 per share. At December 22, 2022 the Company issued 1,148,282 common shares for gross proceeds of $223,915 in the first tranche, less issuance costs of $7,732. On January 25, 2023, the Company closed the Private Placement by issuing an additional 8,510,000 common shares, at $0.195 per common share, for additional aggregate gross proceeds of approximately $1,659,450, less issuance costs of $37,393.
[11] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
9. Loss per share
For the three months ended March 31, |
| |||||||
|
| 2023 |
|
| 2022 |
| ||
Net loss for the period |
| $ | (1,614,647 | ) |
| $ | (1,840,868 | ) |
Weighted average number of shares outstanding for the period: |
|
|
|
|
|
|
|
|
Basic |
|
| 76,452,260 |
|
|
| 65,282,940 |
|
Diluted |
|
| 76,452,260 |
|
|
| 65,282,940 |
|
Net loss per share – Basic |
| $ | (0.02 | ) |
| $ | (0.03 | ) |
Net loss per share – Diluted |
| $ | (0.02 | ) |
| $ | (0.03 | ) |
In periods in which a loss results, all outstanding stock options are excluded from the diluted loss per share calculations as their effect is anti-dilutive.
10. Share based compensation
The Company has an equity compensation program in place for its executives, employees and directors. Executives and employees are given equity compensation grants that vest based on a recipient’s continued employment. The Company’s stock-based compensation awards outstanding as at March 31, 2023, include stock options, restricted stock units (“RSUs”), deferred share units (“DSUs”) and the employee share purchase plan (“ESP Plan”). The following tables provide information about stock option, RSU, DSU, and ESP Plan activity.
For the three months ended March 31, | ||||||||
|
| 2023 |
|
| 2022 |
| ||
Stock Option Expense |
| $ | 46,250 |
|
| $ | 7,500 |
|
Restricted Stock Units |
|
| 18,388 |
|
|
| 36,285 |
|
Employee Share Purchase Plan |
|
| 7,604 |
|
|
| 12,731 |
|
Total stock based compensation expense |
|
| 72,242 |
|
|
| 56,516 |
|
[12] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
Stock Options:
The following is a summary of stock options which are outstanding as at March 31, 2023.
Exercise price per share | # of options outstanding | # of options exercisable | Average remaining life (in years) |
$0.174 | 69,200 | 69,200 | 4.6 |
$0.216 | 2,005,200 | 55,200 | 4.8 |
$0.260 | 52,650 | 52,650 | 4.8 |
$0.264 | 177,200 | 177,200 | 4.8 |
$0.440 | 21,360 | 21,360 | 3.3 |
$0.510 | 16,000 | 16,000 | 2.5 |
$0.520 | 100,000 | 100,000 | 1.3 |
$0.550 | 30,000 | 30,000 | 1.8 |
$0.590 | 150,000 | 150,000 | 0.6 |
$0.620 | 18,050 | 18,050 | 3.8 |
$0.680 | 14,750 | 14,750 | 3.5 |
$0.680 | 17,500 | 17,500 | 4.2 |
$0.720 | 24,460 | 24,460 | 4.2 |
2,696,370 | 746,370 | 4.3 |
[13] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
A continuity of the number of stock options which are outstanding at the end of the current period and as at the prior fiscal year ended December 31, 2022 are as follows:
For the three months ended |
|
| For the year ended |
| ||||||||||||
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||||||||
|
|
|
|
| weighted |
|
|
|
|
| Weighted |
| ||||
|
| # of stock |
|
| average |
|
| # of stock |
|
| Average |
| ||||
|
| Options |
|
| exercise price |
|
| Options |
|
| exercise price |
| ||||
Options outstanding, start of the period |
|
| 461,320 |
|
| $ | 0.51 |
|
|
| 358,660 |
|
| $ | 0.56 |
|
Granted |
|
| 2,335,050 |
|
| $ | 0.22 |
|
|
| 134,060 |
|
| $ | 0.40 |
|
Forfeited |
|
| (100,000 | ) |
| $ | (0.22 | ) |
|
| - |
|
|
| - |
|
Cancelled |
|
| - |
|
|
| - |
|
|
| (31,400 | ) |
| $ | (0.51 | ) |
Options outstanding, end of the period |
|
| 2,696,370 |
|
| $ | 0.27 |
|
|
| 461,320 |
|
| $ | 0.51 |
|
Options exercisable, end of the period |
|
| 746,370 |
|
| $ | 0.41 |
|
|
| 461,320 |
|
| $ | 0.51 |
|
Stock options granted generally expire, if unexercised, five years from the date granted and entitlement to exercise them generally vests at a rate as determined by the Board of Directors.
Stock based compensation expense (“SBCE”) is calculated based on the fair value attributed to grants of stock options using the Black-Scholes valuation model and utilizing the following weighted average assumptions:
|
| For the three months ended |
|
| For the year ended |
| ||
For the year ended |
| March 31, 2023 |
|
| December 31, 2022 |
| ||
Expected dividends paid per common share |
| Nil |
|
| Nil |
| ||
Expected life in years |
|
| 5.0 |
|
|
| 5.0 |
|
Weighted average expected volatility in the price of common shares |
|
| 75 | % |
|
| 75 | % |
Weighted average risk free interest rate |
|
| 3.23 | % |
|
| 3.05 | % |
Weighted average fair market value per share at grant date |
| $ | 0.22 |
|
| $ | 0.40 |
|
On January 6, 2023 the Company announced the grant of 2,050,000 incentive stock options at a price of $0.216 to employees, officers and directors. These incentive stock options will vest upon receipt of cash for SFD® services performed: 1/3 upon collection of US$6.5 million, 1/3 upon the collection of the next US$7.0 million and the final 1/3 upon collection of an additional US$7.5 million.
[14] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
Deferred Stock Units:
A continuity of the number of DSUs which are outstanding at the end of the current period and as at the prior fiscal years ended December 31, 2022 are as follows:
|
| For the three months ended |
|
| For the year ended |
| ||
| March 31, 2023 |
|
| December 31, 2022 |
| |||
Opening balance |
|
| 37,354 |
|
|
| 37,354 |
|
Granted |
|
| - |
|
|
| - |
|
Closing balance |
|
| 37,354 |
|
|
| 37,354 |
|
The DSUs plan is a long-term incentive plan that permits the grant of DSUs to qualified directors. DSUs granted under the DSUs plan are to be settled at the retirement, resignation or death of the Board member holding the DSUs.
Restricted Stock Units:
RSUs entitle the holder to receive, at the option of the Company, either the underlying number of shares of the Company’s Common Stock upon vesting of such units or a cash payment equal to the value of the underlying shares. The RSUs vest at a rate of one-third at the end of each of the first three years following the date of grant. In the third quarter of 2022, the Company settled the RSUs that vested with shares and cash, and intends to continue to settle the RSUs in shares and cash.
A continuity of the number of RSUs, including fair value (“FV”) which are outstanding at the end of the current period and as the end of the prior fiscal year ended December 31, 2022 are as follows:
|
| For the three months ended |
|
| For the year ended |
| ||||||||||
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||||||||
|
| # of RSUs |
|
| FV/Unit |
|
| # of RSUs |
|
| FV/Unit |
| ||||
RSUs outstanding, start of the period |
|
| 348,334 |
|
| $ | 0.21 |
|
|
| 696,666 |
|
| $ | 0.61 |
|
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Common shares issued |
|
| (52,173 | ) |
| $ | (0.28 | ) |
|
| (212,304 | ) |
| $ | (0.58 | ) |
Settlement of payroll withholdings |
|
| 507 |
|
| $ | 0.42 |
|
|
| (136,028 | ) |
| $ | (0.58 | ) |
RSUs outstanding, end of the period |
|
| 296,668 |
|
| $ | 0.18 |
|
|
| 348,334 |
|
| $ | 0.21 |
|
Employee Share Purchase Plan:
The ESP Plan allows employees and other individuals determined by the Board to be eligible to contribute a minimum of 1% and a maximum of 10% of their earnings to the plan for the purchase of common shares in the capital of the Company, of which the Company will make an equal contribution. Common shares contributed by the Company may be issued from treasury or acquired through the facilities of the TSX. During 2023 and 2022 the Company has elected to issue common shares from treasury.
[15] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
A continuity of the number of commons shares under the ESP Plan which are outstanding at the end of the current period and as at the prior fiscal year ended December 31, 2022 are as follows:
|
| For the three months ended |
|
| For the year ended |
| ||||||||||
|
| March 31,2023 |
|
| December 31, 2022 |
| ||||||||||
|
| # of shares |
|
| $ amount |
|
| # of shares |
|
| $ amount |
| ||||
Purchased by employees |
|
| 49,604 |
|
| $ | 9,854 |
|
|
| 105,221 |
|
| $ | 49,738 |
|
Matched by the Company |
|
| 38,245 |
|
|
| 7,604 |
|
|
| 83,412 |
|
|
| 39,389 |
|
Bonus match by the Company |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total common shares issued |
|
| 87,849 |
|
|
| 17,458 |
|
|
| 188,633 |
|
|
| 89,127 |
|
11. Financial instruments
Non-derivative financial instruments:
The Company’s non-derivative financial instruments consist of cash and cash equivalents, accounts receivable, deposits, accounts payables and accrued liabilities, long-term debt and lease obligations. The carrying value of these financial instruments, excluding lease obligations and long-term debt, approximates their fair values due to their short terms to maturity.
Credit Risk
Credit risk arises from the potential that the Company may incur a loss if counterparty to a financial instrument fails to meet its obligation in accordance with agreed terms. The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The carrying value of cash and cash equivalents and accounts receivable reflects management’s assessment of maximum exposure to credit risk. At March 31, 2023, cash and cash equivalents included balances in bank accounts placed with financial institutions with investment grade credit ratings. The Company manages Accounts Receivable credit risk by requiring advance payments before entering into certain contract milestones and when possible, accounts receivable insurance.
Foreign Exchange Risk
The Company is exposed to foreign exchange risk in relation to its holding of significant US$ balances in cash and cash equivalents, deposits, accounts payables, accrued liabilities, and lease obligations, and entering into United States dollar revenue contracts. The Company does not currently enter into hedging contracts, but to mitigate exposure to fluctuations in foreign exchange the Company uses strategies to reduce the volatility of United States Dollar assets including converting excess United States dollars to Canadian dollars. As at March 31, 2023, the Company held net U.S. dollar liabilities totaling US$137,360. Accordingly, a hypothetical 10% change in the value of one United States dollar expressed in Canadian dollars as at March 31, 2023 would have had an approximately $18,574 effect on the unrealized foreign exchange gain or loss for the period. As at March 31, 2022, the Company held net U.S. dollar assets totaling US$803,028. Accordingly, a hypothetical 10% change in the value of one United States dollar expressed in Canadian dollars as at March 31, 2022 would have had an approximately $100,234 effect on the unrealized foreign exchange gain or loss for the period.
[16] |
NXT ENERGY SOLUTIONS INC.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
As at and for the period ended March 31, 2023
(Expressed in Canadian dollars unless otherwise stated)
12. Change in non-cash operating working capital
The changes in non-cash operating working capital balances are comprised of:
|
| For the three months ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Accounts receivable |
| $ | (34,699 | ) |
| $ | 264,760 |
|
Prepaid expenses and deposits |
|
| (5,953 | ) |
|
| 9,260 |
|
Accounts payable and accrued liabilities |
|
| (222,251 | ) |
|
| 139,247 |
|
|
|
| (262,903 | ) |
|
| 413,267 |
|
13. Geographic information
The Company generates revenue from its SFD® survey system that enables the clients to focus their exploration decisions concerning land commitments, data acquisition expenditures and prospect prioritization on areas with the greatest potential. NXT conducts all of its survey operations from its head office in Canada, and occasionally maintains administrative offices in foreign locations if and when needed. Revenue fluctuations are a normal part of SFD® survey system sales and can vary significantly year-over-year. There were no SFD® revenues in the quarters ended March 31, 2023 and 2022.
14. Other related party transactions
One of the members of NXT’s Board of Directors is a partner in a law firm which provides legal advice to NXT. Accounts payable and accrued liabilities includes a total of $41,434 ($76,843 as at December 31, 2022) payable to this law firm.
Accounts payable and accrued liabilities includes $156,731 ($162,500 as at December 31, 2022) for Board of Director’s fees.
|
| For the three months ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Legal Fees |
| $ | 32,678 |
|
| $ | 10,965 |
|
[17] |