NXT Energy Solutions Inc 6-K, filed Apr 17, 2020

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of April, 2020

Commission File Number: 000-24027

NXT Energy<br>Solutions Inc.<br><br><br>(Translation of registrant's name into<br>English)
Suite 302, 3320-17th Avenue<br>S.W.<br><br><br>Calgary, Alberta  T3E<br>0B4<br><br><br>Canada<br><br>(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  X Form 40-F _____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes _____ No     X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes _____ No    X

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _____ No    X

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

The Issuer is filing material documents not previously filed.

Exhibit List:

99.1     Consolidated Financial Statements for the year ended December 31, 2019

99.2     Management’s Discussion and Analysis (“MD&A”) for the year ended December 31, 2019

99.3 Annual Information Form for the year ended December 31, 2019

99.4 Certification Of Annual Filings CEO

99.5     Certification Of Annual Filings CFO

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NXT Energy Solutions<br>Inc.
	(Registrant)
Date: April 16, 2019	/s/ Eugene<br>Woychyshyn
	Eugene Woychyshyn
	Chief Financial Officer

nsfdf_ex991

NXT ENERGY SOLUTIONS INC.

Consolidated Financial Statements

For the year ended

December 31, 2019

NXT ENERGY SOLUTIONS INC.

Consolidated Balance Sheets

(Expressed in Canadian dollars)

	December 31,	December<br>31,
	2019	2018
Assets
Current<br>assets
Cash<br>and cash equivalents	$2,858,245	$339,532
Short-term<br>investments (Note 3)	3,781,512	3,900,000
Accounts<br>receivable (Note 4)	1,384,315	61,279
Note<br>receivable (Note 5)	324,700	-
Prepaid<br>expenses	97,132	65,159
	8,445,904	4,365,970
Long<br>term assets
Deposits<br>(Note 6)	535,554	560,341
Property<br>and equipment (Note 7)	677,647	683,157
Right<br>of use Assets (Note 8)	3,063,769	-
Intellectual<br>property (Note 9)	17,970,067	19,654,800
	$30,692,941	$25,264,268
Liabilities and Shareholders' Equity
Current<br>liabilities
Accounts<br>payable and accrued liabilities (Note 10)	$448,928	$499,535
Contract<br>Obligations (Note 11)	131,386	-
Current<br>portion of capital lease obligation (Note 13)	736,408	42,603
	1,316,722	542,138
Long-term<br>liabilities
Long-term<br>lease obligation (Note 13)	2,669,736	42,515
Asset<br>retirement obligation (Note 12)	21,481	26,778
Other<br>liabilities and Deferred charges	-	441,368
	2,691,217	510,661
	4,007,939	1,052,799
Commitments<br>and contingencies (Note 14)
Shareholders'<br>equity
Common<br>shares (Note 15): - authorized unlimited
Issued:<br>64,406,891 (2018 - 68,573,558) common shares	95,313,064	96,656,248
Contributed<br>capital	9,306,493	9,262,684
Deficit	(78,645,489)	(82,418,397)
Accumulated<br>other comprehensive income	710,934	710,934
	26,685,002	24,211,469
	$30,692,941	$25,264,268
Signed "George<br>Liszicasz"	Signed "Bruce G. Wilcox"
---	---
Director	Director

The accompanying notes are an integral part of these consolidated financial statements.

[1]

NXT ENERGY SOLUTIONS INC.

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Expressed in Canadian dollars)

	For the year ended December 31,
	2019	2018	2017
Revenue
Survey<br>revenue (Note 21)	$11,976,149	$-	$-
Expenses
Survey<br>costs, net (Note 22)	2,611,086	1,103,946	1,289,429
General<br>and administrative expenses	3,497,785	3,999,089	4,960,961
Stock<br>based compensation expense (Note 17)	43,809	386,154	581,356
Amortization<br>expense (Note 7, 8 & 9)	1,781,181	1,790,267	1,897,576
	7,933,861	7,279,456	8,729,322
Other expenses (income)
Interest<br>expense (income), net	(20,684)	(62,004)	4,485
Foreign<br>exchange (gain) loss	233,231	(19,852)	69,676
Intellectual<br>property and other	56,833	(43,428)	91,370
Gain<br>on extinguishment of liability (Note 24)	-	(185,661)	-
	269,380	(310,945)	165,531
Income<br>(loss) before income taxes	3,772,908	(6,968,511)	(8,894,853)
Income<br>tax expense (Note 18)
Current	-	-	75,545
Net income (loss) and comprehensive income (loss)	3,772,908	(6,968,511)	(8,970,938)
Net income (loss) per share (Note 16)
Basic	0.06	(0.11)	(0.16)
Diluted	0.06	(0.11)	(0.16)

The accompanying notes are an integral part of these consolidated financial statements.

[2]

NXT ENERGY SOLUTIONS INC.

Consolidated Statements of Cash Flows

(Expressed in Canadian dollars)

	For the year<br>ended December 31,
	2019	2018	2017
Cash provided by (used in):
Operating activities
Comprehensive<br>income (loss) for the period	$3,772,908	$(6,968,511)	$(8,970,398)
Items<br>not affecting cash:
Stock<br>based compensation expense (Note 17)	43,809	386,154	581,356
Amortization expense (Notes 7, 8 & 9)	1,781,181	1,790,267	1,897,576
Settlement<br>of payable with shares	-	-	95,181
Non-cash<br>changes to asset retirement obligation	2,068	(29,925)	1,462
Non-cash<br>lease and interest expense	(171,056)	-	-
Valuation<br>allowance of Bolivian Tax credits	-	-	207,682
Unrealized<br>Foreign exchange	121,578	(19,853)	-
Amortization<br>of deferred gain on sale of aircraft	-	(155,301)	(103,534)
Gain<br>on settlement of liabilities and Deferred Rent	-	(188,580)	(3,018)
Change<br>in non-cash working capital balances (Note 20)	(1,464,695)	(858,170)	829,014
ARO<br>liabilities settled	(7,366)	-	-
	305,519	924,592	3,505,719
Net<br>cash (used in) operating activities	4,078,427	(6,043,919)	(5,464,679)
Financing activities
Net<br>funds used in targeted issuer bid (Note 15)	(1,343,184)	-	-
Proceeds<br>from exercise of stock options	-	5,067	35,995
Net<br>Proceeds from Rights Offering	-	-	2,029,867
Cost<br>of equity-based transaction with non-employees	-	-	(6,149)
Net<br>Proceeds from Private Placement	-	9,211,351	-
Repayment<br>of capital lease obligation	(42,603)	(39,579)	(36,769)
Net<br>cash from (used in) financing activities	(1,385,787)	9,176,839	2,022,944
Investing activities
Purchase<br>of property and equipment, net	(216,691)	(10,006)	3,133,531
Decrease<br>(increase) in short-term investments and Deposits	42,764	(2,950,000)	(15,674)
Net<br>cash from (used in) investing activities	(173,927)	(2,960,006)	3,117,857
Net<br>increase (decrease) in cash and cash equivalents	2,518,713	172,914	(323,878)
Cash<br>and cash equivalents, beginning of the period	339,532	166,618	490,496
Cash<br>and cash equivalents, end of the period	$2,858,245	$339,532	$166,618
Supplemental information
Cash<br>interest (received)	(16,724)	(58,889)	4,487
Cash<br>taxes paid	-	-	72,587

The accompanying notes are an integral part of these consolidated financial statements.

[3]

NXT ENERGY SOLUTIONS INC.

Consolidated Statements of Shareholders' Equity

(Expressed in Canadian dollars)

	For the Year ending December 31,
	2019	2018	2017
Common Shares
Balance<br>at beginning of the period (Note 15)	$96,656,248	$88,121,286	$85,966,393
Shares<br>purchased and retired during the year (Note 15)	(1,343,184)	-	-
Issuance<br>of Common Stock on Private Placement (Note 15)	-	8,387,451	-
Rights<br>Offering & Finder’s Fee (Note 15)	-	136,003	2,029,867
Issued<br>upon exercise of stock options	-	5,067	35,995
Transfer<br>from contributed capital upon exercise of stock<br>options	-	6,441	-
Equity-based<br>transaction with non-employee	-	-	89,031
Balance<br>at end of the period	95,313,064	96,656,248	88,121,286
Contributed Capital
Balance<br>at beginning of the period	9,262,684	8,195,075	7,613,719
Issuance<br>of warrants on Private Placement (Note 15)	-	687,896	-
Recognition<br>of stock based compensation expense	43,809	386,154	581,356
Contributed capital transferred<br>to common shares upon exercise of stock options	-	(6,441)	-
Balance<br>at end of the period	9,306,493	9,262,684	8,195,075
Deficit
Balance<br>at beginning of the period	(82,418,397)	(75,449,886)	(66,479,488)
Net<br>income (loss) and comprehensive income (loss) for the<br>period	3,772,908	(6,968,511)	(8,970,398)
Balance<br>at end of the period	(78,645,489)	(82,418,397)	(75,449,886)
Accumulated Other Comprehensive Income
Balance<br>at beginning and end of the period	710,934	710,934	710,934
Total Shareholders' Equity at end of the period	26,685,002	24,211,469	21,577,409

The accompanying notes are an integral part of these consolidated financial statements.

[4]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

1. The Company and future operations

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 consolidated 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.  However, NXT's future financial results and its longer term success remains dependent upon the ability to continue to attract and execute client projects to build its revenue base. NXT continues to develop its pipeline of opportunities to secure new revenue contracts. The Company’s longer-term success remains dependent upon its ability to 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 continue to generate positive cash flow from operations.  The occurrence and timing of these events cannot be predicted with certainty.

2. Significant Accounting Policies

Basis of Presentation

These consolidated financial statements for the year ended December 31, 2019 have been prepared by management in accordance with generally accepted accounting principles of the United States of America ("US GAAP”).

Consolidation

These consolidated financial statements reflect the accounts of the Company and its wholly owned subsidiaries (all of which are inactive). All significant inter-company balances and transactions among NXT and its subsidiaries have been eliminated and are therefore not reflected in these consolidated financial statements.

Estimates and Judgements

Estimates made relate primarily to the use of the going concern assumption, estimated useful lives, and the valuation of intellectual property and property and equipment, the measurement of stock-based compensation expense, valuation of deferred income tax assets, and estimates for asset retirement obligations. The estimates and assumptions used are based upon management's best estimate. 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.

[5]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and short term GICs with an original maturity less than 90 days from the date of acquisition.

Short Term Investments

Short term investments consist of short term GICs, with original maturity dates greater than 90 days and up to one year.

Fair Value of Derivative Instruments

Derivative Instruments

Derivative instruments are recognized on the balance sheet at fair value with any changes in fair value between periods recognized in the determination of net income (loss) for the period. NXT does not apply hedge accounting to any of its derivatives. As at December 31, 2019 and 2018, NXT had no outstanding derivative instruments.

Fair Value Measures

For any balance sheet items recorded at fair value on a recurring basis or non-recurring basis, the Company is required to classify the fair value measure into one of three categories based on the fair value hierarchy noted below.

In Level I, the fair value of assets and liabilities is determined by reference to quoted prices in active markets for identical assets and liabilities that the Company has the ability to assess at the measurement date.

In Level II, determination of the fair value of assets and liabilities is based on the extrapolation of inputs, other than quoted prices included within Level I, for which all significant inputs are observable directly or indirectly. Such inputs include published exchange rates, interest rates, yield curves and stock quotes from external data service providers. Transfers between Level I and Level II would occur when there is a change in market circumstances.

In Level III, the fair value of assets and liabilities measured on a recurring basis is determined using a market approach based on inputs that are unobservable and significant to the overall fair value measurement. Assets and liabilities measured at fair value can fluctuate between Level II and Level III depending on the proportion of the value of the contract that extends beyond the time frame for which inputs are considered to be observable. As contracts near maturity and observable market data becomes available, the contracts are transferred out of Level III and into Level II.

[6]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

Deposits

Deposits consist of security payments made to lessors for the Company’s office and aircraft lease. They are classified as long term if the lease end date is greater than one year.

Property and Equipment

Property and equipment is recorded at cost, less accumulated amortization, which is recorded over the estimated service lives of the assets using the following annual rates and methods:

Computer<br>hardware (including survey equipment)	30%<br>declining balance
Aircraft	10%<br>declining balance
Furniture<br>and other equipment	20%<br>declining balance
Leasehold<br>improvements	10%<br>declining balance

Impairment of Long-Lived Assets

The Company reviews long-lived assets, which includes property, equipment and intellectual property for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. When indictors 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 asset.

Intellectual Property

Intellectual property acquired is recorded at cost, less accumulated amortization, which is recorded over the estimated minimum useful life of the assets. Intellectual property is also subject to ongoing tests of potential impairment of the recorded net book value.

Research and Development Expenditure

Research and development ("R&D") expenditures incurred to develop, improve and test the SFD® survey system and related components are expensed as incurred. Any intellectual property that is acquired for the purpose of enhancing research and development projects, if there is no alternative use for the intellectual property, is expensed in the period acquired. No significant external R&D was incurred in the years ended 2019, 2018 and 2017.

Foreign Currency Translation

The Company's functional currency is the Canadian dollar. Revenues and expenses denominated in foreign currencies are translated into Canadian dollars at the average exchange rate for the applicable period. Shareholders' equity accounts are translated into Canadian dollars using the exchange rates in effect at the time of the transaction. Monetary assets and liabilities are translated into Canadian dollars at the exchange rate in effect at the end of the applicable period. Non-monetary assets and liabilities are recorded at the relevant exchange rates for the period in which the balances arose. Any related foreign exchange gains and losses resulting from these translations are included in the determination of net income (loss) for the period.

[7]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

Income Taxes

NXT follows the asset and liability method of accounting for income taxes. This method recognizes deferred income tax assets and liabilities based on temporary differences in reported amounts for financial statement and income tax purposes, at the income tax rates expected to apply in the future periods when the temporary differences are expected to be reversed or realized. The effect of a change in income tax rates on deferred income tax assets and deferred income tax liabilities is recognized in income in the period when the tax rate change is enacted. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized.

Stock Based Compensation Expense

NXT follows the fair value method of accounting for stock options that are granted to acquire common shares under NXT's stock option plan. Under this method, an estimate of the fair value of the cost of stock options that are granted to employees, directors and consultants is calculated using the Black-Scholes option pricing model and charged to income over the future vesting period of the stock options, with a corresponding increase recorded in contributed capital. Upon exercise of the stock options, the consideration received by NXT, and the related amount which was previously recorded in contributed capital, is recognized as an increase in the recorded value of the common shares of the Company.

Income (Loss) Per Share

Basic income (loss) per share amounts are calculated by dividing net income (loss) by the weighted average number of common shares that are outstanding for the fiscal period. Shares issued during the period are weighted for the portion of the period that the shares were outstanding. Diluted income per share, in periods when NXT has net income, is computed using the treasury stock method, whereby the weighted average number of shares outstanding is increased to include any additional shares that would be issued from the assumed exercise of stock options and common share purchase warrants. The incremental number of shares added under the treasury stock method assumes that outstanding stock options and warrants that are exercisable at exercise prices below the Company's average market price (i.e. they were “in-the-money”) for the applicable fiscal period are exercised and then that number of incremental shares is reduced by the number of shares that could have been repurchased by the Company from the issuance proceeds, using the average market price of the Company’s shares for the applicable fiscal period.

No addition to the basic number of shares is made when calculating the diluted number of shares if the diluted per share amounts become anti-dilutive (such as occurs in the case where there is a net loss for the period).

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

value added taxes) is recognized over time by measuring the progress toward satisfaction of its performance obligation 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 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 of the performance obligation being satisfied over time.

[8]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

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 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 13, Leases.

In accordance with Topic 842, NXT recognized a ROU asset and corresponding lease liability for all operating leases on the Consolidated Balance Sheet. Prior to the adoption of Topic 842, operating leases were not recognized on the Consolidated Balance Sheet. There was no impact to finance leases on transition to Topic 842. The impact from recognizing operating leases on NXT’s Consolidated Balance Sheet is as follows:

Account	Notes	As reported December 31, 2018	Adjustments	Balance on Adoption as at January 1, 2019
Property<br>and equipment	i	$683,157	$(139,725)	$543,432
Right<br>of Use	ii	-	3,535,919	3,535,919
Total<br>Assets		$25,264,268	$3,396,194	$28,660,462
Accounts<br>payable and accrued liabilities	iii	$499,535	$(155,301)	$344,234
Current<br>portion of capital lease obligations	i	42,603	(42,603)	-
Current<br>portion of lease obligations	iv	-	672,087	672,087
Capital<br>lease obligations	i	42,515	(42,515)	-
Long-term<br>lease obligations	iii	-	3,405,894	3,405,894
Other<br>liabilities	iv	362,368	(362,368)	-
Deferred<br>charges	v	79,000	(79,000)	-
Total<br>Liabilities and Shareholders’ Equity		$25,264,268	$3,396,194	$28,660,462

Notes:

i.

Reclassify previously recognized finance leases:

Leases accounted for as finance leases were reclassified to Right of Use Assets and lease liabilities from property, plant and equipment and capital leases, respectively.

ii.

Right of use:

Right of use assets have been recognized for the building lease, aircraft lease and office equipment. Upon transition the building and aircraft right of use assets were calculated on the net present value of future lease payments less deferred charges for the building. The office equipment lease was previously recorded as a finance lease. The unamortized portion of the leased asset was reclassified to right of use assets.

iii.

Lease liabilities:

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 $4,077,981 were recorded as at January 1, 2019, of which $672,087 was the current portion.

iv.

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.

v.

Deferred charges:

The Deferred charges for the office lease have been reclassified to Right of use assets and are being amortized on a straight line basis over the remaining period of the lease.

Although Topic 842 does not have a material impact on the Consolidated Statements of Income (loss) and Comprehensive Income (Loss) or Cash Flows, the change in the accounting of the aircraft lease now has interest expense of $69,776 for the year ended December 31, 2019 being recorded, whereas under Topic 840 that amount was recorded under survey costs. In the Consolidated Statements of Cash Flows under Operating Activities, amortization of deferred gain on sale of aircraft and deferred charges are now presented as Non-cash lease and interest expense, under Topic 842.

[9]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

3. Short-term investments

Short-term investments consist of Guaranteed Investment Certificates (“GIC’s”) with originally maturity dates of 90 days to one year from the date of purchase. As at December 31, 2019 all GIC’s had less than one year left before maturity. For December 31, 2019, interest rates ranged from 1.70% to 2.15%. For December 31, 2018, interest rates ranged from 2.10% to 2.15%.

	For the year<br>ended
	December<br>31,	December<br>31,
Days to<br>maturity	2019	2018
Less than 90<br>days	$1,754,302	$-
91 to 183<br>days	1,218,724	-
183 days to one<br>year	808,486	3,900,000
	3,781,512	3,900,000

4. Accounts Receivable

Accounts receivable are all current as at December 31, 2019.

	For the year ended
	December 31,	December 31,
	2019	2018
Trade<br>receivables	$1,297,792	$-
Other<br>receivables	86,523	61,279
	1,384,315	61,279
Allowance<br>for doubtful accounts	-	-
Net<br>accounts receivable	1,384,315	61,279

The entire Trade receivable is with one client. In March 2020, US$466,000 (CAD$619,128) was received on the outstanding trade receivable as at December 31, 2019.

[10]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

5. Notes Receivable

NXT advanced $250,000 USD (the “Note Receivable”) to Alberta Green Ventures Limited Partnership (“AGV”) on a secured basis in September 2019. The interest rate on the Notes Receivable is the greater of 2% and the rate prescribed under the Income Tax Act (Canada) from time to time, payable monthly in arrears. All interest was collected as at December 31, 2019. AGV secured the Notes Receivable with common shares previously held by AGV.

As per the terms of the Note Receivable, NXT, in its sole and absolute discretion, was entitled to elect to receive any payment made by AGV by way of cash payment, or delivery for cancellation to NXT of the equivalent number of Common Shares having a fair market value equal to the aggregate of such amounts, calculated using the volume weighted average price of the Common Shares as reported and traded on the Toronto Stock Exchange for the five trading days immediately preceding the repayment date.

On December 13, 2019 NXT issued a Direction to Pay to AGV, in which the principle of the Note Receivable would be settled in shares of NXT, however, this did not occur. On April 13, 2020, NXT has cancelled the previous Direction to Pay and has issued a new Direction to Pay to AGV. The April 13, 2020 Direction to Pay has now directed AGV to deliver US$250,000 in cash proceeds as repayment on the principle amount of US$250,000. Interest will begin to accrue until the date on which payment in full of all amounts owing pursuant to the Notes Receivable are received by NXT. NXT may change its Direction to Pay, if NXT so decides, at its sole and absolute discretion to receive the principal repayment by way of Common Shares by application to the Alberta Securities Commission.

Based on the fair market value of the common shares held as collateral the Note Receivable is fully collateralized.

6. 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.

	For the year ended
	December 31,	December 31,
	2019	2018
Building	$43,309	$43,310
Aircraft	492,245	517,031
	535,554	560,341

7. Property and equipment

	Cost	Accumulated	Net book
For the period ended December 31, 2019	Base	amortization	value
Survey<br>equipment	$892,637	$646,953	$245,684
Computers<br>and software	1,265,045	1,219,045	46,000
Furniture<br>and other equipment	528,419	509,146	19,273
Leasehold<br>improvements	965,108	598,418	366,690
	3,651,209	2,973,562	677,647
	Cost	Accumulated	Net book
---	---	---	---
For the period ended December 31, 2018	Base	amortization	value
Survey<br>equipment	$684,890	$628,037	$56,853
Computers<br>and software	1,256,101	1,201,047	55,054
Furniture<br>and other equipment	528,420	504,328	24,092
Leasehold<br>improvements	1,165,108	617,950	547,158
	3,634,519	2,951,362	683,157

[11]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

8. Right of use assets

	Cost	Accumulated	Right of
For the period ended December 31, 2019	Base	Amortization	Use
Aircraft	$1,578,774	$256,778	$1,321,996
Office<br>Building	1,799,626	197,426	1,602,200
Printer	17,794	3,973	13,821
Office<br>equipment	139,725	13,973	125,752
	3,535,919	472,150	3,063,769

9. 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.

	For the year ended
	December 31,	December 31,
	2019	2018
Intellectual<br>property acquired	$25,271,000	$25,271,000
Accumulated<br>amortization	(7,300,933)	(5,616,200)
	17,970,067	19,654,800

10. Accounts payable and accrued liabilities

	For the year ended
	December 31,	December 31,
	2019	2018
Accrued<br>liabilities related to:
Consultants<br>and professional fees	$311,635	$151,427
Board<br>of Directors' fees	-	22,500
Deferred<br>gain on sale of aircraft (current)	-	155,301
Payroll<br>(wages payable and vacation pay)	106,529	47,271
	418,164	376,499
Trade<br>payables and other	30,764	123,036
	448,928	499,535

[12]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

11. Contract Obligations

The Company has received a deposit of $100,000USD from Alberta Green Ventures Limited Partnership (“AGV’) to be applied to an SFD® survey which is scheduled to be completed by June 30, 2020.

	For the year ended
	December 31,	December 31,
	2019	2018
Contract<br>obligations	$131,386	$-

12. Asset Retirement Obligation

Asset retirement obligations ("ARO") relate to minor non-operated interests in oil and natural gas wells in which NXT has outstanding abandonment and reclamation obligations in accordance with government regulations. The estimated future abandonment liability is approximately $22,000 which is based on estimates of the future timing and costs to abandon, remediate and reclaim the well sites within the next five years. The net present value of the ARO is as noted below, and has been calculated using an inflation rate of 2.0% and discounted using a credit-adjusted risk-free interest rate of 2.5%.

	2019	2018
ARO balance,<br>beginning of the year	$26,778	$56,702
Accretion<br>expense	2,068	2,069
Costs<br>incurred	(7,365)	-
Change in ARO<br>estimates	-	(31,993)
ARO balance, end of<br>the year	21,481	26,778

[13]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

13. Lease obligation

	December<br>31,	December<br>31,
	2019	2018
Aircraft	$1,680,103	$-
Office<br>Building	1,669,953	-
Printer	13,573	-
Office<br>equipment	42,515	85,118
	3,406,144	85,118
Current<br>Portion of lease obligations	(736,408)	(42,603)
Long-term<br>lease obligations	2,669,736	42,515
Maturity<br>of lease liabilities:
---	---
2020	$1,057,776
2021	1,018,789
2022	587,536
2023	367,185
2024	367,185
After<br>2024	799,333
Total lease<br>payments	4,197,804
Less imputed lease<br>payments	(791,660)
Total discounted<br>lease payments	3,406,144
Current portion of<br>lease obligations	(736,408)
Non-current portion<br>of lease obligations	2,669,736

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 Consolidated 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 Consolidated 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.

[14]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

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 include 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.

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 Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) on a straight line basis over the lease term. Finance lease ROU assets are amortized 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.

14. Commitments

Associated with the adoption of Topic 842, all operating leases were recognized on the 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 costs of the building lease. See Notes 2 and 13 for additional disclosures on leases.

For<br>the fiscal period ending December 31,	Office Premises
2020	$222,069
2021	222,501
2022	222,501
2023	222,501
2024	222,501
	1,112,073
2025	166,876
	1,278,949

[15]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

15. Common shares

The Company is authorized to issue an unlimited number of common shares, of which the following are issued and outstanding:

	For the Year Ended
	31-Dec-19		31-Dec-18
	# of shares	$ amount	# of shares	$ amount
As<br>at the beginning of the year	68,573,558	$96,656,248	58,161,133	$88,121,286
Shares<br>retired during the year	(4,166,667)	(1,343,184)	-	-
Shares<br>issued during the year:
Issuance<br>of Common Stock
on<br>the Private Placement	-	-	10,264,946	8,387,451
Exercise<br>of stock options	-	-	6,667	5,067
Transfer<br>from contributed capital
on<br>the exercise of stock options	-	-	-	6,441
Finder’s<br>fee	-	-	140,812	136,003
As<br>at the end of the period	64,406,891	95,313,064	68,573,558	96,656,248
	For the Year Ended
---	---	---
	31-Dec-17
	# of shares	$ amount
As<br>at the beginning of the year	53,856,509	$85,966,393
Shares<br>issued during the year:
Exercise<br>of stock options	7,334	5,710
Rights<br>Offering, net of issue costs	4,187,290	2,029,867
Stock<br>options proceeds receivable	-	30,285
Shares<br>for Debt	110,000	89,031
As<br>at the end of the period	58,161,133	88,121,286

During the fourth quarter of 2019 the Company purchased 4,166,667 common shares in the capital of the Company at a price of $0.30 per common share for total gross costs of $1.25 million plus related costs of $93,184 from AGV. The 4,166,667 shares were cancelled immediately after they were purchased. This transaction was approved by the Toronto Stock Exchange and the Alberta Securities Commission. AGV’s 3,421,648 warrants expired as of October 31, 2019.

In July 2018, the company completed a private placement. In total, AGV purchased 10,264,946 Units at a price of $0.924 per Unit for total gross proceeds of approximately $9,484,810.

A finder’s fee of 3% of the total amount of the Private Placement, which was paid one half in shares and one half in cash during the third quarter of 2018.

[16]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

On November 3, 2017, NXT closed the Rights Offering that had been announced to existing shareholders on September 26, 2017. The Company issued 4,187,290 common shares a price of $0.50 per common share, for aggregate gross proceeds of $2,093,645. Share issue costs of $63,778 were recorded as a reduction to share capital.

During 2017, the Company settled certain accounts payable to a consultant totaling $78,980 by way of issuing 110,000 common shares at a price per share of $0.718. The cost of issuing these shares of $6,149 were recorded as a reduction to share capital.

16. Earnings (Loss) per share

	2019	2018	2017
Comprehensive<br>income (loss) for the year	$3,772,908	$(6,968,511)	$(8,970,398)
Weighted<br>average number of shares outstanding for the year:
Basic	68,156,059	65,455,325	54,523,113
Diluted	68,156,059	65,455,325	54,523,113
Net<br>Income (loss) per share – Basic	$0.06	$(0.11)	$(0.16)
Net<br>Income (loss) per share – Diluted	$0.06	$(0.11)	$(0.16)

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. During 2019 all stock options were out of the money and are not included in the Diluted weighted average number of shares.

[17]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

17. Share based compensation

Stock Options:

The following is a summary of stock options which are outstanding as at December 31, 2019.

			Average<br>remaining
Exercise<br>price	# of<br>options	#of<br>options	contractual
per<br>share	outstanding	exercisable	life (in<br>years)
$0.52	100,000	100,000	4.5
$0.59	150,000	100,000	3.8
$1.35	236,900	236,900	0.0
$1.45	37,500	37,500	2.0
$1.48	37,500	37,500	1.5
$1.50	50,000	50,000	1.6
$1.57	30,000	30,000	0.1
$1.73	92,600	92,600	0.9
$1.82	135,000	135,000	0.8
$2.10	300,000	300,000	0.7
	1,169,500	1,119,500	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 December 31, 2019 is as follows:

	For the year ended		For the year ended
	December 31, 2019		December 31, 2018
		weighted		weighted
	# of stock	average	# of stock	average
	options	exercise price	options	exercise price
Options<br>outstanding, start of the period	1,297,000	$1.58	1,648,667	$1.60
Granted	100,000	$0.52	1,150,000	$1.06
Exercised	-	-	(6,667)	$0.76
Expired	(47,500)	$(1.51)	(65,000)	$1.17
Forfeited	(180,000)	$(1.70)	(1,430,000)	$1.21
Options<br>outstanding, end of the period	1,169,500	$1.48	1,297,000	$1.58
Options<br>exercisable, end of the period	1,119,500	$1.52	1,197,000	$1.67

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.

[18]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

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	2019	2018	2017
Expected<br>dividends paid per common share	Nil	Nil	Nil
Expected<br>life in years	5.0	5.0	-
Expected<br>volatility in the price of common shares	65%%	65%%	-
Risk<br>free interest rate	1.68%%	1.75%%	-
Weighted<br>average fair market value per share at grant date	$0.52	$1.06	$-
Intrinsic<br>(or “in-the-money”) value per share of options<br>exercised	$-	$0.59	$-

The unamortized portion of SBCE related to the non-vested portion of stock options, which will be recognized in 2020, is approximately $12,582.

18. Income Tax Expense

NXT periodically earns revenues while operating outside of Canada in foreign jurisdictions. Payments made to NXT for services rendered to clients and branch offices in certain countries may be subject to foreign income and withholding taxes. Such taxes incurred are only recoverable in certain limited circumstances, including potential utilization in Canada as a foreign tax credit, or against future taxable earnings from the foreign jurisdictions.

Income tax expense is different from the expected amount that would be computed by applying the statutory Canadian federal and provincial income tax rates to NXT's income (loss) before income taxes as follows:

	2019	2018	2017
Net<br>loss before income taxes	$3,772,908	$(6,968,551)	$(8,894,853)
Canadian<br>statutory income tax rate	26.5%	27.0%	27.0%
Income<br>tax (recovery) at statutory income tax rate	999,821	(1,881,509)	(2,401,610)
Effect<br>of non- deductible expenses and other items:
Stock-based<br>compensation and other expenses	11,609	99,919	156,966
Change<br>in statutory tax rates	918,821	-	962,486
Foreign<br>exchange adjustments	82,433	(131,555)	110,121
Foreign<br>tax credit benefit	-	-	-
Non-taxable<br>portion of capital gain	-	-	(50,525)
Other	43,592	(221,978)	91,668
	2,056,276	(2,135,123)	(1,130,894)
Change<br>in valuation allowance	(2,056,276)	2,135,123	1,130,894
	-	-	-
Income<br>taxes in foreign jurisdictions	-	-	75,545
Income<br>tax expense (recovery)	-	-	75,545

Effective July 1, 2019 the Province of Alberta decreased its corporate tax rate to 11%, with a further reductions to 10% on January 1, 2020, 9% on January 1, 2021 and 8% on January 1, 2022. On December 22, 2017, The Tax Cuts and Jobs Act (the “Act”) was enacted in the United States. This has resulted in a decrease in the US Federal tax rate from 35% to 21%.

[19]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

A valuation allowance has been provided for the potential financial statement value of the Company’s deferred income tax assets, due to uncertainty regarding the amount and timing of their potential future utilization, as follows:

	2019	2018	2017
Net<br>operating losses carried forward:
Canada<br>(expiration dates 2027 to 2039)	$6,840,817	$9,563,701	$8,180,209
USA<br>(expiration dates 2020 to 2026)	1,494,711	1,569,976	1,443,729
Timing<br>differences on property & equipment
and<br>financing costs	1,810,789	2,109,557	2,012,709
SRED<br>Expenditures	348,341	396,020	215,303
Foreign<br>Tax Credit	285,772	371,133	371,133
	10,780,430	14,010,387	12,223,083
Intellectual<br>property	(4,133,115)	(5,306,796)	(5,761,674)
	6,647,315	8,703,591	6,461,409
Less<br>valuation allowance	(6,647,315)	(8,703,591)	(6,461,409)

19. 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, note receivable, accounts payables and accrued liabilities and leases. The carrying value of these financial instruments, excluding leases, approximates their fair values due to their short terms to maturity. NXT is exposed to significant interest or credit risks arising from accounts receivable and notes receivable. For accounts receivable NXT has received advance payments and does not release results of surveys until a substantial portion of the accounts receivable has been paid. For the notes receivable, NXT has secured the note receivable.

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 December 31, 2019 and 2018, the Company held no derivative financial instruments.

[20]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

20. Change in non-cash working capital

The changes in non-cash working capital balances are comprised of:

	For the year ended December 31
	2019	2018	2017
Accounts<br>receivable	$(1,339,408)	$(1,252)	$(61,657)
Note<br>receivable	(332,175)	-	-
Prepaid<br>expenses and deposits	(31,973)	42,204	59,439
Accounts<br>payable and accrued liabilities	104,745	(899,122)	986,533
Deferred<br>gain	-	-	(155,301)
Contractual<br>obligations	134,116	-	-
	(1,464,695)	(858,170)	829,014
Portion<br>attributable to:
Operating<br>activities	(1,464,695)	(858,170)	829,014
Financing<br>activities	-	-	-
Investing<br>activities	-	-	-
	(1,464,695)	(858,170)	829,014

[21]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

21. Geographic information

The Company generates revenue from its SFD® survey system that enables the clients to focus their hydrocarbon 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.

Revenues by geographic area were generated solely in Nigeria in 2019, entirely from a single client. There were no revenues in 2018 and 2017.

	2019	2018	2017
Nigeria	$11,976,149	$-	$-
	11,976,149	-	-

22. Survey Expenses

Survey Expenses include the following:

	2019	2018	2017
Aircraft<br>Operations
Charter<br>Hire Revenue Earned	$(613,038)	$(698,211)	$(470,982)
Lease<br>payments	400,847	454,729	304,410
Operating<br>Expenses	1,459,536	1,347,428	1,084,432
	1,247,345	1,103,946	917,860
Survey<br>Projects	1,363,741	-	371,569
	2,611,086	1,103,946	1,289,429

23. 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:

	2019	2018	2017
Legal<br>Fees	$276,261	$249,218	$172,199

Accounts payable and accrued liabilities includes a total of $146,197 ($5,999 as at December 31, 2018) payable to this law firm. Interest of $1,809 was received from AGV during the year.

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.

[22]

NXT ENERGY SOLUTIONS INC.

Notes to the Audited Consolidated Financial Statements

As at and for the years ended December 31, 2019, 2018 and 2017

(Expressed in Canadian dollars unless otherwise stated)

24. Gain on extinguishment of liability

In 2018 NXT determined that liabilities it had recorded before 2005 were no longer payable. As a result a gain of $185,661 has been recognized on the extinguishment of the liability. No cash was paid.

25. Subsequent events

Covid-19

As of the report date of these consolidated financial statements the Covid-19 pandemic has not had a material effect on the operations of the Company. The Company has made provisions so employees can work from home, suspended all travel, international travelers are to self-isolate for 14 days after return to Canada, and hygiene and social distancing policies are in effect if present in the office. NXT continues to communicate with employees and customers via available communication methods such as tele-conferences and on-line video conferencing.

Demand for our services and prospective revenues may become adversely impacted the longer the Covid-19 Pandemic continues. The impact of the continuation of the Covid-19 Pandemic may hamper our ability to deliver SFD® surveys contracts in the following ways. If restrictions on international travel continue, our aircraft and personal will not be able to perform surveys. An outbreak of the virus among our staff or our customers’ personnel would delay any survey in progress. Business development may be delayed when in-person meetings and technical presentations may be a superior delivery method.

[23]

nsfdf_ex992

Exhibit 99.2

NXT ENERGY SOLUTIONS INC.

Management's Discussion and Analysis

For the year ended

December 31, 2019

Management's Discussion and Analysis

This discussion and analysis ("MD&A") was prepared by management of NXT Energy Solutions Inc. ("NXT", "we", "us", "our" or the "Company") based on information available as at April 13, 2020 unless otherwise stated, has been approved by the Board of Directors of the Company (the "Board"), and should be reviewed in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2019. This MD&A covers the unaudited three month and twelve month periods ended December 31, 2019, with comparative totals for the unaudited three month and twelve month periods ended December 31, 2018.

Our functional and reporting currency is the Canadian dollar. All references to "dollars", "$", "CDN dollars" and "CDN$" in this MD&A are to Canadian dollars unless specific reference is made to United States dollars ("US dollars" or "US$").

NXT® and SFD®  are registered trademarks of NXT in Canada and the United States.

Advisories

Forward-looking Information

Certain statements in this MD&A constitute forward-looking information under applicable securities laws. These statements typically contain words such as "intends", "plans", "anticipates", "expects", "scheduled", "estimates", "believes", "forecasts" or other variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved and relate primarily to:

●

the Nigerian SFD® Survey (as defined below), the Co-operation Agreement (as defined below) and the Loan Arrangement (as defined below), and the performance and satisfaction of the obligations thereunder (including with respect to amounts payable to NXT);

●

estimates related to our future financial position and liquidity; and

●

general business strategies and objectives.

This forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this document:

●

our ability to 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; and

●

general business, economic and market conditions (including global commodity prices).

These forward-looking statements are based on current expectations and are subject to a wide range of known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Known risks include, but are not limited to, risks related to:

●

the ability of management to execute its business plan;

●

health, safety and the environment (including risks related the novel coronavirus);

●

the emergence of alternative competitive technologies;

●

our ability to protect and maintain our intellectual property and rights to our SFD® technology;

●

our reliance on a limited number of key personnel;

●

our reliance on a limited number of aircraft ;

●

our reliance on a limited number of clients;

●

counterparty credit risk;

●

foreign currency and interest rate fluctuations;

●

changes in, or in the interpretation of, laws, regulations or policies; and

●

general business, economic and market conditions (including global commodity prices).

Although the Company has attempted to identify important factors and risks that could cause actual actions, events or results to differ materially from those described in the forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Financial outlooks are provided for the purpose of understanding the Company’s accounting practices and liquidity position, and the information may not be appropriate for other purposes.

For more information relating to risks, see the section titled "Summary of Operating Results – Risks and Uncertainties" in this MD&A and the section titled "Risk Factors" in NXT's most recently filed Annual Information Form. Except as required by law, NXT assumes no obligation to update forward-looking information should circumstances or the Company's estimates or opinions change. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

Non-GAAP Measures

NXT's accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").  This MD&A includes references to net working capital which does not have a standardized meanings prescribed by US GAAP and may not be comparable to similar measures be presented by other entities.  Net working capital is the net result of the difference between current assets and current liabilities. Management of NXT uses this non-GAAP measure to improve its ability to assess liquidity at a point in time.

Other Calculations

Fair market values and market capitalizations referenced herein have been calculated in accordance with section 1.11(1) of National Instrument 62-104 Take-over Bids and Issuer Bids and section 1.1 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, respectively.

NXT<br>Energy Solutions Inc.	page	<br>3
MD&A<br>for the year ended December 31, 2019

Description of the Business

NXT Energy Solutions Inc. is a Calgary-based technology company whose proprietary and patented Stress Field Detection ("SFD®") survey system 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. The SFD® survey system enables NXT’s clients to focus their hydrocarbon exploration decisions concerning land commitments, data acquisition expenditures and prospect prioritization on areas with the greatest potential. SFD® is environmentally friendly and unaffected by ground security issues or difficult terrain and is the registered trademark of NXT Energy Solutions Inc. NXT Energy Solutions Inc. provides its clients with an effective and reliable method to reduce time, costs and risks related to exploration.

Financial and Operational Highlights

Key financial and operational highlights for Q4-19 and YE-19 include are summarized below.

●

In Q3-19 the Company completed its Nigerian SFD® survey for approximately US$8.9 Million with PE Energy Limited (“PE”), a Nigerian oil and gas service company. PE had a contract with the Nigerian National Petroleum Company (“NNPC”), to provide 5,000-line kilometers of SFD® surveys in Nigeria.

●

As of the date of this MD&A, the Company has received a total of US$8.4 million payments in cash from PE for the SFD® survey in Nigeria, including US$1.9 million in the Q4-19 and an additional US$0.47 million in the first quarter of 2020. The final payment for contracted holdbacks amount to approximately $0.5 million USD.

●

NXT received confirmation of a patent granted from the European Patent Office. This brings the total number of countries granting the patent to 44. The final step is for the validation process of the SFD®  technology patent in select European countries.

●

In Q4-19 the Company completed the C$1,250,000 targeted issuer bid, purchasing for cancellation 4,166,667 common shares in the capital of the Company representing approximately 6.08% of the total outstanding Common Shares as of November 14, 2019, at a price of C$0.30 per Common Share.

●

In February 2019, NXT entered into a Co-operative Agreement with Alberta Green Ventures Limited Partnership (“AGV”), for AGV to bring to proposal up to three SFD® surveys for cooperation with the Company within two years. The Co-operative Agreement is based on a cost-plus formula and a gross overriding royalty interest in oil and gas production arising on lands subject to the surveys. The Company received a US$100,000 non-refundable deposit paid in connection with the Co-operative Agreement in Q2-19. Pursuant to the Co-operation Agreement, the deadline to complete at least one of three SFD® surveys is June 30, 2020.

●

In Q3-2019, the Company advanced US$250,000 (the "Principal Amount") to AGV for the purpose of furthering the shared objectives of NXT and AGV under the Co-operation Agreement (the "Loan Arrangement"). On April 13, 2020, NXT elected to receive and directed AGV to deliver US$250,000 as repayment of the Principal Amount (the "Principal Repayment).

●

Common share purchase warrants held by AGV have expired as of October 31, 2019.

●

Cash and short-term investments at the end of the YE-19 were $6.64 million.

●

There was $11.98 million of survey revenues recorded in YE-19.

●

Net income of $3.77 million was recorded for YE-19, including amortization expense of $1.78 million.

●

A net loss of $1.78 million was recorded for Q4-19, including amortization expense of $0.49 million.

●

Operating activities provided $4.08 million of cash during YE-19 and net cash used for financing activities was $1.39 million.

●

Operating activities provided $1.29 million of cash during Q4-19 and net cash used for financing activities was $1.35 million.

●

Net income per common share for YE-19 was $0.06 basic and $0.06 fully diluted.

●

Net loss per common share for Q4-19 was ($0.03) basic and (0.03) fully diluted.

●

General and administrative costs for YE-19 as compared to YE-18 have been reduced by $0.50 million or 13% mostly due a reduction in business development costs, lower headcount and costs and certain expenditures being recognized as direct survey costs, offset by higher professional fees and information technology costs.

●

General and administrative costs for Q4-19 as compared to Q4-18 have increased by $0.05 million or 6%, mostly due to an increase in business development offset by a reduction in headcount.

NXT<br>Energy Solutions Inc.	page	<br>4
MD&A<br>for the year ended December 31, 2019

Selected Annual Information

($M except per<br>share)	YE-19	YE-18	YE-17
Total<br>Assets	$30,692,941	$25,264,268	$23,920,991
Long-term<br>debt	2,691,217	510,661	741,408
Sales	11,976,149	-	-
Net<br>earnings	3,772,908	(6,968,511)	(8,970,398)
Net<br>earnings per share
Basic	$0.06	$(0.11)	$(0.16)
Diluted	$0.06	$(0.11)	$(0.16)
NXT<br>Energy Solutions Inc.	page	<br>5
---	---
MD&A<br>for the year ended December 31, 2019

Discussion of Operations

Co-operation Agreement

In February 2019, NXT entered into the Co-operation Agreement with AGV, one of NXT's largest shareholders, to complete up to three SFD® surveys within two years. The compensation to be received by NXT for services rendered under the Co-operation Agreement is based on a cost plus formula and a gross overriding royalty interest in oil and gas production arising on lands surveyed, with US$100,000 paid in advance as a non-refundable deposit.

Under the Co-operation Agreement, AGV committed to completing at least two SFD® surveys in North America and an additional SFD® survey internationally. The first SFD® survey was to be completed by August 31, 2019, with NXT and AGV agreeing to extend such deadline to December 31, 2019, and to further extend such deadline to June 30, 2020 (such further extension provided under the terms of the Targeted Issuer Bid). If the first SFD® survey is not completed by June 30, 2020, the US$100,000 non-refundable deposit will be forfeited to NXT. AGV has also committed to completing an exploration drilling program on each of the lands subject to the SFD® surveys within two years of completion of the surveys.

Nigerian SFD® Survey

In March 2019, the Company signed an US$8.9 million contract with PE to provide 5,000 line kilometers of SFD®  surveys in Nigeria. As the Nigerian SFD® Survey was the Company's first project in Africa, the Company was required to deliver more than 10,000 pages of documents to NNPC and the Department of Petroleum Resources, a department under Nigeria's Ministry of Petroleum Resources, and complete a test flight as part of the qualification process which took seven months. Data acquisition operations were completed on May 1, 2019 and NXT's recommendations were delivered in Q3-19.

Prior to entering into the Nigerian SFD® Survey contract with PE, the Company conducted significant due diligence to ensure it understood the business environment in Nigeria and was in compliance with applicable laws in each of Canada, the United States of America and Nigeria. The Company also engaged Norton Rose Fulbright Canada LLP and Kreller Group as advisors to provide guidance and to ensure the integrity of its contract with PE, as well as PE's contract with NNPC.

The Company has received payments of US$8.4 million for the Nigerian SFD® Survey as at the date hereof. The contracted holdback amount of approximately US$0.5 million is expected to be paid to the Company upon the conclusion of negotiations for additional work under the current contract framework.

The Department of Petroleum Resources (the "DPR"), a department under the Federal Republic of Nigeria's Ministry of Petroleum Resources responsible for the sustainable development of Nigeria's oil and gas resources, provided written confirmation of their recommendation in favour of NXT's SFD® technology based on the recent survey results, noting specifically "in line with federal government aspiration to increase its Oil and Gas reserves base at a considerable reduced cost, risk and optimize exploration cycle, the Stress Field Detection SFD® technology is hereby adopted and recommended to be deployed as an independent data exploration tool for hydrocarbon exploration to identify and rank prospect-level leads to focus exploration efforts in the Nigerian Oil and Gas industry".

Patents

As of the date of this MD&A, SFD® patents have been granted in Russia (January 2017), Japan (July 2017), Canada (August 2017), Europe (September 2017) and the United States (November 2017), and notices of allowance have been also received from Mexico (July 2017) and China (March 201s of prime commercial focus for the Company. NXT has recently received confirmation of a patent granted from the European Patent Office. This brings the total number of countries granting the patent to 44. The final step is for the validation process of the SFD® technology patent in select European countries. This is expected to take several month to complete. The SFD® patents serve an important purpose beyond the protection they provide to the proprietary SFD® technology. Our patents also serve as an independent third-party verification of the scientific principles that form the basis of the SFD® process and its application.

NXT<br>Energy Solutions Inc.	page	<br>6
MD&A<br>for the year ended December 31, 2019

Notes Receivable

In September 2019, NXT entered into the Loan Arrangement with AGV and advanced to AGV the US$250,000 Principal Amount, as evidenced by, and governed in accordance with the terms of, a promissory note dated September 6, 2019 (the "Notes Receivable"), for the purpose of providing AGV with additional funds necessary to continue advancing the common objectives of NXT and AGV under the Co-operation Agreement. Pursuant to the Notes Receivable, it was agreed and acknowledged, among other things, that:

a)

AGV was indebted to the Company and unconditionally promised to pay to, or to the order of, the Company on or before December 15, 2019 (the "Repayment Date"), the Principal Amount together with all interest payable at a rate of the greater of 2% and the rate prescribed under the Income Tax Act (Canada) from time to time in monthly arrears on the first day of each month commencing October 1, 2019 until the repayment of the Principal Amount in full (the "Interest");

b)

AGV had the right and privilege of prepaying the whole or any portion of the Principal Amount together with the Interest at any time or times without notice, bonus or penalty; and

c)

NXT, in its sole and absolute discretion, was entitled to elect to receive any payment made by AGV in accordance with the Notes Receivable by way of, in whole or in combination: (i) wire transfer or other immediately available funds ("Cash"), or (ii) delivery for cancellation to the Company of the equivalent number of Common Shares having a fair market value equal to the aggregate of such amounts, calculated using the volume weighted average price of the Common Shares as reported and traded on the Toronto Stock Exchange for the five trading days immediately preceding the repayment date (the "5-day VWAP").

On December 13, 2019, the last business and trading day before the Repayment Date, the Company elected to receive and directed AGV to:

a)

in respect of the Principal Amount, deliver to the Company for cancellation 543,673 Common Shares, calculated as the product of US$250,000 being the Principal Amount owing on the last business day before the Repayment Date, and 1.3183, being the daily average US$/CDN$ exchange rate as quoted on the Bank of Canada's website for December 13, 2019, the last business day for which a daily average exchange rate was published before the Repayment Date, divided by $0.6062, being the 5-day VWAP, the delivery of such Common Shares to occur subject to and only upon receipt of confirmation from the Company that all necessary regulatory approvals had been received; and

b)

in respect of the Interest, pay US$1,366.12 by way of Cash. AGV paid this amount.

On April 13, 2020, NXT issued a Direction to Pay to AGV in which NXT has revoked the previous Direction to Pay dated December 13, 2019, and has now directed AGV to deliver US$250,000 as repayment on the Principle Amount. Interest will begin to accrue until the date on which payment in full of all amounts owing pursuant to the Principle Amount are received by NXT.

The Company may change its election if it so decides, in its sole and absolute discretion to receive the Principal Repayment by way of Common Shares by application to the Alberta Securities Commission.

Targeted Issuer Bid

Between November 15, 2019 (the "TIB Commencement Date") and December 9, 2019 (the "TIB Completion Date"), NXT purchased for cancellation an aggregate of 4,166,667 Common Shares, representing approximately 6.08% of the 68,573,558 Common Shares outstanding as at the TIB Commencement Date. The purchase price of $0.30 per Common Share represented a discount of approximately 22.9% relative to the market price of $0.389 per Common Share as at the TIB Commencement Date. Gross proceeds received by AGV totaled approximately $1,250,000.00, representing approximately 6.1% of the Company's market capitalization of approximately $26,675,114.062 as at the TIB Commencement Date.

The terms of the Targeted Issuer Bid also provided that the 3,421,648 Warrants expired effective October 31, 2019, and that certain deadlines under the Co-operation Agreement be extended. AGV's registered ownership in the Company was reduced from 10,264,946 Common Shares and 3,421,648 Warrants, representing, on a fully diluted basis, approximately 20.0% of the 68,573,558 issued and outstanding Common Shares as at the TIB Commencement Date, to 6,098,279 Common Shares and nil Warrants, representing approximately 9.5% of the 64,406,891 issued and outstanding Common Shares as at the TIB Completion Date.

By strategically acquiring its Common Shares for cancellation in a private transaction at a discount to the then current market price, the Company improved the equity position of its other shareholders and provided AGV with additional funds necessary to continue advancing the common objectives of the parties under the Co-operation Agreement, while also avoiding a substantial decrease in the market price and liquidity of the Common Shares reasonably expected if AGV were to sell a substantial portion of its equity position into the open market.

The Targeted Issuer Bid was exempt from the formal valuation and disinterested shareholder approval requirements typically applicable to related party transactions under applicable securities laws as neither the fair market value of the Common Shares (approximately $1,620,833.46) nor the consideration received by AGV for the Common Shares (approximately $1,250,000.00) exceeded 25% of the Company's market capitalization at the TIB Commencement Date (approximately $26,675,114.06).

NXT<br>Energy Solutions Inc.	page	<br>7
MD&A<br>for the year ended December 31, 2019

Summary of Operating Results

	Q4-19	Q4-18	YE-19	YE-18
Survey<br>revenue	$-	$-	$11,976,149	$-
Expenses:
Survey	308,374	315,175	2,611,086	1,103,946
General<br>and administrative	926,919	875,705	3,497,785	3,999,089
Stock-based<br>compensation	(28,724)	(173,367)	43,809	386,154
Amortization<br>of property and equipment	449,015	447,942	1,781,181	1,790,267
	1,655,584	1,465,455	7,933,861	7,279,456
Other<br>Expenses (income):
Interest<br>income, net	(18,452)	(21,626)	(20,684)	(62,004)
Foreign<br>exchange (gain) loss	99,136	(20,330)	233,231	(19,852)
Other<br>expense (recovery)	39,019	(30,783)	56,833	(229,089)
	119,703	(72,739)	269,380	(310,945)
Income<br>(loss) before income taxes	(1,775,287)	(1,392,716)	3,772,908	(6,968,511)
Income<br>tax expense	-	-	-	-
Net<br>Income (loss) for the period	$(1,775,287)	$(1,392,716)	3,772,908	(6,968,511)
Net<br>Income (loss) per share – basic	$(0.03)	$(0.02)	$0.06	$(0.11)
Net<br>Income (loss) per share – diluted	$(0.03)	$(0.02)	$0.06	$(0.11)

Annual operating results. Net income for YE-19 compared to YE-18 increased by $10,741,419, or $0.17 per share basic. $11,976,149 of revenue was recorded in YE-19 for the Nigerian SFD® Survey. Survey costs were higher by $1,507,140 due to the Nigerian SFD® Survey. G&A expenses were reduced by $501,304, or 13%, in YE-19 compared to YE-18 due primarily to a reduction in business development costs, lower headcount and costs and certain expenditures being recognized as direct survey costs. This was offset by higher professional fees and information technology costs. SBCE were lower in YE-19 as most outstanding options were vested before 2019 and therefore were fully expensed. Foreign exchange rates were unfavorable in YE-19 compared to YE-18 resulting in a $253,084 loss as the Company held significant balances in US$ in YE-19 and US$ increased in value compared to CDN$. US$ balances held by NXT were significantly lower in YE-18. In YE-18, the Company determined that liabilities it had recorded before 2005 were no longer payable and, as a result, a gain of $185,661 was recorded in other income on the extinguishment of the liability.

Quarterly operating results. Net loss for Q4-19 compared to Q4-18 increased by $382,571 or $0.01 per share-basic. No revenue was recorded in Q4-19. Survey costs were lower by $6,801 due to the major phase 5 maintenance in Q4-18. G&A expenses were increased by $51,214, or 6%, as compared to Q4-18, due primarily to increased business development travel offset by a reduction in headcount and favorable headcount cost mix. Stock-based compensation expense ("SBCE") was negative in both Q4-19 and Q4-18. In Q4-19, restricted stock unit ("RSU") expense from the previous quarter was derecognized as the expected granting of RSUs to employees was not formalized. In Q4-18, 333,333 vested options were forfeited resulting in the negative expense. Amortization expense was $1,073 higher in Q4-19 because the Company acquired transponder technology known as Automatic Dependent Surveillance – Broadcast ("ADS-B") during the year. Foreign exchange rates were unfavorable in Q4-19 compared to Q4-18 resulting in a $119,467 loss as the Company held significant balances in US$ in Q4-19 and US$ increased in value compared to CDN$. US$ balances held by NXT were lower in Q4-18. For Q4-19 and YE-19, the Company's intellectual property ("IP"), research and development ("R&D") and asset retirement obligation ("ARO") expenses were mostly for costs to begin the validation process for certain European SFD® patents. In YE-18, R&D expenses were negative as the Company incurred less costs from a provider of R&D services than originally estimated.

NXT<br>Energy Solutions Inc.	page	<br>8
MD&A<br>for the year ended December 31, 2019

Survey Expenses

Survey<br>Expenses	Q4-19	Q4-18	Net<br>change
Aircraft<br>lease costs	$101,860	$154,397	$(52,537)
Amortization<br>of deferred gain	-	(38,826)	38,826
Aircraft<br>operations	154,527	199,342	(44,815)
Survey<br>projects	51,987	262	51,725
Total<br>survey expenses, net	308,374	315,175	(6,801)
Survey<br>Expenses	YE-19	YE-18	Net<br>change
---	---	---	---
Aircraft<br>lease costs	$400,847	$610,029	$(209,182)
Amortization<br>of deferred gain	-	(155,301)	155,301
Aircraft<br>operations	846,498	648,783	197,715
Survey<br>projects	1,363,741	435	1,363,306
Total<br>survey expenses, net	2,611,086	1,103,946	1,507,140

Survey expenses relate entirely to the direct survey costs and aircraft handling and maintenance costs, net of charter hire revenue. In Q4-19, survey expenses included incremental travel related costs to present results for the Nigerian SFD® Survey. Fixed aircraft costs were lower in Q4-19 versus Q4-18 as scheduled maintenance was performed on the aircraft in Q4-18.

In YE-19, survey expenses included direct incremental survey costs for the Nigerian SFD® Survey incurred which include aircraft and hanger operating costs, staff costs to support the survey, and mobilization/demobilization costs. Also these costs include staff costs to interpret and integrate the survey, and their travel costs. Aircraft operations costs in YE-19 were higher than YE-18 as additional scheduled maintenance was required after the Nigerian SFD® Survey, net of charter hire revenue.

The aircraft is available for charter to third parties through our aircraft manager when it is not being used by NXT. Any charter fees received are used to offset aircraft costs.

In April 2017, NXT completed a sale and leaseback agreement of its aircraft with a Calgary-based international aircraft services organization (the "Lessor"). NXT has leased the aircraft over an initial term of 60 months and retains all existing operating rights and obligations. NXT is required to make monthly payments to the Lessor of approximately US$39,500. NXT has the option to extend the term of the lease by an additional two years. Should NXT want to repurchase the aircraft at the end of the initial lease term, the purchase price will be US$1.45 million. Under the new lease accounting standard, the amortization of the deferred gain is now classified within "lease and lease interest costs".

NXT<br>Energy Solutions Inc.	page	<br>9
MD&A<br>for the year ended December 31, 2019

General and Administrative Expenses

G&A<br>Expenses	Q4-19	Q4-18	Net<br>change	%
Salaries,<br>benefits and consulting charges	$406,300	$510,491	$(104,191)	(20)
Board<br>and professional fees, public company costs	205,942	139,039	66,903	48
Premises<br>and administrative overhead	193,661	191,277	2,384	1
Business<br>development	121,016	38,463	82,553	215
Bolivian<br>overhead	-	(3,565)	3,565	(100)
Total<br>G&A Expenses	926,919	875,705	51,214	6
G&A<br>Expenses	YE-19	YE-18	Net<br>change	%
---	---	---	---	---
Salaries,<br>benefits and consulting charges	$1,599,247	$2,046,886	$(447,639)	(22)
Board<br>and professional fees, public company costs	857,556	781,330	76,226	10
Premises<br>and administrative overhead	800,626	753,380	47,246	6
Business<br>development	240,356	382,146	(141,790)	(37)
Bolivian<br>overhead	-	35,347	(35,347)	(100)
Total<br>G&A Expenses	3,497,785	3,999,089	(501,304)	(13)

G&A expenses increased $51,214, or 6%, in Q4-19 compared to Q4-18 for the following reasons:

●

salaries, benefits and consulting charges decreased $104,191, or 20%, due primarily to a change to a lower cost mix in corporate staff and two less headcount;

●

board and professional fees and public company costs increased $66,903, or 48%, due primarily to higher professional fees given the increase in business activity and the addition of one board member;

●

premises and administrative overhead costs increased $2,384, or 1%, due primarily to increased costs related to the improvement of the Company's information systems security (partially offset by the lower headcount and the related overhead costs);

●

business development costs increased by $82,553, or 215%, as the Company's resources were again focused on business development activities in Q4-19 vs Q4-18 where resources were focused on closing the Nigerian SFD® Survey; and

●

Bolivian overhead costs decreased by $3,565, or 100%, as the Company officially closed its offices and ceased operations in that country in Q4-18.

NXT<br>Energy Solutions Inc.	page	<br>10
MD&A<br>for the year ended December 31, 2019

G&A expenses decreased by $501,304, or 13%, in YE-19 compared to YE-18 for the following reasons:

●

salaries, benefits and consulting charges decreased $447,639, or 22%, due primarily to a change to a lower cost mix in corporate staff, two less headcount and allocation of direct salary costs to survey costs;

●

board and professional fees and public company costs increased $76,226, or 10%, due primarily to higher professional fees paid in connection with the Nigerian SFD® Survey and higher insurance costs given the increased business activity (partially offset by termination costs to suspend the Advisory Board in YE-18);

●

premises and administrative overhead increased $47,246, or 6%, due primarily to increased costs related to the improvement of the Company's information systems security;

●

business development costs decreased $141,790, or 37%, due primarily to increased costs related to the negotiation and implementation of the Nigerian SFD® Survey; and

●

Bolivian overhead costs decreased by $35,347, or 100%, as the Company officially closed its offices and ceased operations in that country in Q4-18.

Stock-based Compensation Expenses

SBCE varies in any given quarter or year as it is a function of several factors including the number of stock options issued in the period and the period of amortization (based on the term of the contract and/or number of years for full vesting of the options, which is normally three years) of the resultant expense. Also, SBCE is a function of periodic changes in the inputs used in the Black-Scholes option valuation model, such as volatility in NXT's trailing share price.

SBCE in Q4-19 was higher compared to Q4-18 by $144,643. In Q4-18, significant unvested stock options were forfeited by a former employee which resulted in a credit to the expense. In Q4-19, the Company's SBCE represented costs for the part of the remaining unvested options and a reversal of the RSU expense in Q3-19 as the expected granting of RSUs to employees was not formalized.

SBCE in YE-19 was lower compared to YE-18 by $342,345. In Q1-18, 333,333 options vested resulting in substantial SBCE. In YE-19, most options previously issued by the Company had vested resulting in minimal SBCE, partially offset by 100,000 options awarded to a consultant.

Other Expenses

Other<br>Expenses	Q4-19	Q4-18	Net<br>change	%
Interest<br>(income) expense, net	$(18,452)	$(21,626)	$3,174	(15)
Foreign<br>exchange loss (gain)	99,137	(20,330)	119,467	(588)
IP<br>and other	39,019	(30,783)	69,802	(216)
Total<br>Other Expenses, net	119,704	(72,739)	192,443	(265)
Other<br>Expenses	YE-19	YE-18	Net<br>change	%
---	---	---	---	---
Interest<br>(income) expense, net	$(20,684)	$(62,004)	$41,320	(67)
Foreign<br>exchange loss (gain)	233,232	(19,852)	253,084	(1275)
IP,<br>and other	56,833	(43,428)	100,261	(231)
Gain<br>on extinguishment of liability	-	(185,661)	185,661	(100)
Total<br>Other Expenses, net	269,381	(310,945)	580,326	(187)
NXT<br>Energy Solutions Inc.	page	<br>11
---	---
MD&A<br>for the year ended December 31, 2019

Interest (income) expense, net. This category of other expenses includes interest income earned on short-term investments netted by interest expense from financial lease obligations. Since January 1, 2019 interest on finance leases is included in this account under the new lease accounting standard. Q4-19 interest (income) expense net was $3,174 less than Q4-18, and YE-19 interest (income) expense net was $41,320 less than YE-18, as lease interest expense has offset income earned on guaranteed investment certificates.

Foreign exchange loss (gain). This category of other expenses includes losses and gains caused by changes in the relative currency exchange values of US dollars and CDN dollars. The Company held significant assets in US dollars at December 31, 2019, including accounts receivable, cash and cash equivalents, short-term investments and the security deposit for the aircraft, all of which have an effect on the unrealized foreign exchange gain and loss. At December 31, 2019, the CDN dollar strengthened as compared to the US dollar and as compared to the end of Q3-19 resulting in an unrealized foreign exchange loss for the quarter. At December 31, 2019, the Company had a significant foreign exchange loss which was the result of the CDN dollar strengthening compared to May 2019 when several of the US dollar assets were initially recorded. The Company does not currently have the ability to enter hedging contracts, but uses strategies to reduce the volatility of US dollar assets including converting excess US dollars to CDN dollars.

IP and other. This category of other expenses primarily includes costs related to IP filings, R&D activity related to the SFD® technology and ARO costs for certain non-recurring "project" activities.

In Q4-19 and YE-19, the Company's IP, R&D and ARO expenses related mostly to costs associated with the validation process for certain European SFD® patents. In YE-18, these costs were negative as the Company renegotiated fees from a provider of R&D services.

Gain on extinguishment of liability. In Q3-18, the Company determined that liabilities it had recorded before 2005 were no longer payable. As a result, a gain of $185,661 was recorded in other income on the extinguishment of the liability. No cash was paid to settle the liability.

Amortization<br>Expenses	Q4-19	Q4-18	Net<br>change	%
Property<br>and equipment	$27,832	$26,759	$1,073	4
Intellectual<br>property	421,183	421,183	-	-
Total<br>Amortization Expenses	449,015	447,942	1,073	-
Amortization<br>Expenses	YE-19	YE-18	Net<br>change	%
---	---	---	---	---
Property<br>and equipment	$96,448	$105,534	$(9,086)	(9)
Intellectual<br>property	1,684,733	1,684,733	-	-
Total<br>Amortization Expenses	1,781,181	1,790,267	(9,086)	(1)

Intellectual property and related amortization expense. NXT acquired specific rights to utilize the proprietary SFD® technology in global hydrocarbon exploration applications from the inventor of the SFD® technology, NXT's Chairman, President and Chief Executive Officer, on August 31, 2015. The value attributed to the acquired IP assets was $25.3 million. The IP assets are being amortized on a straight-line basis over a 15-year period (future amortization expense of $1,685,000 per year) and are also being subject to ongoing tests of potential impairment of the recorded net book value. No impairments were recognized in Q4-19 or Q4-18.

Property and equipment and related amortization expense. Property and equipment amortization was higher in YE-19 compared to YE-18 due to the Company acquiring and installing in its aircraft a new transponder technology known as ADS-B. The U.S. Federal Aviation Administration (the "FAA") and European Aviation Safety Agency have mandated that all aircraft flying in designated controlled airspaces must be equipped with ADS-B by January 1, 2020 (US airspace) and June 7, 2020 (European airspace). Total costs for installing the ADS-B was approximately $208,000. This amortization was partially offset as the Company uses the declining balance method of depreciation, thereby having the effect of lowering amortization each year on existing assets.

Income tax expense. There was no income tax expense in YE-19 or YE-18.

NXT<br>Energy Solutions Inc.	page	<br>12
MD&A<br>for the year ended December 31, 2019

Competition

Our SFD® airborne survey service is based upon a proprietary technology, which is capable of remotely identifying, from a survey aircraft, subsurface anomalies associated with potential hydrocarbon traps with a resolution that we believe is technically superior to other airborne survey systems. To our knowledge there is no other company employing technology comparable to our SFD® survey system for oil and natural gas exploration.

Seismic is the standard technology used by the oil & gas industry to image subsurface structures. It is our view that the SFD® survey system is highly complementary to seismic analysis. Our system may reduce the need for seismic in wide-area reconnaissance but will not replace the role of seismic in verifying structure, closure and selecting drilling locations. The seismic industry is very competitive with many international and regional service providers.

The SFD® system can be used as a focusing tool for seismic. With a SFD® survey, a large tract (i.e. over 5,000 square kilometers) of land can be evaluated quickly to identify locations with indications of reservoir potential. Seismic surveys, although effective in identifying these locations, are much more expensive, require significantly more time and impose a much greater negative impact on local communities and the environment. A SFD® survey deployed first can provide necessary information to target a seismic program over a limited area of locations selected by SFD®. This approach can result in a more effective seismic program and reduce the overall cost, time, community resistance and environmental impact required to locate and qualify a prospect.

The industry uses other technologies for wide area oil and natural gas reconnaissance exploration, such as aeromagnetic and gravity surveys. These systems can provide regional geological information, such as basement depth, sedimentary thickness and major faulting and structural development.

Risk and Uncertainties

Hydrocarbon exploration operations involve a number of risks and uncertainties that have affected our financial statements and are reasonably likely to affect them in the future. These risks and uncertainties are discussed further below.

Exchange Rates. Revenues and costs incurred in currencies other than Canadian dollars expose us to exchange rate fluctuations between the Canadian dollar and foreign currencies. In addition, exchange rate changes impact the Canadian equivalent carrying balances for our assets and liabilities, and for foreign currency denominated monetary assets (such as cash and cash equivalents), the impact of changes in exchange rates is recorded in net earnings as a foreign exchange gain or loss.

Interest Rates. We periodically invest available cash in short term investments that generate interest income that will be affected by any change in interest rates.

Tax Rates. Changes in tax rates in the jurisdictions that we operate in would impact the amount of current taxes that we pay. In addition, changes to substantively enacted tax rates would impact the carrying balance of deferred tax assets and liabilities, potentially resulting in a deferred tax recovery or incremental deferred tax expense.

In addition to the above, we are exposed to risk factors that may impact the Company and our business. For further information on these risk factors, please refer to our Annual Information Form, available on NXT's website at www.nxtenergy.com and on SEDAR at www.sedar.com

NXT<br>Energy Solutions Inc.	page	<br>13
MD&A<br>for the year ended December 31, 2019

Summary of Quarterly Results

A summary of operating results for each of the trailing eight quarters (including a comparison of certain key categories to each respective prior quarter) follows.

	Q4-19	Q3-19	Q2-19	Q1-19
Survey<br>revenue	$-	$1,021,532	$10,954,617	$-
Net<br>income (loss)	(1,775,287)	(774,373)	8,085,888	(1,763,320)
Income<br>(loss) per share – basic	$(0.03)	$(0.01)	$0.12	$(0.03)
Income<br>(loss) per share – diluted	$(0.03)	$(0.01)	$0.11	$(0.03)
	Q4-18	Q3-18	Q2-18	Q1-18
---	---	---	---	---
Survey<br>revenue	$-	$-	$-	$-
Net<br>income (loss)	(1,392,716)	(1,660,031)	(1,961,114)	(1,954,650)
Income<br>(loss) per share – basic	$(0.02)	$(0.02)	$(0.03)	$(0.03)
Income<br>(loss) per share – diluted	$(0.02)	$(0.02)	$(0.03)	$(0.03)

In Q4-19, survey costs were higher as final integration costs from the Nigerian SFD® Survey were incurred. SBCE was lower as most outstanding options were fully vested. In Q3-19, NXT recognized $1,021,532 of revenue for services rendered in connection with the Nigerian SFD® Survey, compared to $10,954,617 in Q2-19. There were no revenues in the previous five quarters, rather, the Company incurred net losses in each due primarily to survey costs (related to aircraft lease and aircraft maintenance costs), G&A expenses and non-cash items like SBCE, which can be a significant expense in any given quarter, as detailed more specifically below:

●

in Q1-19, survey costs were higher due to scheduled maintenance on the aircraft and significant legal and contract negation costs in preparing for the Nigerian SFD® Survey;

●

in Q4-18, SBCE was lower by $283,811 as unvested options were forfeited. In addition, G&A expenses decreased $156,271 for two reasons: (i) business development decreased as most of the business development work was centered in Calgary supporting the Nigerian SFD® Survey negotiations; and (ii) there was a decrease in public company costs as the previous quarter had significant costs related to reviewing equity financing options (offsetting the decreases in SBCE and G&A expenses was an increase of $44,010 in survey expenses as NXT's aircraft incurred a scheduled major maintenance in December 2018);

●

in Q3-18, a gain of $185,661 was recognized on the extinguishment of a liability from 2005 that was no longer payable, and interest income of $26,171 was earned on cash received from equity financings; and

●

in Q1-18, G&A expenses were lower as NXT began to recognize the full extent of cost reductions started in the prior quarter.

NXT<br>Energy Solutions Inc.	page	<br>14
MD&A<br>for the year ended December 31, 2019

Liquidity and Capital Resources

Going Concern

The consolidated financial statements for YE-19 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.

NXT's financial statements for YE-18 included disclosure related to the use of the "going concern" basis of presentation. In YE-19, NXT has had positive cash flow from operations which has resulted in a significant strengthening of the Company's liquidity and working capital position. As a consequence, management is of the view that removal of the "going concern" disclosure in respect of its YE-19 disclosure is warranted on the basis than the Company currently has sufficient funds to maintain operations for the next 12 months as of the date of these financial statements.

In the preparation of the YE-19 financial statements, management determined that there are no existing conditions or reasonably foreseeable events that raise substantial doubt about the Company's ability to continue as a going concern. However, NXT's future financial results and its longer term success remains dependent upon the ability to continue to attract and execute client projects to build its revenue base. 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 and to continue to attract new client projects and expand the revenue base to a level sufficient to exceed fixed operating costs and continue to generate positive cash flow from operations.  The occurrence and timing of these events cannot be predicted with certainty.

NXT's cash and cash equivalents plus short-term investments at December 31, 2019 totaled $6.64 million. Net working capital totaled $7.13 million.

As NXT is operating on a going concern basis, NXT's short-term ability to generate sufficient cash depends on the success of signing contracts and receiving advance payments pursuant to the terms of such agreements. NXT's longer-term success remains dependent upon our ability to continue to attract new client projects and expand the revenue base to a level sufficient to exceed G&A expenses and generate excess net cash flow from operations. Proceeds from past equity financings have been used to provide NXT with funds to pursue, close and implement commercial transactions currently in negotiation, develop additional revenue streams including multi-client data sales and strategic partnerships and for general corporate and net working capital purposes.

Risks related to having sufficient ongoing net working capital to execute survey project contracts are mitigated through our normal practice of obtaining advance payments and progress payments from customers throughout the course of the projects, which often span three to four months. In addition, where possible, risk of default on client billings has been mitigated through the use of export insurance programs offered by Export Development Canada.

In YE-19, NXT continued to make progress in strengthening its liquidity and net working capital by completing the Nigerian SFD® Survey and reducing corporate costs by reducing the number of staff and by implementing new human resource policies to reduce staffing costs. Please see the discussion under "Summary of Operating Results – General and Administrative Expenses" for the results of these cost reductions.

As of the date of this MD&A, NXT has sufficient funds to maintain its operations for more than 12 months.

The Company does not have provisions in its leases, contracts, or other arrangements that would trigger additional funding requirements or early payments.

If the Company were to default on its office lease, the current month rent plus the next three months become immediately due. If the Company were to default on the aircraft lease, the Company would be required to deliver the aircraft back to the Lessor.

NXT<br>Energy Solutions Inc.	page	<br>15
MD&A<br>for the year ended December 31, 2019

Net Working Capital

Net Working<br>Capital	YE-19	YE-18	Net<br>Change	%
Current<br>assets (current liabilities)
Cash,<br>cash equivalents and short-term investments	$6,639,757	$4,239,532	$2,400,225	57
Accounts<br>receivable	1,384,315	61,279	1,323,036	2,159
Note<br>receivable	324,700	-	324,700	100
Prepaid<br>expenses and deposits	97,132	65,159	31,973	49
Accounts<br>payable and accrued liabilities	(448,928)	(499,535)	50,607	(10)
Contract<br>obligations	(131,386)	-	(131,386)	(100)
Current<br>portion of lease obligation	(736,408)	(42,603)	(693,805)	1,629
Total<br>Net Working Capital	7,129,182	3,823,832	3,305,350	86

NXT had no secured debt and had net working capital of $7,129,182 as at December 31, 2019.

The increase in net working capital in YE-19 was due to recognizing accounts receivable, cash from the Nigerian SFD® Survey and the note receivable in respect of the Loan Arrangement. This increase was offset due to the recognition of the current portion of lease obligations under ASC Topic 842 ("Topic 842") and contract obligations (deposit) received from AGV for the Co-operation Agreement.

Accounts Payable

Accounts<br>Payable	YE-19	YE-18	Net<br>Change	%
Trade<br>accounts payable	$(181,790)	$(138,509)	$(43,281)	31
Deferred<br>gain on sale of aircraft	-	(155,301)	155,301	(100)
Deferred<br>director and advisor payable	(24,352)	(48,079)	23,727	(49)
Accrued<br>liabilities	(136,257)	(110,375)	(25,882)	23
Vacation<br>pay accrued	(106,529)	(47,271)	(59,258)	125
Total<br>Accounts Payable	(448,928)	(499,535)	50,607	(10)

Accounts payable increased by $50,607, or 10%, in YE-19 compared to YE-18 for the following reasons:

●

trade accounts payable increased by $43,281, or 31%, due primarily to increased professional fees payable in connection with the Targeted Issuer Bid (payables are considered current at December 31, 2019 other than minor disputed items);

●

the deferred gain on sale of aircraft was reclassified under current lease obligations;

●

deferred director and advisor fees decreased by $23,727, or 49%, as director fees have been fully paid (the remaining payable is for advisor fees from prior to YE-18 which are in the process of being settled);

●

accrued liabilities increased by $25,882, or 23%, due to timing of invoice receipts, which is consistent with the decrease in accounts payable; and

●

vacation pay accrued increased by $59,258, or 125%, as employees vacations were deferred to complete the Nigerian SFD® Survey.

NXT<br>Energy Solutions Inc.	page	<br>16
MD&A<br>for the year ended December 31, 2019

The overall net changes in cash balances in each of the periods noted above is a function of several factors including any inflows (outflows) due to changes in net working capital balances and net of any cash transferred into/out of short-term investments. Further information on the net changes in cash, by each of the operating, financing and investing activities, is as follows:

Cash Flow

Cash Flow - from<br>/ (used in)	Q4-19	Q4-18	YE-19	YE-18
Operating<br>activities	$1,289,465	$(1,162,392)	$4,078,427	$(6,043,919)
Financing<br>activities	(1,354,121)	(12,187)	(1,385,787)	9,176,839
Investing<br>activities	257,236	1,100,000	(173,927)	(2,960,006)
Net<br>source (use) of cash	192,580	(74,579)	2,518,713	172,914
Cash<br>and cash equivalents, start of period	2,665,665	414,111	339,532	166,618
Cash<br>and cash equivalents, end of period	2,858,245	339,532	2,858,245	339,532
Cash<br>and cash equivalents	2,858,245	339,532	2,858,245	339,532
Short-term<br>investments	3,781,512	3,900,000	3,781,512	3,900,000
Total<br>Cash and Short-Term Investments	6,639,757	4,239,532	6,639,757	4,239,532
Operating<br>Activities	Q4-19	Q4-18	YE-19	YE-18
---	---	---	---	---
Net<br>income (loss) for the period	$(1,775,287)	$(1,392,716)	$3,772,908	$(6,968,511)
Total<br>non-cash expense items	383,794	184,362	1,777,580	1,782,762
	(1,391,493)	(1,208,354)	5,550,488	(5,185,749)
Change<br>in non-cash working capital balances	2,680,958	45,962	(1,472,061)	(858,170)
Total<br>Cash from (used in) Operating Activities	1,289,465	(1,162,392)	4,078,427	(6,043,919)

Operating cash flow increased by $2,451,858 in Q4-19 as compared to Q4-18 and by $10,122,347 in YE-19 as compared to YE-18 because of payments received from the Nigerian SFD® Survey net of payments for survey costs.

NXT<br>Energy Solutions Inc.	page	<br>17
MD&A<br>for the year ended December 31, 2019
Financing<br>Activities	Q4-19	Q4-18	YE-19	YE-18
---	---	---	---	---
Net<br>funds used-in targeted issuer bid	$(1,343,184)	$-	$(1,343,184)	$-
Proceeds<br>from exercise of stock options	-	-	-	5,067
Net<br>proceeds from equity financings	-	(2,033)	-	9,211,351
Repayment<br>of capital lease obligation	(10,937)	(10,154)	(42,603)	(39,579)
Total<br>Cash from (used in) Financing Activities	(1,354,121)	(12,187)	(1,385,787)	9,176,839

During Q4-19 the Company completed the TIB for $1,250,000 plus costs of $93,184 to repurchase 4,166,667 TIB Common Shares, at a price of $0.30 per.

NXT recorded a net cash financing outflow of $10,937 in Q4-19 and $42,603 in YE-19 on payments for its finance leases. The YE-18 inflows were received in connection with equity financings.

Investing<br>Activities	Q4-19	Q4-18	YE-19	YE-18
Purchase<br>of property and equipment	$-	$-	$(216,691)	$(10,006)
Decrease<br>(increase) in short-term investments	257,236	1,100,000	42,764	(2,950,000)
Total<br>Cash from (used in) Investing Activities	257,236	1,100,000	(173,927)	(2,960,006)

Short-term investments in Q4-19 and YE-19 increased as the Company invested excess funds from operations into Guaranteed Investment Certificates. The decrease in short-term investments in Q4-18 was for cash to finance operating costs. The increase in short-term investments in YE-18 was from the cash received from equity financings.

Contractual Commitments

Associated with the adoption of Topic 842, all operating leases were recognized on the 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.

The estimated minimum annual commitments for these leases are as follows, as at December 31, 2019:

For the period<br>ended December 31	Office<br>Premises
2020	$222,069
2021	222,501
2022	222,501
2023	222,501
2024	222,501
	1,112,073
2025	166,876
	1,278,949
NXT<br>Energy Solutions Inc.	page	<br>18
---	---
MD&A<br>for the year ended December 31, 2019

Off-balance Sheet Arrangements

The Company has no off-balance sheet arrangements as of the date of this MD&A other than office premise non-lease operating costs with Interloq Capital (the "Landlord"). If the Company were to default on its office lease the current month rent including operation costs plus the next three months become immediately due. Operating cost amounts are disclosed under the heading "Liquidity and Capital Resources – Contractual Commitments". NXT pays an estimated operating cost during the current year, but has the obligation to pay the actual operating costs incurred as defined in the office lease with the Landlord early in the first quarter of the preceding year if the estimate was low, or will receive a refund if the estimate was too high. Currently, the Company believes that the current operating cost estimate is reasonable and is constant with discussions with the Landlord.

Transactions with Related Parties

In addition to the related party transactions discussed elsewhere herein (i.e. the Co-operation Agreement, the Loan Arrangement and the Targeted Issuer Bid), one of the members of NXT's Board, Thomas Valentine, is a partner in the law firm Norton Rose Fulbright Canada LLP which provides legal advice to NXT. Legal fees incurred with Norton Rose Fulbright Canada LLP were as follows:

	Q4-19	Q4-18	YE-19	YE-18
Legal<br>Fees	$111,562	$7,796	$276,261	$249,218

Accounts payable and accrued liabilities includes a total of $146,197 ($5,999 as at December 31, 2018) payable to Norton Rose Fulbright Canada LLP. Interest of $1,809 was received from AGV during the year.

NXT<br>Energy Solutions Inc.	page	<br>19
MD&A<br>for the year ended December 31, 2019

Critical Accounting Estimates

The key elements and assumptions are substantially unchanged from those described in NXT's annual audited consolidated financial statements as at and for the year-ended December 31, 2018 other than as described below.

Revenue

The performance obligation for NXT is the acquisition, processing, interpretation and integration of 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 obligation 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 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 of the performance obligation being satisfied over time.

IP Assets

The value attributed to the IP assets acquired in 2015 was $25.3 million. The IP assets are being amortized on a straight-line basis over a 15-year period (future amortization expense of $1,685,000 per year) and are also subject to ongoing tests of potential impairment of the recorded net book value. No impairments were recognized in Q4-19 and Q4-18. Any adverse change in competition, patent protection and the oil and gas market could substantially change the useful life of the IP asset.

NXT<br>Energy Solutions Inc.	page	<br>20
MD&A<br>for the year ended December 31, 2019

Changes in Accounting Policies

Leases

On January 1, 2019, NXT adopted Topic 842, Leases 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 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 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; and

b)

the use of hindsight in determining the lease term where the contract contains terms to extend or terminate the lease.

In accordance with Topic 842, NXT recognized a Right Of Use ("ROU") asset and corresponding lease liability for all operating leases on the Consolidated Balance Sheet. Prior to the adoption of Topic 842, operating leases were not recognized on the Consolidated Balance Sheet. There was no impact to finance leases on transition to Topic 842. The impact from recognizing operating leases on NXT's Consolidated Balance Sheet is as follows:

Account	Notes	As<br>reported<br><br><br>December 31,<br>2018	Adjustments	Balance on<br>Adoption as at January 1, 2019
Property<br>and equipment	i	$683,157	$(139,725)	$543,432
Right<br>of Use	ii	-	3,535,919	3,535,919
Total<br>Assets		$25,264,268	$3,396,194	$28,660,462
Accounts<br>payable and accrued liabilities	iii	$499,535	$(155,301)	$344,234
Current<br>portion of capital lease obligations	i	42,603	(42,603)	-
Current<br>portion of lease obligations	iv	-	672,087	672,087
Capital<br>lease obligations	i	42,515	(42,515)	-
Long-term<br>lease obligations	ii	-	3,405,894	3,405,894
Other<br>liabilities	iv	362,368	(362,368)	-
Deferred<br>charges	v	79,000	(79,000)	-
Total Liabilities and Shareholders' Equity		$25,264,268	$3,396,194	$28,660,462

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.

ii.

Right of use: Right of use assets have been recognized for the building lease, aircraft lease and office equipment. Upon transition the building and aircraft right of use assets were calculated on the net present value of future lease payments less deferred charges for the building. The office equipment lease was previously recorded as a finance lease. The unamortized portion of the leased asset was reclassified to right of use assets.

iii.

Lease liabilities: 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 $4,077,981 were recorded as at January 1, 2019, of which $672,087 was the current portion.

iv.

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.

v.

Deferred charges: 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<br>Energy Solutions Inc.	page	<br>21
MD&A<br>for the year ended December 31, 2019

Although Topic 842 does not have a material impact on the Consolidated Statements of Income (loss) and Comprehensive Income (Loss) or Cash Flows, the change in the accounting of the aircraft lease now has interest expense of $15,095 and $69,776 for the three and twelve months ended December 31, 2019 being recorded, whereas under Topic 840 that amount was recorded under survey costs. In the Consolidated Statements of Cash Flows under Operating Activities, amortization of deferred gain on sale of aircraft and deferred charges are now presented as Non-cash lease and interest expense, under Topic 842.

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 Consolidated 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 Consolidated 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 include 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.

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 Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) on a straight line basis over the lease term. Finance lease ROU assets are amortized 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.

Financial Instruments

The Company's non-derivative financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, notes receivable, accounts payable and accrued liabilities and 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 arising from these financial instruments, but is exposed to significant credit risk with accounts receivable and notes receivable. For accounts receivable, where possible, NXT requests advance payments and utilizes risk mitigation products offered by entities such as Export Development Canada including, for example, insurance coverage of contract accounts receivable, guarantee support for contract performance bonds and wrongful call insurance for such bonds. For the notes receivable, NXT has secured the note receivable against assets of AGV’s affiliates.

NXT is exposed to foreign exchange risk as a result of 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.

As at December 31, 2019 and December 31, 2018, the Company held no derivate financial instruments.

For more information relating to risks, see the section titled "Liquidity and Capital Resources – Net Working Capital".

Outstanding Share Capital

	April<br>13,<br><br><br>2020	December 31,<br>2019	December 31,<br>2018
	64,406,891	64,406,891	68,573,558
Stock<br>options	932,600	1,169,500	1,297,000
	-	-	3,421,646
Total<br>Share Capital and Dilutive Securities	65,339,491	65,576,391	73,292,204

All 3,421,648 Warrants issued in 2018 expired as of October 31, 2019, pursuant to the terms of the Targeted Issuer Bid.

NXT<br>Energy Solutions Inc.	page	<br>22
MD&A<br>for the year ended December 31, 2019

Disclosure Controls and Procedures ("DCPs") and

Internal Controls over Financial Reporting ("ICFR")

NXT's Chief Executive Officer and Chief Financial Officer (together the "Responsible Officers") are responsible for establishing and maintaining DCPs, or causing them to be designed under their supervision, for NXT to provide reasonable assurance that material information relating to the Company is made known to the Responsible Officers by others within the organization, particularly during the period in which the Company's quarterly and year-end consolidated financial statements and MD&A are being prepared.

DCPs and other procedures are designed to ensure that information required to be disclosed in reports that are filed is recorded, summarized and reported within the time periods specified by the relevant security authority in either Canada or the United States of America. DCPs include controls and procedures designed to ensure that information required to be disclosed in our reports is communicated to management, including our Responsible Officers, to allow timely decisions regarding required disclosure.

The Company has established and maintains ICFR using the criteria that were set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). The control framework was designed or caused to be designed under the supervision of the Responsible Officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP.

In an evaluation of the effectiveness of the Company's DCPs as defined under the rules adopted by the Canadian securities regulatory authorities and by the United States Securities and Exchange Commission, the Company's Responsible Officers concluded that there are material weaknesses in the Company's ICFR that have a direct impact on the Company's DCPs:

●

due to the limited number of staff, it is not feasible to achieve adequate segregation of incompatible duties – NXT mitigates this deficiency by adding management and Audit Committee review procedures over the areas where inadequate segregation of duties are of the greatest concern; and

●

NXT does not have a sufficient level of staff with specialized expertise to adequately conduct separate preparation and a subsequent independent review of certain complex or highly judgmental accounting issues – NXT mitigates this deficiency by preparing financial statements with their best judgments and estimates of the complex accounting matters and relies on reviews by management, external consultants and the Audit Committee for quality assurance.

From time to time to reduce these risks and to supplement a small corporate finance function, the Company engages various outside experts and advisors to assist with various accounting, controls and tax issues in the normal course.

The small size of the Company's finance team has resulted in control deficiencies in maintaining DCPs and ICFR that in turn have led to a recurrence of previously identified deficient disclosure.  Given the small size of the Companies finance team and in order to improve ICFR moving forward, management has established a practice of increased engagement of the Company's Disclosure Committee and Audit Committee in reviewing the public disclosure and has increased engagement of external consultants and legal counsel as well.

NXT's efforts to mitigate the risks associated with the above-mentioned deficiencies has resulted in continuous improvements in its DCPs. The Responsible Officers concluded that, as at December 31, 2019, the Company's ICFR have improved, but are still not effective and as a result its DCPs are still not sufficiently effective. NXT reached this conclusion based upon its assessment that there is a more than remote likelihood that its ICFR will not prevent or detect material misstatements if they should exist in the Company's consolidated financial statements. NXT continues a process of continuous improvement in financial reporting and disclosure policies and responsibilities from which the Company expects to see continued benefits in 2020. The Responsible Officers continue to take certain actions to remediate these material weaknesses including: (i) the implementation of new controls with regards to the review procedures surrounding its disclosure; and (ii) engagement of third-party specialists. In addition, the Company has appointed its Corporate Controller as the new Chief Financial Officer as of August 1, 2019. The Chief Financial Officer engages subject matter consultants as the need arises.

The new controls over financial reporting and disclosure policies and responsibilities have been performed over seven quarterly periods. Material weaknesses cannot be considered remediated until the remedial controls operate for a sufficient period of time and Responsible Officers have concluded through testing that these controls are operating effectively.

It should be noted that a control system, including the Company's DCPs and ICFR procedures, no matter how well conceived, can provide only reasonable, but not absolute assurance that the objectives of the control system will be met, and it should not be expected that the DCPs and ICFR will prevent all errors or fraud.

Additional Information

Additional information related to the Company, including the Company's Annual Information Form, is available on NXT's website at www.nxtenergy.com and on SEDAR at www.sedar.com.

NXT<br>Energy Solutions Inc.	page	<br>23
MD&A<br>for the year ended December 31, 2019

nsfdf_ex993

Exhibit 99.3

NXT ENERGY SOLUTIONS INC.

ANNUAL INFORMATION FORM

FOR THE YEAR ENDED 31 DECEMBER 2019

April 13, 2020

TABLE OF CONTENTS

	FORWARD-LOOKING<br>STATEMENTS	3
1.0	CORPORATE<br>STRUCTURE
1.1	Company<br>Information	4
1.2	Intercorporate<br>Relationship	5
2.0	GENERAL<br>DEVELOPMENT OF THE BUSINESS
2.1	Three Year<br>History	5
3.0	BUSINESS<br>OVERVIEW
3.1	Company’s Operations and<br>Principal Activities	9
3.2	Seasonality of the Company’s<br>Main Business	10
3.3	Sources and Availability of Raw<br>Materials	10
3.4	Marketing<br>Channels	11
3.5	Employees	11
3.6	Patents	11
3.7	Competition	12
3.8	Government and Environmental<br>Regulations	12
3.9	Property, Plant &<br>Equipment	13
4.0	RISK<br>FACTORS
4.1	Continued<br>Operations	14
4.2	Financial<br>Statements	14
4.3	Commodity<br>Prices	14
4.4	Foreign Currency<br>Fluctuations	14
4.5	Interest Rate<br>Fluctuations	15
4.6	Availability of<br>Aircraft	15
4.7	Segregation of<br>Duties	15
4.8	Related Party<br>Transactions	15
4.9	Conflicts of<br>Interest	16
4.10	Rights to SFD®<br>Technology	16
4.11	Reliance on Specialized<br>Equipment	16
4.12	Geological<br>Conditions	16
4.13	Technological<br>Improvement	16
4.14	Reliance on Key<br>Personnel	17
4.15	Cyber<br>Security	17
4.16	Ability to Trade<br>Shares	18
4.17	Dividends	18
4.18	Dilution	18
4.19	Intellectual<br>Property	18
4.20	Flight<br>Operations	19
4.21	Foreign<br>Countries	20
4.22	Flight<br>Permits	20
4.23	Covid-19<br>Pandemic	21
5.0	DIVIDEND<br>POLICY	21
6.0	CAPITAL<br>STRUCTURE
6.1	Common<br>Shares	21
6.2	Preferred<br>Shares	22
6.3	Warrants	22
7.0	MARKET FOR<br>SECURITIES	22
8.0	ESCROWED<br>SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON<br>TRANSFER	23
9.0	DIRECTORS and<br>OFFICERS
9.1	Cease Trade Orders, Bankruptcies,<br>Penalties or Sanctions	25
9.2	Board<br>Practices	25
10.0	RELATED PARTY<br>TRANSACTIONS
10.1	Technology Transfer Agreement<br>(TTA)	29
11.0	TRANSFER<br>AGENT	29
12.0	MATERIAL<br>CONTRACTS	29
13.0	LEGAL<br>PROCEEDINGS	29
14.0	INTEREST OF<br>EXPERTS	29
15.0	ADDITIONAL<br>INFORMATION	29
APPENDICES
A	AUDIT COMMITTEE<br>CHARTER	30
B	BOARD OF<br>DIRECTORS MANDATE	33

FORWARD-LOOKING STATEMENTS

Except for any historical information contained herein, certain statements contained in this Annual Information Form constitute “forward-looking statements” or “forward-looking information” within the meaning of applicable securities legislation, with respect to our financial condition, results of operations and business. These statements relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “will” and similar terms and phrases, including references to assumptions. These forward-looking statements involve risks and uncertainties, including current trend information, projections for deliveries and other trend projections, that may cause our actual future activities and results of operations to be materially different from those suggested or described in this Annual Information Form.

These risks include:

●

novel coronavirus (2019-nCoV/COVID-19), and the potentially negative effects thereof on the Company's workforce, its supply chain or demand for its products our ability to generate sufficient ongoing cash flow from operations or to raise adequate capital to allow us to grow the business and continue operations;

●

our ability to generate sufficient ongoing cash flow from operations or to raise adequate capital to allow us to grow the business and continue operations;

●

conducting operations in international markets;

●

the emergence of alternative competitive technologies;

●

protection of our intellectual property and rights to our SFD® technology;

●

reliance on a limited number of aircraft;

●

the loss of key personnel;

●

our dependence on a limited number of clients;

●

foreign currency and interest rate fluctuations which may affect our financial position;

●

changes in, or in the interpretation of, laws, regulations or policies; and

●

volatility in oil and natural gas commodity prices which may reduce demand for our services; and

●

other factors described herein under “Risk Factors”.

If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected. Given these uncertainties, users of the information included in this Annual Information Form, including investors and prospective investors, are cautioned not to place undue reliance on such forward-looking statements. We do not intend to update the forward-looking statements included in this Annual Information Form.

In this Annual Information Form, except as specified otherwise or unless the context requires otherwise, “we”, “us”, “our”, the “Company”, and “NXT” refer to NXT Energy Solutions Inc. and its subsidiaries. All references to “fiscal” in connection with a year shall mean the year ended December 31.

All financial information contained herein is expressed in Canadian dollars (“CDN$”) unless otherwise stated.

AIF for the year ended December 31, 2019

3

CORPORATE STRUCTURE

1.1

Company Information

NXT Energy Solutions Inc. is a Calgary-based technology company whose proprietary and patented SFD® survey system respond to fine-scale perturbations in the gravitational field caused by changes in subsurface density and stress distribution.  These responses are transformed through electromechanical transduction into electronic digital signals as the output.  The SFD® method has proven highly effective at identifying potential hydrocarbon traps in a wide variety of geological settings onshore and offshore. The SFD® survey system enables our clients to focus their hydrocarbon exploration decisions concerning land commitments, data acquisition expenditures and prospect prioritization on areas with the greatest potential. SFD® is environmentally friendly and unaffected by ground security issues or difficult terrain and is the registered trademark of NXT Energy Solutions Inc. NXT Energy Solutions Inc. provides its clients with an effective and reliable method to reduce time, costs and risks related to exploration. SFD® and NXT® are both registered trademarks of NXT Energy Solutions Inc.

Our head office is located at Suite 302, 3320 - 17th Ave. SW, Calgary, Alberta Canada. Phone number is (403) 264-7020.

We are a reporting issuer in Alberta, Ontario and British Columbia and are principally governed by the Alberta Securities Commission in accordance with the Securities Act (Alberta) and the Business Corporations Act (Alberta). We are a foreign private issuer under United States securities laws and are subject to the regulation of the US Securities in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

AIF for the year ended December 31, 2019

4

1.2

Intercorporate Relationship

The following table provides a list of all subsidiaries and other companies controlled by NXT:

Subsidiaries	Date and Manner<br>of Incorporation	Authorized Share<br>Capital	Issued and<br>Outstanding Shares	Nature of the<br>Business	% of each Class<br>of Shares owned by NXT
NXT<br>Energy USA, Inc.	October<br>20, 1995 by Articles of Incorporation – State of Nevada,<br>USA	20,000,000<br>common	5,000,000<br>common	Inactive	100%
NXT<br>Aero USA, Inc.	August<br>28, 2000 by Articles of Incorporation – State of Nevada,<br>USA	1,000<br>common<br><br><br>4,000<br>preferred	100<br>common	Inactive	100%
Cascade<br>Petroleum Inc. (Formerly Survey Services International<br>Inc.)¹	September<br>6, 2011 by Articles of Incorporation – Province of<br>Alberta	Unlimited<br>number of common shares	100<br>common	Inactive	100%
NXT<br>Energy Services (SFD) Inc.	December<br>2008 by Federal Articles of Incorporation –<br>Canada	Unlimited<br>number of common shares	100<br>common	Inactive	100%
PetroCaza<br>Exploration Inc.	May<br>2015 by Articles of Incorporation – Province of<br>Alberta	Unlimited<br>number of common and preferred shares	100<br>common	Inactive	100%

¹ On January 16th, 2017 the name of Survey Services International Inc. was changed to “Cascade Petroleum Inc.”

In February 2010, NXT registered a wholly owned “Branch” entity with the tax administration and Chamber of Commerce authorities in Colombia, (NXT Energy Solutions Inc. Sucursal Colombia). The formation of this branch became a Colombian legal requirement following the Company commencing permanent activity in Colombia in 2010 while conducting commercial survey operations. This branch was closed in 2017.

In addition, in March 2015, NXT registered NXT Energy Solutions Inc. (Sucursal Bolivia) as a wholly owned “Branch” entity under the laws of the Plurinational State of Bolivia, to contract and conduct survey operations in Bolivia. Operations have now ceased in Bolivia and we are in the process of closing the branch which should be completed in the second quarter of 2020.

2.

GENERAL DEVELOPMENT OF THE BUSINESS

2.1

Three Year History

We have an opportunity to provide our services in any region of the world where oil and gas exploration activities are conducted. However, we choose to be strategic and focus our limited marketing and sales resources on a limited number of markets in the early stages of commercialization on a limited number of markets.

A summary of revenues derived in our primary geographic market segments for the last 3 fiscal years:

Year ended December 31	2019	2018	2017
Nigeria	$11,976,149	$-	$-
	$11,976,149	-	-

AIF for the year ended December 31, 2019

5

2017

NXT completed the data acquisition and interpretation of 37,596 line km for the first ever SFD® Multi-Client survey in the Gulf of Mexico in June 2017. The airborne survey was conducted over the area that was identified by Comision Nacional de Hidrocarburos (“CNH”) for the shallow water bid round 2.1 covering the Tampicao-Misantla, Veracruz and Cuencas del Sureste exploration areas. The survey data provides 100% grid coverage over the offshore blocks offered in Bid Round 2.1, an area of approximately 8,900 square kilometers and was completed ahead of time and budget. In addition, NXT acquired incidental data over many of the 35 blocks offered in the recently concluded Bid Round 3.1. Based on the Five-Year Tender Program for the Exploration and Extraction of Hydrocarbons 2015 - 2019 by the Mexican Secretary of Energy, much of the remaining data will also be applicable to future Bid Rounds. To date, there have been no sales of this proprietary data.

We also completed testing of an upgraded SFD® Data Acquisition System. This system was successfully used on the Gulf of Mexico SFD® survey project and is more reliable, compact, and expandable to acquire larger SFD® datasets. It also eliminates the dependency on custom operating systems.

Initiatives to expand and protect our IP (including patenting and new R&D initiatives) were very successful in 2017 and 2018. NXT’s patent applications have been filed in nine (9) jurisdictions.  Thus far seven (7) patents have been granted: U.S.A. (2), Canada, Japan, Russia, Mexico, and China. Three (3) are pending: European Patent Office (38 countries), Brazil, and India. In total NXT has been granted patents or received patent allowance for SFD® in 48 separate countries.

During 2017 NXT made significant progress in strengthening its liquidity and working capital position through a series of corporate actions described below. Nevertheless, liquidity remains a major risk and concern of the company.

Sale Lease Back: In December 2015, NXT acquired (from its third party owner), a 1997 Cessna Citation Ultra 560 jet aircraft, the primary aircraft which had previously been charter hired to NXT by its operator, Air Partners. In order to enhance the short-term cash flow of the business, NXT completed a sale and leaseback agreement with a Calgary based international aircraft services organization on April 28, 2017. The terms of the agreement involved NXT selling its’ Cessna Citation aircraft that was purchased in 2015 for US$2,000,000 for the sum of US$2,300,000. NXT leased the aircraft back for a minimum period of 60 months and retains all existing operating rights and obligations. Net proceeds to NXT from the sale were approximately CAD $2,700,000, after payment of all commissions and fees. The net book value of the asset of $2,400,000 was derecognized and the resulting gain on disposition of $776,504 was deferred ($621,203 included in long term liabilities and $155,301 included in accounts payable and accrued liabilities). The gain will be recognized as a reduction to the Company’s lease expense over the 60 month term of the lease. The resulting leaseback transaction is an operating lease. NXT is required to make monthly payments to the lessor of approximately US$39,500. NXT has the option to extend the term of the lease by an additional two years. Should NXT want to repurchase the aircraft at the end of the initial lease term, the purchase price is US$1,450,000.

Reduction in Corporate Costs: Following the completion of the Leaseback Transaction, NXT took further steps to reduce corporate costs. The most significant of these steps included a reduction in non-essential staff and new Human Resource policies to reduce staffing costs.

Rights Offering: On September 26th, 2017 the Company announced a Rights Offering to its existing shareholders.

The Rights Offering closed on November 3rd 2017 with the following results:

	Non<br>Insiders	Insiders	Total
Basic<br>Subscription	1,556,751	680,856	2,237,607
Over<br>Subscription	1,949,683	-	1,949,683
Total Shares<br>Purchased	3,506,434	680,856	4,187,290
Total<br>Proceeds			2,093,645

All values are in US Dollars.

AIF for the year ended December 31, 2019

6

2018

In July 2018, the company completed the Private Placement. In total, the Subscriber purchased 10,264,946 Units at a price of $0.924 per Unit for total gross proceeds of approximately $9,484,810.

Following the Company’s participation at the Upstream West Africa Summit in Senegal in Q2, NXT management traveled twice to Africa to meet with representatives of the Nigerian National Petroleum Corporation (“NNPC”) and the Ghana National Petroleum Corporation (“GNPC”) to discuss the benefits SFD® would bring to their current exploration programs. Discussions with NNPC continued in the fourth quarter of 2018 and have resulted in the signing of a contract in March 2019 with PE Energy Limited (“PE”), a Nigerian oil and gas service company, for the value of approximately $US8.9 million.

NXT received notification of the granting of NXT's SFD® patent in China on April 13, 2018. In September, 2018, NXT received a United States patent for its new sensor design we term the “Cascade” configuration. The Cascade sensor is the result of NXT’s continued research & development efforts and builds upon our existing US patent. Management believes the Company’s Cascade sensors will provide enhanced ability for identifying trapped fluid bodies indicative of potential hydrocarbon accumulations along with improved reliability and flexibility during SFD® survey operations.

In October, we signed an MOU with BGP Inc., a subsidiary of China National Petroleum Corporation, to further explore opportunities for NXT and BGP Inc. to work together. NXT’s forward strategy is to secure SFD® contracts with BGP and its affiliates.

2019

Nigerian SFD® Survey: In March 2019, the Company signed an US$8.9 Million contract with PE. PE has a contract with the NNPC, to provide 5,000 line kilometers of SFD®  surveys in Nigeria. Data acquisition operations for this contract were completed on May 1, 2019 and NXT’s recommendations were delivered during Q3-19.

The Company conducted significant due diligence to ensure it understands the business environment in Nigeria and complies with Canadian, United States of America and Nigerian law. The Company has engaged advisors such as Norton Rose Fulbright and Kreller Group to provide guidance to ensure the integrity of these contracts.

The Company received payments of US$8.4 million for the project at the date of this Annual Information Return.

Because this project was the Company’s first project in Africa, a number of logistical issues needed to be overcome. The Company has delivered more than 10,000 pages of documents to NNPC and the Department of Petroleum Resources as part of the qualification process which took seven months. Before receiving approval for the survey, NXT had to complete a test flight onshore. Within days, we presented the preliminary results to NNPC and received approval for the project.

From April 17 to May 1, 2019, NXT completed the 5,000 line kilometers of data acquisition. The Company presented the final report in the Q3-19. The contracted holdback amount of approximately $0.5 million USD is expected to be paid to the Company in Q2-20.

The Department of Petroleum Resources (the "DPR"), a department under the Federal Republic of Nigeria's Ministry of Petroleum Resources responsible for the sustainable development of Nigeria's oil and gas resources, provided written confirmation of their recommendation in favour of NXT's SFD® technology based on the recent survey results, noting specifically "in line with federal government aspiration to increase its Oil and Gas reserves base at a considerable reduced cost, risk and optimize exploration cycle, the Stress Field Detection SFD® technology is hereby adopted and recommended to be deployed as an independent data exploration tool for hydrocarbon exploration to identify and rank prospect-level leads to focus exploration efforts in the Nigerian Oil and Gas industry".

Co-operation Agreement: In February 2019, NXT entered into a Co-operative Agreement with one of its largest shareholders, AGV, to propose up to three SFD® surveys within two years. The Co-operative Agreement is based on a cost plus formula and a gross overriding royalty interest in oil and gas production arising on lands subject to the surveys.

Under the Co-operative Agreement, NXT and AGV will consider at least two SFD® surveys in North America and an additional SFD® survey internationally. The first SFD® survey was contemplated to be completed by August 31, 2019 and the fees payable by AGV are partially secured by a US$100,000 non-refundable deposit. NXT has granted AGV an extension of the August 31, 2019 requirement under the Co-operation Agreement to complete at least one of three SFD® survey to June 30, 2020. If the survey is not completed by June 30, 2020, the non-refundable deposit will be forfeited to NXT. AGV has committed to completing an exploration drilling program on each of the lands subject to the SFD® surveys within two years of completion of the surveys.

AIF for the year ended December 31, 2019

7

Loan Arrangement:

In September 2019, NXT entered into the Loan Arrangement with AGV and advanced to AGV the US$250,000 Principal Amount, as evidenced by, and governed in accordance with the terms of, a promissory note dated September 6, 2019 (the "Notes Receivable"), for the purpose of providing AGV with additional funds necessary to continue advancing the common objectives of NXT and AGV under the Co-operation Agreement. Pursuant to the Notes Receivable, it was agreed and acknowledged, among other things, that:

a)

AGV was indebted to the Company and unconditionally promised to pay to, or to the order of, the Company on or before December 15, 2019 (the "Repayment Date"), the Principal Amount together with all interest payable at a rate of the greater of 2% and the rate prescribed under the Income Tax Act (Canada) from time to time in monthly arrears on the first day of each month commencing October 1, 2019 until the repayment of the Principal Amount in full (the "Interest");

b)

AGV had the right and privilege of prepaying the whole or any portion of the Principal Amount together with the Interest at any time or times without notice, bonus or penalty; and

c)

NXT, in its sole and absolute discretion, was entitled to elect to receive any payment made by AGV in accordance with the Notes Receivable by way of, in whole or in combination: (i) wire transfer or other immediately available funds ("Cash"), or (ii) delivery for cancellation to the Company of the equivalent number of Common Shares having a fair market value equal to the aggregate of such amounts, calculated using the volume weighted average price of the Common Shares as reported and traded on the Toronto Stock Exchange for the five trading days immediately preceding the repayment date (the "5-day VWAP").

On December 13, 2019, the last business and trading day before the Repayment Date, the Company elected to receive and directed AGV to:

a)

in respect of the Principal Amount, deliver to the Company for cancellation 543,673 Common Shares, calculated as the product of US$250,000 being the Principal Amount owing on the last business day before the Repayment Date, and 1.3183, being the daily average US$/CDN$ exchange rate as quoted on the Bank of Canada's website for December 13, 2019, the last business day for which a daily average exchange rate was published before the Repayment Date, divided by $0.6062, being the 5-day VWAP, the delivery of such Common Shares to occur subject to and only upon receipt of confirmation from the Company that all necessary regulatory approvals had been received; and

b)

in respect of the Interest, pay US$1,366.12 by way of Cash. AGV paid this amount.

On April 13, 2020, NXT issued a Direction to Pay to AGV in which NXT has revoked the previous Direction to Pay dated December 13, 2019, and has now directed AGV to deliver US$250,000 as repayment on the Principle Amount. Interest will begin to accrue until the date on which payment in full of all amounts owing pursuant to the Principle Amount are received by NXT.

The Company may change its election if it so decides, in its sole and absolute discretion to receive the Principal Repayment by way of Common Shares by application to the Alberta Securities Commission.

Targeted Issuer Bid:

Between November 15, 2019 (the "TIB Commencement Date") and December 9, 2019 (the "TIB Completion Date"), NXT purchased for cancellation an aggregate of 4,166,667 Common Shares, representing approximately 6.08% of the 68,573,558 Common Shares outstanding as at the TIB Commencement Date. The purchase price of $0.30 per Common Share represented a discount of approximately 22.9% relative to the market price of $0.389 per Common Share as at the TIB Commencement Date. Gross proceeds received by AGV totaled approximately $1,250,000.00.

The terms of the Targeted Issuer Bid also provided that the 3,421,648 Warrants expired effective October 31, 2019, and that certain deadlines under the Co-operation Agreement be extended. AGV's registered ownership in the Company was reduced from 10,264,946 Common Shares and 3,421,648 Warrants, representing, on a fully diluted basis, approximately 20.0% of the 68,573,558 issued and outstanding Common Shares as at the TIB Commencement Date, to 6,098,279 Common Shares, representing approximately 9.5% of the 64,406,891 issued and outstanding Common Shares as at the TIB Completion Date.

By strategically acquiring its Common Shares for cancellation in a private transaction at a discount to the then current market price, the Company improved the equity position of its other shareholders and provided AGV with additional funds necessary to continue advancing the common objectives of the parties under the Co-operation Agreement, while also avoiding a substantial decrease in the market price and liquidity of the Common Shares reasonably expected if AGV were to sell a substantial portion of its equity position into the open market.

The Targeted Issuer Bid was exempt from the formal valuation and disinterested shareholder approval requirements typically applicable to related party transactions under applicable securities laws as neither the fair market value of the Common Shares (approximately $1,620,833.46) nor the consideration received by AGV for the Common Shares (approximately $1,250,000.00) exceeded 25% of the Company's market capitalization at the TIB Commencement Date (approximately $26,675,114.06).

AIF for the year ended December 31, 2019

8

Outlook

NXT intends to continue its business model of providing SFD® Surveys on a fee for service basis, marketing of multi-client data and is also beginning to execute its vertical model where it will share in successful production as a result of SFD® recommendations.

3.

BUSINESS OVERVIEW

3.1

Company’s Operations and Principal Activities

We utilize our proprietary, airborne SFD® survey system to provide a service for the oil and gas exploration industry. NXT provides a rapid and cost-effective method for our clients to evaluate large land areas for their exploration potential.

The underlying technology employed by our SFD® survey system was invented by George Liszicasz, our President and Chief Executive Officer (“CEO”), Chairman and our largest shareholder. The technology was initially licensed to the Company by Mr. Liszicasz until December 31, 2006 through a series of consecutive license agreements. On December 31, 2006 we obtained the rights to the technology from Mr. Liszicasz pursuant to the terms of a Technology Transfer Agreement (“TTA”).

Upon execution of the TTA, Mr. Liszicasz transferred to us all his rights and entitlements to the SFD® technology for use in the field of hydrocarbon exploration.

For further details of the TTA, see “Section 10.1” below.

SFD® technology for the purposes of the TTA is defined as the theories of quantum physics and engineering which are utilized in the operation of stress field detectors used by NXT for the reception, collection and recording of subsurface geological stresses for hydrocarbon exploration.

SFD® sensors remotely respond to gravity perturbations and changes in subsurface stress regimes that are meaningful for oil and gas exploration. These responses are captured as raw data that, when interpreted, can provide an indirect method to detect the presence of geological features such as structures, faults, fractures and reefs that are often associated with traps and reservoir accumulations. SFD® is highly effective in frontier and under-explored areas, in offshore or onshore environments, and over any terrain. The SFD® survey system has been demonstrated to quickly focus exploration resources, offering the benefit of reducing the risk, time and expense associated with frontier exploration.

Following completion of the aerial surveys, we deliver to our clients a detailed report and maps of the surveyed area that identifies, ranks and recommends areas with SFD® indications of reservoir potential.

In 2006, we commenced our current business model and began providing SFD® survey services to clients on a fee-for-service basis. In accordance with this model, we have not invested either directly or indirectly in exploration or development wells or engaged in other exploration or production activities. Our current business model minimizes our capital requirements, thereby conserving cash, and minimizes any perceived or real conflicts between the interests of NXT and its survey clients.

NXT’s primary business model is to earn revenues by conducting SFD® surveys for clients on a fee-for-service basis. Secondly, we may be able to negotiate to earn revenue from gross overriding royalty income and/or other incentive fees from clients should they generate production on areas recommended by SFD® surveys. Finally, in the future, we may earn a fee by providing other related geological and geophysical integration services to clients.

We also continue to utilize high quality local sales representatives with key knowledge of their respective areas, potential clients and the exploration potential of a region allowing us to cover larger areas and more clients with minimum fixed cost. Our sales representatives continue to pursue SFD® opportunities in numerous regions including Latin America, the Middle-East and Southeast Asia (Sri Lanka, Indonesia, Malaysia and Pakistan). Furthermore, to ensure our sales representatives follow industry best practices, each representative is required to annually certify they adhere to NXT's code of conduct and business ethics.

In support of these sales efforts, NXT has also been effective in positioning the SFD® method as an established geophysical tool for oil & gas exploration following the successful completion of projects in Latin America (Bolivia and Mexico) with the publication of technical papers, creation of project case studies and the development of a strong list of references and recommendation letters. In addition, NXT has now been granted patents or received patent allowance in 44 separate countries.

AIF for the year ended December 31, 2019

9

Our overall objective remains to continue to increase industry awareness and appreciation of the value of our SFD® survey system and our strategy to achieve this includes maximizing client endorsement opportunities (such as through joint case studies) and targeting the most appropriate markets (i.e. where SFD® provides the maximum benefits). Our specific tactics include:

1.

Focus the majority of sales resources on high profile primary markets which offer the maximum opportunity for success;

2.

Build upon success in this initial market, and step out to other markets in Latin America, in Africa and in South Asia;

3.

Pursue requests of interest from qualified potential client "bluebirds" from all other locations in the world. The bluebird model is defined as an opportunity that arises, not from deliberate targeted sales initiatives, but in response to unsolicited client enquiries;

4.

Continue to conduct pilot surveys to expand our knowledge base and provide documentation to support the use of SFD® in new applications. Each new application opens more market opportunities and provides valuable case studies to support our sales initiatives; and

5.

Respond to opportunities to present at technical conferences, publish papers in periodicals and generally maximize our opportunities to educate the industry on SFD® capabilities and document case study successes.

As we continue to progress and grow our project pipeline on a Fee for Survey Project basis, we remain optimistic given our progress during the year. Notwithstanding, NXT continues the development of an alternative business line though the sale of “Multi-Client Datasets” focused on IOCs and the development of their global exploration strategies. The purpose of this strategy has been to integrate our SFD® technology into the standard exploration process of such organizations. We believe this approach will be instrumental in helping us to build an independent and steady backlog of smaller scale data sales enabling us to enhance and smooth our revenue flow while we continue to execute on larger Fee for Survey Projects.

3.2

Seasonality of the Company’s Main Business

There is no seasonality to our business. NXT does however, have a very cyclical business, as revenue activity is dependent upon the level of capital investment in exploration drilling in the oil & gas industry and the size and timing of a limited number of survey contracts each year.

3.3

Sources and Availability of Raw Materials

We do not foresee any constraints upon materials or equipment that will impede our ability to execute our business plan or affect our ability to conduct and/or expand our business. Our main direct project input costs are aircraft operating costs and data interpretation staff. None of these expenses have been subject to significant price volatility.

In order to conduct our survey operations, we require the following:

●

Survey aircraft – Historically, we have both owned aircraft and chartered aircraft from independent charter aircraft companies. From 2009 to December 2015, we utilized an aircraft charter agreement with Air Partners, a Calgary-based air-charter operator, to provide aircraft, crew and maintenance services for our survey operations worldwide In December 2015, we acquired from Air Partners a jet aircraft which was previously charter hired to NXT. In April, 2017, NXT completed a sale and leaseback agreement of its aircraft with a Calgary based international aircraft services organization. The terms of the agreement resulted in NXT selling its 1997 Cessna Citation Ultra 560 jet aircraft. We currently rely on Air Partners as the manager / operator of the aircraft which we use in SFD® survey operations.

●

SFD® sensors

• All of the survey sensors are manufactured in-house. Certain machining is required by third party machine shops, with final assembly performed by our technical staff. The sensors, once assembled, require flight testing prior to being considered acceptable for operational use. Not all sensors meet the performance criteria for operational use; however, we have demonstrated our ability to manufacture new functional SFD® sensors.

●

SFD® assembly

• The units in which the sensors are incorporated are custom designed, fabricated and assembled in-house or through subcontracted vendors. We utilize the services of Transport Canada approved Design Approval Representatives to prepare subsequent type certificates (“STC”) for the installation of our SFD® units in each aircraft that we utilize for surveys. The time to obtain an STC approval for the installation of our SFD® units into any proposed aircraft type may require several months.

●

Computer hardware and software - (Data Acquisition System, SFD® Signal Conditioning Unit, and data Interpretation software). During 2016, a new data acquisition system completed final testing. The software was developed by in-house personnel and will be utilized on future surveys. The hardware we use in our SFD® survey systems (other than the SFD® unit), and the balance of the computer software we use, are all readily available from retail or wholesale sources.

AIF for the year ended December 31, 2019

10

We are not dependent upon any other third-party contract manufacturers or suppliers to satisfy our technology requirements.

3.4

Marketing Channels

We largely use direct sales methods with some use of independent commissioned sales representatives in international markets.

3.5

Employees

Fiscal year ended December 31, 2019

As of the fiscal year ended December 31, 2019 we had a total of 10 employees. NXT has no employees that are members of a labor union. The following summarizes the number of employees and independent contractors by main job function as at December 31, 2019:

Function	Employees	Contractors	Total
Senior<br>management team	2	-	2
Finance, administration and<br>sales	2	-	2
Operations and technical<br>development	6	-	6
Total	10	-	10

All of the above noted staff are based in Calgary, Canada. The 6 operations and technical development staff includes one research scientist holding a Ph.D. and 3 geoscientists. We periodically engage other technical and administrative contract personnel as required on a project basis.

3.6

Patents

In May 2012, we commenced a “provisional” patent application process in the U.S. and formally filed a patent on May 22, 2013, which was subsequently published on November 28, 2013. We intend to continue expanding the process with additional formal patent applications in the future. We understand that our right to patent the SFD® technology is not compromised by our ongoing commercial use of the technology, as the components of the SFD® technology have never been disclosed to third parties (except under very limited and confidential terms) or released in any manner into the public domain.

Initiatives to expand and protect our IP (including patenting and new R&D initiatives) were very successful in 2017. Squire Patton Boggs LLP, a United States (“US”) based leader in IP protection, has been advising NXT on our IP strategy, including the prior filing of an initial US provisional patent application in May 2012. In November 2014, NXT filed a related patent amendment submission in the US and since that time has undertaken new patent applications in select strategic international markets.

SFD® patents have been granted in Russia (January 2017), Japan (July 2017), Canada (August 2017), Mexico (September 2017), United States (November 2017 and September 2018), China (April 2018), and European Patent Office consisting of 38 member states (January 2020). These are areas of prime commercial focus for the Company.  So far, the total number of countries granting the patent has reached 44.  The immediate next step is the validation of the patents in select European countries.  This process is expected to take several month to complete.  Our patents serve an important purpose beyond the protection for the proprietary SFD® technology.  They also provide multiple independent third-party recognitions of the technological invention in terms of the practical applicability, conceptual novelty, and knowledge advancement.

AIF for the year ended December 31, 2019

11

3.7

Competition

Our SFD® airborne survey service is based upon a proprietary technology, which is capable of remotely identifying, from a survey aircraft, subsurface anomalies associated with potential hydrocarbon traps with a resolution that we believe is technically superior to other airborne survey systems. To our knowledge there is no other company employing technology comparable to our SFD® survey system for oil and natural gas exploration.

Seismic is the standard technology used by the oil & gas industry to image subsurface structures. It is our view that the SFD® survey system is highly complementary to seismic analysis. Our system may reduce the need for seismic in wide-area reconnaissance but will not replace the role of seismic in verifying structure, closure and selecting drilling locations. The seismic industry is very competitive with many international and regional service providers.

The SFD® system can be used as a focusing tool for seismic. With an SFD® survey a large tract (i.e. over 5,000 square kilometers) of land can be evaluated quickly to identify locations with indications of reservoir potential. Seismic surveys, although effective in identifying these locations, are much more expensive, require significantly more time and impose a much greater negative impact on local communities and the environment. An SFD® survey deployed first can provide necessary information to target a seismic program over a limited area of locations selected by SFD®. This approach can result in a more effective seismic program and reduce the overall cost, time, community resistance and environmental impact required to locate and qualify a prospect.

The industry uses other technologies for wide area oil and natural gas reconnaissance exploration, such as aeromagnetic and gravity surveys. These systems can provide regional geological information, such as basement depth, sedimentary thickness and major faulting and structural development; however, these other airborne techniques are not as suitable for identifying areas with reservoir potential as the SFD® system.

3.8

Government & Environmental Regulation

SFD® Survey Flight Operations

The operation of our business, namely conducting aerial SFD® surveys and interpreting SFD® data, is not subject to material governmental or environmental regulation in Canada and the United States with the exception of flight rules issued by Transport Canada and the Federal Aviation Authority governing the use of commercial aircraft, including rules relating to low altitude flights. The requirements in other countries vary greatly and may require permits and/or provide other restrictions to conducting flight operations in the country that may restrict our ability to perform SFD® surveys as freely as in Canada and the United States.

For example, in Colombia, SFD® surveys must comply with three requirements not encountered in Canada and the United States. These requirements are i) customs obligations and bonds related to the importation and exportation of the aircraft into Colombia, ii) obtaining permits from the local aviation authority, and iii) obtaining permits from the Colombian Air Force. NXT has successfully operated in the past in Colombia in accordance with these requirements.

With our past experience in Canada, the United States, Nigeria, Bolivia, Mexico, Colombia and other countries, we do not anticipate any unusual government controls or regulations that might significantly prevent timely completion of SFD® surveys. However, we may encounter unforeseen government regulations or restrictions in other countries that may impair or restrict our ability to conduct surveys, which could limit our ability to earn revenue or potentially expose us to forfeiture of performance bonds.

AIF for the year ended December 31, 2019

12

3.9

Property, plant and equipment.

Facilities / office premises

In August 2015, NXT moved to a new office premises (11,333 square feet) at 3320 – 17th Avenue SW in Calgary under a 10-year lease at an initial estimated minimum monthly lease payment of $48,243 (including building operating costs) commencing in October 2015.

Equipment

Our SFD® technology is comprised of three main components, detailed below, which we collectively refer to as our SFD® survey system. This system is generally stored at our Calgary office facility unless deployed during survey operations when this equipment would travel with the aircraft or be stored in a locked facility at the survey location when not in use. In addition, there is extensive interpretation equipment located in Calgary. The main categories of equipment we use are:

●	Stress Field Detector - The<br>stress field detector, or SFD®<br>system, including a unit which houses the SFD®<br>sensors, is the principal component of our technology.  The<br>SFD®<br>sensors respond to fine-scale perturbations in the gravitational<br>field caused by changes in subsurface density and stress<br>distribution. These responses are transformed through<br>electromechanical transduction into electronic digital signals as<br>the output.  The SFD®<br>method has proven highly effective at identifying potential<br>hydrocarbon traps in a wide variety of geological settings onshore<br>and offshore. Airborne SFD®<br>surveys are currently conducted utilizing an array of 22<br>SFD®<br>sensors, consisting of 6 primary, 8 secondary and 8 research and<br>development sensors, allowing multiple independent SFD ®<br>signals to be acquired at all points of a designed<br>survey.
●	Data Acquisition System - used in conjunction with the<br>SFD®<br>sensor array on surveys, our data acquisition system is a compact,<br>portable computer system which concurrently acquires the electronic<br>digital signals from the SFD®<br>sensor array and other pertinent client data, including the GPS<br>location information of the data.
●	SFD®<br>Signal Conditioning Unit - this self-contained unit contains<br>electronic circuits for stabilizing and conditioning electronic<br>signals. All sensor output is directly connected to this unit and<br>after signal conditioning is completed, all output is forwarded to<br>the computer system.
●	Interpretation Theatre - once returned to our home base, the<br>SFD®<br>data collected is processed and converted into a format that can be<br>used by our interpretation staff using systems consisting of<br>generally off-the-shelf computer equipment, high definition<br>monitors, projectors and screens. This equipment is generally<br>permanently set up at our Calgary office facility. A remote<br>SFD®<br>data interpretation theater is available and may be deployed during<br>survey operations and would be set up in a facility at the survey<br>client’s city.

Oil and Gas Properties

We have minor historical interests in a limited number of acreage holdings of undeveloped lands in western Canada. These assets are not a material asset and have been written off in our financial statements. Additionally, we may in the future become entitled to receive gross over-riding royalty (“GORR”) interests on production from portions of certain lands where we conducted past surveys for clients in Canada, such as in the Horn River shale gas basin in British Columbia, Canada. There is no certainty that wells on these lands will become placed on production, or that future royalty revenues will be earned from these entitlements prior to the expiry of the landowners’ related mineral leases. No asset value has been recorded in the financial statements for these GORRs.

We are not affected by any significant environmental concerns, nor is there any planned significant capital additions contemplated.

AIF for the year ended December 31, 2019

13

4.0           RISK FACTORS

Investing in our common shares involves a high degree of risk. In addition to the other information included in this document, you should carefully consider the risks described below before purchasing our common shares. If any of the following risks actually occur, our business, financial condition and results of operations could materially suffer. As a result, the trading price of our common shares could decline, and you might lose all or part of your investment.

4.1

Future Operations

NXT is still in the early stages of realizing wide-spread commercialization of its SFD® technology. Its ability to generate cash flow from operations will depend on its ability to service its existing clients and develop new clients for its SFD® services. Management recognizes that the commercialization phase can last for several years, and that it can have significant economic dependence on a small number of clients, which can have a material effect on the Company's operating results and financial position.

NXT anticipates that it will be able to generate both net income and cash from operations in future years based on its current business model however, this outcome cannot be predicted with certainty. The Company has a history of generating net losses and periodic shortages of current assets less current liabilities. The Company's consolidated financial statements do not include any adjustments to amounts and classifications of assets and liabilities that might be necessary should NXT be unable to generate sufficient revenues, net income and cash flow from operations in future years in order to continue as a going concern.

4.2

Financial Statements

The preparation of financial statements requires our management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities including the disclosure of contingent assets and liabilities as well as revenues and expenses recorded in our financial statements. Estimates made relate primarily to the measurement of accrued liabilities, stock-based compensation expense, valuation of future income tax assets, estimates for asset retirement obligations, and the useful lives of capital assets and intellectual property.

The estimates and assumptions are reviewed periodically and are based upon the best information available to management; however, we cannot provide assurance that future events will not prove that these estimates and assumptions are inaccurate. Any revisions to our estimates and assumptions may have a material impact on our future reported net income or loss and assets and liabilities.

4.3

Commodity Prices

NXT's customer base is in the oil and natural gas exploration industry, which is exposed to risks of volatility in oil and natural gas commodity prices. As such, demand for our services and prospective revenues may become adversely impacted by ongoing declines in oil and natural gas prices. The impact of price changes on our ability to enter into SFD® survey contracts cannot be readily determined at this time. However, in general, as commodity prices have decline significantly, our opportunity to obtain and execute SFD® survey contracts may also likely decline, at least in the short term. Therefore NXT is beginning to consider strategies to reduce cash expenditures and focus on National Oil Companies as they have a long term strategic view and are not as affected by short-term oil fluctuations.

4.4

Foreign Currency Fluctuations

We currently conduct cash transactions and have holdings in Canadian dollars, U.S. dollars and periodically have holdings of local currency in other countries. We generally contract to earn revenues in U.S. dollars and potentially may earn revenues in Canadian dollars and other foreign currencies.

Our reporting currency is in Canadian dollars. We currently do not engage in currency hedging activities, but are reviewing opportunities to do so. Our cash positions and potential foreign currency revenue streams in currencies other than Canadian dollars exposes us to exchange rate fluctuations between the Canadian dollar and foreign currencies.

Our financial position will be affected by exchange rate fluctuations. We may earn revenue and incur expenses denominated in foreign currencies, yet report our financial results in Canadian dollars. Furthermore, we intend to enter into contracts to provide services in foreign countries and may periodically conduct business in other currencies such as the Euro. Changes in currency exchange rates could have an adverse effect on the Company's business, financial condition and results of operations.

AIF for the year ended December 31, 2019

14

4.5

Interest Rate Fluctuations

We periodically invest available cash in short term investments that generate interest income that will be affected by any change in interest rates.

4.6

Availability of Aircraft

In April, 2017, NXT completed a sale and leaseback agreement of its aircraft with a Calgary based international aircraft services organization (the “Lessor”). The terms of the agreement resulted in NXT selling its 1997 Cessna Citation Ultra 560 jet aircraft that was purchased in 2015. NXT has leased the aircraft over an initial term of 60 months and retains all existing operating rights and obligations. NXT is required to make monthly payments to the Lessor of approximately US$39,500. NXT has the option to extend the term of the lease by an additional two years. Should NXT want to repurchase the aircraft at the end of the initial lease term, the purchase price is US$1,450,000. When the aircraft is not needed for use by NXT, we seek to earn charter hire revenues from the aircraft through a 3rd party, Air Partners.

Air Partners also has access to an alternate, similar model aircraft (certified for the use of our survey equipment) which could be charter hired for use by NXT if needed.

In the event that NXT’s aircraft is not available (due to damage, a need for extensive repairs, or other unforeseen events) to conduct survey projects, there is a risk that suitable alternative aircraft may not be available on a timely basis from other charter operators when needed. This inability to conduct survey operations could have a material adverse effect on the Company's business, financial condition and results of operations.

4.7

Segregation of Duties

Certain duties that are most appropriately segregated between different employees are due to our current limited staff, assigned to one or two individuals depending on the task.

Standard internal control methodology involves the separation of incompatible functions by assigning these functions to separate individuals and in larger organizations to separate departments. We often cannot allocate these functions to separate individuals because our administrative staff is limited.

Although we have adopted alternative control methods designed to compensate for the reduced ability to separate incompatible functions, these alternative controls are not effective and there is more than a remote likelihood that our internal control over financial reporting will not prevent or detect material misstatements if they should exist in our financial statements. This lack of separation of duties exposes us to potential misappropriation of funds, embezzlement and other forms of fraud and could have a material adverse effect on our business, financial condition and results of operations.

4.8

Related Party Transactions

We may periodically enter into related party transactions with our officers and directors. The most significant transaction was a “Technology Transfer Agreement” (the “TTA”) that was executed on December 31, 2006 between NXT and Mr. George Liszicasz, our CEO, President and Chairman wherein we issued 10,000,000 convertible preferred shares to him in exchange for the rights to the SFD® technology for use in hydrocarbon exploration. In 2013, a total of 2,000,000 of these preferred shares were converted (on a one-to-one basis) into common shares, and the remaining 8,000,000 preferred shares were converted in August 2015. In addition to the related party transactions discussed elsewhere herein (i.e. the Co-operation Agreement, the Loan Arrangement and the Targeted Issuer Bid), one of the members of NXT's Board, Thomas Valentine, is a partner in the law firm Norton Rose Fulbright Canada LLP which provides legal advice to NXT.

Although we manage this potential conflict of interest risk through maintenance of a strong independent board of directors (the “Board”), all related party transactions have the potential for conflicts of interest that may compromise the ability of Board members to exercise their fiduciary responsibility to NXT shareholders.

For the period December 1, 2017 to January 31, 2018, Mr. Selby acted as the Interim CFO of the Company.

AIF for the year ended December 31, 2019

15

4.9

Conflicts of Interest

Mr. George Liszicasz, our CEO, is our largest shareholder, and as of April 13, 2020 owns approximately 23% of our outstanding common shares and therefore has a substantial influence in all shareholder matters.

Controls do exist to mitigate any potential risks associated with this conflict of interest. Mr. Liszicasz adheres to a code of conduct which includes a fiduciary responsibility to the Company and its shareholders and this conduct is governed by the independent Board of directors who collectively represent a majority of the Board. Furthermore, all material related party transactions are disclosed publicly.

However, should these conflict of interest controls not be effective, decisions could be made by the Company that may advantage Mr. Liszicasz and negatively impact other shareholders.

4.10

Rights to SFD® Technology

Our rights to ownership and use of SFD® technology depended on Mr. Liszicasz having the lawful right to sell to NXT the exclusive rights to exploit the SFD® technology for the exploration of hydrocarbons as agreed to in the TTA.

A risk exists that an unknown party may claim some legal entitlement to our intellectual property, our rights to commercialize this intellectual property or our right to create SFD® devices and processes. However, we believe that such a claim would be without merit.

The SFD® technology is an essential component of our business plan. If a third party challenged our lawful entitlement to this technology, the legal defense of our right to the technology may be expensive and could cause a loss of our right to the SFD® technology, or a protracted legal process to assert our right to the technology would have a material adverse effect on the Company's business, financial condition and results of operations.

4.11

Reliance on Specialized Equipment

We rely on specialized data acquisition equipment, including a limited number of SFD® sensor devices, to conduct our aerial SFD® survey operations. We would be at risk if these survey sensors were to become damaged, destroyed, worn out, stolen or in any way became unavailable for use in operations prior to us creating and testing additional sensors. Should the sensors become unavailable for any reason, our ability to conduct surveys could be delayed for several months as we built new sensors. During this period we may become unable to satisfy contractual obligations, which may jeopardize future revenue opportunities and may potentially result in a client drawing on a contract performance bond posted by the Company or otherwise making claims against the Company for breach of contract. In addition, an inability to satisfy contractual obligations may have an adverse effect on our developing reputation within the oil and gas community.

NXT seeks to mitigate this risk by researching new designs and constructing additional SFD® sensor devices.

4.12

Geological Conditions

As the Company is in the early commercialization phase, SFD® surveys have not been tested over all potential geological conditions. Some geological conditions may subsequently be proven to be unsuited for SFD® surveys thereby creating unforeseen limitations to the application of SFD® surveys.

Any limitation to the application of SFD® surveys has the potential of restricting future revenue opportunities and if not properly disclosed to industry clients, such limitations may impact the reputation of the Company with these clients.

4.13

Technological Improvement

Unless we pursue ongoing technological improvement and development, we may be unable to respond to changes in customer requirements or new competitive technologies.

We must continue to refine and develop our SFD® survey system to make it scalable for growth and to respond to potential future competitive pressures. These improvements require substantial time and resources. Furthermore, even if resources are available, there can be no assurance that the Company will be commercially or technically successful in enhancing the technology. Our inability to keep pace with new technologies and evolving industry standards and demands could have a material adverse effect on our business, financial condition and results of operations.

AIF for the year ended December 31, 2019

16

4.14

Reliance on Key Personnel

We rely on a limited number of key personnel who collectively possess the knowledge and skills to conduct SFD® surveys and interpret SFD® data as required to meet contract obligations. Additional or replacement personnel cannot be found and trained quickly. The loss of any of these key persons or increased demand for our services from clients could impair our ability to meet contract obligations, thereby adversely impacting our reputation and our ability to earn future revenue from clients.

The Company's future success depends, to a significant extent, on the continued service of its key technical and management personnel and on our ability to continue to attract and retain qualified employees. The loss of the services of our employees or a failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and results of operations. We do not have “key man” insurance on any of our personnel.

The Company put in place employment agreements with its chief executive officer, George Liszicasz.

We have a dependence on Mr. Liszicasz and three other staff members to be involved in the SFD® data interpretation process and to continue to enhance our technology. We are working to minimize dependency on key personnel. Mr. Liszicasz has trained and continues to train a team of signal interpreters to minimize our reliance on him to perform these functions. Currently, a total of four persons, two of which are highly experienced, are trained to interpret SFD® signals.

Although we have engaged employees with suitable credentials to work with Mr. Liszicasz to enhance our interpretation process and further develop the SFD® technology, if we are unable to reduce dependence on Mr. Liszicasz and he becomes incapable of performing or unwilling to perform these functions, then there may be an adverse effect on our ability to interpret the data from SFD® surveys or to enhance our technology.

Within the province of Alberta, the skilled personnel that we require may periodically be in short supply and there is specialized training required that can take several months in order for a new employee to become effective. If we cannot hire these key personnel, we have inadequate time to train them or should we lose current personnel, then our ability to accept contracts or meet contract commitments may be adversely affected, thereby restricting our ability to earn revenue.

4.15

Cyber Security

Our ability to manage our operations successfully is critical to our success. Our business relies on our ability to electronically gather, compile, process, store and distribute data and other information. Unintended interruptions or failures resulting from computer and telecommunications failures, equipment or software malfunction, power outages, catastrophic events, security breaches (such as unauthorized access by hackers), social engineering schemes, unauthorized access, errors in usage by our employees, computer viruses, ransomware or malware, and other events could harm our business.

In April 2019, we were the target of a ransomware attack that involved the infiltration and infection of our computer systems.  We made no payments relating to the ransomware and did not lose data.  Following the ransomware incident, we began undertaking remediation efforts and other steps to enhance our data security infrastructure. In connection with these efforts, we have incurred costs and expect to incur additional costs as we take further steps to prevent unauthorized access to our systems and the data we maintain.  We cannot provide any assurance that all potential causes of the incident have been identified and remediated and will not occur again.  While we have taken measures to minimize the impact of these problems, the proper functioning of these systems is critical to our business operations. Any security breach or failure in our computer equipment, systems or data could result in the interruption of our business operations and adversely impact our financial results.

AIF for the year ended December 31, 2019

17

4.16

Ability to Trade Shares

There is no certainty that an investor can trade our common shares on public markets at a stable market price. The Company has historically had a limited public market for our common shares on the TSX Venture Exchange (the “TSX-V”), and the United States (“U.S.”) OTC Markets Group’s Venture Stage Marketplace (the “OTCQB”) and there is a risk that a broader or more active public trading market for our common shares will not develop or be sustained, or that current trading levels will not be sustained. Effective March 22, 2016, the Company’s application to graduate from the TSX-V to the broader Toronto Stock Exchange (“TSX”), Canada’s premier stock exchange listing, was approved.

The market price for the common shares on the exchanges where our stock is listed has been, and we anticipate will continue to be, extremely volatile and subject to significant price and volume fluctuations in response to a variety of external and internal factors. This is especially true with respect to emerging companies such as ours. Examples of external factors, which can generally be described as factors that are unrelated to the operating performance or financial condition of any particular company, include changes in interest rates and worldwide economic and market conditions, as well as changes in industry conditions, such as changes in oil and natural gas prices, oil and natural gas inventory levels, regulatory and environment rules, and announcements of technology innovations or new products by other companies. Examples of internal factors, which can generally be described as factors that are directly related to our consolidated financial condition or results of operations, would include release of reports by securities analysts and announcements we may make from time to time relative to our operating performance, clients exploration results, financing, advances in technology or other business developments.

Because we have a limited operating history and a limited history of profitability to date, the market price for the common shares is more volatile than that of a seasoned issuer. Changes in the market price of the common shares, for example, may have no connection with our operating results or the quality of services provided to clients. No predictions or projections can be made as to what the prevailing market price for the common shares will be at any time, or as to what effect, if any, that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price. Given the relatively low historic trading volumes, small trades of NXT’s common shares can adversely and potentially dramatically affect the market prices for those shares.

Accordingly, investors in our common stock should anticipate both volatile stock price and poor liquidity unless these conditions change.

4.17

Dividends

We have never paid any cash dividends on our common shares and we do not anticipate that we will pay any dividends in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion of our business. Any future determination to pay cash dividends will be at the discretion of our Board of directors and will be dependent upon our consolidated financial condition, results of operations, capital requirements and other factors as our Board of directors may deem relevant at that time.

4.18

Dilution

Our right to issue additional capital stock at any time could have an adverse effect on your proportionate ownership and voting rights.

We are authorized under our Articles of Incorporation to issue an unlimited number of common shares and an unlimited number of preferred shares. We may issue these shares under such circumstances and in such manner and at such times, prices, amounts and purposes as our Board of Directors may, in its discretion, determine to be necessary and appropriate, subject to compliance with all applicable exchange regulations and corporate and securities laws. Proportionate ownership and voting rights of common shareholders could be adversely affected by the issuance of additional common shares which may result in common share value dilution.

4.19

Intellectual Property

We may not be able to protect our trade secrets and intellectual property from competitors who would use this knowledge to eliminate or reduce our technological advantage.

Our success and future revenue growth will depend, in part, on our ability to protect our intellectual property (“IP”). We have commenced an IP strategy process to obtain patents related to the SFD® technology, while also utilizing “trade secrets” protection of the proprietary nature of our technology as applicable.

Initiatives to expand and protect our IP (including patenting and new R&D initiatives) have been very successful. Squire Patton Boggs LLP, a United States (“US”) based leader in IP protection, has been advising NXT on our IP strategy, including the prior filing of an initial US provisional patent application in May 2012. In November 2014, NXT filed a related patent amendment submission in the US and since that time has undertaken new patent applications in select strategic international markets.

AIF for the year ended December 31, 2019

18

So far, SFD® patents applications have been filed in nine (9) jurisdictions worldwide.  Thus far seven (7) patents have been granted: two (2) in U.S.A., and one (1) in each of the following countries: Canada, Japan, China, Russia, and Mexico. In late January 2019, we received a positive feedback from the examiner of the European Patent Office (consisting of 38 country members), showing potential to be allowed in the near future. In addition, two (2) more applications are pending in Brazil and India. The SFD® patents serve an important purpose beyond the protection they provide to the proprietary SFD® technology. Our patents also serve as an independent third-party verification of the scientific principles that form the basis of the SFD® process and its application.

The patent protection application process requires disclosure of at least some aspects of our SFD® technology to third parties and ultimately public disclosure. This disclosure could significantly increase the risk of unlawful use of our technology by third parties. Furthermore, we have no assurance that, even if we seek patent protection, a patent could be registered to protect our IP in all or any jurisdictions within North America or other countries throughout the world. If registered, there can be no assurance that it would be sufficiently broad to protect our technology or that any potential patent would not be challenged, invalidated or circumvented or that any right granted thereunder would provide meaningful protection or a competitive advantage to us. Finally, protection afforded by patents is limited by the financial resources available to legally defend IP rights. We currently do not possess the required financial resources to fund a lengthy defense of our rights if challenged by a much larger competitor or an oil and gas company.

We do enjoy common and contract law protection of our technology and trade secrets. Employees and contractors are governed by confidentiality agreements as well as a fiduciary responsibility to protect our technology, supporting documentation and other proprietary information.

Our strongest protection of the SFD® technology comes from restricting access to knowledge concerning the technology. Only a very limited number of NXT personnel have access to or knowledge of the underlying SFD® technology and no one employee and only one officer has access or knowledge of all aspects of the SFD® system. Currently, no third party has any significant knowledge of the technology. As further protection, SFD® equipment does not leave the direct control of NXT employees, thereby preventing unauthorized replication of the equipment.

The Company reassesses the appropriateness of its IP protection strategy on an ongoing basis and seeks advice from IP advisors as necessary.

It is possible that a third party will copy or otherwise obtain and use the Company's technology without authorization, develop a similar technology independently or design around the Company's secrets. Accordingly, there can be no assurance that the steps taken by the Company to prevent misappropriation or infringement of our IP will be successful.

An inability to protect our IP would make it possible for competitors to offer similar products and services that could have a material adverse effect on our business, financial condition and results of operations.

4.20

Flight Operations

We experience operational hazards in our flight operations that may subject us to potential claims in the event that an incident or accident occurs.

The flight operations of SFD® surveys are subject to the hazards associated with general flight operations. An aircraft accident may cause personal injury and loss of life, as well as severe damage to and destruction of property or the SFD® sensors and related equipment.

Independent third parties provide all the services required to maintain, operate the aircraft and they bear the primary risks of flight operations. These services are provided by an organization accredited by Transport Canada to operate aircraft in accordance with Transport Canada approved and audited operating procedures. The aircraft operator employs the required pilots, aircraft maintenance engineers, support personnel and ensures that they operate within their Transport Canada operating certificate. Our employees do not perform any airworthiness or flight safety operations.

We require the flight contractor to maintain appropriate insurance coverage for the risks associated with aircraft operations and we obtain insurance coverage to provide us with additional risk protection. In addition, we maintain general business insurance coverage and believe that this insurance and the policy limits are appropriate for the operational risks that we incur.

Despite our policy to not operate the aircraft directly and our insurance coverage, we cannot avoid or alternatively be insured for all risks of flight operations. In the event of an incident or accident we may be sued by injured parties in excess of our policy limits or for damages that are not covered by our insurance policy. The magnitude of a lawsuit of this nature is not determinable. Furthermore, to the extent that our SFD® equipment is damaged, we may be unable to conduct SFD® surveys for several months following an accident.

AIF for the year ended December 31, 2019

19

4.21

Foreign Countries

We conduct operations in foreign countries, which exposes us to several risks that may have a material adverse effect on the Company.

Criminal Activity and Social Instability – we have operated in the past in foreign countries such as Colombia, which over the past two decades experienced significant social upheaval and criminal activity relating to drug trafficking, kidnapping and terrorist acts. While the situation has improved dramatically in recent years, there can be no guarantee that the situation will not deteriorate again, nor are these risks eliminated as yet. Furthermore, other potential international survey locations may have similar or other indeterminate criminal or social instability risks.

Systemic criminal activity in a country or isolated criminal acts may disrupt operations, impact our ability to earn revenue, dramatically add to our cost of operations or potentially prevent us from earning any survey revenue in a country.

Political Instability - Any changes in regulations or shifts in political attitudes are beyond the control of the Company and may adversely affect our business. Exploration may be affected in varying degrees by government regulations which have the effect of restricting exploration and production activities. These changes may adversely impact the laws and policies governing price controls, export controls, foreign exchange controls, income taxes, expropriation of property, environmental legislation, site safety or other areas.

Currently, there are no restrictions (other than the payment of local with-holding taxes) on the repatriation back to Canada of our earnings in foreign countries in which we have operated, such as Colombia and Bolivia; however, there can be no assurance that significant restrictions on repatriation to Canada of earnings will not be imposed in the future.

Our operations may also be adversely affected by changes in laws and policies in Canada impacting foreign travel and immigration, foreign trade, taxation and investment.

Commercial Disputes – While operating in a foreign country, we are subjected to local commercial laws which often involve executing contracts in a foreign language. Although every effort is made to ensure we have access to an accurate English translation, misunderstanding and potential disputes between parties may arise.

In the event of a dispute arising in connection with our foreign operations for any reason, we may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdictions of the courts of Canada or enforcing Canadian judgments in such other jurisdictions. We may also be hindered or prevented from enforcing our rights with respect to a government instrumentality because of the doctrine of sovereign immunity.

Accordingly, these risk factors have the potential of adversely reducing the level of survey revenue from our clients, our ability to operate effectively or our ability to be paid for our services and may have a material adverse effect on our financial position.

Where possible, NXT utilizes risk mitigation products offered by entities such as Export Development Canada (“EDC”). EDC financial products include insurance coverage of contract accounts receivable, guarantee support for contract performance bonds, and wrongful call insurance for such bonds.

Corruption and Bribery- Foreign markets may be susceptible to a higher risk of corruption and bribery. All of NXT’s employees, contractors, and independent sales agents are required to adhere to the Company’s code of conduct and business ethics, which prohibits illegal activities, including any acts of bribery or corruption. NXT conducts due diligence on all of its sales representatives and distributors and requires them to complete annual certifications that they adhere to the Company’s Anti-Bribery and Anti-Corruption policy.

4.22

Flight permits

We rely upon the right to conduct airborne surveys in foreign countries. These foreign operations expose us to the risks that we will be prevented from conducting surveys when requested by clients.

The operation of our business, namely conducting aerial SFD® surveys and interpreting SFD® data, is not subject to material governmental or environmental regulation in Canada and the United States with the exception of flight rules issued by Transport Canada and the U.S. Federal Aviation Administration (“FAA”) governing the use of commercial aircraft, including rules relating to low altitude flights. The requirements in other countries vary greatly and may require permits and/or provide other restrictions to conducting flight operations in the country that may restrict our ability to perform SFD® surveys.

AIF for the year ended December 31, 2019

20

For example, in South American countries in which we have operated, such as Colombia and Bolivia, SFD® surveys must comply with additional requirements not encountered in Canada and the United States, including customs obligations and bonds related to the importation and exportation of the aircraft into the country, obtaining permits from the local aviation authority, and obtaining permits from the local Air Force. We have successfully operated in South America and other global regions in accordance with these typical requirements.

With our North America and International experience to date, we do not anticipate any government controls or regulations that will prevent timely completion of SFD® surveys. However, we may encounter government restrictions in other countries that may impact or restrict our ability to conduct surveys.

If we encounter government regulation and restrictions that impact or prevent us from conducting surveys in any country, then we will not be able to earn revenue in the country and we may be exposed to forfeiting any performance bonds which may have been issued.

4.23 Covid-19 Pandemic

As of the date of this Annual Information Form, the Covid-19 pandemic has not had a material effect on the operations of the Company. The Company has made provisions so employees can work from home, suspended all travel, international travelers are to self-isolate for 14 days after return to Canada, and hygiene and social distancing policies are in effect. NXT continues to communicate with employees and customers via available communication methods such as tele-conferences and on-line video conferencing.

Demand for our services and prospective revenues may become adversely impacted the longer the Covid-19 Pandemic continues. The impact of the continuation of the Covid-19 Pandemic may hamper our ability to deliver SFD® surveys contracts in the following ways. If restrictions on international travel continue, our aircraft and personal will not be able to perform surveys. An outbreak of the virus among our staff or our customers’ personnel would delay any survey in progress. Business development may be delayed when in-person meetings and technical presentations may be a superior delivery method. Please also see Reliance on Key Personnel and Flight Permit Risk Factors above.

We caution that the factors referred to above and those referred to as part of particular forward-looking statements may not be exhaustive and that new risk factors emerge from time to time in our rapidly changing business environment.

5.           DIVIDEND POLICY

The Company has not paid dividends since its inception.

6.           CAPITAL STRUCTURE

6.1

Common Shares

The Company is authorized to issue an unlimited number of common shares. As of April 13, 2020, there were 64,406,891 fully paid and non-assessable common shares issued and outstanding. The holders of common shares are entitled to dividends (subject to any prior rights of the holders of Preferred Shares) if, as and when declared by the Board of Directors.

The holders of common shares are entitled to one vote per share at any meeting of the shareholders of the Company and to receive in the event of liquidation or dissolution (subject to any prior rights of the holders of Preferred Shares), all assets of the Company as are distributable to the holders of shares.

The complete description of the rights, privileges, restrictions and conditions of the common shares is included in our articles a copy of which is available through the Company's issuer profile on SEDAR at www.sedar.com.

AIF for the year ended December 31, 2019

21

6.2

Preferred Shares

The Company is authorized to issue an unlimited number of Preferred Shares, issuable in series.  The Board may by resolution fix before issuance, the designation, rights, privileges, restrictions and conditions to attach to the Preferred Shares of each series.  The Preferred Shares are entitled to preference over the common shares with respect to the payment of dividends, if any, and in the event of liquidation, dissolution or winding-up of the Company. As of April 13, 2020, there are no Preferred Shares issued and outstanding.

The complete description of the rights, privileges, restrictions and conditions of the Preferred Shares is included in our articles a copy of which is available through the Company's issuer profile on SEDAR at www.sedar.com.

6.3

Warrants

On February 16, 2018, the Company entered into an agreement to complete a three-tranche Private Placement under which AGV has committed to purchase 10,905,212 Units at a price of $0.924 per Unit for total gross proceeds of approximately $10,076,416. Each Unit consisted of one Common Share and one-third of one Warrant. Each Warrant entitles the holder to acquire one Warrant Share at an exercise price of $1.20 for twelve (12) months from closing of the first tranche of the Private Placement. A total of 3,421,648 Warrants were issued. In June 2019 the shareholders of the Company agreed to extend the expiry date of the Warrants until February 16, 2020. Later, as part of the TIB agreement, all 3,421,648 Warrants expired on October 31, 2019.

The Company had 64,406,891 common shares outstanding at the 31st December 2019. All shares have equal voting rights.

7.           MARKET FOR SECURITIES

The following tables set forth the price history of the Company’s common shares listed on the OTC in the United States and on the TSX in Canada.

	TSX			OTC<br>QB
	High	Low		High	Low
Month<br>Ended	(in CDN$)	(in CDN$)	Volume	(in US$)	(in US$)	Volume
December<br>31, 2019	$0.65	$0.47	201,967	$0.51	$0.30	537,156
November<br>30, 2019	$0.49	$0.34	94,955	$0.38	$0.25	440,422
October<br>31, 2019	$0.41	$0.34	39,260	$0.34	$0.25	164,431
September<br>30, 2019	$0.48	$0.31	37,909	$0.36	$0.23	208,714
August<br>31, 2019	$0.50	$0.36	23,310	$0.43	$0.28	189,306
July<br>31, 2019	$0.58	$0.42	161,686	$0.52	$0.30	420,752
June<br>30, 2019	$0.87	$0.33	95,309	$0.67	$0.24	487,320
May 31,<br>2019	$0.53	$0.37	206,298	$0.38	$0.28	551,301
April<br>30, 2019	$0.59	$0.37	160,913	$0.47	$0.28	437,184
March<br>31, 2019	$0.40	$0.32	44,038	$0.28	$0.23	149,690
February<br>29, 2019	$0.54	$0.36	156,469	$0.42	$0.30	102,018
January<br>31, 2019	$0.52	$0.33	86,839	$0.39	$0.27	193,842

AIF for the year ended December 31, 2019

22

8.             ESCROWED SECURITIES and SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER

There are no securities held in escrow or securities subject to a contractual restriction on transfer.

9. DIRECTORS and OFFICERS

Our articles of incorporation provide for a minimum of one director and a maximum of 15 directors comprising our Board of directors. At present, our Board of directors consists of five members.

Our directors are elected by our shareholders at our annual meeting of shareholders and hold the position either until the next annual shareholders’ meeting, the date of their resignation or until a successor is appointed.

The following sets forth information, including directorships in other reporting issuers, as of April 13, 2019, for our directors, executive officers and key employees:

George Liszicasz<br><br><br>Calgary, Alberta, Canada<br><br><br><br><br><br>Director, Chairman<br>and Chief<br><br><br>Executive Officer<br>since January<br><br><br>1996;<br>President since July 2002	Mr.<br>Liszicasz is the inventor of the SFD®<br>Technology and has been Chairman and Chief Executive Officer since<br>the Corporation's inception in 1996. Mr. Liszicasz’ primary<br>responsibilities, as the President and CEO, are to oversee all<br>operations and to further develop the SFD®<br>technology.<br><br><br><br><br><br>He<br>holds an Electronics Engineer degree from the Landler Jeno<br>Technitken in Hungary in 1973 and studied general sciences at the<br>University of British Columbia between 1979 and 1983. Mr. Liszicasz<br>has extensive R&D body of work with various technologies, and<br>52 inventions.
Charles Selby<br><br><br>Calgary, Alberta, Canada<br><br><br>Director<br>since<br><br><br>January<br>2006	Mr.<br>Selby holds a B. Sc. (Hons) in Chemical Engineering, a J.D. degree<br>and is a registered Professional Engineer in the Province of<br>Alberta.  He previously practiced law for two large Canadian<br>law firms, specializing in securities, international transactions<br>in the energy business and corporate finance matters.  Since<br>leaving the practice of law,   Mr. Selby was a<br>Vice President of Pengrowth Corporation, the Administrator of<br>Pengrowth Energy Trust, for almost 20 years.  He also<br>has served on the board and in management of a number of reporting<br>issuers including Arakis Energy, which had operations in the Sudan,<br>and other issuers in the oil and natural gas industry.<br><br><br><br><br><br>He is<br>currently the president and a director of Wildcat Royalty<br>Corporation and Caledonian Midstream Corporation, private entities<br>which are involved in oil & gas production and the midstream<br>oil and gas business primarily in the Province of Alberta.  He<br>is a director of Caledonian Global Corporation, an international<br>company with royalty interests Vietnam and Chairman and CEO of<br>Montana Exploration Corp. (formerly AltaCanada Energy Corp.) an oil<br>and gas company.<br><br><br><br><br><br>Mr.<br>Selby is the Lead Director of NXT.  He is also Chair of NXT's<br>Compensation Committee and a member of the Audit, Disclosure, and<br>Strategic Planning Committees.<br><br><br>Mr.<br>Selby also served as the Company's Interim Chief Financial Officer<br>from December, 2017 to January, 2018.
John Tilson<br><br><br>Montecito, California, USA<br><br><br><br><br><br>Director since February 2015	Mr.<br>Tilson is retired, and after obtaining MBA and CFA designations,<br>had a distinguished career as an analyst, portfolio manager,<br>and advisor in the US investment and financial industry with<br>such firms as Sutro & Company and EF Hutton & Company.<br>Mr. Tilson joined Roger Engemann and Associates in 1983 when assets<br>under management were roughly US$160 million. During<br>his tenure there, the Pasadena Group of Mutual Funds was<br>started, with Pasadena Capital Corporation formed as the holding<br>company for the mutual funds and investment management business.<br>After working as an analyst and portfolio manager, John later<br>became Executive Vice President & Managing Director of Pasadena<br>Capital Corporation. Assets under management had grown to over US$5<br>billion by the time the firm was sold to Phoenix Companies in 1997.<br>Mr. Tilson later retired in 2005.<br><br><br><br><br><br>From<br>2006 to 2012, Mr. Tilson was a member of the Board of Trustees,<br>including three years serving as VP and Chairman of the long-range<br>planning committee, for Lotusland, a Santa Barbara non-profit<br>organization established by Madame Ganna Walska.<br><br><br><br><br><br>Mr.<br>Tilson is the Chair of the Board’s Strategic Planning<br>Committee, and a member of the Compensation, Governance and Audit<br>Committees.

AIF for the year ended December 31, 2019

23

Thomas E. Valentine<br><br><br>Calgary, Alberta, Canada<br><br><br>Director since November 2007<br><br><br>Corporate Secretary since April 2014	Mr.<br>Valentine is a Partner with Norton Rose Fulbright Canada LLP, where<br>he has practiced law, both as a Barrister and a Solicitor, since<br>his call to the Bar in 1987. He is a member of the firm’s<br>Energy and Infrastructure Practice Group and is involved in energy<br>and energy related matters throughout the Middle East, North<br>Africa, the CIS, Asia and South America.<br><br><br>Mr.<br>Valentine is a member of the Board of Directors of Touchstone<br>Exploration Inc., and formerly was a director of two other Canadian<br>public companies, Calvalley Petroleum Inc. (to May 2015) and Veraz<br>Petroleum Ltd.<br><br><br><br><br><br>Mr.<br>Valentine holds a BA from the University of British Columbia, a LLB<br>from Dalhousie University, and a LL.M. from the London School of<br>Economics.<br><br><br><br><br><br>Mr.<br>Valentine is the Chair of the Governance Committee and a member of<br>the Compensation Committee.
Bruce G. Wilcox<br><br><br>New York, New York, USA<br><br><br>Director since June 2015	Mr.<br>Wilcox has had a long career as an investment company CEO, analyst<br>and portfolio manager. He spent most of his career with Cumberland<br>Associates, LLC, a New York equity fund, from 1986 through<br>retirement in 2010, progressing from analyst/portfolio manager to<br>partner, and Chairman of the Management Committee. Mr. Wilcox<br>specialized in Cumberland's investments in the energy industry<br>(E&P and service companies), with an emphasis on value and<br>long-term holdings. During his tenure, the fund's assets under<br>management ranged from US$0.7 to $1.5 billion.<br><br><br>From<br>1984 to 1986, Mr. Wilcox was with Central National-Gottesman, Inc.<br>as an analyst and portfolio manager on a team responsible for a<br>$500 million listed equity portfolio.<br><br><br>Mr.<br>Wilcox is presently CEO of E Street Management, LLC which manages a<br>long/short equity fund of funds. He is also one of the managing<br>members of Xiling Fund III, LLC, part of a series of private equity<br>funds (US$100+ million) which specialize in investing in museum<br>quality Chinese art and collectibles.<br><br><br>Mr.<br>Wilcox obtained a BA (Honors), in Modern Chinese from the<br>University of California, Santa Barbara, and a Master of<br>International Management from the American Graduate School of<br>International Management in Phoenix.<br><br><br>Mr.<br>Wilcox is a member of several Boards, including the Teachers<br>College of Colombia University (2003 to date, including acting as<br>the Chair of the Investment Committee), the University of<br>California Santa Barbara Foundation (2003 to date, including as<br>former Chair of the Board, Investment and Finance Committees), and<br>is a Trustee (2001 to date) of the Manhattan Institute For Policy<br>Research, a leading urban, state, and national policy institution,<br>which works on matters such as energy policy.<br><br><br>Mr.<br>Wilcox is the chair of the Board's Audit Committee and a member of<br>the Disclosure, Governance and Strategic Planning<br>Committees.
Frank Ingriselli<br><br><br>Danville, California, USA<br><br><br><br><br><br>Director since September 2019	Mr.<br>Ingriselli has over 40 years of experience in the energy industry,<br>Mr. Ingriselli is a seasoned leader and entrepreneur with<br>wide-ranging energy industry experience in diverse geographies,<br>business climates and political environments.<br><br><br>From<br>1979 to 2001, Mr. Ingriselli worked at Texaco in a variety of<br>senior executive positions involving exploration and production,<br>power and gas operations, merger and acquisition activities,<br>pipeline operations and corporate development.  While at<br>Texaco, Mr. Ingriselli held the position of President of Texaco<br>Technology Ventures, President and CEO of the Timan Pechora Company<br>(owned by affiliates of Texaco, Exxon, Amoco, Norsk Hydro and<br>Lukoil), and President of Texaco International Operations, where he<br>directed Texaco's global initiatives in exploration and<br>development.  During his tenure, Mr. Ingriselli, also led<br>Texaco's initiatives in exploration and development in China,<br>Russia, Australia, India, Venezuela and many other<br>countries.<br><br><br><br><br><br>From<br>2005 to 2018, he was the founder, President, CEO and Chairman of<br>PEDEVCO Corp. and Pacific Asia Petroleum, Inc., both energy<br>companies which are or were listed on the New York or American<br>stock exchanges.  From 2016 through 2019, Mr. Ingriselli was<br>the founder, President and CEO of Blackhawk Energy Ventures Inc.<br>which endeavored to acquire oil and gas assets in the United States<br>for development purposes.<br><br><br><br><br><br>Currently<br>Mr. Ingriselli is the President of Indonesia Energy Corporation and<br>is a member of the Board of Directors of DataSight Corporation.<br> Mr. Ingriselli serves on the Board of Trustees of the Eurasia<br>Foundation, and is the founder and Chairman of Brightening Lives<br>Foundation, Inc., a US Section 501(c)(3) public charitable<br>foundation.<br><br><br><br><br><br>Mr.<br>Ingriselli graduated from Boston University with a B.S. in business<br>administration. He also earned an M.B.A. from New York University<br>in both finance and international finance and a J.D. from Fordham<br>University School of Law.<br><br><br><br><br><br>Mr.<br>Ingriselli is a member of NXT’s audit committee.
Eugene Woychyshyn<br><br><br>Calgary, Alberta, Canada<br><br><br><br><br><br>VP Finance and CFO since December 2018	Mr.<br>Woychyshyn originally served as a consultant to NXT since late<br>November 2017 providing controllership services. Mr. Woychyshyn<br>brings to NXT over 25 years of leadership experience in multiple<br>industries and worldwide regions including North America, Europe<br>and Asia. He has extensive hands-on experience and accomplishments<br>in mergers and acquisitions, organizational restructuring,<br>purchasing, treasury, financial reporting and control, compliance,<br>human resource management and tax planning. In almost ten years as<br>an expatriate with assignments in Norway, China, the United States<br>and South East Asia he developed international business<br>competencies.<br><br><br><br><br><br>Mr.<br>Woychyshyn is a Chartered Professional Accountant, CA, who holds a<br>Bachelor of Commerce (Hons.) from the University of Manitoba and a<br>Masters of Business Administration from St. Joseph’s<br>University, Philadelphia PA.<br><br><br><br><br><br>Mr.<br>Woychyshyn is a member of the Disclosure Committee.

AIF for the year ended December 31, 2019

24

As of April 13, 2019, the directors and officers of NXT, as a group, beneficially owned or controlled or directed, directly or indirectly 19,086,226 Common Shares or approximately 29.6% of the issued and outstanding Common Shares.

9.1 Cease Trade Orders, Bankruptcies, Penalties or Sanctions

None of the directors or executive officers is, or has been in the last ten years, a director, chief executive officer or chief financial officer of any company that: (i) was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation for a period of more than 30 consecutive days that was issued while the director was acting in that capacity; (ii) was subject to such an order that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in such a capacity.

None of the directors or executive officers is, or has been in the last ten years, a director or executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, other than as discussed below.

Charles Selby was previously a member of the board of directors of Wellpoint Systems Inc. (“Wellpoint”, a reporting issuer on the TSX-V), which in 2011 had a Receiver appointed by the Court of Queen’s Bench of the Province of Alberta on behalf of the holders of secured debts.  Wellpoint was subsequently wound up following a restructuring and sale of its operating assets.  Charles Selby was previously a member of the board of directors of Idaho Natural Resources Corp., which was cease-traded by the TSX Venture Exchange in December 2012 for failing to meet listing requirements.  A cease trade order was issued by the Alberta Securities Commission on May 4, 2018 against Montana Exploration Corp. (“MEC”) for failing to file its annual audited financial statements, annual management’s discussion and analysis and certification of annual filings within the required time period.  Charlies Selby is the Chief Executive Officer of MEC.  The TSX Venture Exchange has announced that upon revocation of the Cease Trade Order, MEC’s shares will remain suspended until the company meets TSX Venture Exchange requirements.

None of the directors or executive officers has, within the last ten years, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold their assets.

Messrs. Tilson, Valentine, Ingriselli, and Wilcox are considered "independent" within the meaning of Canadian securities law.

9.2

Board Practices

Expiration Dates

No director or member of our administrative, or supervisory bodies has an expiration date for their current term of office. Directors are elected by shareholders at the annual meeting of shareholders and hold the position either until the next annual shareholders’ meeting or until a successor is appointed. The period during which each individual has served as a director is set out in the table under Item 9 – “Directors and Officers”.

Service Contracts

No directors (other than an employment contract for the CEO, Mr. Liszicasz) have service contracts with the Company or any of its subsidiaries that provide benefits upon termination of employment.

Board of Directors Mandate

The principal role of the Board is stewardship of the Company through the creation of shareholder value, including the protection and enhancement of the value of its assets, as the fundamental objective. The stewardship responsibility means that the Board oversees the general operation of the business and management, which is responsible for the day-to-day conduct of the business. The Board must assess and ensure systems are in place to manage the risks of the Company’s business with the objective of preserving the Company’s assets. The Board, through the CEO, sets the attitude and disposition of the Company towards compliance with applicable laws, environmental, safety and health policies, financial practices and reporting. In addition to its primary accountability to shareholders, the Board is also accountable to employees, government authorities, other stakeholders and the public. The Mandate of the Board is located in Appendix B.

AIF for the year ended December 31, 2019

25

Board Committees

CORPORATE GOVERNANCE COMMITTEE

The Company and the Board recognize the importance of corporate governance to the effective management of the Company and to its shareholders. The Company’s approach to significant issues of corporate governance is designed with a view to ensuring that the business and affairs of the Company are effectively managed so as to enhance shareholder value. The Mandate of the Corporate Governance Committee is posted on the Company website and may be viewed at www.nxtenergy.com or you may request a copy be mailed to you by writing to our offices at Suite 302, 3320 - 17th Avenue SW Calgary, Alberta, Canada, T3E 0B4.

The Board and management endorse the need to establish forward-looking governance policies and to continuously evaluate and modify them to ensure their effectiveness.

Composition of the Corporate Governance Committee

Mr. Valentine (Chair), Mr. Wilcox and Mr. Tilson are members of the Corporate Governance Committee and are independent.

Responsibilities of the Corporate Governance Committee

The Corporate Governance Committee’s duties, as outlined in its charter, are to deal with the Company’s approach to corporate governance and the promotion of compliance with industry and regulatory standards. The committee is responsible for overseeing and assessing the functioning of the Board and the committees of the Board and for the development, recommendation to the Board, implementation and assessment of effective corporate governance principles and guidelines. The Committee’s responsibilities also include identifying new candidates for director and recommending that the Board select qualified director candidates for election at the next annual meeting of shareholders.

DISCLOSURE COMMITTEE

Composition of the Disclosure Committee

The Disclosure Committee currently consists of Mr. Wilcox who is independent and Mr. Selby and Mr. Woychyshyn.

Responsibilities of the Disclosure Committee

The Disclosure Committee’s duties are to ensure that the Company provides timely, accurate and balanced disclosure of all material information about the Company and to provide fair and equal access to such information. All news releases, including but not limited to releases of material information, are managed by the Disclosure Committee. If the information has been determined by the Disclosure Committee to be material, news releases will be prepared, reviewed and then disseminated through a news-wire service that provides simultaneous service to widespread news services and financial media. Additionally, the Disclosure Committee is responsible for ensuring public disclosure through filing these news releases on SEDAR, EDGAR, and our website.

AIF for the year ended December 31, 2019

26

AUDIT COMMITTEE

Composition of the Audit Committee

The Audit Committee consists of Messrs. Wilcox (Chair), Tilson, Selby and Ingriselli. Messrs. Wilcox, Tilson, and Ingriselli are independent. Each member is financially literate. The Company’s Audit Committee Charter is attached in “Appendix A”.

Bruce Wilcox

Mr. Wilcox holds a Master of International Management from the American Graduate School of International Management in Phoenix. His career as an investment company CEO, analyst and portfolio manager was spent primarily with Cumberland Associates, LLC, a New York equity fund, where he was a partner, and served as Chairman of the Managing Committee.

John Tilson

Mr. Tilson is retired, and after obtaining MBA and CFA designations, had a distinguished career as an analyst, portfolio manager, and advisor in the US investment and financial industry with such firms as Sutro & Company and EF Hutton & Company.

Charles Selby

Mr. Selby is both a lawyer and Professional Engineer, with past legal experience specializing in securities and corporate finance matters.  He has served on the board or in senior management roles with a number of private firms as well as reporting issuers in the oil and natural gas industry.

Mr. Selby has previously served on the audit committees of Alta Canada Energy Corp. and served as the audit committee chairman for Idaho Natural Resources Corp. (formerly Bridge Resources Corp.).

Frank Ingriselli

Mr. Ingriselli graduated from Boston University with a B.S. in business administration. He also earned an M.B.A. from New York University in both finance and international finance and a J.D. from Fordham University School of Law.

All members of the Audit Committee have the educational background and experience that provides them with the knowledge and ability to understand accounting policies and related financial reporting and disclosure issues, in order to fulfill their duties and responsibilities as an Audit Committee member.

Audit Committee Oversight - The Company’s Board has adopted all recommendations by the Audit Committee with respect to the nomination and compensation of the external auditor.

Pre-Approval Policies and Procedures - The Audit Committee has adopted a formal policy requiring the pre-approval of all audit and non-audit related services to be provided by the Company’s principal auditor prior to the commencement of the engagement, subject to the following:

●

the Audit Committee will review annually a list of audit, audit related, recurring tax and other non-audit services and recommend pre-approval of those services for the upcoming year. Any additional requests will be addressed on a case-by-case specific engagement basis;

●

for engagements not on the pre-approved list, the Audit Committee has delegated to the Chair of the Committee the authority to pre-approve individual non-audit service engagements with expected costs of up to $50,000 (annual aggregate total) subject to reporting to the Audit Committee, at its next scheduled meeting; and

●

for engagements not on the pre-approved list and with expected costs greater than $50,000 (annual aggregate total), the entire Audit Committee must approve this service, generally at its next scheduled meeting.

AIF for the year ended December 31, 2019

27

The following table sets forth the aggregate audit fees, audit-related fees, tax fees of our principal accountants and all other fees billed for products and services provided by our principal accountants for each of the fiscal years ended December 31, 2019 and 2018.

	2019	2018
Audit<br>fees	$90,470	$87,250
Tax<br>fees	18,340	5,510
Other Audit Related Fees	46,000	39,560
Total fees	154,810	132,320

Audit Committee’s Pre-approval Policies and Procedures

Our Audit Committee nominates and engages our independent auditors to audit our financial statements. Our Audit Committee also requires management to obtain the Audit Committee’s approval on a case-by-case basis before engaging our independent auditors to provide any audit or permitted non-audit services to the Company or any of our subsidiaries. All fees shown have been pre-approved by the Audit Committee.

COMPENSATION COMMITTEE

Composition of the Compensation Committee

Messrs. Selby (Chair), Tilson, and Valentine are members of the Compensation Committee. Messrs. Tilson and Valentine are independent. The charter or mandate of the Compensation Committee is posted on the Company website and may viewed at www.nxtenergy.com or you may request a copy be mailed to you by writing to our offices at Suite 302, 3320 - 17th Ave. SW, Calgary, Alberta, Canada, T3E 0B4.

Responsibilities of the Compensation Committee

The Compensation Committee's duties, as outlined in its charter, are to deal with the assessment of management and succession to key positions and compensation within the Company. The Compensation Committee shall assist the Board in discharging the Board’s oversight responsibilities relating to the compensation and retention of key senior management employees, and in particular the CEO, with the skills and expertise needed to enable the Company to achieve its goals and strategies at fair and competitive compensation and appropriate performance incentives. In discharging its responsibilities, the Compensation Committee will report and, where appropriate make recommendations to the Board in respect of the matters identified in the charter.

STRATEGIC PLANNING COMMITTEE

Composition of the Strategic Planning Committee

Messrs. Tilson (Chair), Selby and Wilcox are members of the Strategic Planning Committee. Messrs. Tilson and Wilcox are independent. The Committee was formed in 2015 to assist the Company with addressing long range planning considerations, including plans for growth and management succession.

AIF for the year ended December 31, 2019

28

10. RELATED PARTY TRANSCTIONS

Summarized below are certain other transactions and business relationships between NXT and persons who are related parties, for the current fiscal year ended December 31, 2019:

●

No stock options or restricted stock units were granted to related parties during the above noted period.

●

One of the members of NXT’s Board of directors, Mr. Thomas Valentine is a partner in the law firm Norton Rose Fulbright, which provides legal advice to NXT. In 2019, NXT incurred legal expenses of $276,261 with this firm, for which a total of $146,197 is included in accounts payable as at December 31, 2019. Norton Rose Fulbright continues to provide legal services to NXT.

●

There were no stock options to acquire common shares of the Company exercised in 2019 by persons who were directors or officers of NXT as at the date of their exercise.

10.1

Technology Transfer Agreement (TTA)

Upon execution of the TTA on December 31, 2006, Mr. Liszicasz transferred all his rights and entitlements to the SFD® technology for use in the field of hydrocarbon exploration to NXT in exchange for receiving 10,000,000 non-voting, convertible preferred shares. Effective May 22, 2013, Mr. Liszicasz formally converted 2,000,000 of these preferred shares into 2,000,000 common shares. NXT’s independent members of the Board of Directors elected to retain the SFD® technology by converting the remaining outstanding preferred shares to common shares effective August 31, 2015.

Following the conversion, Mr. Liszicasz has continued to retain the rights to utilize the SFD® technology in all other potential field-of-use applications.

11. TRANSFER AGENT

Our Transfer Agent is of Computershare Trust Company of Canada, located in Calgary, Alberta, Canada, and the Company's transfer agent for its common shares.

12. MATERIAL CONTRACTS

The Company has not entered into any material contracts outside its normal course of business.

13. LEGAL PROCEEDINGS

To the best of the Company's knowledge, there are no legal or arbitration proceedings existing or pending which have had or may have, significant effects on the Company's financial position or profitability and no such proceedings are pending or known to be contemplated by governmental authorities.

14. INTEREST OF EXPERTS

KPMG LLP are the auditors of NXT Energy Solutions Inc. and have confirmed with respect to the Company, that they are independent within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations.

15.  ADDITIONAL INFORMATION

The Company’s consolidated financial statements are stated in Canadian dollars and are prepared in accordance with U.S. generally accepted accounting principles. Additional information relating to NXT can be found on SEDAR at www.sedar.com.

AIF for the year ended December 31, 2019

29

APPENDIX “A”

NXT ENERGY SOLUTIONS INC.

AUDIT COMMITTEE CHARTER

INTRODUCTION

This charter (the "Charter") has been adopted to govern the composition, mandate, responsibilities and authority of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of NXT Energy Solutions Inc. (the "Company").

COMPOSITION AND PROCEDURES

1.

The Committee shall be appointed by the Board and shall be composed of three directors, with at least two of whom being "independent" as required by the Business Corporations Act (Alberta) (the "Act").

2.

The Board will appoint the chair of the Committee.

3.

The quorum for meetings shall be a majority of the members of the Committee, present in person or by telephone or other telecommunication device that permits all persons participating in the meeting to speak and to hear each other.

4.

Meetings of the Committee shall be conducted as follows:

(a)

the Committee shall meet, in person or by teleconference, at least four times annually at such times and locations as may be requested by the chair of the Committee. Notice of meetings to the members shall be the same as set out in the by-laws of the Company for meetings of the Board. The Auditors or any member of the Committee may request a meeting of the Committee; and

(b)

management representatives may be invited to attend meetings (except private sessions with the Auditors as defined below).

PRIMARY RESPONSIBILITIES OF THE COMMITTEE

The primary responsibilities of the Committee are:

1.

To recommend to the Board:

(a)

the external auditor (the "Auditors") to be nominated for appointment by the Shareholders of the Company for the purpose of preparing or issuing the Auditor's report or performing other audit, review or attest services for the Company; and

(b)

the compensation of the Auditors.

2.

To oversee the work of the Auditors in preparing or issuing the Auditor's report on the Company's annual consolidated financial statements or performing other audit, review or attest services for the Company including the resolution of disagreements between management of the Company and the Auditors regarding financial reporting.

3.

To pre-approve, as required by the Act and subject to the exemptions in the Act, all non-audit services to be provided to the Company by the Auditors. The Committee may, in accordance with the requirements of the Act, delegate to one or more members of the Committee the authority to pre-approve non-audit services to be provided by the Auditors, provided that all such pre-approvals of non-audit services shall be presented to the Committee at its first scheduled meeting following such pre-approval.

AIF for the year ended December 31, 2019

30

4.

To review:

(a)

the Company's unaudited quarterly consolidated financial statements for the first, second and third quarters of the Company's fiscal year ("quarterly statements") and the Company's audited annual consolidated financial statements ("annual statements");

(b)

the Management's Discussion and Analysis ("MD&A") prepared in conjunction with the quarterly and annual statements; and

(c)

all press releases to be issued by the Company with respect to its annual and quarterly earnings and press releases on other material financial reporting matters.

5.

To satisfy itself that adequate procedures are adopted by the Company for the review of the Company's public disclosure of financial information extracted or derived from the Company's financial statements other than the public disclosure referred to in section 4 above, and to regularly assess the adequacy of such procedures.

6.

To satisfy itself that adequate procedures are adopted and oversee the maintenance of procedures for:

(a)

the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and

(b)

the confidential anonymous submission by employees of the Company and its subsidiaries of concerns regarding questionable accounting or auditing matters.

7.

To review and approve the Company's and its subsidiaries' hiring policies regarding partners, employees and former partners and employees of the current and former Auditors of the Company and its subsidiaries.

AUTHORITY OF THE COMMITTEE

Subject to prior consultation with the Chief Executive Officer or the Chief Financial Officer (except in unusual circumstances), the Committee is authorized to:

1.

engage independent counsel and other advisors it determines necessary to carry out the Committee's duties and responsibilities;

2.

set and require the Company to pay the compensation and charged expenses for any advisors engaged by the Committee; and

3.

communicate directly with any internal audit staff of the Company and its subsidiaries (if any) and the Auditors.

ADDITIONAL RESPONSIBILITIES AND DUTIES OF THE COMMITTEE

Auditors

1.

The Committee shall ensure that the Company requires and instructs the Auditors to report directly to the Committee.

2.

The Committee is responsible for ensuring the independence of the Auditors. On an annual basis, the Committee shall obtain a formal written statement from the Auditors delineating all relationships between the Auditors and the Company and confirming the independence of the Auditors. This written statement shall be obtained in conjunction with the audit of the annual financial statements after each fiscal year end.

AIF for the year ended December 31, 2019

31

Review of Annual Financial Statements

The Committee shall review the annual financial statements and related MD&A of the Company prior to their public release and shall report the results of its review to the Board and make recommendations to the Board with respect to Board approval of the financial statements and related MD&A. At the Committee meeting at which the Company's annual financial statements are to be reviewed, the Committee shall meet, in person or by teleconference, with representatives of the Auditors and with the Company's management to assess and understand the annual financial statements and the results of the audit including, but not limited to:

1.

that the Company's system of internal controls and financial reporting systems are adequate to produce fair and complete disclosure of its financial results;

2.

that the Company's reporting is complete and fairly presents its financial condition in accordance with generally accepted accounting principles;

3.

that accounting judgments and estimates used by management are reasonable and do not constitute earnings management;

4.

that risk management policies are in place to identify and reduce significant financial and business risks; and

5.

that the Company has in place a system to ensure compliance with applicable laws, regulations and policies.

Review of Quarterly Financial Statements

The Committee shall review the interim quarterly financial statements and related MD&A of the Company prior to their public release and shall report the results of its review to the Board and make recommendations to the Board with respect to Board approval of the quarterly statements and related MD&A unless the Board has delegated to the Committee the authority to approve the quarterly statements and related MD&A, in which case the Committee shall also approve the quarterly statements and related MD&A. The review by the Company shall be substantially completed prior to the issuance of a press release respecting the quarterly financial results. The Committee shall meet with the Company's management to assess and understand the interim quarterly financial statements and to discuss the results of their preparation and review.

Other Responsibilities and Duties

1.

As part of the quarterly and annual reviews described above, the Committee will:

(a)

meet with management in the absence of the Auditors for the annual review;

(b)

meet with the Auditors in the absence of management for the annual review;

(c)

review with management and the Auditors any proposed changes in major accounting policies, the presentation and impact of significant risks and uncertainties, and key estimates and judgments of management that may be material to financial reporting;

(d)

review with management and the Auditors any significant financial reporting issues discussed during the fiscal period and the method of resolution;

(e)

review any problems experienced by the Auditors in performing the annual audit, including any restrictions imposed by management or significant accounting issues on which there was a disagreement with management;

(f)

obtain an explanation from management of all significant variances between comparative reporting periods;

(g)

review the post-audit or management letter, containing the recommendations of the Auditors, and management's response and subsequent follow up to matters raised by the Auditors;

(h)

review any evaluation of internal controls by the Auditors, together with management's response; and

(i)

review and reassess the Charter for adequacy at least annually and make changes as it deems necessary.

2.

In addition to the quarterly and annual reviews, the Committee will:

(a)

prior to the commencement of each annual audit, meet with the Auditors to review the Auditors' audit plan for the ensuing audit;

(b)

review with management and the Auditors all material accounting and financial issues affecting the Company not dealt with in annual and quarterly reviews; and

(c)

review annually and recommend changes to the Company's Code of Conduct & Business Ethics.

The Committee shall perform such other duties as may be required by the Board or as may be delegated to the Committee by the Board.

AIF for the year ended December 31, 2019

32

APPENDIX B

Board of Directors Mandate

PURPOSE

The principal role of the Board of Directors of NXT Energy Solutions Inc. (the "Company") is stewardship of the Company through the creation of shareholder value, including the protection and enhancement of the value of its assets, as the fundamental objective. The stewardship responsibility means that the Board oversees the conduct of the business and management, which is responsible for the day-to-day conduct of the business. The Board must assess and ensure systems are in place to manage the risks of the Company's business with the objective of preserving the Company's assets. The Board, through the Chief Executive Officer ("CEO"), sets the attitude and disposition of the Company towards compliance with applicable laws, environmental, safety and health policies, financial practices and reporting. In addition to its primary accountability to shareholders, the Board is also accountable to employees, government authorities, other stakeholders and the public.

PRIMARY RESPONSIBILITIES

The principal responsibilities of the Board, which are required to ensure the overall stewardship of the Company are as follows:

1.

The Board must ensure that there are long-term goals in place and must adopt a strategic planning process. The CEO, with the approval of the Board, must establish long-term goals for the Company. The CEO formulates the Company's strategy, policies and proposed actions and presents them to the Board for approval. The Board brings objectivity and judgment to this process. The Board ultimately approves, on an annual basis, the strategic plan which takes into account, among other things, the opportunities and risks of the Company's business.

2.

The Board must identify and have an understanding of the principal risks associated with the Company's businesses and must ensure that appropriate systems are in place which effectively monitor and manage those risks.

3.

The Board must ensure that processes are in place to enable it to monitor and measure management's, and in particular the CEO's, performance in achieving the Company's stated objectives. These processes should include appropriate training, development and succession planning of management.

4.

To the extent feasible, the Board shall satisfy itself as to the integrity of the CEO and other executive officers and that the CEO and other executive officers create a culture of integrity throughout the Company.

5.

The Board must ensure that the necessary internal controls and management systems are in place that effectively monitor the Company's operations and ensure compliance with applicable laws, regulations and policies.

6.

The Board must monitor compliance with the Company's Code of Business Conduct and Ethics; and

7.

The Board must ensure the Company has adopted a communication policy which effectively communicates with and receives feedback from shareholders. The Board must also ensure that the Company has appropriate processes in place to effectively communicate with employees, government authorities, other stakeholders and the public.

AIF for the year ended December 31, 2019

33

NON-DELEGABLE RESPONSIBILITIES

Pursuant to the Business Corporations Act (Alberta) (the "Act"), certain matters are considered to be of such importance, so as to warrant the attention of all Directors and, accordingly, the Act prescribes that the following matters either cannot be delegated or may only be delegated in a qualified or partial manner:

●

the submission of items to shareholders for their approval;

●

the filling of a vacancy among the directors or in the office of auditor;

●

the appointment of additional directors;

●

the issue of securities;

●

the declaration of dividends;.

●

the purchase, redemption or other acquisition of the Company's own shares;

●

the payment of certain commissions prescribed by the Act;

●

the approval of a management proxy circular;

●

the approval of annual financial statements; and

●

the adoption, amendment or repeal of by-laws.

AIF for the year ended December 31, 2019

34

CUSTOMARY BOARD MATTERS

The following typifies matters customarily considered by the Board in fulfilling its responsibility for stewardship of the Company. The Board may determine it appropriate to delegate certain of these matters to committees of the Board:

●

the appointment of officers, other than executive officers;

●

adopting a process to consider the competencies and skills the Board, as a whole, should possess and assess the competencies and skills of each Board member and consider the appropriate size of the Board, with a view to facilitating effective decision-making;

●

determining the remuneration of directors and auditors;

●

reviewing and recommending to shareholders, changes to capital structure;

●

approving the Company's long-term strategy and the annual capital expenditure plan of the Company and its subsidiaries and where appropriate any supplementary capital plan;

●

approving banking, borrowing and investment policies;

●

determining dividend policy;

●

developing the Company's approach to corporate governance including, without limitation, developing a set of corporate governance principles and guidelines;

●

approving the holding, location and date of meetings of shareholders;

●

appointment of members to committees of the Board of Directors and approving terms of reference for and the matters to be delegated to such committees;

●

granting any waivers from the Company's Code of Business Conduct and Ethics for the benefit of the Company's directors or executive officers;

●

granting and delegating authority to designated officers and employees including the authority to commit capital, open bank accounts, sign bank requisitions and sign contracts, documents and instruments in writing;

●

determining the number of directors and recommending nominees for election by the shareholders;

●

approving amendments to the Company's existing plans: Stock Option Plan, employee benefits plans, or such other plans as the Company approves from time to time;

●

approving the acquisition or disposition or certain corporate assets; and

●

appointing the Company's transfer agents and registrars.

AIF for the year ended December 31, 2019

35

BOARD COMMITTEES

The Board of Directors has the authority to appoint a committee or committees of the Board and may delegate powers to such committees (with the exceptions prescribed by the Act). The matters to be delegated to committees of the Board and the constitution of such committees are assessed annually or more frequently as circumstances require. The following committees have been constituted:

1.

the Audit Committee, to deal with financial reporting and control systems;

2.

the Compensation Committee, to deal with the assessment of management and succession to key positions and compensation within the Company;

3.

the Disclosure Committee, to deal with the Company's approach to disclosure and the promotion of compliance; and

4.

the Corporate Governance Committee, to deal with the Company's approach to corporate governance and the promotion of compliance.

COMPOSITION & PROCEDURE

The Board of Directors is elected annually by shareholders. The number of Directors to be elected at shareholders meetings is fixed by the by-laws. While the election of directors is ultimately determined by the shareholders, it is the policy of the Board that a majority of the Directors be independent (as defined under applicable stock exchange rules and securities laws).

The Chairman of the Board presides as Chair at all meetings of the Board and shareholders of the Company. The Corporate Secretary or the Recording Secretary attends all meetings of the Board and shareholders and records the proceedings thereof. The Corporate Secretary prepares and keeps minutes and records of all meetings of the Board.

Meetings of the Board of Directors, including telephone conference meetings, are to be held at such time and place as the Chairman of the Board, or any two Directors, may determine. Notice of meetings shall be given to each Director in accordance with the by-laws. Meetings of the Board of Directors may be held without formal notice if all of the Directors are present and do not object to notice not having been given, or if those absent waive notice in any manner before or after the meeting.

Notice of meeting may be delivered personally, given by mail, facsimile or other electronic means of communication.

Each Board member is expected to attend Board meetings and meetings of committees of which he or she is a member and to become familiar with deliberations and decisions as soon as possible after any missed meetings. In that regard, members of the Board are expected to prepare for Board (and committee) meetings by reviewing meeting materials distributed to members of the Board, to the extent feasible, in advance of such meetings. Matters of a confidential or sensitive nature may be discussed at Board (or committee) meeting without advance distribution of meeting materials to members of the Board. It is expected that members of the Board will actively participate in determining and setting the long and short-term goals and interests of the Company.

In recognition of its independence, the Board shall regularly hold discussions without management present.

A resolution in writing signed by all the Directors entitled to vote on that resolution at a meeting of the Directors is as valid as if it had been passed at a meeting of the Directors. A copy of any such resolution in writing is kept with the minutes of the proceedings of the Directors.

At meetings of the Board, any matter requiring a resolution of the Directors is decided by a majority of the votes cast on the question; and in the case of an equality of votes, the Chair of the meeting is entitled to a second or casting vote.

The Board shall ensure that there is a process in place for annually evaluating the effectiveness of the Board, the committees of the Board and individual directors.

COMPENSATION

No Director, unless he or she is an officer of the Company, should receive remuneration from the Company other than compensation received in his or her capacity as a Director.

AIF for the year ended December 31, 2019

36

nsfdf_ex994

FORM 52-109F1

CERTIFICATION OF ANNUAL FILINGS

FULL CERTIFICATE

I, George Liszicasz, Chairman, President and Chief Executive Officer of NXT Energy Solutions Inc., certify the following:

1.

Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the "annual filings") of NXT Energy Solutions Inc. (the "issuer") for the financial year ended December 31, 2019.

2.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.

3.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.

4.

Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

5.

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the financial year end

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and

(ii)

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b)

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1

Control framework: The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is the Internal Control – Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2

ICFR – material weakness relating to design: The issuer has disclosed in its annual MD&A for each material weakness relating to design existing at the financial year end

(a)

a description of the material weakness;

(b)

the impact of the material weakness on the issuer's financial reporting and its ICFR; and

(c)

the issuer's current plans, if any, or any actions already undertaken, for remediating the material weakness.

5.3

N/A

6.

Evaluation: The issuer's other certifying officer and I have

(a)

evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and

(b)

evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's ICFR at the financial year end and the issuer has disclosed in its annual MD&A

(i)

our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and

(ii)

for each material weakness relating to operation existing at the financial year end

(A)

a description of the material weakness;

(B)

the impact of the material weakness on the issuer's financial reporting and its ICFR; and

(C)

the issuer's current plans, if any, or any actions already undertaken, for remediating the material weakness.

7.

Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer's ICFR that occurred during the period beginning on October 1, 2019 and ended on December 31, 2019 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

8.

Reporting to the issuer's auditors and board of directors or audit committee: The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of ICFR, to the issuer's auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer's ICFR.

Date: April 13, 2020

"/s/ George Liszicasz"

George Liszicasz

Chairman, President and Chief Executive Officer

nsfdf_ex995

FORM 52-109F1

CERTIFICATION OF ANNUAL FILINGS

FULL CERTIFICATE

I, Eugene Woychyshyn , Vice President, Finance and Chief Financial Officer of NXT Energy Solutions Inc., certify the following:

1.

Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the "annual filings") of NXT Energy Solutions Inc. (the "issuer") for the financial year ended December 31, 2019.

2.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.

3.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.

4.

Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

5.

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the financial year end

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and

(ii)

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b)

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1

Control framework: The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is the Internal Control – Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission.

5.2

ICFR – material weakness relating to design: The issuer has disclosed in its annual MD&A for each material weakness relating to design existing at the financial year end

(a)

a description of the material weakness;

(b)

the impact of the material weakness on the issuer's financial reporting and its ICFR; and

(c)

the issuer's current plans, if any, or any actions already undertaken, for remediating the material weakness.

5.3

N/A

6.

Evaluation: The issuer's other certifying officer and I have

(a)

evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and

(b)

evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's ICFR at the financial year end and the issuer has disclosed in its annual MD&A

(i)

our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and

(ii)

for each material weakness relating to operation existing at the financial year end

(A)

a description of the material weakness;

(B)

the impact of the material weakness on the issuer's financial reporting and its ICFR; and

(C)

the issuer's current plans, if any, or any actions already undertaken, for remediating the material weakness.

7.

Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer's ICFR that occurred during the period beginning on October 1, 2019 and ended on December 31, 2019 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

8.

Reporting to the issuer's auditors and board of directors or audit committee: The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of ICFR, to the issuer's auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer's ICFR.

Date: April 13, 2020

"/s/ Eugene Woychyshyn"

Eugene Woychyshyn

Vice President, Finance and Chief Financial Officer