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NXT ENERGY SOLUTIONS INC. |
Consolidated Balance Sheets |
(Unaudited - expressed in Canadian dollars) |
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 168,918 | $ | 50,635 | ||||
Short-term investments | 3,550,289 | 5,173,430 | ||||||
Accounts receivable | 273,240 | 248,930 | ||||||
Prepaid expenses and deposits | 358,167 | 338,644 | ||||||
4,350,614 | 5,811,639 | |||||||
Long term assets | ||||||||
Property and equipment | 276,234 | 237,464 | ||||||
$ | 4,626,848 | $ | 6,049,103 | |||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 679,477 | $ | 782,626 | ||||
Long term liabilities | ||||||||
Asset retirement obligation | 50,000 | 50,000 | ||||||
729,477 | 832,626 | |||||||
Commitments and contingencies [note 9] | ||||||||
Subsequent events [note 12] | ||||||||
Shareholders' equity | ||||||||
Common shares [note 3]: - authorized unlimited | ||||||||
Issued: 44,965,509 (2014 - 44,958,843) common shares | 65,800,439 | 65,792,307 | ||||||
Preferred shares [note 4]: - authorized unlimited | ||||||||
Issued: 8,000,000 (2014 - 8,000,000) Preferred shares | 232,600 | 232,600 | ||||||
Contributed capital | 6,591,723 | 6,400,789 | ||||||
Deficit | (69,438,326 | ) | (67,920,154 | ) | ||||
Accumulated other comprehensive income | 710,935 | 710,935 | ||||||
3,897,371 | 5,216,477 | |||||||
$ | 4,626,848 | $ | 6,049,103 |
Signed "George Liszicasz" | Signed "John Agee" | |
Director | Director |
NXT ENERGY SOLUTIONS INC. |
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) |
(Unaudited - expressed in Canadian dollars) |
For the three months | ||||||||
ended March 31, | ||||||||
2015 | 2014 | |||||||
Revenue | ||||||||
Survey revenue [note 10] | $ | - | $ | 3,913,367 | ||||
Expense | ||||||||
Survey costs | 25,440 | 333,188 | ||||||
General and administrative | 1,124,562 | 947,528 | ||||||
Stock based compensation expense [note 6] | 194,000 | 131,000 | ||||||
Amortization of property and equipment | 15,525 | 14,929 | ||||||
1,359,527 | 1,426,645 | |||||||
Other expense (income) | ||||||||
Interest (income) expense, net | (10,361 | ) | (7,627 | ) | ||||
Foreign exchange (gain) loss | (9,066 | ) | (158,659 | ) | ||||
Increase in fair value of US$ Warrants [note 7] | - | 42,800 | ||||||
Other expense | 178,072 | 24,475 | ||||||
158,645 | (99,011 | ) | ||||||
Income (loss) before income taxes | (1,518,172 | ) | 2,585,733 | |||||
Income tax expense | - | - | ||||||
Net income (loss) and comprehensive income (loss) | $ | (1,518,172 | ) | $ | 2,585,733 | |||
Earnings (loss) per share [note 5] | ||||||||
Basic | $ | (0.03 | ) | $ | 0.06 | |||
Diluted | $ | (0.03 | ) | $ | 0.05 |
NXT ENERGY SOLUTIONS INC. |
Consolidated Statements of Cash Flows |
(Unaudited - expressed in Canadian dollars) |
For the three months | ||||||||
ended March 31, | ||||||||
2015 | 2014 | |||||||
Cash provided by (used in): | ||||||||
Operating activities | ||||||||
Comprehensive income (loss) for the period | $ | (1,518,172 | ) | $ | 2,585,733 | |||
Items not affecting cash: | ||||||||
Stock-based compensation expense | 194,000 | 131,000 | ||||||
Amortization of property and equipment | 15,525 | 14,929 | ||||||
Increase in fair value of US$ Warrants | - | 42,800 | ||||||
209,525 | 188,729 | |||||||
(1,308,647 | ) | 2,774,462 | ||||||
Change in non-cash working capital balances [note 8] | (146,982 | ) | (3,807,608 | ) | ||||
Net cash (used in) operating activities | (1,455,629 | ) | (1,033,146 | ) | ||||
Financing activities | ||||||||
Proceeds from exercise of US$ Warrants | - | 2,683,301 | ||||||
Proceeds from exercise of stock options | 5,066 | 145,115 | ||||||
Net cash generated by financing activities | 5,066 | 2,828,416 | ||||||
Investing activities | ||||||||
Purchase of property and equipment | (54,295 | ) | - | |||||
Decrease (increase) in short-term investments | 1,623,141 | (1,007,560 | ) | |||||
(Increase) in restricted cash | - | (2,125 | ) | |||||
Net cash from (used in) investing activities | 1,568,846 | (1,009,685 | ) | |||||
Net increase in cash and cash equivalents | 118,283 | 785,585 | ||||||
Cash and cash equivalents, beginning of the period | 50,635 | 3,319,627 | ||||||
Cash and cash equivalents, end of the period | $ | 168,918 | $ | 4,105,212 | ||||
Supplemental information | ||||||||
Cash interest (received) | (15,938 | ) | (7,627 | ) | ||||
Cash taxes paid | $ | - | $ | - |
NXT ENERGY SOLUTIONS INC. | |||||
Consolidated Statements of Shareholders' Equity | |||||
(Unaudited - expressed in Canadian dollars) |
For the three months | ||||||||
ended March 31, | ||||||||
2015 | 2014 | |||||||
Common Shares | ||||||||
Balance at beginning of the period | 65,792,307 | 61,340,321 | ||||||
Issued upon exercise of US$ Warrants [note 3(ii)] | - | 2,683,301 | ||||||
Issued upon exercise of stock options | 5,066 | 145,115 | ||||||
Transfer from contributed capital upon exercise of stock options | 3,066 | 84,598 | ||||||
Transfer from fair value of US$ Warrants | ||||||||
upon exercise of US$ Warrants [note 7] | - | 1,266,000 | ||||||
Balance at end of the period | 65,800,439 | 65,519,335 | ||||||
Preferred Shares | ||||||||
Balance at beginning and end of the period | 232,600 | 232,600 | ||||||
Contributed Capital | ||||||||
Balance at beginning of the period | 6,400,789 | 5,889,914 | ||||||
Recognition of stock based compensation expense | 194,000 | 131,000 | ||||||
Contributed capital transferred to common shares | ||||||||
pursuant to exercise of stock options | (3,066 | ) | (84,598 | ) | ||||
Balance at end of the period | 6,591,723 | 5,936,316 | ||||||
Deficit | ||||||||
Balance at beginning of the period | (67,920,154 | ) | (66,356,793 | ) | ||||
Net income (loss) and comprehensive income (loss) for the period | (1,518,172 | ) | 2,585,733 | |||||
Balance at end of the period | (69,438,326 | ) | (63,771,060 | ) | ||||
Accumulated Other Comprehensive Income | ||||||||
Balance at beginning and end of the period | 710,935 | 710,935 | ||||||
Total Shareholders' Equity at end of the year | $ | 3,897,371 | $ | 8,628,126 |
As at and for the three month period ended March 31, 2015
As at and for the three month period ended March 31, 2015
The FASB has established a going concern standard that becomes effective for reporting periods ending after December 31, 2016 (with early adoption permitted). The Company will be required to assess if there is substantial doubt about its’ ability to continue as a going concern, which will exist if it is probable that it will be unable to meet payment of its obligations within one year after the assessment date (which will be based on the date of issue of the period end financial statements). Disclosure will be required of the significance of and the conditions or events that give rise to the substantial doubt, as well as whether it is probable that managements’ plans can be effectively implemented to mitigate these conditions. Further disclosure, including managements mitigation plans, will be required if it is assessed that the substantial doubt cannot be overcome.
The Company has not yet adopted the new standard and in future periods will assess if the required disclosures related to the going concern assumption are applicable.
For the three month periods ended | ||||||||||||||||
March 31, 2015 | March 31, 2014 | |||||||||||||||
# of shares | $ amount | # of shares | $ amount | |||||||||||||
As at beginning of the period | 44,958,843 | 65,792,307 | 42,418,326 | $ | 61,340,321 | |||||||||||
Shares issued during the period: | ||||||||||||||||
Exercise of stock options | 6,666 | 5,066 | 257,665 | 145,115 | ||||||||||||
Exercise of US$ Warrants (ii) | - | - | 2,017,852 | 2,683,301 | ||||||||||||
Transfer from contributed capital upon | ||||||||||||||||
exercise of stock options | - | 3,066 | - | 84,598 | ||||||||||||
Transfer from fair value of | ||||||||||||||||
US$ Warrants upon exercise (see note 7) | - | - | - | 1,266,000 | ||||||||||||
As at the end of the period | 44,965,509 | 65,800,439 | 44,693,843 | 65,519,335 |
As at and for the three month period ended March 31, 2015
(i) | NXT also has outstanding a total of 8,000,000 Preferred Shares (see note 4) which are convertible on a 1 for 1 basis into an additional maximum of 8,000,000 common shares by December 31, 2015. An initial total of 2,000,000 of these Preferred Shares were converted into 2,000,000 common shares of the Company effective May 22, 2013. |
(ii) | In 2012, NXT conducted private placement financings (the "2012 Financings", for proceeds $3,183,132) which consisted of units issued at a price of US $0.75 (the "Units"). Each Unit consisted of one NXT common share and one warrant (the "US$ Warrants") to purchase an additional NXT common share at a price of US $1.20 for a term of two years from the date of issue. Including 244,816 finder’s warrants issued, a total of 4,502,821 US$ Warrants were issued in the 2012 Financings. The following is a continuity of the US$ Warrants that were issued in the 2012 Financings and which had expiry dates in March and May 2014: |
exercise | ||||||||
# of US$ | proceeds | |||||||
Warrants | received | |||||||
Outstanding as at January 1, 2012 | ||||||||
Issued in the 2012 Financings | 4,502,821 | - | ||||||
US$ Warrants exercised in 2013 | (846,700 | ) | $ | 1,064,222 | ||||
Outstanding as at December 31, 2013 | 3,656,121 | 1,064,222 | ||||||
Activity in 2014: | ||||||||
US$ Warrants exercised in 2014 | (2,057,852 | ) | 2,735,995 | |||||
US$ Warrants expired in 2014 | (1,598,269 | ) | - | |||||
Outstanding as at December 31, 2014 | - | $ | 3,800,217 |
# of shares | $ value | |||||||
As at December 31, 2011 and 2012 | 10,000,000 | $ | 3,489,000 | |||||
Conversion of Preferred Shares in May 2013 | (2,000,000 | ) | (3,256,400 | ) | ||||
As at March 31, 2015 and December 31, 2014 | 8,000,000 | 232,600 |
As at and for the three month period ended March 31, 2015
● | 2,000,000 of the Preferred Shares became convertible into common shares upon issue. Effective May 22, 2013, these 2,000,000 Preferred Shares were converted into 2,000,000 common shares. |
● | the remaining 8,000,000 Preferred Shares are subject to conditions related to potential future conversion. They may become convertible into common shares in four separate increments of 2,000,000 Preferred Shares each, should NXT achieve specified cumulative revenue thresholds of US $50 million, US $100 million, US $250 million and US $500 million prior to the December 31, 2015 Maturity Date. |
● | an additional bonus of 1,000,000 common shares are issuable in the event that cumulative revenues exceed US $500 million. |
● | if the final US $500 million cumulative revenue threshold is not achieved by the Maturity Date, NXT can elect to retain ownership of the SFD® technology by converting all of the remaining Preferred Shares into common shares, which it intends to do in 2015 prior to the Maturity Date. |
● | cumulative revenue is defined as the sum of total revenue earned plus proceeds from the sale of assets accumulated since January 1, 2007, all denominated in US$, and calculated in accordance with generally accepted accounting principles. |
● | in the event of a change of control or other transaction involving a re-arrangement of the business of NXT prior to the Maturity Date, the number of outstanding Preferred Shares which can be converted will be dependent on the transaction value payable (“TVP”) per outstanding NXT common share as follows: |
# of Preferred | ||||||||
Shares | $ value | |||||||
convertible upon issue effective December 31, 2005 | 2,000,000 | $ | 3,256,400 | |||||
conditionally convertible on or before December 31, 2015 | 8,000,000 | 232,600 | ||||||
10,000,000 | 3,489,000 |
As at and for the three month period ended March 31, 2015
Expected dividends paid per common share | Nil | |||
Expected life in years | 1.9 | |||
Expected volatility in the price of common shares | 62 | % | ||
Risk free interest rate | 1.0 | % | ||
Weighted average fair value per Right at grant date | $ | 0.60 |
Three months ended March 31, | 2015 | 2014 | ||||||
Comprehensive net income (loss) for the period | $ | (1,518,172 | ) | $ | 2,585,733 | |||
Weighted average number of shares outstanding for the period: | ||||||||
Common shares issued | 44,960,695 | 43,100,789 | ||||||
Convertible Preferred Shares (i) | - | - | ||||||
Basic | 44,960,695 | 43,100,789 | ||||||
Additional shares related to assumed | ||||||||
exercise of stock options and US$ Warrants | ||||||||
under the treasury stock method (ii) | - | 1,426,523 | ||||||
Contingently issuable Preferred Shares (ii) | - | 8,000,000 | ||||||
Diluted | 44,960,695 | 52,527,312 | ||||||
Earnings (loss) per share – Basic | $ | (0.03 | ) | $ | 0.06 | |||
Earnings (loss) per share – Diluted | $ | (0.03 | ) | $ | 0.05 |
(i) | The outstanding 8,000,000 convertible Preferred Shares are contingently issuable, and are included in the diluted number of shares outstanding if applicable. |
(ii) | In periods in which a loss results, all outstanding stock options, common share purchase Warrants and the 8,000,000 convertible Preferred Shares are excluded from the diluted loss per share calculations as their effect is anti-dilutive. |
As at and for the three month period ended March 31, 2015
average remaining | ||||||||||||||
Exercise price | # of options | # of options | contractual | |||||||||||
per share | outstanding | exercisable | life (in years) | |||||||||||
$ | 0.45 | 74,600 | 74,600 | 0.5 | ||||||||||
$ | 0.75 | 355,000 | 228,333 | 2.3 | ||||||||||
$ | 0.76 | 296,669 | 190,002 | 2.8 | ||||||||||
$ | 0.86 | 707,500 | 454,168 | 2.4 | ||||||||||
$ | 1.16 | 411,000 | 411,000 | 1.3 | ||||||||||
$ | 1.20 | 300,000 | 300,000 | 2.4 | ||||||||||
$ | 1.35 | 611,066 | 55,000 | 4.8 | ||||||||||
$ | 1.39 | 55,000 | 55,000 | 4.3 | ||||||||||
$ | 1.55 | 40,000 | 13,333 | 4.0 | ||||||||||
$ | 1.57 | 45,000 | - | 4.9 | ||||||||||
$ | 1.61 | 25,000 | 8,333 | 3.9 | ||||||||||
$ | 1.67 | 150,000 | - | 4.7 | ||||||||||
$ | 1.83 | 65,000 | 65,000 | 3.7 | ||||||||||
$ | 1.09 | 3,135,835 | 1,854,769 | 2.9 |
For the three months | For the year ended | |||||||||||||||
ended March 31, 2015 | December 31, 2014 | |||||||||||||||
weighted | weighted | |||||||||||||||
# of stock | average | # of stock | average | |||||||||||||
options | exercise price | options | exercise price | |||||||||||||
Options outstanding, start of the period | 2,541,435 | $ | 1.01 | 2,888,100 | $ | 0.88 | ||||||||||
Granted | 601,066 | $ | 1.37 | 325,000 | $ | 1.55 | ||||||||||
Exercised | (6,666 | ) | $ | 0.66 | (482,665 | ) | $ | 0.60 | ||||||||
Forfeited | - | - | (35,000 | ) | $ | 1.42 | ||||||||||
Expired | - | - | (154,000 | ) | $ | 0.71 | ||||||||||
Options outstanding, end of the period | 3,135,835 | $ | 1.09 | 2,541,435 | $ | 1.02 | ||||||||||
Options exercisable, end of the period | 1,854,769 | $ | 1.01 | 1,782,537 | $ | 1.01 |
As at and for the three month period ended March 31, 2015
Three months ended March 31 | 2015 | 2014 | ||||||
Expected dividends paid per common share | Nil | Nil | ||||||
Expected life in years | 5.0 | 5.0 | ||||||
Expected volatility in the price of common shares | 111 | % | 118 | % | ||||
Risk free interest rate | 1.1 | % | 1.6 | % | ||||
Weighted average fair market value per share at grant date | $ | 1.11 | $ | 1.29 | ||||
Intrinsic (or "in-the-money") value per share of options exercised | $ | 1.07 | $ | 1.05 |
Three months ended March 31 | 2015 | 2014 | ||||||
SBCE recognized related to: | ||||||||
Stock options | $ | 136,000 | $ | 80,000 | ||||
Preferred Share Rights (see note 4) | 58,000 | 51,000 | ||||||
194,000 | 131,000 |
March 31, | December 31, | |||||||
As at the period ended | 2015 | 2014 | ||||||
Unamortized SBCE related to: | ||||||||
Stock options | $ | 789,000 | $ | 367,000 | ||||
Preferred Share Rights (see note 4) | 176,000 | 234,000 | ||||||
965,000 | 601,000 |
As at and for the three month period ended March 31, 2015
Three months ended March 31, | 2014 | |||
Fair value of US$ Warrants | ||||
Balance at beginning of the year | $ | 1,238,000 | ||
Transfer to common shares upon | ||||
exercise of US$ Warrants in the period | (1,266,000 | ) | ||
Increase in fair value during the period | 42,800 | |||
Fair value of US$ Warrants, as at March 31, 2014 | 14,800 |
Three months ended March 31, | 2015 | 2014 | ||||||
Expected dividends paid per common share | n/a | Nil | ||||||
Expected life in years | n/a | 0.08 | ||||||
Expected volatility in the price of common shares | n/a | 42 | % | |||||
Risk free interest rate | n/a | 1.0 | % |
For the three months ended March 31, | 2015 | 2014 | ||||||
Accounts receivable | (24,310 | ) | $ | (1,064,871 | ) | |||
Work-in-progress | - | 299,842 | ||||||
Prepaid expenses and deposits | (19,523 | ) | (99,889 | ) | ||||
Accounts payable and accrued liabilities | (103,149 | ) | (161,589 | ) | ||||
Deferred revenue | - | (2,781,101 | ) | |||||
(146,982 | ) | (3,807,608 | ) | |||||
Portion attributable to: | ||||||||
Operating activities | (146,982 | ) | (3,807,608 | ) | ||||
Financing activities | - | - | ||||||
Investing activities | - | - | ||||||
(146,982 | ) | (3,807,608 | ) |
As at and for the three month period ended March 31, 2015
Existing | New | |||||||||||
Fiscal year ending December 31, | premises | premises | Total | |||||||||
2015 | $ | 114,283 | $ | 127,103 | $ | 241,386 | ||||||
2016 | - | 508,410 | 508,410 | |||||||||
2017 | - | 508,410 | 508,410 | |||||||||
2018 | - | 508,410 | 508,410 | |||||||||
2019 | - | 508,410 | 508,410 | |||||||||
114,283 | 2,160,743 | 2,275,026 | ||||||||||
Thereafter, 2020 through 2025 | - | 2,979,848 | 2,979,848 | |||||||||
114,283 | 5,140,591 | 5,254,874 |
As at and for the three month period ended March 31, 2015
For the three months ended March 31 | 2015 | 2014 | ||||||
$ | 21,668 | $ | 8,228 |