NXT Energy Solutions Inc. ("NXT" or the "Company") is pleased to announce it has received the first tranche of a planned US$900,000 (approximately CDN$1,252,080) convertible debenture (the "Debentures") from Ataraxia Capital ("Ataraxia") for the principal amount of US$500,000, (approximately CDN$,695,600), pursuant to the terms of the subscription agreement signed between Ataraxia and NXT in 2023. The Toronto Stock Exchange (the "TSX") has provided conditional approval of the final phase of this 2023 agreement.
The Debentures bear interest at 10.0% per annum, paid quarterly in arrears, and are due and payable two years after the issue date. The Debentures are convertible into common shares of NXT (the "Common Shares") at a conversion price of US$0.24 (CDN$0.324) per Common Share which provides Ataraxia with the right to obtain up to 2,083,333 Common Shares of NXT. The Debentures may also be converted into voting preferred shares of NXT (the "Preferred Shares") with an annual dividend rate of 10% paid quarterly in arrears. The Preferred Shares are not transferable, but may be converted on a one-to-one basis into Common Shares. The Debentures are payable on demand and are secured by a general security agreement, subordinate to the Business Development Bank of Canada's Highly Affected Sectors Credit Availability Program loan.
Ataraxia currently holds US$1,400,000 (approximately CDN$1,947,680) of previously issued debentures under the 2023 subscription agreement (the "2023 Debentures") with a conversion price of US$0.143 per Common Share. Once Ataraxia has completed the tranches of its US$900,000 investment, Ataraxia will own an aggregate of US$2,300,000 Debentures and 2023 Debentures (collectively, the "Ataraxia Debentures"). With the acquisition of the Debentures, Ataraxia will have the right to own, after conversion of the Ataraxia Debentures, up to 13,540,209 Common Shares, representing approximately 14.7% of the issued and outstanding Common Shares (after giving effect to the conversion of the full amount of the Ataraxia Debentures).
The proceeds from the Debentures will be used to support the working capital needs of the upcoming SFD® surveys in Africa and Southeast Asia, and other general and administrative costs which include business development and marketing activities required to transform the existing pipeline of SFD® opportunities into firm contracts.
Commenting on the Debenture offering, Bruce G. Wilcox, CEO of NXT said, "We are very pleased and grateful that our strategic alliance partner, Ataraxia Capital, has increased its ownership position in fulfillment of its commitment from 2023. This provides NXT with additional capital to support the successful execution of our upcoming surveys. As previously disclosed, NXT was recently awarded an SFD® survey contract in Africa by Synergy Exploration and Production Technologies Limited., an affiliate of Ataraxia Capital. Data acquisition operations for this contract are expected to commence in the fourth quarter of 2024, and NXT's interpretations and recommendations are expected to be delivered during the first quarter of 2025."
In accordance with MI 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the Company's issuance of the Debentures to Ataraxia constitutes a "related party transaction".
The Company has relied on exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 contained in sections 5.5(a) and 5.7(1)(a) of MI 61-101 in respect to the issuance of the Debentures to Ataraxia as the fair market value of the Debentures is below 25% of the Company's market capitalization (in each case as determined in accordance with MI 61-101).
Please note that the securities described herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "1933 Act"), or any state securities laws, and accordingly, may not be offered or sold within the United States except in compliance with the registration requirements of the 1933 Act and applicable state securities requirements or pursuant to exemptions therefrom. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in the United States or in any other jurisdiction in which such offer, solicitation or sale would be unlawful.
