NXT Energy Solutions Inc 6-K, filed Apr 4, 2024

NXT Energy Solutions Inc. (NSFDF)

6-K 2024-04-04 For: 2023-12-31

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Added on April 07, 2026

About this 6-K

NXT Energy Solutions Inc filed this 6-K on April 4, 2024.

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99.1	Audited Consolidated Financial Statements For the year ended December 31, 2023
99.2	Management’s Discussion and Analysis (“MD&A”) For the year ended December 31, 2023
99.3	Annual Information form for the year ended December 31, 2023
99.4	Certification Of Interim Filings CEO
99.5	Certification Of Interim Filings CFO
99.6	AB Form 13-501F1 (Class 1 and 3B Reporting Issuers - Participation Fee)
99.7	On From 13-502F2 (Class and 3B Reporting Issuer - Participation Fee)

		NXT Energy Solutions Inc.
		(Registrant)

Date: March 27,2024		/s/ Eugene Woychyshyn
		Eugene Woychyshyn
		Vice President of Finance & CFO

MNP LLP
Suite 2000, 112 - 4th Avenue SW, Calgary AB, T2P 0H3	1.877.500.0792 T: 403.263.3385 F: 403.269.8450
	MNP.ca

	·	Agreeing key contractual terms to the executed service agreement signed in the year ended December 31, 2023.

	·	Agreeing total revenue per the agreement to the issued invoices and other supporting documentation and reconciling it to the revenue recognized during the reporting period.

	·	Inquiring of management and operational personnel to understand the status of the project and relevant activities.

	·	Evaluating the reasonableness of management’s calculation of the total anticipated costs at completion, including testing of significant inputs, such as estimated labour costs, material costs, subcontractor costs, and other costs, to appropriate supporting documentation.

	·	Testing the costs incurred to date as at the end of the reporting period, including costs accrued as at December 31, 2023, by testing cut-off and inspecting supporting documents for a sample of transactions.

	·	Recalculating revenue recognized during the year ended December 31, 2023, based on the total anticipated costs at completion and costs incurred to date as at the end of the reporting period.

	·	Obtaining an understanding from management on the Company’s future plans for the operations, including financing arrangements.

	·	Evaluating the key assumptions used in management’s model to estimate future cash flows by comparing assumptions used by management against historical performance, budgets, economic and industry indicators and publicly available information.

	·	Comparing the assumptions related to revenue projections to those used in assessments of impairment indicators for non-financial assets.

	·	Assessing the adequacy of the going concern disclosure included in Note 1 to the consolidated financial statements and considering whether these appropriately reflected the assessments that management performed.

	December 31,			December 31,
	2023			2022
Assets
Current assets
Cash and cash equivalents	$	401,713		$	263,437
Accounts receivable (Note 3)		1,828,523			57,065
Prepaid expenses and deposits (Note 4)		53,673			36,157
		2,283,909			356,659
Long term assets
Deposits (Note 5)		249,917			246,589
Property and equipment (Note 6)		515,809			544,446
Right of Use Assets (Note 7)		665,130			1,259,092
Intellectual property (Note 8)		11,469,995			13,168,509
	$	15,184,760		$	15,575,295
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities (Note 9, 23)	$	1,836,741		$	1,276,236
Convertible debentures (Note 10)		1,842,566			-
Current portion of long-term debt (Note 11)		111,111			111,111
Current portion of lease obligation (Note 12)		343,513			650,315
		4,133,931			2,037,662
Long-term liabilities
Convertible debentures (Note 10)		1,513,423			-
Long-term debt (Note 11)		712,963			824,074
Long-term lease obligations (Note 12)		252,004			596,408
Asset retirement obligation (Note 13)		27,030			24,574
		2,505,420			1,445,056
		6,639,351			3,482,718

Shareholders' equity
Common shares (Note 15): - authorized unlimited
Issued: 78,025,237 (2022 – 68,949,109) common shares		98,179,271			96,423,648
Contributed capital		9,552,839			9,404,518
Deficit		(99,186,701	)		(93,735,589	)
		8,545,409			12,092,577
	$	15,184,760		$	15,575,295

	For the Year ended December 31,
	2023			2021			2021
Revenue
SFD^® related revenue (Note 21)	$	2,145,716		$	-		$	3,134,250
Expenses
SFD^® related costs, net		2,249,126			1,178,183			1,224,168
General and administrative expenses (Note 17, 22, 23)		3,420,143			3,736,431			3,189,857
Amortization (Note 6, 8)		1,759,473			1,768,727			1,776,484
		7,428,742			6,683,341			6,190,509
Other expenses (income)
Interest expense, net		160,262			36,220			37,955
Foreign exchange loss (gain)		(8,028	)		(15,340	)		8,597
Intellectual property and other		15,852			28,855			20,988
		168,086			49,735			67,540

Loss before income taxes		(5,461,112	)		(6,733,076	)		(3,123,799	)

Income tax expense (Note 18)		-			-			-

Net loss and comprehensive loss		(5,461,112	)		(6,733,076	)		(3,123,799	)
Net loss per share (Note 16)
Basic		(0.07	)		(0.10	)		(0.05	)
Diluted		(0.07	)		(0.10	)		(0.05	)

	For the Year ending December 31,
	2023			2022			2021

Common Shares
Balance at beginning of the year	$	96,423,648		$	95,779,352		$	95,327,123
Issuance of common stock, net of share issuance costs for:
Rights Offering (Note 15)		-			216,062			-
Private placement (Note 15)		1,622,057			216,182			-
Employee Share Purchase Plan (Note 15)		66,755			89,127			173,023
Restricted Stock Unit Plan (Note 15)		66,811			122,925			114,604
Acquisition of SFD^® Geothermal Right (Note 15)		-			-			164,602
Balance at end of the year		98,179,271			96,423,648			95,779,352
Contributed Capital
Balance at beginning of the year		9,404,518			9,381,966			9,355,716
Issuance of Equity for intellectual property (Note 15)		-			-			207,300
Transfer of equity to common shares (Note 15)		-			-			(207,300	)
Recognition of stock based compensation expense (Note 17)		148,321			22,552			26,250
Balance at end of the year		9,552,839			9,404,518			9,381,966
Deficit
Balance at beginning of the year		(93,735,589	)		(87,002,513	)		(83,878,714	)
Net loss		(5,451,112	)		(6,733,076	)		(3,123,799	)

Balance at end of the year		(99,186,701	)		(93,735,589	)		(87,002,513	)

Total Shareholders' Equity at end of the year		8,545,409			12,092,577			18,158,805

Survey equipment		20% declining balance
Aircraft equipment		10% declining balance
Computers		30% declining balance
Furniture and other equipment		20% declining balance
Leasehold improvements		10% declining balance

	December 31, 2023
	Cost		Accumulated		Net book
	Base		Amortization		value
Survey equipment	$	924,959	$	743,239	$	181,720
Computers and software		1,265,045		1,254,000		11,045
Furniture and other equipment		528,419		520,525		7,894
Leasehold improvements		1,064,225		749,075		315,150
		3,782,648		3,266,839		515,809

	December 31, 2022
	Cost		Accumulated		Net book
	Base		Amortization		value
Survey equipment	$	892,637	$	724,002	$	168,635
Computers and software		1,265,045		1,249,267		15,778
Furniture and other equipment		528,419		518,552		9,867
Leasehold improvements		1,064,225		714,059		350,166
		3,750,326		3,205,880		544,446

	1.	US$40,000 (CDN$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.	CDN$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 CDN$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.

	SFD® Hydrocarbon Right			SFD® Geothermal Right			Total
Net book value at December 31, 2021	$	14,600,600		$	266,423		$	14,867,023
Amortization		(1,684,734	)		(13,780	)		(1,698,514	)
Net book value at December 31, 2022		12,915,866			252,643			13,168,509
Amortization		(1,684,734	)		(13,780	)		(1,698,514	)
Net book value at December 31, 2023		11,231,132			238,863			11,469,995

Repayment of principal and interest (US$):	US$			CDN$^1.
2024	$	255,000		$	337,355
2025		2,740,000			3,624,910
Total principal and interest payments		2,995,000			3,962,265
Less interest		(445,000	)		(588,717	)
Less Debt issuance costs		(13,273	)		(17,559	)
Net principal remaining		2,536,727			3,355,989
Current portion of convertible debentures		1,400,000			1,842,566
Non-current portion of convertible debentures		1,136,727			1,513,423

Repayment of principal and interest:
2024	$	142,037
2025		137,593
2026		133,148
2027		128,704
2028		124,259
2029 to 2031		281,944
Total principal and interest payments		947,685
Less interest		(123,611	)
Total principal remaining		824,074
Current portion of long-term debt		111,111
Non-current portion of long-term debt		712,963

	For the Year ended December 31,
	2023			2022			2021
Cash from (used in): (Lease payments in prior years have been reclassified to improve presentation.)
Operating activities
Net loss	$	(5,451,112	)	$	(6,733,076	)	$	(3,123,799	)
Items not affecting cash:
Stock based compensation expense (Note 17)		241,271			215,284			287,900
Amortization		1,759,473			1,768,727			1,776,484
Accretion expense (recovery) (Note 13)		2,456			2,237			(404	)
Non-cash lease amortization and accretion		683,190			752,149			810,881
Unrealized foreign exchange (gain) loss		(25,451	)		13,956			157
Loss on disposal of assets and lease modifications		-			11,921			-
Change in deposits		3,362			-			-
Change in non-cash working capital balances (Note 20)		(1,294,087	)		1,755,107			13,717
Lease payments		(739,527	)		(720,309	)		(798,109	)
Prepaid Ling-term insurance		(11,525	)		-			-
		619,162			3,799,072			2,090,626
Net cash used in operating activities		(4,831,950	)		(2,934,004	)		(1,033,173	)

Financing activities
Proceeds from the Employee Share Purchase plan (Note 17)		36,246			49,738			69,259
Proceeds for Restricted Stock Units		4,370			-			-
Proceeds from (repayment of) long-term debt (Note 11)		(111,111	)		(64,815	)		1,000,000
Net proceeds from Rights Offering (Note 15)		-			216,062			-
Net proceeds from Private Placement (Note 15)		1,622,057			216,182			-
Net proceeds from Convertible Debentures (Note 10)		3,457,555			-			-
Share issuance costs for Geothermal (Note 15)		-			-			(42,697	)
Repayment of financial liability and lease obligation		-			(27,950	)		(151,134	)
Net cash from (used in) financing activities		5,009,117			389,217			875,428
Investing activities
Acquisition of intellectual property (Note 8)		-			-			(65,310	)
Purchase of property and equipment, net		(32,322	)		-			-
Proceeds from (used in) short-term investments		-			550,000			(208,739	)
Net cash from (used in) investing activities		(32,322	)		550,000			(274,049	)

Effect of foreign exchange rate changes on cash and cash equivalents		(6,569	)		369			(497	)

Net decrease in cash and cash equivalents		138,276			(1,994,418	)		(432,291	)
Cash and cash equivalents, beginning of the year		263,437			2,257,855			2,690,146
Cash and cash equivalents, end of the year	$	401,713		$	263,437		$	2,257,855

Maturity of lease liabilities:				Weighted Average Remaining Lease Term
2024	$	381,939		1.7 years
2025		259,528		0.8 years
2026		3,139		0.9 years
Total lease payments		644,606
Less imputed interest		(49,089	)
Total discounted lease payments		595,517
Current portion of lease obligations		343,513
Non-current portion of lease obligations		252,004

	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	%

For the fiscal period ending December 31,	Office Premises
2024	$	225,255
2025		168,941
Total		394,196

	For the years ended December 31,
	2023				2022
	# of shares		$ amount		# of shares		$ amount
As at the beginning of the year		68,949,109		96,423,648		65,250,710	$	95,779,352
Rights offering, net of issuance costs		-		-		2,149,180		216,062
Private placement, net of issuance costs		8,510,000		1,622,057		1,148,282		216,182
Employee Share Purchase Plan (Note 17)		309,509		66,755		188,633		89,127
Restricted Stock Units		256,619		66,811		212,304		122,925
As at the end of the year		78,025,237		98,179,271		68,949,109		96,423,648

Exercise price per share	# of options outstanding	# of options exercisable	Average remaining life (in years)
$0.174	69,200	69,200	3.9
$0.200	166,200	166,200	4.4
$0.216	2,005,200	55,200	4.0
$0.252	115,250	115,250	4.7
$0.259	100,000	-	4.7
$0.260	52,650	52,650	4.0
$0.264	177,200	177,200	4.0
$0.440	21,360	21,360	2.5
$0.510	16,000	16,000	1.8
$0.520	100,000	100,000	0.5
$0.550	30,000	30,000	1.1
$0.620	18,050	18,050	3.0
$0.680	32,250	32,250	3.2
$0.720	24,460	24,460	3.4
	2,927,820	877,820	3.9

For the year ended December 31,
	2021
				Weighted
	# of stock			Average
	Options			exercise price
Options outstanding, start of the year		421,000		$	0.83
Granted		62,660		$	0.56
Expired		(125,000	)	$	(1.48	)
Options outstanding, end of the year		358,660		$	0.56
Options exercisable, end of the year		358,660		$	0.56

For the year ended	2023	2022	2021
Expected dividends paid per common share	Nil	Nil	Nil
Expected life in years	5.0	5.0	5.0
Weighted average expected volatility in the price of common shares	79%	75%	108%
Weighted average risk free interest rate	3.32%	3.05%	0.38%
Weighted average fair market value per share at grant date	$0.22	$0.40	$0.56
Forfeiture rate	18.5%	0%	0%

	For the years ended December 31,
Opening balance	2023		2022		2021
Opening balance		37,354		37,354		37,354
Granted		-		-		-
Closing balance		37,354		37,354		37,354

For the year ended December 31,
	2021
	# of RSUs			FV/Unit
RSUs outstanding, start of the year		1,200,000		$	0.79
Granted		-			-
Common shares issued		(208,370	)	$	(0.55	)
Payroll withholdings settled in cash		(139,964	)	$	(0.55	)
Forfeited		(155,000	)	$	(0.79	)
RSUs outstanding, end of the year		696,666		$	0.61

	·	receipt of accounts receivable from the Turkish SFD^® survey (as defined below);
	·	receipt of the remaining US$900,000 from the Ataraxia subscription agreement and approval of terms for the remaining US$900,000 by the Toronto Stock Exchange (“TSX”);
	·	the Company’s ability to successfully work with Synergy and Ataraxia (each as defined herein) to develop future business in the African continent;
	·	receipt of funding under the NRC IRAP (as defined herein);
	·	expectations regarding maintenance performed on the Company’s leased aircraft;
	·	expectations regarding the future vesting, settlement and expiry of securities issued in connection with the Company’s share-based compensation plans;
	·	expectations regarding the amortization of the Company’s intellectual property (“IP”) assets;
	·	the Company’s ability to achieve the remaining milestone with respect to the Consideration (as defined below) owing to Mr. George Liszicasz, the future payment of such Consideration to the estate of Mr. George Liszicasz, and the satisfaction of the conditions thereto (including with respect to cash balances, receipt of funds, and the execution and completion of contracts);
	·	the development, commercialization, and protection of the SFD^®technology for geothermal resource exploration;
	·	the extent to which expanding the Company’s scope of business to include exploring for both hydrocarbon and geothermal resources is anticipated to result in an expansion of its scope of revenue sources;
	·	the Company’s pursuit of opportunities to secure new revenue contracts;
	·	expectations regarding competition within the industries in which the Company operates;

NXT Energy Solutions Inc.	page \| 2
MD&A for the year ended December 31, 2023

	·	approval by the TSX to issue common shares for payables to the marketing consultant and the issuance of such shares in connection therewith;
	·	the Company’s ability to continue operating as a going concern;
	·	the Company’s ability to pay deferred operating costs such as payroll and G&A;
	·	the Company’s ability to continue making payments on its office lease, its aircraft lease and the effects of any default under either such lease;
	·	the Company’s ability to pay amounts owing und the Ataraxia Debentures or the November Debentures;
	·	expectations regarding the future conversion of the Ataraxia Debentures or the November Debentures into common shares or preferred shares of the Company, as applicable;
	·	expectations around the future appointment of a representative of Mork Capital to the Board, including the identity of such representative and the timing of such appointment;
	·	the Company’s ability to repay the amounts owing under the HASCAP Loan (as defined herein);
	·	the timing and value of payments owing under the Company’s office lease;
	·	expectations regarding the Company’s DCPs and ICFR (each as defined herein), including the Company’s ability to further adjust such DCPs and ICFR and mitigate material weaknesses going forward;
	·	estimates related to our future financial position and liquidity including certain contractual obligations; and
	·	general business strategies and objectives.

	·	our ability to develop and market our SFD^® technology and services to current and new customers;
	·	our ability to source personnel and equipment in a timely manner and at an acceptable cost;
	·	our ability to obtain all permits and approvals required;
	·	our ability to obtain financing on acceptable terms;
	·	our ability to obtain insurance to mitigate the risk of default on client billings;
	·	foreign currency exchange and interest rates;
	·	general business, economic, and market conditions (including global commodity prices and inflation); and
	·	approval of the next phase of the NRC IRAP project.

	·	the ability of management to execute its business plan, including their ability to secure additional new revenue contracts;
	·	health, safety, and the environment;
	·	our ability to develop and commercialize the geothermal technology;
	·	our ability to service existing debt;
	·	our ability to protect and maintain our IP and rights to our SFD^® technology;

NXT Energy Solutions Inc.	page \| 3
MD&A for the year ended December 31, 2023

	·	our reliance on a limited number of key personnel;
	·	our reliance on a single aircraft;
	·	our reliance on a limited number of clients;
	·	counterparty credit risk;
	·	foreign currency and interest rate fluctuations;
	·	the likelihood that the Company’s DCPs and ICFR (each as defined below) will prevent or detect material misstatements in our audited consolidated financial statements;
	·	changes in, or in the interpretation of, laws, regulations, or policies; and
	·	general business, economic, and market conditions (including global commodity prices).

NXT Energy Solutions Inc.	page \| 4
MD&A for the year ended December 31, 2023

	·	during the quarter, the Company commenced the Turkish SFD^® Survey for an independent oil and gas exploration company in Türkiye. See “Discussion of Operations – SFD^® Survey in Türkiye;
	·	the first two tranches of the November Debentures, as defined and described below, were received for a total of US$1.15 million (CDN$1.58 million) of cash;
	·	cash at December 31, 2023 was approximately $0.40 million;
	·	net working capital was approximately ($1.86) million at December 31, 2023 versus approximately ($3.47) million at September 30, 2023;
	·	the Company recorded SFD^®-related revenues of approximately $2.15 million;
	·	a net loss of $0.43 million was recorded for Q4-23, including stock-based compensation expense (“SBCE”) and amortization expense of approximately $0.50 million;
	·	a net loss of approximately $5.45 million was recorded for YE-23, including SBCE and amortization expense of approximately $1.97 million;
	·	net loss per common share for Q4-23 was $0.01 per share (basic) and $0.01 per share (diluted);
	·	net loss per common share for YE-23 was $0.07 per share (basic) and $0.07 per share (diluted);
	·	cash flow used in operating activities was approximately $1.47 million during Q4-23 and $4.83 million in the 2023 financial year; and
	·	general and administrative (“G&A”) expenses decreased by approximately $0.04 million (5%) in Q4-23 as compared to Q4-22 and G&A expenses decreased by approximately $0.32 million (8%) in YE-23 as compared to YE-22.

	·	NXT completed the Turkish SFD^® Survey, delivered the final results thereof to its Turkish customers and completed the integration of SFD^® data with such customers’ existing geological and geophysical data;
	·	NXT and HULOOLQ LTD. (known as “Qamia”), an Abu Dhabi based startup focused on “deep tech” disruptive technologies, entered into a sales agency agreement covering the United Arab Emirates (“UAE”);
	·	On March 22, the Company extended its lease on its aircraft for an additional three years as a capital lease. Under the terms of the lease, the Company will own the aircraft at the end of the term; and
	·	the November Debentures were finalized for a total of US$1.87 million (CDN$2.54 million). US$0.72 million (approximately CDN$0.97 million) of that was received in Q1-24.

NXT Energy Solutions Inc.	page \| 5
MD&A for the year ended December 31, 2023