As filed with the Securities and Exchange Commission on May 15, 2001

Securities And Exchange Commission
Washington, D.C. 20549

_________________

FORM 10-Q

_________________

(Mark One)

[ X ]	Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934 For The  Three-Month Period Ended March 31, 2001; Or
	Transition Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934 For The  Transition Period From ________ To _______

Commission File No. 0-24027

ENERGY EXPLORATION TECHNOLOGIES
(Exact name of registrant as specified in its charter)

Nevada
(State or other jurisdiction ofincorporation or organization) 61-1126904
(I.R.S. EmployerIdentification No.)

840 7^th Avenue S.W., Suite 700, Calgary, Alberta, Canada T2P 3G2
(Address of principal executive offices) (Zip Code)

(403) 264-7020
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all Reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registration was required to file such Reports), and (2) has been subject to such filing requirements for the past 90 days: Yes No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

13,112,916 shares of common stock, par value $0.001 per share, as of May 11, 2001

ENERGY EXPLORATION TECHNOLOGIES
QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Page

PART I	BUSINESS		1
Item 1	FINANCIAL STATEMENTS		1
Item 2	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		17
		General	17
		Overview	17
		Results Of Operations	18
		Liquidity And Capital Resources	21
		Other Matters	23
		Uncertainties And Other Risk Factors That May Affect Our Future Results And Financial Condition	24
Item 3	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK		35
		Oil And Gas Price Fluctuations	35
		Currency Fluctuations	35
		Interest Rate Fluctuations	35
Part II	OTHER INFORMATION		36
Item 1	LEGAL PROCEEDINGS		36
Item 2	CHANGES IN SECURITIES AND USE OF PROCEEDS		36
Item 3	DEFAULTS UPON SENIOR SECURITIES		36
Item 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		36
Item 5	OTHER INFORMATION		36
Item 6	EXHIBITS		36
		Exhibits	36
		Reports on form 8-K	36

-ii-

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Consolidated Balance Sheets
(unaudited) (expressed in U.S. dollars)

	March 31,                       2001	December 31,                                   2000
Assets
Current assets:
Cash and cash equivalents	$           3,219,806		$ 4,279,279
Accounts receivable	393,793		745,756
Due from officers and employees	198		100
Prepaid expenses and other	134,086		68,487
	----------------------		-----------------------
Total current assets	3,747,883		5,093,622
Note receivable from officer [note 4]	33,001		34,886
Debt issuance costs [notes 2(f) and 7]	24,230		24,706
Oil and natural gas properties, on the basis of full cost accounting, net of impairments [notes 2(h) and 5]	3,678,564		3,160,808
Other property and equipment, net of accumulated depreciation and amortization [notes 2(i) and 6]	3,756,270		3,854,206
	----------------------		-----------------------
Total assets	$         11,239,948		$ 12,168,228
	===============		================
Liabilities And Shareholders' Equity
Current liabilities:
Trade payables	$              624,359		$ 720,745
Wages and employee benefits payable	108,501		109,522
Accrued oil and natural gas property costs	61,481		67,575
Current portion long-term debt [note 7]	66,441		64,864
Other accrued liabilities	33,694		85,380
	----------------------		-----------------------
Total current liabilities	894,476		1,048,086
Long-term debt [note 7]	1,517,923		1,535,136
	----------------------		-----------------------
Total liabilities	2,412,399		2,583,222
Shareholders' equity:
Series "A" convertible preferred stock; par value $0.001 per share,      liquidation preference $7.50 per share:
800,000 shares authorized and 800,000 shares issued as of          March 31, 2001 and December 31, 2000 [note 9]	800		800
Common stock, par value $0.001 per share:
50,000,000 shares authorized;           13,112,916 shares issued as of March 31, 2001 and           December 31, 2000, respectively [note 8]	13,113		13,113
Warrants [notes 9 and 10]	-		-
Additional paid-in capital	19,612,276		19,612,276
Deficit accumulated during the development stage	(10,602,112)		(9,977,155)
Accumulated other comprehensive loss	(196,528)		(64,028)
	----------------------		-----------------------
Total shareholders' equity	8,827,549		9,585,006
	----------------------		-----------------------
Total liabilities and shareholders' equity	$         11,239,948		$ 12,168,228
	===============		================

The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets

-1-

ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Consolidated Statements Of Loss And Comprehensive Loss
(unaudited)
                                                                                                                                                                                   (expressed in U.S. dollars)

Three Months Ended March 31, and Cumulative From Inception (October 20, 1995) To March 31, 2001	2001	2000	Cumulative
Operating expense:
Administrative	$ 314,150	$ 327,684	$ 5,106,458
Impairment of oil and natural gas properties [notes 2(h) and 5]	20,775	-	520,605
Amortization and depreciation [note 2(i)]	76,579	74,021	713,798
Research and development [note 2(j)]	130,115	64,641	1,032,765
Survey support [note 2(k)]	51,082	84,049	898,778
Survey operations and data analysis [note 2(l)]	37,957	53,333	124,915
Write-down of property and equipment	-	-	17,662
	----------------------	----------------------	------------------------
Total operating expense	630,658	603,728	8,414,981
Operating loss	(630,658)	(603,728)	(8,414,981)
Other income (expense):
Interest expense	(38,839)	-	(182,412)
Interest income	42,988	112,830	1,023,900
Other income	1,552	-	38,305
Settlement of damages	-	-	157,500
Total other income (expense)	5,701	112,830	1,037,293
	----------------------	----------------------	------------------------
Net loss for the period	(624,957)	(490,898)	(7,377,688)
Other comprehensive loss:
Foreign currency translation adjustments [note 2(m)]	(132,500)	(8,702)	(196,528)
	----------------------	----------------------	------------------------
Comprehensive loss for the period	$ (757,457)	$ (499,600)	$ (7,574,216)
	===============	===============
Basic and diluted loss per share [note 2(n)]	$ (0.05)	$ (0.04)
	===============	===============
Weighted average shares outstanding	13,112,916	12,863,050
	===============	===============

The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements of loss and comprehensive loss

-2-

 

ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Consolidated Statements Of Shareholders' Equity (Deficit)
(unaudited)
                                                                                                                                                                                               (expressed in U.S. dollars)

Accumulated Other Comprehensive                                    Income		Common Stock		Series "A" Convertible     Preferred Stock		Warrants		Paid-in        Capital	Deficit Accumulated During The Development            Stage
		Shares	Amount	Shares	Amount	Number	Amount
1995:
Issued at inception for cash at $0.001 per share on October 20, 1995	$                -	5,000,000	$        5,000	-	$               -	-	$               -	$               -	$                    -
Net loss for fiscal 1995	-	-	-	-	-	-	-	-	(53,696)
Net other comprehensive loss for fiscal 1995	-	-	-	-	-	-	-	-	-
	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	------------------
Balance - December 31, 1995	-	5,000,000	5,000	-	-	-	-	-	(53,696)
1996:
Issued on reverse acquisition on January 30, 1996	-	5,968,281	5,968	-	-	-	-	(5,968)	-
Issued for cash at $1 per share on May 29, 1996	-	975,000	975	-	-	-	-	967,775	-
Net loss for fiscal 1996	-	-	-	-	-	-	-	-	(475,578)
Net other comprehensive loss for fiscal 1996	-	-	-	-	-	-	-	-	-
	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	------------------
Balance - December 31, 1996	-	11,943,281	11,943	-	-	-	-	961,807	(529,274)
1997:
Issued for services at $2.31.5 per share on July 1, 1997	-	71,938	72	-	-	-	-	166,469	-
Net loss for fiscal 1997	-	-	-	-	-	-	-	-	(913,321)
Net other comprehensive loss for fiscal 1997	-	-	-	-	-	-	-	-	-
	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	------------------
Balance - December 31, 1997	-	12,015,219	12,015	-	-	-	-	1,128,276	(1,442,595)
1998:
Issued on conversion of promissory notes at $2.72 per share on February 1, 1998, net of issuance costs	-	411,764	412	-	-	-	-	1,119,588	-
Issued for cash at $7.50 per share on April 3, 1998	-	-	-	800,000	800	-	-	7,792,167	(2,104,000)
Issued with series "A" preferred stock on April 3, 1998	-	-	-	-	-	200,000	1,132,000	-	(1,132,000)
Net loss for fiscal 1998	-	-	-	-	-	-	-	-	(1,117,808)
Net other comprehensive loss for fiscal 1998	-	-	-	-	-	-	-	-	-
	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	------------------
Balance - December 31, 1998	$                -	12,426,983	$      12,427	800,000	$           800	200,000	$  1,132,000	$10,040,031	$   (5,796,403)
[continued on next page]

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ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Consolidated Statements Of Shareholders' Equity (Deficit)
(expressed in U.S. dollars)

Accumulated Other Comprehensive                                                                              Income		Common Stock		Series "A" Convertible     Preferred Stock		Warrants		Paid-in        Capital	Deficit Accumulated During The Development             Stage
		Shares	Amount	Shares	Amount	Number	Amount
1999:
Issued for cash at $15 per share on May 17, 1999, net of issuance costs	$                -	400,000	$          400	-	$                -	-	$               -	$ 5,998,252	$                   -
Options exercised for cash at prices between $8.12.5 and $9.50 per share during fiscal 1999	-	35,000	35	-	-	-	-	303,979	-
Cancelled on October 14, 1999	-	(5,167)	(5)	-	-	-	-	(11,570)	11,575
Net loss for fiscal 1999	-	-	-	-	-	-	-	-	(1,534,513)
Net other comprehensive loss for fiscal 1999	(29,403)	-	-	-	-	-	-	-	-
	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	------------------
Balance - December 31, 1999	(29,403)	12,856,816	12,857	800,000	800	200,000	1,132,000	16,330,692	(7,319,341)
2000:
Warrants exercised for cash at $7.50 per share on March 31, 2000	-	200,000	200	-	-	(200,000)	(1,132,000)	2,631,800	-
Options exercised for cash at prices between $8.25 and $17.00 per share during fiscal 2000	-	56,100	56	-	-	-	-	649,784	-
Net loss for fiscal 2000	-	-	-	-	-	-	-	-	(2,657,814)
Net other comprehensive loss for fiscal 2000	(34,625)	-	-	-	-	-	-	-	-
	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	------------------
Balance - December 31, 2000	(64,028)	13,112,916	13,113	800,000	800	-	$-	19,612,276	$(9,977,155)
2001:
Net loss for the three-months ended March 31, 2001	-	-	-	-	-	-	-	-	(624,957)
Net other comprehensive loss for the three-month period ended March 31, 2001	(132,500)	-	-	-	-	-	-	-	-
	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	------------------
Balance - March 31, 2001	$ (196,528)	13,112,916	$      13,113	800,000	$           800	-	$                -	$19,612,276	$ (10,602,112)
	==========	==========	==========	==========	==========	==========	==========	==========	===========

The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements of shareholders' equity (deficit)

-4-

ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Consolidated Statements Of Cash Flows
(unaudited)
                                                                                                                                                                                 (expressed in U.S. dollars)

Three Months Ended March 31, and Cumulative From Inception (October 20, 1995) To March 31, 2001                                                                                                                            ;	2001	2000	Cumulative
Operating activities:
Net loss for the period	$            (624,957)	$          (490,898)	$         (7,377,687)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation of property and equipment	76,579	74,021	713,798
Write-down of property and equipment	-	-	17,662
Amortization of deferred costs	-	-	154,287
Impairment of oil and natural gas properties	20,775	-	520,605
Gain on sale of property and equipment	-	-	(11,059)
Changes in non-cash working capital:
Accounts receivable	351,963	(59,850)	(393,793)
Due from officers and employees	(98)	(173,392)	(198)
Prepaid expenses	(65,599)	24,903	(134,086)
Trade payables	(96,386)	19,901	624,359
Wages and employee benefits	(1,021)	(26,841)	108,501
Accrued liabilities	(51,686)	(54,418)	33,694
Deferred financing for insurance premium	-	-	7,766
Consulting costs settled by issuance of common stock	-	-	166,541
Interest costs settled by issuance of common stock	-	-	120,000
	---------------------	----------------------	---------------------
Net cash used in operating activities	(390,430)	(686,574)	(5,449,610)
Financing activities:
Funds borrowed for aircraft financing	(15,636)	-	1,584,364
Funds borrowed from affiliates	-	-	1,100,000
Repayment of funds borrowed from affiliates	-	-	(100,000)
Funds raised through the sale of common stock, net of costs	-	-	6,972,402
Funds raised through the sale of preferred stock and warrants, net of costs	-	-	5,688,967
Funds raised through the exercise of options	-	132,140	953,819
Funds raised through the exercise of warrants	-	1,500,000	1,500,000
Repayment of deferred financing for insurance premium	-	-	(146,520)
Changes in non-cash working capital:
Debt issuance costs	476	-	(24,230)
	---------------------	----------------------	---------------------
Net cash generated by financing activities	(15,160)	1,632,140	17,528,802
Investing activities:
Funds invested in property and equipment	(5,673)	(105,496)	(4,504,164)
Proceeds on sale of property and equipment	-	-	11,996
Funds invested in oil and natural gas properties	(511,501)	(331,528)	(4,199,168)
Funds borrowed by an employee	-	-	(35,760)
Repayment of funds borrowed by an employee	1,885	841	2,757
Changes in non-cash working capital:
Accrued oil and natural gas property costs	(6,094)	(193,546)	61,481
	---------------------	----------------------	---------------------
Net cash used in investing activities	(521,383)	(629,729)	(8,662,858)
Effect of net other comprehensive loss	(132,500)	(8,702)	(196,528)
Net cash inflow (outflow)	(1,059,473)	307,135	3,219,806
Cash position, beginning of period	4,279,279	9,068,723	-
	---------------------	----------------------	---------------------
Cash position, end of period	$          3,219,806	$            9,375,858	$          3,219,806
	==============	===============	==============

The accompanying notes to consolidated financial statements are an integral part of
these consolidated statements of cash flows

-5-

ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

1. Organization And Operations

Energy Exploration Technologies ("we," "our company" or "NXT"), a development stage enterprise, was incorporated under the laws of the State of Nevada on September 27, 1994. We are a technology-based reconnaissance exploration company which utilizes our proprietary stress field detection or "SFD" remote-sensing airborne survey technology, which we refer to as our "SFD survey system," to quickly and inexpensively identify and high-grade oil and natural gas prospects. We conduct our reconnaissance exploration activities, as well as land acquisition, drilling, completion and production activities to exploit prospects identified using our SFD technology, through our wholly-owned subsidiaries-NXT Energy USA Inc. ("NXT Energy USA") and NXT Energy Canada Inc. ("NXT Energy Canada"), our two exploration subsidiaries which focus on exploration acquisition and development efforts in the United States and Canada, respectively; and NXT Aero USA Inc. ("NXT Aero USA") and NXT Aero Canada Inc. ("NXT Aero Canada"), our two aircraft operation subsidiaries which operate our aircraft on survey missions for NXT Energy USA and NXT Energy Canada, respectively. NXT, in turn, focuses on research and development efforts to improve the efficacy of our SFD survey system.

Since we have not generated operating revenues to date, we should be considered a development stage enterprise. Our ability to continue as a going concern in the longer term will be dependent upon our ability, either through our joint venture arrangements or for our own account, to successfully identify hydrocarbon bearing prospects, and to finance, develop, extract and market oil and natural gas from these prospects for a profit. We anticipate that we will continue to incur further operating losses until such time as we receive revenues from our production with respect to prospects currently in the development stage, or through prospects we identify and exploit for our own account.

2. Significant Accounting Policies
1. Basis of Presentation

We have prepared these consolidated financial statements in accordance with accounting principles generally accepted in the United States for interim financial reporting.  While these financial statements reflect all normal recurring adjustments which, in the opinion of our management, are necessary for fair presentation of the results of the interim period, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements.  For additional information, refer to our financial statements included in our annual report on form 10 -K for our fiscal year ended December 31, 2000.

2. Consolidation

We have consolidated the accounts of our wholly owned subsidiaries with those of NXT in the course of preparing these consolidated financial statements. All significant intercompany balances and transactions amongst NXT and its subsidiaries have been eliminated as a consequence of the consolidation process, and are therefore not reflected in these consolidated financial statements.

-6-

ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

3. Reclassifications

We have changed the manner of presentation in these consolidated financial statements and, as a consequence, have reclassified certain accounts and amounts reflected in our prior annual consolidated financial statements to conform to this change in presentation.

4. Estimates and Assumptions

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results may differ from those estimates.

5. Cash and Cash Equivalents

For purposes of preparing the consolidated balance sheets and statements of cash flows contained in these consolidated financial statements, we consider all investments with original maturities of ninety days or less to constitute "cash and cash equivalents."

6. Debt Issuance Costs

We amortize debt issuance costs on a straight-line basis over the life of the related debt.

7. Fair Value of Financial Instruments

Our financial instruments consist of cash, accounts receivable, notes receivable, trade payables, accrued liabilities and long-term debt. The book value of these financial instruments, other than long-term debt, approximates their fair values due to their short-term to maturity and similarity to current market rates. The carrying value of our long-term debt is considered to approximate its fair value because the interest rate is comparable to current rates available to the company. It is the opinion of our management that we are not exposed to significant interest, currency or credit risks arising from these financial instruments.

8. Oil and Natural Gas Properties

We follow the full cost method of accounting for oil and natural gas properties and equipment whereby we capitalize all costs relating to our acquisition of, exploration for and development of oil and natural gas reserves. These capitalized costs include:

• land acquisition costs;

• geological and geophysical costs;

• costs of drilling both productive and non-productive wells;

• cost of production equipment and related facilities; and

• various costs associated with evaluating petroleum and natural gas properties for potential acquisition.

-7-

ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

We only capitalize overhead that is directly identified with acquisition, exploration or development activities. All costs related to production, general corporate overhead and similar activities are expensed as incurred.

Under the full cost method of accounting, capitalized costs are accumulated into cost centers on a country-by-country basis. These costs, plus a provision for future development costs (including estimated dismantlement, restoration and abandonment costs) of proved undeveloped reserves, are then depleted and depreciated using the unit-of-production method, based on estimated proved oil and gas reserves as determined by independent engineers where significant. For purposes of the depletion and depreciation calculation, proved oil and gas reserves are converted to a common unit of measure on the basis of their approximate relative energy content. No depletion or depreciation expense was recorded as NXT is a development stage enterprise.

In applying the full cost method of accounting, capital costs in each cost center less accumulated depletion and depreciation and related deferred income taxes are restricted from exceeding an amount equal to the sum of the present value of their related estimated future net revenues discounted at 10% less estimated future expenditures, and the lower of cost or estimated fair value of unproved properties included in the costs being amortized, net of related tax effects. Should this comparison indicate an excess carrying value, a write-down would be recorded. 

The carrying values of unproved properties, which are excluded from the depletion calculation, are assessed on a quarterly basis to ascertain whether any impairment in value has occurred. This assessment typically includes a determination of the anticipated future net cash flows based upon reserve potential and independent appraisal where warranted. Impairment is recorded if this assessment indicates the future potential net cash flows are less than the capitalized costs.

All recoveries of costs through the sale or other disposition of oil and gas properties and equipment are accounted for as adjustments to capitalized costs, with no gain or loss recorded, unless the sale or disposition involves a significant change in the relationship between costs and the value of proved reserves or the underlying value of unproved property, in which case the gain or loss is computed and recognized.

We conduct oil and natural gas exploration, drilling, development and production activities through our joint venture partners. These consolidated financial statements reflect only our proportionate interest in these activities.

9. Other Property and Equipment

We carry our other capitalized property and equipment at cost, and depreciate or amortize them over their estimated service lives using the declining balance method as follows:

Aircraft	5%
Computer equipment	30%
Computer software	100%
Equipment	20%
Furniture and fixtures	20%
Leasehold improvements	20%
Tools	20%
Vehicles	30%

When we retire or otherwise dispose of our other capitalized property and equipment, we remove their cost and related accumulated depreciation or amortization from our accounts, and record any resulting gain or loss in the results of operations for the period. Our management periodically reviews the carrying value of our property and equipment to ensure that any permanent impairment in value is recognized and reflected in our results of operations.

-8-

ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

10. Research and Development Expenditures

We expense all research and development expenditures we incur to develop, improve and test our SFD survey system and related components, including allocable salaries.

11. Survey Support Expenditures

We expense all survey support expenditures we incur, after netting costs which are reimbursable by our joint venture partners. Survey support expenditures consist primarily of the cost, including allocable salaries, to:

• conduct field evaluations designed by our joint venture partners to evaluate the SFD survey system; and

• develop, organize, staff and train our survey and interpretation operational functions.

12. Survey Operations and Data Analysis Expenditures

We expense all survey and data analysis costs we incur, after netting costs which are reimbursable by our joint venture partners. Survey and data analysis expenditures consist primarily of:

• aircraft operating costs, travel expenses and allocable salaries of our personnel while on survey assignment; and

• allocable salaries of our personnel while interpreting SFD data.

13. Foreign Currency Translation

Our only operations outside of the United States are in Canada. Foreign currency translation adjustments resulting from the translation of the financial statements of our Canadian subsidiaries, whose functional currency is Canadian dollars, into U.S. dollar equivalents for purposes of consolidating our financial statements, are included in other comprehensive loss. For purposes of consolidation, we use the following methodology to convert Canadian dollar denominated accounts and transactions into U.S. dollars:

• all asset and liability accounts are translated into U.S. dollars at the rate of exchange in effect as of the end of the applicable fiscal period;

• all shareholders' equity accounts are translated into U.S. dollars using historical exchange rates; and

• all revenue and expense accounts are translated into U.S. dollars at the average rate of exchange for the applicable fiscal period.

We record the cumulative gain or loss arising from the conversion of the noted Canadian dollar denominated accounts and transactions into U.S. dollars as a foreign currency translation adjustment as a component of accumulated other comprehensive income or loss for that period.

-9-

ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

15. Basic and Diluted Loss Per Share

Our basic loss per share is computed in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share," ("SFAS 128"), by dividing the net loss for the period attributable to holders of our common stock by the weighted average number of shares of our common stock outstanding for the period. Our diluted loss per share is computed, also in accordance with SFAS 128, by including the potential dilution that could occur if holders of our dilutive securities were to exercise or convert these securities into our common stock.

In calculating our diluted loss per share, we take into consideration deemed distributions analogous to the declaration of a dividend attributable to the beneficial conversion features affording a discount or benefit to the holders of our securities. See note 9.

16. Stock-Based Compensation

In accounting for the grant of our employee and director stock options, we have elected to follow Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees," ("APB 25"), and related interpretations. Under APB 25, companies are not required to record any compensation expense relating to the grant of options to employees or directors where the awards are granted upon fixed terms with an exercise price equal to fair value and the only condition of exercise is continued employment.

17. Recent Pronouncements

On January 1, 2001, NXT adopted SFAS No. 133, "Accounting for Derivative Instruments And Hedging," as modified by SFAS No. 138, "Accounting for Certain Derivative Instruments and Hedging Activities." SFAS No. 133 requires a company to recognize all derivative instruments on the balance sheet as either an asset or a liability measured at fair value. Changes in fair value of derivative instruments are recognized in earnings unless specific hedge criteria is met. Changes in fair value of derivative instruments that are designated as hedges are recognized in earnings in the same period as the hedged item. SFAS No. 133 requires that a company formally document, designate and assess the effectiveness of instruments that receive the hedge accounting. NXT has no derivative instruments and the adoption of SFAS No. 133 on January 1, 2001 has not had a material impact to our consolidated financial position or the results of operations.

3. Reverse Acquisition

We acquired what is now our wholly-owned subsidiary, NXT Energy USA (then known as Pinnacle Oil Inc.), on January 20, 1996, in a transaction accounted for as a "reverse acquisition." This acquisition was effected through the issuance of 10,090,675 common shares of NXT (then known as Auric Mining Corporation), constituting approximately 92% of its outstanding shares at that date, in exchange for all of the outstanding shares of NXT Energy USA. As a result of the application of the noted accounting principles governing reverse acquisitions, NXT Energy USA (and not NXT) was treated as the "acquiring" or "continuing" entity for financial accounting purposes.

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ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

We have accounted for the NXT Energy USA acquisition as an issuance of stock by NXT Energy USA in exchange for the tangible net assets of NXT, valued at fair value, which approximate historical costs. As a result, our consolidated statements of loss and shareholders' equity (deficit) included in these consolidated financial statements are deemed to be a continuation of NXT Energy USA's financial statements, and therefore reflect:

• NXT Energy USA's operations from the date of its formation (October 20, 1995) through the effective date of the reverse acquisition (January 20, 1996); and

• our consolidated operations after the effective date of the reverse acquisition (January 20, 1996).

4. Note Receivable From Officer

In September 1998, we loaned the sum of Cdn. $54,756 (U.S. $35,760 as of that date) to one of our officers in connection with his relocation to Calgary, Alberta. Pursuant to the terms of an underlying promissory note, the officer is required to repay the loan on a monthly basis, with a balloon payment due on October 3, 2003. The amount of the monthly payments is calculated on the basis of a 300-month amortization rate, principal plus interest, using a variable interest rate computed at our cost of funds, which we define as our floating interest rate for liquid investments (presently 5.5%).

5. Oil and Natural Gas Properties

Summarized below are the oil and natural gas property costs we capitalized for our three months ended March 31, 2001 and March 31, 2000, and as of March 31, 2001:

	Three Months Ended                          March 31		As of       March 31,              2001
	2001	2000
Acquisition costs	$      67,798	$       6,263		$      530,760
Exploration costs	470,733	325,265		3,668,409
	-----------------	-----------------		-------------------
Oil and natural gas properties	538,531	331,528		4,199,169
Less impairment	(20,775)	-		(520,605)
	-----------------	-----------------		-------------------
Net oil and natural gas properties	$    517,756	$    331,528		$   3,678,564
	===========	===========		=============

Since all of our oil and natural gas properties as of March 31, 2001 were either not yet producing or still in the drilling stage, we have classified all of these properties as unproved properties. Consequently, we did not record any depletion to date for these properties.

The impairment of oil and natural gas properties relates to the write-down of the cost of drilling and completing wells which are either non-commercial or which we are unable to complete for technical reasons. While, as noted below, our management believes in the prospective commercial viability and non-impairment of the overall prospects of which each of these wells are a part and is continuing active exploration and development activities with respect to each of these prospects, we have nevertheless written-off these individual well costs as an impairment cost since we have not established proved reserves to date.

At the end of each fiscal quarter, our management performs an overall assessment of each of our oil and natural gas properties to determine if any of these properties had been subject to any impairment in value (see note 2(h)). Based upon these evaluations, our management has determined that each of our oil and natural gas properties continued to have prospective commercial viability as of that date, including each of those properties noted above that contain wells which we have written-off. Based upon these considerations, we have not recorded any impairments against our properties to date other than the noted write-offs. While we are currently conducting active exploration and development programs with respect to each of these unproved oil and natural gas properties, we anticipate that all of these properties will be evaluated and the associated costs transferred into the amortization base or impaired over the next five years.

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ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

6. Other Property and Equipment

Summarized below are our capitalized costs for other property and equipment as of March 31, 2001 and December 31, 2000:

	March 31,               2001	December 31,                2000
Aircraft	$     3,385,665		$     3,385,139
Computer equipment	272,678		282,272
Computer software	115,336		116,819
Equipment	76,782		77,169
Furniture and fixtures	181,137		190,039
Leasehold improvements	241,110		253,459
SFD survey system (including software)	112,606		115,336
Tools	1,560		1,640
Vehicle	18,828		18,828
	---------------------		----------------------
Property and equipment	4,405,702		4,440,701
Less accumulated depreciation and amortization	(649,432)		(586,495)
	---------------------		----------------------
Net property and equipment	$     3,756,270		$     3,854,206
	==============		==============

7. Long-Term Debt

On November 6, 2000, we borrowed $1,600,000 on an asset-based loan collateralized by our Piaggio P180 Avanti aircraft. The principal and interest on this loan, which accrues at the rate of 9.65% per annum, are repayable in 156 equal installments of $18,037 each, commencing January 1, 2001 with the last payment due on December 1, 2013. The loan contains no restrictive or financial ratio covenants. We also paid $24,706 in fees with respect to this loan which we recorded as debt issuance costs.

8. Common Stock

On January 31, 1997, two of our executive officer-directors at that time each loaned our company the sum of $500,000, for total loan proceeds of $1,000,000. These loans were extended by these officer-directors pursuant to unsecured, convertible promissory notes due January 31, 1998, together with interest accrued at a rate of 12% per annum. Each promissory note contained identical conversion provisions pursuant to which:

• each officer-director could elect to convert any or all of the outstanding balance of his loan into common stock based upon a ratio of one share per $4.07 in converted principal and interest at any time; and
• our company could convert any or all of the outstanding balance of either loan into common stock based upon a ratio of one share per $2.72 in converted principal and interest should we be unable to repay that amount by the January 31, 1998 due date.

We exercised our right to convert the notes into 411,764 shares of common stock on February 1, 1998, in satisfaction of $1,120,000 in aggregate principal and accrued interest which became due on January 31, 1998.

On May 17, 1999, we raised $6,000,000 in gross proceeds through a private placement of 400,000 shares of our common stock at $15 per share. Net proceeds to our company from this offering were $5,998,652, after deducting $1,348 in offering expenses.

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ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

During fiscal 1999, we raised $303,979 in gross proceeds through our employees' exercise of stock options entitling them to purchase 35,000 shares of our common stock at exercise prices between $8.12.5 and $9.50 per share.

On March 31, 2000, the holder of warrants to purchase 200,000 shares of our common stock at an exercise price of $7.50 per share exercised these warrants, resulting in gross proceeds to our company of $1,500,000. See note 9.

During fiscal 2000, we raised $649,840 in gross proceeds through our employees' exercise of stock options entitling them to purchase 56,100 shares of our common stock at exercise prices between $8.25 and $17 per share.

9. Preferred Stock and Warrants

On April 3, 1998, we completed a series of transactions pursuant to which:

• NXT Energy USA entered into a joint venture agreement, and

• we concurrently raised $6,000,000 in gross proceeds from an affiliate of the joint venture partner through the private placement to that party of 800,000 shares of our series "A" convertible preferred stock, and warrants to purchase 200,000 shares of our common stock at an exercise price of $7.50 per share.

The net proceeds of this private placement were $5,688,167, after deducting $311,833 in offering expenses, including the cost of becoming a reporting company with the Securities and Exchange Commission.

Each share of preferred stock is convertible into one common share at the election of the holder, and carries a $7.50 liquidation preference should our company wind-up and dissolve. We reserved the right to redeem the preferred stock at a price of $7.50 per share if it has not been converted into common stock by April 3, 2000, and the holder forgoes a final opportunity to exercise his conversion rights to avoid redemption. The preferred shares are not entitled to payment of any dividends, although they are entitled under certain circumstances to participate in dividends on the same basis as if converted into common shares. Each warrant carried a $7.50 per share exercise price, and stipulated that it would lapse to the extent not exercised by April 3, 2000. All of the warrants were exercised on March 31, 2000 for gross proceeds of $1,500,000. See note 8.

Insofar as the preferred shares and warrants contained beneficial conversion features affording a discount or benefit to the purchaser of these securities, we recorded a deemed distribution analogous to the declaration of a dividend to that purchaser. This deemed distribution resulted in:

• an increase in additional paid-in capital in the amount of $2,104,000 to record the intrinsic value of the beneficial conversion feature of the preferred shares (i.e., the discount in the purchase price of these securities relative to the public trading price as of the date of issuance of the underlying common shares into which these preferred shares could be converted, without adjustment for discounts or restrictions);

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ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

• a newly created warrant capital account to record the fair value of the warrants in the amount of $1,132,000, including the value of their beneficial conversion feature, as determined by the Black-Scholes method of valuation (this amount was subsequently reclassified to additional paid-in capital upon the exercise of the warrants); and

• a counterbalancing charge against our accumulated deficit capital account in the amount of $3,236,000.

We also made appropriate adjustment for the deemed distribution in calculating our basic loss per common share. See note 2(n).

10. Performance Warrants

On August 1, 1996, we granted a performance-based contractual right to acquire NXT warrants to the licensor of our SFD technology, Momentum Resources Corporation, in connection with the amendment of our exclusive SFD technology license with Momentum to use the SFD technology for hydrocarbon exploration. The primary purpose of the amendment was to indefinitely extend the termination date of the license. Pursuant to this contractual right, Momentum is entitled to a separate grant of warrants entitling it to purchase 16,000 shares of our common stock at the then current trading price for each month after December 31, 2000 in which production from SFD-identified prospects during that month exceeds 20,000 barrels of hydrocarbons. Momentum has not earned any warrants under the SFD technology license as of March 31, 2001.

11. Options

1. Description of Plans

Through March 31, 2001, we have granted options to selected employees and directors of our company pursuant to the following separate arrangements or plans (the "Plans"):

• separate free-standing directors' options which we granted to selected directors as compensation for serving on our board of directors;

• the 1997 Energy Exploration Technologies Stock Plan (the "1997 Plan"), pursuant to which 1,000,000 shares of our common stock were reserved for issuance to employees, directors and consultants in the form of stock options or outright stock grants;

• the 1999 Energy Exploration Technologies Executive Option Plan (the "1999 Plan"), pursuant to which 1,000,000 shares of our common stock were reserved for issuance to executive officers in the form of stock options; an d

• the 2000 Energy Exploration Technologies Directors' Option Plan (the "2000 Plan"), pursuant to which 400,000 shares of our common stock were reserved for issuance to selected directors in the form of stock options.

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ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

2. Summary of Option Grants

We have summarized below all outstanding options under the Plans as March 31, 2001:

	Grant             Date	Original Exercise            Price	As of March 31, 2001
			Outstanding	Vested
Director-Free-standing	5-12-97	$    5.81	45,000	45,000
Director-Free-standing	5-12-97	5.81 (1)	30,000	30,000
Director-Free-standing	5-20-97	5.25	45,000	45,000
Director-Free-standing	5-20-97	5.25 (1)	45,000	45,000
Employee-1997 Plan	11-24-97	9.50 (1)	36,600	16,600
Director-Free-standing	3-10-98	8.31 (1)	45,000	45,000
Employee-1997 Plan	5-12-98	8.25	5,000	5,000
Employee-1997 Plan	5-12-98	8.25 (1)	25,000	15,000
Employee-1997 Plan	8-24-98	8.25 (1)	117,500	17,500
Employee-1997 Plan	10-1-98	8.125(1)	20,000	5,000
Employee-1999 Plan	5-1-99	14.00 (1)	561,136	151,134
Employee-1999 Plan	5-1-99	15.00 (1)	26,664	6,666
Employee-1999 Plan	5-1-99	- (2)	400,000	-
Employee-1997 Plan	5-12-99	17.00 (1)	16,000	-
Employee-1997 Plan	9-21-99	13.625(1)	100,000	20,000
Employee-1997 Plan	11-16-99	14.125(1)	65,000	13,000
Employee-1997 Plan	11-16-99	4.125(3)	4,000	4,000
Director-2000 Plan	2-15-00	28.75 (1)	60,000	20,000
Employee-1997 Plan	3-20-00	34.50 (1)	20,000	4,000
Director-2000 Plan	4-17-00	26.25 (1)	120,000	-
Employee-1997 Plan	5-8-00	29.75 (1)	45,000	-
Employee-1997 Plan	6-1-00	32.125(1)	30,000	-
Employee-1997 Plan	6-1-00	27.125(1)	100,000	-
Employee-1997 Plan	8-9-00	4.125(4)	3,000	3,000
Employee-1997 Plan	9-1-00	25.875(1)	125,000	-
Employee-1997 Plan	12-27-00	4.125	30,000	-
Employee-1997 Plan	12-27-00	4.125(1)	50,000	-
Employee-1997 Plan	1-02-01	5.50 (1)	25,000	-
			2,194,900	490,900

(1) Effective January 4, 2001, the recipient elected to receive replacement options with respect to this original grant having
      the same terms as the original grant, except that the exercise price for the replacement options would be fixed at 
      the closing price for NXT common stock as of July 5, 2001. 

(2) The exercise price for these options will be fixed, in accordance with the terms of the original grant, on May 1, 2001.

(3) The exercise price for these options was repriced from $14.12.5 in February 2001.

(4) The exercise price for these options was repriced from $28.06.5 in February 2001.

The employee options outstanding as of March 31, 2001 vest over three to five years from the grant date, depending upon the recipient, based upon the continued provision of services as an employee. The director options granted before January 1, 2000 that are outstanding as of March 31, 2001 vest one-third on date of grant, and an additional one-third each on the first anniversary and second anniversaries of the grant date, respectively, based upon the continued provision of services as a director. The director options granted after January 1, 2000 that are outstanding as of March 31, 2001 vest one-third each on the first through third anniversaries of the grant date, respectively, based upon the continued provision of services as a director. Both the employee and director options generally lapse, if unexercised, five years from the date of vesting.

NXT's board of directors ratified the re-grant and re-pricing of all outstanding options held by our employees and directors effective as of January 3, 2001 on the same terms (including vesting, term and lapse) as the original grant, except that (1) the new exercise price for the options would equal the closing price for our common stock as of the close of business on July 5, 2001, and (2) the term of the options would be extended to July 5, 2003 with respect to any options which would otherwise lapse, if unexercised, on or prior to that date. In consideration of the foregoing, the holders of the options agreed that they could not exercise the new options until they were re-priced, and further agreed that their unvested new options would lapse should they resign their position with our company on or before July 5, 2003.

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ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

12. Commitments

At March 31, 2001, we had entered into joint venture agreements with two separate oil and natural gas exploration companies. We are required under these joint venture agreements to conduct SFD surveys to identify oil and natural gas prospective prospects on selected exploration areas of up to 2,400 square miles, and our joint venture partners are required to drill each SFD-identified prospect they accept under their respective agreement.

Our recent practice with our joint venture partners has been to participate in selected prospects on a combination of working interest and overriding royalty basis, typically a 22.5% working interest and a 4% overriding royalty. In any situation where we elect to participate on a working interest basis, we must bear our share of mineral and drilling right acquisition (if necessary), drilling, completion and production costs incurred with respect to the prospect based upon our elected working interest percentage. Although we will bear our share of these costs, our joint venture partner will nevertheless remain responsible for conducting and managing all drilling, production and marketing activities to exploit the prospect.

On November 25, 1997, we entered into a five-year non-cancelable operating lease for our principal executive offices. This lease, which consists of 13,325 rentable square feet as of March 31, 2001, expires on January 21, 2003. Our combined obligations for base lease payments, building operating cost and other pass-through items as of March 31, 2001 was Cdn. $21,418 per month, which translates into U.S. $13,588 per month based upon the closing conversion rate as of that date.

On June 1, 2000, we entered into a five-year operating lease for our hanger facility. This lease, which consists of 14,513 rentable square feet, expires May 31, 2005. Our combined monthly obligation as of March 31, 2001 was Cdn. $13,345, which translates into U.S. $8,466 per month based upon the closing conversion rate as of that date. The monthly lease obligation increases three percent annually commencing June 1, 2002 until the end of the lease term.

13. Segment Information

We currently operate in only one business segment, oil and natural gas exploration, insofar as we intend to develop all oil and natural gas exploration prospects identified using our proprietary SFD airborne survey technology either directly for our account or indirectly for our account through working interest or overriding royalty interests through our joint venture partners. We do not currently sell or market our SFD data as a separate product to third parties.

As we are a development stage enterprise, the majority of our revenues through March 31, 2001, have been from interest earned on cash and cash equivalents.

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ENERGY EXPLORATION TECHNOLOGIES
(a development stage enterprise)
Notes To Consolidated Statements
(unaudited)
(expressed in U.S. dollars)
                                                                                                                                                                                       March 31, 2001 and 2000

Summarized below with respect to our three-month interim periods ended March 31, 2001 and 2000 is geographic information relating to:

• revenues we have received during the interim period from our external customers, allocated amongst the geographic areas in which the revenue was generated;

• revenues we have received during the interim period from sources other than our external customers, allocated amongst the geographic areas in which the revenue was generated; and

• our operating loss for the interim period, allocated amongst the geographic areas in which the revenue and associated expenses were generated.

Three Months Ended:	United States	Canada	Total
March 31, 2001:
Revenues from external customers	-	-	-
Revenues from other sources	41,998	2,542	44,540
Operating loss	(439,737)	(190,921)	(630,658)
March 31, 2000:
Revenues from external customers	-	-	-
Revenues from other sources	111,635	1,195	112,830
Operating loss	(351,425)	(252,303)	(603,728)

Summarized below is geographic information relating to our assets as of March 31, 2001 and December 31, 2000, allocated amongst the geographic areas in which the assets were physically located or principally connected:

As of:	United States	Canada	Total
March 31, 2001:
Assets	$ 7,893,490	$ 3,346,458	$ 11,239,948
December 31, 2000:
Assets	$ 9,330,483	$ 2,837,745	$ 12,168,228

Item 2.    Management's Discussion And Analysis Of Financial Condition And Results Of Operations

General

The following discussion of our consolidated financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to our consolidated financial statements included in Part I, Item 1, of this report. The information set forth below in this report is current as of the date of this report, May 11, 2001, unless an earlier or later date is indicated.

All references to "dollars" in this report refer to United States or U.S. dollars unless specific reference is made to Canadian or Cdn. dollars. For information relative to currency conversion, see note 2(m) to our consolidated financial statements. The rate of exchange of Canadian dollars to United States dollars as of March 31, 2001, was Cdn. $1.5763 to U.S. $1.

Overview

NXT is a technology-based reconnaissance exploration company which utilizes our proprietary, quantum physics-based, stress field detection or "SFD" remote-sensing airborne survey technology, which we refer to as our "SFD survey system," to quickly and inexpensively identify and high-grade oil and natural gas prospects. We conduct our reconnaissance exploration activities, as well as land acquisition, drilling, completion and production activities to exploit prospects identified using our SFD technology, through our wholly-owned subsidiaries-NXT Energy USA and NXT Energy Canada, our two exploration subsidiaries which focus on exploration acquisition and development efforts in the United States and Canada, respectively; and NXT Aero USA and NXT Aero Canada, our two aircraft operation subsidiaries which operate our aircraft on survey missions for NXT Energy USA and NXT Energy Canada, respectively. NXT, in turn, focuses on research and development efforts to improve the efficacy of our SFD survey system.

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Our United States exploration efforts to date have been conducted for CamWest Exploration LLC under a joint venture agreement pursuant to which we conduct aerial surveys to identify prospects in exploration areas in the United States selected by CamWest. Our Canadian exploration efforts to date have been conducted primarily for Encal Energy Ltd. under a joint venture agreement pursuant to which we conduct aerial surveys to identify prospects in exploration areas in Canada selected by Encal. We have also agreed upon the terms of a joint-venture agreement with a second Canadian exploration company, but are awaiting the occurrence of certain events before proceeding to finalize the agreement. We have also commenced conducting exploration activities in western Canada for our own account.

Our joint venture partners are each also required under the terms of their respective joint venture agreements to reimburse us for 100% of the expenses we incur in conducting aerial surveys for them.

Our recent practice with our joint venture partners has been to participate in selected prospects on a combination working interest/overriding royalty interest basis, typically a 22.5% working interest and a 4% overriding royalty.

Our rights to use our SFD technology arises from an SFD technology license which we acquired from the owner and licensor of that technology, Momentum Resources, pursuant to which we received the exclusive world-wide right to use the SFD technology for hydrocarbon exploration purposes. We are obligated under the terms of that license to pay Momentum Resources a fee equal to 1% of any "prospect profits" (as that term is defined in the license) which we may receive on or before December 31, 2000, and 5% of any prospect profits which we may receive after December 31, 2000.

Since we have not generated operating revenues to date, we should be considered a development stage enterprise.

Results Of Operations

Operating Revenues

We had no oil and gas working interest or royalty revenues for our three-month interim fiscal periods ended March 31, 2001 and March 31, 2000.

Operating Loss

We incurred an operating loss of $630,658 for our three-month interim period ended March 31, 2001, as compared to $603,728 for the corresponding interim period in fiscal 2000, representing a $26,930 or 4.5% overall increase. The nominal increase in our operating loss for our three-month interim period ended March 31, 2001 over the corresponding interim period in fiscal 2000 was primarily attributable to the following changes in expense:

• a $65,474, or 101.3%, increase in research and development expense from $64,641 to $130,115;

• a $20,775 charge to reflect impairment in our oil and natural gas properties; and

• a $2,558, or 3.5%, increase in amortization and depreciation from $74,021 to $76,579; and

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partially offset by

• a $32,967, or 39.2%, decrease in survey support expense from $84,049 to $51,082;

• a $15,376, or 28.8%, decrease in survey operations and data analysis expense from $53,333 to $37,957; and

• a $13,534, or 4.1%, decrease in administrative expense from $327,684 to $314,150;

Relative Changes In Research and Development Expense

The $65,474 or 101.3% increase in research and development expense for our three-month interim period ended March 31, 2001 over the corresponding interim period in fiscal 2000 was principally attributable to salaries associated with additional research and development staffing as well as a greater allocation of existing personnel toward research and development activities as we focused increased efforts to improve the operation and efficacy of our SFD survey system.

Impairment Of Oil And Natural Gas Properties

The $20,775 impairment of oil and natural gas properties for our three-month interim period ended March 31, 2001 relates to our write-down of the cost of drilling and completing one well in Canada which was non-commercial. Since we do not have proved reserves to date with respect to the prospect that contained this well, these costs are fully expensed notwithstanding our continuing active exploration and development activities with respect to other wells in this prospect.

Relative Changes In Amortization and Depreciation

The $2,558 or 3.5% increase in amortization and depreciation for our three-month interim period ended March 31, 2001 over the corresponding interim period in fiscal 2000 was primarily attributable to additional depreciation and amortization arising as the result of the acquisition of our second survey aircraft in mid-2000.

Relative Changes In Survey Support Expense

Survey support expense generally relates to costs-including allocable salaries-to:

• equip, maintain and hangar our survey aircraft;

• conduct field evaluations designed by our joint venture partners to evaluate our SFD technology (after netting any costs which our joint venture partners are required to reimburse us for); and

• develop, organize, staff and train our survey and interpretation operational functions.

Excluded from survey support expense are costs capitalized as property and equipment (including costs relating to our survey aircraft) and costs capitalized as exploration costs related to oil and gas prospects identified through our commercial SFD survey activities.

The $32,967 or 39.2% decrease in survey support expense for our three-month interim period ended March 31, 2001 over the corresponding interim period in fiscal 2000 was primarily attributable to lower costs to maintain our survey aircraft for the period, partially offset by increased hangarage costs.

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Relative Changes In Survey Operations And Data Analysis Expense

Survey and data analysis expenditures consist primarily of any costs we incur conducting commercial SFD survey activities. These costs can generally be broken down into the following two components:

• aircraft operating costs, travel expenses and allocable salaries of our personnel while on survey assignment (after netting any costs our joint venture partners are required to reimburse us for); and

• allocable salaries incurred by our personnel interpreting SFD data.

Excluded from survey and data analysis expense are costs capitalized as property and equipment (including costs relating to our survey aircraft) and costs capitalized as exploration costs related to oil and gas prospects identified through our commercial SFD survey activities.

Our survey and data analysis expense for our three-month interim period ended March 31, 2001 was $37,957 as compared to $73,611 over the corresponding interim period in fiscal 2000, before taking joint venture partner reimbursements into consideration. Our survey and data analysis expense for our three-month interim period ended March 31, 2001 was $37,957 as compared to $53,333 over the corresponding interim period in fiscal 2000, after taking joint venture partner reimbursements into consideration. Our joint venture partner reimbursement for our three-month interim period ended March 31, 2001 was $0 as compared to $20,278 for the corresponding interim period in fiscal 2000.

The decrease in survey and data analysis expense for our three-month interim period ended March 31, 2001 over the corresponding interim period in fiscal 2000 was primarily attributable to the increased capitalization of costs associated with exploration prospects as well as a reduction in non-SFD survey and interpretation activities for our joint venture partners in that period, partially offset by an increase in SFD survey and interpretation activities in that period for our own account.

Relative Changes In Administrative Expense

The $13,534 or 4.1% decrease in our administrative expense for our three-month interim period ended March 31, 2001 over the corresponding interim period in fiscal 2000 was primarily attributable to the stabilization of our general and administrative staffing and space requirements over the past year.

Other Income And Expense

• Interest Income

We earned $42,988 in interest income for our three-month interim period ended March 31, 2001, as compared to $112,830 for the corresponding interim period in fiscal 2000. The decrease in interest income for our three-month interim period ended March 31, 2001 was attributable to lower cash balances in our accounts as a result of our application of available cash for operational and capital requirements.

• Interest Expense

We incurred $38,839 in interest expense for our three-month interim period ended March 31, 2001, as compared to $0 for the for the corresponding interim period in fiscal 2000. Our interest expense for our three-month interim period ended March 31, 2001 related to interest due on a $1.6 million asset-based loan collateralized by our Piaggio P180 Avanti aircraft.

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Liquidity And Capital Resources

Sources of Cash

Our cash flow requirements from our inception as NXT Energy USA (October 20, 1995) through March 31, 2001 were funded principally from:

• a private placement in May 1996 of 975,000 shares of our common stock for total gross proceeds of $975,000,

• a private placement in May 1996 of 975,000 shares of our common stock for total gross proceeds of $975,000,

• loans to our company in the amount of $1,000,000 in January 1997, and the subsequent conversion of the outstanding balance of principal and accrued interest of these loans in the amount of $1,120,000 into 411,764 shares of our common stock in February 1998;

• a private placement in April 1998 of 800,000 shares of our convertible series "A" preferred stock and 200,000 common stock purchase warrants for total gross proceeds of $6,000,000;

• a private placement in May 1999 of 400,000 shares of our common stock for total gross proceeds of $6,000,000;

• the exercise on March 31, 2000 of warrants to purchase 200,000 shares of our common stock at an exercise price of $7.50 per share, resulting in gross proceeds of $1,500,000; and

• the exercise of employee stock options during fiscal 2000 and fiscal 1999 resulting in aggregate gross proceeds of $953,854.

We also borrowed $1.6 million for working capital purposes on November 6, 2000 pursuant to an asset-based loan collateralized by our Piaggio P180 aircraft. The principal and interest on this loan, which accrues at the rate of 9.65% per annum, are repayable in 156 equal installments of $18,037 each, commencing January 1, 2001 with the last payment due on December 1, 2013. The loan contains no restrictive or financial ratio covenants, although it does allow the lender to accelerate the loan in the event of our insolvency or bankruptcy or any adverse change in our financial condition, or in the event the estimated retail value of the secured collateral falls anytime to less than 50% of the outstanding balance of the loan.

Current Cash Position And Historical Changes In Cash Position

Our cash position as of March 31, 2001 was $3,219,806, as compared to $4,279,279 as of December 31, 2000. Our cash position as of March 31, 2000 was $9,375,858, as compared to $9,068,723 as of December 31, 1999. We maintain the bulk of our cash in a United States government and government-backed securities money-market account.

The $1,059,473 decrease in our cash position for our three-month period ended March 31, 2001 was attributable to $390,430 in cash used in operating activities, $521,383 in cash used in investing activities, $15,160 in cash used through financing activities and a $132,500 comprehensive loss due to the effect of exchange rate changes. The $307,135 increase in our cash position for our three-month period ended March 31, 2000 was attributable to $1,632,140 in cash raised through financing activities, partially offset by $686,574 in cash used in operating activities, $629,729 in cash used in investing activities, and a $8,702 comprehensive loss due to the effect of exchange rate changes.

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Our operating activities required cash in the amount of $390,430 for our three-month period ended March 31, 2001, as compared to cash requirements of $686,574 for our three-month period ended March 31, 2000. The $390,430 in cash used in operating activities for our three-month period ended March 31, 2001 reflected our net loss of $624,957 for that period, as decreased for non-cash deductions and a net increase in non-cash working capital balances. The $686,574 in cash used in operating activities for our three-month period ended March 31, 2000 reflected our net loss of $490,898 for that period, as decreased for non-cash deductions and a net increase in non-cash working capital balances.

We used $15,160 in cash from financing activities for our three-month period ended March 31, 2001, as compared to raising $1,621,140 in cash from financing activities for our three-month period ended March 31, 2000. The $15,160 in cash used through financing activities for our three-month period ended March 31, 2001 was due to principal repayments of loan proceeds from an asset-based loan collateralized by our Piaggio P180 Avanti aircraft. The $1,632,140 in cash raised through financing activities for our three-month period ended March 31, 2000 was principally comprised of $1,500,0000 in gross proceeds from the exercise of warrants and $132,140 in gross proceeds from the exercise of employee stock options.

We used cash in the amount of $521,383 for investing activities for our three-month period ended March 31, 2001, as compared to $629,729 in cash used for investing activities for our three-month period ended March 31, 2000. The principal use of cash for our three-month period ended March 31, 2001 was to acquire drilling rights and seismic data in exploratory blocks pursuant to working interest elections ($538,531), while the principal use of cash for our three-month period ended March 31, 2000 was to acquire drilling rights in exploratory blocks pursuant to working interest elections ($331,528) and to acquire property, equipment and software ($105,496).

Capital Requirements Going Forward

Due to the nature and early stage of development of our SFD technology and also due to the practices of the oil and gas industry and their experience and attitudes toward new and unproven technologies, the only practical way for NXT to prove-out the efficacy of our SFD technology, achieve industry acceptance and to generate revenues and profits is to participate in drilling projects either through our joint-venture partners or on our own account. We believe that we would need to participate in a minimum of 30 prospects in order to statistically prove-out the efficacy of our SFD technology. Since costs to acquire or conduct ancillary seismic, to acquire drilling rights, and to drill, case and complete wells and to tie-them into sales or gathering systems are very expensive and can easily exceed $1 million per well, the overall cost to prove-out our SFD technology over at least 30 prospects will be fairly high and will require significant capital resources, particularly if NXT as opposed to our joint venture or other drilling partners is required to bear a significant portion or all of these costs.

We have approximately $3.22 million in cash on hand to fund our administration, operational and research and development requirements and to contribute toward our proposed fiscal 2001 drilling program. Of this amount, approximately $500,000 is dedicated toward the completion of pending projects.

NXT estimates that it will need to raise additional capital in the range of between $3 million and $5 million to facilitate our proposed fiscal 2001 drilling program, whether through our participation in exploration projects under our joint venture agreements or on our own account. The exact cost of our fiscal 2001 drilling program, which includes a number of recently identified new projects, will vary based upon a variety of factors, including our ability to acquire drilling rights. We would reduce our fiscal 2001 drilling program to a number of core prospects, principally those in Wyoming, to the extent sufficient funds are not available to facilitate the entire program. If a sufficient number of prospects are successfully drilled in our fiscal 2001 drilling program, we should be able to finance further levels of exploration, acquisition and drilling activities through available cash flow or financings funded, in part, through our anticipated base of proven reserves. If we do not invest in any proposed drilling prospects, we would likely reduce the level of our staff and operations, cut-back or eliminate our participation in drilling projects, and liquidate a portion of our assets. At that point we would likely focus our efforts on further improving and validating our SFD technology and our interpretive functions, including conducting additional SFD survey in order to further develop statistical data bases to validate these interpretive functions, until such time as we can use these efforts to raise sufficient additional capital to reestablish commercial participations in exploratory projects and to otherwise ramp-up operations. Based upon our current cash position, we believe that this minimal level of operations could be maintained for approximately 24 months from the date of this report. Our inability to raise sufficient additional working capital in the longer-term would likely force us to suspend our operations, and possibly even liquidate our assets and wind-up and dissolve our company.

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We are currently evaluating a proposed working interest investment together with CamWest in two SFD prospects which CamWest is currently negotiating to acquire-one in the Green River basin and the other in the Williston basin. Our decision to participate will ultimately be based upon CamWest's ability to acquire drilling rights and our evaluation of the correlation of our SFD data with available geological and geophysical data. While an investment in the prospects would be in the range of $1.2 million to $2 million and would consume the bulk of our available capital, we also believe these prospects have the potential to generate sufficient revenues to cover all of our current operating costs going forward, and that an investment in these prospects may be warranted notwithstanding their risk. If successful, we could also raise additional capital through levering these prospects, which we could apply toward additional exploration efforts. Depending in part upon our decisions with respect to, or the outcome of, these two opportunities, we will likely also have opportunities to invest in other prospects under our other joint ventures that may have similar investment profiles, although these opportunities are not as advanced as the two opportunities under current consideration. We can give you no assurance, in any event, that any of these prospects if acquired and drilled will be commercial, or if commercial will generate sufficient revenues to cover our operating or other exploration costs. Should this be the case, we would be forced, unless we can raise sufficient additional working capital, to suspend our operations, and possibly even liquidate our assets and wind-up and dissolve our company.

Since we have insufficient capital resources as of the date of this report to fully fund all or a significant portion of our proposed fiscal 2001 drilling program, and since we also do not expect meaningful revenues from existing wells to come on-line, if at all, in the near future, we will seek to raise the necessary funds to facilitate this program in one or more increments through project or drilling fund financing, public or private sales of debt or equity securities, debt financing or short-term loans, or a combination of the foregoing. We cannot give you any assurance that we will be able to secure the additional capital we require to fully or partially fund our proposed fiscal 2001 drilling program, or on terms which will not be objectionable to our company or our shareholders, including substantial dilution.

Other Matters

Foreign Exchange Fluctuations

We recorded a $132,500 foreign currency translation loss for the first three months of fiscal 2000 as a comprehensive loss item on our statements of loss and shareholders' equity (deficit) in consolidating our accounting records for financial reporting purposes as a result of the fluctuation in United States-Canadian currency exchange rates during that period. We anticipate that our exposure to significant foreign currency gains or losses on our accounting records will increase as we invest a greater portion of our United States-dollar denominated cash reserves into our Canadian operations and properties through intercompany advancements. We cannot give you any assurance that our future operating results will not be similarly adversely affected by currency exchange rate fluctuations. See Part I, Item 3, of this report captioned "Quantitative and Qualitative Disclosure About Market Risk," for a description of other aspects of our company that may be potentially affected by foreign exchange fluctuations.

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Effect Of Inflation

We do not believe that our operating results were adversely affected during the first three months of fiscal 2001 or fiscal 2000 by inflation or changing prices.

Uncertainties And Other Risk Factors That May Affect Our Future Results And Financial Condition

Our future results of operations or financial condition may be affected by the uncertainties and other risk factors enumerated below as well as those presented elsewhere in this report and in other reports we periodically file with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended December 31, 2000, and should be considered in context with the various disclosures concerning our company presented elsewhere herein and therein.

Uncertainties And Risk Factors Generally Relating To Our Company And Our Business

• We have accumulated losses since our inception, and our continued inability to generate revenues and profits would adversely affect our ability to participate in land acquisition and drilling projects and raise additional capital, and could ultimately force us to reduce or suspend operations and even liquidate our assets and wind-up and dissolve our company

We are a developmental stage enterprise since we have not generated any oil or gas revenues from prospects we have drilled to date. Our failure to generate revenues and ultimately profits would:

• in the shorter-term, adversely affect our ability to:

• complete pending drilling and development projects and fund our current operational requirements and our proposed fiscal 2001 drilling program;

• raise additional working capital; and

• force us to reduce our level of operations; and

• in the longer-term, force us to suspend our operations, and possibly even liquidate our assets and wind-up and dissolve our company.

Decisions relating to whether any of the wells we have completed in Wyoming or Alberta will be tied-into gathering systems will not be made until the second or third quarters of fiscal 2001 at the earliest, and the earliest we would receive revenues from these wells-assuming any of these wells were indeed tied-into gathering systems-would be the second half of fiscal 2001. Given that decisions relating to tying-in these wells and otherwise funding the development of the underlying fields resides with our joint-venture partners, and also given the issues and complexities inherent to our partners in tying-in these wells and otherwise funding the development of the underlying fields, we can give you no assurance as to when or whether any of these wells will be tied-into gathering systems or the underlying fields developed. We have, as a result of our lack of revenues, incurred cumulative net losses (after taking comprehensive gains and losses into consideration) in the amount of $7,574,216 from our inception in October 1995 through March 31, 2001, and we anticipate that we will continue to incur substantial operating losses for the foreseeable future unless and until we are able to bring satisfactory producing wells and fields on-line. We cannot give you any assurance that we will generate revenues or profits in the near future or at all.

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• If we do not raise additional working capital funds to fund our fiscal 2001 drilling program, we will be forced to reduce or even suspend our operations, and may even be forced to liquidate our assets and wind-up and dissolve our company

As previously discussed in detail in that part of this section captioned "-Liquidity And Capital Resources-Capital Requirements Going Forward," NXT will need to raise, after taking our administration, operational and research and development requirements into consideration, a significant amount of additional capital in order to facilitate our proposed fiscal 2001 drilling program. As also discussed in that section, we cannot give you any assurance that we will be able to secure the additional capital we require to fully or partially fund our proposed fiscal 2001 drilling program, or on terms which will not be objectionable to our company or our shareholders, including substantial dilution. If we are not able to finance all or a meaningful portion of our fiscal 2001 drilling program, we would likely cut-back or eliminate our participation in drilling projects, liquidate a portion of our assets, and significantly reduce the level of our staff and operations. Our inability to raise sufficient additional working capital in the longer-term would likely force us to suspend our operations, and possibly even liquidate our assets and wind-up and dissolve our company.

• Our future success is dependent upon our ability, through utilization of our SFD technology, to successfully identify commercially viable hydrocarbon accumulations

Our future success is dependent upon our ability, through utilization of our SFD technology, to successfully identify commercially viable hydrocarbon accumulations for development by our joint venture partners or for our own account. Based on our business plan, we will be dependent on:

• the efficacy of our SFD technology in identifying SFD prospects; and

• the cooperation of, and capital investment by, our joint venture partners in exploiting these prospects, or our ability to independently raise the funds necessary to exploit these prospects.

Although we believe that our SFD technology has proven its prospective ability as a geologic structural identification tool, we nevertheless cannot give you any assurances that our SFD technology will be able to consistently locate hydrocarbons or oil and gas prospects, or that these prospects will be commercially exploitable. We also cannot give you any assurances that we will be able to consistently discover commercial quantities of oil and gas, or that our joint venture partners will successfully acquire and drill properties at low finding costs.

• We are reliant upon our joint venture partners for opportunities to participate in exploration prospects and for funding and expeditiously pursuing the acquisition and development of those prospects

We will be reliant, at least in the near-term, upon our joint venture partners for opportunities to participate in exploration prospects, through overriding royalties or equity participation on a working interest basis from producing SFD prospects. We exclusively focus on exploration and the review and identification of viable prospects through our SFD technology, and rely upon our joint venture partners to provide and complete all other project operations and responsibilities, including land acquisition, seismic, drilling, marketing and project administration. As a result, we have only a limited ability to exercise control over the selection of prospects for development, drilling or production operations, or the associated costs of such operations, and the timeliness of our partners in pursuing or carrying-out those activities. The success of each project will be dependent upon a number of factors which are outside our control, or controlled by our joint venture partners as the project operator, in accordance with the applicable agreements between our company and the joint venture partners. These factors include:

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• the selection and approval of prospects for lease/acquisition and exploratory drilling;

• obtaining favorable leases and required permitting for projects;

• the availability of capital resources of the joint venture partner for land acquisition and drilling expenditures;

• the timing of drilling activity, and the economic conditions at such time, including then prevailing prices for oil and gas; and

• the timing and amount of distributions from the production.

Our reliance on our joint venture partners, and our limited ability to directly control project operations, costs and distributions could have a material adverse effect on the realization of return from our interest in projects, and on our overall financial condition.

• Our revenues and cash flow will be principally dependent upon the success of drilling and production from prospects in which we participate

Pursuant to our business plan, our revenues and cash flow will, at least in the near-term, be principally dependent upon the success of drilling and production from prospects in which we participate through agreements with our joint venture partners in the form of an overriding royalty or a working interest or other participation right. The success of these prospects will be determined by the location, development and production of commercial quantities of hydrocarbons. Exploratory drilling is subject to numerous risks, including the risk that no commercially productive oil and gas reservoirs will be encountered. The cost to our joint venture partners to drill, complete and operate wells is often uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors including unexpected formation and drilling conditions, pressure or other irregularities in formations, equipment failures or accidents, as well as weather conditions, compliance with governmental requirements and shortages or delays in the delivery of equipment. Our partners' inability to successfully locate and drill wells that produce commercial quantities of oil and gas would have a material adverse effect on our business, financial position and results of operations.

• Our future operating results may fluctuate significantly

Our future operating results may fluctuate significantly depending upon a number of factors including industry conditions, prices of oil and gas, rate of drilling success, rates of production from completed wells and the timing of capital expenditures. This variability could have a material adverse effect on our business, financial condition and results of operations. In addition, any failure or delay in the realization of expected cash flows from initial operating activities could limit our future ability to continue exploration and to participate in economically attractive projects.

• Volatility of oil and natural gas prices could have a material adverse effect on our business

It is impossible to predict future oil and natural gas price movements with any certainty, as they have historically been subject to wide fluctuations in response to a variety of market conditions, including:

• relatively minor changes in the supply and demand for oil and natural gas,

• economic, political and regulatory developments, and

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• competition from other sources of energy.

Any extended or substantial decline in oil and gas prices would have a material adverse effect on:

• our ability to negotiate favorable joint ventures with viable industry participants;

• our ability to acquire drilling rights;

• the volume of oil and gas that could be economically produced by the joint ventures in which we participate;

• our cash flow; and

• our access to capital.

We do not currently intend to engage in hedging activities (although we reserve the right to do so in the future), and may be more adversely affected by fluctuations in oil and gas prices than other industry participants that do engage in such activities. Our business, results of operations and financial condition would be materially and adversely affected by adverse changes in prevailing oil and gas prices. See Part I, Item 3, of this report captioned "Quantitative And Qualitative Disclosures About Market Risk," for additional discussion of market risks relating to oil and gas price fluctuations.

• The intense competition that is prevalent in the oil and gas industry could have a material adverse effect on our business

We compete directly with independent, technology-driven exploration and service companies, and indirectly (through our joint venture partnerships) with major and independent oil and gas companies in our exploration for and development of commercial oil and gas properties. We will experience competition from numerous oil and gas exploration competitors offering a wide variety of geological and geophysical services. Many of these competitors have substantially greater financial, technical, sales, marketing and other resources than we do, and may be able to devote greater resources to the development, promotion and sales of their services than our company. We cannot give you any assurance that our competitors will not develop exploration services that are superior to our SFD technology, or that these technologies will not achieve greater market acceptance than our SFD technology. Increased competition could impair our ability to attract viable industry participants, and to negotiate favorable participations and joint ventures with such parties, which could materially and adversely affect our business, operating results and financial condition.

The oil and gas industry is highly competitive. Many companies and individuals are engaged in the business of acquiring interests in and developing oil and gas properties in the United States and Canada, and the industry is not dominated by any single competitor or a small number of competitors. Our joint venture partners will compete with numerous industry participants for the acquisition of land and rights to prospects, and for the equipment and labor required to drill and develop those prospects. Many of these competitors have financial, technical and other resources substantially in excess of those available to us or our joint venture partners. These competitive disadvantages could adversely affect our or our joint venture partners' ability to participate in projects with favorable rates of return.

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• There is limited market acceptance for our SFD technology, and it must compete with established geological and geophysical technologies which have already achieved market acceptance

There is limited market acceptance for our SFD technology, and it must compete with established geological and geophysical technologies which have already achieved market acceptance. As is typical in the case of any new technology, demand and market acceptance for our SFD technology is subject to a high level of uncertainty and risk. Because the market for our SFD technology is new and evolving, it is difficult to predict the future growth rate, and the size of the potential market. We cannot give you any assurance that a market for our exploration technology will develop, or be sustainable. If the market fails to develop, or if our exploration technology does not achieve or sustain market acceptance, our business, results of operations and financial condition would be materially and adversely affected.

• Our inability to retain our key managerial, geological and geophysical, and research and development personnel could have a material adverse effect on our business

Our success depends to a significant extent on the continued efforts of our senior management team, which currently is composed of a small number of individuals, including Mr. George Liszicasz, the inventor of our SFD technology who is our Chief Executive Officer and who is responsible for the continuing development of our SFD technology; Mr. Daniel C. Topolinsky, our President, who handles strategic decision making and our joint venture partners; and Mr. James R. Ehrets, our Executive Vice President of Operations, who handles operations and supervises SFD interpretation activities. The loss of any of these individuals would likely have a material adverse effect on our business, results of operations and financial condition. While we have entered into employment agreements Messrs. Liszicasz, Topolinsky and Ehrets, these executive officers would nevertheless not be prevented from working for other companies in the oil and gas industry so long as they did not employ SFD technology should they elect to terminate their employment with NXT. We also do not carry key person life insurance policies any of our executive officers.

Our success also depends, to a lesser extent, on the continued efforts of our geological and geophysical interpretive and SFD research and development teams, which are composed of a small number of individuals. While there are professionals who could replace these individuals, none of these professionals have any theoretical or working knowledge of how to interpret SFD data or how our SFD technology operates, and it would take a significant period of time to train any replacement personnel. Until such time as we have a fully trained complement of geological and geophysical interpretive and SFD research and development teams, the loss of any members of these teams could adversely affect the pace at which we interpret SFD data or effect improvements to our SFD technology, which could adversely impact our business and results of operations and financial condition.

• We may be unable to attract the qualified managerial, geological and geophysical, and research and development personnel required to implement our longer-term growth strategies

Our ability to implement our longer-term growth strategies depends upon our continuing ability to attract and retain highly qualified geological, technical, scientific, information management and administrative personnel. Competition for these types of personnel is intense and we cannot give you any assurance that we will be able to retain our key managerial, professional and/or technical employees, or that we will be able to attract and retain additional highly qualified managerial, professional and/or technical personnel in the future. Our inability to attract and retain the necessary personnel could impede our growth.

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• Our limited operating history could adversely affect our business

We are a recently organized development stage enterprise with an unproven technology and a limited operating history. Our activities through the date of this report have encompassed:

• developing our business plan;

• obtaining license rights to our SFD technologies;

• establishing administrative offices and laboratory facilities, and engaging executive, administrative, scientific, geological, geophysical, scientific, information technology and aviation personnel;

• developing our SFD technology to a commercial stage;

• acquiring joint venture partners;

• conducting commercial SFD surveys on behalf of our joint venture partners; and

• successfully drilling oil and gas wells identified through our SFD technology.

We are subject to all the risks and issues inherent in the establishment and expansion of a new business enterprise including, among others, problems of using new and unproven technologies, hiring and training personnel, acquiring reliable facilities and equipment, and implementing operational controls. In general, startup businesses are subject to levels of risk that are often greater than those encountered by companies with established operations and relationships. Startups often require significant capital from sources other than operations. The management and employees of a startup business shoulder the burdens of the business operations and a workload associated with company growth and capitalization that is disproportionately greater than that for an established business. Our limited operating history makes it difficult, if not impossible, to predict future operating results. We cannot give you any assurance that we will successfully address these risks. Our failure to successfully address these risks could have a material, adverse effect on our business, financial condition and operating results.

• We may be unable to effectively manage our expected growth

Our success will depend upon the rapid expansion of our business. Expansion will place a significant strain on our financial, management and other resources, and will require us, among other things, to:

• change, expand and improve our operating, managerial and financial systems and controls; and

• improve coordination between our various corporate functions.

We cannot give you any assurance that we will be able to manage the expansion of our business effectively. Our inability to effectively manage our growth, including the failure of any new personnel we hire to achieve anticipated performance levels, would have a material adverse effect on our business, results of operations and financial position.

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• Our business may be adversely affected by currency fluctuation, regulatory, political and other risks associated with international transactions

We currently operate within the United States and Canada and anticipate we will also operate outside of these countries in the foreseeable future. These operations will subject us to several potential risks, including risks associated with:

• fluctuating exchange rates,

• the regulation by the governments of the United States and Canada as well as foreign governments of fund transfers and export and import duties and tariffs; and

• political instability.

We cannot give you any assurance that any of these risks will not have a material adverse effect upon our business. We do not currently engage in activities to mitigate the effects of foreign currency fluctuations. If earnings from international operations increase, our exposure to fluctuations in foreign currencies may increase, and we may utilize forward exchange rate contracts or engage in other efforts to mitigate foreign currency risks. We can give you no assurance as to the effectiveness of these efforts in limiting any adverse effects of foreign currency fluctuations on our international operations and our overall results of operations.

Matters Relating To Our Common Stock

• There is only a limited public market for our common stock on the OTC Bulletin Board and that market is extremely volatile

There is only a limited public market for our common stock on the NASD OTC Electronic Bulletin Board, and we cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. We are under no obligation to take any action to improve the public market for our securities including, without limitation, filing an application to list our common stock on any stock exchange or any over the counter market other than the OTC Bulletin Board.

The market price for our common stock on the OTC Bulleting Board is 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 gas prices, oil and 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 operating performance or financial condition, would include release of reports by securities analysts and announcements we may make from time-to-time relative to our operating performance, drilling results, advances in technology or other business developments.

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Moreover, because we are a development stage enterprise with a limited operating history and no revenues or profits, the market price for our common stock will be more volatile than that of a seasoned issuer. Changes in the market price of our common stock, for example, may have no connection with our operating results or prospects. No predictions or projections can be made as to what the prevailing market price for our common stock will be at any time, or as to what effect, if any, that the sale of shares or the availability of shares for sale at any time will have on the prevailing market price. Sales of substantial amounts of our common stock on the public market, or the perception that substantial sales could occur, could adversely affect the prevailing market prices for our common stock and also, to the extent the prevailing market price for our common stock is reduced, adversely impact our ability to raise additional capital in the equity markets.

• You will be subject to the penny stock rules to the extent our stock price on the OTC Bulletin Board is less than $5

Since our common stock is not listed on a national stock exchange or quoted on the Nasdaq Market, trading in our common stock on the OTC Electronic Bulletin Board is subject, to the extent the market price for our common stock is less than $5 per share, to a number of regulations known as the "penny stock rules." The penny stock rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission, to provide the customer with additional information including current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the customer's account, and to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. To the extent these requirements may be applicable they will reduce the level of trading activity in the secondary market for our common stock and may severely and adversely affect the ability of broker-dealers to sell our common stock.

• Our common shareholders should not expect to receive dividends

NXT has never paid any cash dividends on shares of our capital stock, 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 financial condition, results of operations, capital requirements and other factors as our board of directors may deem relevant at that time.

• Our common shareholders should not expect to receive a liquidation distribution

If we were to wind-up or dissolve our company and liquidate and distribute our assets, the holders of our common stock would share ratably in our assets only after we satisfy any amounts we would owe to our creditors and any amounts we would owe to our series "A" preferred shareholders as a liquidation preference ($7.50 per share, or $6,000,000 in the aggregate). If our liquidation or dissolution were attributable to our inability to profitably operate our business, then it is likely that we would have material liabilities at the time of liquidation or dissolution. Accordingly, we cannot give you any assurance that sufficient assets will remain available after the payment of our creditors and preferred shareholders to enable you to receive any liquidation distribution with respect to any shares of our common stock you may hold.

• Our right to issue additional capital stock at any time could have an adverse effect the proportionate ownership and voting rights of our common shareholders

NXT is authorized under our Articles of Incorporation to issue up to 50,000,000 shares of our common stock. Subject to compliance with applicable corporate and securities laws, we may issue these shares under such circumstances and in such manner and at such times, prices, amounts and purposes as our management may, in their discretion, determine to be necessary and appropriate. The proportionate ownership and voting rights of our common shareholders could be adversely effected by the issuance of these additional shares, including a substantial dilution in their net tangible book value per share.

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• Two of our principal shareholders control our company

Messrs. George Liszicasz and R. Dirk Stinson, our two principal shareholders, beneficially own approximately two-thirds of our common stock, and therefore have the power, as a group, to elect a majority of our board of directors. Our board of directors, in turn, has the power to appoint our officers and to determine, in accordance with their fiduciary duties and the business judgment rule, our direction, objectives and policies, such as:

• our business expansion or acquisition policies;

• whether we should raise additional capital through financing or equity sources, and in what amounts;

• whether we should retain cash reserves for future product development, or distribute them as a dividend, and in what amounts;

• whether we should sell all or a substantial portion of our assets, or should merge or consolidate with another corporation; and

• transactions which may cause or prevent a change in control or the winding up and dissolution of our company.

An investment in our common stock will entail entrusting these and similar decisions to our present management subject, of course, to their fiduciary duties and the business judgment rule.

• There is an inherent conflict in interest arising as a result of the relationship between our two principal shareholders and the licensor of our SFD technology

Messrs. George Liszicasz and R. Dirk Stinson indirectly own and control both our company and Momentum Resources, which has granted us an exclusive license to identify oil and natural gas prospects using the SFD data while reserving the exclusive right to use the SFD technology for purposes other than oil and natural gas exploration. Although we control the possession, development and use of our SFD technology under our license agreement with Momentum Resources, and have also made provision to prevent the termination or adverse amendment conflicts of that agreement without the independent approval of our disinterested directors and, in some cases, shareholders, various conflicts of interests between our company and one or more of Momentum Resources and Messrs. Liszicasz and Stinson may nevertheless directly or indirectly arise as a result of the foregoing relationships, including disputes regarding the validity, scope or duration of our SFD technology license and the rights to proprietary property and information. While Messrs. Liszicasz and Stinson and our company have each executed certain disclosures and consents relating to these conflicts, these disclosures and consents will not remediate these conflicts, but will merely release Messrs. Liszicasz and Stinson from liability as a result of the conflicts so long as they use reasonable efforts to minimize the conflicts. In the event any of these conflicts prove to be irreconcilable, Mr. Liszicasz, who is currently an officer and director of NXT, may be forced to resign his positions with our company.

The Observations, Beliefs And Opinions Expressed In This Report Relating To The Scientific Basis And Principles Of Our SFD Technology Represent Those Of NXT Alone

The observations, beliefs and opinions we express in this report relating to the scientific basis and principles of our SFD technology, and the ability of our SFD Technology to detect subsurface mechanical and hydraulic stress, represent those of our company and our management alone, and should not be construed as representing those of any third party, including our joint venture partners and any professional geologists and engineers we may engage, except to the extent expressly stated in this report. We maintain the scientific and operating principles and mechanics of our SFD technology in strict confidence. While our joint venture partners and any professional geologists and engineers we may engage from time-to-time have observed the operations of our SFD technology while on survey assignments, and have also observed the SFD interpretive process, they have not been given any proprietary information relating to the scientific and operating principles and mechanics of our SFD technology other than general information consistent with the general observations, beliefs and opinions we express in this report. Our joint venture partners and any professional geologists and engineers we may engage do not hold themselves out as being experts in or otherwise having specific knowledge as to our SFD technology and its scientific basis and principles.

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Special Note Regarding Forward Looking Statements

Contained in this uncertainties and risk factors section as well as in other sections of this report are so-called "forward-looking statements" which generally relate to our expectations or speculations as to potential future events and our observations as to trends and factors that may impact our future operating results. These forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements. You can generally identify forward-looking statements through words such as "believe," "anticipate," "expect," "project," "estimate," "budget," "will be," "will continue," "will likely result," or words or phrases with similar meanings. Forward-looking statements that may be contained in this report would, for example, include statements relating to:

• the timing of our SFD survey activities and the amount of SFD data we may acquire including, by way of example and not limitation, those statements contained in that section in Item 1 of this report captioned "Business-Operational Practices In Conducting SFD Surveys-How Fast Can We Acquire And Interpret SFD Data?;"

• the timing and likelihood of success of our SFD data interpretation activities including, by way of example and not limitation, those statements contained in that section in Item 1 of this report captioned "Business-Operational Practices In Conducting SFD Surveys-How We Interpret SFD Data?;"

• the timing and likelihood of success of our drilling and production plans including, by way of example and not limitation, those statements contained in that section in Item 1 of this report captioned "Business-Status Of Our Exploration Efforts" and Item 2 of this report captioned "Properties-Petroleum Properties?;"

• the amount and character of future oil and gas revenues we may receive, the timing of receipt of revenues, and the timing of break-even, including, by way of example and not limitation, those statements contained in that section in Item 1 of this report captioned "Business-Status Of Our Exploration Efforts," Item 2 of this report captioned "Properties-Petroleum Properties?;" Item 7 of this report captioned "Management's Discussion And Analysis Of Financial Condition And Results Of O perations-Overview;" and Item 7 of this report captioned "Management's Discussion And Analysis Of Financial Condition And Results Of Operations-Capital Requirements;"

• the amount and character of expenses we may incur, and the timing of these expenditures including, by way of example and not limitation, those statements contained in those sections in Item 7 of this report captioned "Management's Discussion And Analysis Of Financial Condition And Results Of Operations-Capital Requirements" and "Management's Discussion And Analysis Of Financial Condition And Results Of Operations-Results Of Consolidated Operations-Expectations Relative To Future Expense Levels;"

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• the amount and composition of our capital expense budget, and the timing of these capital outlays including, by way of example and not limitation, those statements contained in those sections in Item 7 of this report captione d "Management's Discussion And Analysis Of Financial Condition And Results Of Operations-Capital Requirements" and "Management's Discussion And Analysis Of Financial Condition And Results Of Operations-Results Of Consolidated Opera tions-Expectations Relative To Future Expense Levels;" and

• our corporate objectives and growth strategies including, by way of example and not limitation, those statements contained in that section in Item 1 of this report captioned "Business-Corporate Objective."

Whenever you read any forward looking statement contained in this report, you should be aware of and take into consideration that:

• the forward-looking statement merely reflects the current expectations and speculation of our management as to anticipated events or observations relating to future trends based, in part, upon currently available information and our current business plan,

• actual results from these future events may differ materially from the results expected or speculated or trends observed as expressed in, or implied by, the forward-looking statement, as a result of changes in circumstances and events and other uncertainties and risks, including:

• changes in our business plan and corporate strategies or that of our joint venture partners;

• delays in our ability to conduct and complete SFD surveys or interpret SFD data,

• delays on the part of our joint venture partners in planning SFD survey activities, in conducting geologic and geophysical evaluations of recommended anomalies, in acquiring drilling rights, in conducting exploratory drilling activities and completing wells, and in connecting producing wells to pipelines and other production infrastructure; or

• the occurrence of the various types of uncertainties and risk factors described above in this section as well as those described in Item 7A of this report captioned "Quantitative And Qualitative Disclosure About Market Risk;"

• the forward-looking statement must, in any event, be considered in context with the various disclosures made by our company in this report about our business; and

• the uncertainties and risks presented in this section and elsewhere in this report are not exhaustive, and new uncertainties and risk factors may emerge from time to time. It is not possible for management to predict all such uncertainties and risk factors, nor can it assess the impact of all such uncertainties and risk factors on NXT's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from, those contained in any forward-looking statements.

Given these risks and uncertainties, holders of our securities should not place undue reliance on forward-looking statements as a prediction of actual results.

We are not obligated to update or revise any forward looking statement contained in this report to reflect new events or circumstances. You are also cautioned that we intend for all forward-looking statements contained in this report to be construed as "forward-looking statements" within the meaning Section 21E of the United States Securities Exchange Act of 1934 and, to the extent it may be applicable by way of the incorporation of statements contained in this report by reference or otherwise, Section 27A of the United States Securities Act of 1933, each of which establishes a safe-harbor from private actions for forward-looking statements as defined in those statutes.

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Item 3.    Quantitative And Qualitative Disclosures About Market Risk

Oil And Gas Price Fluctuations

Our primary market risks will be related to market changes in oil and gas prices (See Part I, Item 2, of this report captioned "Management's Discussion And Analysis Of Financial Condition And Results Of Operations-Uncertainties And Other Factors That May Affect Our Future Results And Financial Condition-Uncertainties And Risk Factors Generally Relating To Our Company And Our Business-Volatility Of Oil And Natural Gas Prices Could Have A Material Adverse Effect On Our Business"). Since our prospective revenues will be tied to the price at which either NXT or our joint venture partners sell oil and gas on the world market, any fluctuations in these prices will directly and proportionately impact our income base. Similarly, our ability to acquire drilling rights is also directly affected by fluctuations in oil and gas prices, since competition for and the cost to acquire drilling rights is generally a function of oil and gas prices. Specifically, increases in oil and gas prices are generally accompanied by increases in costs to acquire drilling rights, while decreases in oil and gas prices are generally accompanied by a similar decline in costs to acquire drilling rights. The affect of changes in oil and gas prices will also affect joint-venture partner decision-making relative to the scope and budget for exploration, land acquisition, drilling, completion and tie-in activities, which will then impact NXT.

Currency Fluctuations

An additional significant market risk relates to foreign currency fluctuations between United States and Canadian dollars. Since our royalty or working interest revenues generated by our Canadian-based joint venture partners will be denominated in Canadian currency, our financial position could be adversely affected by United States-Canadian currency fluctuations. We have not previously engaged in activities to mitigate the effects of foreign currency fluctuations due to the absence of Canadian revenues to date, and we anticipate that the exchange rate between the United States and Canadian dollar will remain fairly stable. If earnings from our Canadian operations increase, our exposure to fluctuations in the United States-Canadian exchange rate will increase, and we may utilize forward exchange rate contracts or engage in other efforts to mitigate these foreign currency risks. We cannot give you any assurance that the use of exchange rate contracts or other mitigation efforts would effectively limit any adverse effects of foreign currency fluctuations on our Company's international operations and our overall results of operations.

Interest Rate Fluctuations

We currently maintain the bulk of our available cash in money-market accounts maintained in United States dollars. Our interest income from these short-term investments could be adversely affected by any material changes in interest rates within the United States.

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Part II    OTHER INFORMATION

Item 1.    Legal Proceedings

As of the date of this report, there are:

• no material pending legal or governmental proceedings relating to our company or properties to which we are a party, or to our knowledge any proceeding of this nature which are being contemplated or threatened; and

• to our knowledge, no material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us.

Item 2.    Changes In Securities And Use Of Proceeds

Not Applicable

Item 3.    Defaults Upon Senior Securities

Not Applicable

Item 4.    Submission Of Matters To A Vote Of Security Holders

Not Applicable

Item 5.    Other Information

Not Applicable

Item 6.    Exhibits

Exhibits

None

Reports on Form 8-K

None

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Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated at Calgary, Alberta, Canada, this 11th day of May, 2001.

Energy Exploration Technologies

By: /s/ George Liszicasz
George Liszicasz
Chief Executive Officer
(principal executive officer)

By: /s/ Daniel C. Topolinsky
Daniel C. Topolinsky
President and Chief Operating Officer
(principal executive officer)

By: /s/ John M. Woodbury, Jr.
John M. Woodbury, Jr.,
Chief Financial Officer
(principal accounting officer)