As at and for the 3 month period ended March 31, 2012

 

---

 

 

 

 

 

 

Certain statements in this document may constitute "forward-looking statements".  These forward-looking statements can generally be identified as such because of the context of the statements including words such as "believes", "anticipates", "expects", "plans", "intends", "estimates", "scheduled" or words of a similar nature.

 

●	estimates of the amount and expected timing of revenue and costs related to existing SFD® survey contracts that are planned to be conducted and completed in 2012 in Argentina, Guatemala, and potentially South Asia, Colombia and other areas. As at March 31, 2012, these contracts had a potential future revenue value (including amounts billed but deferred as at March 31, 2012) of approximately US $6.0 million.
●	the material factors and assumptions which affect this forward-looking information include assumptions that NXT will have the personnel, equipment and required local permits to conduct the contracts as intended in 2012, and that the as yet unperformed survey contracts will not be cancelled or subject to any additional material delays.
●	potential future growth opportunities in new international markets, such as Brazil and Mexico.
●	potential financing related activities, including the potential future exercise of outstanding warrants that were issued in March and May 2012, and their related potential effect on liquidity and capital resources.
●	the Company’s ability to continue as a going concern.
●	estimated future costs related to asset retirement obligations.
●	limitations in disclosure controls, procedures, and internal controls over financial reporting.

 

 

 

 

 

 

 

 

 

		Contract			Contract			Amounts
		completion,			value			billed to
		or estimated			in US $			March 31,
		completion			millions			2012
Colombia - 4 contracts commenced in Q4-2011, completed in Q1-2012			Q1-2012			2.9			2.9
Argentina - survey operations commenced in February, 2012			Q2-2012			1.6			1.2
Guatemala - survey operations commenced in April, 2012			Q2-2012			0.7			—
						5.2			4.1
South Asia project - contract awarded, awaiting final regulatory approvals of survey flights			unknown			2.7			—
Colombia - last of the 6 blocks covered under a May 2011 Letter of Intent			unknown			1.0			—
						8.9			4.1

 

 

●	Colombia - In Q2-11, NXT announced a letter of intent (“LOI”) with a major Canadian public exploration and production company to conduct a US $4.6 million SFD® survey on 6 separate exploration blocks in Colombia and Guatemala. This LOI represented a major validation of the SFD® technology, in the form of a significant repeat customer order. SFD® data acquisition operations were completed on 4 survey blocks in Colombia in Q4-2011, with final interpretation of the data, and delivery of the reports on findings and recommendations to the client, completed in mid January 2012. As such, the related revenue of US $2.9 million was recognized in NXT’s Q1-2012 period. Survey operations on the fifth block, in Guatemala, are discussed below. The LOI also contemplates the last of the six surveys being conducted on another Colombia block, but terms of this survey (expected value of US $1 million) have not yet been finalized. Execution of a survey on this sixth block will be planned in conjunction with other new survey opportunities which may arise in the Colombia area for late 2012 and 2013.
●	Argentina - a US $1.65 million survey contract was executed in September 2011, and mobilization from Colombia occurred in mid December. We were pleased to gain a foothold in Argentina, which has an attractive profile of large frontier exploration areas suited to conduction of early stage SFD® exploration surveys. While the actual survey flying time was very efficient (9 days total), the overall project took much longer than expected to start and complete, due to numerous regulatory delays in the aircraft importation and permitting process. In addition, our survey aircraft required repairs following completion of the survey and prior to departure from Argentina, which again was subject to ongoing regulatory delays. Data acquisition was completed in March 2012, and the data interpretation and the related delivery of the SFD report and recommendations to the client is expected to be completed by the end of June 2012 (in the Q2-2012 period).
●	Guatemala - this smaller survey was conducted in early April 2012, following the Argentina survey.  This survey has a contract value of US $0.7 million, which is expected to be recognized in the Q2-2012 period, following interpretation and recommendations on the data acquired.
●	South Asia - in early 2011, NXT finalized a US $2.7 million survey contract to be conducted in South Asia. This project unfortunately encountered ongoing flight permitting delays, as multiple government agencies have a role in the permitting process. NXT, in conjunction with our local agent, advanced the project in 2011, and the client and key government decision makers provided support for our SFD® survey. The permitting process has advanced to its final stages, and is pending approval of the flight areas by one of the government agencies, following which a No Objections Certificate (“NOC”) is required to be issued by the relevant parties. There is, however, no certainty when or if this project will be able to commence.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		Q1-12			Q4-11			Q3-11			Q2-11
		Mar 31, 2012			Dec 31, 2011			Sep 30, 2011			Jun 30, 2011
Survey revenue		$	2,815,320		$	—		$	—		$	144,650
Net income (loss)			337,928			(1,072,560	)		(1,026,814	)		(692,510	)
Basic and diluted earnings (loss) per share			0.01			(0.03	)		(0.03	)		(0.02	)

		Q1-11			Q4-10			Q3-10			Q2-10
		Mar 31, 2011			Dec 31, 2010			Sep 30, 2010			Jun 30, 2010
Survey revenue		$	—		$	—		$	—		$	443,011
Net loss			(792,717	)		(1,276,693	)		(962,590	)		(890,673	)
Basic and diluted loss loss per share			(0.02	)		(0.04	)		(0.03	)		(0.03	)

 

 

 

 

 

 

 

 

 

 

 

			Q1-12			Q1-11
Survey revenue		$	2,815,320		$	—
Expenses
Survey costs			1,174,393			—
General and administrative (“G&A”)			1,139,527			703,466
Stock based compensation expense (“SBCE”)			67,000			29,942
Amortization of property and equipment			26,540			36,267
			2,407,460			769,675
Other expense (income)
Interest expense (income), net			2,864			(2,417	)
Loss (gain) on foreign exchange			65,869			24,942
Oil and natural gas operations and other			1,199			517
			69,932			23,042
Net income (loss) for the period			337,928			(792,717	)

 

 

		Q1-12			Q1-11			net change
Salaries, benefits and consulting charges		$	504,508		$	375,357		$	129,151
Board, professional fees, and public company costs			196,418			97,440			98,978
Premises and administrative overhead			166,116			137,253			28,863
Business development			218,610			60,917			157,693
Colombia office			53,875			32,499			21,376
Total G&A			1,139,527			703,466			436,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

			Excluding deferred balances and derivative liability			Add deferred balances re surveys and derivative liability			Total as at March 31, 2012
												Total as at December 31, 2011
Current assets:
Cash and short term investments		$	2,766,889		$	—		$	2,766,889		$	1,518,946
Accounts receivable			872,722			—			872,722			122,231
Prepaid expenses and other			93,364			—			93,364			43,105
Work-in-progress			—			889,852			889,852			1,112,210
			3,732,975			889,852			4,622,827			2,796,492
Current liabilities:
Accounts payable and accrued liabilities			922,092			—			922,092			1,347,925
Current portion of capital lease obligation			6,926			—			6,926			8,591
Deferred revenue			—			1,221,410			1,221,410			1,776,496
Derivative liability			—			249,143			249,143			—
			929,018			1,470,553			2,399,571			3,133,012
Net working capital (deficiency)			2,803,957			(580,701	)		2,223,256			(336,520	)

 

 

 

			Work-in			Deferred
The components of the balances recorded as at March 31, 2012 are:			progress			revenues
Argentina		$	828,651		$	1,221,410
Guatemala			11,651			—
South Asia and other			49,550			—
			889,852			1,221,410

 

 

 

Cash flows from (used in):			Q1-12			Q1-11
Operating activities		$	(1,126,965	)	$	(891,846	)
Financing activities			2,347,191			1,491,436
Investing activities			17,717			328,636
Net source (use) of cash			1,237,943			928,226
Cash, start of the period			1,508,946			464,583
Cash, end of the period			2,746,889			1,392,809

 

 

Operating Activities			Q1-12			Q1-11
Net income (loss) for the period			337,928			(792,717	)
Add back non-cash expense items			94,418			67,086
			432,346			(725,631	)
Decrease (increase) in non-cash working capital balances			(1,559,311	)		(166,215	)
Net cash from (used in) operating activities			(1,126,965	)		(891,846	)

 

●	overall net cash source of $2,347,191.
●	a private placement financing of units (US $2.2 million gross proceeds) in March resulted in net proceeds to NXT of $2,022,846.
●	$278,760 was realized in Q1-12 from proceeds on exercise of common share purchase warrants that were issued in February 2011.
●	stock option exercise proceeds in Q1-12 were $47,250.
●	repayment of a capital lease obligation totaled $1,665.

 

●	overall net cash source of $17,717.
●	use of $10,000 to purchase short-term investments.
●	a cash inflow of $31,765 arose from a net decrease in restricted cash balances which have been issued primarily as security for contract performance bonds.
●	$4,048 was used for minimal purchases of equipment.

 

●	In March 2012, NXT closed a non-brokered private placement of units (the “Units”) of the Company for gross proceeds of US $2,216,005 (the “Financing”). Each Unit was issued at a price of US $0.75 and consisted of one common share and one common share purchase warrant (a “Warrant”).
	Each Warrant entitles the holder thereof to purchase one additional common share of NXT at an exercise price of US $1.20 for a term of two years (expiring in March, 2014). NXT has the option to call for acceleration of the expiry (the “Acceleration”, subject to a maximum of 50% in the first 6 months after issuance) of the Warrants if it issues a press release advising that its common shares have traded in excess of US $1.50 for 20 consecutive trading days on the OTCBB Exchange. Any Warrants subject to such Acceleration shall expire 30 days after notice.
	NXT paid finder’s fees totaling US $121,812 and issued a total of 162,416 finder’s warrants (which have the same terms as the Warrants noted above) on this Financing. The Financing was priced in US $ as it was expected that the majority of investor interest would be with US subscribers.
●	On May 4, 2012, NXT had an additional, fourth closing of this Financing (at a rate of approximately Cdn $0.9991 per US$), under the same terms as noted above, for gross proceeds of US $977,500. The cumulative effect of the closings in March and May, 2012 for the Financing was as follows:

 

			March,			May 4,
			2012			2012			Total
Proceeds (in US $)		$	2,216,005		$	977,500		$	3,193,505
Proceeds, net of finders fees (in US $)			2,094,193			915,700			3,009,893
Number of common shares issued			2,954,672			1,303,333			4,258,005
Number of Warrants issued			2,954,672			1,303,333			4,258,005
Number of finder’s warrants issued			162,416			82,400			244,816
			3,117,088			1,385,733			4,502,821

 

 

 

for the			total minimum
year ending			lease
December 31			payments
2012		$	364,093
2013			289,245
2014			289,245
2015			96,415
			1,038,998

 

 

 

 

 

						as at May 29,			as at March 31,			as at December 31,
		exercise
		price				2012			2012			2011
Shares issued:
Common shares						39,554,959			38,251,626			34,757,396
Preferred shares						10,000,000			10,000,000			10,000,000
Common shares reserved for issue re:
Stock options						2,040,600			2,060,600			2,473,100
Common share purchase warrants (expire March 7 to May 4, 2014)			US $1.20			4,502,821			3,117,088			—
Common share purchase warrants (expired February 16, 2012)		$	0.60			—			—			2,645,920
Total, fully diluted						56,098,380			53,429,314			49,876,416

 

 

 

Revenue Recognition

 

 

 

Changes in Accounting Policies Including Initial Adoption

 

 

Financial Instruments

 

 

 

 

Risk Factors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All related party transactions have the potential to create conflicts of interest that may undermine the Board of Director's fiduciary responsibility to NXT shareholders.  NXT manages this risk of conflict of interest through maintenance of a strong independent Board of Directors.  Five of the six current Directors are independent.  All transactions between Officers and or Directors of the Company are negotiated on behalf of NXT and voted upon by the disinterested Directors to protect the best interests of all shareholders.