Exhibit 99.1
NXT ENERGY SOLUTIONS INC.
Unaudited Condensed Consolidated Interim Financial
Statements
For the three and six months ended
June 30, 2019
NXT ENERGY SOLUTIONS INC.
Condensed Consolidated Interim Balance Sheets
(Unaudited-expressed
in Canadian dollars)
|
|
|
|
|
|
Assets
|
|
|
Current
assets
|
|
|
Cash
and cash equivalents
|
$
1,156,351
|
$
339,532
|
Short-term
investments (Note 3)
|
1,800,000
|
3,900,000
|
Accounts
receivable (Note 4)
|
9,129,288
|
61,279
|
Prepaid
expenses
|
226,055
|
65,159
|
|
12,311,694
|
4,365,970
|
Long
term assets
|
|
|
Deposits
(Note 5)
|
539,306
|
560,341
|
Property
and equipment (Note 6)
|
505,935
|
683,157
|
Right
of use Assets (Note 7)
|
3,307,277
|
-
|
Intellectual
property (Note 8)
|
18,812,433
|
19,654,800
|
|
$
35,476,645
|
$
25,264,268
|
Liabilities and Shareholders' Equity
|
|
|
Current
liabilities
|
|
|
Accounts
payable and accrued liabilities (Note 9)
|
$
1,025,418
|
$
499,535
|
Deferred
revenue
|
-
|
-
|
Contract
Obligations (Note 10)
|
132,079
|
-
|
Current
portion of capital lease obligation (Note 11)
|
703,423
|
42,603
|
|
1,860,920
|
542,138
|
Long-term
liabilities
|
|
|
Long-term
lease obligation (Note 11)
|
3,046,322
|
42,515
|
Other
liabilities
|
-
|
362,368
|
Asset
retirement obligation
|
27,816
|
26,778
|
Deferred
charges
|
-
|
79,000
|
|
3,074,138
|
510,661
|
|
4,935,058
|
1,052,799
|
Commitments
and contingencies (Note 12)
|
|
|
Going
concern (Note 1)
|
|
|
Shareholders'
equity
|
|
|
Common
shares (Note 13): - authorized unlimited
|
|
|
Issued:
68,573,558 (2018 - 68,573,558) common shares
|
96,656,248
|
96,656,248
|
Contributed
capital
|
9,270,234
|
9,262,684
|
Deficit
|
(76,095,829
)
|
(82,418,397
)
|
Accumulated
other comprehensive income
|
710,934
|
710,934
|
|
30,541,587
|
24,211,469
|
|
$
35,476,645
|
$
25,264,268
|
Signed
"George Liszicasz"
|
|
Signed
"Bruce G. Wilcox"
|
Director
|
|
Director
|
The
accompanying notes are an integral part of these condensed
consolidated interim financial statements.
NXT ENERGY SOLUTIONS INC.
Condensed
Consolidated Interim
Statements of Income (Loss) and
Comprehensive Income (Loss)
(Unaudited-expressed
in Canadian dollars)
|
For the
three months ended June 30,
|
For the
six months ended June 30,
|
|
|
|
|
|
Revenue
|
|
|
|
|
Survey
revenue (Note 18)
|
$
10,954,617
|
$
-
|
$
10,954,617
|
$
-
|
Expenses
|
|
|
|
|
Survey
costs, net
|
1,412,380
|
267,672
|
1,790,113
|
517,434
|
General
and administrative expenses
|
767,401
|
1,110,634
|
1,689,150
|
2,092,038
|
Stock
based compensation expense
|
3,775
|
153,791
|
7,550
|
449,075
|
Amortization
expense (Note 6 and 8)
|
443,154
|
447,192
|
886,851
|
894,383
|
|
2,626,710
|
1,979,289
|
4,373,664
|
3,952,930
|
|
|
|
|
Interest
expense (income), net
|
3,916
|
(14,276
)
|
7,116
|
(14,207
)
|
Foreign
exchange (gain) loss
|
234,244
|
(3,264
)
|
240,350
|
(10,136
)
|
Intellectual
property and other expenses
|
3,859
|
(635
)
|
10,919
|
(12,823
)
|
|
242,019
|
(18,175
)
|
258,385
|
(37,166
)
|
|
|
|
|
|
Income (loss) before income tax
|
8,085,888
|
(1,961,114
)
|
6,322,568
|
(3,915,764
)
|
|
|
|
|
Current
|
-
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) and comprehensive income
(loss)
|
8,085,888
|
(1,961,114
)
|
6,322,568
|
(3,915,764
)
|
Net income (loss) per share (Note 14)
|
|
|
|
Basic
|
$
0.12
|
$
(0.03
)
|
$
0.09
|
$
(0.06
)
|
Diluted
|
$
0.11
|
$
(0.03
)
|
$
0.09
|
$
(0.06
)
|
The
accompanying notes are an integral part of these condensed
consolidated interim financial statements.
NXT
ENERGY SOLUTIONS INC.
Condensed
Consolidated Interim
Statements of Cash Flows
(Unaudited-expressed
in Canadian dollars)
|
For the three months ended June 30,
|
For the six months ended June 30,
|
|
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
Operating activities
|
|
|
|
|
Comprehensive
income (loss) for the period
|
$
8,085,888
|
$
(1,961,114
)
|
6,322,568
|
$
(3,915,764
)
|
Items
not affecting cash:
|
|
|
|
|
Stock
based compensation expense (Note 15)
|
3,775
|
153,791
|
7,550
|
449,075
|
Amortization
expense (Notes 6 and 8)
|
443,154
|
447,192
|
886,851
|
894,383
|
Non-cash
changes to asset retirement obligation
|
521
|
518
|
1,037
|
1,035
|
Amortization
of financial liability
|
(42,824
)
|
-
|
(85,649
)
|
-
|
Foreign
Exchange
|
218,113
|
(17,321
)
|
224,219
|
(23,611
)
|
Amortization
of deferred gain on sale of aircraft
|
-
|
(38,825
)
|
-
|
(77,650
)
|
Deferred
rent
|
-
|
(730
)
|
-
|
(1,460
)
|
Change
in non-cash working capital balances (Note 17)
|
(9,092,898
)
|
(526,475
)
|
(8,618,826
)
|
(607,880
)
|
|
(8,470,159
)
|
18,150
|
(7,584,818
)
|
633,892
|
Net
cash used in operating activities
|
(384,271
)
|
(1,942,964
)
|
(1,262,250
)
|
(3,281,872
)
|
|
|
|
|
|
Financing activities
|
|
|
|
|
Proceeds
from exercise of stock options
|
-
|
-
|
-
|
5,067
|
Net
Proceeds from Private Placement
|
-
|
4,103,011
|
-
|
8,392,332
|
Repayment
of capital lease obligation
|
(10,554
)
|
(9,806
)
|
(20,931
)
|
(19,458
)
|
Net
cash from (used in) financing activities
|
(10,554
)
|
4,093,205
|
(20,931
)
|
8,377,941
|
|
|
|
|
|
Investing activities
|
|
|
|
|
Proceeds
for sale/purchase of property and equipment, net
|
-
|
(10,006
)
|
-
|
(10,006
)
|
Increase
in short-term investments
|
900,000
|
(4,950,001
)
|
2,100,000
|
(4,300,000
)
|
Net
cash from (used in) investing activities
|
900,000
|
(4,960,007
)
|
2,100,000
|
(4,310,006
)
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
505,175
|
(2,809,766
)
|
816,819
|
786,063
|
Cash
and cash equivalents, beginning of the period
|
651,176
|
3,762,447
|
339,532
|
166,618
|
Cash
and cash equivalents, end of the period
|
$
1,156,351
|
$
952,681
|
$
1,156,351
|
$
952,681
|
|
|
|
|
|
Supplemental information
|
|
|
|
|
|
(15,799
)
|
(10,339
)
|
(32,390
)
|
(10,931
)
|
Cash taxes paid
|
-
|
-
|
-
|
-
|
The
accompanying notes are an integral part of these condensed
consolidated interim financial statements.
NXT ENERGY SOLUTIONS INC.
Condensed
Consolidated Interim
Statements of Shareholders'
Equity
(Unaudited-expressed
in Canadian dollars)
|
For the six
months ending June 30,
|
|
|
|
Common Shares
|
|
|
Balance
at beginning of the period (Note 13)
|
$
96,656,248
|
$
88,121,286
|
Issuance
of Common Stock on Private Placement
|
-
|
7,438,085
|
Issued
upon exercise of stock options
|
-
|
5,067
|
Transfer
from contributed capital upon exercise of stock
options
|
-
|
6,441
|
Balance
at end of the period
|
96,656,248
|
95,570,879
|
Contributed Capital
|
|
|
Balance
at beginning of the period
|
9,262,684
|
8,195,075
|
Issuance
of warrants on Private Placement
|
-
|
698,932
|
Recognition
of stock based compensation expense
|
7,550
|
449,075
|
Contributed
capital transferred to common shares
|
-
|
-
|
upon
exercise of stock options
|
-
|
(6,441
)
|
|
|
|
Balance
at end of the period
|
9,270,234
|
9,336,641
|
Deficit
|
|
|
Balance
at beginning of the period
|
(82,418,397
)
|
(75,449,887
)
|
Net
income (loss) and comprehensive income (loss)
|
6,322,568
|
(3,915,764
)
|
|
|
|
Balance
at end of the period
|
(76,095,829
)
|
(79,365,651
)
|
Accumulated Other Comprehensive Income
|
|
|
Balance
at beginning and end of the period
|
710,934
|
710,935
|
Total Shareholders' Equity at end of the period
|
$
30,541,587
|
$
26,252,804
|
The
accompanying notes are an integral part of these condensed
consolidated interim financial statements.
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for three years and six months periods ended June 30,
2019
(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 is used in the oil and natural gas
exploration industry to identify subsurface trapped fluid
accumulations. 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 financial
statements have been issued.
The
Company’s current cash position, in addition to payments of
approximately $4,400,000 United States Dollars received in the
third quarter on the Nigerian SFD
®
survey are not
expected to be sufficient to meet the Company’s obligations
for the 12 month period beyond the date that these financial
statements have been issued. With completion of the Nigerian
SFD
®
survey, the Company’s cash position will improve if contract
milestones payments continue to be made as per contract
terms.
The
Company is also taken future steps to reduce costs which include
evaluating alternatives to reduce aircraft and office costs. In
addition, the Advisory Board has been suspended indefinitely and
staffing costs are being reduced with new Human Resource policies.
If required, 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 contracts and
obtaining financing 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 convert these opportunities into
successful contracts and to continue to attract new client projects
and expand the revenue base to a level sufficient to exceed fixed
operating costs and generate positive cash flow from
operations. The occurrence and timing of these events cannot
be predicted with certainty.
The
condensed consolidated financial interim 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 consolidated financial statements, then
significant adjustments would be necessary in the classification
and carrying value of assets and liabilities and the reported
revenues and expenses.
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the three and six month periods ended June 30,
2019
(Expressed in Canadian dollars unless otherwise
stated)
2. Significant Accounting Policies
Basis of Presentation
These
condensed consolidated interim financial statements for the period
ended June 30, 2019 have been prepared by management in accordance
with generally accepted accounting principles of the United States
of America ("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, 2018, except as
noted below.
Update to Significant Accounting Policies
Revenue
The performance obligation for NXT is the acquisition, processing,
interpretation and integration of Stress Field Detection
(SFD
®
) data. Revenue
from the sale of SFD
®
survey
contracts (net of any related foreign sales taxes) is recognized
over time by measuring the progress toward satisfaction of its
performance obligations to the customer.
All funds received or invoiced in
advance of recognition of revenue are reflected as contract
obligations and classified as a current liability on our balance
sheet.
The Company uses direct survey costs as the input measure to
recognize revenue given in any fiscal period. The percentage of
direct survey costs incurred to date over the total expected survey
costs to be incurred, provides an appropriate measure of the stage
performance obligation being satisfied over time.
Leases
On January 1, 2019, NXT adopted ASC Topic 842, Leases (“Topic
842”) and related amendments, using the modified
retrospective approach recognizing a cumulative effect adjustment
at the beginning of the reporting period in which Topic 842 was
applied. Results for reporting the periods beginning after January
1, 2019, are presented in accordance with Topic 842, while prior
periods have not been restated and are reported in accordance with
ASC Topic 840, Leases (“Topic 840”). On transition, NXT
elected certain practical expedients permitted under Topic 842
which include:
a)
No reassessment of the classification of leases previously assessed
under Topic 840.
b)
The use of hindsight in determining the lease term where the
contract contains terms to extend or terminate the
lease
The policy and disclosures required under Topic 842 are included in
Note 11, Leases.
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the three and six month periods ended June 30,
2019
(Expressed in Canadian dollars unless otherwise
stated)
In accordance with Topic 842, NXT recognized a Right of Use ("ROU")
asset and corresponding lease liability for all operating leases on
the Condensed Consolidated Interim Balance Sheet. Prior to the
adoption of Topic 842, operating leases were not recognized on the
Condensed Consolidated Interim Balance Sheet. There was no impact
to finance leases on transition to Topic 842. The impact from
recognizing operating leases on NXT’s Condensed Consolidated
Balance Sheet is as follows:
Account
|
|
As reported
December 31,
2018
|
|
Balance on
Adoption as at
January 1,
2019
|
Property
and equipment
|
i
|
$
683,157
|
$
(139,725
)
|
$
543,432
|
Right
of Use
|
|
-
|
3,536,161
|
3,536,161
|
Total
Assets
|
|
$
25,264,268
|
$
3,396,436
|
$
28,660,704
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
499,535
|
$
(155,301
)
|
$
344,234
|
Current
portion of capital lease obligations
|
i
|
42,603
|
(42,603
)
|
-
|
Current
portion of lease obligations
|
|
-
|
672,087
|
672,087
|
Capital
lease obligations
|
i
|
42,515
|
(42,515
)
|
-
|
Long-term
lease obligations
|
|
-
|
3,406,136
|
3,406,136
|
Other
liabilities
|
|
362,368
|
(362,368
)
|
-
|
Deferred
charges
|
|
79,000
|
(79,000
)
|
-
|
Total
Liabilities and Shareholders’ Equity
|
|
$
25,264,268
|
$
3,396,436
|
$
28,660,704
|
Notes:
i.
Reclassify
previously recognized finance leases:
Leases
accounted for as finance leases were reclassified to ROU Assets and
lease liabilities from property, plant and equipment and capital
lease obligations, respectively.
The
Company recognized lease liabilities in relation to leases which
had previously been classified as operating. Under the principles
of the new standard these leases have been measured at the present
value of the remaining lease payments, discounted using the
Company’s estimated incremental borrowing rates or implied
interest rate in the lease contract. Rates varied between 7.4% and
15.7%. Total lease liabilities of $4,078,223 were recorded as at
January 1, 2019, of which $672,087 is the current
portion.
iii.
Account
payable and other accrued liabilities, Other
liabilities:
The
deferred gain on sale of the aircraft was reclassified from
Accounts payable and other accrued liabilities and Other
liabilities to Current portion of lease obligations and Long-term
Lease Obligations.
The
Deferred charges for the office lease have been reclassified to ROU
assets and are being amortized on a straight line basis over the
remaining period of the lease.
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the
three and six month
periods ended June 30, 2019
(Expressed in Canadian dollars unless otherwise
stated)
Although
Topic 842 does not have a material impact on the Condensed
Consolidated Statements of Earnings or Cash Flows, the change in
the accounting of the aircraft lease now has interest expense of
$18,228 and $38,019 for the three and six months ended June 30,
2019 being recorded, whereas under Topic 840 that amount was
recorded under survey costs. In the Condensed Consolidated Interim
Statements of Cash Flows under Operating Activities, amortization
of deferred gain on sale of aircraft and deferred rent are now
presented as Non-cash lease and interest expense, under Topic
842.
3. Short-term investments
Short-term
investments consist of Guaranteed Investment Certificates
(“GIC’s”) with maturity dates of one year from
the date of purchase for Canadian Dollar GIC’s and overnight
for United States GIC’s. For June 30, 2019, interest rates
are 2.15%. For December 31, 2018, interest rates ranged from 2.10%
to 2.15%.
|
|
|
|
|
|
|
|
|
|
|
One year cashable
GIC’s
|
$
1,800,000
|
$
3,900,000
|
|
1,800,000
|
3,900,000
|
4. Accounts Receivable
Accounts
receivable are all current as of June 30, 2019.
|
|
|
|
|
|
|
|
Trade
receivables
|
$
9,011,158
|
$
-
|
Other
receivables
|
118,130
|
61,279
|
|
9,129,288
|
61,279
|
Allowance
for doubtful accounts
|
-
|
-
|
Net
accounts receivable
|
9,129,288
|
61,279
|
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the
three and six month
periods ended June 30, 2019
(Expressed in Canadian dollars unless otherwise
stated)
5. Deposits
Security
deposits have been made to the lessors of the office building and
the aircraft. The aircraft deposit is held in United States
Dollars.
|
|
|
|
|
|
|
|
Building
|
$
43,309
|
$
43,310
|
Aircraft
|
495,997
|
517,031
|
|
539,306
|
560,341
|
6. Property and equipment
|
|
|
|
For the period ended June 30, 2019
|
|
|
|
Survey
equipment
|
$
684,890
|
$
634,033
|
$
50,858
|
Computers
and software
|
1,256,101
|
1,209,768
|
46,333
|
Furniture
and other equipment
|
528,420
|
506,737
|
21,683
|
Leasehold
improvements
|
965,108
|
578,047
|
387,062
|
|
3,434,519
|
2,926,584
|
505,935
|
|
|
|
|
|
|
|
|
For the period ended December 31, 2018
|
|
|
|
Survey
equipment
|
$
684,890
|
$
628,037
|
$
56,853
|
Computers
and software
|
1,256,101
|
1,201,047
|
55,054
|
Furniture
and other equipment
|
528,420
|
504,328
|
24,092
|
Leasehold
improvements
|
1,165,108
|
617,950
|
547,158
|
|
3,634,519
|
2,951,362
|
683,157
|
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the
three and six month
periods ended June 30, 2019
(Expressed in Canadian dollars unless otherwise
stated)
7
. Right of
use assets
|
|
|
|
For the period ended June 30, 2019
|
|
|
|
Aircraft
|
$
1,578,774
|
$
123,385
|
$
1,455,389
|
Office
Building
|
1,799,868
|
96,571
|
1,703,297
|
Printer
|
17,794
|
1,942
|
15,852
|
Office
equipment
|
139,725
|
6,986
|
132,739
|
|
3,536,161
|
228,884
|
3,307,277
|
8. Intellectual property
During
2015, NXT acquired the permanent rights to the SFD
®
technology for
use in the exploration of hydrocarbons from Mr. George Liszicasz
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
asset is being amortized on a straight line basis over its
estimated useful life of 15 years. The annual amortization expense
expected to be recognized in each of the next five years is
approximately $1.7 million per year for a 5 year aggregate total of
$8.5 million.
|
|
|
|
|
|
|
|
Intellectual
property acquired
|
$
25,271,000
|
$
25,271,000
|
Accumulated
amortization
|
(6,458,567
)
|
(5,616,200
)
|
|
18,812,433
|
19,654,800
|
9. Accounts payable and accrued liabilities
|
|
|
|
|
|
|
|
Accrued
liabilities related to:
|
|
|
Consultants
and professional fees
|
$
288,055
|
$
151,427
|
Board
of Directors' fees
|
102,500
|
22,500
|
Deferred
gain on sale of aircraft (current)
|
-
|
155,301
|
Payroll
(wages payable and vacation pay)
|
113,240
|
47,271
|
|
503,795
|
376,499
|
Trade
payables and other
|
521,623
|
123,036
|
|
1,025,418
|
499,535
|
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the
three and six month
periods ended June 30, 2019
(Expressed in Canadian dollars unless otherwise
stated)
10. Contract Obligations
The
Company has received a deposit of $100,000USD from Alberta Green
Ventures Limited Partnership (“AGV”) on behalf the
Co-operative Agreement. See Note 13 for further
details.
|
|
|
|
|
|
|
|
Contract
obligations
|
$
132,079
|
$
-
|
11. Lease obligation
|
|
|
|
|
|
Aircraft)
|
$
1,893,276
|
$
-
|
Office
Building
|
1,776,677
|
-
|
Printer
|
15,604
|
-
|
Office
equipment
|
64,188
|
85,118
|
|
3,749,745
|
85,118
|
Current
Portion of lease obligations
|
(703,423
)
|
(42,603
)
|
Long-term
lease obligations
|
3,046,322
|
42,515
|
Leases
entered into for the use of an asset are classified as either
operating or finance, which is determined at contract inception.
Upon commencement of the lease, a ROU asset and corresponding lease
liability are recognized on the Condensed Consolidated Interim
Balance Sheet for all operating and finance leases. NXT has elected
the short-term lease exemption, which does not require a ROU asset
or lease liability to be recognized on the Condensed Consolidated
Interim Balance Sheet when the lease term is 12 months or less and
does not include an option to purchase the underlying asset that
the lessee is reasonably certain to exercise.
Upon
commencement of the lease, ROU assets are measured at the initial
measurement of the lease liability adjusted for any lease payments
made before commencement date of the lease, less any lease
incentives received and including any initial direct costs
incurred. Lease liabilities are initially measured at the present
value of future minimum lease payments over the lease term. The
discount rate used to determine the present value is the rate
implicit in the lease unless that rate cannot be determined, in
which case NXT’s incremental borrowing rate is
used.
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the
three and six month
periods ended June 30, 2019
(Expressed in Canadian dollars unless otherwise
stated)
Operating
lease ROU assets and liabilities are subsequently measured at the
present value of the lease payments not yet paid and discounted at
the initial discount rate at commencement of the lease, less any
impairments to the ROU asset. Operating lease expense and revenue
from any subleases are recognized in the Condensed Consolidated
Interim Statement of Earnings on a straight line basis over the
lease term. Finance lease ROU assets are over the estimated useful
life of the asset if the lessee is reasonably certain to exercise a
purchase option or ownership of the leased asset transfers at the
end of the lease term, otherwise the leased assets are amortized
over the lease term. Operating leases include office building,
aircraft and printer. Finance leases include office equipment.
Currently there are no subleases.
NXT’s
lease contracts include rights to extend leases after the initial
term. Rights to extend or terminate a lease are included in the
lease term when there is reasonable certainty the right will be
exercised. Factors used to assess reasonable certainty of rights to
extend or terminate a lease include current and forecasted survey
plans, anticipated changes in strategies, historical practice in
extending similar contracts and current market
conditions.
12. Commitments and contingencies
Associated
with the adoption of Topic 842, all operating leases were
recognized on the Condensed Consolidated Balance Sheet.
Accordingly, operating leases are not included in the commitments
table below. The table below is the non-lease operating cost
components associated with the building lease. See Notes 2 and 11
for additional disclosures on leases.
For
the fiscal period ending June 30,
|
|
2019
|
$
110,962
|
2020
|
222,069
|
2021
|
222,501
|
2022
|
222,501
|
2023
|
222,501
|
|
1,000,534
|
Thereafter,
2024 through 2025
|
389,377
|
|
1,389,911
|
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the
three and six month
periods ended June 30, 2019
(Expressed in Canadian dollars unless otherwise
stated)
13. 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
|
|
|
|
|
|
|
|
|
As
at the beginning of the year
|
68,573,558
|
$
96,656,248
|
58,161,133
|
$
88,121,286
|
Shares
issued during the year:
|
|
|
|
|
Issuance
of Common Stock
|
|
|
|
|
on
the Private Placement
|
-
|
-
|
9,210,497
|
7,438,085
|
Exercise
of stock options
|
-
|
-
|
6,667
|
11,508
|
As
at the end of the period
|
68,573,558
|
96,656,248
|
67,378,297
|
95,570,879
|
In
February 2019, NXT entered into a Co-operative Agreement with AGV
to propose up to three SFD
®
surveys
within two years. As part of the consideration for the agreement,
NXT received approval from the Toronto Stock Exchange and
shareholders for a 12-month extension of the expiry date of
AGV’s 3,421,648 warrants (“Warrants”). Each
Warrant entitles the holder to acquire one Common Share at an
exercise price of $1.20 to February 16, 2020
.
14. Earnings (Loss) per share
|
For the three
months
ended June
30,
|
For the six
months
ended June
30,
|
|
|
|
|
|
Comprehensive
earnings (loss) for the period
|
$
8,085,888
|
$
(1,961,114
)
|
$
6,322,568
|
$
(3,915,764
)
|
Weighted average
number of shares outstanding for the period:
|
|
|
|
|
Basic
|
68,573,558
|
64,319,452
|
68,573,558
|
62,366,678
|
Diluted
|
73,267,206
|
64,319,452
|
73,274,112
|
62,366,678
|
Net Income (loss)
per share – Basic
|
$
0.12
|
$
(0.03
)
|
$
0.09
|
$
(0.06
)
|
Net Income (loss)
per share – Diluted
|
$
0.11
|
$
(0.03
)
|
$
0.09
|
$
(0.06
)
|
In
periods in which a loss results, all outstanding stock options are
excluded from the fully diluted loss per share calculations as
their effect is anti-dilutive.
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the
three and six month
periods ended June 30, 2019
(Expressed in Canadian dollars unless otherwise
stated)
15. Stock options
The
following is a summary of stock options which are outstanding as at
June 30, 2019.
|
|
|
Average remaining contractual life (in years)
|
$
0.59
|
150,000
|
50,000
|
4.3
|
$
1.35
|
236,900
|
236,900
|
0.5
|
$
1.39
|
22,500
|
22,500
|
0.0
|
$
1.45
|
37,500
|
37,500
|
2.5
|
$
1.48
|
37,500
|
37,500
|
2.0
|
$
1.50
|
50,000
|
50,000
|
2.1
|
$
1.57
|
30,000
|
30,000
|
0.6
|
$
1.67
|
150,000
|
150,000
|
0.4
|
$
1.73
|
92,600
|
92,600
|
1.4
|
$
1.82
|
165,000
|
165,000
|
1.3
|
$
2.10
|
300,000
|
300,000
|
1.2
|
|
1,272,000
|
1,172,000
|
1.4
|
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
June 30, 2019 is as follows:
|
For the three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding, start of the period
|
1,297,000
|
$
1.58
|
1,648,667
|
$
1.60
|
Granted
|
-
|
-
|
1,150,000
|
$
1.06
|
Exercised
|
-
|
-
|
(6,667
)
|
$
0.76
|
Expired
|
(25,000
)
|
$
1.61
|
(65,000
)
|
$
1.17
|
Forfeited
|
-
|
-
|
(1,430,000
)
|
$
1.21
|
Options
outstanding, end of the period
|
1,272,000
|
$
1.58
|
1,297,000
|
$
1.58
|
Options
exercisable, end of the period
|
1,172,000
|
$
1.67
|
1,197,000
|
$
1.67
|
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the
three and six month
periods ended June 30, 2019
(Expressed in Canadian dollars unless otherwise
stated)
Stock
options granted generally expire, if unexercised, five years from
the date granted and entitlement to exercise them generally vests
at a rate of one-third at the end of each of the first three years
following the date of grant.
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 period ended
|
|
|
Expected dividends
paid per common share
|
-
|
Nil
|
Expected life in
years
|
-
|
5.0
|
Expected volatility
in the price of common shares
|
-
|
65
%
|
Risk free interest
rate
|
-
|
1.75
%
|
Weighted average
fair market value per share at grant date
|
-
|
$
1.06
|
Intrinsic (or
"in-the-money") value per share of options exercised
|
-
|
$
0.59
|
The
unamortized portion of SBCE related to the non-vested portion of
stock options, which will be recognized in 2019 to 2020 is
approximately $20,000.
16. Financial instruments
1) Non-derivative financial instruments:
The
Company's non-derivative financial instruments consist of cash and
cash equivalents, short-term investments, accounts receivable,
accounts payables and accrued liabilities and finance leases. The
carrying value of these financial instruments approximates their
fair values due to their short terms to maturity. NXT is not
exposed to significant interest or credit risks arising from these
financial instruments. NXT is exposed to foreign exchange risk as a
result of periodically holding foreign denominated financial
instruments. Any unrealized foreign exchange gains and losses
arising on such holdings are reflected in earnings at the end of
each period.
2) Derivative financial instruments
As at
June 30, 2019 and 2018, the Company held no derivative financial
instruments.
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the
three and six month
periods ended June 30, 2019
(Expressed in Canadian dollars unless otherwise
stated)
17. Change in non-cash working capital
The
changes in non-cash working capital balances are comprised
of:
|
For the three months ended June 30
|
For the six months ended June 30
|
|
|
|
|
|
Accounts
receivable
|
$
(9,239,098
)
|
$
(90,936
)
|
$
(9,273,628
)
|
$
(79,180
)
|
Prepaid
expenses and deposits
|
(13,946
)
|
(57,614
)
|
(160,896
)
|
(34,874
)
|
Accounts
payable and accrued liabilities
|
421,424
|
(377,925
)
|
680,796
|
(493,625
)
|
Income
taxes payable
|
-
|
-
|
-
|
(201
)
|
Contractual
obligations
|
(261,278
)
|
-
|
134,902
|
-
|
|
(9,092,898
)
|
(526,475
)
|
(8,618,826
)
|
(607,880
)
|
|
|
|
|
|
Portion
attributable to:
|
|
|
|
|
Operating
activities
|
(9,092,898
)
|
(526,475
)
|
(8,618,826
)
|
(607,880
)
|
Financing
activities
|
-
|
-
|
-
|
-
|
Investing
activities
|
-
|
-
|
-
|
-
|
|
(9,092,898
)
|
(526,475
)
|
(8,618,826
)
|
(607,880
)
|
18. Geographic information
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. NXT has no long term assets
outside of Canada.
Revenues
by geographic area were generated solely in Nigeria in the second
quarter in 2019, entirely from a single client. There were no
revenues in 2018.
|
For three months ended June 30,
|
For the six-month period ended June 30
|
|
|
|
|
|
Nigeria
|
$
10,954,617
|
$
-
|
$
10,954,617
|
$
-
|
NXT ENERGY SOLUTIONS INC.
Notes
to the Unaudited Condensed Consolidated Interim Financial
Statements
As at
and for the three and six month periods ended June 30,
2019
(Expressed in Canadian dollars unless otherwise
stated)
19. 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. Legal fees (including
costs related to share issuance) incurred with this firm were as
follows:
|
For three months
ended June 30,
|
For the
six-month period ended June 30
|
|
|
|
|
|
Legal
Fees
|
$
57,160
|
$
188,263
|
$
97,149
|
$
209,156
|
Accounts
payable and accrued liabilities includes a total of
$81,720
($5,999 as at December 31, 2018)
payable to this law firm.
In
addition, accounts payable and accrued liabilities includes $NIL
($7,461 as at December 31, 2018) related to re-imbursement of
expenses owing to an Officer of NXT.
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