George Liszicasz – President and Chief Executive Officer. Jakub Brogowski – Vice President-Finance and Chief Financial Officer

Good day ladies and gentlemen. My name is Patrick, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the NXT Energy Solutions’ Q2 2018 Operating and Financial Results Conference Call. [Operator Instructions]. I would like to turn the meeting over to Mr. George Liszicasz, President and CEO of NXT Energy Solutions. Please go ahead Mr. Liszicasz.

Thank you, Peter – I mean Patrick. Welcome and thank you everyone for joining us today for NXT Energy Solutions’ second quarter 2018 financial and operating results conference call. This is George Liszicasz and joining me today’s conference call to present our result is Jakub Brogowski, our VP Finance and Chief Financial Officer, and also Enrique Hung, Director of Global Geo-Science for Latin America. The purpose of today’s call is to briefly discuss the highlights of this morning’s release of NXT’s second quarter 2018 financial and operating results and to update you on the market and our business activities. Following our updates, we will be open the line for questions. Please note all statements made by the Company and management during this call are subject to the readers advisory regarding forward-looking information and non-GAAP measures set forth in our second quarter results press release and MD&A issued this morning before market open. All dollar amount discussed in today’s conference call are in Canadian dollars unless or otherwise stated. The complete financial and operating results and other detailed contents interim financial statements for Q2 2018 were published this morning and are available at NXT’s website as well on SEDAR’s website. The second quarter was another active quarter for the company, with particular focus on three main areas, business development, contract, IP and research and development, and financing. I will explain that each of these later in today’s call. During the quarter, international crude oil prices also continue to strengthen, with brent oil, now trading in the mid-70s range, up from the mid-60s range during the first quarter. Although geopolitical tensions have created a risk premium in the oil prices fundamental support remains strong. and the international energy agency forecasting crude oil demand to reach 100 million barrels per day this year. The strengthening of oil market in 2018, has supported our business development discussions, as more and more companies are preparing plans to return to exploration drill bit, which is well for NXT Contract discussions. As a result, we have been involved in negotiations with major oil and gas companies and large seismic providers as well. NXT has renewed discussions for SFD surveys in a number of countries in Africa, while also continuing developing our current contract pipeline in Southeast Asia, Latin America and North America. We are very pleased with our progress. We are positioning our team to increase focus on regions and opportunities, we believe that are translatable in the next 12 months while laying the groundwork for the development of our 2019 business development pipeline. I'm also pleased to report that we concluded our important private placement during the quarter raising a total of $9.48 million from Alberta Green Ventures, which was only slightly less than our plant of $10 million. This was a crucial financing for the company and we are excited to continue working with AGV moving forward. I would like to turn the financial review to Jakub now if you would please.

Thank you, George, and welcome everybody on the call. As George mentioned, our Q2 2018 financial statements and management discussion and analysis was filed on SEDAR’s website this morning and will be available on EDGAR shortly. From a financial perspective, the focus remains on reducing non-core corporate costs where available and focusing on business development efforts in support of pursuing opportunities for generating SFD Contract revenue over the quarter. For the second quarter 2018, our financial results were as follows. There were no revenues earned in the second quarter of 2018. NXT recorded a net loss after tax of approximately $1.96 million or $0.03 a share based on 64.3 million weighted average common shares outstanding. The increase in our shares outstanding during the quarter was a result of closing the two parts of the second tranche of Private Placement of May 15, and June 15. NXT received CAD4.2 million in connection with the issuance of approximately 4.5 million units. Each unit consisted of one common share of NXT, and one-third of one common share purchase warrant, each warrant entitles the holder or AGV to acquire one common share at an estimated price of CAD1.20 for 12 months, up to February 16, 2019. The total operating expenses excluding the adjustments for tax for the quarter were approximately CAD1.96 million, this included non-cash expenses of approximately CAD0.6 million related mainly to the amortization and stock based compensation expenses. Operating activities used approximately CAD1.9 million of cash during the quarter and we had a net increase in cash and short-terms investments of CAD2.1 million as a result of closing additional tranches of our private placement. We continue to see significant progress in our corporate cost reduction program over the quarter, and we are seeing year-on-year drop in cost of 17%, while at the same time we’ve doubled spending in business development as we focus on this area to secure SFD Contracts. The main driver for the lower costs were salaries, benefits and consulting charges, due to the reduction in the corporate headcount. These cost reductions were offset by higher board professional fees and public company costs, which were approximately 35% higher during the second quarter compared to Q2 2017. As the Company incurred cost related private placement and termination costs related to longer-term cost reduction efforts. As business development costs increased – also business development cost increased two-fold in the second quarter of 2018, as we continue to focus capital on potential revenue generating initiatives in regards to our SFD technology. Furthermore, business development cost had decreased significantly below normal in Q2 2017, as the company needed to conserve cash prior to the completion of its recent financings. We’ve ended the second quarter with a significantly improved financial position with $6.2 million of cash and short-term investments on hand and a net working capital position of $5.2 million. Moving forward, we're continuing to seek areas where we can reduce costs and also directing expenditures towards business development activities to close on near-term contract negotiations and build our contact pipeline moving forward. I'd now like to hand the call back over to George to further discuss our business update and forward plans.

Thank you very much Jakub. As I mentioned in the start of the call it was a active quarter for the company. Strengthening oil markets continue to support our business development efforts in marketing SFD contracts. We also continue to invest in our technology to improve the capabilities of SFD and our product offering for clients. Key business development highlights during the quarter include the following: starting in Southeast Asia, our partner SHINE Quests advanced financing and government approval discussions for their large scale infrastructure and resource development in the Mannar Basin in Sri Lanka. Once these are concluded we are ready to enter into and execute an SFD contract for a large portion of the Mannar Basin. The delay has resulted from increased compliance requirements stemming from new U.S. banking regulations. We hope it's all going to be resolved shortly. In Indonesia, Generation Resources or GRD have also progressed financing and permitting discussions needed for geophysical survey over an area up to 20,000 square kilometers in the North Sumatra basin offshore Aceh, Indonesia. These are expected to conclude by August 2018 – by the end of August 2018. As per GRD MoU signed with the Government of Ache, SFD will be the lead technology, utilizing, conducting this geological survey. During the third week of August, we will be in Indonesia to support GRD’s financing effort and finalize the survey plan for the region. As I mentioned last quarter, NXT had the opportunity to present the Upstream Africa Summit in Senegal in June. The conference was very well attended and it was clear exploration – it was clear that exploration interest in the continent is being revitalized. On the back of our trip to Senegal, we also renewed marketing efforts for SFD contracts both offshore and onshore Africa. These include the discussions with governments of Ghana, Nigeria and their national companies. We're also in discussions with a few large oil and gas players regarding their onshore Africa acreage and the potential for utilization of SFD where the use of large scale seismic programs would be very costly and time consuming, relative to SFD. The opportunities under the discussions are both near-term and for the development of our 2019 project pipeline. In the Gulf of Mexico we have submitted technical materials to a major oil and gas player regarding our market client data and to support their data integration. We have planned meetings in Asia during the third quarter to advance these initiatives. Back in North America, we are discussing smaller scale survey project to identify prospective new place for E&P companies. The total structure being contemplated will charge a lower upfront survey fee in exchange for royalty revenue from future production. This is an exciting initiative for all of us because it allows us to benefit from the value in the ground, which we created through the use of SFD and creates a win-win with clients. On the technology front, we are delighted to have received notice of allowance for the continuation of European patent in the United States regarding our new Cascade sensor design. We're continually developing and testing new sensors where we conduct surveys. It's allowed us to improve our ability to identify trapped fluid bodies below the ground and also helps us to stay ahead of the industry and technology development. The Cascade sensors are rigorously tested using a vehicle driven – using a vehicle driven through some areas with known oil and gas accumulations and geophysical – geological features in Alberta, and R&D flights conducted as part of our multi-client survey in the Gulf of Mexico. The Cascade sensors will be applied in all SFD surveys moving forward, providing greater flexibility for sensor adjustments and improve sensors’ stability during the SFD Survey operations. In conclusion, we are excited by our continued progress during the second quarter. Corporate resources have been repositioned to key business development efforts, we believe can be translated into revenue generating contracts over the next year, and we continue to build our pipeline for growth in the future. On behalf of our Board of Directors and the entire NXT team, I want to thank you all of our share – thank you all for our shareholders for their continued support. I now ask our operator Patrick, to open up the lines for questions.

Thank you. We’ll now take questions from the telephone lines. [Operator Instructions]. We have a question from Mike Moore [ph]. Please go ahead.

Hi. I got a question regarding the private counterparties in Canada and the U.S, obviously it’s been frustrated in the last couple of years, because the governments react so slowly, they’re so bureaucratic. It looks like this is kind of a way to get around that because you’re dealing with private companies. I wonder if you have a timeframe on when you might be able to engage these private companies and actually get the drill bit in the ground and hopefully get some royalty income?

Well, right now we’re in discussions with a private funding that would allow us to conduct surveys for a corporation or other – a number of companies are involved in this process in Canada and also in the United States. They are two independent operations, but they are connected through the funders, and that would allow us to – basically we are testing the technology for a certain play type, and if that play type we will be able to show that we can image the play type and it will be a much bigger operation. Right now we are looking at about CAD1 million worth of surveys to see, if we can see these two different play types, one in the United States and the other one in Canada and the timeframe is, we are in negotiations as we speak.

Okay. That sounds good.

Thank you.

Thank you. [Operator Instructions]. There are no further questions registered at this time, I would like to turn the meeting back over to Mr. Liszicasz.

Thank you very much everybody for participating on our conference call and looking forward to give you updates as guaranteed. And thank you for your support.

Thank you. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.