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spk04: Good day, ladies and gentlemen. My name is Leah and I will be your conferencing operator today. At this time, I would like to welcome everyone to the NXT Energy Solutions 2021 first quarter and operating and financial results conference call. All participants will be in listening only mode for the first part of the conference call with the ability to ask questions after the presentation by the company. For the question and answer session, if you would like to ask a question, please press star 1 on your telephone keypad. Should you wish to cancel your question, please press the count key. So that all callers have an opportunity to answer a question, we will limit each caller to one question and a follow-up question. But you are welcome to go back and queue if you have any other questions. I would now like to turn the meeting over to Mr. George Lizitas, President and CEO of NXT Energy Solutions. Please go ahead, Mr. Lizitas.
spk00: Thank you, Leah, and welcome, and thank you, everyone, for joining us today for NXT Energy Solutions' first quarter 2021 financial and operating results conference call. This is George Lizitas, and joining me today's conference call is Eugene Voshishin, Vice President of Finance and Chief Financial Officer, Dr. Xian Gui of R&D, Director of R&D Research and Development of SFD Sensors, Rashid Tipu, Director of Geosciences for Africa, Asia, and Middle East, Enrica Hung, Director of Geosciences for the Americas, and Mohamed Sakib, Head of Interpretation and Project Engineer. Please be advised that Mr. Sakib has been incorrectly referred to as the director of operations previously. He has never been a director, and his position has always been head of interpretation, project engineer, and no change to his role or responsibility has occurred. The purpose of today's call is to briefly discuss the highlights of the news release of NXT's first quarter 2021 financial and operating results. Following our update, we will open up the line for questions. Please note, all statements made by the company and management during this call are subject to the Reaser's advisory overlooking information and non-GAAP measures set forth in our Q1 2021 results press release and MD&A issued yesterday. All dollar amounts discussed in today's conference call are in Canadian dollars unless otherwise stated. The complete financial and operating results and consolidated financial statements for this first quarter 2021 were published yesterday, May 11th, and are available on NXT's website, CEDAW's website, and soon will be available on EDGAR's website. Now over to Eugene. for the financial review.
spk02: Thank you, George, and welcome everyone. As George mentioned, our first quarter 2021 financial statements and management discussion analysis were filed on CDAR's website yesterday and will shortly be available in EDGAR. From a financial perspective, the focus remained on supporting the execution of the business development effort and continuing to control and optimize costs. For the first quarter, our financial results were as follows. Cash and short-term investments were $2.15 million at March 31, 2021, and net working capital was $1.51 million. Operating activities used $0.88 million of cash during the quarter. There was no revenue earned in the first quarter. For the quarter, NXT recorded a net loss of approximately $1.64 million, or $0.03 per share based on 64.5 million weighted average common shares outstanding. This compares to a net loss of $1.33 million in the first quarter of 2020, or 2 cents per share. Total operating expenses for the first quarter were $1.61 million, including survey costs. This included non-cash expenses of $0.47 million related to amortization and stock-based compensation expenses. G&A expenses decreased by $96,000, or 10%, in the first quarter of 2021, compared to 2020 for the following reasons. Salaries, benefits and consulting charges increased by $34,000 or 8% due to an increase in temporary headcount. This was offset by board and professional fees and public company costs which decreased $35,000 or 15% due to decreased insurance costs and legal fees. Premises and administrative overhead costs increased $27,000 for the quarter or 16% due to building common area charges being higher and increased software costs. Business development costs decreased by $127,000 or 97% due to the restrictions on travel from the COVID-19 pandemic. And finally, the stock-based compensation expense was higher by $5,000 or 22% due to the employee share purchase plan which commenced in the fourth quarter of 2020 and has approximately 75% of employee participation. To summarize some key financial points, we ended the quarter with $2.15 million of cash and short-term investments on hand and a net working capital balance of $1.51 million. Net loss for the quarter was $1.64 million. Cash used in operations was $883,000. Our main focus is on the execution of NXT's commercial opportunities. I would now like to hand the call back over to George to further discuss our business update.
spk00: Thank you, Eugene. First, I want to convey my sincere hope that everyone is well and continues to stay healthy at this time. As the world increases its vaccination levels and economies reopen, we continue to see strong evidence that robust economic activity is expected to continue. The International Energy Agency announced today that the 2020 oil supply glut created by the global pandemic has cleared, even as demand suffers a blow from the resurgence of the virus in India. Global consumption is on track for a rebound of $5.4 million barrels a day for 6% this year after 2020's unprecedented slump. The International Energy Agency forecasting the recovery will gather momentum in the second half, causing stockpiles to dwindle even further. The WTI is currently sitting around $66 per barrel, which is a good sign for the business of oil and gas exploration. Although no survey revenues were recorded in Q1, SFD survey opportunities continue to progress in our core areas of focus in Africa, Mexico, and South America. In addition, with the recently announced acquisition of the SFD geothermal technology rights, the company now embarks on an exciting new chapter in transitioning itself as a multiple application solutions provider for both the oil and gas, and geothermal exploration industry. The main subsurface properties such as porosity, permeability, and impermeable cap rock that are vital in the search for oil and gas resources are equally critical for locating the most prospective geothermal resources. For these reasons, the SMD technology has a natural extension to geothermal application. Since first commercialized in 2007 for hydrocarbon use, NXT's non-intrusive SFD airborne technology enables its customers to significantly improve drill success rates while reducing the overall negative environmental impact of traditional large-scale ground surveys by minimizing disruptions to community life and surface use. In April 2020, NXT received confirmation of a patent granted from the European Patent Office, bringing the total number of countries granting the patent internationally to 44. NXT will apply for patent protection for the geothermal application of SFD once development of the SFD sensors reach appropriate milestones. As industries worldwide transition toward low-carbon economy, geothermal energy has gained greater prominence for its environmental benefits as a non-intermittent renewable energy source. NXT looks forward to leveraging this extensive research and marketing skill set acquired in hydrocarbon resource development and commercialization, and apply it to geothermal resource application worldwide. Let us discuss our continued business development efforts. Since we recently had an investor call, I will only focus on matters that have progressed today. I will start with Africa. As I mentioned within our previous call six weeks ago, NXT has received approval to plan a trip to Nigeria for senior level discussion on existing and future projects. The purpose of these meetings was to close out the remaining milestone of our 2019 project and begin efforts to design the next SFD grid surveys based on technical recommendations. We are now able to report that the trip was undertaken between the second and the fourth weeks of April. Numerous face-to-face technical meetings were held. However, due to privacy and competitive reasons, We are not permitted to publicly discuss specifics at this stage. Suffice to say that it is our opinion that the trip was successfully achieved most of its objectives. We acknowledge the efforts of our partner, PENRG, led by Mr. Daere Akobo, in developing and arranging these important strategic meetings, and we look forward to continued collaboration with PENRG. Since our return to Canada two weeks ago, active discussions and technical meetings have continued, and it is our hope that we will be able to update the market further on any new developments as soon as we are in the position to do so. With respect to Mexico, as you are aware, the bulk of NXT's efforts in Mexico have been directed to leverage our previous surveys and positive drilling results to generate repeat business. The impact of COVID-19 has been significant, and this has resulted in challenges in finalizing discussions and projects. We are able to report that the Mexican government has allocated 15 blocks to its national oil company as part of a wide-ranging reserve displacement plan replacement plan, and NXT is continually in discussions with the management and technical leads for these blocks. We'll keep you posted on further developments. Geothermal. As previously mentioned, NXT has begun its initial foray into geothermal applications of SFD-GT. Our first step is to working on sensor development and then conduct subsequent data calibration flights over geothermal prospects in Alberta, British Columbia, and California in preparation for eventual commercial deployment. We have had some preliminary discussion with potential clients regarding commercial applications of SFD for geothermal, both in Canada and internationally. Our technical premise for this has been well received. We are excited about this new avenue for the company. Conclusion, on behalf of our board of directors and the entire NXT team, I want to thank all of our shareholders for their continued support. We wish the best of health to you and your families. I now ask our operator, Leah, to open up the line for us to take a few of your questions. Thank you.
spk04: As a reminder, to ask a question, you will need to press star 1 on your telephone keypad. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Mike Morse. Your line is open.
spk01: Hi, George and guys. Just wondering if you could give a little more definitive answer on testing and the timeframe of testing the SFT for the geothermal, potential geothermal surveys.
spk00: Thank you, Mike, for your question. As we mentioned in this call, on this call before, NXT needs to finalize the necessary modifications to the sensors. We are working on that right now, and we are going to undertake a more robust work very soon. Once it is completed, then we will do calibration flights, as we mentioned, where the geothermal applications are going to be set in the geology, because you can have different geological settings, as you know. And we have to calibrate the sensors for that. And then once it is done, then we are going to develop the project pipeline. and start engaging the clients that have expressed interest in the geothermal application already worldwide.
spk01: Okay, thank you.
spk04: Once again, if you would like to ask a question, just press star and then the number one key on your telephone keypad. Your next question comes from the line of Jens Wazow. Your line is open.
spk06: Good afternoon, team. I'm just checking, are you guys looking in the future to also find the oil and also drill it ourselves so we can also get the profits from the sale of the oil, not just the flying over and detecting it? Thank you.
spk00: Thank you very much. Yes, our plan is basically, I don't know, somebody has their telephone open, but I will just continue. So our plan is basically to participate in some ways in the, I don't know, it's very difficult for yourself. But we are looking at some of the contracts would contain participation rights, also access to royalties and policies so that we can even our revenue stream. But the line is very bad, so I don't know what's going on. I don't know if you can hear us well. But the answer is yes.
spk06: Yeah, I heard the whole thing. Thank you.
spk00: Thank you very much.
spk04: And your next question comes from the line of Charles Davidson. Your line is open.
spk05: Good afternoon, George. How are you all today?
spk00: Hi, Charles. How are you?
spk05: Fine. Thank you. A quick question about cash. Considering the cash that the company went through in the first quarter, and the remaining cash, there is, of course, the possibility that a contract won't come through in the next quarter. Perhaps you could touch on what the company's plans are.
spk02: Thanks, Charles. So we are confident in our ability to execute on our commercial plan and the operating cash that will generate from it. So we're confident in our commercial plans.
spk05: Okay, so basically you're not worried about it at all.
spk00: That is correct.
spk05: Thank you.
spk00: Thank you.
spk04: And your next question comes from the line of Vicki Miller. Your line is open.
spk03: Hello, and thank you for the conference call. I'm just curious. like we didn't generate any revenue this round, are we anticipating through some of these contracts coming up that by year end we will have generated some revenue?
spk02: Our short answer is we are confident that we will be able to generate revenue.
spk03: A significant amount or enough to cover the cost?
spk02: That is to be determined, but we've got several items in our pipeline, and we are working on converting those into revenue.
spk03: Okay, thank you.
spk04: Once again, if you would like to ask a question, just press star and the number one key on your touch-down telephone. And we have a follow-up question from the line of Jan Suazo. Your line is open. Mr. Jan Suazo, your line is open. Mr. Jan Suazo, sir, your line is open. You may ask your question.
spk06: Do you hear me? Hello?
spk00: Yes, we can.
spk06: Yes, we can. Oh, I don't have a follow-up question. Something happened there. Thank you.
spk00: Thank you, everyone, then, attending to our conference call and wish to update you shortly.
spk04: And this concludes today's conference call. Thank you for participating. You may now disconnect.
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