JA Filed by Filing Services Canada Inc. 403-717-3898

0001654954-18-008651.txt : 20180808 0001654954-18-008651.hdr.sgml : 20180808 20180808160041 ACCESSION NUMBER: 0001654954-18-008651 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20180630 FILED AS OF DATE: 20180808 DATE AS OF CHANGE: 20180808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NXT Energy Solutions Inc. CENTRAL INDEX KEY: 0001009922 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 611126904 STATE OF INCORPORATION: A0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24027 FILM NUMBER: 181001255 BUSINESS ADDRESS: STREET 1: 3320 - 17TH AVENUE SW STREET 2: SUITE 302 CITY: CALGARY, T3E 0B4 STATE: A0 ZIP: 90035 BUSINESS PHONE: 403-264-7020 MAIL ADDRESS: STREET 1: 3320 - 17TH AVENUE SW STREET 2: SUITE 302 CITY: CALGARY, T3E 0B4 STATE: A0 ZIP: 90035 FORMER COMPANY: FORMER CONFORMED NAME: ENERGY EXPLORATION TECHNOLOGIES / DATE OF NAME CHANGE: 20000628 FORMER COMPANY: FORMER CONFORMED NAME: PINNACLE OIL INTERNATIONAL INC DATE OF NAME CHANGE: 20000626 FORMER COMPANY: FORMER CONFORMED NAME: ENERGY EXPLORATION TECHNOLOGIES DATE OF NAME CHANGE: 20000616 6-K 1 nxt6k05152018.htm FORM 6-K JA Filed by Filing Services Canada Inc. 403-717-3898

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934

For the month of August, 2018

Commission File Number: 000-24027

NXT Energy Solutions Inc.

(Translation of registrant's name into English)

Suite 302, 3320-17th Avenue S.W.

Calgary, Alberta T3E 0B4

Canada
(Address of principal executive offices)

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

Form 20-F X Form 40-F _____

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

Yes _____ No X

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

Yes _____ No X

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

Yes _____ No X

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

The Issuer is filing material documents not previously filed.

Exhibit List:

99.1 Consolidated Financial Statements for the three month period ended March 31, 2018

99.2 Management’s Discussion and Analysis (“MD&A”) for the three month period ended March 31, 2018

99.3 Certification Of Interim Filings CEO

99.4 Certification Of Interim Filings CFO

SIGNATURES

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

Date: August 7, 2018

NXT Energy Solutions Inc.

By: /s/ Jakub Brogowski

Name: Jakub Brogowski

Title: Vice-President Finance and Chief Financial Officer

EX-99.1 2 fin.htm CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2018 Blueprint

Exhibit 99.1

NXT ENERGY SOLUTIONS INC.

Unaudited Condensed Interim Consolidated Financial Statements

For the 3 and 6 month periods ended

June 30, 2018

NXT ENERGY SOLUTIONS INC.

Condensed Consolidated Interim Balance Sheets

(Unaudited - expressed in Canadian dollars)

	June 30,	December 31,
	2018	2017
Assets
Current assets
Cash and cash equivalents	$952,681	$166,618
Short-term investments (Note 3)	5,250,000	950,000
Accounts receivable	139,207	60,027
Prepaid expenses	142,237	107,363
	6,484,125	1,284,008
Long term assets
Deposits (Note 4)	542,376	518,765
Property and equipment (Note 5)	736,674	778,685
Intellectual property (Note 6)	20,497,167	21,339,533

	$28,260,342	$23,920,991

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities (Note 7)	$1,324,084	$1,562,394
Income taxes payable	-	201
Current portion of capital lease obligation (Note 8)	41,051	39,579
	1,365,135	1,602,174
Long-term liabilities
Capital lease obligation (Note 8)	64,188	85,118
Other liabilities (Note 17)	440,019	517,669
Asset retirement obligation	57,737	56,702
Deferred charges (Note 14)	80,459	81,919
	642,403	741,408
	2,007,538	2,343,582
Commitments and contingencies (Note 14)
Subsequent events (Note 18)
Shareholders' equity
Common shares (Note 9): - authorized unlimited
Issued: 67,378,297 (2017 – 58,161,133) common shares	95,570,879	88,121,286
Contributed capital (Note 9)	9,336,641	8,195,075
Deficit	(79,365,651)	(75,449,886)
Accumulated other comprehensive income	710,935	710,934
	24,252,804	21,577,409
	$28,260,342	$23,920,991

Signed "George Liszicasz"	Signed "Bruce G. Wilcox"
Director	Director

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

NXT ENERGY SOLUTIONS INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(Unaudited - expressed in Canadian dollars)

	For the three months		For the six months
	ended June 30		ended June 30
	2018	2017	2018	2017

Revenue

Survey revenue (Note 15)	$-	$-	$-	$-

Expenses

Survey costs, net	267,672	612,342	517,434	775,559
General and administrative expenses	1,110,634	1,337,051	2,092,038	2,699,632
Stock based compensation expense (Note 11)	153,791	169,033	449,075	334,281
Amortization expense (Notes 5 & 6)	447,192	474,558	894,383	989,250

	1,979,289	2,592,984	3,952,930	4,798,722

Other expenses (income)
Interest expense (income), net	(14,276)	(389)	(14,207)	4,726
Foreign exchange (gain) loss	(3,264)	11,306	(10,136)	17,281
Intellectual property and other expenses	(635)	38,785	(12,823)	45,366

	(18,175)	49,702	(37,166)	67,373

Loss before income taxes	(1,961,114)	(2,642,686)	(3,915,761)	(4,866,095)

Income tax expense
Current	-	81,270	-	72,587

	-	81,270	-	72,587

Net loss and comprehensive loss	$(1,961,114)	$(2,723,956)	$(3,915,764)	$(4,938,682)


Net loss per share (Note 10)
Basic	$(0.03)	$(0.05)	$(0.06)	$(0.09)
Diluted	$(0.03)	$(0.05)	$(0.06)	$(0.09)

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

NXT ENERGY SOLUTIONS INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited - expressed in Canadian dollars)

	For the three months		For the six months
	ended June 30		ended June 30
	2018	2017	2018	2017

Cash provided by (used in):

Operating activities

Comprehensive income (loss) for the period	$(1,961,114)	$(2,723,956)	$(3,915,764)	$(4,938,682)

Items not affecting cash:
Stock based compensation expense (Note 11)	153,791	169,033	449,075	334,281
Amortization expense (Notes 5 & 6)	447,192	474,558	894,383	989,250
Non-cash changes to asset retirement obligation	518	1,500	1,035	3,000
Valuation allowance of Bolivian Tax Credits	-	207,682	-	207,682
Foreign Exchange	(17,321)	-	(23,611)	-
Amortization of deferred gain on sale of aircraft (Note 17)	(38,825)	(25,884)	(77,650)	(25,884)
Deferred rent (Note 14)	(730)	(730)	(1,460)	(1,460)
Change in non-cash working capital balances (Note 13)	(526,475)	19,079	(607,880)	130,409
	18,150	845,238	633,892	1,637,278
Net cash used in operating activities	(1,942,964)	(1,878,718)	(3,281,872)	(3,301,404)

Financing activities

Proceeds from exercise of stock options	-	136	5,067	30,420
Net Proceeds from Private Placement (Note 9)	4,103,011	-	8,392,332	-
Repayment of capital lease obligation (Note 8)	(9,806)	(9,112)	(19,458)	(18,090)
Net cash from financing activities	4,093,205	(8,976)	8,377,941	12,330

Investing activities

Proceeds from sale / purchase of property and equipment, net	(10,006)	3,137,905	(10,006)	3,133,533
Increase in short-term investments	(4,950,001)	(1,196,909)	(4,300,000)	(46,909)

Net cash from (used in) investing activities	(4,960,007)	1,940,996	(4,310,006)	3,086,624

Net increase (decrease) in cash and cash equivalents	(2,809,766)	53,302	786,063	(202,450)
Cash and cash equivalents, beginning of the period	3,762,447	234,744	166,618	490,496

Cash and cash equivalents, end of the period	$952,681	$288,046	$952,681	$288,046

Supplemental information
Cash interest (received)	(10,339)	1,175	(10,931)	(1,148)
Cash taxes paid	-	-	-	65,989

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

NXT ENERGY SOLUTIONS INC.

Condensed Consolidated Interim Statements of Shareholders' Equity

(Unaudited - expressed in Canadian dollars)

	For the six months
	ended June 30
	2018	2017

Common Shares

Balance at beginning of the period (Note 9)	$88,121,286	$85,966,393
		-
Issuance of Common Stock on Private Placement (Note 9)	7,438,085	30,420
Issued upon exercise of stock options (Note 9)	5,067	-
Transfer from contributed capital upon exercise of stock options	6,441	-

Balance at end of the period	95,570,879	85,996,813

Contributed Capital

Balance at beginning of the period	8,195,075	7,613,719
Issuance of warrants on Private Placement	698,932	-
Recognition of stock based compensation expense	449,075	334,281
Contributed capital transferred to common shares
upon exercise of stock options	(6,441)	-

Balance at end of the period	9,336,641	7,948,000

Deficit

Balance at beginning of the period	(75,449,887)	(66,479,488)
Net loss and comprehensive loss for the period	(3,915,764)	(4,938,683)


Balance at end of the period	(79,365,651)	(71,418,171)

Accumulated Other Comprehensive Income
Balance at beginning and end of the period	710,935	710,935


Total Shareholders' Equity at end of the period	$26,252,804	$25,237,577

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

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

1. The Company and future operations

NXT Energy Solutions Inc. (the "Company" or "NXT") is a publicly traded company based in Calgary, Alberta Canada.

NXT's proprietary Stress Field Detection ("SFD®") technology is an airborne survey system that is used in the oil and natural gas exploration industry to identify subsurface trapped fluid accumulations.

NXT’s financial statements at December 31, 2016 included disclosure related to the use of the “going concern” basis of presentation. Various steps were taken in 2017 and the first two quarters of 2018, which resulted in a significant strengthening of the Company’s liquidity and working capital position and removal of the “going concern” disclosure as of the December 31, 2017 financial statements.

In the preparation of these financial statements management determined that there are no conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. However, NXT's future financial results and its longer term success remains dependent upon the ability to continue to attract and execute client projects to build its revenue base. NXT closed on the final portion of a total financing of $9,484,810 on July 3, 2018 (the “Private Placement”) (Note 18).

The Company’s longer term success remains dependent upon its ability to execute successful contracts providing a revenue base sufficient to fund operating costs and general and administrative costs, and generate positive cash flow from operations. The occurrence and timing of these events cannot be predicted with certainty. The Company will be closely monitoring its going concern assessment in future periods to determine whether its current conclusions remain appropriate.

2. Significant Accounting Policies

Basis of presentation

These consolidated interim financial statements for the period ended June 30, 2018 have been prepared by management in accordance with generally accepted accounting principles of the United States of America ("US GAAP") and by applying the same accounting policies and methods as used in preparing the consolidated financial statements for the fiscal year ended December 31, 2017, except as noted below.

Revenue recognition:

In May 2014, the US Financial Accounting Standards Board (“FASB”) issued new guidance on accounting for “Revenue from Contracts with Customers”, which supersedes the current revenue recognition requirements and most industry-specific guidance. This new guidance requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

This new guidance became effective from January 1, 2018. The Company applied the new standard retrospectively to the prior reporting period. As the Company has generated no revenue in the comparative period, the new standard has no significant impact on the prior period as a result of the adoption of the standard. As the Company enters into new contracts with customers, it will evaluate the recognition of revenue under the new standard.

Future Accounting Policy Changes

Leases:

In February 2016, the FASB issued new guidance on leases. The new guidance requires lessees to recognize most leases, including operating leases, on the balance sheet as lease assets and lease liabilities. In addition, lessees may be required to reassess assumptions associated with existing leases as well as to provide expanded qualitative and quantitative disclosures. The new guidance is effective January 1, 2019. NXT is evaluating the impact of the adoption of this new guidance and has not yet determined the effect on its consolidated financial statements.

3. Short-term investments

Short-term investments consist of Guaranteed Investment Certificates with maturity dates from 90 days to one year from the date of purchase. For June 30, interest rates range from 1.6% to 1.8%. For December 31, 2017 the interest rate was 0.7%.

	For the period ended
	June 30,	December 31,
	2018	2017
90 Day non-redeemable GIC	$1,800,000	$-
One year cashable GIC's	3,450,000	950,000
	5,250,000	950,000

4. Deposits

Security deposits have been made to the lessors of the office building and the aircraft. They are due to be repaid at the end of the respective lease terms (Building- 2025, Aircraft-2022)

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

	For the period ended
	June 30,	December 31,
	2018	2017
Building	$43,310	$43,310
Aircraft	499,066	475,455
	542,376	518,765

5. Property and equipment

	Cost	Accumulated	Net book
Six months ended June 30, 2018	Base	amortization	value
Survey equipment	$684,890	$620,377	$64,513
Computers and software	1,256,101	1,188,600	67,501
Furniture and other equipment	528,420	501,316	27,104
Leasehold improvements	1,165,108	587,552	577,556
	3,634,519	2,897,845	736,674

	Cost	Accumulated	Net book
Year ended December 31, 2017	Base	amortization	value
Survey equipment	$684,890	$612,717	$72,173
Computers and software	1,246,095	1,177,653	68,442
Furniture and other equipment	528,420	498,304	30,116
Leasehold improvements	1,165,108	557,154	607,954
	3,624,513	2,845,828	778,685

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

6. Intellectual property

During 2015, NXT acquired the permanent rights to the SFD® technology for use in the exploration of hydrocarbons from Mr. George Liszicasz and recorded the acquisition as an intellectual property asset on the balance sheet. The asset was recorded at the fair value of the consideration transferred, including the related tax affect, of approximately $25.3 million.

The asset is being amortized on a straight line basis over its estimated useful life of 15 years. The annual amortization expense expected to be recognized in each of the next five years is approximately $1.7 million per year for a 5 year aggregate total of $8.4 million.

	For the period ended
	June 30,	December 31,
	2018	2017
Intellectual property acquired	$25,271,000	$25,271,000
Accumulated amortization	(4,773,833)	(3,931,467)
	20,497,167	21,339,533

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

7. Accounts payable and accrued liabilities

	For the period ended
	June 30,	December 31,
	2018	2017
Accrued liabilities related to:
Consultants and professional fees	$265,692	$353,333
Board of Directors' fees	117,500	175,000
Deferred gain on sale or aircraft (current)	155,301	155,301
Finder's fee	255,315	-
Payroll (vacation pay and wages payable)	235,020	551,110
	1,028,828	1,234,744
Trade payables and other	295,256	327,650
	1,324,084	1,562,394

8. Capital lease obligation

	For the period ended
	June 30,	December 31,
	2018	2017
Capital lease obligation	$105,239	$124,697
Less current portion	(41,051)	(39,579)
	64,188	85,118

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

The capital lease obligation is secured by specific leasehold improvements included in property and equipment, bears interest at a rate of 7.4%, and is repayable as follows:

Year ended December 31:
2018	$20,121
2019	42,603
2020	42,515
	$105,239

9. Common shares

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

	For the three month periods ended
	June 30, 2018		June 30, 2017
	# of shares	$ amount	# of shares	$ amount
As at the beginning of the period	58,161,133	$88,121,286	53,856,509	$85,966,393
Shares issued during the period:
Issuance of Common Stock
on the Private Placement 1st Tranche	4,665,043	3,642,719	-	-
Exercise of stock options	6,667	5,067	-	30,420
Transfer from contributed capital on the
exercise of stock options	-	6,441	-	-
on the Private Placement 2nd Tranche	4,545,454	3,795,366	-	-

As at the end of the period	67,378,297	95,570,879	53,856,509	85,996,793

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

On February 16, 2018 the Company entered into an agreement to complete a three-tranche Private Placement under which Alberta Green Ventures Limited Partnership (the “Subscriber”) committed to purchase 10,905,212 Units at a price of $0.924 per Unit for total gross proceeds of approximately $10,076,416. Each Unit consists of one common share and one-third of one warrant. Each warrant entitles the holder to acquire one common share at an exercise price of $1.20 for twelve (12) months from closing of the first tranche of the Private Placement. The first tranche of the Private Placement was completed on February 16, 2018 and the Company received $4,310,500 (less share issuance costs of $150,494) in connection with the issuance of 4,665,043 Units. On June 7, 2018 shareholders’ approval was obtained to pay a finder’s fee of 3% which will be paid in either cash or shares (at the Company’s discretion).

In connection with the Private Placement of 4,665,043 common shares, a total of 1,555,014 warrants were issued to the Subscriber on February 16, 2018. As a result, $3,793,213 of the gross proceeds of the Private Placement were allocated to the common shares and $517,287 to the share purchase warrants, less share issuance costs of $150,494. The fair value of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: (i) dividend yield of 0%, (ii) estimated volatility of 65%, (iii) risk free interest rate of 1.68% based on the Canada 1-Year Treasury Bill Yield and (iv) and expected life of 1 year.

On May 15, 2018 and June 15, 2018, as part of the second tranche, an additional 4,545,454 common shares and 1,515,151 warrants in aggregate were issued to the Subscriber for gross proceeds of $4,200,000. As a result, $4,018,355 of the gross proceeds of the Private Placement were allocated to the common shares and $181,645 to the share purchase warrants less share issuance costs of $222,989. The fair value of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: (i) dividend yield of 0%, (ii) estimated volatility of 65%, (iii) risk free interest rate of 1.68% based on the Canada 1-Year Treasury Bill Yield and (iv) and expected life of less than one year.

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

10. Loss per share

	For the three months		For the six months
	Ended June 30		Ended June 30
	2018	2017	2018	2017
Comprehensive loss for the period	$(1,961,114)	$(2,723,956)	$(3,915,764)	$(4,938,682)

Weighted average number of shares
outstanding for the period:
Basic	64,319,452	53,856,509	62,366,678	53,856,509


Diluted	64,319,452	53,856,509	62,366,678	53,856,509

Earnings (loss) per share – Basic	$(0.03)	$(0.05)	$(0.06)	$(0.09)
Earnings (loss) per share – Diluted	$(0.03)	$(0.05)	$(0.06)	$(0.09)

In periods in which a loss results, all outstanding stock options are excluded from the fully diluted loss per share calculations as their effect is anti-dilutive.

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

11. Stock options

The following is a summary of stock options which are outstanding as at June 30, 2018:

			Average remaining
Exercise price	# of options	# of options	contractual
per share	outstanding	exercisable	life (in years)
$0.86	22,500	22,500	0.0
$1.13	1,000,000	333,332	4.6
$1.35	286,900	286,900	1.5
$1.39	22,500	22,500	1.0
$1.45	37,500	37,500	3.5
$1.48	37,500	37,500	3.0
$1.50	100,000	100,000	3.2
$1.57	30,000	30,000	1.6
$1.61	25,000	25,000	0.6
$1.67	150,000	150,000	1.4
$1.73	92,600	75,933	2.4
$1.82	165,000	110,000	2.3
$1.83	22,500	22,500	0.5
$2.10	300,000	200,000	2.2
$1.44	2,292,000	1,453,665	3.1

A continuity of the number of stock options which are outstanding as at the current period ending June 30, 2018 and as at the prior fiscal year ended December 31, 2017 is as follows:

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

	For the six months		For the year ended
	ended June 30, 2018		December 31, 2017
		weighted		weighted
	# of stock	average	# of stock	average
	options	exercise price	options	exercise price
Options outstanding, start of the period	1,648,667	$1.60	3,221,001	$1.33
Granted	1,000,000	$1.13	-	$-
Exercised	(6,667)	$0.76	(7,334)	$0.76
Expired	(20,000)	$0.76	(1,190,000)	$0.91
Forfeited	(330,000)	$1.38	(375,000)	$1.48
Options outstanding, end of the period	2,292,000	$1.44	1,648,667	$1.60
Options exercisable, end of the period	1,453,665	$1.52	1,268,867	$1.59

Stock options granted generally expire, if unexercised, five years from the date granted and entitlement to exercise them generally vests at a rate of one-third at the end of each of the first three years following the date of grant.

Stock based compensation expense (“SBCE”) is calculated based on the fair value attributed to grants of stock options using the Black-Scholes valuation model and utilizing the following weighted average assumptions:

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

	For the period ended
	June 30,	December 31,
	2018	2017
Expected dividends paid per common share	Nil	Nil
Expected life in years	5.0	5.0
Expected volatility in the price of common shares	65%	85%
Risk free interest rate	1.68%	0.75%
Weighted average fair market value per share at grant date	$1.13	$0.99

The unamortized portion of SBCE related to the non-vested portion of stock options, which will be recognized in 2018 to 2020 is approximately $304,000.

12. Financial instruments

1) Non-derivative financial instruments:

The Company's non-derivative financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, accounts payables and accrued liabilities, and capital leases. The carrying value of these financial instruments approximates their fair values due to their short terms to maturity. NXT is not exposed to significant interest or credit risks arising from these financial instruments. NXT is exposed to foreign exchange risk as a result of periodically holding foreign denominated financial instruments. Any unrealized foreign exchange gains and losses arising on such holdings are reflected in earnings at the end of each period.

2) Derivative financial instruments

As at June 30, 2018 and December 31, 2017 the Company held no derivative financial instruments.

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

13. Change in non-cash working capital

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

	For the three months		For the six months
	ended June 30		ended June 30
	2018	2017	2018	2017
Accounts receivable	$(90,936)	$209,836	$(79,180)	$172,755
Prepaid expenses and deposits	(57,614)	(473,640)	(34,874)	(505,568)
Accounts payable and accrued liabilities	(377,925)	282,892	(493,625)	463,303
Income Taxes Payable	-	(9)	(201)	(81)
	(526,475)	19,079	(607,880)	130,409

Portion attributable to:
Operating activities	(526,475)	19,079	(607,880)	130,409
Financing activities	-	-	-	-
Investing activities	-	-	-	-
	(526,475)	19,079	(607,880)	130,409

14. Commitments and contingencies

Aircraft and Office premises lease

NXT has an operating lease commitment on its Calgary office space for a 10 year term ending in 2025 at an estimated minimum monthly lease payment of $44,624 (including operating costs).

The leaseback of NXT’s aircraft is an operating lease with a minimum term of 60 months and monthly lease payments of approximately US$39,500.

The estimated minimum annual commitments for these leases are as follows as at June 30, 2018:

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

	Office Premises	Aircraft
2018	$275,776	$312,082
2019	551,553	624,163
2020	554,526	624,163
2021	563,450	624,163
2022	563,450	156,041
	2,508,755	2,340,612
Thereafter, 2023 through 2025	1,549,487	-
	4,058,242	2,340,612

Deferred charges of $80,459 as at June 30, 2018 relates to the valuation of an initial free-rent period received on the office lease in 2015. This balance will be amortized as a reduction of general and administrative expense over the remaining 7 year term of the lease commitment.

15. Geographic information

NXT conducts all of its survey operations from its head office in Canada, and occasionally maintains administrative offices in foreign locations if and when needed. NXT has no long term assets outside of Canada.

There were no revenues in the three and six month periods ended June 30, 2018 and 2017.

16. Other related party transactions

One of the members of NXT’s Board of Directors is a partner in a law firm which provides legal advice to NXT. Legal fees (including costs related to share issuance) incurred with this firm were as follows:

NXT ENERGY SOLUTIONS INC.

Notes to the Condensed Consolidated Interim Financial Statements

As at and for the three and six month periods ended June 30, 2018

(Expressed in Canadian dollars unless otherwise stated)

For the three months		For the six months
Ended June 30		ended June 30
2018	2017	2018	2017
$188,263	$8,884	$209,156	$22,478

Accounts payable and accrued liabilities includes a total of $121,403 ($120,479 as at December 31, 2017) payable to this law firm.

In addition, accounts payable and accrued liabilities includes $24,184 ($14,210 as at December 31, 2017) related to re-imbursement of expenses owing an Officer of NXT.

17. Aircraft Financing

In April, 2017, NXT completed a sale and leaseback agreement of its aircraft with a Calgary based international aircraft services organization (the “Lessor”). The terms of the agreement resulted in NXT selling its Cessna Citation aircraft that was purchased in 2015 for US$2,000,000 for the sum of US$2,300,000. NXT has leased the aircraft over an initial term of 60 months and retains all existing operating rights and obligations. Net proceeds to NXT from the sale were approximately CAD $2,700,000, after payment of all commissions and fees. The net book value of the asset of $2.4 million was derecognized and the resulting gain on disposition of $776,504 was deferred ($621,203 included in long term liabilities and $155,301 included in accounts payable and accrued liabilities). The gain will be recognized as a reduction to the Company’s lease expense over the 60 month term of the lease. The resulting leaseback transaction is an operating lease. NXT is required to make monthly payments to the Lessor of approximately US $39,500. NXT has the option to extend the term of the lease by an additional two years. Should NXT want to repurchase the aircraft at the end of the initial lease term, the purchase price is US $1.45 million.

18. Subsequent Event – Private Placement Closing

On July 3, 2018 the Company closed the final portion of the Private Placement consisting $974,311 or 1,054,449 units. This brings the total amount raised to approximately $9,484,810 through the issuance of an aggregate of 10,264,946 units to the Subscriber comprised of 10,264,946 common shares and 3,421,646 warrants. The Subscriber now holds approximately 20.0% of the Corporation's 68,432,746 outstanding common shares including common shares issuable through the exercise of its warrants.

In conjunction with the closing on the final amount of the Private Placement, the Company and the Subscriber have agreed to enter into an Investor Rights Agreement pursuant to which: (a) the Subscriber has the right to nominate one director for election to the board of directors of the Company (subject to maintaining any equity ownership of at least 10% in the Company); (b) the Subscriber is entitled to participate in future equity or convertible security offerings of the Company in order to maintain its pro rata equity interest in the Company (subject to maintaining any equity ownership of at least 10% in the Company); (c) the Subscriber is entitled to a similar equity offering participation right in connection with certain new entities that may be created by the Company to expand the application of its proprietary technologies; and (d) the Subscriber has agreed to a 18 month standstill from the closing date of this final amount of the Private Placement and a 12 month restriction on dispositions of 75% of the securities acquired in the Private Placement.

EX-99.2 3 mda.htm MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A") FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2018 Blueprint

NXT ENERGY SOLUTIONS INC.

Management's Discussion and Analysis

For the three and six month periods ended

June 30, 2018

Management's Discussion and Analysis

The following management's discussion and analysis ("MD&A") was prepared by management based on information available as at August 3, 2018, has been approved by the Board of Directors, and should be reviewed in conjunction with the unaudited Consolidated Interim Financial Statements for the period ended June 30, 2018. This MD&A covers the unaudited three months ("Q2-18") and the six months year-to-date ended June 30, 2018 ("2018 YTD"), with comparative totals for the three-month ("Q2-17") and the six months year-to-date ended June 30, 2017 ("2017 YTD").

As used in this MD&A, the terms "we", "us", "our", "NXT" and the "Company" mean NXT Energy Solutions Inc.

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

NXT and Stress Field Detector ("SFD®") in Canada and the United States are the registered trademarks of NXT.

Forward-looking Information

Certain statements in this MD&A constitute forward-looking information under applicable securities laws. These statements typically contain words such as "intends", "plans", "anticipates", "expects", "scheduled", and relate primarily to:

●

the anticipated use of proceeds from the Private Placement (as defined below);

●

the timing and extent of potential future growth opportunities in new international markets, including new business ventures, and the satisfaction by third-parties of certain necessary conditions related thereto including obtaining financing and government and regulatory approvals;

●

estimates related to our future financial position and liquidity;

●

estimated minimum annual commitments for our leased premises and equipment;

●

the extent to which the Company is entitled to receive tax credits under the SR&ED Program (as defined below), and the anticipated timing of receipt thereof; and

●

general business strategies and objectives.

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

●

our ability to source personnel and equipment in a timely manner and at an acceptable cost;

●

our ability to obtain all permits and approvals required;

●

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

●

the ability to obtain insurance to mitigate the risk of default on client billings; and

●

foreign currency exchange and interest rates.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Known risks include:

●

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

●

conducting operations in international markets;

●

the emergence of alternative competitive technologies;

●

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

●

the loss of key personnel;

●

our dependence on a limited number of clients;

●

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

●

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

●

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

For more information relating to risks, see the section titled "Risk Factors" in NXT's current annual information form. Except as required by law, NXT assumes no obligation to update forward-looking information should circumstances or the Company's estimates or opinions change.

Non-GAAP Measures

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

Description of the Business

NXT utilizes its proprietary and patented SFD® survey method to provide airborne, gravity-based geophysical surveys to companies involved in oil and gas exploration and production globally.

The discussion in this MD&A focuses on the highlights of NXT's ongoing business development activities, and any significant changes arising prior to the filing of our MD&A for the three and six month periods ended June 30, 2018.

Financial and Operational Highlights

Key financial and operational highlights for the second quarter of 2018 include:

●

Completed a private placement financing on July 3, 2018 of $9,484,810 through the issuance of an aggregate of 10,264,946 units at $0.924 per unit, marginally less than the original target of $10,076,416 and the issuance of 10,905,212 units that was announced in the first quarter (the "Private Placement").

Closed on an aggregate of $4,200,000 during the second quarter over two separate closings on May 15 and June 15, 2018.

Subsequent to the quarter-end on July 3, 2018 we closed on a further amount of $974,311.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

●

Entered into an Investor Rights Agreement with Alberta Green Ventures Limited Partnership (the "Subscriber" or "AGV") in conjunction with the completion of the Private Placement. The Subscriber now holds approximately 20.0% of the Company’s 68,432,746 outstanding common shares (including common shares issuable through the exercise of its warrants).

●

SHINE Quests FZC continued working towards securing government approvals for a larger scale infrastructure and resource development within the Mannar Basin of Sri Lanka which will include a commitment to use SFD®.

●

Generation Resource Discoveries advanced discussions with various Indonesian authorities on securing financing and permits required for a geophysical survey over an area of up to 20,000 km2 in the North Sumatra basin offshore Aceh, Indonesia, with discussions expected to conclude by August 2018. Upon successful conclusion, NXT will initiate SFD® survey contract discussions with Generation Resource Discoveries.

●

Reinitiated discussions with the governments of Ghana and Nigeria regarding potential SFD® surveys for offshore exploration acreage.

●

Engaged in discussions with private counterparties in Canada and the USA regarding the utilization of SFD® for the identification of new reservoir horizons with limited prior geophysical information in mature conventional and unconventional areas.

●

Received notification of the granting of NXT's SFD® patent in China on April 13, 2018.

●

No survey revenues were recorded for the first two quarters of 2018.

●

A net loss of $1.96 million was recorded for the three months ended June 30, 2018, including amortization expense of $0.45 million and stock-based compensation expense of $0.15 million.

●

A net loss of $3.92 million was recorded for the six months ended June 30, 2018, including amortization expense of $0.89 million and stock-based compensation expense of $0.45 million.

●

Operating activities used $1.94 million of cash during the second quarter, and net cash proceeds provided from financing activities was $4.09 million.

●

Operating activities used $3.28 million of cash during the six months ended June 30, 2018, and net cash from financing activities provided was $8.38 million.

●

Losses per common share were $0.03 for the second quarter and $0.06 for the six months ended June 30, 2018 (basic and diluted).

●

Continued progress in our corporate cost reduction program with a decrease in general and administrative costs of 17% compared to the same quarter last year and a reduction of 23% year to date.

●

Cash and short-term investments at the end of the second quarter of 2018 were $6.20 million.

●

Subsequent to quarter-end on July 19, 2018, NXT received Notice of Allowance for a CIP (continuation-in-part) patent in the United States regarding a new sensor design we term the “Cascade” configuration. The patent will be granted and issued in the coming months.

The Cascade sensor is the result of NXT’s continued research & development efforts and builds upon our existing US patent. The Company’s Cascade sensors will provide enhanced ability for identifying trapped fluid bodies indicative of potential hydrocarbon accumulations along with improved reliability and flexibility during SFD® survey operations.

Private Placement Closing

On July 3, 2018, the Company closed the final portion of the Private Placement, issuing 1,054,449 units for gross proceeds of $974,311. This brings the total amount raised in connection with the Private Placement to approximately $9,484,810 through the issuance of an aggregate of 10,264,946 units to the Subscriber comprised of 10,264,946 common shares and 3,421,646 warrants. The Subscriber now holds approximately 20.0% of the Company's 68,432,746 outstanding common shares (including common shares issuable through the exercise of its warrants).

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

In conjunction with the closing of the final amount of the Private Placement, the Company and the Subscriber have entered into an Investor Rights Agreement pursuant to which: (a) the Subscriber has the right to nominate one director for election to the board of directors of the Company (subject to maintaining any equity ownership of at least 10% in the Company); (b) the Subscriber is entitled to participate in future equity or convertible security offerings of the Company in order to maintain its pro rata equity interest in the Company (subject to maintaining any equity ownership of at least 10% in the Company); (c) the Subscriber is entitled to a similar equity offering participation right in connection with certain new entities that may be created by the Company to expand the application of its proprietary technologies; and (d) the Subscriber has agreed to a 18 month standstill from the closing date of this final amount of the Private Placement and a 12 month restriction on dispositions of 75% of the securities acquired in the Private Placement.

Summary of Quarterly Results

A summary of operating results for each of the trailing eight quarters (including a comparison of certain key categories to each respective prior quarter) follows. The extent of the profit or loss each quarter is mainly due to SFD® surveys that have been completed or are underway, and variances in such non-cash items as stock-based compensation expense ("SBCE"), which can occasionally be a significant expense in any given quarter.

	Q2-18 Jun 30	Q1-18 Mar 31	Q4-17 Dec 31	Q3-17 Sep 30
Survey revenue	$-	$-	$-	$-
Net income (loss)	(1,961,114)	(1,954,650)	(2,096,360)	(1,935,356)

Income (loss) per share - basic	$(0.03)	$(0.03)	$(0.04)	$(0.04)
Income (loss) per share - diluted	$(0.03)	$(0.03)	$(0.04)	$(0.04)

	Q2-17 Jun 30	Q1-17 Mar 31	Q4-16 Dec 31	Q3-16 Sep 30
Survey revenue	$-	$-	$-	$-
Net income (loss)	(2,723,956)	(2,214,726)	(2,356,848)	(2,142,834)

Income (loss) per share - basic	$(0.05)	$(0.04)	$(0.04)	$(0.04)
Income (loss) per share - diluted	$(0.05)	$(0.04)	$(0.04)	$(0.04)

Q2-18 to Q1-18 comparison – NXT had survey revenue of $nil ($nil in Q1-18), survey costs (related to aircraft lease and aircraft maintenance costs) of $267,672 ($249,762 in Q1-18), and SBCE of $153,791 ($295,284 in Q1-18).

Q1-18 to Q4-17 comparison – NXT had survey revenue of $nil ($nil in Q4-17), survey costs of $249,762 ($252,212 in Q4-17) related to aircraft lease and aircraft maintenance costs and SBCE of $295,284 ($84,351 in Q4-17).

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

Q4-17 to Q3-17 comparison – NXT had survey revenue of $nil ($nil in Q3-17), survey costs of $252,212 ($261,658 in Q3-17) related to aircraft lease and aircraft maintenance costs and SBCE of $84,351 ($162,724 in Q3-17).

Q3-17 to Q2-17 comparison - NXT had survey revenue of $nil ($nil in Q2-17), survey costs of $261,658 ($612,342 in Q2-17) related to aircraft lease and maintenance costs, and SBCE of $162,724 ($169,033 in Q2-17).

Q2-17 to Q1-17 comparison – NXT had survey revenue of $nil ($nil in Q1-17), survey costs (related to the Gulf of Mexico multi-client survey, and aircraft lease and maintenance costs) of $612,342 ($163,217 in Q1-17), and SBCE of $169,033 ($165,248 in Q1-17).

Q1-17 to Q4-16 comparison – NXT had survey revenue of $nil ($nil in Q4-16), survey costs (related to equipment test flights and aircraft maintenance costs) of $163,217 ($9,998 in Q4-16), and SBCE of $165,248 ($287,500 in Q4-16).

Q4-16 to Q3-16 comparison – NXT had survey revenue of $nil ($nil in Q3-16), survey costs (related to equipment test flights and aircraft maintenance costs) of $9,998 ($200,443 in Q3-16), and SBCE of $287,500 ($218,000 in Q3-16).

Summary of Operating Results

	Q2-18	Q2-17	2018 YTD	2017 YTD
Survey revenue	$-	$-	$-	$-
Expenses:
Survey costs	267,672	612,342	517,434	775,559
General and administrative	1,110,634	1,337,051	2,092,038	2,699,632
Stock-based compensation	153,791	169,033	449,075	334,281
Amortization of property & equipment	447,192	474,558	894,383	989,250
	1,979,289	2,592,984	3,952,930	4,798,722

Other Expenses (income):
Interest Expense (income), net	(14,276)	(389)	(14,207)	4,726
Foreign exchange (gain) loss	(3,264)	11,306	(10,136)	17,281
Other expense (recovery)	(635)	38,785	(12,823)	45,366
	(18,175)	49,702	(37,166)	67,373
Income (loss) before income taxes	(1,961,114)	(2,642,686)	(3,915,764)	(4,866,095)

Income tax expense (recovery):	-	81,270	-	72,587

Net Income (loss) for the period	$(1,961,114)	$(2,723,956)	(3,915,764)	(4,938,682)

Net Income (loss) per share - basic	$(0.03)	$(0.05)	$(0.06)	$(0.09)
Net Income (loss) per share - diluted	$(0.03)	$(0.05)	$(0.06)	$(0.09)

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

Net loss for Q2-18 versus Q2-17 decreased $762,842 (28%) or $0.02 per share. This was mostly driven by cost reduction efforts in general and administrative ("G&A") expense as described below and the Gulf of Mexico survey flown in Q2-17 in which all costs were expensed. Net loss for 2018 YTD versus 2017 YTD decreased $1,022,918 (21%) or $0.03 per share. Again this was driven by cost reduction efforts in G&A expense and the Q2-17 Gulf of Mexico survey. There were no revenues in any of the periods.

Summary of Survey Expenses

	Q2-18	Q2-17	2018 YTD	2017 YTD
Aircraft lease costs	$112,267	$107,052	$223,411	$107,052
Amortization of deferred gain	(38,825)	(25,883)	(77,650)	(25,883)
Aircraft operations	194,173	161,645	371,559	324,219
Survey projects	57	369,528	114	370,171
Total Survey Expenses, net	267,672	612,342	517,434	775,559

During Q2-17, the Company entered into a sale and leaseback transaction of its aircraft (the "Leaseback Transaction"). Accordingly, subsequent to entering into the Leaseback Transaction in April 2017, survey expenses include the net costs related to this operating lease. The monthly lease payments are net of the amortized deferred gain on sale that was realized upon completion of the Leaseback Transaction.

During Q2-18, survey expenses related entirely to the aircraft lease and maintenance costs, net of charter hire revenue. A significant scheduled major maintenance was performed in Q2-18 with resulted in higher operating costs versus Q2-17. In addition, Q2-17 survey project costs were direct costs related to the Gulf of Mexico survey. Aircraft lease costs in Q2-18 are slightly higher than Q2-17 as the lease payments started in May 2017, which resulted in one less month of lease costs.

In comparing 2018 YTD with 2017 YTD, costs for aircraft operations were higher because of the scheduled major maintenance performed in Q2-18. Also charter hours were lower in Q1-18 which reduced the offset against operating costs. Aircraft lease costs in 2018 YTD are $116,359 higher than 2017 YTD as the lease payments started in May 2017, which resulted in 4 less month of lease costs in during 2017. This is offset by lower amortization costs in 2018 YTD.

The aircraft is available for charter to third parties through our aircraft manager when it is not being used by NXT. All associated revenues, net of commissions, and costs of charter activity are retained by NXT.

General and administrative expense – all salaries and overhead costs related to SFD® data interpretation staff are included in G&A, and not included with direct survey expenses. The categories of costs included in G&A are as follows:

G&A Expenses	Q2-18	Q2-17	net change	%
Salaries, benefits and consulting charges	$473,095	$699,449	$(226,354)	(32%)
Board, professional fees, & public company costs	295,772	219,532	76,240	35%
Premises and administrative overhead	199,113	199,363	(250)	(0%)
Business development	142,654	64,201	78,453	122%
Bolivian overhead	-	154,506	(154,506)	(100%)
Total G&A Expenses	1,110,634	1,337,051	(226,417)	(17%)

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

G&A Expenses	2018 YTD	2017 YTD	net change	%
Salaries, benefits and consulting charges	$1,023,175	$1,484,096	$(460,921)	(31%)
Board, professional fees, & public company costs	483,592	437,102	46,490	11%
Premises and administrative overhead	369,461	457,990	(88,529)	(19%)
Business development	209,354	132,082	77,272	59%
Bolivian overhead	6,456	188,362	(181,906)	(97%)
Total G&A Expenses	2,092,038	2,699,632	(607,594)	(23%)

G&A decreased 17% or $226,417 in Q2-18 compared to Q2-17 as the result of successful cost reduction efforts. The Company did increase spending in business development as it continues to focus in this area.

●

The main reason for salaries, benefits and consulting charges being lower than Q2-17 is due to a reduction in corporate headcount and recognition of a refundable credit from the Scientific Research and Experimental Development Tax Incentive Program (the “SR&ED Program”).

●

Board, professional fees & public company costs, were 35% higher in Q2-18 compared to Q2-17 as the Company incurred costs indirectly related to the Private Placement and termination costs for contracts as part of cost reduction efforts.

●

Premises and administrative overhead were flat in Q2-18 compared to the same period the prior year.

●

Business development costs increased $78,453 as the Company increased marketing efforts for the SFD® technology.

●

The Bolivian office is shut-down. Therefore there was no spending in Q2-18.

G&A decreased 23% or $607,594 in 2018 YTD compared to 2017 YTD.

●

The main reason for salaries, benefits and consulting charges being lower than 2017 YTD is due to a reduction in corporate headcount. In addition focus was put on reducing vacation liabilities. This was offset partially by engaging two agents in South America to leverage the Company's experience and success in the region.

●

Board, professional fees & public company costs, were 11% higher in 2018 YTD compared to 2017 YTD as the Company incurred costs indirectly related to the Private Placement and termination costs for contracts as part of cost reduction efforts. These increases were partially offset as a result of the Company having one less director during these comparative periods.

●

Premises and administrative overhead were 19% lower in 2018 YTD compared to the prior year, mostly due to lower rental common area costs as actual property taxes and significantly lower maintenance costs due to lower than expected property taxes. In addition there were no temporary staff in 2018 YTD and the overall reduced headcount reduced overhead spending in several areas like supplies.

●

Business development costs increased $77,272 as the Company increased marketing efforts for the SFD® technology during Q2-18.

●

2018 YTD Bolivian overhead costs of $6,456 are related to closing of the branch. At the beginning of 2017, Bolivian overhead costs were presented as G&A to reflect the fact the office has been maintained to facilitate periodic operating activities in Bolivia that were anticipated from time to time.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

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

SBCE in Q2-18 was lower compared to Q2-17 by $15,242. The expense was lower as headcount reductions caused the forfeiture of options during late 2017.

SBCE in 2018 YTD was higher compared to 2017 YTD by $114,794. The expense was higher because of the vesting of 333,333 options granted in February 2018. No options were granted in 2017.

Interest income (expense), net – includes interest income earned on short-term investments netted by interest expense from capital lease obligations. Net interest income for Q2-18 was $14,276 as compared to net interest income of $389 for Q2-17. For 2018 YTD net interest income was $14,207 and for 2017 YTD net interest expense was $4,726. Proceeds from the Private Placement were placed in short-term investments as soon as they were received and therefore interest income increased versus the prior periods. Short-term investments were minimal in Q2-17 and 2017 YTD.

Loss (gain) on foreign exchange – this total is caused by changes in the relative exchange values of the US$ and CDN$. For example, when the CDN$ trades higher relative to the US$, cash held in US$ and monetary assets denominated in US$ will decline in value. This decline will be reflected as a foreign exchange loss in the period. NXT normally holds its cash and short-term investments in CDN$ to reduce the effect of market volatility. The security deposit for the aircraft is held in US$, which has a significant effect on the unrealized foreign exchange gain and loss.

The value of net US$ monetary assets can vary widely each period, based on such factors as the extent of US$ revenue contracts in process, and the level of US$ cash and short-term investments on hand.

The valuation is also affected by the relative strength of the US$ at each period end, resulting in both realized and unrealized net exchange movements on the net holdings of US$ cash and other working capital items. The foreign exchange gain for the quarter was primarily caused by the translation of assets and liabilities in the Canadian Company which were held in US$.

Intellectual property and other expenses – this category includes primarily costs related to intellectual property ("IP") filings and research and development ("R&D") activity related to the SFD® technology, and costs for certain non-recurring, "project" activities.

Other Expenses	Q2-18	Q2-17	2018 YTD	2017 YTD
Intellectual property and R&D	$2,106	$30,594	$(10,964)	$41,027
Other, net	(2,741)	8,191	(1,859)	4,339
Total Other Expenses, net	(635)	38,785	(12,823)	45,366

For 2018 YTD, the Company's other expenses were negative as it incurred less R&D costs from a provider of services than originally estimated. For 2017 YTD, other expenses consisted primarily of costs incurred to secure a patent for SFD® in the United States and to continue to develop SFD® technology.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

Intellectual property and related amortization expense – NXT finalized its acquisition of specific rights to utilize the proprietary SFD® technology from its inventor, NXT's President & CEO, on August 31, 2015. As a result of this acquisition, NXT obtained the exclusive rights to utilize the SFD® intellectual property in global hydrocarbon exploration applications.

The value attributed to the IP assets acquired in 2015 was $25.3 million. The IP assets are being amortized on a straight-line basis over a 15-year period (future amortization expense of $1,685,000 per year), and will also be subject to ongoing tests of potential impairment of the recorded net book value. No impairments were recognized during the three and six months ended June 30, 2018 and 2017.

Property and equipment amortization is lower for both the three and six month periods ending June 30, 2018 versus the same periods in the prior year due to the Leaseback Transaction.

Amortization Expenses	Q2-18	Q2-17	2018 YTD	2017 YTD
Property and equipment	$26,008	$53,374	$52,016	$146,883
Intellectual property	421,184	421,184	842,367	842,367
Total Amortization Expenses	447,192	474,558	894,383	989,250

Income tax expense – NXT periodically earns revenues while operating outside of Canada as a non-resident within certain foreign jurisdictions, and services rendered to clients in such countries may be subject to foreign withholding taxes, which are only recoverable in certain limited circumstances. Income tax expense for 2017 is withholding taxes that were incurred on charges related to the Bolivia survey project. There was no income tax expense in Canada or Bolivia during 2018.

Liquidity and Capital Resources

NXT's cash and cash equivalents plus short-term investments at June 30, 2018 was $6,202,682.

NXT's longer-term success remains dependent upon our ability to continue to attract new client projects and expand the revenue base to a level sufficient to exceed G&A expenses and generate excess net cash flow from operations. Proceeds from past equity financings have been, and the proceeds from the Private Placement are expected to be, used to provide NXT with funds to pursue, close and implement commercial transactions currently in negotiation, develop additional revenue streams including multi-client data sales and strategic partnerships, and for general corporate and working capital purposes.

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

During Q2-18, NXT continued to make progress in strengthening its liquidity and working capital position through a series of corporate actions described below.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

Reduction in corporate costs: Following the completion of the Leaseback Transaction, NXT took further steps to reduce corporate costs. The most significant of these steps included the deferral of a portion of the employees' cash compensation and a reduction in non-essential staff. Please see the discussion under "Summary of Operating Results – General and administrative expense" for the results of these reductions.

Private Placement: As discussed in the section Private Placement Closing the Company closed the final portion of the Private Placement on July 3, 2018.

With the completion of the Private Placement, NXT estimates it will have sufficient funds to meet its ongoing obligations for a period of approximately 16 months. The lower closing amount of the Private Placement has reduced this period by approximately 3 months.

NXT has no secured debt, and had net working capital of $5,118,990 as at June 30, 2018, as follows:

Net Working Capital Summary	Jun 30, 2018	Dec 31, 2017	net change as at Q2-18
Current assets (current liabilities)
Cash, cash equivalents and Short Term Investments	$6,202,681	$1,116,618	$5,086,063
Accounts receivable	139,207	60,027	79,180
Prepaid expenses and deposits	142,237	107,363	34,874
Accounts payable and accrued liabilities	(1,324,084)	(1,562,394)	238,310
Income taxes payable	-	(201)	201
Current portion of capital lease obligation	(41,051)	(39,579)	(1,472)
Net Working Capital	5,118,990	(318,166)	5,437,156

The increase in working capital was due to the cash provided by the Private Placement net of cash operating costs during the quarter, lower accounts payable and accrued liabilities and a receivable for tax credits the Company is entitled to under the SR&ED Program which it expects to receive in the third quarter of 2018.

The net decrease in accounts payable and accrued liabilities is comprised of the following movements:

Accounts Payable Summary	Jun 30, 2018	Dec 31, 2017	net change as at Q2-18
Trade accounts payable	$(282,604)	$(430,100)	$147,496
Deferred gain on sale of aircraft	(155,301)	(155,301)	-
Deferred employee salaries	(157,419)	(380,548)	223,129
Deferred director /Advisory Board payable	(150,420)	(213,181)	62,761
Accrued liabilities	(537,927)	(212,701)	(325,226)
Vacation pay accrued	(40,413)	(170,563)	130,150
Total Accounts Payable	(1,324,084)	(1,562,394)	238,310

Trade payables as at June 30, 2018 decreased $147,496 compared to those outstanding as at December 31, 2017 as several deferred payables were settled in the period.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

Deferred employee salaries decreased by $223,129 as employees were paid their deferred salaries up until March 31, 2018.

Deferred director and Advisory Board fees decreased $62,761 as several of these outstanding liabilities were paid or settled upon termination of contracts during Q2-18.

Accrued liabilities as at June 30, 2018 increased compared to those accrued as at December 31, 2017 as an accrual was made for the finder's fee payable in connection with the Private Placement.

Vacation Pay Accrued decreased $130,150 as employees took significant vacation time and any remaining outstanding balances from prior years were settled.

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

Cash Flow Summary - from / (used in)	Q2-18	Q2-17	2018 YTD	2017 YTD
Operating activities	$(1,942,964)	$(1,878,718)	$(3,281,872)	$(3,301,404)
Financing activities	4,093,205	(8,976)	8,377,941	12,330
Investing activities	(4,960,007)	1,940,996	(4,310,006)	3,086,624
Net source (use) of cash	(2,809,766)	53,302	786,063	(202,450)
Cash and cash equivalents, start of period	3,762,447	234,744	166,618	490,496
Cash and cash equivalents, end of period	952,681	288,046	952,681	288,046

Cash and cash equivalents	952,681	288,046	952,681	288,046
Short-term investments	5,250,000	1,500,000	5,250,000	1,500,000
Total Cash and Short-Term Investments	6,202,681	1,788,046	6,202,681	1,788,046

Operating Activities	Q2-18	Q2-17	2018 YTD	2017 YTD
Net income (loss) for the period	$(1,961,114)	$(2,723,956)	$(3,915,764)	$(4,938,682)
Total non-cash expense items	544,625	826,159	1,241,772	1,506,869
	(1,416,489)	(1,897,797)	(2,673,992)	(3,431,813)
Change in non-cash working
capital balances	(526,475)	19,079	(607,880)	130,409
Total Cash from (used in) Operating Activities	(1,942,964)	(1,878,718)	(3,281,872)	(3,301,404)

For all periods, changes in operating cash flow was driven by the lack of revenue and incurred operating costs for the period. Operating cash outflow increased $64,246 when comparing Q2-18 versus Q2-17 as previously deferred liabilities were settled. Cost savings increased operating cash flow by $481,308, but payments of deferred liabilities decreased non-cash working capital by $545,554. When comparing 2018 YTD to 2017 YTD operating activity outflow improved slightly by $19,532. Again cost reduction and cash deferral efforts reduced the operating cash by $757,821, but payments of deferred liabilities decreased non-cash working capital by $738,289 for a net improvement of $19,532.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

Financing Activities	Q2-18	Q2-17	2018 YTD	2017 YTD
Proceeds from exercise of stock options	-	$136	$5,067	$30,420
Net proceeds from Private Placement	4,103,011	-	8,392,332	-
Repayment of capital lease obligation	(9,806)	(9,112)	(19,458)	(18,090)
Total Cash from (used in) Financing Activities	4,093,205	(8,976)	8,377,941	12,330

NXT recorded a net cash inflow of $4,103,011 in Q2-18 and $8,392,332 in 2018 YTD as a result of proceeds received from the closing of tranches in the Private Placement.

Investing Activities	Q2-18	Q2-17	2018 YTD	2017 YTD
Sale/(purchase) of property and equipment	$(10,006)	$3,137,905	$(10,006)	$3,133,533
Decrease (increase) in short-term investments	(4,950,001)	(1,196,909)	(4,300,000)	(46,909)
Total Cash from (used in) Investing Activities	(4,960,007)	1,940,996	(4,310,006)	3,086,624

Short-term investments in Q2-18 increased $4,950,001 with cash received from the Private Placement. In Q2-17, short-term investments increased from cash received from the Leaseback Transaction.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

Contractual Commitments

Aircraft and office premises lease

NXT has an operating lease commitment on its Calgary office space for a 10-year term at an initial estimated minimum monthly lease payment of $44,624 (including operating costs).

The leaseback of NXT's aircraft is an operating lease with a minimum term of 60 months and monthly lease payments of approximately US$39,500.

The estimated minimum annual commitments for these leases are as follows, as at June 30, 2018:

For the period ended December 31	Office Premises	Aircraft
2018	$275,776	$312,082
2019	551,553	624,163
2020	554,526	624,163
2021	563,450	624,163
2022	563,450	156,041
	2,508,755	2,340,612
Thereafter, 2023 through 2025	1,549,487	-
	4,058,242	2,340,612

Additional Disclosures – Outstanding Share Capital and Dilutive Securities

	As at
	August 3, 2018	June 30, 2018	December 31, 2017
Common shares issued and outstanding:
Common shares	68,432,746	67,378,297	58,161,133
Common shares issuable upon exercise:
Warrants	3,421,646	3,070,164	0
Stock options	2,269,500	2,292,000	1,648,667
Total Share Capital and Dilutive Securities	74,123,892	72,740,461	59,809,800

During the month of July 2018, a total of 22,500 stock options expired without being exercised.

Other Transactions with Related Parties

One of the members of NXT's Board of Directors is a partner in a law firm which provides legal advice to NXT. Legal fees (including costs related to share issuance) incurred with this firm were as follows:

	For the three-month period		For the six-month period
	ended June 30		ended June 30
	2018	2017	2018	2017
Legal Fees	$188,263	$8,884	$209,156	$22,478

Accounts payable and accrued liabilities includes a total of $121,403 ($120,479 as at December 31, 2017) payable to this law firm.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

In addition, accounts payable and accrued liabilities includes $24,184 ($14,210 as at December 31, 2017) related to re-imbursement of expenses owing to an officer of NXT.

Critical Accounting Estimates

The key elements and assumptions are substantially unchanged from those described in NXT's annual audited consolidated financial statements as at and for the year-ended December 31, 2017. The following is also important to note:

Revenue recognition

Revenue earned on SFD® survey contracts (net of any related foreign sales taxes) is recognized on a completed contract basis. This method of revenue recognition is currently deemed appropriate given the complex nature of the end product that is delivered to the client. While the quantity of data acquisition can be measured based on actual line kilometers flown, the acquired SFD® data does not realize its full value until it is processed, interpreted in detail, and a recommendations report is generated and reviewed with the client's geological and geophysical staff.

All funds received or invoiced in advance of completion of the contract are reflected as unearned revenue and classified as a current liability on our balance sheet. All survey expenditures and obligations related to uncompleted SFD® survey contracts (including directly-related sales commissions) are reflected as work-in-progress and classified as a current asset on our balance sheet. Upon completion of the related contract, unearned revenue and the work-in-progress is moved as appropriate to the statement of earnings (loss) as either revenue or survey cost. Survey costs do not include any salaries and overhead related to SFD® data interpretation staff (which is included in G&A expense) or amortization of property and equipment expense.

Changes in Accounting Policies

Issued but not yet adopted: Leases

In February 2016, the Financial Accounting Standards Board issued new guidance on leases. The new guidance requires lessees to recognize most leases, including operating leases, on the balance sheet as lease assets and lease liabilities. In addition, lessees may be required to reassess assumptions associated with existing leases as well as to provide expanded qualitative and quantitative disclosures. The new guidance is effective January 1, 2019. NXT is evaluating the impact of the adoption of this new guidance and has not yet determined the effect on its consolidated financial statements.

Disclosure Controls and Procedures ("DCP") and

Internal Controls over Financial Reporting ("ICFR")

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

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

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

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

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

●

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

●

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

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

The small size of the Company's finance team can result in control deficiencies in maintaining DCP and ICFR that in turn have led to a recurrence of previously identified deficient disclosure and the requirement for refiling of certain disclosure documents. To address this issue and improve ICFR moving forward, management has established a practice of increased engagement of the Company's Disclosure Committee and Audit Committee in reviewing the public disclosure and has increased engagement of external consultants and legal counsel as well.

Notwithstanding NXT's efforts to mitigate the risks associated with the above-mentioned deficiencies, the CEO and CFO concluded that, as at June 30, 2018, the Company's ICFR are not effective and as a result its DCP are not effective. NXT reached this conclusion based upon its assessment that there is more than a remote likelihood that its ICFR will not prevent or detect material misstatements if they should exist in the Company's consolidated financial statements. NXT has therefore further taken on a process of continuous improvement in financial reporting and disclosure policies and responsibilities from which the Company expects to see benefits over the course of 2018.

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

Additional Information

Additional information is available on NXT's website at www.nxtenergy.com and on SEDAR at www.sedar.com.

NXT Energy Solutions Inc.

MD&A for the three and six month periods ended June 30, 2018

EX-99.3 4 ceo.htm CERTIFICATION OF INTERIM FILINGS CEO Blueprint

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, George Liszicasz, Chairman and CEO, NXT Energy Solutions Inc., certify the following:

Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of NXT Energy Solutions Inc. (the “issuer”) for the interim period ended June 30, 2018.

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

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

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

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)

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

(i)

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

(ii)

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

(b)

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

5.1

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

5.2

ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period

(a)

a description of the material weakness;

(b)

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

(c)

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

5.3

Limitation on scope of design: N/A

Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2018 and ended on June 30, 2018 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: August 7, 2018

“/s/ George Liszicasz”

George Liszicasz

Chairman & CEO

EX-99.4 5 cfo.htm CERTIFICATION OF INTERIM FILINGS CFO Blueprint

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Jakub Brogowski, Vice President of Finance & CFO, NXT Energy Solutions Inc., certify the following:

Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of NXT Energy Solutions Inc. (the “issuer”) for the interim period ended June 30, 2018.

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)

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

(i)

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

(ii)

(b)

5.1

5.2

ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period

(a)

a description of the material weakness;

(b)

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

(c)

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

5.3

Limitation on scope of design: N/A

Date: August 7, 2018

“/s/ Jakub Brogowski”

Jakub Brogowski

Vice President of Finance & CFO

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