NXT ENERGY SOLUTIONS INC
As at and for the three and six months ended June 30, 2009
NXT ENERGY SOLUTIONS INC. Consolidated Balance Sheets (Unaudited) (Expressed in Canadian dollars except share data) |
June 30, 2009 | December 31, 2008 | |||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ 3,893,087 | $ 146,065 | ||
Short term investments | 848,003 | 6,748,105 | ||
Accounts receivable [note 4] | 2,462,094 | 20,569 | ||
Prepaid expenses and other | 76,491 | 57,159 | ||
7,279,675 | 6,971,898 | |||
Oil and natural gas properties | 7,315 | 7,315 | ||
Property and equipment, net of accumulated depreciation and amortization | 660,284 | 621,396 | ||
$ 7,947,274 | $ 7,600,609 | |||
Liabilities and Shareholders' Equity | ||||
Current liabilities: | ||||
Trade payables | $ 482,181 | $ 359,535 | ||
Other accrued liabilities [note 3] | 824,471 | 256,624 | ||
Unearned revenue | - | - | ||
Current portion of capital lease obligation | 10,684 | 10,684 | ||
Current portion of asset retirement obligation [note 5] | 20,000 | 20,000 | ||
1,337,336 | 646,843 | |||
Long term liabilities: | ||||
Capital lease obligation | 20,907 | 24,811 | ||
Asset retirement obligation [note 5] | 30,447 | 28,997 | ||
Derivative liability [note 6] | 133,979 | - | ||
1,522,669 | 700,651 | |||
Future operations [note 1] | ||||
Shareholders' equity: | ||||
Preferred shares: - authorized, unlimited | ||||
Issued: 10,000,000 | 3,489,000 | 3,489,000 | ||
Common shares: - authorized, unlimited | ||||
Issued: 30,701,796 shares as of June 30, 2009 (December 31, 2008 - 30,676,796) [note 7] | 51,934,360 | 51,884,121 | ||
Contributed capital | 3,690,192 | 3,519,072 | ||
Deficit | (53,399,882) | (52,703,170) | ||
Accumulated other comprehensive income | 710,935 | 710,935 | ||
6,424,605 | 6,899,958 | |||
$ 7,947,274 | $ 7,600,609 |
Signed "George Liszicasz" | Signed "Charles Selby" |
The accompanying notes to these consolidated financial statements are an integral part of these consolidated balance sheets. |
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NXT ENERGY SOLUTIONS INC. Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Unaudited) (Expressed in Canadian dollars except share data) |
For the three months ended June 30, | For the six months ended June 30, | |||||||
2009 | 2008 | 2009 | 2008 | |||||
Revenue | ||||||||
Survey revenue | $ 2,638,560 | $ 1,744,470 | $ 2,638,560 | $ 1,744,470 | ||||
Oil and natural gas revenue | 199 | 4,606 | 427 | 11,189 | ||||
2,638,759 | 1,749,076 | 2,638,987 | 1,755,659 | |||||
Expense | ||||||||
Survey cost | 1,092,869 | 142,281 | 1,105,700 | 142,281 | ||||
Oil and natural gas operating expenses | 5,423 | 446 | 6,818 | 996 | ||||
Administrative | 1,010,039 | 820,853 | 2,031,921 | 1,601,796 | ||||
Depletion of oil and natural gas properties | - | 1,520 | - | 4,372 | ||||
Amortization and depreciation | 45,853 | 37,958 | 85,676 | 75,262 | ||||
2,154,184 | 1,003,058 | 3,230,115 | 1,824,707 | |||||
484,575 | 746,018 | (591,128) | (69,048) | |||||
Other expense (income) | ||||||||
Interest income | (24,905) | (52,929) | (69,224) | (124,077) | ||||
Loss (gain) on foreign exchange | (38,153) | 12,693 | (25,771) | (19,388) | ||||
Gain on sale of property | - | (20,325) | (1,016) | (20,325) | ||||
Abandonment of oil and natural gas | ||||||||
properties [note 5] | 772 | - | 5,103 | - | ||||
(62,286) | (60,601) | (90,908) | (163,790) | |||||
Net income (loss) before income tax | 546,861 | 806,619 | (500,220) | 94,742 | ||||
Income tax expense [note 4] | 263,856 | - | 263,856 | - | ||||
Net income (loss) and comprehensive income | ||||||||
(loss) | $ 283,005 | $ 806,619 | $ (764,076)$ | 94,742 | ||||
Net income (loss) per share unit [note 7] | ||||||||
Basic | $ 0.01 | $ 0.03 | $ (0.02) | $ 0.00 | ||||
Diluted | $ 0.01 | $ 0.02 | $ (0.02) | $ 0.00 |
The accompanying notes to these consolidated financial statements are an integral part of these consolidated statements of income (loss) and comprehensive income (loss).
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NXT ENERGY SOLUTIONS INC. Consolidated Statements of Cash Flow (Unaudited) (Expressed in Canadian dollars) |
For the three months ended June 30, | For the six months ended June 30, | |||||||
2009 | 2008 | 2009 | 2008 | |||||
Operating activities | ||||||||
Net income (loss) | $ 283,005 | $ 806,619 | $ (764,076) | $ 94,742 | ||||
Amortization and depreciation | 45,853 | 37,958 | 85,676 | 75,262 | ||||
Depletion of oil and natural gas properties | - | 1,520 | - | 4,372 | ||||
Abandonment of oil and natural gas properties | 772 | - | 5,103 | - | ||||
Costs settled by issuance of common share | - | 163,858 | - | 300,742 | ||||
Stock-based compensation expense | 147,089 | - | 372,463 | - | ||||
Gain on sale of properties | (1,016) | (20,325) | (1,016) | (20,325) | ||||
Changes in non-cash working capital | ||||||||
Accounts receivable | (2,428,628) | (464,243) | (2,441,525) | (982,957) | ||||
Work-in-progress | - | 142,281 | - | - | ||||
Prepaid expenses and other | 61,104 | 24,053 | (19,332) | (5,855) | ||||
Unearned revenue | - | (1,621,718) | - | (400,776) | ||||
Trade payables | 138,364 | (7,453) | 122,646 | (171,362) | ||||
Other accrued liabilities | 560,582 | 35,276 | 567,847 | - | ||||
Asset retirement obligations paid | (47) | - | (3,653) | (15,339) | ||||
Net cash used by operating activities | (1,192,922) | (902,174) | (2,075,867) | (1,121,496) | ||||
Financing activities | ||||||||
Repayment of capital lease | (1,971) | (1,813) | (3,904) | (3,587) | ||||
Repayment of registration penalty | - | - | - | (178,540) | ||||
Issue of common shares, net of issuance costs | 50,239 | 1,376,643 | 50,239 | 1,460,244 | ||||
Net cash generated by financing activities | 48,268 | 1,374,830 | 46,335 | 1,278,117 | ||||
Investing activities | ||||||||
Invested in other property and equipment | (88,022) | (82,112) | (125,452) | (103,713) | ||||
Invested in oil and natural gas properties | - | (1,668) | - | (3,177) | ||||
Proceeds on sale of properties | 1,904 | 47,400 | 1,904 | 47,400 | ||||
Decrease (increase) in short term investments | 4,817,251 | (343,035) | 5,900,102 | (856,205) | ||||
Net cash generated (used) by investing activities | 4,731,133 | (379,415) | 5,776,554 | (915,695) | ||||
Net cash inflow (outflow) | 3,586,479 | 93,241 | 3,747,022 | (759,074) | ||||
Cash and cash equivalents, beginning of period | 306,608 | 1,135,981 | 146,065 | 1,988,296 | ||||
Cash and cash equivalents, end of period | $ 3,893,087 | $ 1,229,222 | $ 3,893,087 | $ 1,229,222 | ||||
Cash interest paid | $ 698 | $ 859 | $ 1,438 | $ 1,755 |
The accompanying notes to these consolidated financial statements are an integral part of these consolidated statements of cash flows. |
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NXT ENERGY SOLUTIONS INC.
Consolidated Statements of Shareholders' Equity (Unaudited)
(Expressed in Canadian dollars except share data)
For the three months ended June 30, | For the six months ended June 30, | |||||||
2009 | 2008 | 2009 | 2008 | |||||
Common Shares | ||||||||
Balance at the beginning of the period | $ 51,884,121 | $ 49,963,649 | $ 51,884,121 | $ 49,789,695 | ||||
Issued upon exercise of stock options and warrants | - | 1,867,931 | - | 1,997,489 | ||||
Issued through private placement; net of issue | ||||||||
costs | 50,239 | - | 50,239 | - | ||||
Shares issued for services | - | - | - | 44,396 | ||||
Balance at end of the period | 51,934,360 | 51,831,580 | 51,934,360 | 51,831,580 | ||||
Preferred Shares | ||||||||
Balance at the beginning and end of the period | 3,489,000 | 3,489,000 | 3,489,000 | 3,489,000 | ||||
Contributed Capital | ||||||||
Balance at the beginning of the period | 3,552,592 | 3,507,134 | 3,519,072 | 3,416,207 | ||||
Opening balance adjustment pursuant to | ||||||||
implementation of EITF 07-05 | - | - | (108,779) | - | ||||
Fair market value of options and warrants | 137,600 | 163,858 | 279,899 | 300,742 | ||||
Contributed capital transferred to shares pursuant | ||||||||
to exercise of options and warrants | - | (491,288) | - | (537,245) | ||||
Balance at end of the period | 3,690,192 | 3,179,704 | 3,690,192 | 3,179,704 | ||||
Deficit | ||||||||
Balance at the beginning of the period | (53,682,887) | (52,273,756) | (52,703,170) | (51,561,879) | ||||
Opening balance adjustment pursuant to | ||||||||
implementation of EITF 07-05 | - | - | 67,364 | - | ||||
Net income (loss) for the period | 283,005 | 806,619 | (764,076) | 94,742 | ||||
Balance at end of the period | (53,399,882) | (51,467,137) | (53,399,882) | (51,467,137) | ||||
Accumulated Other Comprehensive Income | ||||||||
Balance at beginning and end of the period | 710,935 | 710,935 | 710,935 | 710,935 | ||||
Total Shareholders' Equity at end of period | $ 6,424,605 | $ 7,744,082 | $ 6,424,605 | $ 7,744,082 |
The accompanying notes to the consolidated financial statements are an integral part of the condensed consolidated statements of shareholder's equity.
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NXT ENERGY SOLUTIONS INC. Notes to the Consolidated Financial Statements As at and for three and six months ended June 30, 2009 (Unaudited) (Expressed in Canadian dollars unless otherwise stated) |
1. Organization and Ability to Continue Operations
NXT Energy Solutions Inc ("we", "company"or"NXT") was incorporated under the laws of the State of Nevada on September 27, 1994. NXT was continued from the State of Nevada to the Province of Alberta, Canada on October 24, 2003. The shareholders voted on and approved this change which moved the jurisdiction of incorporation from the U.S. to Canada. In November 2007 at our Annual General Meeting the shareholders voted on and approved changing our name. Effective September 22, 2008 our name changed from Energy Exploration Technologies Inc to NXT Energy Solutions Inc.
We own a proprietary technology called Stress Field Detection (“SFD®”). SFD® is a remote sensing airborne survey system that is designed to identify areas with oil and natural gas reserve potential. This technology was acquired from NXT's current CEO and President on December 31, 2005 following a ten year period wherein the company controlled the technology through a series of licensing agreements. For the ten year period prior to 2006 the company had engaged in extensive activities that were effective in developing the technology to a stage wherein SFD® was both technically ready and had the required industry validation to embark on the commercial phase of the company. These early activities included conducting SFD® surveys for oil and gas industry partners on a cost recovery basis and participating as a joint venture partner in SFD® identified exploration wells. By December 31, 2005 the company had accumulated approximately $47.6 million of deficits in conducting these activities.
The company is in the early stage of commercializing its SFD® technology. Its ability to generate cash flow from operations will depend on its ability to service its existing clients and develop new clients for its SFD® services. Management recognizes that this early commercialization phase can last for several years. Consistent with this early stage of commercialization the company has a significant economic dependency on a few clients. While the company is in this early stage of commercialization, the company’s financial position is materially impacted by the loss or gain of any one client. The company's ability to continue operations is dependent on attracting future customers through demonstrating the value that the company can bring to their exploration activities.
For the six months ended June 30, 2009 the company generated $2,638,560 of SFD® survey revenue, incurred a net loss of $764,076 and used $2,075,867 of cash in operating activities.
The company anticipates generating both net income and cash from operations in future years with its business model; however this outcome cannot be predicted with certainty. The company has an extensive prior history of generating net losses. These consolidated financial statements do not include any adjustments to amounts and classifications of assets and liabilities that may be necessary should we be unable to generate sufficient net income and cash from operations in future years in order to continue as a going concern.
2. Significant Accounting Policies
Basis of Presentation
These interim consolidated financial statements have been prepared by management in accordance with generally accepted accounting principles of the United States of America in accordance with the same accounting policies and methods used in preparing the consolidated financial statements for the fiscal year ended December 31, 2008. These interim statements should be read in conjunction with the 2008 annual consolidated financial statements as they contain disclosure which is supplemental to our annual consolidated financial statements and accordingly certain disclosure normally required for annual financial statements has been condensed or omitted.
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Change in Accounting Policies
SFAS No. 141(R) replaces SFAS No. 141,"Business Combinations". SFAS No. 141(R) retains the fundamental requirements of SFAS No. 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination, with the objective of improving the relevance and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS No. 160 clarifies the classification of non-controlling interests in consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such non-controlling interests. The requirements of these standards will be applied to business combinations subsequent to December 31, 2008.
SFAS No. 161, which amends SFAS No. 133,"Accounting for Derivative Instruments and Hedging Activities", requires companies with derivative instruments to disclose information about how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133, and how derivative instruments and related hedged items affect a company’s financial position, financial performance, and cash flows. The required disclosures include the fair value of derivative instruments and their gains or losses in tabular format, information about credit-risk-related contingent features in derivative agreements, counterparty credit risk, and the company’s strategies and objectives for using derivative instruments. SFAS 161 is effective prospectively for periods beginning on or after November 15, 2008. SFAS No. 161 does not impact our financial statements as we do not have any derivative instruments or hedging activities except as it relates to EITF 07-5.
In June 2008, the FASB issued EITF 07-5,"Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock".EITF 07-5 provides guidance in assessing whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock for purposes of determining whether the instrument falls outside the scope of SFAS No. 161. This EITF became effective for all fiscal year ends beginning after December 15, 2008 and required the cumulative effect in the account principle to be recognized as an adjustment to the opening balance of retained earnings.
The adoption of this policy resulted in the company reducing contributed capital by $108,779, representing the historical value attributed to certain derivative instruments and then recording these instruments as a derivative liability at their fair market value of $41,415. The cumulative effect of this change in accounting principle of $67,364 was recognized as a reduction to the opening balance of Accumulated Loss for the year ended December 31, 2008. These options will be revalued to market at each reporting period and the change in the liability value will be charged or credited to the Statement of Income (Loss).
In May 2009, the FASB issued SFAS No. 165,Subsequent Events(SFAS 165), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 is effective for the company’s interim reporting at June 30, 2009. SFAS 165 did not have a material impact on the company's disclosures.
In June 2009, the FASB issued SFAS No. 168,The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles(SFAS 168), as a replacement of SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles.SFAS 168 will become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. SFAS 168 is effective for the company's interim reporting period ending after September 15, 2009. The adoption of this standard will have no impact on disclosures or amounts recorded in the company's financial statements.
Consolidation
We have consolidated the accounts of our wholly owned subsidiaries in the course of preparing these consolidated financial statements. All significant inter-company balances and transactions amongst NXT and its subsidiaries have been eliminated and are therefore not reflected in these consolidated financial statements. On December 22, 2008 the company's fully owned Canadian subsidiaries, NXT Energy Canada Inc. and NXT Aero Canada Inc., were dissolved and all assets and liabilities were wound up into the company. As of June 30, 2009 and December 31, 2008 the company consisted of NXT Energy Solutions Inc. and two inactive subsidiaries in the United States.
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3. Accrued Liabilities | ||||||
As at | ||||||
June 30, 2009 | December 31, 2008 | |||||
Legal and accounting | $ 181,814 | $ 198,570 | ||||
Commission on sales | 129,548 | - | ||||
Consultants fees | 37,500 | 37,500 | ||||
Survey costs | 458,974 | - | ||||
Other | 16,635 | 20,554 | ||||
$ 824,471 | $ 256,624 |
4. Accounts Receivable, Net of Withholding Tax
As at | ||||||
June 30, 2009 | December 31, 2008 | |||||
Gross value of accounts receivables | $ 2,690,761 | $ 20,569 | ||||
Balance subject to withholding tax | 263,856 | - | ||||
Carrying value of accounts receivable | $ 2,426,905 | $ 20,569 |
In 2009 (2008 �� nil) the company earned revenue while operating outside of Canada as a non-resident foreign national company within a foreign jurisdiction. In accordance with the income tax laws of this foreign jurisdiction payments made by domestic clients for the company’s services are to be remitted net of a 10% withholding tax. Accordingly, all accounts receivable from this jurisdiction have been carried at a balance that is net of withholding tax. This withholding tax can be utilized in Canada as a foreign tax credit against future taxable earnings.
For the six month period ended and as at June 30, 2009 this withholding tax has been reflected as a current tax expense and the future tax benefit was not recognized because the recognition criteria for deferred tax assets had not been met.
5. Asset Retirement Obligation | |||||
For the six months ended | For the year ended | ||||
The following table reconciles the asset retirement obligations: | June, 2009 | December , 2008 | |||
Asset retirement obligation, beginning of period | $ 48,997 | $ - | |||
Additions in the year | 3,653 | 208,307 | |||
Accretion | 1,450 | 2,636 | |||
Costs incurred | (3,653) | (161,946) | |||
Asset retirement obligation | 50,447 | 48,997 | |||
Current portion of asset retirement obligation | 20,000 | 20,000 | |||
Asset retirement obligation, end of period | $ 30,447 | $ 28,997 |
6. Derivative Liability
Under Statement of Financial Accounting Standards (SFAS) No. 157,Fair Value Measurements(SFAS 157), financial instruments are recorded at fair value on a recurring basis. The company's only financial instrument recorded at fair value on a recurring basis are the vested contractor options. We have classified these derivative financial instruments as level II where the fair value is determined by using valuation techniques that refer to observable market data. During the six months ended June 30, 2009, we recorded a gain of $31,760 in regards to the vested contractor options. These expenses are included in the line item ‘Administrative’ on the company's consolidated statement of income (loss).
The fair market value of these vested contractor options was calculated at June 30, 2009 and December 31, 2008 using the Black Scholes options valuation model.
The following table outlines the change in the derivative liability value in the year: | ||
Balance as at December 31, 2008 | $ - | |
Adjustment to the opening balance pursuant | 41,415 | |
Increase in value | 92,564 | |
Balance as at June 30, 2009 | $ 133,979 |
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7. Common Shares
The following table provides common shares and their value:
Common Shares | ||||||
Shares | Amount | |||||
As at December 31, 2008 | 30,676,796 | $ 51,884,121 | ||||
Transactions during the three months ended June 30, 2009 | ||||||
ÏIssued through private placement | 25,000 | 50,239 | ||||
As at June 30, 2009 | 30,701,796 | $ 51,934,360 |
The company has an unlimited number of shares authorized.
Reconciliation of Earnings per Share Calculations
For the three months ended June 30, 2009
Weighted Average | ||||||
Net Income | Shares Outstanding | Per Share | ||||
Basic | $ 283,005 | 30,680,872 | $ 0.01 | |||
Options assumed exercised | 516,741 | |||||
Warrants assumed exercised | 150,000 | |||||
Preferred shares assumed converted | 2,000,000 | |||||
Shares assumed purchased | (1,430,996) | |||||
Diluted | $ 283,005 | 31,916,617 | $ 0.01 |
For the six months ended June 30, 2009
Weighted Average | ||||||
Net Income | Shares Outstanding | Per Share | ||||
Basic and diluted | $ (764,076) | 30,678,868 | $ (0.02) |
For the three months ended June 30, 2008
Weighted Average | ||||||
Net Income | Shares Outstanding | Per Share | ||||
Basic | $ 806,619 | 30,329,711 | $ 0.03 | |||
Options assumed exercised | 1,743,371 | |||||
Warrants assumed exercised | 150,000 | |||||
Preferred shares assumed converted | 2,000,000 | |||||
Shares assumed purchased | (1,151,356) | |||||
Diluted | $ 806,619 | 33,071,726 | $ 0.02 |
For the six months ended June 30, 2008
Weighted Average | ||||||
Net Income | Shares Outstanding | Per Share | ||||
Basic | $ 94,742 | 30,050,447 | $ 0.00 | |||
Options assumed exercised | 1,758,371 | |||||
Warrants assumed exercised | 150,000 | |||||
Preferred shares assumed converted | 2,000,000 | |||||
Shares assumed purchased | (1,065,239) | |||||
Diluted | $ 94,742 | 32,893,579 | $ 0.00 |
All options, warrants and preferred shares were excluded from the diluted earnings per share calculation for the six month period ended June 30, 2009 as they were antidilutive.
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8. Employee, Directors and Contractor Options
We have summarized below all outstanding options under the Plans as of June 30, 2009:
Weighted average | Weighted average | |||||||
exercise price of | exercise price of | |||||||
Range of exercise prices in U.S. dollars | Outstanding options | outstanding options | Options exercisable | exercisable options | ||||
Under $0.50 | 150,000 | $ 0.40 | - | $ - | ||||
$0.50 - $0.99 | 441,741 | $ 0.74 | 335,074 | $ 0.71 | ||||
$1.00 - $1.99 | 1,451,463 | $ 1.51 | 1,056,463 | $ 1.45 | ||||
$2.00 - $3.99 | 177,000 | $ 2.35 | 132,333 | $ 2.22 | ||||
Over $4.00 | 300,000 | $ 4.90 | 100,000 | $ 4.90 | ||||
2,520,204 | $ 1.77 | 1,623,870 | $ 1.57 |
Weighted average remaining | ||
Range of exercise prices in U.S. dollars | contractual life (years) | |
Under $0.50 | 4.8 | |
$0.50 - $0.99 | 2.4 | |
$1.00 - $1.99 | 2.5 | |
$2.00 - $3.99 | 1.3 | |
Over $4.00 | 3.7 | |
2.7 |
For the six months ended June 30, 2009 | For the six months ended June 30, 2008 | |||||||
Weighted average | Weighted average | |||||||
Exercise prices in U.S. dollars | # of options | exercise price | # of options | exercise price | ||||
Outstanding at beginning of year | 2,270,204 | $ 1.24 | 2,348,371 | $ 1.72 | ||||
Granted | 250,000 | $ 0.56 | 35,000 | $ 1.45 | ||||
Forfeited | - | $ - | (115,000) | $ 2.43 | ||||
Exercised | - | $ - | (190,000) | $ 0.65 | ||||
Options outstanding as at end of period | 2,520,204 | $ 1.77 | 2,078,371 | $ 1.24 | ||||
Exercisable as at end of period | 1,623,870 | $ 1.57 | 1,049,038 | $ 1.11 |
Unvested options outstanding as of June 30, 2009 and December 31, 2008 vest over the three year period starting from the date of grant dependant on the continued provision of services. The options vest one-third at the end of each of the first three years following the grant date. Options generally expire, if unexercised, five years from the date of vesting.
Compensation Expense Associated with Grant of Options
The grant date fair value is calculated in U.S. dollars using the Black Scholes option valuation model utilizing the following weighted average assumptions:
For the six months ended | ||||
June 30, 2009 | June 30, 2008 | |||
Expected dividends paid per common share | Nil | Nil | ||
Expected life (years) | 3 | 3 | ||
Expected volatility in the price of common shares (%) | 104% | 84% | ||
Risk free interest rate (%) | 1.5% | 4.0% | ||
Weighted average grant date fair market value per share | $ 0.36 | $ 1.85 | ||
Intrinsic value of options exercised | $ - | $ 2.46 |
As of June 30, 2009 and 2008 there were U.S. $715,512 and U.S. $1,011,816 respectively of total unrecognized compensation cost related to non-vested share-based compensation awards granted under the stock option plans. This cost will be recognized over the remaining vesting period.
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9. Warrants
For the six months ended June 30, 2009 | For the six months ended June 30, 2008 | |||||||
Weighted average | Weighted average | |||||||
# of warrants | exercise price | # of warrants | exercise price | |||||
Outstanding as at beginning of the year | 150,000 | $ 2.20 Cdn | 2,776,560 | $ 1.96 U.S. | ||||
Exercised | - | - | (702,543) | $ 2.00 U.S. | ||||
Expired | - | - | (1,924,017) | - | ||||
Outstanding as at end of the period | 150,000 | $ 2.20 Cdn | 150,000 | $ 2.20 Cdn |
As at June 30, 2009 | As at June 30, 2008 | |||||||
Weighted average | Weighted average | |||||||
Outstanding | remaining contractual | remaining contractual life | ||||||
Exercise prices | warrants | life (years) | Outstanding warrants | (years) | ||||
$ 2.20 Cdn | 150,000 | 0.5 | 150,000 | 1.5 | ||||
150,000 | 0.5 | 150,000 | 1.5 |
The company has historically issued warrants in U.S. and Canadian dollars. At June 30, 2009, all warrants outstanding are exercisable in Canadian dollars.
10. Commitments and Contingencies
On March 18, 2003 we were served a Statement of Claim naming NXT and others as defendants. The plaintiffs allege that the defendants were negligent and in breach of a ferry flight contract under which an aircraft was to be delivered to Greece. The aircraft crashed enroute. The Plaintiffs are seeking, among other things, damages in the amount of Cdn. $450,000 or loss and damages to the aircraft and cargo, and damages in respect to search and rescue expenses, salvage, storage, transportation expenses and pollution and contamination expenses. NXT was not party to the Ferry Flight Contract. The outcome of the claim is not determinable. Management believes the claim is without merit and we intend to defend ourselves against the claim.
The company has an office lease until October 31, 2012 which requires minimum monthly lease payments of $29,483.
On May 8, 2009 the company executed an aircraft charter agreement with a Calgary based aircraft charter company to provide aircraft, crew and maintenance services for SFD® survey operations utilizing a fleet of Cessna Citation 560 series jet aircraft. NXT’s minimum aircraft charter commitment under this agreement is Cdn. $396,250 prior to the anniversary date of the agreement. Through August 17, 2009 we have consumed 70% of the hours committed to in the agreement.
11. Comparative Figures
Certain amounts in the consolidated financial statements have been reclassified in the comparative periods to conform to the current period's presentation.
12. Prior Quarter Adjustment
In the second quarter of 2009 the company determined that in the first quarter of 2009 it had incorrectly accounted for the company’s common stock options issued to contractors and the adoption of EITF 07-5"Determing Whether an Instrument is Indexed to an Entity’s Own Stock". The net result of this error was a $14,056 overstatement of net loss for the first quarter 2009. The impact of the error on opening contributed capital, deficit and liabilities was $108,779, $67,364 and $41,415 respectively for fiscal 2009. The company has concluded that these adjustments are not material to the financial statements for the first quarter of 2009.
The company recorded these immaterial corrections to its previously issued first quarter 2009 financial statements. The company has reflected these immaterial adjustments within the consolidated statement of income (loss) and consolidated statements of shareholders’ equity for the six months ended June 30, 2009.
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