EXHIBIT 99.1

NXT ENERGY SOLUTIONS INC.

Unaudited Condensed Consolidated

Interim Financial Statements

For the three months ended

March 31, 2022

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

1. The Company and going concern

NXT Energy Solutions Inc. (the “Company” or “NXT”) is a publicly traded company based in Calgary, Alberta Canada.

NXT’s proprietary Stress Field Detection (“SFD^®”) technology is an airborne survey system that utilizes quantum-scale sensors to detect gravity field perturbations in an airborne survey method which can be used both onshore and offshore to remotely identify traps and reservoirs with exploration potential in both the hydrocarbon and geothermal industries.

These condensed consolidated interim financial statements of NXT have been prepared by management in accordance with generally accepted accounting principles of the United States of America (“US GAAP”).

These condensed consolidated interim financial statements reflect adjustments, all of which are normal recurring adjustments that are, in the opinion of management, necessary to reflect fairly the financial position and results of operations for the respective periods.

These condensed consolidated interim financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that NXT will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. 

The events described in the following paragraphs highlight that there is substantial doubt about NXT’s ability to continue as a going concern within one year after the date that these condensed consolidated interim financial statements have been issued. The Company’s current cash position is not expected to be sufficient to meet the Company’s obligations and planned operations for a year beyond the date that these condensed consolidated interim financial statements have been issued.

The Company has plans in place to reduce operating costs including payroll and other general and administrative costs and is evaluating alternatives to reduce other costs. If required, further financing options that may or may not be available to the Company include issuance of new equity, debentures or bank credit facilities. The need for any of these options will be dependent on the timing of securing new SFD^® related revenues and obtaining financing on terms that are acceptable to both the Company and the financier.

NXT continues to develop its pipeline of opportunities to secure new revenue contracts. However, the Company’s longer-term success remains dependent upon its ability to convert these opportunities into successful contracts, to continue to attract new client projects, ultimately to expand the revenue base to a level sufficient to exceed fixed operating costs and generate consistent positive cash flow from operations. The occurrence and timing of these events cannot be predicted with sufficient certainty.

The condensed consolidated interim financial statements do not reflect adjustments that would be necessary if the going concern basis was not appropriate. If the going concern basis was not appropriate for these condensed consolidated interim financial statements, then adjustments would be necessary in the carrying value of the assets and liabilities, the reported revenues and expenses and the balance sheet classifications used. These adjustments could be material.

Covid-19 Pandemic

As of the date of these condensed consolidated interim financial statements, the Covid-19 pandemic continues to be a risk to the operations of the Company. The Company has made provisions so employees can work safely in the office or if necessary from home, followed all Alberta Health Services and Health Canada recommendations, and implemented hygiene and physical distancing policies. Demand for our services and prospective revenues may become adversely impacted the longer the Covid-19 pandemic continues. The impact of the continuation of the Covid-19 pandemic may hamper our ability to deliver SFD^® related revenues in the following ways. If restrictions on international travel continue, our aircraft and personal may not be able to perform project surveys. An outbreak of the virus among our staff or our customers’ personnel could delay any survey in progress. Business development may be delayed when in-person meetings and technical presentations may be a superior delivery method to tele-conferences or on-line video conferencing.

The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect to the Company is not known at this time. Estimates and judgments made by management in the preparation of these condensed consolidated interim financial statements are subject to a higher degree of measurement uncertainty during this volatile period.

Use of Estimates and Judgements

In preparing these condensed consolidated interim financial statements, NXT is required to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. The Company uses the most current information available and exercises careful judgment in making these estimates and assumptions. In the opinion of management, these condensed consolidated interim financial statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies included in the annual audited consolidated financial statements for the year ended December 31, 2021. The estimates and assumptions used are based upon management’s best estimate as at the date of the condensed consolidated interim financial statements. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period when determined. Actual results may differ from those estimates.

Critical accounting estimates relate primarily to the use of the going concern assumption, estimated useful lives and the valuation of intellectual property, property and equipment and the measurement of stock-based compensation expense.

2. Significant Accounting Policies

Basis of Presentation

These condensed consolidated interim financial statements for the period ended March 31, 2022 have been prepared by management in accordance with generally accepted accounting principles of the United States of America (“US GAAP”).

Leases

During 2021, the Company determined that the amounts previously recorded for the Aircraft lease were calculated incorrectly and the United States Dollar denominated lease liability had not been re-measured to Canadian Dollars each reporting period as required. The result of these corrections are to reduce the value of both the Right of use assets and Lease obligations, with changes to related income statement. The Company has determined that the effect of these adjustments are not material. The Company has recorded the adjustments in the related accounts in the comparative periods in these financial statements. On the balance sheet and income statement, the specific accounts affected are Deposits, Right of use assets, Current portion of lease obligations, Long-term lease obligations, Deficit, SFD^® related costs, Interest income (expense), and Foreign exchange loss (gain). The loss per share in each of the comparative periods did not change as a result of these immaterial corrections. The table below highlights the changes to each account in each of the comparative period presented in these condensed consolidated interim financial statements. The disclosure in note 9 has also been revised.

Consolidated Statement of Cash Flows

In the preparation of the annual financial statements as at and for the year ended December 31, 2021, the Company has determined that certain amounts previously recorded in the first quarter 2021 consolidated statements of cash flows were not correctly calculated to properly reflect payments on the financial liability, lease obligation payments and accretion, and application of exchange rates to calculate unrealized foreign exchange (gain) loss including the effect of foreign exchange on changes on cash and cash equivalents. The adjustments to correct the respective financial statement line items are not material and did not change the Cash, SFD^® related revenues, or Net income (loss) accounts or basic and diluted loss per share. The Company has recorded the adjustments in the related line items in each of the comparative periods. Line items affected on the Consolidated Statement of Cash Flows by the adjustment are: Non-cash lease costs, Change in the carrying amount of right of use assets and lease liabilities, unrealized foreign exchange (gain) loss, Repayment of financial liability and finance lease obligations, Proceeds from (used in) short-term investments, and Effect of foreign exchange rate changes on cash and cash equivalents. The table below highlights the changes to each line item in each of the comparative periods.

3. Right of use assets

In the fourth quarter of 2021, the Company determined it was reasonably certain it would extend the term of its Aircraft Leasing Agreement effective in the second quarter of 2022 for a period of 24 months with payments of approximately US$22,500 (CDN$28,675) per month, or US$270,000 (CDN$344,099) per year.The incremental borrowing rate is 11.2%. The Company recognized an additional $615,737 Aircraft ROU assets and US$493,166 ($615,570) additional Lease obligations at December 31, 2021. Should NXT want to repurchase the aircraft at the end of the extended term, the purchase price will be US$1.21 million.

On March 15, 2022, the Company surrendered 826 square feet of its office building lease to the landlord. As a result its non-lease operating cost commitments for the building lease will be reduced by approximately $13,881 for 2022, 17,537 for 2023 and 2024, and $13,150 for 2025. The Company incurred a surrender fee of $14,000. The Company derecognized the following amounts on its balance sheet in the quarter and recorded a gain on the remeasurement of the lease of $3,062.

4. Intellectual property

Acquisition of SFD^® Geothermal Right

The Company acquired the SFD® technology rights for geothermal resources (“Geothermal Right”) from Mr. George Liszicasz, President and CEO of NXT (“CEO”) on April 18, 2021. The consideration deliverable by the Company in connection with the acquisition of the Geothermal Right is set forth below:

As of March 31, 2022, the Company has recognized $275,610 for the acquisition Geothermal Right which is the combination of the US$40,000 (CAD$50,310) and CAD$15,000 signature payments, the value of the 300,000 common shares of $207,300 and other costs of $3,000. Before the 300,000 common shares were issued by the Company, the value of the common shares was recorded as Contributed capital. Upon Toronto Stock Exchange (the “TSX”) approval, the amount recognized of $207,300 less issuance costs of $42,697 were reclassified to common shares. The cost of the remaining two milestones will be recognized when it is deemed probable that these two milestones will be achieved by a special committee of the Board of Directors, comprised entirely of independent directors. The Board of Directors delegated authority to the special committee to determine when the milestones have been achieved. As of March 31, 2022 the remaining two milestones are still deemed not probable of being achieved.

The current book value of the Geothermal Right is being amortized on a straight line basis over its estimated useful life of 20 years. The annual amortization expense expected to be recognized is approximately $13,781 per year for a 5 year aggregate total of approximately $68,902.

SFD® Hydrocarbon Right

During 2015, NXT acquired the rights to the SFD^® technology for use in the exploration of hydrocarbons (“Hydrocarbon Right”) from the CEO, and recorded the acquisition as an intellectual property asset on the balance sheet. The asset was recorded at the fair value of the consideration transferred, including the related tax effect of approximately $25.3 million.

The Hydrocarbon Right is being amortized on a straight line basis over its estimated useful life of 15 years. The annual amortization expense expected to be recognized is approximately $1.7 million per year for a 5 year aggregate total of $8.5 million.

5. Accounts payable and accrued liabilities

6. Lease obligation

The Company’s total lease expenditures for the period ended March 31, 2022 was $260,205 (2021 - $237,738).

7. Commitments

The table below is the non-lease operating cost components associated with the costs of the building lease.

8. Common shares

The Company is authorized to issue an unlimited number of common shares, of which the following are issued and outstanding:

9. Earnings (Loss) per share

In periods in which a loss results, all outstanding stock options are excluded from the diluted loss per share calculations as their effect is anti-dilutive.

10. Share based compensation

The Company has an equity compensation program in place for its executives, employees and directors. Executives and employees are given equity compensation grants that vest based on a recipient’s continued employment. The Company’s stock-based compensation awards outstanding as at March 31, 2022, include stock options, restricted stock units (“RSUs”), deferred share units (“DSUs”) and the employee share purchase plan (“ESP Plan”). The following tables provide information about stock option, RSU, DSU, and ESP Plan activity.

A continuity of the number of stock options which are outstanding at the end of the current period and as at the prior fiscal year ended December 31, 2021 is as follows:

Stock options granted generally expire, if unexercised, five years from the date granted and entitlement to exercise them generally vests at a rate of one-third at the end of each of the first three years following the date of grant.

Stock based compensation expense (“SBCE”) is calculated based on the fair value attributed to grants of stock options using the Black-Scholes valuation model and utilizing the following weighted average assumptions:

Subsequent to March 31 the Company has been informed by the TSX that 31,400 previously issued options will need to be cancelled. The Company intends to reissue the options in Q2-22. Any accounting impact will be reflected in Q2-22.

The DSUs plan is a long-term incentive plan that permits the grant of DSUs to qualified directors. DSUs granted under the DSUs plan are to be settled at the retirement, resignation or death of the Board member holding the DSUs

Restricted Stock Units:

RSUs entitle the holder to receive, at the option of the Company, either the underlying number of shares of the Company’s Common Stock upon vesting of such units or a cash payment equal to the value of the underlying shares. The RSUs vest at a rate of one-third at the end of each of the first three years following the date of grant. In the third quarter of 2021, the Company settled the RSUs that vested with shares and cash, and intends to continue to settle the RSUs in shares and cash.

A continuity of the number of RSUs, including fair value (“FV”) which are outstanding at the end of the current period and as the end of the prior fiscal year ended December 31, 2021 is as follows:

Employee Share Purchase Plan:

The ESP Plan allows employees and other individuals determined by the Board to be eligible to contribute a minimum of 1% and a maximum of 10% of their earnings to the plan for the purchase of common shares in the capital of the Company, of which the Company will make an equal contribution. Common shares contributed by the Company may be issued from treasury or acquired through the facilities of the TSX. During 2022 and 2021 the Company has elected to issue common shares from treasury.

A continuity of the number of commons shares under the ESP Plan which are outstanding at the end of the current period and as at the prior fiscal year ended December 31, 2021 is as follows:

If the employee does not withdraw common shares from the ESP Plan in the first year of their participation, the Company will match an additional 100% of the employee contributions, up to $15,000 per employee (the “Bonus Match”). The Company matched employee contributions for a total of $52,867, less any payroll withholdings in 2021. As at March 31, 2022 the Company has accrued $nil for the Bonus Match ($nil as at December 31, 2021).

11. Financial instruments

a) Non-derivative financial instruments:

The Company’s non-derivative financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, deposits, accounts payables and accrued liabilities, long-term debt and lease obligations. The carrying value of these financial instruments, excluding leases, approximates their fair values due to their short terms to maturity.

Credit Risk

Credit risk arises from the potential that the Company may incur a loss if counterparty to a financial instrument fails to meet its obligation in accordance with agreed terms. The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. The carrying value of cash and cash equivalents, short-term investments, and accounts receivable reflects management’s assessment of credit risk. At March 31, 2022, cash and cash equivalents and short-term investments included balances in bank accounts, term deposits and guaranteed investment certificates, placed with financial institutions with investment grade credit ratings. The majority of the Company’s accounts receivable relate to sales to one customer in the African region and is exposed to foreign country credit risks. The Company manages this credit risk by requiring advance payments before entering into certain contract milestones and when possible accounts receivable insurance.

Foreign Exchange Risk

The Company is exposed to foreign exchange risk in relation to its holding of significant US$ balances in cash and cash equivalents, short-term investments, accounts receivable, deposits, accounts payables, accrued liabilities, and lease obligations, and entering into United States dollar revenue contracts. The Company does not currently enter into hedging contracts, but to mitigate exposure to fluctuations in foreign exchange the Company uses strategies to reduce the volatility of United States Dollar assets including converting excess United States dollars to Canadian dollars. As at March 31, 2022, the Company held net U.S. dollar assets totaling US$803,028. Accordingly, a hypothetical 10% change in the value of one United States dollar expressed in Canadian dollars as at March 31, 2022 would have had an approximately $100,234 effect on the unrealized foreign exchange gain or loss for the period.

b) Derivative financial instruments

As at March 31, 2022 and December 31, 2021, the Company held no derivative financial instruments.

12. Change in non-cash operating working capital

The changes in non-cash operating working capital balances are comprised of:

13. Geographic information

The Company generates revenue from its SFD^® survey system that enables the clients to focus their exploration decisions concerning land commitments, data acquisition expenditures and prospect prioritization on areas with the greatest potential. NXT conducts all of its survey operations from its head office in Canada, and occasionally maintains administrative offices in foreign locations if and when needed. Revenue fluctuations are a normal part of SFD^® survey system sales and can vary significantly year-over-year.

The Company received US$0.125 million (CDN$0.16 million) of payments on outstanding accounts receivable during April 2022. There were no SFD^® revenues in the quarter ended March 31, 2022 and 2021.

14. Other related party transactions

One of the members of NXT’s Board of Directors is a partner in a law firm which provides legal advice to NXT. Accounts payable and accrued liabilities includes a total of $12,832 ($16,000 as at December 31, 2021) payable to this law firm.

Accounts payable and accrued liabilities includes $3,336 ($11,467 as at December 31, 2021) related to reimbursement of expenses owing to an executive officer and $38,750 ($nil as at December 31, 2021) for Board of Director’s fees

A company owned by a family member of an executive officer was contracted to provide presentation design services to the Company in 2021.

The Geothermal Right was acquired from the Company’s CEO on April 18, 2021. As discussed in Note 4,the Company acquired the Geothermal Right from its Chairman, President and Chief Executive Officer, Mr. Liszicasz.

EXHIBIT 99.2

NXT ENERGY SOLUTIONS INC.

Management's Discussion and Analysis

For the three months ended

March 31, 2022

Management's Discussion and Analysis

This discussion and analysis ("MD&A") was prepared by management of NXT Energy Solutions Inc. ("NXT", "we", "us", "our" or the "Company") based on information available as at May 12, 2022 unless otherwise stated, has been approved by the Board of Directors of the Company (the "Board"), and should be reviewed in conjunction with the unaudited condensed consolidated interim financial statements and related notes for the period ended March 31, 2022 (the "unaudited condensed consolidated interim financial statements"). This MD&A covers the unaudited three month period ended March 31, 2022, with comparative amounts for the unaudited three months period ended March 31, 2021.

Our functional and reporting currency is the Canadian dollar. All references to "dollars", "$" and "CDN$" in this MD&A are to Canadian dollars unless specific reference is made to United States dollars ("US$").

NXT^® and SFD^® are registered trademarks of NXT in Canada and the United States.

Advisories

Forward-looking Information

Certain statements contained in this MD&A constitute "forward-looking information" within the meaning of applicable securities laws. These statements typically contain words such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "will", "continue" and similar words and phrases suggesting future outcomes or an outlook. Forward-looking statements in this document includes, but is not limited to:

	·	payment of the Consideration (as defined below), and the satisfaction of the conditions thereto (including with respect to cash balances, receipt of funds, and the execution and completion of contracts);
	·	the development, commercialization and protection of the SFD® technology for geothermal resource exploration;
	·	the extent to which expanding the Company's scope of business to include exploring for both hydrocarbon and geothermal resources is anticipated to result in an expansion of its scope of revenue sources;
	·	the Company’s pursuit of opportunities to secure new revenue contracts;
	·	estimates related to our future financial position and liquidity including certain contractual obligations; and
	·	general business strategies and objectives.

Such forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this document:

	·	our ability to develop and market our SFD® technology and services to current and new customers;
	·	our ability to source personnel and equipment in a timely manner and at an acceptable cost;
	·	our ability to obtain all permits and approvals required;
	·	our ability to obtain financing on acceptable terms;

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	·	our ability to obtain insurance to mitigate the risk of default on client billings;
	·	foreign currency exchange and interest rates; and
	·	general business, economic and market conditions (including global commodity prices).

Although NXT believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on them as NXT can give no assurance that such expectations will prove to be correct. Forward-looking information is based on expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by NXT and are described in the forward-looking information. Material risks and uncertainties include, but are not limited to:

	·	the ability of management to execute its business plan, including their ability to secure new revenue contracts;
	·	health, safety and the environment (including risks related to the COVID-19 pandemic);
	·	the emergence of alternative competitive technologies;
	·	our ability to develop and commercialize the geothermal technology;
	·	our ability to service existing debt;
	·	our ability to protect and maintain our intellectual property ("IP") and rights to our SFD® technology;
	·	our reliance on a limited number of key personnel;
	·	our reliance on a limited number of aircraft;
	·	our reliance on a limited number of clients;
	·	counterparty credit risk;
	·	foreign currency and interest rate fluctuations;
	·	the likelihood that the Company’s ICFR (as defined below) will prevent or detect material misstatements in our unaudited condensed consolidated interim financial statements;
	·	changes in, or in the interpretation of, laws, regulations or policies; and
	·	general business, economic and market conditions (including global commodity prices).

For more information relating to risks, see the section titled "Discussion of Operations – Risk and Uncertainties" in this MD&A and the section titled "Risk Factors" in NXT's most recently filed Annual Information Form. Except as required by applicable securities law, NXT undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

Financial outlooks are provided for the purpose of understanding the Company's accounting practices and liquidity position, and the information may not be appropriate for other purposes.

Non-GAAP Measures

NXT's accompanying unaudited condensed consolidated interim financial statements were prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). This MD&A includes references to net working capital which does not have a standardized meaning prescribed by US GAAP and may not be comparable to similar measures being presented by other entities. Net working capital is the net result of the difference between current assets and current liabilities, and can be used by investors and management to assess liquidity at a particular point in time. See "Liquidity and Capital Resources – Net Working Capital" for further information.

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Description of the Business

NXT Energy Solutions Inc. is a Calgary-based technology company whose proprietary and patented Stress Field Detection ("SFD^®") survey system utilizes quantum-scale sensors to detect gravity field perturbations in an airborne survey method which can be used both onshore and offshore to remotely identify traps and reservoirs with hydrocarbon and geothermal exploration potential. The SFD^® survey system enables NXT's clients to focus their exploration decisions concerning land commitments, data acquisition expenditures and prospect prioritization on areas with the greatest potential. SFD^® is environmentally friendly and unaffected by ground security issues or difficult terrain and is the registered trademark of NXT. NXT provides its clients with an effective and reliable method to reduce time, costs and risks related to exploration.

Financial and Operational Highlights

Key financial and operational highlights for Q1-22 are summarized below:

	·	the Company extended its aircraft lease until April 2024;
	·	NXT patent application in Brazil has been officially allowed, bringing the total number of countries in which NXT holds patents to 46;
	·	cash and short-term investments at March 31, 2022 were $1.87 million;
	·	net working capital was $1.35 million at March 31, 2022;
	·	the Company recorded SFD® related revenues of $nil and received US$0.20 (CDN$0.25) of payments on outstanding accounts receivable in February 2022;
	·	a net loss of $1.84 million was recorded for Q1-22, including stock-based compensation expense ("SBCE") and amortization expense of $0.50 million;
	·	net loss per common share for Q1-22 was $0.03 basic and $0.03 diluted;
	·	cash flow used in operating activities was $0.91 million during Q1-22;
	·	general and administrative ("G&A") expenses increased by $0.01 million (1%) as compared to Q1-21; and
	·	the Company surrendered 826 square feet of office space in March 2022.

Key financial and operational highlights occurring subsequent to Q1-22 are summarized below:

·

the Company received US$0.13 million (CDN$0.16) of payments on outstanding accounts receivable during April 2022.

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Discussion of Operations

COVID-19 Pandemic

As of the date of the unaudited condensed consolidated financial interim statements, the COVID-19 pandemic continues to be a risk on the operations of the Company. The Company has made provisions so employees can work safely in the office or from home, followed all Alberta Health Services and Health Canada recommendations, and implemented hygiene and physical distancing policies. Demand for our services, as well as our ability to provide services and to generate revenues may become adversely impacted the longer the COVID-19 pandemic continues. For example, if restrictions on international travel continue and/or an outbreak of the virus among our or our customers' personnel occurred, it may result in NXT being unable to perform surveys. Further, business development may impacted, as tele-conferences or on-line video conferencing may be an inferior method of business development than in-person meetings and technical presentations.

The Company’s approach to managing the impacts of the COVID-19 pandemic is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect to the Company is not known at this time. Estimates and judgments made by management in the preparation of the condensed consolidated interim financial statements are subject to a higher degree of measurement uncertainty during this volatile period.

Acquisition of the Geothermal Right

The Company acquired the SFD^® technology rights for geothermal resources (“Geothermal Right”) from Mr. George Liszicasz, President and Chief Executive Officer of NXT (“CEO”) on April 18, 2021. The consideration deliverable by the Company in connection with the acquisition of the Geothermal Right is set forth below (the “Consideration”):

	1.	US$40,000 (CDN$50,310) signature payment, which became due immediately and was paid on April 22, 2021;
	2.	300,000 common shares, which were issued in December 2021;
	3.	CDN$15,000 signature milestone payment paid in August 2021;
	4.	US$200,000 milestone payment which will become due in the event that the Company's cash balance exceeds CDN$5,000,000 due to receipt of specifically defined funds from operations; and
	5.	US$250,000 milestone payment which will become due in the event that the Company executes and completes and receives full payment for an SFD® contract valued at US$10,000,000 or greater, provided such contract is entered into and completed and payment of at least US$5,000,000 is received by April 18, 2023.

As of March 31, 2022, the Company has recognized $275,610 for the acquisition Geothermal Right which is the combination of the US$40,000 (CDN$50,310) and CDN$15,000 signature payments, the value of the 300,000 common shares of $207,300 and other costs of $3,000. The cost of the remaining two milestones will be recognized when it is deemed probable that these two milestones will be achieved by a special committee of the Board, comprised entirely of independent directors. The Board delegated authority to the special committee to determine when the milestones have been achieved.

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Geothermal Right Development Update

Progress continues with respect to the development of the SFD-GT geothermal sensor family. The objective of this project was to test, identify and analyze the desired elements of the SFD^® geothermal sensor response over known geothermal areas with the ultimate goal of providing a green upstream geophysical service for advancing renewable power initiatives in Canada and abroad. The agreed project work was completed in November 2021 with total funding of $50,000 from the National Research Council of Canada Industrial Research Assistance Program ("NRC IRAP"). The Company is currently working with NRC IRAP to develop a funding and research plan for the next phase to support the research and development of the SFD^® technology for geothermal applications.

Patents

In Q1-22, NXT announced its patent application in Brazil has been allowed. As of the date of this MD&A, NXT has been granted SFD^® patents in Brazil (February 2022) India (July 2021), Russia (January 2017), Japan (July 2017), Canada (August 2017), Mexico (September 2017), the United States (two patents were granted in November 2017 and September 2018, respectively), China (April 2018), and Europe (January 2020). In total, NXT has obtained SFD^® patents or received patent allowances in 46 countries. These patents protect our proprietary SFD^® technology and serve as independent third-party recognition of our technological invention in terms of practical applicability, conceptual novelty, and knowledge advancement.

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Quarterly operating results. Net loss for Q1-22 compared to Q1-21 increased by $193,576, or $0.00 per share-basic. SFD^® related costs, net, were $171,667 higher due to the timing of routine maintenance costs and adding 300 available flight hours to the Company’s aircraft. G&A expenses increased by $12,241, or 1%, compared to Q1-21, due primarily to an increase in SBCE, which was offset by lower vacation, consulting and professional fee expenses. Interest (income) expense, net changed by $2,682 in Q1-22 versus Q1-21 due to interest expense for the Business Development Bank of Canada’s ("BDC") Highly Affected Sectors Credit Availability Program (the "HASCAP Loan") in Q1-22. With respect to foreign exchange, the CDN$ strengthened to the US$ in both quarters (2.0% in 2022 and 0.9% in 2021), the Company held less net assets in US$ as at March 31, 2022 versus March 31, 2021 resulting in a similar foreign exchange loss. IP and other expenses increased $10,536. Q1-22 related mostly to costs associated with maintaining certain SFD^® patents.

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SFD^® related costs include aircraft charter costs (net of charter hire reimbursements), lease expenses and aircraft operation and maintenance costs. In Q1-22, SFD^® related costs were higher compared to Q1-21 due to the timing of routine maintenance costs and preparing the aircraft for up to 300 hours of flight hours to conduct SFD^® surveys.

The aircraft is available for charter to third parties through our aircraft manager when it is not being used by NXT. Any charter hire reimbursements received are used to offset aircraft costs.

The Company extended the term of its Aircraft Leasing Agreement effective in the second quarter of 2022 for a period of 24 months with payments of approximately US$22,500 (CDN$28,675) per month, or US$270,000 (CDN$344,099) per year. The incremental borrowing rate is 11.2%.

Should NXT want to repurchase the aircraft at the end of the extended term, the purchase price will be US$1.21 million.

G&A expenses increased $12,241, or 1%, in Q1-22 compared to Q1-21 for the following reasons:

	·	salaries, benefits and consulting charges decreased $15,353, or 3%, due to lower vacation expense and lower consultant fees in Q1-22;
	·	Board and professional fees and public company costs decreased $11,050, or 6%, due primarily to decreased professional fees;
	·	premises and administrative overhead costs increased $10,129, or 5%, as building operating increased costs, mostly due to carbon taxes;
	·	business development costs were minimal in both Q1-22 and Q1-21 as business development travel was reduced in the quarters; and
	·	SBCE were higher in Q1-22 vs Q1-21 by $30,020, or 113% due to higher stock option, Restricted Share Unit Plan ("RSU Plan") and offset by the Employee Share Purchase Plan ("ESP Plan") expenses decreasing. Please see the next section "Discussion of Operations – General and Administrative Expenses – Stock-based Compensation Expenses" for further information on the SBCE.

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SBCE varies in any given quarter or year as it is a function of several factors including the number of units of each type of stock-based compensation plan issued in the period and the amortization term (based on the term of the contract and/or number of years for full vesting of the units, which is normally three years) of the resultant expense. Also, SBCE is a function of periodic changes in the inputs used in the Black-Scholes option valuation model, such as volatility in NXT's trailing share price and for cash-settled stock-based compensation awards variability will occur based on changes to observable prices.

Stock options granted generally expire, if unexercised, five years from the date granted and entitlement to exercise them generally vests at a rate of one-third at the end of each of the first three years following the date of grant.

The deferred share unit ("DSUs") plan (the "DSU Plan") is a long-term incentive plan that permits the grant of DSUs to qualified directors. DSUs granted under the DSU Plan are to be settled at the retirement, resignation or death of the Board member holding the DSUs.

Restricted Share Units (“RSUs”) entitle the holder to receive, at the option of the Company, either the underlying number of shares of the Company's common shares upon vesting of such units or a cash payment equal to the value of the underlying shares. The RSUs vest at a rate of one-third at the end of each of the first three years following the date of grant. In Q3-21, the Company settled the Q3-21 RSU vesting with common shares and cash, and intends to continue to settle the RSUs in common shares and cash.

The ESP Plan allows employees and other individuals determined by the Board to be eligible to contribute a minimum of 1% and a maximum of 10% of their earnings to the plan for the purchase of common shares in the capital of the Company, of which the Company will make an equal contribution. Common shares contributed by the Company may be issued from treasury or acquired through the facilities of the Toronto Stock Exchange. During 2021 and 2022 the Company has elected to issue Common Shares from treasury.

SBCE in Q1-22 was higher compared to Q1-21 by $30,020 or 113%. The main driver of the higher expense was a forfeiture in the RSU Plan in Q1-21 which reduced the RSU expense and one director electing to take all of their 2022 director fees in options versus only one half of the director fees in Q1-21. This increase was offset partially by there being no ESP Plan bonus accrual in Q1-22 as all participants in the plan have been members of the plan for more than one year. No directors elected to participate in the DSU Plan in 2022 and 2021.

NXT Energy Solutions Inc. MD&A for the period ended March 31, 2022

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Property and equipment and related amortization expense. Property and equipment amortization was lower in Q1-22 compared to Q1-21 due to additional assets becoming fully amortized during the period and the Company not acquiring new assets in the periods. Amortization also decreases each year as the Company uses the declining balance method of depreciation, thereby having the effect of lowering amortization each year on existing assets.

Intellectual property and related amortization expense. NXT acquired specific rights to utilize the proprietary SFD^® technology in global hydrocarbon exploration applications from the inventor of the SFD^® technology, NXT's Chairman, President and CEO, on August 31, 2015. The value attributed to the acquired IP assets was $25.3 million. The IP assets are being amortized on a straight-line basis over a 15-year period (future amortization expense of $1,685,000 per year) and are also being subject to ongoing assessment of potential indicators of impairment of the recorded net book value. No impairments were recognized in Q1-22 or Q1-21.

As discussed in the section "Discussion of Operations – Acquisition of the Geothermal Right", the Company acquired the SFD^® technology for the Geothermal Right from NXT’s Chairman, President and CEO on April 18, 2021. The Geothermal Right is being amortized on a straight line basis over its estimated useful life of 20 years. The annual amortization expense expected to be recognized is approximately $13,781 per year for a five-year aggregate total of $68,902.