20-F: NXT Energy Solutions Inc. Releases 2024 Annual Report, Highlights Strategic Advances and Financial Results

NXT Energy Solutions Inc. reports its 2024 financial results, showcasing strategic progress in Africa and Southeast Asia, while addressing ongoing concerns about its ability to continue as a going concern.

Summary

• NXT Energy Solutions Inc., a Calgary-based technology company, has released its 2024 annual report.
• The company's proprietary airborne SFD survey system is designed to identify areas with hydrocarbon and/or geothermal potential.
• NXT completed an SFD survey in 2024 and has deposit payments for three more surveys planned for 2025.
• The company raised $9,757,366 through private placements in 2023 and 2024.
• NXT's success depends on converting revenue opportunities into contracts and expanding its revenue base.
• The company's current cash position may not be sufficient to meet obligations for the next year.
• NXT recorded SFD-related revenues of $644,294 in 2024, compared to $2,145,716 in 2023.
• The company reported a net loss of $9,077,795 for 2024, including $2.45 million in stock-based compensation and amortization expenses.
• Net loss per common share was $0.12 (basic and diluted) for 2024.
• Cash flow used in operating activities was $3.97 million in 2024, compared to $4.83 million in 2023.
• The company is working to develop its geothermal sensor technology and is testing it over known geothermal areas.
• NXT has been granted SFD patents in 47 jurisdictions.
• The company is exposed to foreign exchange risk due to its US dollar liabilities.
• NXT has identified material weaknesses in its internal control over financial reporting.
• The company is taking steps to mitigate these weaknesses.
• NXT has a Code of Conduct & Business Ethics that applies to all directors, officers, employees, and consultants.

Sentiment

Score: 4

Explanation: The document presents a mixed sentiment. While there are positive developments such as new contracts and strategic partnerships, the financial results are concerning, and the going concern uncertainty weighs heavily on the outlook.

Positives

• NXT completed an SFD survey and has deposit payments for three more surveys planned for 2025.
• The company raised $9,757,366 through private placements in 2023 and 2024.
• NXT has been granted SFD patents in 47 jurisdictions.
• The company is working to develop its geothermal sensor technology and is testing it over known geothermal areas.
• NXT is taking steps to mitigate material weaknesses in its internal control over financial reporting.

Negatives

• The company's current cash position may not be sufficient to meet obligations for the next year.
• SFD-related revenues were $644,294 in 2024, compared to $2,145,716 in 2023.
• The company reported a net loss of $9,077,795 for 2024.
• Cash flow used in operating activities was $3.97 million in 2024.
• NXT has identified material weaknesses in its internal control over financial reporting.

Risks

• NXT's ability to continue as a going concern is uncertain due to its current cash position.
• The company relies on a limited number of key personnel and a single aircraft.
• NXT is exposed to foreign currency fluctuations, which could adversely affect its financial results.
• Volatility in oil and natural gas commodity prices may affect demand for the company's services.
• The company's rights to SFD technology may be challenged.
• SFD surveys have not been tested over all potential geological conditions.
• Cyberattacks or other breaches of the company's technology could have an adverse effect.
• There is no certainty that an investor can trade the company's common shares on public markets at a stable market price.
• The company may not be able to protect its trade secrets and IP from competitors.
• The company experiences operational hazards in its flight operations that may subject it to potential claims.
• The company conducts operations in foreign countries, which exposes it to several risks that may have a material adverse effect on the Company.

Future Outlook

The Company continues to develop its pipeline of opportunities to secure additional revenue contracts and its longer-term success remains dependent upon its ability to convert these revenue 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.

Industry Context

NXT operates in the oil and gas exploration industry, providing a proprietary airborne SFD survey system. The company positions its technology as complementary to seismic analysis, offering a rapid and cost-effective method for evaluating large land areas. The company also is expanding into the geothermal sector.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• The document mentions that seismic surveys are the standard technology used by the oil and gas industry to image subsurface structures.
• The document states that NXT's SFD survey system is highly complementary to seismic analysis and may reduce the need for seismic in wide-area reconnaissance.
• The document does not provide specific comparisons to comparable companies or projects.

Related Party Transactions

• One of the members of NXTs Board, Mr. Thomas Valentine is a partner in the law firm Norton Rose Fulbright, which provides legal advice to NXT.
• Another member of NXTs Board of Directors is a board member of Pana Holdings Mauritius, the parent company of Ataraxia, which holds the Ataraxia Debentures.
• A third member of Board is an employee of MCAPM LP, which holds convertible debentures.
• All members of the Board elected to have most of their Board fees payable as at December 31, 2023 converted into the November Debentures.

Stakeholder Impact

• Shareholders face uncertainty due to the company's going concern status and financial performance.
• Employees may be affected by potential cost-cutting measures or restructuring.
• Customers may be impacted by the company's ability to deliver services and support.
• Suppliers and creditors face increased risk due to the company's financial challenges.

Next Steps

• Execute the African SFD Survey.
• Execute the Southeast Asia SFD Survey.
• Execute the AL-Haj Enterprises Private Limited SFD Survey.
• Continue to develop and commercialize the geothermal technology.
• Continue to pursue opportunities to secure new revenue contracts.
• Continue to take certain actions to mitigate material weaknesses in ICFR.

Key Dates

Keywords

SFD survey, geothermal, hydrocarbon, exploration, revenue, patents, financial results, NXT Energy Solutions, going concern, private placement