1. | Focus the majority of sales resources on one high profile market which offers NXT the maximum opportunity for success (Colombia); |
2. | Upon success in this initial market, step out to an associated market (Peru) and eventually other markets that are a logical extension of the primary market; |
3. | Be opportunistic by responding selectively to requests of interest from potential clients "bluebirds" from all other locations in the world (South Asia). The bluebird model is defined as an opportunity that arises, not from deliberate targeted sales initiatives, but in response to unsolicited client enquiries; |
4. | Capitalize on any bluebird sales by soliciting sales opportunities within the bluebird market; and |
5. | Continue to conduct small pilot surveys to expand our knowledge base and provide documentation to support use of SFD® in new applications. Each new application opens more market opportunities and provides valuable case studies to support our sales initiatives. |
1 | We have a history of success in Colombia |
● | One of the two SFD® leads on the Tacacho Block in south Colombia has now been confirmed with an integration study that combined SFD® results with other available data such as seismic and aerogravity. This lead is estimated by the client to hold the potential for 300 million barrels of recoverable oil. |
● | Another client is planning to drill in 2011 the first of three SFD® leads identified in a 2009 SFD® survey after conducting a seismic program that confirmed the lead. |
● | NXT has flown over a large offshore area in Colombia to evaluate an area with existing 3D seismic coverage. The subsequent integration study demonstrated SFD® capability to rapidly evaluate turbidite channel reservoirs in deep water settings. |
2. | Colombia is the darling of international exploration attracting strong SFD® client prospects. |
3. | We have no doubt we can add value for clients in Colombia. |
4. | The Colombian regulatory agency approved SFD® as a recognized work commitment for the 2010 Bid Round. |
5. | The NXT story and the benefits of SFD® are well known in Colombia. |
● | The Next Generation Oil & Gas Summit held on April 5th - 7th in South Africa. This conference, although apparently outside our area of interest, had a primary purpose of facilitating meetings with several potential clients who operate either in Colombia or South Asia; |
● | The Colombia Oil & Gas Exhibition held April 5th - 6th in Cartagena, Colombia; and |
● | The AAPG conference held April 10th - 12th in Houston, Texas. |
1. | Greater collaboration with clients; to better understand their needs and better define appropriate product deliverables; |
2. | Improved client understanding of how SFD® fits into exploration programs; educate through seminars and conferences, papers and one-on-one meetings; |
3. | Expanding industry applications for our service; such as resource plays, deep water and sub-salt applications; and |
4. | Integrating SFD® with all available data; it is essential to work with the customer so that our results add value to the quality of their decision. |
For the year ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Survey revenue | $ | 443,011 | $ | 3,683,326 | $ | 2,944,470 | ||||||
Net loss | (4,452,428 | ) | (2,405,125 | ) | (1,141,291 | ) | ||||||
Net loss per share unit; basic and diluted | (0.14 | ) | (0.08 | ) | (0.04 | ) | ||||||
Net cash used by operating activities | (2,692,776 | ) | (2,580,308 | ) | (1,816,150 | ) | ||||||
Cash and short term investments | 1,370,234 | 4,174,145 | 6,894,170 | |||||||||
Total assets | 2,046,906 | 6,005,640 | 7,600,609 | |||||||||
Long term liabilities | 62,597 | 232,546 | 53,808 |
● | We completed one SFD® survey for one new client earning $443,011 of revenue in the year and incurred a net loss of $4,452,428. |
● | $2,692,776 in cash was used for operating activities in the year. |
● | Our cash and investments held on account as at the end of the year are $1,370,234; a decrease of $2,803,911 from the beginning of the year. Working capital ended the year at $831,974 as compared with $4,649,393 at the end of 2009. |
For the year ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
SFD® survey revenue | $ | 443,011 | $ | 3,683,326 | $ | 2,944,470 |
For the year ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
SFD® survey cost | $ | 466,428 | $ | 1,587,120 | $ | 211,237 | ||||||
Administrative | 4,256,621 | 4,241,139 | 3,678,803 | |||||||||
Amortization, depreciation and depletion | 164,065 | 175,900 | 175,985 | |||||||||
$ | 4,887,114 | $ | 6,004,159 | $ | 4,066,025 |
● | SFD® survey costs - in 2010 and 2009 all of our surveys were performed in Colombia while in 2008 our surveys were conducted in Canada. In 2010 we incurred survey costs of $466,428 ($1,587,120 - 2009 and $211,237 - 2008) which include commissions on sales of $13,662 (2009 - $160,891 and 2008 - nil), flight costs of $322,050 (2009 - $956,836 and 2008 - $223,946) and meal, hotel and transportation costs of $70,249 (2009 - $334,717 and 2008 - $7,145). |
The higher survey costs incurred in 2010 and 2009 as compared with 2008 (as measured as a percentage of revenue) is largely due to two factors. The first is the extra market development costs required to become established and gain a market profile in a new country. The second is the inherent cost differences associated with operating in Colombia as compared with Canada. The market development costs include mainly non-revenue survey flights designed to showcase SFD® capabilities in a new geological and market setting. These non-revenue survey costs represented over 20% of our total survey costs in 2009. In addition, NXT performed SFD® data interpretation in Colombia rather than in Canada for our first Colombian survey. This location decision was entirely marketing driven despite the higher travel, accommodation and out of country premiums. We won added client respect for our survey system by providing them with an opportunity to directly observe the SFD® interpretation process and interact with our interpretation staff. | |
The extra Colombian survey costs as compared with a Canadian survey is due to the time required to conduct a survey as well as the higher cost to mobilize and demobilize the survey aircraft and crews to a non-Canadian location. In Colombia NXT does incur many delays related to obtaining permits and approvals not required in Canada that can result in surveys taking several weeks to complete that may take only a few days in Canada. These delays result in additional aircraft, crew and accommodation costs. | |
● | Administration - the company had a minimal administrative cost increase in 2010 of $15,482. The increase of $562,336 for 2009, in comparison to 2008, related to hiring of additional staff and increased costs associated with symposiums, conferences and travel for marketing and sales in international markets. |
● | Amortization, depreciation and depletion - in 2010 depreciation decreased in comparison to the two previous years. In 2009, the company continued computer and software upgrades necessary for our operations. In 2008, the company invested in additional equipment required to develop sensors and also expanded its office space in its existing building incurring costs to update and furnish the facilities. |
For the year ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Interest income | $ | (9,923 | ) | $ | (80,633 | ) | $ | (234,007 | ) | |||
Loss (gain) on foreign exchange | 16,509 | 150,958 | (20,242 | ) | ||||||||
Loss (gain) on sale of property | 1,074 | (1,037 | ) | (20,325 | ) | |||||||
Accretion of asset retirement obligation | 4,092 | 7,653 | 210,943 | |||||||||
Other | (3,427 | ) | 7,351 | 83,367 | ||||||||
$ | 8,325 | $ | 84,292 | $ | 19,736 |
Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | Mar 31, 2010 | |||||||||||||
Survey Revenue | $ | - | $ | - | $ | 443,011 | $ | - | ||||||||
Net loss from continuing operations | (1,276,690 | ) | (962,590 | ) | (890,673 | ) | (1,322,475 | ) | ||||||||
Basic and diluted loss per share | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.04 | ) |
Dec 31, 2009 | Sep 30, 2009 | Jun 30, 2009 | Mar 31, 2009 | |||||||||||||
Survey Revenue | $ | 1,044,766 | $ | - | $ | 2,638,560 | $ | - | ||||||||
Net income (loss) from continuing operations | (657,401 | ) | (969,591 | ) | 283,005 | (1,061,138 | ) | |||||||||
Basic and diluted earnings (loss) per share | (0.02 | ) | (0.03 | ) | 0.01 | (0.03 | ) |
For the year ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Cash used in operating activities | $ | (2,692,776 | ) | $ | (2,580,308 | ) | $ | (1,816,150 | ) | |||
Cash generated by financing activities | 45,837 | 42,262 | 1,313,984 | |||||||||
Cash generated (used) in investing activities | (1,062,623 | ) | 6,566,126 | (1,340,065 | ) | |||||||
$ | (3,709,562 | ) | $ | 4,028,080 | $ | (1,842,231 | ) |
Payments Due by Period | ||||||||||||||||
Total | Less Than 1 Year | 1-3 Years | 4-5 Years | |||||||||||||
Copier/scanner lease-to-own agreement | $ | 18,837 | $ | 9,447 | $ | 9,390 | - | |||||||||
Rent or operating lease | 709,654 | 419,341 | 290,313 | - |
Outstanding securities: | April 28, 2011 | December 31, 2010 | ||||||
Common shares | 34,002,396 | 30,801,796 | ||||||
Preferred shares | 10,000,000 | 10,000,000 | ||||||
Options | 2,284,804 | 2,134,804 | ||||||
Warrants | - | - | ||||||
Total | 46,287,200 | 42,936,600 |
● | Due to the limited number of staff at the company’s Calgary head office, it is not feasible to achieve adequate segregation of incompatible duties. The company mitigated this deficiency by adding management and audit committee review procedures over the areas where inadequate segregation of duties are of the greatest concern; |
● | The company does not retain staff with the specialized expertise required to prepare, nor does the company employ sufficient staff to adequately review, some complex or highly judgmental accounting issues. These complex areas include income tax accounting, financial reporting and other complex accounting matters. The company mitigates this deficiency by preparing financial statements with their best judgments and estimates of the complex accounting matters and relies on reviews by management, external consultants and the audit committee for quality assurance; and |
● | During the year ended December 31, 2010 there was a change in the company's internal controls following the formation of a Colombian branch office that processes regional financial transactions. The branch is staffed solely by one senior administrative manager. The company mitigated this deficiency by adding administrative and management procedures in the Calgary head office. |