6-K

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 May 2023

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 ☒     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  ☒

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 ☒

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 ☒

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 period ended March 31, 2023
99.2	Management’s Discussion and Analysis (“MD&A”) for the period ended March 31, 2023
99.4	Certification Of Annual Filings CEO
99.5	Certification Of Annual Filings CFO

2

SIGNATURES

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

	NXT Energy Solutions Inc.
	(Registrant)
Date: May 16 2023	/s/ Eugene Woychyshyn
	Eugene Woychyshyn
	Chief Financial Officer

3

EX-99.1

EXHIBIT 99.1

NXT ENERGY SOLUTIONS INC.

Unaudited Condensed Consolidated Interim Financial Statements

For the three months ended

March 31, 2023

[1]

NXT ENERGY SOLUTIONS INC.

Condensed Consolidated Interim Balance Sheets

(Unaudited-expressed in Canadian dollars)

	March 31,			December 31,
	2023			2022
Assets
Current assets
Cash and cash equivalents	$	467,539		$	263,437
Accounts receivable		91,764			57,065
Prepaid expenses and deposits		42,110			36,157
		601,413			356,659
Long term assets
Deposits		246,138			246,589
Property and equipment		529,206			544,446
Right of Use Assets (Note 3)		1,116,286			1,259,092
Intellectual property (Note 4)		12,743,880			13,168,509
	$	15,236,923		$	15,575,295
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued liabilities (Notes 5, 14)	$	1,059,385		$	1,276,236
Current portion of long-term debt		111,111			111,111
Current portion of lease obligation (Note 6)		605,154			650,315
		1,775,650			2,037,662
Long-term liabilities
Long-term debt		796,296			824,074
Long-term lease obligations (Note 6)		461,720			596,408
Asset retirement obligation		25,089			24,574
		1,283,105			1,445,056
		3,058,755			3,482,718
Shareholders’ equity
Common shares (Note 8): - authorized unlimited Issued: 77,599,131 (2022 - 68,949,109) common shares		98,077,636			96,423,648
Contributed capital		9,450,768			9,404,518
Deficit		(95,350,236	)		(93,735,589	)
		12,178,168			12,092,577
	$	15,236,923		$	15,575,295

Going Concern (Note 1)

Commitments (Note 7)

Subsequent event (Note 4)

Signed “John Tilson”	Signed “Bruce G. Wilcox”
Director	Director

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

[2]

NXT ENERGY SOLUTIONS INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(Unaudited-expressed in Canadian dollars)

	For the three months ended March 31,
	2023			2022
Revenue
SFD® related revenue (Note 13)	$	-		$	-
Expenses
SFD® related costs, net		301,634			437,282
General and administrative expenses (Notes 10, 14)		861,354			912,550
Amortization (Note 4)		439,868			442,437
		1,602,856			1,792,269
Other expenses (income)
Interest expense, net		9,754			8,188
Foreign exchange loss (gain)		(5,241	)		20,265
Intellectual property and other		7,278			20,146
		11,791			48,599
Loss before income taxes		(1,614,647	)		(1,840,868	)
Income tax expense		-			-
Net loss and comprehensive loss	$	(1,614,647	)	$	(1,840,868	)
Net loss per share (Note 9)
Basic	$	(0.02	)	$	(0.03	)
Diluted	$	(0.02	)	$	(0.03	)

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

[3]

NXT ENERGY SOLUTIONS INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited-expressed in Canadian dollars)

	For the three months ended March 31,
	2023			2022
Cash from (used in):
Operating activities
Net loss	$	(1,614,647	)	$	(1,840,868	)
Items not affecting cash:
Stock based compensation expense (Note 10)		72,242			56,516
Amortization (Note 4)		439,868			442,439
Accretion expense		516			517
Non-cash lease costs		(1,734	)		(3,023	)
Change in carry amount of right of use assets & lease liabilities		(34,649	)		(13,787	)
Unrealized foreign exchange loss		1,288			19,877
Loss on disposal of assets and lease modifications		-			11,921
Change in non-cash working capital balances (Note 12)		(262,903	)		413,267
		214,628			927,727
Net cash used in operating activities		(1,400,019	)		(913,141	)
Financing activities
Proceeds from the Employee Share Purchase plan (Note 10)		9,854			16,106
Repayment of long-term debt		(27,778	)		-
Net proceeds from Private Placement (Note 8)		1,622,057			-
Repayment of financial liability and lease obligation (Notes 3, 6)		-			(27,950	)
Net cash from (used in) financing activities		1,604,133			(11,844	)
Investing activity
Proceeds used in short-term investments		-			(150,272	)
Net cash used in investing activity		-			(150,272	)
Effect of foreign exchange rate changes on cash and cash equivalents		(12	)		(13,877	)
Net increase (decrease) in cash and cash equivalents		204,102			(1,089,134	)
Cash and cash equivalents, beginning of the period		263,437			2,257,855
Cash and cash equivalents, end of the period	$	467,539		$	1,168,721
Supplemental information
Cash interest paid (received)	$	9,738		$	(1,404	)
Cash taxes paid		-			-

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

[4]

NXT ENERGY SOLUTIONS INC.

Condensed Consolidated Interim Statements of Shareholders’ Equity

(Unaudited-expressed in Canadian dollars)

	For the three months ending March 31,
	2023			2022
Common Shares
Balance at beginning of the period	$	96,423,648		$	95,779,352
Issuance of common stock, net of share issuance costs for:
Private placement (Note 8)		1,622,057			-
Employee Share Purchase Plan (Note 10)		17,458			28,837
Restricted Stock Unit Plan (Note 10)		14,473			-
Balance at end of the period		98,077,636			95,808,189
Contributed Capital
Balance at beginning of the period		9,404,518			9,381,966
Recognition of stock based compensation expense (Note 10)		46,250			7,500
Balance at end of the period		9,450,768			9,389,466
Deficit
Balance at beginning of the period		(93,735,589	)		(87,002,515	)
Net loss		(1,614,647	)		(1,840,868	)
Balance at end of the period		(95,350,236	)		(88,843,383	)
Total Shareholders’ Equity at end of the period	$	12,178,168		$	16,354,272

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

[5]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

1. The Company and going concern

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

NXT’s proprietary Stress Field Detection (“SFD^®”) technology is an airborne survey system that utilizes quantum-scale sensors to detect gravity field perturbations in an airborne survey method which can be used both onshore and offshore to remotely identify traps and reservoirs with exploration potential in both the hydrocarbon and geothermal industries.

These condensed consolidated interim financial statements of NXT have been prepared by management in accordance with generally accepted accounting principles of the United States of America (“US GAAP”).

These condensed consolidated interim financial statements reflect adjustments, all of which are normal recurring adjustments that are, in the opinion of management, necessary to reflect fairly the financial position and results of operations for the respective periods.

These condensed consolidated interim financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that NXT will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

The events described in the following paragraphs highlight that there is substantial doubt about NXT’s ability to continue as a going concern within one year after the date that these condensed consolidated interim financial statements have been issued. The Company’s current cash position is not expected to be sufficient to meet the Company’s obligations and planned operations for a year beyond the date that these condensed consolidated interim financial statements have been issued.

The Company has deferred payment of operating costs, including payroll and other general and administrative costs. Further financing options that may or may not be available to the Company include issuance of new equity, debentures or bank credit facilities. The need for any of these options will be dependent on the timing of securing new SFD^® related revenues and obtaining financing on terms that are acceptable to both the Company and the financier.

NXT continues to develop its pipeline of opportunities to secure new revenue contracts. However, the Company’s longer-term success remains dependent upon its ability to convert these opportunities into successful contracts, to continue to attract new client projects, expand its revenue base to a level sufficient to exceed fixed operating costs, and generate consistent positive cash flow from operations. The occurrence and timing of these events cannot be predicted with sufficient certainty.

The condensed consolidated interim financial statements do not reflect adjustments that would be necessary if the going concern basis was not appropriate. If the going concern basis was not appropriate for these condensed consolidated interim financial statements, then adjustments would be necessary in the carrying value of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. These adjustments could be material.

[6]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

Use of Estimates and Judgements

In preparing these condensed consolidated interim financial statements, NXT is required to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. The Company uses the most current information available and exercises careful judgment in making these estimates and assumptions. In the opinion of management, these condensed consolidated interim financial statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies. The estimates and assumptions used are based upon management’s best estimate as at the date of the condensed consolidated interim financial statements. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period when determined. Actual results may differ from those estimates.

Certain estimates and judgments have a material impact where the assumptions underlying these accounting estimates relate to matters that are highly uncertain at the time the estimate or judgment is made or are subjective. In 2023 and 2022, the estimates and judgments included the assessment of impairment indicators of intellectual property.

The Company reviews intellectual property for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company considers both internal and external factors when assessing for potential indicators of impairment of its intellectual property, including the consideration of historical and forecasted SFD^® related revenues, market capitalization, control premiums, and the SFD^® related revenue multiples compared to industry peers. When indicators of impairment exist, the Company first compares the total of the estimated undiscounted future cash flows or the estimated sale price to the carrying value of an asset. If the carrying value exceeds these amounts, an impairment loss is recognized for the excess of the carrying value over the estimated fair value of the intellectual property.

Other accounting estimates and judgments that may have a material impact on the financial statements include: the forward looking assumptions related to the going concern assumption, the estimated useful lives of intellectual property and property and equipment, and the assumptions used to measure stock based compensation expense.

2. Significant Accounting Policies

Basis of Presentation

These condensed consolidated interim financial statements for the period ended March 31, 2023 have been prepared by management in accordance with 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, 2022. There are no new policies that were adopted on January 1, 2023.

[7]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

3. Right of use assets

	March 31, 2023
	Cost		Accumulated		Right of
	Base		Amortization		Use Assets
Aircraft	$	1,847,617	$	1,484,722	$	362,895
Office Building		1,725,414		981,169		744,245
Printer		9,716		570		9,146
		3,582,747		2,466,461		1,116,286

	December 31, 2022
	Cost		Accumulated		Right of
	Base		Amortization		Use Assets
Aircraft	$	1,847,617	$	1,407,743	$	439,874
Office Building		1,725,414		915,773		809,641
Printer		9,716		139		9,577
		3,582,747		2,323,655		1,259,092

Under the term of its Aircraft Leasing Agreement, should NXT want to repurchase the aircraft at the end of the extended term, the purchase price will be US$1.21 million. 

4.  Intellectual property

	March 31, 2023
	Cost		Accumulated		Net book
	Base		amortization		Value
SFD® Hydrocarbon Right acquired	$	25,271,000	$	12,776,317	$	12,494,683
SFD® Geothermal Right acquired		275,610		26,413		249,197
		25,546,610		12,802,730		12,743,880

	December 31, 2022
	Cost		Accumulated		Net book
	Base		amortization		Value
SFD® Hydrocarbon Right acquired	$	25,271,000	$	12,355,134	$	12,915,866
SFD® Geothermal Right acquired		275,610		22,967		252,643
		25,546,610		12,378,101		13,168,509

[8]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

SFD^® Hydrocarbon Right

During 2015, NXT acquired the rights to the SFD^® technology for use in the exploration of hydrocarbons (“Hydrocarbon Right”) from Mr. George Liszicasz, the former President and CEO of NXT (“CEO”), and recorded the acquisition as an intellectual property asset on the balance sheet.  The asset was recorded at the fair value of the consideration transferred, including the related tax effect of approximately $25.3 million. 

The Hydrocarbon Right is being amortized on a straight line basis over its estimated useful life of 15 years. The annual amortization expense expected to be recognized is approximately $1.7 million per year for a 5 year aggregate total of $8.5 million.

SFD^® Geothermal Right

The Company acquired the SFD^® technology rights for geothermal resources (“Geothermal Right”) from the CEO on April 18, 2021.  The consideration deliverable by the Company in connection with the acquisition of the Geothermal Right is set forth below:

1.	US$40,000 (CAD$50,310) signature payment, which became due immediately and was paid on April 22, 2021;
2.	300,000 common shares, which were issued in December 2021;
3.	CAD$15,000 signature milestone payment paid in August 2021;
4.	US$200,000 milestone payment which will become due in the event that the Company’s cash balance exceeds CAD$5,000,000 due to receipt of specifically defined funds from operations; and
5.	US$250,000 milestone payment would have become due in the event that the Company executed and completed and received full payment for an SFD® contract valued at US$10,000,000 or greater, provided such contract was entered into and completed and payment of at least US$5,000,000 was received by April 18, 2023. This milestone expired as of April 18, 2023.

As of March 31, 2023, the Company has recognized $275,610 for the acquisition Geothermal Right which is the combination of the US$40,000 (CAD$50,310) and CAD$15,000 signature payments, the value of the 300,000 common shares of $207,300 and other costs of $3,000.  The cost of the remaining milestone will be recognized when it is deemed probable that the milestone will be achieved by a special committee of the Board of Directors, comprised entirely of independent directors.  The Board of Directors delegated authority to the special committee to determine when the milestones have been achieved.  As of March 31, 2023 the remaining milestone is still deemed not probable of being achieved.

The current book value of the Geothermal Right is being amortized on a straight line basis over its estimated useful life of 20 years. The annual amortization expense expected to be recognized is approximately $13,781 per year for a 5 year aggregate total of approximately $68,902.

[9]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

5.  Accounts payable and accrued liabilities

	March 31,		December 31,
	2023		2022
Accrued liabilities related to:
Consultants and professional fees	$	204,192	$	533,863
Payroll		485,076		397,500
Board of director’s fees		156,731		162,500
Vacation accrued		67,922		62,413
		913,921		1,156,276
Trade payables and other		145,464		119,960
		1,059,385		1,276,236

6. Lease obligation

	March 31,		December 31,
	2023		2022
Aircraft	$	296,479	$	378,769
Office Building		761,249		858,378
Printer		9,146		9,576
		1,066,874		1,246,723
Current portion of lease obligations		605,154		650,315
Long-term lease obligations		461,720		596,408

Maturity of lease liabilities:				Weighted Average Remaining Lease Term
2023	$	532,491		2.1 years
2024		382,758		1.7 years
2025		259,528		0.8 years
2026		3,139		0.9 years
Total lease payments		1,177,916
Less imputed interest		(111,042	)
Total discounted lease payments		1,066,874
Current portion of lease obligations		605,154
Non-current portion of lease obligations		461,720

	Lease Term Till	Option to Extend	Incremental Borrowing Rate
Aircraft	April 2024	Executed		11.2	%
Office Building	September 2025	No		6.1	%
Printer	November 2026	No		10.8	%

[10]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

The Company’s total lease expenditures for the period ended March 31, 2023 was $177,230 (2022 - $260,205).

7.  Commitments

The table below is the non-lease operating cost components associated with the costs of the building lease. 

For the fiscal period ending December 31,	Office Premises
2023	$	168,941
2024		225,255
2025		168,941
		563,137

8.  Common shares

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

	For the three months ended March 31,
	2023				2022
	# of shares		$ amount		# of shares		$ amount
As at the beginning of the period		68,949,109	$	96,423,648		65,250,710	$	95,779,352
Private placement, net of issuance costs		8,510,000		1,622,057		-		-
Employee Share Purchase Plan		87,849		17,458		51,262		28,837
Restricted Stock Units		52,173		14,473		-		-
As at the end of the period		77,599,131		98,077,636		65,301,972		95,808,189

On December 22, 2022 the Company announced a multi-tranche private placement (the “Private Placement”) at $0.195 per share.  At December 22, 2022 the Company issued 1,148,282 common shares for gross proceeds of $223,915 in the first tranche, less issuance costs of $7,732.  On January 25, 2023, the Company closed the Private Placement by issuing an additional 8,510,000 common shares, at $0.195 per common share, for additional aggregate gross proceeds of approximately $1,659,450, less issuance costs of $37,393.

[11]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

9.  Loss per share

	For the three months ended March 31,
	2023			2022
Net loss for the period	$	(1,614,647	)	$	(1,840,868	)
Weighted average number of shares outstanding for the period:
Basic		76,452,260			65,282,940
Diluted		76,452,260			65,282,940
Net loss per share – Basic	$	(0.02	)	$	(0.03	)
Net loss per share – Diluted	$	(0.02	)	$	(0.03	)

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

10.  Share based compensation

The Company has an equity compensation program in place for its executives, employees and directors. Executives and employees are given equity compensation grants that vest based on a recipient’s continued employment. The Company’s stock-based compensation awards outstanding as at March 31, 2023, include stock options, restricted stock units (“RSUs”), deferred share units (“DSUs”) and the employee share purchase plan (“ESP Plan”).  The following tables provide information about stock option, RSU, DSU, and ESP Plan activity.

	For the three months ended March 31,
	2023		2022
Stock Option Expense	$	46,250	$	7,500
Restricted Stock Units		18,388		36,285
Employee Share Purchase Plan		7,604		12,731
Total stock based compensation expense		72,242		56,516

[12]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

Stock Options:

The following is a summary of stock options which are outstanding as at March 31, 2023.

Exercise price per share	# of options outstanding	# of options exercisable	Average remaining life (in years)
$0.174	69,200	69,200	4.6
$0.216	2,005,200	55,200	4.8
$0.260	52,650	52,650	4.8
$0.264	177,200	177,200	4.8
$0.440	21,360	21,360	3.3
$0.510	16,000	16,000	2.5
$0.520	100,000	100,000	1.3
$0.550	30,000	30,000	1.8
$0.590	150,000	150,000	0.6
$0.620	18,050	18,050	3.8
$0.680	14,750	14,750	3.5
$0.680	17,500	17,500	4.2
$0.720	24,460	24,460	4.2
	2,696,370	746,370	4.3

[13]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

A continuity of the number of stock options which are outstanding at the end of the current period and as at the prior fiscal year ended December 31, 2022 are as follows:

	For the three months ended						For the year ended
	March 31, 2023						December 31, 2022
				weighted						Weighted
	# of stock			average			# of stock			Average
	Options			exercise price			Options			exercise price
Options outstanding, start of the period		461,320		$	0.51			358,660		$	0.56
Granted		2,335,050		$	0.22			134,060		$	0.40
Forfeited		(100,000	)	$	(0.22	)		-			-
Cancelled		-			-			(31,400	)	$	(0.51	)
Options outstanding, end of the period		2,696,370		$	0.27			461,320		$	0.51
Options exercisable, end of the period		746,370		$	0.41			461,320		$	0.51

Stock options granted generally expire, if unexercised, five years from the date granted and entitlement to exercise them generally vests at a rate as determined by the Board of Directors.

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

	For the three months ended			For the year ended
For the year ended	March 31, 2023			December 31, 2022
Expected dividends paid per common share	Nil			Nil
Expected life in years		5.0			5.0
Weighted average expected volatility in the price of common shares		75	%		75	%
Weighted average risk free interest rate		3.23	%		3.05	%
Weighted average fair market value per share at grant date	$	0.22		$	0.40

On January 6, 2023 the Company announced the grant of 2,050,000 incentive stock options at a price of $0.216 to employees, officers and directors. These incentive stock options will vest upon receipt of cash for SFD^® services performed:  1/3 upon collection of US$6.5 million, 1/3 upon the collection of the next US$7.0 million and the final 1/3 upon collection of an additional US$7.5 million. 

[14]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

Deferred Stock Units:

A continuity of the number of DSUs which are outstanding at the end of the current period and as at the prior fiscal years ended December 31, 2022 are as follows:

	For the three months ended		For the year ended
	March 31, 2023		December 31, 2022
Opening balance		37,354		37,354
Granted		-		-
Closing balance		37,354		37,354

The DSUs plan is a long-term incentive plan that permits the grant of DSUs to qualified directors.  DSUs granted under the DSUs plan are to be settled at the retirement, resignation or death of the Board member holding the DSUs.

Restricted Stock Units:

RSUs entitle the holder to receive, at the option of the Company, either the underlying number of shares of the Company’s Common Stock upon vesting of such units or a cash payment equal to the value of the underlying shares. The RSUs vest at a rate of one-third at the end of each of the first three years following the date of grant.  In the third quarter of 2022, the Company settled the RSUs that vested with shares and cash, and intends to continue to settle the RSUs in shares and cash.    

A continuity of the number of RSUs, including fair value (“FV”) which are outstanding at the end of the current period and as the end of the prior fiscal year ended December 31, 2022 are as follows:

	For the three months ended						For the year ended
	March 31, 2023						December 31, 2022
	# of RSUs			FV/Unit			# of RSUs			FV/Unit
RSUs outstanding, start of the period		348,334		$	0.21			696,666		$	0.61
Granted		-			-			-			-
Common shares issued		(52,173	)	$	(0.28	)		(212,304	)	$	(0.58	)
Settlement of payroll withholdings		507		$	0.42			(136,028	)	$	(0.58	)
RSUs outstanding, end of the period		296,668		$	0.18			348,334		$	0.21

Employee Share Purchase Plan:

The ESP Plan allows employees and other individuals determined by the Board to be eligible to contribute a minimum of 1% and a maximum of 10% of their earnings to the plan for the purchase of common shares in the capital of the Company, of which the Company will make an equal contribution. Common shares contributed by the Company may be issued from treasury or acquired through the facilities of the TSX.  During 2023 and 2022 the Company has elected to issue common shares from treasury.

[15]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

A continuity of the number of commons shares under the ESP Plan which are outstanding at the end of the current period and as at the prior fiscal year ended December 31, 2022 are as follows:

	For the three months ended				For the year ended
	March 31,2023				December 31, 2022
	# of shares		$ amount		# of shares		$ amount
Purchased by employees		49,604	$	9,854		105,221	$	49,738
Matched by the Company		38,245		7,604		83,412		39,389
Bonus match by the Company		-		-		-		-
Total common shares issued		87,849		17,458		188,633		89,127

11.  Financial instruments

Non-derivative financial instruments:

The Company’s non-derivative financial instruments consist of cash and cash equivalents, accounts receivable, deposits, accounts payables and accrued liabilities, long-term debt and lease obligations.  The carrying value of these financial instruments, excluding lease obligations and long-term debt, approximates their fair values due to their short terms to maturity. 

Credit Risk

Credit risk arises from the potential that the Company may incur a loss if counterparty to a financial instrument fails to meet its obligation in accordance with agreed terms. The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The carrying value of cash and cash equivalents and accounts receivable reflects management’s assessment of maximum exposure to credit risk.  At March 31, 2023, cash and cash equivalents included balances in bank accounts placed with financial institutions with investment grade credit ratings.  The Company manages Accounts Receivable credit risk by requiring advance payments before entering into certain contract milestones and when possible, accounts receivable insurance.

Foreign Exchange Risk

The Company is exposed to foreign exchange risk in relation to its holding of significant US$ balances in cash and cash equivalents, deposits, accounts payables, accrued liabilities, and lease obligations, and entering into United States dollar revenue contracts.  The Company does not currently enter into hedging contracts, but to mitigate exposure to fluctuations in foreign exchange the Company uses strategies to reduce the volatility of United States Dollar assets including converting excess United States dollars to Canadian dollars.  As at March 31, 2023, the Company held net U.S. dollar liabilities totaling US$137,360.  Accordingly, a hypothetical 10% change in the value of one United States dollar expressed in Canadian dollars as at March 31, 2023 would have had an approximately $18,574 effect on the unrealized foreign exchange gain or loss for the period.  As at March 31, 2022, the Company held net U.S. dollar assets totaling US$803,028.  Accordingly, a hypothetical 10% change in the value of one United States dollar expressed in Canadian dollars as at March 31, 2022 would have had an approximately $100,234 effect on the unrealized foreign exchange gain or loss for the period.

[16]

NXT ENERGY SOLUTIONS INC.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

As at and for the period ended March 31, 2023

(Expressed in Canadian dollars unless otherwise stated)

12.  Change in non-cash operating working capital

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

	For the three months ended March 31,
	2023			2022
Accounts receivable	$	(34,699	)	$	264,760
Prepaid expenses and deposits		(5,953	)		9,260
Accounts payable and accrued liabilities		(222,251	)		139,247
		(262,903	)		413,267

13.  Geographic information

The Company generates revenue from its SFD^® survey system that enables the clients to focus their exploration decisions concerning land commitments, data acquisition expenditures and prospect prioritization on areas with the greatest potential. NXT conducts all of its survey operations from its head office in Canada, and occasionally maintains administrative offices in foreign locations if and when needed.  Revenue fluctuations are a normal part of SFD^® survey system sales and can vary significantly year-over-year.  There were no SFD^® revenues in the quarters ended March 31, 2023 and 2022.

14.  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.  Accounts payable and accrued liabilities includes a total of $41,434 ($76,843 as at December 31, 2022) payable to this law firm.  

Accounts payable and accrued liabilities includes $156,731 ($162,500 as at December 31, 2022) for Board of Director’s fees.

	For the three months ended March 31,
	2023		2022
Legal Fees	$	32,678	$	10,965

[17]

EX-99.2

EXHIBIT 99.2

NXT ENERGY SOLUTIONS INC.

Management’s Discussion and Analysis

For the three months ended

March 31, 2023

Management’s Discussion and Analysis

This management’s discussion and analysis (“MD&A”) was prepared by management of NXT Energy Solutions Inc. (“NXT”, “we”, “us”, “our” or the “Company”) based on information available as at May 15, 2023 and unless otherwise stated, has been approved by the Board of Directors of the Company (the “Board”), and should be reviewed in conjunction with the unaudited consolidated interim financial statements and related notes for the period ended March 31, 2023 (the “unaudited condensed consolidated interim financial statements”). This MD&A covers the unaudited three month period ended March 31, 2023, with comparative amounts for the unaudited three month period ended March 31, 2022.

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

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

Advisories

Forward-looking Information

Certain statements contained in this MD&A constitute “forward-looking information” within the meaning of applicable securities laws. These statements typically contain words such as “anticipate,” “believe,” “would,” “could,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “continue” and similar words and phrases suggesting future outcomes or an outlook. Forward-looking statements in this document include, but are not limited to:

· payment of the Consideration (as defined below), and the satisfaction of the conditions thereto (including with respect to cash balances, receipt of funds, and the execution and completion of contracts);

· the development, commercialization, and protection of the SFD^® technology for geothermal resource exploration;

· the extent to which expanding the Company’s scope of business to include exploring for both hydrocarbon and geothermal resources is anticipated to result in an expansion of its scope of revenue sources;

· the Company’s pursuit of opportunities to secure new revenue contracts;

· estimates related to our future financial position and liquidity including certain contractual obligations; and

· general business strategies and objectives.

Such 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 develop and market our SFD^® technology and services to current and new customers;

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

· our ability to obtain all permits and approvals required;

NXT Energy Solutions Inc.	page | 2
MD&A for the three months ended March 31, 2023

· our ability to obtain financing on acceptable terms;

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

· foreign currency exchange and interest rates;

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

· approval of phase 2 of the NRC IRAP project.

Although NXT believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on them as NXT can give no assurance that such expectations will prove to be correct. Forward-looking information is based on expectations, estimates, and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated by NXT and are described in the forward-looking information. Material risks and uncertainties include, but are not limited to:

· the ability of management to execute its business plan, including their ability to secure new revenue contracts;

· health, safety, and the environment;

· our ability to develop and commercialize the geothermal technology;

· our ability to service existing debt;

· our ability to protect and maintain our intellectual property (“IP”) and rights to our SFD^® technology;

· our reliance on a limited number of key personnel;

· our reliance on a limited number of aircraft;

· our reliance on a limited number of clients;

· counterparty credit risk;

· foreign currency and interest rate fluctuations;

· the likelihood that the Company’s ICFR (as defined below) will prevent or detect material misstatements in our unaudited condensed consolidated interim financial statements;

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

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

For more information relating to risks, see the section titled “Discussion of Operations – Risk and Uncertainties” in this MD&A and the section titled “Risk Factors” in NXT’s most recently filed Annual Information Form. Except as required by applicable securities law, NXT undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

Financial outlooks are provided for the purpose of understanding the Company’s accounting practices and liquidity position, and the information may not be appropriate for other purposes.

Non-GAAP Measures

NXT’s accompanying unaudited condensed consolidated interim financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The Company has consistently used US GAAP for the eight most recently completed quarters. 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 being presented by other entities. Net working capital is the net result of the difference between current assets and current liabilities, and can be used by investors and management to assess liquidity at a particular point in time. See “Liquidity and Capital Resources – Net Working Capital” for further information.

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MD&A for the three months ended March 31, 2023

Description of the Business

NXT Energy Solutions Inc. is a Calgary-based technology company whose proprietary and patented Stress Field Detection (“SFD^®”) survey system utilizes quantum-scale sensors to detect gravity field perturbations in an airborne survey method, which can be used both onshore and offshore to remotely identify traps and reservoirs with hydrocarbon and geothermal exploration potential. The SFD^® survey system enables NXT’s clients to focus their exploration decisions concerning land commitments, data acquisition expenditures, and prospect prioritization on areas with the greatest potential. SFD^® is environmentally friendly and unaffected by ground security issues or difficult terrain and is the registered trademark of NXT. NXT provides its clients with an effective and reliable method to reduce time, costs, and risks related to exploration.

Financial and Operational Highlights

Key financial and operational highlights for Q1-23 are summarized below:

· Private Placement (defined below) contributed $1.62 million of cash;

· In Q1-23 the Company announced the grant of 2,050,000 incentive stock options at a price of $0.216 to employees, officers and directors. These incentive stock options will vest upon receipt of cash for SFD^® services performed: 1/3 upon collection of US$6.5 million, 1/3 upon the collection of the next US$7.0 million and the final 1/3 upon collection of an additional US$7.5 million;

· In January, the Board of Directors formally empowered a Management Committee of the Board (“Management Committee”) to assume the CEO’s duties;

· The Management Committee is working closely with senior management to bring to fruition near-term potential contracts in Africa and Asia Minor;

· cash at March 31, 2023 was $0.47 million;

· net working capital was $(1.17) million at March 31, 2023;

· the Company recorded SFD^®-related revenues of $nil;

· a net loss of $1.61 million was recorded for Q1-23, including stock-based compensation expense (“SBCE”) and amortization expense of $0.51 million;

· net loss per common share for Q1-23 was $0.02 basic and $0.02 diluted;

· cash flow used in operating activities was $1.40 million during Q1-23; and

· general and administrative (“G&A”) expenses decreased by $0.05 million (6%) in Q1-23 as compared to Q1-22.

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MD&A for the three months ended March 31, 2023

Discussion of Operations

Management Committee

Given the recent passing of Mr. George Liszicasz, former Chairman, President and Chief Executive Officer (“CEO”), in Q1-23 the Board of Directors has formally empowered a Management Committee of the Board to assume the CEO’s duties. The Management Committee, which meets several times weekly with NXT management, consists of Lead Director Charles Selby and Directors Gerry Sheehan and Bruce G. Wilcox, who collectively possess senior operating and management experience in the Energy and Capital Markets Industries. The Management Committee will undertake its executive role, until further notice, in close cooperation with NXT’s qualified management team that will continue to manufacture SFD^® systems, perform SFD^® surveys, and provide vital interpretation as contracts are finalized.

Acquisition of the Geothermal Right

The Company acquired the SFD^® technology rights for geothermal resources (“Geothermal Right”) from Mr. George Liszicasz, the former President and CEO of NXT on April 18, 2021. The consideration deliverable by the Company in connection with the acquisition of the Geothermal Right is set forth below (the “Consideration”):

1.	US$40,000 (CDN$50,310) signature payment, which became due immediately and was paid on April 22, 2021;
2.	CDN$15,000 signature milestone payment paid in August 2021;
3.	300,000 common shares, which were issued in December 2021;
4.	US$200,000 milestone payment, which will become due in the event that the Company’s cash balance exceeds CDN$5,000,000 due to receipt of specifically defined funds from operations; and
5.	US$250,000 milestone payment, which will become due in the event that the Company executes and completes and receives full payment for a SFD® contract valued at US$10,000,000 or greater, provided such contract is entered into and completed and payment of at least US$5,000,000 is received by April 18, 2023. This milestone expired as of April 18, 2023.

As of March 31, 2023, the Company has recognized $275,610 for the acquisition of the Geothermal Right, which is the combination of the US$40,000 (CDN$50,310) signature payment, the CDN$15,000 signature milestone payment, the value of the 300,000 common shares of $207,300 and other costs of $3,000. The cost of the remaining milestone will be recognized when it is deemed probable that the milestone will be achieved by a special committee of the Board of Directors, comprised entirely of independent directors. The Board of Directors delegated authority to the special committee to determine when the milestones have been achieved. As of March 31, 2023 the remaining milestone is still deemed not probable of being achieved.

Geothermal Right Development Update

Progress continues with respect to the development of the SFD-GT geothermal sensor family. The objective of this first project was to test, identify, and analyze the desired elements of the SFD^® geothermal sensor response over known geothermal areas with the ultimate goal of providing a green upstream geophysical service for advancing renewable power initiatives in Canada and abroad. The agreed project work was completed in November 2021 with total funding of $50,000 from the National Research Council of Canada Industrial Research Assistance Program (“NRC IRAP”). During Q1-23, the Company submitted a proposal for up to approximately $200,000 to NRC IRAP for a funding and research plan for the next phase to support the research and development of the SFD^® technology for geothermal applications.

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MD&A for the three months ended March 31, 2023

Patents

In Q1-22, NXT announced its patent application in Brazil has been allowed. As of the date of this MD&A, NXT has been granted SFD^® patents in Brazil (February 2022), India (July 2021), Russia (January 2017), Japan (July 2017), Canada (August 2017), Mexico (September 2017), the United States (two patents were granted in November 2017 and September 2018, respectively), China (April 2018), and Europe (January 2020). In total, NXT has obtained SFD^® patents or received patent allowances in 46 countries. These patents protect our proprietary SFD^® technology and serve as independent third-party recognition of our technological invention in terms of practical applicability, conceptual novelty, and knowledge advancement.

Summary of Operating Results

	Q1-23			Q1-22
SFD®-related revenue	$	-		$	-
Expenses:
SFD®-related costs, net		301,634			437,282
General and administrative expenses		861,354			912,550
Amortization		439,868			442,437
		1,602,856			1,792,269
Other Expenses (income):
Interest expense, net		9,754			8,188
Foreign exchange loss (gain)		(5,241	)		20,265
Intellectual property and other		7,278			20,146
		11,791			48,599
Loss before income taxes		(1,614,647	)		(1,840,868	)
Income tax expense		-			-
Net loss and comprehensive loss		(1,614,647	)		(1,840,868	)
Net loss per share – basic	$	(0.02	)	$	(0.03	)
Net loss per share – diluted	$	(0.02	)	$	(0.03	)

Quarterly operating results. Net loss for Q1-23 compared to Q1-22 decreased by $226,221, or $0.01 per share-basic.  There were no SFD^®-related revenues in either quarter. SFD^®-related costs, net, were $135,648 lower due to the Phase V maintenance preformed in Q1-22 and lower lease costs. G&A expenses decreased by $51,196, compared to Q1-22, due primarily to one less headcount.  Interest expense, net, increased by $1,566 in Q1-23 versus Q1-22 due to the Company not investing in short-term investments during Q1-23.  The CDN$ to US$ exchange rate decreased between December 31 and March 31 in both 2022 and 2023.  There was an exchange gain in Q1-23 as the Company had a net US$ liability.  In Q1-22 the Company had a net US$ asset, thereby resulting in an exchange loss.  IP and other expenses related mostly to costs associated with maintaining and renewing certain SFD^® patents.

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MD&A for the three months ended March 31, 2023

SFD^®-Related Costs, Net

SFD®-Related Costs	Q1-23		Q1-22		Net change
Aircraft lease costs	$	91,040	$	121,471	$	(30,431	)
Aircraft operations		210,089		315,211		(105,122	)
Survey projects		505		600		(95	)
Total SFD®-related costs, net		301,634		437,282		(135,648	)

SFD^®-related costs include aircraft charter costs (net of charter hire reimbursements), lease expenses, and aircraft operation and maintenance costs. In Q1-23, SFD^®-related costs were lower compared to Q1-22 by $135,648 due to the Phase V maintenance done on the aircraft in Q1-22 to add 300 flight hours, and lower monthly lease costs.

The aircraft is available for charter to third parties through our aircraft manager when it is not being used by NXT.  Any charter hire reimbursements received are used to offset aircraft costs.  There were no charter hire reimbursements during Q1-23 or Q1-22.

The Company extended the term of its aircraft leasing agreement effective in Q2-22 for a period of 24 months with payments of approximately US$22,500 (CDN$28,675) per month, or US$270,000 (CDN$344,099) per year. 

Should NXT want to repurchase the aircraft at the end of the extended term, the purchase price will be US$1.21 million.  

General and Administrative Expenses

G&A Expenses	Q1-23		Q1-22		Net change			%
Salaries, benefits and consulting charges	$	383,035	$	458,102	$	(75,067	)		(16	)
Board and professional fees, public company costs		199,463		181,954		17,509			10
Premises and administrative overhead		203,678		213,029		(9,351	)		(4	)
Business development		2,936		2,949		(13	)		(0	)
Stock-based compensation		72,242		56,516		15,726			28
Total G&A Expenses		861,354		912,550		(51,196	)		(6	)

G&A expenses decreased $51,196, or 6%, in Q1-23 compared to Q1-22 for the following reasons: 

· salaries, benefits, and consulting charges decreased $75,067, or 16%, as the Company had one less headcount for most of Q1-23;

· board and professional fees and public company costs increased $17,509, or 10%, due to increased professional and insurance fees;

· premises and administrative overhead costs decreased $9,351, or 4%, as the Company surrendered office space at the end of Q1-22 thereby lowering rent costs; and

· SBCE’s were higher in Q1-23 vs Q1-22 by $15,726 or 28% as more director fees were reimbursed in options in Q1-23 versus Q1-22. Please see the next section “Discussion of Operations – General and Administrative Expenses – Stock-based Compensation Expenses” for further information on the SBCE.

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MD&A for the three months ended March 31, 2023

Stock-based Compensation Expenses

Stock-based Compensation Expenses	Q1-23		Q1-22		Net change			% change
Stock Option Expense	$	46,250	$	7,500	$	38,750			517
Deferred Share Units		-		-		-			0
Restricted Stock Units		18,388		36,285		(17,897	)		(49	)
ESP Plan		7,604		12,731		(5,127	)		(40	)
Total SBCE		72,242		56,516		15,726			28

SBCE varies in any given quarter or year as it is a function of several factors, including the number of units of each type of stock-based compensation plan issued in the period and the amortization term based on the number of years for full vesting of the units. 

SBCE is also a function of periodic changes in the inputs used in the Black-Scholes option valuation model, such as volatility in NXT’s trailing common share price. For cash-settled stock-based compensation awards variability will occur based on changes to observable prices. 

Stock options granted generally expire, if unexercised, five years from the date granted and entitlement to exercise them generally vests at a rate as determined by the Board of Directors. 

The deferred share unit (“DSUs”) plan (the “DSU Plan”) is a long-term incentive plan that permits the grant of DSUs to qualified directors. DSUs granted under the DSU Plan are to be settled at the retirement, resignation, or death of the Board member holding the DSUs. 

Restricted Share Units (“RSUs”) entitle the holder to receive, at the option of the Company, either the underlying number of shares of the Company’s common shares upon vesting of such RSUs or a cash payment equal to the value of the underlying shares. The RSUs vest at a rate of one-third at the end of each of the first three years following the date of grant. The Company last settled the RSU vesting with common shares and cash, and intends to continue to settle the RSUs in common shares and cash. 

The ESP Plan allows employees and other individuals determined by the Board to be eligible to contribute a minimum of 1% and a maximum of 10% of their earnings to the plan for the purchase of common shares in the capital of the Company, of which the Company will make an equal contribution. Common shares contributed by the Company may be issued from treasury or acquired through the facilities of the Toronto Stock Exchange. During 2022 and 2023 the Company has elected to issue common shares from treasury.

SBCE in Q1-23 was higher compared to Q1-22 by $15,726 or 28%. The Stock Option expense was higher as options were granted in lieu of cash payments.  The RSU expense was lower as the Company’s share price was lower at March 31, 2023 versus March 31, 2022. In addition there was lower ESP plan participation during Q1-23 due to one less headcount and salary deferrals. 

On January 6, 2023 the Company granted 2,050,000 incentive stock options at a price of $0.216 to employees, officers and directors. These incentive stock options will vest upon receipt of cash for SFD^® services performed:  1/3 upon collection of US$6.5 million, 1/3 upon the collection of the next US$7.0 million and the final 1/3 upon collection of an additional US$7.5 million. 

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MD&A for the three months ended March 31, 2023

Amortization

Amortization	Q1-23		Q1-22		Net change			%
Property and equipment	$	15,240	$	17,809	$	(2,569	)		(14	)
Intellectual property		424,628		424,628		-			0
Total Amortization		439,868		442,437		(2,569	)		(1	)

Property and equipment and related depreciation expense. Property and equipment depreciation was lower in Q1-23 compared to Q1-22 as the Company did not acquire new assets in the periods.  Depreciation also decreases each year as the Company uses the declining balance method of depreciation, thereby having the effect of lowering depreciation each year on existing assets.

Intellectual property and related amortization expense. NXT acquired specific rights to utilize the proprietary SFD^® technology in global hydrocarbon exploration applications from the inventor of the SFD^® technology, NXT’s former Chairman, President and CEO, on August 31, 2015. The value attributed to the acquired IP assets was $25.3 million. The IP assets are being amortized on a straight-line basis over a 15-year period (future amortization expense of $1,685,000 per year) and are also being subject to ongoing assessment of potential indicators of impairment of the recorded net book value. No impairments were recognized in Q1-23 or Q1-22. 

As discussed in the section “Discussion of Operations – Acquisition of the Geothermal Right,” the Company acquired the SFD^® technology for the Geothermal Right from NXT’s former Chairman, President and CEO on April 18, 2021. The Geothermal Right is being amortized on a straight line basis over its estimated useful life of 20 years. The annual amortization expense expected to be recognized is approximately $13,781 per year for a five-year aggregate total of $68,902.

Other Expenses (Income)

Other Expenses	Q1-23			Q1-22		Net change			%
Interest expense, net	$	9,754		$	8,188	$	1,566			19
Foreign exchange loss (gain)		(5,241	)		20,265		(25,506	)		(126	)
Intellectual property and other		36,133			8,224		27,909			>100
Loss on disposal of assets, lease modifications		-			11,922		(11,922	)		(100	)
Total Other Expenses, net		40,646			48,599		(7,953	)		(16	)

Interest expense, net. This category of other expenses includes interest income earned on short-term investments netted, by interest expense from the financial liability related to the aircraft lease (up to February 2022) and long-term debt. Interest expense increased in Q1-23 versus Q1-22 due to no short-term investments during Q1-23 offset by the cessation of the financial liability in Q1-22, and amortization of the HASCAP Loan principle.

Foreign exchange loss (gain). This category of other expenses includes losses and gains caused by changes in the relative currency exchange values of US$ and CDN$. The Company held a net US$ liability at March 31, 2023 and net assets in US$ at March 31, 2022, which included accounts receivable, cash and cash equivalents, short-term investments, US$ lease obligations, and the security deposit for the aircraft, all of which have an effect on the unrealized foreign exchange gain and loss. For Q1-23 the exchange gain was the result of the lower CDN$ to US$ exchange rate between December 31, 2022 and March 31, 2023 and the Company having a net liability in US$.  In Q1-22 the CDN$ to US$ was also lower between December 31, 2021 and March 31, 2022, but the Company had a net US$ asset.  Also the rate of change was higher than the current period.

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MD&A for the three months ended March 31, 2023

The Company does not currently enter into hedging contracts, but does however use alternative strategies to reduce the volatility of US dollar assets including converting excess US dollars to CDN dollars.

IP and other. This category of other expenses primarily includes costs related to IP filings and research & development activity related to the SFD^® technology.

In Q1-23 and Q1-22, the Company’s IP and other expenses were associated with periodic patent maintenance and renewal fees required during these time periods.

Loss on disposal of assets & lease modifications. In Q1-22, the Company surrendered 826 square feet of office space. As a result of the space surrender, the Company recorded a loss on disposal of leasehold improvement assets and lease modifications.

Income Tax Expense

There was no income tax expense in Q1-23 or Q1-22.  

Competition

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

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

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

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

NXT Energy Solutions Inc.	page | 10
MD&A for the three months ended March 31, 2023

Risk and Uncertainties

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

Development, Commercialization, and Protection of the Geothermal Right

With the acquisition of the Geothermal Right, the Company will continue to refine and develop the SFD^® survey system to commercialize the Geothermal Right. This development requires substantial time and resources, and continued government assistance is not guaranteed. Furthermore, even if resources are available, there can be no assurance that the Company will be commercially or technically successful in enhancing the technology. If we are unable to develop and commercialize the geothermal applications of SFD^® technologies, or adapt to evolving industry standards and demands, these could have a material adverse effect on our business, financial condition, and results of operations.

Debt Service

NXT may finance a significant portion of its operations through debt. Amounts paid in respect of interest and principal on debt incurred by NXT may impair NXT’s ability to satisfy its other obligations. Variations in interest rates and scheduled principal repayments could result in significant changes in the amount required to be applied to debt service before payment by NXT of its debt obligations. Lenders may be provided with security over substantially all of the assets of NXT. If NXT becomes unable to pay its debt service charges or otherwise commits an event of default, a lender can foreclose on or sell the assets of NXT.

Credit Risk

Credit risk arises from the potential that the Company may incur a loss if counterparty to a financial instrument fails to meet its obligation in accordance with agreed terms. The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The carrying value of cash and cash equivalents and accounts receivable reflects management’s assessment of maximum exposure to credit risk. 

At March 31, 2023, cash and cash equivalents included balances in bank accounts placed with financial institutions with investment grade credit ratings.  The Company manages Accounts Receivable credit risk by requiring advance payments before entering into certain contract milestones and when possible, accounts receivable insurance.

Foreign Exchange Risk

The Company is exposed to foreign exchange risk in relation to its holding of significant US$ balances in cash and cash equivalents, deposits, accounts payables, accrued liabilities, and lease obligations, and entering into United States dollar revenue contracts.  The Company does not currently enter into hedging contracts, but to mitigate exposure to fluctuations in foreign exchange the Company uses strategies to reduce the volatility of United States Dollar assets including converting excess United States dollars to Canadian dollars.  As at March 31, 2023, the Company held net U.S. dollar liabilities totaling US$137,360.  Accordingly, a hypothetical 10% change in the value of one United States dollar expressed in Canadian dollars as at March 31, 2023 would have had an approximately $18,574 effect on the unrealized foreign exchange gain or loss for the period.  As at March 31, 2022, the Company held net U.S. dollar assets totaling US$803,028.  Accordingly, a hypothetical 10% change in the value of one United States dollar expressed in Canadian dollars as at March 31, 2022 would have had an approximately $100,234 effect on the unrealized foreign exchange gain or loss for the period.

NXT Energy Solutions Inc.	page | 11
MD&A for the three months ended March 31, 2023

Interest Rates

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

Tax Rates

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

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

NXT Energy Solutions Inc.	page | 12
MD&A for the three months ended March 31, 2023

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:

	Q1-23			Q4-22			Q3-22			Q2-22
SFD®-related revenue	$	-		$	-		$	-		$	-
Net loss		(1,614,647	)		(1,469,549	)		(1,647,988	)		(1,774,671	)
Loss per share – basic	$	(0.02	)	$	(0.02	)	$	(0.03	)	$	(0.03	)
Loss per share – diluted	$	(0.02	)	$	(0.02	)	$	(0.03	)	$	(0.03	)
	Q1-22			Q4-21			Q3-21			Q2-21
SFD®-related revenue	$	-		$	(10,123	)	$	-		$	3,144,373
Net income (loss)		(1,840,868	)		(1,573,587	)		(1,434,442	)		1,531,522
Income (loss) per share – basic	$	(0.03	)	$	(0.02	)	$	(0.02	)	$	0.02
Income (loss) per share – diluted	$	(0.03	)	$	(0.02	)	$	(0.02	)	$	0.02

In Q1-23 the Company incurred lower SDF^®-related costs as there was no unplanned maintenance on the aircraft and had one less headcount. During Q4-22 costs were reduced primarily due to lower vacation and SBCE.  In Q3-22 the Company incurred lower SFD^®-related costs as the aircraft had early completed its required maintenance. In Q2-22 the Company recorded unrealized foreign exchange gains as the CDN$ weakened versus the US$. In Q1-22, the Company incurred maintenance fees on its aircraft to have it available for up to 300 flight hours. In Q4-21, the CEWS and the CERS programs were ended therefore increasing G&A expenses. In Q3-21, the Company recorded favourable exchange gains due to the strengthening of the US$. In Q2-21, revenue was recognized for a Pre-existing SFD^® Data Sale.  Excluding Q2-21, the Company incurred net losses primarily due to incurred SFD^®-related costs related to aircraft lease and aircraft maintenance costs, G&A expenses, and non-cash items like SBCE, which can be a significant expense in any given quarter. More specific details are provided below:

· in Q1-23, costs were reduced primarily due to lower headcount and maintenance costs;

· in Q4-22, costs were reduced primarily due to lower vacation and SBCE;

· in Q3-22, costs were reduced primarily due to lower SFD^®-related costs offset partially by higher business development costs;

· in Q2-22, the Company recorded unrealized foreign exchange gains as the CDN$ weakened versus the US$;

· in Q1-22, the Company incurred maintenance fees on the leased aircraft to have it available for up to 300 flight hours;

· in Q4-21, the Company received grants from the CEWS and CERS for only one month due to the termination of these programs;

· in Q3-21, the US$ strengthened vs the CDN$, which resulted in a $102,632 exchange gain; and

· in Q2-21, revenue was earned for the Pre-existing SFD^® Data Sale and costs were lower due to receipt of the CEWS and the CERS. Additionally there was no business development travel due to restrictions from the COVID-19 pandemic.

NXT Energy Solutions Inc.	page | 13
MD&A for the three months ended March 31, 2023

Liquidity and Capital Resources

Going Concern

The unaudited condensed consolidated interim financial statements for Q1-23 have been prepared on a going concern basis. The going concern basis of presentation assumes that NXT will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. 

The events described in the following paragraphs highlight that there is substantial doubt about NXT’s ability to continue as a going concern within one year after the date that these unaudited condensed consolidated interim financial statements have been issued.  The Company’s current cash position is not expected to be sufficient to meet the Company’s obligations and planned operations for a year beyond the date that these unaudited condensed consolidated interim financial statements have been issued.

The Company has deferred payment of operating costs, including payroll and other general and administrative costs.  Further financing options that may or may not be available to the Company include issuance of new equity, debentures or bank credit facilities.  The need for any of these options will be dependent on the timing of securing new SFD^® related revenues and obtaining financing on terms that are acceptable to both the Company and the financier.

NXT continues to develop its pipeline of opportunities to secure new revenue contracts.  However, the Company’s longer-term success remains dependent upon its ability to convert these opportunities into successful contracts, to continue to attract new client projects, expand its revenue base to a level sufficient to exceed fixed operating costs, and generate consistent positive cash flow from operations.  The occurrence and timing of these events cannot be predicted with sufficient certainty.

The unaudited condensed consolidated interim financial statements do not reflect adjustments that would be necessary if the going concern basis was not appropriate. If the going concern basis was not appropriate for the unaudited condensed consolidated interim financial statements, then adjustments would be necessary in the carrying value of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. These adjustments could be material.

NXT’s cash and cash equivalents at March 31, 2023 totaled $0.47 million. Net working capital totaled$(1.17) million. See the information in the section “Liquidity and Capital Resources – Net Working Capital” for further information.

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

The Company does not have provisions in its leases, contracts, or other arrangements that would trigger additional funding requirements or early payments except that if the Company were to default on its office lease, the current month rent, plus the next three months, become immediately due. If the Company were to default on the aircraft lease, the Company would be required to deliver the aircraft back to the Lessor.

NXT Energy Solutions Inc.	page | 14
MD&A for the three months ended March 31, 2023

Net Working Capital (Non-GAAP Measure)

Net Working Capital	March 31, 2023			December 31, 2022			Net Change		%
Current assets (current liabilities)
Cash and cash equivalents	$	467,539		$	263,437		$	204,102		77
Accounts receivable		91,764			57,065			34,699		61
Prepaid expenses and deposits		42,110			36,157			5,953		16
Accounts payable and accrued liabilities		(1,059,385	)		(1,276,236	)		216,851		17
Current portion of long-term debt		(111,111	)		(111,111	)		-		-
Current portion of lease obligation		(605,154	)		(650,315	)		45,161		7
Total Net Working Capital		(1,174,237	)		(1,681,003	)		506,766		30

NXT had net working capital of $(1,174,237) as at March 31, 2023.

Net working capital at March 31, 2023 compared to December 31, 2022 increased by $506,766, or 30%, due to cash received from the Private Placement (defined below) offset by cash used in operating activities.  Accounts payable decreased due to annual timing of professional fees, the payment of several G&A deferred expenses, offset by additional payroll accruals.

Accounts Payable

Accounts Payable	March 31,  2023			December 31, 2022			Net Change			%
Trade accounts payable	$	(123,277	)	$	(270,956	)	$	147,679			55
Deferred advisor board payable		(25,354	)		(25,410	)		56			0
Accrued liabilities		(201,025	)		(357,457	)		156,432			44
Accrued directors fees payable		(156,731	)		(162,500	)		5,769			4
Salaries payable		(450,360	)		(363,594	)		(86,766	)		(24	)
Vacation pay accrued		(67,922	)		(62,413	)		(5,509	)		(9	)
RSU and ESP Plan liability		(34,716	)		(33,906	)		(810	)		(2	)
Total accounts payable		(1,059,385	)		(1,276,236	)		216,851			17

Accounts payable decreased by $216,851 or 17%, as at March 31, 2023 compared to December 31, 2022 for the following reasons:

· trade accounts payable decreased by $147,679, or 55%, due to the Company paying some deferred payables and timing of payables at the stated dates;

· accrued liabilities decreased by $156,432, or 44%, due to timing of payments of annual professional fees;

· accrued directors fees payable decreased by $5,769, or 4%, as cash payment of directors’ fees were deferred, but offset by some directors taking their fees in the form of options;

· salaries payable increased by $86,766, or 24%, as the Company continued its salary deferral program; and

· vacation pay accrued increased by $5,509, or 9%, timing of vacations that are usually taken in the summer months.

NXT Energy Solutions Inc.	page | 15
MD&A for the three months ended March 31, 2023

Cash Flow

Cash Flow - from / (used in)	Q1-23			Q1-22
Operating activities	$	(1,400,019	)	$	(913,141	)
Financing activities		1,604,133			(11,844	)
Investing activity		-			(150,272	)
Effect of foreign exchange changes on cash		(12	)		(13,877	)
Net source (use) of cash		204,102			(1,089,134	)
Cash and cash equivalents, start of period		263,437			2,257,855
Cash and cash equivalents, end of period		467,539			1,168,721
Cash and cash equivalents, end of period		467,539			1,168,721
Short-term investments, end of period		-			700,272
Total cash and short-term investments, end of period		467,539			1,868,993

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:

Operating Activities	Q1-23			Q1-22
Net loss for the period	$	(1,614,647	)	$	(1,840,868	)
Total non-cash expense and lease items		477,531			514,460
Operating activities before change in non-cash working capital balances		(1,137,116	)		(1,326,408	)
Change in non-cash working capital balances		(262,903	)		413,267
Total cash used in operating activities		(1,400,019	)		(913,141	)

Operating cash flow decreased by $486,878 in Q1-23 as compared to Q1-22 due to the receipt of payments for outstanding accounts receivable in Q1-22 of US$200,000 (CDN$252,415) and payments of several deferred costs in Q1-23. 

NXT Energy Solutions Inc.	page | 16
MD&A for the three months ended March 31, 2023

Financing Activities	Q1-23			Q1-22
Repayment of long-term debt	$	(27,778	)	$	-
Proceeds from the employee share purchase plan		9,854			16,106
Net proceeds from Private Placement		1,622,057			-
Repayment of financial liability		-			(27,950	)
Total cash from (used in) financing activities		1,604,133			(11,844	)

The Company began to repay its HASCAP Loan (as defined below) at the beginning of Q3-22. Proceeds were received from employee contributions under the ESP Plan, but at a lower rate due to the salary deferral.  The repayment of financial liability was for the sales and leaseback agreement on NXT’s aircraft which ended in Q1-22. 

In Q1-23 net proceeds from the Offering was $1,622,057.  Please see the sections “Private Placement” for a discussion on the Offering.

Investing Activity	Q1-23		Q1-22
Proceeds used in short-term investments	$	-	$	(150,272	)
Total Cash used in Investing Activity		-		(150,272	)

Changes in short-term investments were for investments in guaranteed investment certificates to fund operations and investing of excess short-term cash. Please see the section “Acquisition of the Geothermal Right” for a discussion on the Acquisition of intellectual property.

Contractual Obligations

Leases

The estimated minimum annual commitments for the Company’s lease components as at March 31, 2023 are listed in the following table:

Lease payment obligations:	Total		2023		2024		2025		2026
Office	$	853,680	$	256,104	$	341,472	$	256,104	$	-
Office operating costs		563,137		168,941		225,255		168,941		-
Aircraft lease1		311,679		273,818		37,861		-		-
Office equipment		12,556		2,568		3,424		3,424		3,140
Total		1,741,052		701,431		608,012		428,469		3,140

1. US$ payments have been converted to CDN$ at a rate of 1.35219.

NXT Energy Solutions Inc.	page | 17
MD&A for the three months ended March 31, 2023

Long-term Debt (HASCAP Loan)

On May 26, 2021, the Company received $1,000,000 from the BDC’s HASCAP Loan. The HASCAP Loan is a $1,000,000 non-revolving ten-year term credit facility with an interest rate of 4%. Repayment terms were interest only until May 26, 2022, and monthly principal plus interest payments for the remaining nine years. The HASCAP Loan is secured by a general security agreement and is guaranteed by BDC. 

Repayment of long-term debt principal and interest:
2023	109,444
2024	142,037
2025	137,593
2026	133,148
2027	128,704
2028 to 2031	406,204
Total principal and interest payments	1,057,130
Less interest	(149,723	)
Total principal remaining	907,407
Current portion of long-term debt	111,111
Non-current portion of long-term debt	796,296

Private Placement

On December 22, 2022 the Company announced a multi-tranche private placement (the “Private Placement”) at $0.195 per share.  At December 22, 2022 the Company issued 1,148,282 common shares for gross proceeds of $223,915 in the first tranche, less issuance costs of $7,732.  On January 25, 2023, the Company closed the Private Placement by issuing an additional 8,510,000 common shares, at $0.195 per common share, for additional aggregate gross proceeds of approximately $1,659,450, less issuance costs of $37,393.

The proceeds from Private Placement are being used to commence SFD^® surveys, and for G&A expenses.

Off-Balance Sheet Arrangements

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

NXT Energy Solutions Inc.	page | 18
MD&A for the three months ended March 31, 2023

Transactions with Related Parties

Related party fees incurred were as follows:

	Q1-23		Q1-22
Legal fees	$	32,678	$	10,965

One of the members of NXT’s Board is a partner in a law firm which provides legal advice to NXT.  Accounts payable and accrued liabilities includes a total of $41,434 ($76,843 as at December 31, 2022) payable to this law firm.  

Accounts payable and accrued liabilities includes $156,731 ($162,500 as at December 31, 2022) for the Board’s fees.

 Critical Accounting Estimates

In preparing the unaudited condensed consolidated interim financial statements, NXT is required to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues, and expenses since the determination of these items may be dependent on future events.  The Company uses the most current information available and exercises careful judgment in making these estimates and assumptions.  In the opinion of management, the unaudited condensed consolidated interim financial statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies.  The estimates and assumptions used are based upon management’s best estimate as at the date of the unaudited condensed consolidated interim financial statements.  Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period when determined.  Actual results may differ from those estimates.

Certain estimates and judgments have a material impact where the assumptions underlying these accounting estimates relate to matters that are highly uncertain at the time the estimate or judgment is made or are subjective. In 2023 and 2022, the estimates and judgments included the assessment of impairment indicators of intellectual property.

The Company reviews intellectual property for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company considers both internal and external factors when assessing for potential indicators of impairment of its intellectual property, including the consideration of historical and forecasted SFD^® related revenues, market capitalization, control premiums, and the SFD^® related revenue multiples compared to industry peers. When indicators of impairment exist, the Company first compares the total of the estimated undiscounted future cash flows or the estimated sale price to the carrying value of an asset. If the carrying value exceeds these amounts, an impairment loss is recognized for the excess of the carrying value over the estimated fair value of the intellectual property.

NXT Energy Solutions Inc.	page | 19
MD&A for the three months ended March 31, 2023

Changes in Accounting Policies

The unaudited condensed consolidated interim financial statements of NXT for Q1-23 have been prepared by management in accordance with US GAAP.  The Company has consistently used US GAAP for the eight most recently completed quarters.  The accounting policies applied are consistent with those outlined in NXT’s annual audited consolidated financial statements for the year ended December 31, 2022, available on NXT’s website at www.nxtenergy.com and on SEDAR at www.sedar.com.

Financial Instruments and Other Instruments

The Company’s non-derivative financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and lease obligations.  The carrying value of these financial instruments approximates their fair values due to their short terms to maturity.  NXT is not exposed to significant interest arising from these financial instruments, but is exposed to significant credit risk with accounts receivable.  For accounts receivable, where possible, NXT requests advance payments and utilizes risk mitigation products offered by entities such as Export Development Canada including, for example, insurance coverage of contract accounts receivable, guarantee support for contract performance bonds, and wrongful call insurance for such bonds.  

NXT is exposed to foreign exchange risk as a result of holding foreign denominated financial instruments.  Any unrealized foreign exchange gains and losses arising on such holdings are reflected in earnings at the end of each period.

As at March 31, 2023 and March 31, 2022, the Company held no derivative financial instruments.  For more information relating to risks, see the section titled “Liquidity and Capital Resources – Net Working Capital”.

Outstanding Share Capital

	May 15,  2023		March 31,  2023		December 31, 2022
Common Shares		77,653,870		77,599,131		68,949,109
Options		2,696,370		2,696,370		461,320
Deferred Share Units		37,354		37,354		37,354
Restricted Share Units		296,668		296,668		348,334
Total share capital and dilutive securities		80,684,262		80,629,523		69,796,117

NXT Energy Solutions Inc.	page | 20
MD&A for the three months ended March 31, 2023

 Current Director & Officer Share Capital

	May 15,  2023		March 31,  2023		December 31, 2022
Charles Selby 1		408,161		408,161		408,161
Gerry Sheehan 1		77,000		77,000		77,000
John Tilson 1		6,887,490		6,887,490		6,887,490
Bruce G. Wilcox 1		500,005		500,005		500,005
Eugene Woychyshyn 2		583,306		553,723		514,937
Total Director and Officer Share Capital		8,455,962		8,426,379		8,387,593

¹  Director of NXT 

²  Officer of NXT 

Disclosure Controls and Procedures (“DCPs”) and

 Internal Controls over Financial Reporting (“ICFR”)

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

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

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

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

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

· NXT does not have a sufficient level of staff with specialized expertise to adequately conduct separate preparation and a subsequent independent review of certain complex or highly judgmental accounting issues. NXT partially 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.

NXT Energy Solutions Inc.	page | 21
MD&A for the three months ended March 31, 2023

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. 

Given the small size of the Company’s finance team, 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 the engagement of external consultants and legal counsel as well.  

The Responsible Officers concluded that, as at March 31, 2023, its ICFR is not effective and as a result, its DCPs are not effective.  NXT reached this conclusion based upon its assessment that there is a more than remote likelihood that its ICFR will not prevent or detect material misstatements if they should exist in the Company’s unaudited condensed consolidated interim financial statements. The Responsible Officers continue to take certain actions to mitigate these material weaknesses including:

· the implementation of controls with regards to the review procedures surrounding its disclosure; and

· engagement of third party specialists.

In addition, the CFO engages subject matter consultants as the need arises.

There were no changes to the Company’s ICFR in Q1-23.

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

Additional Information

Additional information related to the Company, including the Company’s Annual Information Form and the Notice of Change of Auditor pursuant to National Instrument 51-202 (Part 4.11), is available on NXT’s website at www.nxtenergy.com and on SEDAR at www.sedar.com.

NXT Energy Solutions Inc.	page | 22
MD&A for the three months ended March 31, 2023

EX-99.4

EXHIBIT 99.4

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

We, Bruce G. Wilcox, Gerry Sheehan and Charles Selby, together Directors and members of the Management Committee of the Board of Directors of NXT Energy Solutions Inc., certify the following:

1.	Review: We 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 March 31, 2023.
2.	No misrepresentations: Based on our 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.
3.	Fair presentation: Based on our 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.
4.	Responsibility: The issuer’s other certifying officer and us are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and us 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 and us 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.

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5.3	N/A
6.	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 January 1, 2023 and ended on March 31, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: May 15, 2023

“/s/ Charles Selby”

Charles Selby

Lead Director and member of the Management Committee of the Board of Directors

“/s/ Bruce G. Wilcox”

Bruce G. Wilcox

Director and member of the Management Committee of the Board of Directors

“/s/ Gerry Sheehan”

Gerry Sheehan

Director and member of the Management Committee of the Board of Directors

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EX-99.5

EXHIBIT 99.5

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Eugene Woychyshyn, Chief Financial Officer, NXT Energy Solutions Inc., certify the following:

1.	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 March 31, 2023.
2.	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.
3.	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.
4.	Responsibility: The issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officers 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 officers 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	N/A
6.	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 January 1, 2023 and ended on March 31, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: May 15, 2023

“/s/ Eugene Woychyshyn”

Eugene Woychyshyn

Chief Financial Officer