As filed with the Securities and Exchange Commission on April 14, 2004



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UNITED STATES

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549_________________

FORM 10K_________________





|[X]  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934    
|---- | ----------------------------------------------------------------------------------------
|     | For the fiscal year ended December 31, 2003                                             
|     |                                                                                         
|[  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|     | For the transition period from ___________ to ___________                               



Commission file number:  0-24027



ENERGY EXPLORATION TECHNOLOGIES INC(Exact name of registrant as specified in its charter)Alberta, CanadaN/A(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)700-840-7 Avenue SW, Calgary, Alberta, Canada,T2P 3G2(Address of principal executive offices)(Zip Code)




Registrant's telephone number, including area code:  (403) 264-7020



Securities registered pursuant to Section 12(b) of the Act:  None



Securities registered pursuant to Section 12(g) of the Act:  Common stock



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

YES   [X]     NO   [   ]



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this Chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [  ]



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)  YES [  ]  NO [X]



The aggregate market value of the voting stock held by non-affiliates of the registrant as of  June 30, 2003 was approximately $4,618,959  based upon the closing price per share of the registrant's common shares of $0.40 on that date.



The number of shares outstanding of the registrant's common stock as of April 6, 2004:  19,845,293 shares.

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Advisement



Unless specified otherwise as used herein, the terms "we," "NXT", "us" or "our" refers to Energy Exploration Technologies Inc., its wholly owned subsidiaries and its interest in its joint ventures.



Our functional currency is the United States dollar.  All references to "dollars" in this annual report refer to United States or U.S. dollars unless specific reference is made to Canadian or CDN dollars.  The rate of exchange of Canadian dollars to United States dollars as of December 31, 2003, was CDN $1.2965 to U.S. $1.  For information relative to the conversion of Canadian amounts into US dollars, see the section contained in explanatory Note 2 to our consolidated financial statements captioned "Foreign Currency Translation".



Special Note Regarding The Observations, Beliefs And Opinions Expressed In This Annual Report Relating To The Scientific Basis And Principles Of Our SFD Technology



The observations, beliefs and opinions we express in this annual report relating to the scientific basis and principles of our SFD technology, and the ability of our SFD Technology to detect subsurface conditions, represent those of our company and our management alone, and should not be construed as representing those of any third party, except to the extent expressly stated in this annual report.

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TABLE OF CONTENTS



PART I



|                                                                                   | Page
|---------------------------------------------------------------------------------- | ----
|Item 1. Business                                                                   | 4   
|Item 2. Properties                                                                 | 15  
|Item 3. Legal
    Proceedings                                                      | 16  
|Item 4. Submission of Matters to a Vote of Security
    Holders                    | 16  
|PART II                                                                            |     
|Item 5. Market for the Registrants Common Shares and Related Stockholder Matters. | 17  
|Item 6. Selected Financial
    Data                                                | 19  
|Item 7. Managements Discussion and Analysis of Financial Condition and Results    |     
|Of
    Operations                                                                  | 21  
|Item 7A. Quantitative and Qualitative Disclosures About Market
    Risk            | 28  
|Item 8. Financial Statements and Supplementary
    Data                            | 29  
|Item 9. Changes in and Disagreements with Accountants on Accounting and            |     
|Financial
    Disclosure                                                           | 56  
|Item 9A. Controls and
    Procedures                                               | 57  
|PART III                                                                           |     
|Item 10. Directors and Executive Officers of the
    Registrant                    | 57  
|Item 11. Executive
    Compensation                                                | 60  
|Item 12. Security Ownership of Certain Beneficial Owners and
    Management        | 64  
|Item 13. Certain Relationships and Related
    Transactions                        | 66  
|Item 14. Principal Accounting Fees and
    Services                                | 66  
|PART IV                                                                            |     
|Item 15. Exhibits, Financial Statement Schedules and Reports on Form
    8-K       | 67  

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PART I



ITEM 1.  BUSINESS



OVERVIEW



Energy Exploration Technologies Inc. is an oil and gas exploration company that utilizes the Stress Field Detector (SFD) technology invented by George Liszicasz, our CEO, President and largest shareholder. The SFD technology is a remote-sensing airborne survey technology comprised of SFD sensors, integrated electronic data acquisition, processing and interpretation subsystems and software. Our principal executive offices are located at 700, 840 - 7 Avenue SW, Calgary, Alberta, Canada and our telephone number is (403) 264-7020.



We use the airborne SFD technology to survey large exploration areas from leased aircraft at speeds of approximately 200 mph to identify and prioritize oil and gas prospects for further evaluation and potential drilling.  Our SFD affords us the relatively inexpensive ability to acquire, analyze and interpret data on potential hydrocarbon prospects in a matter of days or weeks, as compared to months or years for other wide-area exploration activities.  These advantages can dramatically reduce finding costs and the time required to identify oil and gas prospects. Once SFD prospects are identified, highly focused conventional geological and geophysical methods are employed to evaluate the potential commercial viability of the prospects. Finding costs include seismic acquisition, purchasing mineral rights and drilling and completing exploration wells.



We now conduct our activities primarily through our wholly owned subsidiary, NXT Energy Canada Inc., which focuses on Canadian-based exploration. We also have a division office in the United Arab Emirates. Prior to the sale of our U.S. properties in March of 2003, we also operated through NXT Energy USA Inc. which focused on United States-based exploration.  Survey flight activities are conducted through our subsidiary, NXT Aero Canada Inc. The parent company concentrates on improving our SFD survey system and oversees the operations of and provides management, financial and administrative services to our subsidiaries.



CORPORATE HISTORY



We were initially incorporated in Nevada on September 27, 1994 under the name Auric Mining Corporation.  In January 1996, we acquired all of the common stock of NXT Energy USA (then known as Pinnacle Oil Inc.) from its stockholders in exchange for our common stock.  As a consequence of this reverse acquisition, NXT Energy USA became our wholly-owned subsidiary and its stockholders acquired a 92% controlling interest in our common stock.



Prior to this transaction, we were a corporate shell conducting no active business, and NXT Energy USA was a development stage research and development enterprise holding world-wide rights to use the SFD technology for hydrocarbon exploration purposes.



Immediately after this transaction, we changed our name to Pinnacle Oil International, Inc, and subsequently, on June 13, 2000, we changed our name to Energy Exploration Technologies.



On October 24, 2003 the shareholders, at a special shareholders meeting, approved the continuance of the company from the State of Nevada to the Province of Alberta, Canada. At that time we modified our name to Energy Exploration Technologies Inc.



CORPORATE OBJECTIVE



Our corporate objective is to become an industry leader in technology-driven oil and natural gas exploration.  We believe our SFD technology has the potential to provide significant competitive advantages.

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BUSINESS STRATEGY



Our primary objective is the achievement of profitability and self-sustaining growth:



|· | through the development or sale of our current inventory of properties;                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | by using the SFD survey technology to identify oil and gas prospects that have the potential to justify the acquisition of mineral rights for oil and gas developments;                  
|· | through the early acquisition of mineral rights;                                                                                                                                         
|· | through the use of conventional exploration technologies to confirm the oil and gas prospects identified with the SFD survey technology ;                                                
|· | by either directly  participating in the selection of drilling locations or joint venturing with partners who will earn an interest by drilling the prospects at their cost and risk; and
|· | by the monetization of the properties as they reach the development stage.                                                                                                               



We believe that the majority of the value of hydrocarbon reserves is added early in the development cycle and we plan to sell the reserves as the value-adding curve begins to level off. We do not plan to be a long-term production based company, although we may hold properties after they begin production for periods of time while we wait for oil and natural gas prices to increase. Reserves will be treated as portfolio investments and will be sold off as product prices rise and held when prices drop. This strategy will require discipline and focus, as it tends to be contrary to the activities of many industry participants. Also, we will need to build a financial reserve to enable us to sustain operations through the cyclical price downturns that regularly occur in this industry.



We believe that by successfully exploiting our SFD we will be able to achieve market acceptance and access to additional capital to fund the exploration, land acquisition and drilling efforts that will be necessary to sustain our future growth and expansion.



STRESS FIELD DETECTOR TECHNOLOGY



Nature of SFD

Our SFD allows us to measure variations in energy fields, which we believe to be related to subsurface structures under stress and hydrocarbon accumulations.  By analyzing these field patterns, we are able to determine the probability of locating commercially viable hydrocarbon deposits.



Subsurface mechanical stresses are caused by tectonic forces that disrupt the stress and pressure equilibrium in buried strata. Sedimentary basins are created in a marine environment and initially consist of relatively undisturbed flat-lying or gently dipping sediments or sedimentary rock generally maintaining balanced pressure equilibrium and therefore low constant stress.  Where the sedimentary package is exposed to tectonic forces that compress, fold, fault or fracture the sedimentary column, a balanced mechanical equilibrium is not maintained. The sedimentary rock strata must absorb the additional stress caused by these tectonic forces. In other areas where the regional strata are characterized by non-uniform geologic layering or intrusive geological features, there appears to be exhibited higher residual stress than the surrounding regional strata.



Subsurface hydraulic stresses are caused by the presence of fluids (liquids and gases) such as water, oil and natural gas, within the strata and, more particularly, the inherent and directional pressures resulting from the relative buoyancy of the fluids.  Oil and gas will percolate upwards through the strata by way of fractures or permeable strata

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until they either reach the surface or are stopped or trapped by a non-porous barrier, in which case they will continue to exert pressure against the trapping barrier.



While the response of our SFD to known structurally trapped accumulations is more readily demonstrated, responses to stratigraphically trapped accumulations have led us to infer that a hydraulic component of stress exists in certain trapping conditions.  As a consequence, our SFD technology has practical applications as an oil and natural gas finding tool.



The exact nature of the energy fields the SFD reacts to and measures are unknown.  The two known energy sources to which the SFD may respond are electromagnetic fields (i.e., of an electric, magnetic or electromagnetic character) and gravitational fields.  For the reasons explained below, we believe that the energy fields we are measuring are both non-electromagnetic and non-gravitational in character.



|· | We have determined that when the SFD encounters changing natural or artificially-created electromagnetic fields, it does not appear to respond to the resulting changes in energy levels.  As a consequence, we believe that the energy fields measured are non-electromagnetic by nature.                                                                                                                                                                                                                                                                                           
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | While conducting aerial surveys, the SFD is subjected to changes in horizontal and vertical acceleration arising from turbulence that exceed, by significant orders of magnitude, the changes in acceleration forces attributable to naturally occurring gravity.  Since the SFD does not appear to respond to these horizontal and vertical acceleration forces, it follows that the lesser forces of acceleration associated with gravity do not affect it.  As a consequence of this lack of response, we believe that the energy fields measured are non-gravitational by nature.



We hypothesize that the principal component of our SFD technology, which we refer to as the SFD sensor, is a passive transducer that creates and maintains a stress-related non-electromagnetic and non-gravitational energy field that interacts with stress-related non-electromagnetic and non-gravitational energy fields associated with subsurface conditions.



Our testing and development of the SFD technology to date has been almost entirely focused on an applied basis toward the identification of hydrocarbon related subsurface conditions. We have not scientifically proven our hypothesis and, at this time, we do not plan to conduct more comprehensive scientific evaluations.



SFD Survey System



Our SFD technology is comprised of the following components, which we collectively refer to as our SFD survey system, used for the following functions:



|· | Stress Field Detectorthe stress field detector or SFD is a unit, which houses the SFD sensor, the principal component of our technology.  As discussed above, the SFD sensor is a passive transducer that interacts with energy fields created by subsurface stresses as our aircraft flies over those areas and registers that interaction in the form of digital electronic signals.  When NXT conducts SFD surveys, we use an SFD array incorporating eight interchangeable SFD sensors, which allows us to collect eight sets of SFD signals.  The ability to collect data from multiple SFD sensors is important for several reasons.  First, it facilitates repeatability and signal verification, and cuts down on the need for additional SFD survey flights.  Second, we use different SFD sensor designs which allow us to collect different qualitative information.  For example, one design of SFD sensor appears to better identify anomalies associated with subsurface structures, while another design appears to offer more information concerning faults and a third appears to offer information concerning the quality of the reservoir in the subsurface structure.  Finally, the SFD sensors are extremely sensitive devices, and the operational ability of any one sensor while on an SFD survey flight may be adversely impacted by a number of factors, including turbulence, the turning motion and angle of the aircraft, signal saturation or over-load, and in some cases the age of a given sensor.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|· | Data Acquisition Systemused in conjunction with the SFD array on surveys, our data acquisition system is a compact, portable computer system which concurrently acquires the eight electronic digital signals from the SFD array in two different data formats per sensor or sixteen signal sets in total, marks each of the signal sets with their geographic location using global positioning satellite coordinates and then stores this information for subsequent processing and interpretation at our home base.                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | Data Processing and Interpretation Systemsonce returned to our home base, the SFD data collected is processed and converted into a format that can be used by our interpretive staff.  All processing is performed by our staff using computer workstations and processing software, which has been developed in-house.  Once the SFD data has been processed, our geological and geophysical staff review the data, plot the flight lines and produce computer-generated base maps using our processing software and industry standard mapping software and databases.



SFD Data Acquisition



Our SFD survey system is flown over pre-selected exploration areas at varying altitudes and from different directions.  The SFD sensors interact with the constantly changing stress fields and responses are recorded in the form of digital electronic signals resembling waveforms, referred to as SFD signals.  Our proprietary data acquisition system acquires and records these signals and marks their geographic location with global positioning satellites. These integrated signals are now referred to as SFD data. The SFD signals are also displayed in real time on board our survey aircraft, which allows our on-board technical crew to immediately identify areas of particular interest for further investigation.



SFD Data Interpretation



Once SFD datasets are returned to our offices, our geological and geophysical interpretive staff process the data, plot the flight lines and produce computer-generated base maps. We then commence the following screening and interpretation process:



|· | First, we screen the SFD data for anomalous signals on the flight line, which we refer to as SFDanomalies.  These SFD anomalies include signals from both unknown or non-producing areas that we survey as well as signals obtained over known oil and natural gas pool crossings.                                                                                                                                                                                                                                                                                                            
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | Then our geological team puts each identified SFD anomaly into subsurface context using our in-house geological database.  The SFD anomaly may then become a SFDleadshould the signals of the SFD anomaly appear to coincide in proper geologic context.  In other words we answer the question, "Does the anomaly make sense where it appears in the sedimentary basin?".  Where we have sufficiently qualified an SFD lead with further SFD data acquired from additional surveys, we reclassify the lead as a "recommended SFD prospect" for further geological and geophysical evaluation.
|· | Lastly, should the recommended SFD prospect be targeted for exploration, traditional geological and geophysical methods, usually 2D or 3D seismic, are employed to evaluate the potential commercial viability of the prospect and to pinpoint drilling sites.                                                                                                                                                                                                                                                                                                                                



SFD Time Frames



We conduct our SFD surveys at speeds of approximately 200 mph, and survey approximately 600 linear miles in a three-hour survey.  For each survey, it takes our staff between one to two days of data processing and interpretationincluding plotting flight routes, screening and analyzing anomalies, putting the anomalies in geologic context and ranking the anomaliesto sufficiently identify and recommend the SFD prospects from that survey.

6



As a consequence, we are able to record and interpret approximately 600 linear miles of SFD data acquired in one SFD survey flight over a period of only a few days.  By way of comparison, traditional land-based seismic crews record up to five linear miles of 2D seismic per day.  Two or more weeks are then required to process the data, followed by several weeks for interpretation.  As a result, it can take a minimum of six months to record and interpret 1,000 linear miles of new 2D seismic data.



We identify approximately twenty SFD leads on average for each three-hour survey, and ultimately on average, two or 10% of these leads are considered for further evaluation.  The SFD prospects which we tender can be pool to field-sized targets that could require two to ten wells or more to exploit depending upon the accumulation.  The actual number of these recommended SFD prospects that are accepted and ultimately drilled would, however, be dependent upon any number of competitive, geological and environmental variables.





ANALYSIS OF SFD SURVEY RESULTS TO DATE



We have not identified and drilled any commercially viable prospects. The drilling results have validated the effectiveness of our SFD technology in locating the proper structures as most of the wells drilled have encountered hydrocarbon bearing formations.





JOINT VENTURES



We form standard industry joint ventures on a prospect-by-prospect basis with various partners, depending upon the requirements of the specific prospect.



BUSINESS AND GEOGRAPHIC SEGMENTS



We currently operate in only one business segment, oil and natural gas exploration. We intend to develop oil and natural gas exploration prospects identified using our SFD technology to the point of mineral rights acquisition either with or without joint venture partners.  We do not currently sell or market our SFD data or surveying services as a separate product to third parties. For geographical segment information, see explanatory Note 17 to our consolidated financial statements included with this annual report.





OPERATIONAL RESULTS



During 2003, the following significant events occurred:



|· | in March we sold all of our U.S. properties for $720,000 cash and the return to treasury of all of our outstanding preferred shares;
|- | ------------------------------------------------------------------------------------------------------------------------------------
|· | in August we acquired our Tenaka property in British  Columbia, Canada;                                                             
|· | in September, we closed a private placement for $750,000 for which we issued 1,875,000 common shares;                               
|· | in October we continued NXT from Nevada to Alberta;                                                                                 
|· | in November we commenced drilling our South Adsett , British Columbia, prospect;                                                    
|· | in December we commenced two private placements and closed the 2003 flow-through placement segment; and                             
|· | in December the South Adsett drilling was completed and although there were gas shows, the well was abandoned in late February 2004.



Summary of Exploration Costs



Summarized below are the oil and natural gas property costs we capitalized for the year ended and as of December 31, 2003 and 2002:

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|                  | Capitalized for the Years Ended December 31 |                  | Capitalized As of
December 31
|----------------- | ------------------------------------------- | ---------------- | -----------------------------
|                  | 2003                                        | 2002             |                              
|                  |                                             |                  |                              
|Acquisition costs | $         389,679                           | $        232,226 |                              
|Exploration costs | 865,926                                     | 1,380,801        |                              
|Development costs | -                                           | 27,681           |                              
|                  | Oil and natural gas properties              | 1,255,605        | 1,640,708                    
|Less depletion    | (17,291)                                    | (140,122)        |                              
|Less impairment   | (1,365,008)                                 | (3,495,970)      |                              
|Less dispositions | (1,442,819)                                 | (158,255)        |                              
|                  | Net oil and natural gas properties          | $    (1,569,513) | $  (2,153,639)               



Net proved and unproved oil and natural gas property costs are summarized below:



|                        | Capitalized for the Years Ended
December 31 |                  | Capitalized as of
December 31
|----------------------- | ------------------------------------------- | ---------------- | -----------------------------
|                        | 2003                                        | 2002             |                              
|                        |                                             |                  |                              
|Proved property costs   | $       (781,446)                           | $  (1,363,260)   |                              
|Unproved property costs | (788,067)                                   | (790,379)        |                              
|                        |                                             | $    (1,569,513) | $  (2,153,639)               



Summary of Drilling Results



Summarized below are our drilling results relative to natural gas or oil wells in which we have an interest.



|                        | Total Wells
Drilled
In Period (1) | Wells
Placed In
Commercial
Production | Wells Shut-In Pending |                               | Wells Abandoned Because
|----------------------- | --------------------------------- | ------------------------------------- | --------------------- | ----------------------------- | -----------------------
|Connection
To 
Pipeline | Further
Development
Decisions     |                                       | Dry or NonCommercial  | Junked For
Mechanical
Reasons
|                        |                                  
|                        | (Gross Wells / Net Wells)        
|                        |                                   |                                       |                       |                               |                        
|2003:                   |                                   |                                       |                       |                               |                        
|                        | United States                     |                                      |                      |                              |                       
|                        | Canada                            | 2/ 0.375                              |                      | 1/ 0.225                      | 1/ 0.15                
|                        |                                   | Total                                 | 2/ 0.375              |                              | 1/ .0225               
|                        |                                   |                                       |                       |                               |                        
|                        |                                   |                                       |                       |                               |                        
|2002:                   |                                   |                                       |                       |                               |                        
|                        | United States                     | 1 / 0.17                              |                      |                              |                       
|                        | Canada                            | 1 / 0.21                              |                      |                              |                       
|                        |                                   | Total                                 | 2 / 0.38              |                              |                       
|                        |                                   |                                       |                       |                               |                        
|2001:                   |                                   |                                       |                       |                               |                        
|                        | United States                     | 2 / 0.46                              |                       | 1 / 0.23                      |                       
|                        | Canada                            | 3 / 0.17                              |                      | 2 / 0.11                      |                       
|                        |                                   | Total                                 | 5 / 0.63              |                              | 3 / 0.34               
|                        |                                   |                                       |                       |                               |                        
|Cumulative to date      | 24 / 3.575                        |                                      | 10 / 1.415            | 6 / 0.89                      |                        

(1)

Based on rig release dates.

(2)



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Summary of Proved Reserves



We do not have any proved reserves at December 31, 2003 as we sold our U.S. properties in March 2003.





Summary of Acreage



Summarized below is the acreage of land holdings in which we hold either direct working interest agreements, or have a right to acquire a working interest.



|                             |  |  | Unproved
|---------------------------- |  |  | --------
|Interest (geographical area) |  |  |         
|Alberta                      |  |  |         
|British Columbia             |  |  |         
|Total                        |  |  |         



DESCRIPTION OF PROPERTIES



Alberta, Canada



|· | MonarchWe hold a combination 4 % overriding royalty interest in this 3,723 acre exploration block located in the Kehoe area of southwestern Alberta.                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | Carbon We hold a 2.5% overall net overriding royalty interest in this 640 acre exploration block located in the Carbon area of southwestern Alberta and receive a monthly royalty.                          
|· | Nanton We hold 6,560 acres at this prospect in southern Alberta.                                                                                                                                            
|· | Princess We currently own the Mannville and deeper rights to 1,280 acres in the Princess area. We hold a 22.5% working interest in this prospect.                                                           
|· | Reagan We hold a 22.5% working interest in 2,560 acres in this prospect.                                                                                                                                    
|· | Fincastle We hold 21% to 50 % interests in 1,280 acres in this prospect which targets Jurassic Sawtooth sands in the Taber area.  In December 2002, a partner drilled and abandoned a well on this prospect.



British Columbia, Canada



|· | South AdsettThis land was purchased in August 2002 and was drilled in late 2003. Although there were gas shows the well was abandoned in late February 2004.   We hold a 15.0 % interest in 8,235 acres.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | TenakaThis land was purchased in August 2003 and we plan to run seismic on it in 2004. We hold a 33% interest in 2,703 acres.                                                                           



FUTURE ACTIVITIES



We are in the process of implementing the changes we have made to our business strategy.  In the past, we were compelled by our joint venture agreements to accept our partners decisions on which prospects were to be drilled. The prospects selected by our partners were often not the preferred SFD targets.



As a result of the low success rates achieved in those joint ventures, which have now expired, we believe that we must:

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|· | take the lead in applying SFD to larger relatively unexplored basins, including regions outside of North America;
|- | -----------------------------------------------------------------------------------------------------------------
|· | upon identification of likely prospects, run gravity and 2D seismic to pinpoint drilling locations;              
|· | acquire mineral rights or negotiate participation rights, and                                                    
|· | drill the selected sites, either directly or with interested joint venture partners.                             



By taking control in certain circumstances, we will attempt to ensure that the following objectives are appropriately addressed:



|· | focus our exploration efforts on areas where SFD will be most effective;                                                                                                                                                                                                                                                                                             
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | expeditiously pursue seismic, land acquisition and drilling operations to prove prospects when we believe the circumstances to be warranted;                                                                                                                                                                                                                         
|· | avoid exploration areas where we cannot acquire all prospective zones as our SFD technology cannot determine the depth of subsurface reservoirs or other potential hydrocarbon-bearing features with a sufficient degree of accuracy; and                                                                                                                            
|· | avoid exploration areas with inherent technical difficulties of a nature our SFD technology cannot currently satisfactorily address, asour SFD technology cannot to date determine whether reservoirs containing SFD identified prospects have sufficient porosity and permeability to enable any hydrocarbon accumulations to be extracted in commercial quantities.



Our future activities will be aggressively directed towards creating value from our existing lands through an active program of soliciting farm-ins, participating in the most attractive drilling prospects as well as dispositions of those prospects and reserves which we feel have limited upside potential or are not core to our plans.



Management will be seeking to monetize assets on a continuous basis to fund exploration efforts. A number of properties have been identified as disposition candidates and are being marketed. Creating a consistent revenue stream to fund on-going operations is critical at this point and will be a prime focus for much of 2004. At the same time, we will be seeking opportunities that do not require large outlays of capital but which will enable us to earn interests in mineral rights through the application of SFD.



COMPETITION



Since we use our SFD technology for wide-area oil and natural gas reconnaissance exploration, our competition would generally be described as other companies using other technologies for wide-area oil and natural gas reconnaissance exploration.  The principal competitive technology in this regard is seismic, which is well accepted in the industry and has been used for over 70 years.  While there are numerous seismic service companies, none use their technology for their own exploration but rather they sell the service to the oil and gas industry. The largest seismic providers to our knowledge are Compagnie Generale de Geophysique, S.A, Seitel, Inc., Veritas DGC Inc. and Petroleum Geo-Services A.S.A.



There are also a number of other technologies used in the industry for passive wide-area oil and natural gas reconnaissance exploration, including aeromagnetic, gravity surveys, ground or surface radar, satellite surveys, telemetrics and spectrum analyzers.  However, we do not believe that any of these technologies have been widely accepted in the industry as a highly predictive general exploration tool.

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To our knowledge, there are no other companies in the oil and natural gas exploration industry who commercially employ any technology similar to our SFD technology.



EMPLOYEES



We utilize specialized skill and knowledge in the identification and evaluation of prospects and in the research, development and improvement of the SFD technology.  We have obtained the necessary skill and knowledge through our current employees.  As of December 31, 2003, we had a staff of 12 consisting of  7 full-time employees and 5 consultants including 2 financial staff, 2 operations staff,  1 landman, 1 geologist, 1 pilot, 1 electronics engineer, a research scientist holding a Ph.D. in micro-electronics and 3 administrative staff.



RESEARCH AND DEVELOPMENT



Our research and development activities have focused on developing, improving and testing our SFD survey system and related components.  As we are now in the more mature stage of full practical application we have reduced our expenditures in the base research and are devoting our resources to enhanced application capability. Research and development expenses in 2003 were nil, $152,862 in 2002 and $418,422 in 2001.



MANUFACTURING CAPACITY AND SUPPLIERS



We are not dependent upon any third party contract manufacturers or suppliers to satisfy our technology requirements.  Our SFD sensors and the SFD unit in which they are incorporated are custom designed, fabricated and assembled in-house.  The customized software used in our data acquisition system are written and modified by outside consulting programmers with whom we have long-standing relationships.  The computer hardware we use in our SFD survey systems (other than the SFD unit), and the balance of the computer software we use, are all readily available from retail or wholesale sources.



SUBSIDIARIES



We have two wholly-owned operating subsidiaries:   NXT Energy Canada Inc. and NXT Aero Canada Inc., federal Canadian corporations formed on April 1, 1997 and October 30, 2000, respectively. NXT Energy Canada focuses on Canadian-based exploration and the survey flight activities are conducted through NXT Aero Canada. We also have two wholly-owned inactive subsidiaries: NXT Energy USA, Inc. and NXT Aero USA, Inc., Nevada corporations formed on October 20, 1995 and August 28, 2000, respectively;



GOVERNMENTAL AND ENVIRONMENTAL REGULATION



SFD Survey Flight Operations



The operation of our business, namely, conducting aerial SFD surveys and interpreting SFD data, is not subject to material governmental or environmental regulation with the exception of flight rules issued by Transport Canada governing the use of private aircraft, including rules relating to low altitude flights.



Oil and Gas Exploration and Development Projects



The oil and natural gas industry in general is subject to extensive controls and regulations imposed by various levels of the federal and provincial governments in Canada.  In particular, oil and natural gas exploration and production is subject to laws and regulations governing environmental quality and pollution control, limits on allowable rates of production by well or proration unit, and other similar regulations.  Laws and regulations are generally intended to prevent the waste of oil and natural gas, to protect rights to produce oil and natural gas between owners in a common reservoir, to control the amount of oil and natural gas produced by assigning allowable rates of production, and to reduce contamination of the environment.  Environmental regulations affect our operations on a daily basis.  Drilling

11

in certain areas has been opposed by environmental groups and, in certain areas, has been restricted.  We believe that the trend to stricter environmental legislation and regulations will continue.



We do not expect that any of these government controls or regulations will affect projects in which we participate in a manner materially different than they would affect other projects of similar size or scope of operations.  All current legislation is a matter of public record and we are not able to accurately predict what additional legislation or amendments may be enacted.  Governmental regulations may be changed from time to time in response to economic or political conditions.  Any laws enacted or other governmental action taken which prohibit or restrict onshore and offshore drilling or impose environmental protection requirements that result in increased costs to the oil and natural gas industry in general would have a material adverse effect on our business, financial condition and results of operations.



OPERATING HAZARDS



SFD Survey Flight Operations



The operations of SFD survey flights are subject to the usual hazards incident to general and low-level flight operations.  These hazards can cause personal injury and loss of life, as well as severe damage to and destruction of property.  We maintain general business insurance coverage and insurance specific to the operation of a third party aircraft.



Oil and Gas Exploration and Development Projects



The oil and natural gas exploration and development projects in which we participate will be subject to the usual hazards incident to the drilling of oil and natural gas wells, including the risk of fire, explosion, blow-out, pipe failure, casing collapse, abnormally pressured formations and environmental hazards such as oil spills, gas leaks, ruptures and discharges of toxic gases.  These hazards can cause personal injuries or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties and suspension of operations.



The project operator will, in accordance with prevailing industry practice, maintain insurance against some, but not all, of these risks.  The insurance maintained by the project operator generally would not cover claims relating to failure of title to oil and natural gas leases, trespass during survey acquisition or surface damage attributable to seismic operations, or business interruption, nor would it protect against loss of revenues due to well failure.  There can be no assurance that any insurance obtained by the project operator covering claims related to worker's compensation, comprehensive general liability for bodily injury and property damage, comprehensive automobile liability and pollution, cleanup, underground blowout and evacuation will be adequate to cover any losses or liabilities which may be incurred within projects in which we participate.  We also cannot predict the continued availability of insurance coverage or the availability of insurance at premium levels that justify its purchase.

In cases where we have direct liability as a result of our participation on a working interest basis, the failure or inability of the project operator to procure insurance at an acceptable cost or the occurrence of a significant adverse event not fully insured or indemnified against could have a direct material, adverse effect on our business, financial condition and results of operations.  In these cases, our exposure will be commensurate with our participation percentage.



While we would have no direct liability in cases where our participation is limited to an overriding royalty interest, the failure or inability of the project operator to procure insurance at an acceptable cost or the occurrence of a significant adverse event not fully insured or indemnified against could have an indirect material, adverse effect on our business, financial condition and results of operations to the extent it adversely affects our joint venture partner's ability to complete current projects or explore for and develop additional projects.

12



SFD TECHNOLOGY AGREEMENT



Our rights to use our SFD technology arises from the technology agreement that we entered into with Momentum Resources Corporation whereby we have been granted the exclusive worldwide right to use, possess and control the SFD Data for hydrocarbon identification and exploration purposes.

The terms of the agreement are set forth in a document entitled Restated Technology Agreement and dated August 1, 1996, which purpose was to supercede a prior agreement dated January 1, 1996. Momentum Resources is a Bahamas corporation which is directly owned and controlled by Messrs. George Liszicasz and R. Dirk Stinson, who were also parties to the Restated Technology Agreement. Mr. Liszicasz, who is the inventor of the SFD technology, is also our largest stockholder and the Chief Executive Officer and a director of our company. Mr. Stinson is a past director and officer of NXT.

The material terms of the Restated Technology Agreement, as amended by the Amendment to the Restated Technology Agreement, dated April 3, 1998, are summarized as follows:

•

We hold the exclusive worldwide right to use, possess and control all SFDs created as of August 1, 1996, as well as any enhancements and know-how relating thereto.

•

We are also entitled to the exclusive use of all SFD data generated by the SFDs for hydrocarbon identification and exploration purposes.

•

Momentum Resources is obligated to use its best efforts to survey with the SFD certain geographic areas throughout the world which have been mutually selected by us and Momentum Resources and to provide all raw SFD data resulting form such surveys to us for our exclusive use for the identification and exploitation of hydrocarbons. Momentum Resources further agreed to provide no less than 500 hours per year of trained manpower to generate the SFD data with respect to the selected areas. Despite this obligation, the Restated Technology Agreement does not set forth any provisions in the event that Momentum Resources fails to live up to these obligations.

•

The agreement provides for the Company to pay Momentum Resources a data fee equal to (i) 1% of the Prospect Profits actually received by us or our subsidiaries with respect to the commercial exploitation of each Prospect for which SFD data is provided by Momentum on or before December 31, 2000; and (ii) 5% of any Prospect Profits actually received by us or our subsidiaries with respect to the commercial exploitation of each Prospect for which SFD data is provided by Momentum after December 31, 2000. As of the date of this annual report, we have not generated any Prospect Profits and thus have not paid any data fees to Momentum Resources. Prospect Profits generally means the aggregate of all gross revenues that we or our subsidiaries receive with respect to the commercial exploitation of all Prospects calculated, less all project expenses actually paid by us or our subsidiaries with respect to the commercial exploitation of all Prospects. Prospects generally means any identified search areas that have commercially extractable amounts of hydrocarbons as determined by the interpretation of the SFD data.

•

In addition to the noted royalty the agreement provides for the Company to grant Momentum Resources "performance options" entitling it to purchase 16,000 unregistered common shares for each month in which production from SFD prospects exceeds 20,000 barrels of hydrocarbons. The exercise price for these warrants will be the "fair market value" of our common shares as determined by the mean between the closing representative bid and asked price for our common shares on the last business day of the quarter of calculation as reported by NASDAQ or NASD or if the common shares are not traded on such date, on the next preceding trading day. The options automatically expire to the extent unexercised three years from the date of grant. We are not obligated, under any circumstances, to grant options which would entitle the holders to acquire more than 8% of our common shares, after taking into consideration outstanding unexercised options. The performance options are also non-transferable except to Momentum Resource's

13

affiliates. As of the date of this annual report, no performance options have been earned by Momentum Resources.

•

Momentum Resources is prohibited during the term of the license from (i) engaging in the identification or exploitation of hydrocarbons for its own account or any party other than the Company; (ii) granting any license or sublicense to any third party to use SFDs or SFD data to any other party for any purpose; (iii) disclosing confidential and/or proprietary information relating to the SFD or SFD data to any other party; or (iv) selling, assigning or transferring its business, or license or sublicense the SFD or SFD data to any party.

•

We are prohibited during the term of the license from (i) identifying or exploiting deposits other than hydrocarbons which have been identified using the SFD; (ii) licensing or sublicensing or providing the SFD data or interpretations thereof to any party (other than our subsidiaries and joint venture partners); (iii) disclosing confidential and/or proprietary information relating to the SFD or SFD data to any other party; or (iv) selling, assigning or transferring our business, or rights to the SFD data.

•

The initial term of the Agreement expires on December 31, 2005, however, it renews automatically for additional one year terms unless we give written notice to Momentum Resources, no later than 60 days prior to the expiration of the pending term, of our election not to automatically renew the Agreement.

•

Momentum Resources, in turn, reserves the right to terminate the SFD technology Agreement upon the occurrence of any of the following events:

o

our failure to make any payment required under the Agreement;

o

our abandonment or discontinuance of the conduct of the oil and gas exploration business;

o

our dissolution or liquidation;

o

our assignment of our assets for the benefit of our creditors, or our filing bankruptcy, or the appointment of a receiver for our business or property; or

o

our failure to perform any other material covenant, agreement or term of the Agreement.



ITEM 2.  PROPERTIES



FACILITIES



Our principal executive office and research and development facilities are located at 700-840-7 Avenue SW, Calgary, Alberta, T2P 3G2.  Our sublease, consisting of approximately 6,600 square feet, expires on July 31, 2004.   Our combined obligations for base lease payments and building operating cost and other pass-through items under this lease are approximately CDN $13,100 per month. We are currently considering new premises.



SURVEY AIRCRAFT



We have developed a universal platform for our SFD equipment that can be readily installed into most types of aircraft and we no longer require custom fitted airplanes.  We lease airplanes as needed to conduct surveys.

14



PETROLEUM PROPERTIES



For a description of our petroleum properties, see the sections of this annual report captioned "Summary of Exploration Costs" and "Description of Properties" and Notes 5, 17 and 18 of our consolidated financial statements included at the end of this annual report.



ITEM 3.  LEGAL PROCEEDINGS



On November 27, 2002, we were served a Statement of Claim which had been filed on November 25, 2002, in the Court of Queens Bench of Alberta, Judicial District of Calgary (Action No. 0201-19820), naming Energy Exploration Technologies Inc. and George Liszicasz as defendants.  Mr. Dirk Stinson, the plaintiff, alleges that NXT failed to pay him compensation under a consulting agreement and further alleges that NXT, without lawful justification, obstructed Mr. Stinson from trading his shares of NXT.  At the time of the filing of this suit, Mr. Stinson was a major shareholder of our common stock.  He is a past President and director of NXT and is currently a director and shareholder of Momentum Resources.  Mr. Stinson was seeking, among other things, damages in the amount of $1,614,750 and an injunction directing NXT to instruct our transfer agent to immediately remove the legend from Mr. Stinsons shares.  On December 10, 2002, we filed our Statement of Defence.  On July 14, 2003, we received notice that the plaintiff had dropped all claims except for a claim for $74,750 plus interest for compensation under a consulting agreement.

We believe the claim against us is without merit and intend to vigorously defend ourselves against the claim and are seeking an expeditious dismissal of the claim.

On March 18, 2003, we were served a Statement of Claim which had been filed on March 14, 2003, in the Court of Queens Bench of Alberta, Judicial District of Calgary (Action No. 0301-04309), naming Glen Coffey, Murrays Aviation Repairs (1980) Ltd., Energy Exploration Technologies, its wholly-owned subsidiary, NXT Energy Canada, Inc., Dennis Wolsky, as Administrator of the Estate of Jerry Wolsky, deceased and Embassy Aero Group Ltd. as defendants.  Tops Aviation Ltd., Spartan Aviation Inc. and John Haskakis (the Plaintiffs) allege that the defendants were negligent and in breach of a Ferry Flight Contract between one or some of the defendants and one or some of the Plaintiffs under which Mr. Jerry Wolsky was to deliver a Piper Twin Comanche aircraft to Athens, Greece.  The aircraft crashed in Newfoundland enroute to Athens killing Mr. Wolsky. The Plaintiffs are seeking, among other things, damages in the amount of $450,000 CDN or loss and damages to the aircraft and cargo; and damages in respect to search and rescue expenses, salvage, storage, transportation expenses and pollution and contamination expenses.

Neither we nor our subsidiary, NXT Energy Canada, Inc., were parties to the Ferry Flight Contract.  We believe the claim against us and our subsidiary is without merit and intend to vigorously defend ourselves against the claim and are seeking an expeditious dismissal of the claim.





ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



NXTs Annual Meeting of Shareholders was held on June 20, 2003, at which the following items were voted upon:



1. The following directors were elected to the board of directors to hold such position until the next annual meeting of the shareholders or until their successor is duly elected and qualified:



|Voting Results      | For        | Against | Abstain
|------------------- | ---------- | ------- | -------
|Donald Foulkes      | 11,228,295 | -0-     | 13,050 
|Dennis R. Hunter    | 11,228,295 | -0-     | 13,050 
|George Liszicasz    | 11,218,295 | 10,000  | 13,050 
|Douglas Rowe        | 11,228,295 | -0-     | 13,050 
|Robert Van Caneghan | 11,228,295 | -0-     | 13,050 

15



2. The shareholders ratified the appointment of Deloitte & Touche LLP as our auditors, who have been our auditors since July 9, 2002.



|Voting Results | For        | Against | Abstain
|-------------- | ---------- | ------- | -------
|               | 11,237,445 | 3,800   | -0-    

There were no broker non-votes with respect to any matter presented for vote at our annual meeting.



A Special Meeting of Shareholders of NXT was held on October 24, 2003, at which the continuance of NXT from the State of Nevada into the Province of Alberta and the change of the name to Energy Exploration Technologies Inc. were voted upon. Such action was approved and voted on as follows:



|Voting Results | For       | Against | Abstain
|-------------- | --------- | ------- | -------
|               | 8,509,350 | 32,230  | -0-    

There were 32,130 broker non-votes with respect to this matter presented for vote at the special meeting of shareholders.

As a result of the continuance of NXT into the Province of Alberta, as of November 6, 2003, NXTs ticker symbol on the Over-the-Counter/Bulletin Board was changed from ENXT to ENXTF.





PART II



ITEM 5.  MARKET PRICE OF AND DIVIDENDS ON OUR COMMON SHARES AND RELATED

SHAREHOLDER MATTERS



MARKET INFORMATION



Our common shares currently trade over-the-counter on the OTC Bulletin Board under the trading symbol "ENXTF".The following table lists, by calendar quarter, the volume of trading and the high and low sales prices of our common shares for each of the periods indicated. Our common shares were listed on the Frankfurt and Berlin Exchanges in January, 2004 under the trading symbol EFW. No shares have traded on the Frankfurt or Berlin Exchanges to the date of this report.



Sales PricePeriodVolumeHighLow2003:First Quarter1,010,100$0.20$0.09Second Quarter2,624,000$0.55$0.13Third Quarter5,198,500$1.04$0.30Fourth Quarter3,281,034$2.90$0.702002:First Quarter1,282,300$1.50$0.55Second Quarter757,800$1.10$0.32Third Quarter1,622,700$0.68$0.25Fourth Quarter4,236,300$0.44$0.06




16



The above information was obtained from the Finance.Yahoo.com website. The closing price for our common shares on the OTC Bulletin Board as of March 31, 2004 was $1.80. These over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.



A shareholders' list provided by our transfer agent showed 211 registered shareholders and 19,845,293 common shares outstanding as of March 31, 2004.  We estimate that there are approximately 1,700 beneficial holders of our common shares.



DIVIDEND POLICY



We have never paid any cash dividends on our common shares and do not anticipate paying any dividends in the foreseeable future.  Our current business plan is to retain any future earnings to finance the expansion and development of our business.  Any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our financial condition, results of operations, capital requirements and other factors as our board may deem relevant at that time.



EQUITY COMPENSATION PLANS



|Plan Category                        | Number of securities to be issued upon exercise of outstanding options, warrants and rights(6)                               | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (1)
|------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------
|Independent Option Grants (3)        | 15,000                                                                                                                       | $2.00                                                                       | 195,000                                                                                         
|1997 Employee Stock Option Plan (2)  | 829,335                                                                                                                      | $1.30                                                                       | 307,594                                                                                         
|1999 Executive Stock Option Plan (3) | 520,800                                                                                                                      | $2.00                                                                       | 460,000                                                                                         
|2000 Director Stock Option Plan (4)  | 365,000                                                                                                                      | $0.73                                                                       | 35,000                                                                                          
|2003 Stock Option Plan (5)           | 75,000                                                                                                                       | $0.38                                                                       | 275,000                                                                                         
|                                     |                                                                                                                             
|(1)                                  | Excluding securities reflected Number of securities to be issued upon exercise of outstanding options, warrants and rights
|(2)                                  | Approved by security holders on July 25, 1997.                                                                              
|(3)                                  | Not approved by our shareholders.                                                                                           
|(4)                                  | Approved by security holders on September 20, 2002.                                                                         
|(5)                                  | Not approved by our shareholders                                                                                            
|(6)                                  | Outstanding as of March 31, 2004.                                                                                           



Independent Option Grants



The following individuals hold independent stock option certificates:



On May 20, 1997, we granted stock options to Mr. Liszicasz, our Chairman and Chief Executive Officer, entitling him to purchase 45,000 common shares.  The exercise price for the options was $5.25 per share which corresponded with the trading price of the common shares as of the date of grant.  The options were subject to vesting conditions based upon continued performance of services as a director, pursuant to which one-third of the granted options vested on the date of grant, and one-third of the granted options would prospectively vest on each of the first and second anniversaries of the date of grant, respectively.



On January 3, 2001, as part of a broader arrangement for all of our then serving employees, our Board approved the cancellation of the foregoing outstanding options, and the grant of new options to Mr. Liszicasz on the same terms (including number of shares, vesting, term and lapse) as the original grant, with the exception of the exercise price,





17

which would be fixed at the closing price for our common shares as of the close of business on July 5, 2001 (subsequently fixed at $2.00).  In May of 2003, 30,000 of these options expired.  The remaining 15,000 are fully vested and will expire on March 31, 2006.





1999 Pinnacle Oil International, Inc. Executive Stock Option Plan



Our board of directors approved the 1999 Pinnacle Oil International, Inc. Executive Stock Option Plan on April 27, 1999.  Under the plan, the plan administrator may issue up to 1,000,000 common shares to executive officers who are a natural person and an employee.  All options outstanding under this plan are held by either Mr. Jim Ehrets or Mr. Daniel Topolinsky, who are no longer employees.  Mr. Ehrets and Mr. Topolinsky have two years from their last day of employment to exercise any options which had vested prior to the end of their employment if that date is earlier than the expiry date.



The Stock Option Plan is intended to attract, compensate and motivate selected executives providing them with the opportunity to share in the potential capital appreciation in NXTs shares. Each issuance of an award shall be deemed to vest immediately upon issuance and shall expire on the first business day prior to the tenth anniversary of the issuance, unless otherwise outlined in the agreement underlying the issuance.



The Plan Administrator fixes the exercise price for issuances in the exercise of its sole discretion, except that the exercise price for an incentive stock option must be at least the fair market value per share of the common shares at the date of grant (as determined by the plan administrator in good faith), or in the case of greater-than ten percent shareholders, at least one hundred ten percent of the fair market value per share.  The exercise price may be paid in cash or, with the approval of the Plan Administrator, by other means, including withholding of option shares or delivery of previously held shares.



All issuances under this stock option plan made to date have a termination clause for vested portions of the issuance of two years from the date of termination if that date is earlier than the expiry date, otherwise the expiry date takes precedence.



Should the recipient pay the exercise price of their stock options with common shares of NXT previously held by them, then, at the discretion of the Plan Administrator, replacement stock options may be issued to the recipient to purchase shares equal to the number of shares of common shares delivered to NXT as payment of the exercise price.  These stock options shall vest immediately, have an exercise price equal to the fair market value of the common shares on the date of conversion and shall expire on the same date as the original stock option.



ITEM 6.  SELECTED CONSOLIDATED FINANCIAL INFORMATION



The following tables present selected historical consolidated financial data for each of our five most recent annual fiscal periods ended December 31, derived from our consolidated financial statements prepared in accordance with United States generally accepted accounting principles.



The selected statement of loss and comprehensive loss data set forth below for our fiscal periods ended December 31, 2003 and 2002 and the selected balance sheet data set forth below as of December 31, 2003 and 2002, have been derived from our consolidated financial statements audited by Deloitte & Touche LLP, independent auditors, as indicated in their report contained in the consolidated financial statements included as part of this annual report.



The selected statement of loss and comprehensive loss data set forth below for our fiscal period ended December 31 2001 has been derived from our consolidated financial statements audited by Arthur Andersen LLP, independent auditors, as indicated in their report contained in the consolidated financial statements included as part of this annual report.

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The selected statements of loss and comprehensive loss data set forth below for our fiscal periods ended December 31, 2000 and 1999 and the selected balance sheet data set forth below as of December 31, 2001, 2000 and 1999 are derived from our audited consolidated financial statements not included in this annual report.



The following selected financial data should be read in conjunction with our consolidated financial statements and the explanatory notes to those statements included as part of this annual report, as well as the section of this annual report captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations".



|                                                                |                                                            |                     
|--------------------------------------------------------------- | ---------------------------------------------------------- | --------------------
|                                                                | Year Ended December 31,                                   
|CONSOLIDATED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS          | 2003                                                       | 2002                
|                                                                |                                                            |                     
|Operating revenues                                              | $                                                         | $    75,628         
|                                                                |                                                            |                     
|Operating expense:                                              |                                                            |                     
|                                                                | Oil and natural gas operating expenses                     |                    
|                                                                | Administrative                                             | 1,782,952           
|                                                                | Depletion and impairment of oil and natural gas properties | 1,004,973           
|                                                                | Amortization and depreciation                              | 56,666              
|                                                                | Research and development                                   |                    
|                                                                | Survey operations and support                              | 130,499             
|                                                                |                                                            |                     
|                                                                |                                                            |                     
|Operating loss                                                  | (2,975,090)                                                | (2,020,816)         
|                                                                |                                                            |                     
|Other income (expense):                                         |                                                            |                     
|                                                                | Interest income                                            | 2,190               
|                                                                | Other income (expense)                                     | (739)               
|                                                                |                                                            |                     
|                                                                |                                                            |                     
|Net loss from continuing operations                             | (2,973,639)                                                | (1,953,907)         
|                                                                |                                                            |                     
|Gain (loss) from discontinued operations                        | 159,765                                                    | (3,722,213)         
|Net loss                                                        | (2,813,874)                                                | (5,676,120)         
|Other comprehensive gain (loss):                                |                                                            |                     
|                                                                | Foreign currency translation adjustment                    | 461,515             
|Comprehensive loss for the year                                 | $    (2,322,633)                                           | $    (5,636,909)    
|Basic and diluted net loss from continuing operations per share | $             (0.17)                                       | $             (0.12)
|Basic and diluted loss per share                                | $             (0.13)                                       | $             (0.33)
|Weighted average shares outstanding                             | 17,606,845                                                 | 16,971,153          









|                                    | As at December 31,
|----------------------------------- | ------------------
|CONSOLIDATED BALANCE SHEET DATA:    | 2003              
|Working capital                     | $        610,380  
|Current assets.                     | $     1,297,431   
|Oil and natural gas properties, net | 1,194,406         
|Other property and equipment, net   | 190,810           
|Total assets                        | $     2,682,647   
|Current liabilities                 | $        687,051  
|Long-term liabilities               |                  
|Total liabilities                   | $        687,051  
|Shareholders' equity                | $     1,995,596   



19



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS



The following discussion of our consolidated financial condition and results of operations should be read in conjunction with our consolidated financial statements and their explanatory notes included as part of this annual report.



OVERVIEW



We are a technology-based reconnaissance exploration company that utilizes our SFD technology to identify and prioritize oil and natural gas prospects.  We conduct our activities through our wholly-owned operating subsidiary, NXT Energy Canada, Inc. which focuses on Canada-based exploration and is also investigating international opportunities.  The parent company concentrates on improving the capability of our SFD survey system and oversees the operations of and provides management, financial and administrative services to our subsidiaries.



RESULTS OF CONSOLIDATED OPERATIONS



During 2003, the following events occurred:



|· | In February we actively commenced the business development activities in the Middle East                                                                                                                                                                                                          
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | In March we sold all of our U.S. properties for $720,000 cash and the return to treasury of all of our outstanding preferred shares                                                                                                                                                               
|· | Also in March, a well at Dalroy, Alberta that we have a small interest in was completed and tested. Right of way delays persisted until 2004 and the well was tied in to the gathering system in early 2004.
The well at Carbon, Alberta commenced production and we have a 5% overriding royalty.
|· | In May we conducted a 5,000 kilometer survey in B.C.                                                                                                                                                                                                                                              
|· | In June we sold our interest in the Monarch property                                                                                                                                                                                                                                              
|· | In September, we closed a private placement for $750,000 for which we issued 1,875,000 common shares                                                                                                                                                                                              
|· | Also, in September our proposal to conduct an SFD technology evaluation survey in Syria was accepted by the Syrian Petroleum Company                                                                                                                                                              
|· | In October we continued NXT from Nevada to Alberta                                                                                                                                                                                                                                                
|· | In November, drilling commenced on our South Adsett prospect in B.C.                                                                                                                                                                                                                              
|· | In December we commenced two private placements and closed the 2003 flow-through placement segment                                                                                                                                                                                                
|· | In December the South Adsett drilling was completed. It was tested in February 2004 and abandoned.                                                                                                                                                                                                



During 2002, the following events occurred:



|· | In January, we decided to take active steps to reduce our overhead. During the next nine months, staff levels were decreased from 22 to 7 and half of the office space was subleased. Salaries for management were reduced by 50%. During this period three of the senior officers left NXT.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20



|· | In March, our Canadian property at Beiseker, Alberta, came on production from three wells and our share of production was approximately 200 thousand cubic feet of natural gas per day.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | In late April, our U.S. production commenced from the Beta Race 22-6 well in North Dakota and our share of production was approximately 500 thousand cubic feet of natural gas per day.
|· | In May, we sold our Piaggio aircraft and the associated debt was fully paid off.                                                                                                       
|· | In July, we sold our Beiseker property.                                                                                                                                                
|· | In August, we purchased our Adsett lands in B.C.                                                                                                                                       
|· | In September, drilling commenced on our Antelope Tail prospect in Wyoming.                                                                                                             
|· | In November, our Antelope Tail well was plugged and abandoned.                                                                                                                         
|· | In December, our 50% partner drilled the Fincastle prospect on a farm-in basis. The well tested gas but subsequently watered-out and has been abandoned.                               
|· | In late December, our Commander aircraft was sold and the hangar lease was terminated.                                                                                                 



Operating Revenues − 2003 compared to 2002



Our U.S. production commenced in late April 2002 and our share of on-going production was approximately 500 thousand cubic feet per day from that time until the sale of all of the U.S. properties on March 1, 2003.We have had no production since that time. The related revenue and expenses are included in loss from discontinued operations.



We commenced production in late March 2002 from the Beiseker property in Alberta, Canada. Our share of production from the three wells was approximately 200 thousand cubic feet per day from that point until it was sold on July 1, 2002. It generated $75,628 in revenue for the period from commencement of production until the property was sold for a gain of $42,046.





Operating Revenues − 2002 compared to 2001



There was no production in 2001.



Operating Loss from Continuing Operations – 2003 compared to 2002



The operating loss of $2,975,090 for 2003 was $954,274 (47%) greater than the loss of $2,020,816 for 2002. This was primarily attributable to the following:



|· | a reduction of oil and natural gas revenues of $75,628 due to sale of the Canadian producing properties in July 2002;                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | an increase of $ 340,475 (24%) in administrative expenses due to costs associated with the corporate continuance, reduced allocations of expenses to research and increased costs associated with the efforts to establish a presence in the Middle East;

21



|· | an increase of $794,102 (377%) in depletion and impairment expenses due to impairment of the Canadian properties; and     
|- | --------------------------------------------------------------------------------------------------------------------------
|· | an increase of $81,590 (167%) in survey operations and support as we made several survey flights in 2003 and none in 2002;



and this was partially offset by:



|· | a decrease in amortization and depreciation of $183,100 (76%) from $239,766 in 2002 to $56,666 in 2003. This was due to the sale of the aircraft in 2002; and                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | a decrease of $152,862 in research and development from $152,862 in 2002 to $nil in 2003. This reduction was due to resources being applied fully to application of the technology as well as reduced staff levels in this area.





Operating Loss from Continuing Operations  2002 compared to 2001



The operating loss was $2,020,816 for 2002, compared to a loss of $3,246,772 for 2001, representing a $1,225,956 (38%) overall decrease. This was primarily attributable to the following:



|· | An increase in oil and natural gas revenues in 2002 of $75,628 from $nil in 2001. These Canadian properties came on stream in early 2002 and were sold July 1, 2002;                                                                                                                                                                                                                    
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | a decrease of $704,657 (77%) in depletion and impairment of oil and natural gas properties to $210,871 in 2002 from $915,528 in 2001due to almost entirely to a reduction in impairments to Canadian properties;                                                                                                                                                                        
|· | a decrease in amortization and depreciation of $97,158 (29%) from $336,924 in 2001 to $239,766 in 2002 due to the decision in early 2002 to sell the aircraft. The aircraft were not depreciated from that point. The reduction related to the aircraft was partially offset by increased depreciation taken on leaseholds and office equipment to reflect the termination of the lease;
|· | a decrease of  $265,560 (63%) in research and development to $152,862 in 2002 from $418,422 in 2001 as we began to reduce the resources spent on research and devoted more resources to application of the technology, as well as reduced staff levels in this area; and                                                                                                                
|· | a decrease of $91,622 (65%) in survey operations and support from $140,531 in 2001 to $48,909 in 2002 as the number of flights was reduced.                                                                                                                                                                                                                                             





Other Income and Expense  2003 compared to 2002



|· | Interest income was down by $24,309 (92%) to $2,190 in 2003 from $26,499 in 2002 and this was caused by reduced cash balances in 2002.
|- | --------------------------------------------------------------------------------------------------------------------------------------
|· | Other income decreased from $40,410 in 2002 to an expense of $739 in 2003. There was a large gain on sale of property in 2002.        



Other Income and Expense  2002 compared to 2001





22

---



|· | Interest income was down by $53,614 (67%) to $26,499 in 2002 from $80,113 in 2001 and this was caused by reduced cash balances in 2002.    
|- | -------------------------------------------------------------------------------------------------------------------------------------------
|· | Other income of $40,410 in 2002, compared to a loss of $662 in 2001, is attributable to the gain made on the sale of the Beiseker property.





Loss from Discontinued Operations  2003 compared to 2002



|· | The loss of $3,722,213 from discontinued operations in 2002 decreased and became income of $159,765 in 2003. The main reasons are the production revenue received in early 2003 before the sale, a small gain on the sale of the U.S. properties and large property impairments in 2002.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Loss from Discontinued Operations  2002 compared to 2001



|· | There was an increase in the loss from discontinued operations of $2,500,944 (205%) from $1,221,269 in 2001 to $3,722,213 in 2002. This was due to property impairments related to the Poblano prospect.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Relationships and Transactions on Terms That Would Not Be Available From Clearly Independent Third Parties



During 2003, we did not enter into any transactions with any parties that were not clearly independent on terms that might not be available from other clearly independent third parties.





LIQUIDITY AND CAPITAL RESOURCES



Sources of Cash



Our cash flow requirements for 2003 were funded principally by: (i) the sale of our U.S. properties for $720,000 in cash and the return to treasury of our preferred shares in March 2003; (ii) a private placement which closed in September 2003 of 1,875,000 common shares for total gross proceeds of $750,000; and (iii) the private flow-through share placement in December 2003 of 101,700 common shares for total gross proceeds of $203,400. Flow-through shares differ from common shares in that they allow the company to pass Canadian exploration expenditure deductions through to the holders of the flow-through shares.



There are no guarantees, commitments, leases, debt agreements or other agreements which could be triggered by an adverse change in our credit rating, earnings, cash flows or stock price, including requirements to perform under standby agreements.



Current Cash Position and Historical Changes in Cash Position



Our cash position as of December 31, 2003 was $1,024,201 as compared to $585,070 as of December 31, 2002.



The $439,131 increase in our cash position for 2003 compared to 2002 was attributable to:



|· | $1,072,897 cash used in operating activities;
|- | ---------------------------------------------

23



|· | $1,072,290 cash provided by financing activities;                        
|- | -------------------------------------------------------------------------
|· | $746,108 cash used in investing activities;                              
|· | $724,331 cash provided by discontinued operations; and                   
|· | a $461,515 comprehensive gain due to the effect of exchange rate changes.





The $2,409,538 decrease in our cash position for 2002 compared to 2001 was attributable to:



|· | $2,065,594 cash used in operating activities;                           
|- | ------------------------------------------------------------------------
|· | $372,825 cash used in investing activities;                             
|· | $ 10,330 cash used in discontinued operations; and                      
|· | a $39,211 comprehensive gain due to the effect of exchange rate changes.



Operating Activities



Our operating activities required cash in the amount of $1,072,897 for 2003, as compared to cash requirements of $2,065,594 for 2002.



|· | The $1,072,897 in cash used in operating activities for 2003 reflected our net loss of $2,973,639 for that period, adjusted for non-cash deductions and a net decrease in non-cash working capital balances.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | The $2,065,594 in cash used in operating activities for 2002 reflected our net loss of $1,953,907 for that period, adjusted for non-cash deductions and a net increase in non-cash working capital balances.



Financing Activities



Financing activities in 2003 generated cash of $1,072,290 compared to the cash of $nil generated from financing activities in 2002.



|· | During 2003 we raised $930,567 net through private placements and $141,723 in cash was provided through the exercise of options.
|- | --------------------------------------------------------------------------------------------------------------------------------
|· | There was no financing activity during 2002.                                                                                    



Investing Activities



Investing activities used cash of $746,108 in 2003 compared to a $372,825 use of cash 2002.



|· | In 2003 there were small property sales which generated $86,125 in cash and the primary use of cash was for other property and equipment ($41,330) and oil and natural properties ($808,879).    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | The principal sources of cash under investing activities in 2002 were the sale of the Beiseker property ($199,326) which was offset by expenditures on oil and natural gas properties ($463,107).



Discontinued Operations

24

---



|· | Cash generated from discontinued operations in 2003 was $724,331 which was the proceeds on the sale of the U.S. properties.
|- | ---------------------------------------------------------------------------------------------------------------------------
|· | Cash used in discontinued operations in 2002 was $10,330.                                                                  



Contractual Obligations

None.

OffBalance Sheet Arrangements

None.

Capital Requirements Going Forward

We have approximately $1,200,000 in cash on hand as of April 6, 2004. This amount will fund our administration, operational, research and development requirements for the next twelve months.  We may be required to raise additional financing through equity issues, borrowings or property dispositions.



Assuming our success in a number of these activities, we believe we can maintain this minimal level of operations for approximately twelve months.  At this time, we have no other capital commitments, however, if we ramp-up operations, we will be required to raise additional capital to support increased operations.



We can give no assurance that any or all projects in our pending programs will be commercial, or if commercial will generate sufficient revenues to cover our operating or other costs. Should this be the case, we would be forced, unless we can raise sufficient additional working capital, to suspend our operations, and possibly even liquidate our assets and wind-up and dissolve our company.



OTHER MATTERS



Foreign Exchange



We recorded a $461,515 foreign currency translation gain for 2003 (2002  gain of $39,211 ) as a comprehensive income item on our statements of loss and comprehensive loss and shareholders' equity (deficit) in consolidating our accounting records for financial reporting purposes as a result of the fluctuation in United States-Canadian currency exchange rates during that period.  We cannot give you any assurance that our future operating results will not be adversely affected by currency exchange rate fluctuations.



Effect of Inflation



We do not believe that our operating results were unduly affected by inflation during our three years ended December 31, 2003.



Critical Accounting Policies



We follow the full cost method of accounting for oil and natural gas properties and equipment whereby we capitalize all costs relating to our acquisition of, exploration for and development of oil and natural gas reserves.  Our consolidated financial condition and results of operations are sensitive to, and may be adversely affected by, a number of subjective or complex judgments relating to methods, assumptions or estimates required under the full cost method of accounting concerning the effect of matters that are inherently uncertain.  For example:

25



|· | Capitalized costs under the full cost method of accounting are generally depleted and depreciated on a country-by-country cost center basis using the unit-of-production method, based on estimated proved oil and gas reserves as determined by independent engineers where significant.  In addition, capital costs in each cost center are also restricted from exceeding the sum of the present value of the estimated discounted future net revenues of those properties, plus the cost or estimated fair value of unproved properties (the "ceiling test").  Should this comparison indicate an excess carrying value, a write-down would be recorded.  In making these accounting determinations, we rely in part upon a reserve report prepared by independent engineers specifically engaged for this purpose.  To economically evaluate our proved oil and natural gas reserves, these independent engineers must necessarily make a number of assumptions, estimates and judgments that they believe to be reasonable based upon their expertise and professional and U.S. Securities and Exchange Commission guidelines.  Were the independent engineers to use differing assumptions, estimates and judgments, then our consolidated financial condition and results of operations would be affected.  For example, we would have lower revenues and net profits (or higher net losses) in the event the revised assumptions, estimates and judgments resulted in lower reserve estimates, since our depletion and depreciation rate would then be higher and it might also result in a write down under the ceiling test.  Similarly, we would have higher revenues and net profits (or lower net losses) in the event the revised assumptions, estimates and judgments resulted in higher reserve estimates.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | Our management also periodically assesses the carrying values of unproved properties to ascertain whether any impairment in value has occurred.  This assessment typically includes a determination of the anticipated future net cash flows based upon reserve potential and independent appraisal where warranted.  Impairment is recorded if this assessment indicates the future potential net cash flows are less than the capitalized costs. Were our management to use differing assumptions, estimates and judgments, then our consolidated financial condition and results of operations would be affected.  For example, we would have lower net profits (or higher net losses) in the event the revised assumptions, estimates and judgments resulted in increased impairment expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



Recent Accounting Pronouncements



In August 2001, the U.S. Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations".  SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.  The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset.  We were required to adopt the provisions of SFAS No. 143 on January 1, 2003.  We have sold our U.S. properties, along with the associated abandonment liabilities, and we have no retirement liabilities associated with the Canadian properties.  Therefore, this SFAS has no impact on us at this time.



In January 2003, the FASB issued Statement No. 148 Accounting for Stock-Based Compensation  Transition and Disclosure, an Amendment of FASB Statement No. 123(FAS 148).  FAS 148 amends FAS 123 Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair-value method of accounting for stock-based compensation.  The impact of this accounting standard is discussed more fully in note 11.



The following standards issued by the FASB do not impact us at this time:

- Statement No. 149  Amendment for Statement 133 on Derivative Instruments and Hedging Activities effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003.
- Statement No. 150  Accounting for Certain Instruments with Characteristics of Both Liabilities and Equity effective for financial instruments issued at the beginning of the first interim period beginning after June 15, 2003.

26

•

- Fin 45  Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others effective prospectively for guarantees issued or modified after December 31, 2002 for initial recognition and initial measurement provisions; for financial statements of interim or annual periods ending after December 15, 2002 for disclosure requirements.
- Interpretation No. 46 - Consolidation of Variable Interest Entities, effective for financial statements issued after January 31, 2003
- Interpretation No. 46R Consolidationof Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51, requires consolidation of entities in which the Corporation is the primary beneficiary, despite not having voting control, effective for financial statements issued after December 31, 2003.
- SFAS 146  Accounting for Costs Associated with Exit or Disposal Activities, effective prospectively for such activities initiated after December 31, 2002. It requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



OIL AND GAS PRICE FLUCTUATIONS



Our primary market risk is market changes in oil and natural gas prices.  Although we do not have any production at this time, prospective revenues from the sale of products or properties will be impacted by oil and natural gas prices.  Similarly, our ability to acquire petroleum and natural gas rights and to drill the lands is also directly affected since competition for and the cost to acquire petroleum and natural gas rights is generally a function of oil and natural gas prices.  Specifically, increases in oil and natural gas prices are generally accompanied by increases in industry competition and costs to acquire drilling rights, while decreases in oil and natural gas prices are generally accompanied by a similar decline in competition and costs to acquire drilling rights.



CURRENCY FLUCTUATIONS



We currently hold the bulk of our cash in Canadian currency. This does expose us to exchange rate fluctuations between the Canadian and United States currencies. Until early 2003 we operated primarily in U.S. dollars but the sale of the U.S. properties means that our transactions are mainly in Canadian dollars. This can result in gains or losses in our reported consolidated financial condition and results of operations. However, we are planning to expand our operations in the international markets and the U.S. dollar is the standard functional currency for international transactions in the oil and gas industry. Therefore, we intend to continue using the U.S. dollar as our reporting currency for the foreseeable future. As we become more active in international markets we will transfer cash into U.S. currency based upon expected needs at that time.  We have not previously engaged in activities to mitigate the effects of foreign currency. At our current levels of activity, a U.S. $0.01 change in the U.S. / Canadian exchange rate will impact our net income by $63,000.



INTEREST RATE FLUCTUATIONS



We currently maintain the bulk of our available cash in Canadian dollars and our reported interest income from these short-term investments could be adversely affected by any material changes in interest rates within Canada.



27

---



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



TABLE OF CONTENTS



|                                                                                                                                             | Page
|-------------------------------------------------------------------------------------------------------------------------------------------- | ----
|REPORTS OF INDEPENDENT AUDITORS                                                                                                              | 30  
|CONSOLIDATED FINANCIAL STATEMENTS                                                                                                            |     
|Consolidated Balance
    Sheets                                                                                                              | 33  
|Consolidated Statements of Loss and Comprehensive Loss                                                                                       | 34  
|Consolidated Statements of Shareholders Equity
    (Deficit)                                                                                | 35  
|Consolidated Statements of Cash
    Flows                                                                                                    | 36  
|Notes to Consolidated Financial
    Statements                                                                                               | 37  
|                                                                                                                                             |     
|SUPPLEMENTAL INFORMATION ON OIL AND GAS ACTIVITIES (UNAUDITED)                                                                               |     
|Table I  Total Costs Incurred In Oil And Natural Gas Acquisition, Exploration And                                                           |     
|Development Activities                                                                                                                       | 52  
|Table II - Capitalized Costs Related To Oil And Natural Gas Producing Activities                                                             | 53  
|Table III - Quantities Of Oil And Natural Gas Reserves                                                                                       | 53  
|Table IV - Standardized Measure Of Discounted Future Net Cash Flows Related To Proved 
               Oil And Natural Gas Reserve Quantities | 55  
|Quarterly Financial Data                                                                                                                     | 56  



28



REPORT OF INDEPENDENT AUDITORS



To the Shareholders of Energy Exploration Technologies Inc.:



We have audited the consolidated balance sheet of Energy Exploration Technologies Inc. as at December 31, 2003 and  2002 and the consolidated statements of loss and comprehensive loss, cash flows and shareholders equity (deficit) for the years then ended.  These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.



We conducted our audits in accordance with Canadian generally accepted auditing standards and auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.



In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Energy Exploration Technologies Inc. as at December 31, 2003 and  2002 and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.



The consolidated financial statements of Energy Exploration Technologies Inc. for the year ended December 31, 2001 were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those consolidated financial statements in their report dated March 22, 2002. These financial statements have been revised to give effect to the discontinued operations, as described in Note 16. Our procedures included agreeing previously reported amounts related to the discontinued operations to the previously issued financial statements, agreeing the amounts classified as discontinued operations and related disclosures to Energy Exploration Technologies Inc.s underlying records obtained from management and testing mathematical accuracy of the amounts related to the discontinued operations applicable to the 2001 amounts. In our opinion, the adjustments related to the discontinued operations for 2001 are appropriately and properly applied. However, we were not engaged to audit, review or apply any procedures to the 2001 consolidated financial statements of Energy Exploration Technologies Inc. other than with respect to such adjustments and disclosures, and accordingly, we do not express an opinion or any other form of assurance on the 2001 consolidated financial statements taken as a whole.









Calgary, Canada

/s/ Deloitte & Touche LLP

March 17, 2004

Chartered Accountants



29

Comments by Auditor on Canada-United States of America Reporting Difference



In the United States of America, reporting standards for auditors require the addition of an explanatory paragraph when the financial statements are affected by conditions and events that cast substantial doubt on the Companys ability to continue as a going concern, such as those described in note 1 to the financial statements. Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and auditing standards generally accepted in the United States of America, our report is expressed in accordance with Canadian reporting standards, which do not permit a reference to such conditions and events in the auditors report when these are adequately disclosed in the financial statements.





Calgary, Canada

/s/ Deloitte & Touche LLP

March 17, 2004

Chartered Accountants















30

THIS REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS IS A COPY OF THE REPORT

PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED.







REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS




To the Shareholders ofEnergy Exploration Technologies Inc.:



We have audited the consolidated balance sheets of ENERGY EXPLORATION TECHNOLOGIES INC. as at December 31, 2001 and 2000, and the consolidated statements of loss and comprehensive loss, shareholders equity (deficit) and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with generally accepted auditing standards in Canada and the United States.  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.



In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2001 and 2000 and the results of its operations and its cash flows for the years then ended in accordance with generally accepted accounting principles in the United States.





/s/ Arthur Andersen LLP

Chartered Accountants





Calgary, Canada
March 22, 2002





31



|ENERGY EXPLORATION TECHNOLOGIES INC.CONSOLIDATED BALANCE SHEETS(expressed in U.S. dollars except share data)
|------------------------------------------------------------------------------------------------------------
|                                                                                                            
|ASSETS                                                                                                      
|Current assets:                                                                                             
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Note receivable from former officer [note 3]                                                                
|Flight equipment held for sale [notes 2 and 4]                                                              
|Oil and natural gas properties, on the basis of full cost accounting, 
net of impairments [notes 2 and 5]   
|Other property and equipment, net of accumulated depreciation,
amortization and impairment [notes 2 and 6]  
|                                                                                                            
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                        
|Current liabilities:                                                                                        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Commitments and contingencies  [notes 1 and 15]                                                             
|                                                                                                            
|Shareholders' equity:                                                                                       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            

The accompanying notes to consolidated financial statements 
are an integral part of these consolidated balance sheets
32

---

|ENERGY EXPLORATION TECHNOLOGIES INC.CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS(expressed in U.S. dollars except share data)
|---------------------------------------------------------------------------------------------------------------------------------------



|                                                                         | Years ended December 31,                                                        
|------------------------------------------------------------------------ | --------------------------------------------------------------------------------
|                                                                         | 2003                                                                            
|Revenues:                                                                |                                                                                 
|Oil and natural gas revenues [note 16]                                   | $                        -                                                      
|Operating expenses:                                                      |                                                                                 
|                                                                         | Oil and natural gas operating expenses [note 16]                                
|                                                                         | Administrative [note 12]                                                        
|                                                                         | Depletion and impairment of oil and natural gas 
 properties [notes 2, 5 and 16]
|                                                                         | Amortization and depreciation [notes 2, 6 and 16]                               
|                                                                         | Research and development [note 2]                                               
|                                                                         | Survey operations and support [note 2]                                          
|                                                                         |                                                                                 
|Operating loss                                                           | (2,975,090)                                                                     
|Other income (expense):                                                  |                                                                                 
|                                                                         | Interest income                                                                 
|                                                                         | Other income (expense)                                                          
|                                                                         |                                                                                 
|Net loss for the period from continuing operations                       | (2,973,639)                                                                     
|Income (loss) from discontinued operations[note 16]                      | 159,765                                                                         
|Net loss for the period                                                  | (2,813,874)                                                                     
|Other comprehensive income (loss):                                       |                                                                                 
|                                                                         | Foreign currency translation adjustment                                         
|Comprehensive loss for the period                                        | $       (2,352,359)                                                             
|Basic and diluted net loss from continuing operations per share [note 8] | $                (0.17)                                                         
|Basic and diluted loss per share [note 8]                                | $                (0.13)                                                         
|Weighted average shares outstanding                                      | 17,599,783                                                                      



The accompanying notes to consolidated financial statements are 
an integral part of these consolidated statements of loss and comprehensive loss

33
ENERGY EXPLORATION TECHNOLOGIES INC.CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) 
(expressed in U.S. dollars except share data)



|                                                                                                                                | Accumulated Other
Comprehensive
Income (Loss) | Common
Shares | Series 'A' Convertible
Preferred Shares | Warrants     |             
|------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ------------- | --------------------------------------- | ------------ | ------------
|-                                                                                                                               | -                                             | Shares        | Amount                                  | Shares       | Amount      
|                                                                                                                                |                                               |               |                                         |              |             
|Balance  December 31, 2000                                                                                                     | $      (64,028)                               | 13,112,916    | $ 18,896,189                            | 800,000      | $    730,000
|                                                                                                                                |                                               |               |                                         |              |             
|                                                                                                                                |                                               |               |                                         |              |             
|2001:                                                                                                                           |                                               |               |                                         |              |             
|Issued for cash at $1.15 per share on September 18, 2001, net of issuance costs                                                 |                                              | 3,858,237     | 4,359,252                               |             |            
|Grant and vesting of options to investor relations consultant (note 12)                                                         |                                              |              | 75,769                                  |             |            
|Net loss from continuing operations for fiscal 2001                                                                             |                                              |              |                                        |             |            
|Net loss from discontinued operations for fiscal 2001                                                                           |                                              |              |                                        |             |            
|Net other comprehensive loss for fiscal 2001                                                                                    | (158,952)                                     |              |                                        |             |            
|                                                                                                                                | Balance  December 31, 2001                   | (222,980)     | 16,971,153                              | 23,331,210   | 800,000     
|2002:                                                                                                                           |                                               |               |                                         |              |             
|Grant and vesting of options to investor relations consultant (note 12)                                                         |                                              |              | 34,216                                  |             |            
|Net loss from continuing operations for fiscal 2002                                                                             |                                              |              |                                        |             |            
|Net loss from discontinued operations for fiscal 2001                                                                           |                                              |              |                                        |             |            
|Net other comprehensive income for fiscal 2002                                                                                  | 39,211                                        |              |                                        |             |            
|                                                                                                                                | Balance  December 31, 2002                   | (183,769)     | 16,971,153                              | 23,365,426   | 800,000     
|                                                                                                                                |                                               |               |                                         |              |             
|2003:                                                                                                                           |                                               |               |                                         |              |             
|Grant and vesting of options to investor relations consultant (note 12)                                                         |                                              |              | 46,773                                  |             |            
|Issued for cash at $0.40 per share on September 19, 2003, net of issuance costs.                          |                                              | 1,999,000     | 744,050                                 |             |            
|Redemption of preferred shares.                                                                                  |                                               |               |                                         | (800,000)    | (730,000)   
|Compensation expense related to issuance of options to employees and directors..                          |                                              |              | 89,100                                  |             |            
|Options exercised for cash at prices between $ 0.21 and $ 2.00 per share during 2003.                       |                                              | 234,999       | 95,200                                  |             |            
|Flow-through shares issued for cash at $2.00 per share on December 31, 2003, net of issuance costs and including warrants. |                                              | 101,700       | 186,517                                 |             |            
|Net loss from continuing operations for fiscal 2003                                                                             |                                              |              |                                        |             |            
|Net income from discontinued operations for fiscal 2003.                                                                    |                                              |              |                                        |             |            
|Net other comprehensive income for fiscal 2003                                                                                  | 461,515                                       |              |                                        |             |            
|                                                                                                                                | Balance  December 31, 2003                   | $    277,746  | 19,306,852                              | $ 24,527,066 |            

The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements of shareholders' equity (deficit)

34ENERGY EXPLORATION TECHNOLOGIES INC.
Consolidated Statements Of Cash Flows
(expressed in U.S. dollars)



|                                                     | Years ended December 31,                                                    
|---------------------------------------------------- | ----------------------------------------------------------------------------
|                                                     | 2003                                                                        
|Operating activities:                                |                                                                             
|                                                     | Net loss for the period                                                     
|                                                     | Adjustments to reconcile net loss to net cash 
used in operating activities:
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     | Net cash used in operating activities                                       
|Financing activities:                                |                                                                             
|                                                     |                                                                             
|                                                     | Funds raised through the sale of common stock, net of issuance costs        
|                                                     | Funds raised through the exercise of options                                
|                                                     | Net cash generated by financing activities                                  
|Investing activities:                                |                                                                             
|                                                     | Funds invested in other property and equipment                              
|                                                     | Proceeds on sale of other property and equipment                            
|                                                     | Funds invested in oil and natural gas properties                            
|                                                     | Proceeds on sale of oil and natural gas properties                          
|                                                     | Funds repaid (interest accrued) on loan to former employee                  
|                                                     |                                                                             
|                                                     |                                                                             
|                                                     | Net cash used in investing activities                                       
|Net cash generated (used) by discontinued operations | 724,331                                                                     
|Effect of net other comprehensive income (loss)      | 461,515                                                                     
|Net cash  inflow (outflow)                           | 439,131                                                                     
|Cash and cash equivalents, beginning of year         | 585,070                                                                     
|Cash and cash equivalents, end of year               | $            1,024,201                                                      
|                                                     |                                                                             

The accompanying notes to consolidated financial statements are an integral part of
 these consolidated statements of cash flows



35

1. Organization and Ability to Continue Operations



Energy Exploration Technologies Inc. ("we","our company" or "NXT") was incorporated under the laws of the State of Nevada on September 27, 1994.



In March 2003 we divested all our U.S. properties. For reporting purposes, the results of operations and the cash flows of the U.S. properties have been presented as discontinued operations.  Accordingly, prior period financial statements have been reclassified to reflect this change. For details, refer to note 16.



NXT was continued from the State of Nevada to the Province of Alberta, Canada on October 24, 2003. The shareholders voted on and approved this change which moved the jurisdiction of incorporation from the U.S. to Canada. The tax effects are disclosed in the proxy statement circulated to shareholders for the Special Meeting on October 24, 2003. As a result of the continuance into Canada, our common and preferred shares no longer have a par value assigned, as is the practice in the United States. Therefore the amount that was disclosed as Additional paid-in Capital in prior years on the consolidated balance sheets and consolidated statements of shareholders equity (deficit) has been added to the share issued amount. This is a legal jurisdiction reporting difference only.



We are a technology-based reconnaissance exploration company which utilizes our proprietary stress field detection (SFD) remote-sensing airborne survey technology to quickly and inexpensively identify and high-grade oil and natural gas prospects.



We conduct our reconnaissance exploration activities, as well as land acquisition, drilling, completion and production activities through our wholly-owned subsidiary, NXT Energy Canada Inc and we conduct the aerial surveys through our wholly owned subsidiary, NXT Aero Canada Inc.



NXT Energy USA Inc. and NXT Aero USA Inc. are two wholly owned subsidiaries through which we previously conducted our U.S. operations but these companies have been inactive since the sale of the U.S. properties in early 2003.



For the year ended December 31, 2003, we incurred a loss of $2,352,359 and our ability to continue as a going concern will be dependent upon successfully identifying hydrocarbon bearing prospects, and financing, developing and monetizing these assets for a profit. We anticipate that we will continue to incur further losses until such time as we receive revenues from production or sale of properties with respect to currently held prospects or through prospects we identify and exploit for our own account.



We have divested our U.S. properties, raised capital through private placements in 2003 and we are in the midst of additional fund raising in 2004. As a result of these measures, we believe we will be able to pursue and exploit our goals and opportunities throughout 2004.



We can give no assurance that any or all pending projects will generate sufficient revenues to cover our operating or other costs.  Should this be the case, we would be forced, unless we can raise sufficient additional working capital, to suspend our operations, and possibly even liquidate our assets and wind-up and dissolve our company.



These consolidated financial statements are prepared using generally accepted accounting principles that are applicable to a going concern, which assumes the realization of assets and the settlement of liabilities in the normal course of operations. Should this assumption not be appropriate, adjustments in the carrying amounts of the assets and liabilities to their realizable amounts and the classification thereof will be required and these adjustments and reclassifications may be material.

36





2. Significant Accounting Policies



Basis of Presentation



We have prepared these consolidated financial statements for our years ended December 31, 2003, 2002 and 2001 and as at December 31, 2003 and 2002 in accordance with accounting principles generally accepted in the United States of America for annual financial reporting.



Consolidation



We have consolidated the accounts of our wholly-owned subsidiaries with those of NXT in the course of preparing these consolidated financial statements.  All significant inter-company balances and transactions amongst NXT and its subsidiaries have been eliminated as a consequence of the consolidation process, and are therefore not reflected in these consolidated financial statements.



Estimates and Assumptions



The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amount of revenues and expenses during the reporting periods.  Actual results may differ from those estimates.



Cash and Cash Equivalents



For purposes of preparing the consolidated balance sheets and statements of cash flows contained in these consolidated financial statements, we consider all investments with original maturities of ninety days or less to constitute "cash and cash equivalents".



Debt Issuance Costs



We amortize debt issuance costs on a straight-line basis over the life of the related debt.



Fair Value of Financial Instruments



Our financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, trade payables, accrued liabilities and subscriptions payable. The book value of these financial instruments approximates their fair values due to their short-term to maturity and similarity to current market rates.  It is the opinion of our management that we are not exposed to significant interest, currency or credit risks arising from these financial instruments.



Flight Equipment Held For Sale



Both aircraft were sold in 2002. We carry our flight equipment held for sale at the lower of the carrying amount or the fair value less cost to sell. These assets are not depreciated as long as they are held for sale.



Oil and Natural Gas Properties



We follow the full cost method of accounting for oil and natural gas properties and equipment whereby we capitalize all costs relating to our acquisition of, exploration for and development of oil and natural gas reserves.  These capitalized costs include:

37





| | land acquisition costs;                                                                                 
|- | --------------------------------------------------------------------------------------------------------
| | geological and geophysical costs;                                                                       
| | costs of drilling both productive and non-productive wells;                                             
| | cost of production equipment and related facilities; and                                                
| | various costs associated with evaluating petroleum and natural gas properties for potential acquisition.



We only capitalize overhead that is directly identified with acquisition, exploration or development activities. All costs related to production, general corporate overhead and similar activities are expensed as incurred.

Under the full cost method of accounting, capitalized costs are accumulated into cost centers on a country-by-country basis.  These costs, plus a provision for future development costs (including estimated dismantlement, restoration and abandonment costs) of proved undeveloped reserves, are then depleted and depreciated using the unit-of-production method, based on estimated proved oil and gas reserves as determined by independent engineers where significant.  For purposes of the depletion and depreciation calculation, proved oil and gas reserves are converted to a common unit of measure on the basis of their approximate relative energy content. NXT was a development stage enterprise until 2002 and any net revenues received prior to achieving commercial production were accounted for as an adjustment to capitalized costs. NXT achieved commercial operations at the beginning of the second quarter of 2002.



In applying the full cost method of accounting, capital costs in each cost center less accumulated depletion and depreciation and related deferred income taxes are restricted from exceeding an amount equal to the sum of the present value of their related estimated future net revenues discounted at 10% less estimated future expenditures, and the lower of cost or estimated fair value of unproved properties included in the costs being amortized, net of related tax effects.  Should this comparison indicate an excess carrying value, a write-down would be recorded.



The carrying values of unproved oil and natural gas properties, which are excluded from the depletion calculation, are assessed on a quarterly basis to ascertain whether any impairment in value has occurred.  This assessment typically includes a determination of the anticipated future net cash flows based upon reserve potential and independent appraisal where warranted.  Impairment is recorded if this assessment indicates the future potential net cash flows are less than the capitalized costs.



All recoveries of costs through the sale or other disposition of oil and gas properties and equipment are accounted for as adjustments to capitalized costs, with no gain or loss recorded, unless the sale or disposition involves a significant change in the relationship between costs and the value of proved reserves or the underlying value of unproved property, in which case the gain or loss is computed and recognized.

We conduct oil and natural gas exploration, drilling, development and production activities through joint venture partners.  These consolidated financial statements reflect only our proportionate interest in these activities.



Other Property and Equipment



We carry our other capitalized property and equipment at cost, and depreciate or amortize them over their estimated service lives using the declining balance method as follows:

38



|Aircraft                          | 5%  
|--------------------------------- | ----
|Computer and SFD system equipment | 30% 
|Computer and SFD system software  | 100%
|Equipment                         | 20% 
|Furniture and fixtures            | 20% 
|Flight equipment                  | 10% 
|Leasehold improvements            | 20% 
|Tools                             | 20% 
|Vehicle                           | 30% 



When we retire or otherwise dispose of our other capitalized property and equipment, we remove their cost and related accumulated depreciation or amortization from our accounts, and record any resulting gain or loss in the results of operations for the period.  Our management periodically reviews the carrying value of our property and equipment to ensure that any permanent impairment in value is recognized and reflected in our results of operations. For details, refer to note 6.



Revenue Recognition



Revenue associated with sales of crude oil and natural gas is recorded when title passes to the customer.



Research and Development Expenditures



We expense all research and development expenditures we incur to develop, improve and test our SFD survey system and related components, including allocable salaries.



Survey Operations and Support



We expense all survey operations and support expenditures we incur and these consist primarily of the cost to:



| | conduct field evaluations to evaluate the SFD survey system;                                                     
|- | -----------------------------------------------------------------------------------------------------------------
| | develop, organize, staff and train our survey and interpretation operational functions;                          
| | aircraft operating costs, travel expenses and allocable salaries of our personnel while on survey assignment; and
| | allocable salaries of our personnel while interpreting SFD data.                                                 





Foreign Currency Translation



Foreign currency translation adjustments resulting from the translation of the financial statements of our Canadian subsidiaries, whose functional currency is Canadian dollars, into U.S. dollar equivalents for purposes of consolidating our financial statements, are included in other comprehensive income (loss).  We use the following methodology to convert Canadian dollar denominated accounts and transactions into U.S. dollars:



| | all asset and liability accounts are translated into U.S. dollars at the rate of exchange in effect as of the end of the applicable fiscal period;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------
| | all shareholders' equity accounts are translated into U.S. dollars using historical exchange rates; and                                           

39



| | all revenue and expense accounts are translated into U.S. dollars at the average rate of exchange for the applicable fiscal period.
|- | -----------------------------------------------------------------------------------------------------------------------------------



We record the cumulative gain or loss arising from the conversion of the noted Canadian dollar denominated accounts and transactions into U.S. dollars as a foreign currency translation adjustment as a component of the accumulated other comprehensive loss for that period.



Income Taxes



We follow the liability method of accounting for income taxes (see Note 13). This method recognizes income tax assets and liabilities at current rates, based on temporary differences in reported amounts for financial statement and tax purposes. The effect of a change in income tax rates on future income tax assets and future income tax liabilities is recognized in income when substantively enacted.



Stock-Based Compensation for Employees and Directors



In accounting for the grant of our employee and director stock options, we have elected to follow Accounting Principles Board Opinion No. 25,"Accounting for Stock Issued to Employees" ("APB 25"), and related interpretations. Under APB 25, companies are not required to record any compensation expense relating to the grant of options to employees or directors where the awards are granted upon fixed terms with an exercise price equal to fair value at the date of grant and the only condition of exercise is continued employment.  See note 11.



Summarized below is pro forma financial information for the three years ended December 31, 2003.2002 and 2001 which presents the net loss for the year and loss per common share for the year calculated in accordance with SFAS No. 123:



|December 31                                                                                                      | 2003               | 2002               | 2001              
|---------------------------------------------------------------------------------------------------------------- | ------------------ | ------------------ | ------------------
|Net loss for the period as reported                                                                              | $  (2,813,874)     | $  (5,676,120)     | $  (4,388,590)    
|Add: Stock-based employee compensation expense, included in reported net loss                                    | 89,100             | -                  | -                 
|Deduct:  Total stock-based employee compensation expense determined under fair value based method for all awards | (306,509)          | (738,176)          | (686,211)         
|Pro forma net loss for the period                                                                                | $  (3,031,283)     | $  (6,414,296)     | $  (5,074,801)    
|Pro forma basic and diluted loss per common share                                                                | $           (0.17) | $           (0.37) | $           (0.36)





Recent Accounting Pronouncements



In August 2001, the U.S. Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations".  SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.  The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset.  We were required to adopt the provisions of SFAS No. 143 on January 1, 2003.  We have sold our U.S. properties, along with the associated abandonment liabilities, and we have no retirement liabilities associated with the Canadian properties.  Therefore, this SFAS has no impact on us at this time.



In January 2003, the FASB issued Statement No. 148 Accounting for Stock-Based Compensation  Transition and Disclosure, an Amendment of FASB Statement No. 123(FAS 148).  FAS 148 amends FAS 123 Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair-value method of accounting for stock-based compensation.  The impact of this accounting standard is discussed more fully in note 11.

40





The following standards issued by the FASB do not impact us at this time:

•

Statement No. 149  Amendment for Statement 133 on Derivative Instruments and Hedging Activities effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003.

•

Statement No. 150  Accounting for Certain Instruments with Characteristics of Both Liabilities and Equity effective for financial instruments issued at the beginning of the first interim period beginning after June 15, 2003.

•

Interpretation No. 45  Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others effective prospectively for guarantees issued or modified after December 31, 2002 for initial recognition and initial measurement provisions; for financial statements of interim or annual periods ending after December 15, 2002 for disclosure requirements.

•

Interpretation No. 46 - Consolidation of Variable Interest Entities, effective for financial statements issued after January 31, 2003

•

Interpretation No. 46R - Consolidationof Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51, requires consolidation of entities in which the Corporation is the primary beneficiary, despite not having voting control, effective for financial statements issued after December 31, 2003.

•

SFAS 146  Accounting for Costs Associated with Exit or Disposal Activities, effective prospectively for such activities initiated after December 31, 2002. It requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.



3. Note Receivable from Former Officer



In September 1998, we loaned the sum of CDN $54,756 (US $35,760 as of that date) to one of our officers in connection with his relocation to Calgary, Alberta.  The interest rate averaged 5%. Pursuant to the terms of an underlying promissory note, the officer was required to repay the loan on a monthly basis, with a balloon payment due on October 3, 2003. The officer left NXT in 2002 and we are pursuing repayment of the note.



4. Flight Equipment Held for Sale



Both aircraft were sold in 2002.



Summarized below are our capitalized costs for the aircraft and flight equipment held for sale as of December 31, 2003 and 2002:



|                               |                                                 | December 31,               
|------------------------------ | ----------------------------------------------- | ---------------------------
|                               |                                                 | 2003                       
|Flight equipment held for sale |                                                 | $                       Nil
|Less write-down                |                                                 | -                          
|                               | Net aircraft and flight equipment held for sale |                            



These assets are reported as part of assets from our United States operations as of December 31, 2002. See note 17.



5. Oil and Natural Gas Properties

41



Summarized below are the oil and natural gas property costs we capitalized for our years ended December 31, 2003 and 2002, and as of December 31, 2003 and 2002:







|                                   | Years Ended
December 31 | As of
December 31
|---------------------------------- | ----------------------- | -----------------
|                                   | 2003                    | 2002             
|Acquisition costs                  | $     389,679           | $      232,226   
|Exploration costs                  | 865,926                 | 1,380,801        
|Development costs                  | -                       | 27,681           
|                                   | 1,255,605               | 1,640,708        
|Less depletion.               | (17,291)                | (140,122)        
|Less impairment                    | (1,365,008)             | (3,495,970)      
|Less dispositions                  | (1,442,819)             | (158,255)        
|Net oil and natural gas properties | $  (1,569,513)          | $ (2,153,639)    





The property costs net of depletion, impairments and dispositions, by proved and unproved classification, are as follows at December 31, 2003 and 2002:



|                        | As of
December 31   | As of
December 31
|----------------------- | ------------------- | -----------------
|                        | 2003                | 2002             
|Proved property costs   | $               Nil | $       781,446  
|Unproved property costs | 1,194,406           | 1,982,473        
|                        |                     | $    1,194,406   





As there were no proved properties at the end of 2003, a ceiling test was not performed. For 2002, the ceiling tests resulted in write-downs of $263,000.



The impairment of oil and natural gas properties also includes the write-down of the cost of drilling and completing wells which are either non-commercial or which we are unable to complete for technical reasons.  We have written-off these individual well costs as an impairment cost since this determination was made prior to the establishment of proved reserves.



At the end of each quarter, our management performs an overall assessment of each of our unproved oil and natural gas properties to determine if any of these properties had been subject to any impairment in value (see note 2).  The method we use is to compare the average price paid per acre for petroleum and natural gas rights in the province, after applying a discount to recognize the shorter remaining life of certain of our leases and the possible reduced economic value, to the recorded carrying cost of our leases. Based upon these evaluations, we have determined that our unproved properties continued to have prospective commercial viability as of these dates but that an impairment of $945,000 had occurred in 2003 ($Nil in 2002).  Based upon these considerations, we have recorded these impairments against our properties to date as noted above.



6. Other Property and Equipment



Summarized below are our capitalized costs for other property and equipment as of December 31, 2003 and 2002:

42



|                                                                        |                                  |                            | December, 31                
|----------------------------------------------------------------------- | -------------------------------- | -------------------------- | ----------------------------
|                                                                        |                                  | 2003                       | 2002                        
|Computer and SFD equipment                                              |                                  | $                  332,011 | $   268,254                 
|Computer and SFD software                                               |                                  | 142,238                    | 118,470                     
|Equipment                                                               |                                  | 86,046                     | 80,912                      
|Furniture and fixtures                                                  |                                  | 187,588                    | 165,984                     
|Leasehold improvements                                                  |                                  | 238,475                    | 195,983                     
|SFD survey system (including software)                                  |                                  | 127,845                    | 115,471                     
|Tools                                                                   |                                  | 1,897                      | 1,559                       
|Flight equipment                                                        |                                  | 1,380                      | -                           
|Vehicle                                                                 |                                  | 18,828                     | 18,828                      
|                                                                        |                                  |                            | 1,136,308                   
|Less accumulated depreciation,              amortization and impairment |                                  | (944,083)                  | (759,315)                   
|                                                                        | Net other property and equipment |                            | $                    192,225



7. Long-Term Debt



At December 31, 2001, we owed $1,535,136 on an asset-based loan collateralized by our Piaggio P180 Avanti aircraft.  On May 1, 2002, we completed the sale of our Piaggio Avanti P180 aircraft to a third party and used the proceeds to settle the principal and interest due on this loan in full. We also expensed the remaining unamortized debt issuance costs of $22,805.  For 2002, we paid $61,264 of interest on this long-term debt.



43

---

8. Common Stock



We calculate basic earnings per common share from continuing operations using net income from continuing operations, net of income taxes, divided by weighted average number of common shares outstanding. We calculate basic earnings per common share using net income attributable to common shareholders and the weighted average number of common shares outstanding. We calculate diluted earnings per common share from continuing operations and diluted earnings per common share in the same manner as basic, except we use the weighted-average number of diluted common shares outstanding in the denominator.



In calculating diluted earnings per common share for the years ended December 31, 2003, 2002 and 2001,we excluded all options either because the exercise price was greater than the annual average market price of our common shares in those years or the exercise of the options would have been anti-dilutive. During these three years, outstanding stock options were the only potentially dilutive instrument.



On September 11, 2003, we raised $750,000 in gross proceeds through a private placement of 1,875,000 common shares at $0.40 per share.  Net proceeds to our company were $744,050 after deducting $5,950 in offering expenses and we also issued 124,000 shares as finders fees.



On December 31, 2003 we closed a private placement of 101,700 flow-through common shares at $2.00 ($2.60 CAN) per share for $203,400 in gross proceeds. Net proceeds were $186,517. We issued 7,496 warrants with a strike price of $2.75 and a one year term and paid $14,992 in cash as finders fees.



9. Preferred Shares



The series 'A' preferred shares were not entitled to payment of any dividends, although they were entitled under certain circumstances to participate in dividends on the same basis as if converted into common shares.  Each series 'A' preferred share carried a $7.50 liquidation preference should our company wind-up and dissolve.  Each series 'A' preferred share was convertible by either the holder or NXT into common shares based upon a $7.50 per share conversion price, subject to adjustment should NXT sell common shares or common share purchase options or warrants at prices less than $7.50 per share in specified circumstances.



All of the outstanding preferred shares were returned to treasury effective May 9, 2003 as part of the consideration received for the sale of the U.S. properties



10. Performance Warrants



On August 1, 1996, we granted a performance-based contractual right to acquire NXT warrants to the licensor of our SFD technology, Momentum Resources Corporation ("Momentum Resources"), in connection with the amendment of our exclusive SFD technology license with Momentum Resources to use the SFD technology for hydrocarbon exploration.  The primary purpose of the amendment was to indefinitely extend the termination date of the license.  Pursuant to this contractual right, Momentum Resources is entitled to a separate grant of warrants entitling it to purchase 16,000 common shares at the then current trading price for each month after December 31, 2000 in which production from SFD-identified prospects during that month exceeds 20,000 barrels of hydrocarbons.  Momentum Resources has not earned any warrants under the SFD technology license as of December 31, 2003.



44

---

11. Employee and Director Options



Description of Plans



Through December 31, 2003, we have granted options to selected employees, directors, advisors and consultants of our company pursuant to the following separate arrangements or plans (the "Plans"):



| | separate stand-alone directors' options which we granted to selected directors as compensation for serving on our board of directors;                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the 1997 Pinnacle Oil International, Inc. Stock Plan (the "1997 Plan"), pursuant to which 1,500,000 common shares are reserved for issuance to employees, directors and consultants in the form of stock options or outright stock grants;
| | the 1999 Pinnacle Oil International, Inc. Executive Option Plan (the "1999 Plan"), pursuant to which 1,000,000 common shares are reserved for issuance to executive officers in the form of stock options;                                
| | the 2000 Pinnacle Oil International, Inc. Directors' Option Plan (the "2000 Plan"), pursuant to which 400,000 common shares are reserved for issuance to selected directors in the form of stock options; and                             
| | the 2003 Stock Plan under which 375,000 common shares are reserved for issuance to consultants.                                                                                                                                           



Summary of Option Grants



We have summarized below all transactions involving option grants under the Plans for our three fiscal years ended December 31, 2003:



|                                   | 2003                        |                                 | 2002 |                             | 2001                           
|---------------------------------- | --------------------------- | ------------------------------- | ---- | --------------------------- | -------------------------------
|                                   | Common
Shares
Under
Options | Weighted
Average
Exercise
Price |      | Common
Shares
Under
Options | Weighted
Average
Exercise
Price
|Outstanding at beginning of year   | 1,501,842                   | $         2.02                  |      | 2,174,900                   | $        2.25                  
|Granted                            | 790,000                     | 0.35                            |      | 344,000                     | 0.36                           
|Exercised                          | (234,999)                   | (0.41)                          |      | -                           | -                              
|Cancelled or lapsed                | (47,901)                    | 1.85                            |      | (1,017,058)                 | (2.10)                         
|Outstanding at end of year         | 2,008,942                   | $         1.45                  |      | 1,501,842                   | $       2.02                   
|Exercisable at end of year         | 1,309,270                   | $        1.84                   |      | 1,063,842                   | $       2.02                   
|Available for grant at end of year | 1,149,959                   |                                 |      | 438,000                     |                                



We have summarized below all outstanding options under the Plans as of December 31, 2003:



|                                |                   |                | As of December 31, 2003
|------------------------------- | ----------------- | -------------- | -----------------------
|Stock Option Plan               | Grant Date        | Exercise Price | Outstanding            
|                                |                   |                |                        
|Independent Grants              |                   |                |                        
|                                | January 4, 2001   | $2.00          | 15,000                 
|                                | June 24, 2003     | $0.38          | 100,000                
|                                |                   |                |                        
|1997 Employee Stock Option Plan |                   |                |                        
|                                | January 4 2001    | $2.00          | 378,892                
|                                | December 27, 2000 | $4.125         | 15,000                 
|                                | February 1, 2001  | $2.00          | 6,250                  
|                                | May 15, 2001      | $2.50          | 120,000                

45

---



|                                 | July 5, 2001       | $2.00 | 30,000    | 15,000   
|-------------------------------- | ------------------ | ----- | --------- | ---------
|                                 | August 13, 2002    | $0.38 | 100,000   | 33,330   
|                                 | September 20, 2002 | $0.29 | 8,000     | 2,666    
|                                 | March 27, 2003     | $0.14 | 60,000    | -        
|                                 | September  8,2003  | $0.43 | 270,000   | -        
|                                 |                    |       |           |          
|1999 Executive Stock Option Plan |                    |       |           |          
|                                 | May 1, 1999        | $2.00 | 520,800   | 520,800  
|                                 |                    |       |           |          
|2000 Directors Stock Option Plan |                    |       |           |          
|                                 | May 15, 2000       | $2.00 | 35,000    | 35,000   
|                                 | April 17, 2000     | $2.00 | 60,000    | 60,000   
|                                 | August 13, 2002    | $0.38 | 120,000   | 39,999   
|                                 | September 20, 2002 | $0.29 | 10,000    | 3,333    
|                                 | September 8, 2003  | $0.43 | 160,000   | -        
|                                 |                    |       | 2,008,942 | 1,309,270



The employee options outstanding as of December 31, 2003 vest over three to five years from the grant date, depending upon the recipient, based upon the continued provision of services as an employee. The director options granted after January 1, 2000 that are outstanding as of December 31, 2003 vest one-third each on the first through third anniversaries of the grant date, respectively, based upon the continued provision of services as a director.  Both the employee and director options generally lapse, if unexercised, five years from the date of vesting.





Compensation Expense Associated With Grant of Options



Pursuant to APB 25, we have recorded $89,100 ( 2002  nil, 2001  nil) in compensation expense relating to the grant of options for 2003 as the exercise price for certain options we have granted to our employees and directors was less than the market price of the underlying common shares on the effective date of grant.  See note 2.



Had we elected to follow the alternative fair value accounting provided for under SFAS No. 123, "Accounting for Stock-Based Compensation", we would have recorded additional compensation expense of approximately $464,798, $738,176 and $686,211 for the years ended December 31, 2003, December 31, 2002 and December 31, 2001, respectively.  These amounts are determined using an option-pricing model with the following assumptions:





|  |                                                                         | 2003 | 2002 | 2001
|- | ----------------------------------------------------------------------- | ---- | ---- | ----
|  | Weighted-Average Fair Value of Options Granted in Each Year  ($/option) | 1.45 | 1.69 | 1.98
|  |                                                                         |      |      |     
| | Dividends paid per common share ($/share)                               | Nil  | Nil  | Nil 
| | Estimated average life (years)                                          | 4.5  | 4.5  | 4.5 
| | Expected volatility in the price of NXTs common shares (%)             | 207  | 225  | 57  
| | Risk free interest rate (%)                                             | 4    | 4    | 4   





12. Investor Relations Options



On May 15, 2001, as additional compensation to our investor relations consultant pursuant to an investor and public relations services agreement, we granted that consultant options to purchase 155,000 common shares

46

at $2.50 per share.  The underlying agreement provided that 50,000 options would vest immediately, and an additional 35,000 options would vest upon each of the first, second and third anniversary dates of the agreement, respectively, even if the agreement was not subsequently renewed so long as the agreement has not been terminated by either party prior to the end of the termination of the prior term or NXT has not terminated this agreement for "good cause" as defined in the agreement.  These options lapse, to the extent vested and unexercised, five years after the date of vesting.  Pursuant to SFAS No. 123, for the year ended December 31, 2003, we recorded compensation expense, as part of administrative expenses, determined in accordance with the Black-Scholes option pricing model in the amount of $46,773 in connection with the grant and vesting of these options.



13. Income Taxes



Net Operating Losses Carried Forward



As of December 31, 2003, the following net operating losses are available to reduce our taxable income in future years:



|Country       |  | Amount             |  | Expiration Dates
|------------- |  | ------------------ |  | ----------------
|United States |  | $        9,273,221 |  | 20102022       
|Canada        |  | $        3,650,053 |  | 20042010       





Deferred Income Tax Assets and Liabilities



As of December 31, 2003, our accounts contained the following deferred income tax assets and liabilities:



|United States                      |  | Amount            |  | Statutory
Tax Rate | Tax
Benefit         
|---------------------------------- |  | ----------------- |  | ------------------ | --------------------
|Tax benefit of loss carry forwards |  | $       ( 48,718) |  | 34%                | $         (16,564)  
|Tax asset related to depreciation  |  | $      9,273,221  |  | 34%                | 3,152,895           
|Valuation reserve                  |  |                   |  |                    | (3,136,331)         
|                                   |  |                   |  |                    | $                Nil
|                                   |  |                   |  |                    |                     
|Canada                             |  | Amount            |  | Statutory
Tax Rate | Tax
Benefit         
|Tax benefit of loss carry forwards |  | $      4,361,265  |  | 39.25%             | $      1,711,578    
|Tax asset related to depreciation  |  | $      3,650,053  |  | 39.25%             | 1,432,463           
|Valuation reserve                  |  |                   |  |                    | (3,144,041)         
|                                   |  |                   |  |                    | $                Nil

As of December 31, 2002, our accounts contained the following deferred income tax assets and liabilities:



|United States                      |  | Amount           |  | Statutory
Tax Rate |  | Tax
Benefit          
|---------------------------------- |  | ---------------- |  | ------------------ |  | ---------------------
|Tax benefit of loss carry forwards |  | $     9,449,886  |  | 34%                |  | $      3,212,961     
|Tax asset related to depreciation  |  | 127,041          |  | 34%                |  | 43,194               
|Valuation reserve                  |  |                  |  |                    |  | (3,256,155)          
|                                   |  |                  |  |                    |  | $                 Nil
|                                   |  |                  |  |                    |  |                      
|Canada                             |  | Amount           |  | Statutory
Tax Rate |  | Tax
Benefit          
|Tax benefit of loss carry forwards |  | $      3,233,103 |  | 39.25%             |  | $     1,268,831      
|Tax asset related to depreciation  |  | 2,656,551        |  | 39.25%             |  | 1,042,563            
|Valuation reserve                  |  |                  |  |                    |  | (2,311,394)          
|                                   |  |                  |  |                    |  | $               Nil  



47





We have not provided for any amount of current or deferred U.S. federal, state or foreign income taxes for the current period or any prior period presented.  We have provided a full valuation allowance on the deferred tax asset and liability, consisting primarily of net operating loss carry forwards, because of uncertainty regarding its realization.  The increase in the valuation allowance on the deferred tax asset during the year ended December 31, 2003 was $712,823 as compared to $1,727,592 for the year ended December 31, 2002.



14. Related Party Transactions



Summarized below is information concerning related party transactions and balances not disclosed elsewhere in these consolidated financial statements for the years ended December 31, 2003, 2002 and 2001:



|December 31                                                                                                                                 | 2003        | 2002        | 2001         
|------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | -------------
|Collective legal fees expensed to law firms in fiscal 2003, 2002 and 2001 with partners who were also directors of NXT or NXT Energy Canada | Nil         | $   72,440  | $    61,411  
|Collective wages, fees and benefits paid to executive officers of NXT in fiscal 2003, 2002 and 2001, who were also directors of NXT         | $   107,382 | $ 234,958   | $  487,607   
|Accounts receivable due from executive officers                                                                                             | Nil         | $     5,004 | $         790



Our rights to use our SFD technology arises from a sharing of the technology with Momentum Resources Corporation, and an agreement pursuant to which we were originally granted the exclusive worldwide right to use, possess and control the SFD Data for hydrocarbon identification and exploration purposes and any SFD data derived from that use for the same purpose pursuant to a sharing of the SFD Technology permitted by Momentum Resources Corporation, which was originally the exclusive owner of the SFD. Momentum Resources is owned 50% by one of our significant stockholders who is a director and an executive officer of NXT as of December 31, 2003.  Under the terms of the SFD technology agreement, we are to pay Momentum a royalty equal to 5% of any Prospect Profits (as such terms is defined in the agreement) which we may receive based on data received from Momentum Resources Corporation. No such royalty was earned or payable as of December 31, 2003.



15. Commitments and Contingencies



The lease for the principal offices expired on January 31, 2003.  A new sub-lease from another tenant was signed with a term of eighteen months ending July 31, 2004.  The space is approximately 6,600 square feet and the monthly cost is about $13,100 CDN.



On November 27, 2002, we were served a Statement of Claim which had been filed on November 25, 2002, in the Court of Queens Bench of Alberta, Judicial District of Calgary (Action No. 0201-19820), naming Energy Exploration Technologies Inc. and George Liszicasz as defendants.  Mr. Dirk Stinson, the plaintiff, alleges that NXT failed to pay him compensation under a consulting agreement and further alleges that NXT, without lawful justification, obstructed Mr. Stinson from trading his shares of NXT.  At the time of the filing of this suit, Mr. Stinson was a major shareholder of our common stock.  He is a past President and director of NXT and is currently a director and shareholder of Momentum Resources.  Mr. Stinson was seeking, among other things, damages in the amount of $1,614,750 and an injunction directing NXT to instruct our transfer agent to immediately remove the legend from Mr. Stinsons shares.  On December 10, 2002, we filed our Statement of Defence.  On July 14, 2003, we received notice that the plaintiff had dropped all claims except for a claim for $74,750 plus interest for compensation under a consulting agreement.



We believe the claim against us is without merit and intend to vigorously defend ourselves against the claim and are seeking an expeditious dismissal of the claim.



On March 18, 2003, we were served a Statement of Claim which had been filed on March 14, 2003, in the Court of Queens Bench of Alberta, Judicial District of Calgary (Action No. 0301-04309), naming Glen

48

Coffey, Murrays Aviation Repairs (1980) Ltd., Energy Exploration Technologies, its wholly-owned subsidiary, NXT Energy Canada, Inc., Dennis Wolsky, as Administrator of the Estate of Jerry Wolsky, deceased and Embassy Aero Group Ltd. as defendants.  Tops Aviation Ltd., Spartan Aviation Inc. and John Haskakis (the Plaintiffs) allege that the defendants were negligent and in breach of a Ferry Flight Contract between one or some of the defendants and one or some of the Plaintiffs under which Mr. Jerry Wolsky was to deliver a Piper Twin Comanche aircraft to Athens, Greece.  The aircraft crashed in Newfoundland enroute to Athens killing Mr. Wolsky. The Plaintiffs are seeking, among other things, damages in the amount of $450,000 CDN for loss and damages to the aircraft and cargo; and damages in respect to search and rescue expenses, salvage, storage, transportation expenses and pollution and contamination expenses.



Neither we nor our subsidiary, NXT Energy Canada, Inc., were parties to the Ferry Flight Contract.  We believe the claim against us and our subsidiary is without merit and intend to vigorously defend ourselves against the claim and are seeking an expeditious dismissal of the claim.



16.  Discontinued Operations



In January 2003, we adopted a formal plan to divest our U.S. oil and gas properties. On May 9, 2003 we closed a sale transaction with our U.S. joint venture partner to sell the properties for total consideration of $1,450,000 with proceeds of $720,000 in cash and the return to treasury of all the outstanding preferred shares.  The effective date of the transaction was March 1, 2003 and was recorded at fair market value.  For reporting purposes, the results of operations and the financial position of the properties have been presented as discontinued operations.  Accordingly, prior period financial statements have been reclassified to reflect this change.



17. Segment Information



We operate in only one business segment, oil and natural gas exploration, insofar as we develop oil and natural gas exploration prospects identified using our proprietary SFD airborne survey technology.

Summarized below with respect to our years ended December 31, 2003, 2002 and 2001 is geographic information relating to:



| | revenues we have received during the year from continuing operations allocated amongst the geographic areas in which the revenue was generated;                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | our net loss for the year from continuing operations allocated amongst the geographic areas in which the revenue and associated expenses were generated.           
| | our net income (loss) for the year from discontinued operations allocated amongst the geographic areas in which the revenue and associated expenses were generated.



|Years Ended                          | United States         |  | Canada                 |  | Total                      
|------------------------------------ | --------------------- |  | ---------------------- |  | ---------------------------
|December 31, 2003:                   |                       |  |                        |  |                            
|Revenues from oil and gas production | $                 Nil |  | $                  Nil |  | $                       Nil
|Net loss from continuing operations  | $                 Nil |  | $    (2,973,639)       |  | $         (2,973,639)      
|Income from discontinued operations  | $         159,765     |  | $                 Nil  |  | $               159,765    
|December 31, 2002:                   |                       |  |                        |  |                            
|Revenues from oil and gas production | $                 Nil |  | $             75,628   |  | $                 75,628   
|Net loss from continuing operations  | $                 Nil |  | $     (1,953,907)      |  | $         (1,953,907)      
|Loss from discontinued operations    | $   (3,722,213)       |  | $                 Nil  |  | $         (3,722,213)      
|December 31, 2001:                   |                       |  |                        |  |                            
|Revenues from oil and gas production | $                 Nil |  | $                 Nil  |  | $                     Nil  
|Net loss from continuing operations  | $                 Nil |  | $    (3,167,321)       |  | $         (3,167,321)      
|Loss from discontinued operations    | $    (1,221,269)      |  | $                 Nil  |  | $         (1,221,269)      



49



Summarized below is geographic information relating to our assets as of December 31, 2003 and 2002, allocated amongst the geographic areas in which the assets were physically located or principally connected:



|Assets as of:     | United States          |  | Canada           |  | Total             
|----------------- | ---------------------- |  | ---------------- |  | ------------------
|December 31, 2003 | $                  Nil |  | $      2,682,647 |  | $        2,682,647
|December 31, 2002 | $        1,682,768     |  | $      2,336,057 |  | $        4,018,825



In preparing the above tables, we have eliminated all inter-segment revenues, expenses and assets.



18. Subsequent Event



During December 2003, NXT initiated a Private Placement which has not closed as of the date of this report. Each unit has an issue price of $2.00 and consists of one common share and one warrant with a strike price of $2.75 and a one year term. We had raised $472,501 in gross proceeds prior to December 31, 2003 and this amount is shown as subscriptions payable on the balance sheet.



50

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SUPPLEMENTAL INFORMATION ON OIL AND NATURAL GAS PRODUCING ACTIVITIES (UNAUDITED)



In accordance with SFAS No. 69,"Disclosures About Oil and Gas Producing Activities", this section provides supplemental information on our oil and natural gas exploration and production activities.  Tables I and II provide historical cost information pertaining to costs incurred in acquisitions, exploration, development and capitalized costs.  Tables III through IV present information on our estimated proved reserve quantities and standardized measure of estimated discounted future net cash flows related to proved reserves.



Table I 
Total Costs Incurred In Oil and Natural Gas Acquisition, Exploration and Development Activities



|Years Ended        | United States         |  | Canada            |  | Total                
|------------------ | --------------------- |  | ----------------- |  | ---------------------
|December 31, 2003: |                       |  |                   |  |                      
|Acquisition costs  | $               1,665 |  | $         388,014 |  | $             389,679
|Exploration costs  | 67,982                |  | 797,944           |  | 865,926              
|Development costs  | -                     |  | -                 |  | -                    
|                   | $             69,647  |  | $      1,185,958  |  | $          1,255,605 
|December 31, 2002: |                       |  |                   |  |                      
|Acquisition costs  | $               8,260 |  | $         223,966 |  | $           232,226  
|Exploration costs  | 1,169,339             |  | 211,462           |  | 1,380,801            
|Development costs  | -                     |  | 27,681            |  | 27,681               
|                   | $       1,177,599     |  | $         463,109 |  | $         1,640,708  
|December 31, 2001: |                       |  |                   |  |                      
|Acquisition costs  | $          486,573    |  | $        86,906   |  | $      573,479       
|Exploration costs  | 1,940,284             |  | 873,117           |  | 2,813,401            
|Development costs  | -                     |  | 55,553            |  | 55,553               
|                   | $       2,426,857     |  | $   1,015,576     |  | $   3,442,433        



51

Table II 
Capitalized Costs Related To Oil and Natural Gas Producing Activities



|                            | United States           |  | Canada                |  | Total                  
|--------------------------- | ----------------------- |  | --------------------- |  | -----------------------
|As At December 31, 2003:    |                         |  |                       |  |                        
|Proved property costs       | $                   Nil |  | $                 Nil |  | $                   Nil
|Less dispositions           | -                       |  | -                     |  | -                      
|Less impairment             | -                       |  | -                     |  | -                      
|Less depletion              | -                       |  | -                     |  | -                      
|Net proved property costs   | -                       |  | -                     |  | -                      
|Unproved property costs     | -                       |  | 3,404,471             |  | 3,404,471              
|Less impairment             | -                       |  | (2,210,065)           |  | (2,210,065)            
|Net unproved property costs | -                       |  | 1,194,406             |  | 1,194,406              
|                            | $                   Nil |  | $      1,194,406      |  | $          1,194,406   
|                            |                         |  |                       |  |                        
|                            |                         |  |                       |  |                        
|As At December 31, 2002:    |                         |  |                       |  |                        
|Proved property costs       | $  1,977,950            |  | $        524,197      |  | $          2,502,147   
|Less dispositions           |                        |  | (227,351)             |  | (227,351)              
|Less impairment             | (1,262,360)             |  | (90,868)              |  | (1,353,228)            
|Less depletion              | (121,290)               |  | (18,832)              |  | (140,122)              
|Net proved property costs   | 594,300                 |  | 187,146               |  | 781,446                
|Unproved property costs     | 3,673,292               |  | 2,568,340             |  | 6,241,632              
|Less impairment             | (2,994,094)             |  | (1,265,065)           |  | (4,259,159)            
|Net unproved property costs | 679,198                 |  | 1,303,275             |  | 1,982,473              
|                            | $        1,273,498      |  | $      1,490,421      |  | $          2,763,919   
|                            |                         |  |                       |  |                        
|As At December 31, 2001:    |                         |  |                       |  |                        
|Proved property costs       | $   1,775,899           |  | $      458,807        |  | $   2,234,706          
|Less impairment             |                        |  | (90,000)              |  | (90,000)               
|Net proved property costs   | 1,775,899               |  | 368,807               |  | 2,144,706              
|Unproved property costs     | 2,700,246               |  | 2,099,023             |  | 4,799,269              
|Less impairment             | (955,023)               |  | (1,071,394)           |  | (2,026,417)            
|Net unproved property costs | 1,745,223               |  | 1,027,629             |  | 2,772,852              
|                            | $   3,521,122           |  | $   1,396,436         |  | $   4,917,558          



Table III
Quantities of Oil and Natural Gas Reserves



Proved reserves are estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs under existing economic and operating conditions.  Proved developed reserves are those which are expected to be recovered through existing wells with existing equipment and operating methods.



The U.S. Securities and Exchange Commission requires the reserve presentation to be calculated using year-end prices and costs and assuming a continuation of existing economic conditions.  Proved reserves cannot be measured exactly, and the estimation of reserves involves judgmental determinations.  Reserve estimates must be reviewed and adjusted periodically to reflect additional information gained from reservoir performance, new geological and geophysical data and economic changes.  The estimates are based on current technology and economic conditions, and we consider such estimates to be reasonable and consistent with current knowledge of the characteristics and extent of production.  The estimates include only those amounts considered to be proved reserves and do not include additional amounts which may result from new





52

discoveries in the future, or from application of secondary and tertiary recovery processes where facilities are not in place or for which transportation and/or marketing contracts are not in place.



Proved developed reserves are reserves which can be expected to be recovered through existing wells with existing equipment and existing operating methods.  This classification includes: (1) proved developed producing reserves which are reserves expected to be recovered through existing completion intervals now open for production in existing wells; and (2) proved developed non-producing reserves which are reserves that exist behind the casing of existing wells which are expected to be produced in the predictable future, where the cost of making such oil and natural gas available for production should be relatively small compared to the cost of a new well.



Proved undeveloped reserves are proved reserves which are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling units offsetting productive units, which are reasonably certain of production when drilled. Estimates of recoverable reserves for proved undeveloped reserves may be subject to substantial variation and actual recoveries may vary materially from estimates.

Proved reserves for other undrilled units are claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation.  No estimates for proved undeveloped reserves are attributable to or included in this table for any acreage for which an application of fluid injection or other improved recovery technique is contemplated unless proved effective by actual tests in the area and in the same reservoir.





|Year ended December 31, 2003:                      | United States | Canada   | Total    
|-------------------------------------------------- | ------------- | -------- | ---------
|Proved Reserves  Natural Gas And Condensate (BOE) |               |          |          
|Proved reserves, beginning of year                 | 214,100       | 19,800   | 233,900  
|Adjustments                                        | -             | (19,800) | (19,800) 
|Production                                         | (4,634)       | -        | (4,634)  
|Property dispositions                              | ( 209,466)    | -        | (209,466)
|Proved reserves, end of year                       | Nil           | Nil      | Nil      



Table IV
Standardized Measure of Discounted Future Net Cash Flows Related To Proved 
Oil and Natural Gas Reserve Quantities



The standardized measure of discounted future net cash flows is presented in accordance with the provisions of SFAS No. 69.  In preparing this data, assumptions and estimates have been used, and we caution against viewing this information as a forecast of future economic conditions.



We had no proved reserves at December 31, 2003 as we sold all our U.S. properties during 2003. The Canadian reserves shown as proved in 2002 have now been reclassified to probable.



Future cash inflows were estimated by applying year-end prices to the estimated future production of year-end proved reserves.  Future cash inflows were reduced by estimated future production and development costs to determine pre-tax cash inflows.  Future income taxes were estimated by applying the year-end statutory tax rates to the future pre-tax cash inflows, less the tax basis of the properties involved, and tax credits and allowances.  The resultant future net cash inflows are discounted using a ten percent discount rate.

53



|Year Ended December 31, 2003:                            | United States    | Canada          | Total         
|-------------------------------------------------------- | ---------------- | --------------- | --------------
|Future cash inflows                                      | Nil              | Nil             | Nil           
|Future production costs                                  | -                | -               | -             
|Future development costs                                 | -                | -               | -             
|Future net revenue before income taxes                   | -                | -               | -             
|10% annual discount for estimated timing of cash flows   | -                | -               | -             
|Discounted future net cash flows before income taxes     | -                | -               | -             
|Future income taxes, discounted at 10% per annum         | -                | -               | -             
|Standardized measure of discounted future net cash flows | Nil              | Nil             | Nil           
|                                                         |                  |                 |               
|Year Ended December 31, 2002:                            | United States    | Canada          | Total         
|Future cash inflows                                      | $      4,770,000 | $       448,000 | $  5,218,000  
|Future production costs                                  | (1,135,000)      | (19,000)        | (1,154,000)   
|Future development costs                                 | (113,000)        | (34,000)        | (147,000)     
|Future net revenue before income taxes                   | 3,522,000        | 395,000         | 3,917,000     
|10% annual discount for estimated timing of cash flows   | (1,443,000)      | (146,000)       | (1,589,000)   
|Discounted future net cash flows before income taxes     | 2,079,000        | 249,000         | 2,328,000     
|Future income taxes, discounted at 10% per annum         | -                | -               | -             
|Standardized measure of discounted future net cash flows | $      2,079,000 | $       249,000 | $    2,328,000
|                                                         |                  |                 |               
|Year Ended December 31, 2001:                            | United States    | Canada          | Total         
|Future cash inflows                                      | $      4,891,000 | $       967,000 | $  5,858,000  
|Future production costs                                  | (1, 397,000)     | (276,000)       | (1,673,000)   
|Future development costs                                 | (451,000)        | (64,000)        | (515,000)     
|Future net revenue before income taxes                   | 3,043,000        | 627,000         | 3,670,000     
|10% annual discount for estimated timing of cash flows   | (1,034,000)      | (258,000)       | (1,292,000)   
|Discounted future net cash flows before income taxes     | 2,009,000        | 369,000         | 2,378,000     
|Future income taxes, discounted at 10% per annum         | -                | -               | -             
|Standardized measure of discounted future net cash flows | $      2,009,000 | $       369,000 | $    2,378,000

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QUARTERLY FINANCIAL DATA



Summarized quarterly financial data is as follows:

|Interim Quarter Ended                 | Dec. 31, 2003        | Sept. 30 ,2003         | June 30, 2003          | March 31, 2003         
|------------------------------------- | -------------------- | ---------------------- | ---------------------- | -----------------------
|Revenue                               | $                  - | $                    - | $                    - | $                    - 
|Net loss from continuing operations   | $  (1,736,398)       | $       (481,719)      | $      (359,995)       | $          (395,527)   
|Net loss from discontinued operations | $         (6,557)    | $         (26,660)     | $          (5,618)     | 198,600                
|Comprehensive loss                    | $  (1,591,558)       | $       (521,507)      | $      (185,900)       | $            (53,394)  
|Basic and diluted loss per share      | $           (0.09)   | $             (0.03)   | $            (0.01)    | $                (0.00)
|                                      |                      |                        |                        |                        
|Interim Quarter Ended                 | Dec. 31, 2002        | Sept. 30 ,2002         | June 30, 2002          | March 31, 2002         
|Revenue                               | $              190   | $              6,500   | $     58,220           | $      10,718          
|Net loss from continuing operations   | $     (528,387)      | $       (368,087)      | $   (520,970)          | $   (536,463)          
|Net loss from discontinued operations | $  (3,125,276)       | $         (71,119)     | $      (269,065)       | $     (256,753)        
|Comprehensive loss                    | $  (3,633,036)       | $       (532,348)      | $   (679,820)          | $   (791,705)          
|Basic and diluted loss per share      | $          (0.21)    | $             (0.03)   | $        (0.04)        | $        (0.05)        









ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE



On July 9, 2002, our board of directors accepted the resignation of Arthur Andersen LLP Canada, otherwise referred to as Andersen, as our independent auditors.  The resignation was tendered as Andersen was no longer able to fulfill its responsibilities to NXT due to Andersen ceasing operations.  Andersen audited our consolidated financial statements for our two years ended December 31, 2001.



The report of Andersen accompanying the audited financial statements for our two years ended December 31, 2001 was not qualified or modified as to audit scope or accounting principles and did not contain an adverse opinion or disclaimer of opinion.



During our two years ended December 31, 2001, and also during the subsequent interim period through the date of resignation, there were (1) no disagreements between us and Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; (2) no reportable events as such term is defined by paragraph (a)(1)(v) of Item 304 of Regulation S-K promulgated by the U.S. Securities and Exchange Commission; and (3) no matters identified by Andersen involving our internal control structure or operations which was considered to be material weakness.



On July 9, 2002, our board of directors appointed Deloitte & Touche LLP as our new independent auditors.



55

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ITEM 9A.  CONTROLS AND PROCEDURES



We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.



As of December 31, 2003, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.  Based upon the foregoing, our Chief Executive Officer /Chief Financial Officer concluded that our disclosure controls and procedures are effective.



There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation and since the last period reported, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.







PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS



NXTs articles provide for a minimum of one director and a maximum of 15 directors comprising our board of directors. At present, our board of directors consists of six members.



Our directors are appointed by our common stock shareholders at our annual meeting of shareholders and hold the position either until the next annual shareholders meeting or until a successor is appointed. Our directors recently appointed His Highness Sheikh Al Hassan Bin Ali Bin Rashid Al Nuaimi to the board and his appointment will be submitted to the shareholders for approval at the next annual shareholders meeting.



The following table sets forth information, as of April 6, 2004, regarding our directors, executive officers and key employees:



|DONALD E. FOULKESAge 55
Director since May 2002 | Mr. Foulkes has been a director and the President of AltaCanada Energy Corp. (TSX: ANG), an oil and gas exploration company, since September 2002.  Mr. Foulkes was the Chairman of the Board of Bushmills Energy Corp. (TSE:BSH), an oil and gas exploration company, from September 2001 until January 2003.  Mr. Foulkes was with Causeway Energy Corporation (TSE:CUW), an oil and gas exploration and production company, from September 1995 to September 2001, where he held the position of President from 1995 until 1998 when he became the Chief Executive Officer.  From 1992 to 1995, Mr. Foulkes was the President of Highridge Exploration Ltd. (TSE:HRE) and from 1988 to 1992, he was the President of Union Pacific Resources Inc., a private oil and gas company.  Mr. Foulkes serves as a board member on our two Canadian subsidiaries, NXT Energy Canada, Inc. and NXT Aero Canada, Inc., as well; he also serves as a board member of 669677 Alberta Ltd., a private company.

Mr. Foulkes is a professional geologist and received a Bachelor of Science degree in Geology from the University of Calgary in 1970.

Mr. Foulkes sits on both our Audit Committee and our Compensation Committee.
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

56



|HIS HIGHNESS SHEIKH AL HASSAN BIN ALI BIN RASHID AL NUAIMI
Age 40
Director since February 2004 | His Highness is a member of the Saudi Royal Family. He is Chairman of Sea Spray Aluminium Boats "Emirates" L.L.C. which operates four factories, two in the UAE and one factory each in Iran and India.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|DENNIS HUNTERAge 62
Director since September 1998                                              | Mr. Hunter is an entrepreneur who splits his time equally between private investment activities and real estate development and management.  Since 1973, Mr. Hunter has been President and Chairman of the Board of Investment Development Management Corporation, which acquires, constructs, manages, develops and sells properties in California, Oregon and Nevada.  Mr. Hunter has also been Chairman of the Board since 1992, and Vice Chairman of the Board from 1984, of Northern Empire Bancshares, a holding company of Sonoma National Bank, of which Mr. Hunter was a founder in 1982.  Mr. Hunter has also been a director, since 1988, of Northbay Corporation, a private holding company in the solid waste industry with 35 companies in solid waste hauling, transfer stations, portable toilets, land fill operations and real property ownership.  Mr. Hunter is also the trustee and an investment strategist for five charitable remainder trusts collectively holding over $30 million in net assets. Mr. Hunter sits on the board of directors of our two U.S. subsidiaries, NXT Aero USA, Inc. and NXT Energy USA, Inc.

Mr. Hunter received his Bachelor of Arts degree in Economics from California State University Sacramento.

Mr. Hunter has served on our Compensation Committee since February 2000.
|GEORGE LISZICASZAge 50
Director and Chief Executive Officer since January 1996                 | Mr. Liszicasz is the inventor of the SFD technology and has been our Chairman and Chief Executive Officer since inception. Mr. Liszicasz was appointed our interim President and interim Chief Financial Officer in July 2002.  Mr. Liszicasz's primary responsibilities, as the Chief Executive Officer, interim President and interim Chief Financial Officer, are to ensure the smooth running of the day-to-day operations and to further develop our SFD technology.  Prior to founding NXT, Mr. Liszicasz was Vice President of Susa Petroleum Inc. from 1993 to 1994.  From 1987 to 1995, Mr. Liszicasz was President of Owl Industries Ltd., a developer of electronic controlling devices, where he had both engineering and business responsibilities.  Mr. Liszicasz serves as a board member of each of our four subsidiaries; NXT Energy Canada, Inc., NXT Energy USA, Inc., NXT Aero Canada, Inc. and NXT Aero USA, Inc.

Mr. Liszicasz studied electronics and general sciences at the University of British Columbia and obtained a High Voltage Controls and Station Operations degree in Electronics from the Landler Jeno Technitken in Hungary in 1973.                                                                                                                                                         
|DOUGLAS ROWEAge 61
Director since May 2002                                                     | Mr. Rowe has been the President, Chief Executive Officer and a director of Birch Mountain Resources Ltd.(TSX:BMD; OTCBB:BHMNF), a Canadian junior mineral exploration company, since 1994.  Prior to that he was Chairman and President of Brougham Geoquest, Ltd., a company engaged in mineral exploration, from 1986 to 1993, and Brougham Energy Corporation, a company engaged in oil and gas exploration and development, from 1984 to 1986.  Mr. Rowe also sits on the board of directors of our two Canadian subsidiaries, NXT Aero Canada, Inc. and NXT Energy Canada, Inc.

Mr. Rowe is a professional engineer with a Bachelors of Science degree in Electrical Engineering from Queens University which he obtained in 1967 and has over 30 years of industry experience.

Mr. Rowe is chairman of our Compensation Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|SCOTT R. SCHRAMMARAge 53
Corporate Secretary since September 2002                              | Mr. Schrammar retired in 1992 .From 1989 to 1992, Mr. Schrammar was an independent trader at the American Stock Exchange.  From 1983 to 1988, he was Head Floor Broker for Moseley, Hallgarten, Estabrook and Weeden at the American Stock Exchange.  Mr. Schrammar is the Corporate Secretary of all of our subsidiaries.

Mr. Schrammar graduated Summa Cum Laude from the City University of New York with his Bachelor degree in Psychology in 1974 prior to continuing his studies at the Brooklyn Law School and receiving his Juris Doctor Degree in 1978.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ROBERT VAN CANEGHANAge 56
Director since May 2002                                              | Mr. Van Caneghan retired in 1994. He has over 25 years of experience as a market maker and specialist broker.  From 1984 to 1994, he was a principal of Miceli-Van Caneghan, a specialist firm located on the AMEX floor.  Mr. Van Caneghan was also a member of the American Stock Exchange Board of Governance from 1988 to 1994. Mr. Van Caneghan currently is a board member of our two U.S. subsidiaries, NXT Energy USA, Inc. and NXT Aero USA, Inc. and of the Financial Resources Federal Credit Union.

In 1969, Mr. Van Caneghan graduated from Wagner College with a Bachelor of Science in Economics.  He then obtained a Masters Degree in Finance from the New York University Stern School of Business in 1974. Mr. Van Caneghan attended Brooklyn Law School where he graduated with a Juris Doctor degree in 1978.

Mr. Van Caneghan is a member of our Audit Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                           



None of our executive officers or directors have been involved in any bankruptcy proceedings within the last five years, been convicted in or has pending any criminal proceeding, been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity or been found to have violated any federal, state or provincial securities or commodities laws.





Section 16(a) Beneficial Ownership Reporting Compliance



The following represents each person who did not file on a timely basis reports required by Section 16(a) of the Exchange Act during the most recent year:



|Name                | Reporting Person                   | Form 4/# of transactions
|------------------- | ---------------------------------- | ------------------------
|Donald Foulkes      | Director                           | Late/1                  
|George Liszicasz    | Chairman & Chief Executive Officer | Late/1                  
|Douglas Rowe        | Director                           | Late/1                  
|Scott Schrammar     | Corporate Secretary                | Late/1                  
|Robert Van Caneghan | Director                           | Late/1                  



Board Committees



Our board of directors has established two committees, a Compensation Committee and an Audit Committee.

57

---



Messrs. Foulkes, Hunter and Rowe constitute our Compensation Committee.  Our Compensation Committee reviews and makes recommendations with respect to the compensation of our executive officers, and also administers our various stock plans.



The Audit Committee's duties, as outlined in its charter, include recommending to our board of directors the engagement of our independent auditors, reviewing the results of the auditor's examination of our periodic financial statements, and determining the independence of those accountants.  Messrs. Foulkes and Van Caneghan are members of the Audit Committee.  The board of directors is in the process of locating a financial expert to sit on the Audit Committee.



Messrs. Foulkes and Van Caneghan are considered "independent" within the meaning of the rules of NASDAQ, the New York and American Stock Exchanges and the U.S. Securities and Exchange Commission.



Compensation Committee Interlocks and Insider Participation



The Compensation Committee of the board of directors reviews and recommends to the board of directors the compensation and benefits of all our executive officers and establishes and reviews general policies relating to compensation and benefits of our employees.  None of our executive officers served as a director, executive officer or member of a compensation committee of another entity of which one of its executive officers served on our Compensation Committee.  Except as described in "Certain Relationships and Related Transactions", no interlocking relationships exist between our board of directors or compensation committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.



Compensation for our Chief Executive Officer was determined by the Compensation Committee after considering his efforts in assisting in the development of our business strategy, the salaries of executives in similar positions and our general financial condition.  The use of stock options and other awards is intended to strengthen the alignment of interests of executive officers and other key employees with those of our stockholders.



Board and Committee Meetings



Our board of directors was comprised of five directors for 2003, and they held seven meetings during 2003. No director attended less than 80% of the total number of those meetings.  Our board of directors also approved three additional corporate matters during 2003 through unanimous written consents.



The Compensation Committee held two meetings during 2003.  Messrs. Foulkes and Rowe attended both meetings and Mr. Hunter attended neither.



The Audit Committee held four meetings during 2003 and all members were in attendance at both meetings.



ITEM 11.  EXECUTIVE COMPENSATION



The following table shows the compensation paid over the past three years with respect to the following persons:



|· | Our Chief Executive Officer;                                                                                                             
|- | -----------------------------------------------------------------------------------------------------------------------------------------
|· | Our four other most highly compensated executive officers (if any), whose annual salary and bonus exceeded $100,000 in the aggregate; and



58

---





|                                                                     |                |                            |             |             |  | Long Term Compensation
|-------------------------------------------------------------------- | -------------- | -------------------------- | ----------- | ----------- |  | ----------------------
|                                                                     |                | Annual Compensation        |             | Awards      |  | Payouts               
|Named Executive Officer and Principal Position                       | Year           | Salary (1)                 | Bonus       | Other(2)    |  | Restric-
ted
Stock    
|George Liszicasz (7)Chief Executive Officer                          | 2003
2002
2001 | $99,415
$ 83,671
$ 164,474 | ---
---
--- | ---
---
--- |  | ---
---
---           
|Daniel C. Topolinsky (3)Former President and Chief Operating Officer | 2003
2002
2001 | $---
$ 62,187
$ 164,422    | ---
---
--- | ---
---
--- |  | ---
---
---           
|James R. Ehrets (4)Former Vice President 
Exploration (U.S.)         | 2003
2002
2001 | $----
$ 194,802
$ 164,346  | ---
---
--- | ---
---
--- |  | ---
---
---           
|John M. Woodbury(5)Former Chief Financial Officer & General Counsel  | 2003
2002
2001 | $---
$ 90,209
$ 144,276    | ---
---
--- | ---
---
--- |  | ---
---
---           



(1)

NXT ordinarily pays salaries to our executive officers in Canadian dollars.  The amounts shown as paid in this table have been converted into United States dollars based upon the average exchange rate for the year of payment used in preparing our consolidated financial statements.

(2)

Includes, among other things, perquisites and other personal benefits, securities or property which exceed in the aggregate the lesser of either $50,000 or 10% of the total annual salary and bonus reported for that year.

(3)

Mr. Topolinsky resigned as NXT's President and Chief Operating Officer and as a director of NXT effective April 19, 2002.

(4)

Effective March 1, 2002, Mr. Ehrets became NXT's Vice President Exploration (U.S.).  Prior to that Mr. Ehrets was NXT's Executive Vice President of Operations.  Mr. Ehrets contract expired on October 31, 2002 and was not renewed.

(5)

Mr. Woodburys contract expired on July 8, 2002 and was not renewed.

(6)

Common share purchase options granted to Mr. Topolinsky in connection with his appointment to that office.  As of the date of this annual report, Mr. Topolinsky has 270,000 outstanding options which are exercisable until April 19, 2004.

(7)

In January 2002, Mr. Liszicasz accepted a 50% reduction in his annual salary.

(8)

Common share purchase options granted to Mr. Ehrets in connection with his appointment to that office.  As of the date of this annual report, Mr. Ehrets has 250,800 outstanding options which are exercisable until April 30, 2004.



Summary of Stock Options and Stock Appreciation Rights Granted To Executive Officers



There were grants to our executive officer of 70,000 options at prices ranging from $0.14 to $0.43 to purchase our common shares during 2003.



The following table sets forth information regarding stock option grants to our officers and directors as of March 31, 2004:





59

---







|Individual Grants   | Potential Realized Value at Assumed Annual Rates of Stock Price Appreciation for Option Term                                                     
|------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------
|Name                | Number of Securities Underlying Options Granted (#)                                                                                              
|Donald Foulkes      | 40,000

40,000                                                                                                                                   
|Dennis Hunter       | 45,000


20,000

40,000                                                                                                                          
|George Liszicasz    | 15,000


30,000

40,000                                                                                                                          
|Douglas Rowe        | 30,000

10,000

40,000                                                                                                                           
|Robert Van Caneghan | 30,000

40,000                                                                                                                                   
|Scott Schrammar     | 30,000

40,000                                                                                                                                   
|                    |                                                                                                                                                  
|(1)                 | Based on options exercisable to acquire a total 1,805,135 shares to executive officers, directors and employees.                                 
|(2)                 | The exercise price per share was equal to the fair market value of the common stock on the date of grant as determined by the board of directors.



The potential realizable value is calculated based on the assumption that the common shares appreciate at the annual rate shown, compounded annually, from the date of grant until the expiry of the term of the option.  These numbers are calculated based on U.S. Securities and Exchange Commission requirements and do not reflect our projection or estimate of future stock price growth.  Potential realizable values are computed by:



|· | multiplying the number of shares of common stock subject to a given option by the exercise price;                                                                     
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire term of the option; and

60



|· | subtracting from that result the aggregate option exercise price.
|- | -----------------------------------------------------------------



Summary of Stock Options and Stock Appreciation Rights Exercised By Executive Officers and Year End Balances



The following table provides certain information with respect to each of our executive officers in 2003 concerning any options to purchase our common shares or stock appreciation rights they may have exercised in 2003, and the number and value of their unexercised options as of December 31, 2003:



|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                | at December 31, 2003                        
|------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | --------------------------------------------
|Named Executive Officer  | Shares
Acquired On Exercise                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Value
Realized | Options at FY-End(Exercisable/Unexercisable)
|George Liszicasz         | ---                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | ---            | 15,000  / 70,000                            
|Daniel C. Topolinsky (3) | ---                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | ---            | 270,000  / 0                                
|James R. Ehrets (4)      | ---                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | ---            | 250,800  / 0                                
|John M. Woodbury (5)     | ---                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | ---            | 33,167 / 0                                  
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                |                                             
|(1)                      | The dollar amount shown represents the difference between the fair market value of our common shares underlying the options as of the date of exercise and the option exercise price.                                                                                                                                                                                                                                                                                                                                                                                                            
|(2)                      | The dollar value provided represents the cumulative difference in the fair market value of our common shares underlying all in-the-money options as of December 31, 2002 and the exercise prices for those options.  Options are considered "in-the-money" if the fair market value of the underlying common shares as of the last trading day in 2002 exceeds the exercise price of those options.  The fair market value of our common shares for purposes of this calculation is $0.09, based upon the closing price for our common shares on December 31, 2002, the last trading day in 2002.
|(3)                      | Mr. Topolinsky resigned as NXT's President and Chief Operating Officer and as a director of NXT effective April 19, 2002.  He has two years to exercise any options that had vested prior to his resignation.  All unvested options expired upon his resignation.                                                                                                                                                                                                                                                                                                                                
|(4)                      | Effective March 1, 2002, Mr. Ehrets became NXT's Vice President Exploration (U.S.).  Prior to that Mr. Ehrets was NXT's Executive Vice President of Operations.  Mr. Ehrets contract expired on October 31, 2002 and was not renewed.  He has two years to exercise any options that had vested prior to the end of his contract.  All unvested options expired at the end of his contract.                                                                                                                                                                                                     
|(5)                      | Mr. Woodburys contract expired on July 8, 2002 and was not renewed at that time.  He has two years to exercise any options that had vested prior to the end of his contract.  All unvested options expired at the end of his contract.                                                                                                                                                                                                                                                                                                                                                          



Director Compensation



We do not currently pay any cash compensation to directors for serving on our board, but we do reimburse directors for out-of-pocket expenses for attending board and committee meetings.  Our independent directors receive stock options to purchase our common shares as compensation for their service as directors.  The terms of stock option grants made to independent directors are determined by the board of directors.  We do not provide additional compensation for committee participation or special assignments of the board of directors.



Indemnification of Directors, Officers and Others



Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the company, we have been informed that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.



Our By-laws provide that, to the fullest extent permitted by law, we may indemnify our directors, officers and others who were or are a party to, or are threatened to be made a party to, any threatened, pending or completed action, suit or proceeding.



We do maintain directors and officers indemnity insurance.

61



EMPLOYMENT AGREEMENT WITH OUR EXECUTIVE OFFICER



Mr. Liszicasz is employed as our Chief Executive Officer under a five-year employment agreement entered into on December 1, 2002, which contains the following principal compensatory provisions:



|· | An initial base salary of CDN $21,000 per month, with an automatic increase of 5% on each anniversary date.  However, Mr. Liszicasz reduced his monthly salary to CDN $10,500.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | An annual bonus equal to 5% of our "net income after taxes" in the event we earn more than $5 million in net income after taxes in any year.                                  
|· | An annual performance bonus, as determined in the sole discretion of our board of directors.                                                                                  



At the conclusion of his initial term, Mr. Liszicaszs employment agreement renews automatically each year for a successive one-year term, unless we or Mr. Liszicasz elects by a written, 60-day notice not to renew; or the agreement is terminated earlier in accordance with its terms.



Mr. Liszicaszs employment agreement provides for early termination in the case of any of the following events as defined in the employment agreement:



|· | death or disability;                                         
|- | -------------------------------------------------------------
|· | a "change in control" of NXT;                                
|· | termination of employment by NXT for "cause;" or             
|· | termination of employment by Mr. Liszicasz for "good reason."



Under the employment agreement a "change in control" means any of the following:



|· | an acquisition whereby immediately after such acquisition, a person holds beneficial ownership of more than 50% of the total combined voting power of our then outstanding voting securities;                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | if in any period of three consecutive years after the date of the employment agreement, the then incumbent members of our board of directors cease to constitute a majority of the board for reasons other than voluntary resignation, refusal by one or more members of our board of directors to stand for election, or removal of one or more board member for good cause; or
|· | our board of directors or shareholders approve a merger, consolidation or reorganization of NXT; the complete liquidation or dissolution of NXT; or the agreement for the sale or other disposition of all or substantially all of NXT's assets.                                                                                                                                



In general, where a termination is for death, disability, "cause" or by Mr. Liszicasz without "good reason", Mr. Liszicaszs compensation allowances and benefits will accrue only through the effective date of the termination.  However, where a termination is due to a "change in control", without "cause", or Mr. Liszicasz for "good reason", the employment agreement provides that we will pay compensation and certain allowances and benefits to Mr. Liszicasz through the end of the then applicable term.



ITEM 12.  OWNERSHIP OF NXTS SECURITIES BY BENEFICIAL OWNERS AND MANAGEMENT



The following table sets forth certain selected information, computed as of March 31, 2004, about the amount and nature of our securities "beneficially owned" by the following persons as of that date:

62



|· | each of our current directors and executive officers;                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------
|· | each person who is a beneficial owner of more than 5% of any class of our outstanding securities with voting rights; and
|· | the group comprised of our current directors and executive officers.                                                    



The information contained in the following tables was given to us by the individuals, our transfer agent or entities named.  We believe that each of these individuals or entities has sole or shared investment and voting power with respect to the securities indicated as beneficially owned by them, subject to community property laws, where applicable, except where otherwise noted.



|                     | STOCK                                                                  
|-------------------- | -----------------------------------------------------------------------
|NAME                 | Amount                                                                 
|                     |                                                                        
|Directors & Officers |                                                                        
|                     | George Liszicasz (2)
383 Arbour Lake Way NW
Calgary, Alberta
T3G 4A2   
|                     | Dennis R. Hunter
Box 9069
Santa Rosa, CA
95405                         
|                     | Donald E. Foulkes
39 Pinnacle Ridge Dr.
Calgary, Alberta
T3Z 3N7       
|                     | His Highness Sheikh Al Hassan Bin Ali Bin Rashid Al Nuaimi
Ajman,UAE   
|                     | Douglas Rowe
246 Artist View Way
Calgary, Alberta
T3N 3N1              
|                     | Robert Van Caneghan
123 Redcliff Road
Staten Island, NY
10305          
|                     | Scott Schrammar(2)
9438 U.S. 19 North, PMB 210
Port Richey, FL
34668   
|                     | Current directors, director-nominees
and executive officers, as a group

63



|(1) | Rule 13d-3 under the Securities Exchange Act defines the term, "beneficial ownership". Under this rule, the term includes shares over which the indicated beneficial owner exercises voting and/or investment power.  The rules also deem common shares subject to options currently exercisable, or exercisable within 60 days, to be outstanding for purposes of computing the percentage ownership of the person holding the options but do not deem such shares to be outstanding for purposes of computing the percentage ownership of any other person.  The applicable percentage of ownership for each shareholder is based on 19,845,293 common shares outstanding as of March 31, 2004, together with applicable options. Except as otherwise indicated, we believe the beneficial owners of the common shares have sole voting and investment power over the number of shares listed opposite their names.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Executive officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(3) | Includes 5,062,490 common shares directly held by Mr. Liszicasz, and options exercisable within 60 days of March 31, 2004 to acquire 25,000 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(4) | Includes 361,266 common shares and options exercisable within 60 days of March 31, 2004 to acquire 51,666 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(5) | Includes 25,000 common shares and options exercisable within 60 days of March 31, 2004 to acquire 13,333 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(6) | Includes 25,000 common shares and options exercisable within 60 days of March 31, 2004 to acquire 13,333 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(7) | Includes options exercisable within 60 days of March 31, 2004 to acquire 10,000 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(8) | Includes options exercisable within 60 days of March 31, 2004 to acquire 10,000 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(9) | Includes 5,473,756 common shares and options exercisable within 60 days of March 31, 2004 to acquire 173,332 common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



None



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES



AUDIT FEES



Fees billed by Deloitte & Touche LLP were:

 $22,300 in 2003 ($800 in 2002) for the audit of the Consolidated Financial Statements included in our Annual

Report on Form 10-K.

 $5,300 for the 2003 quarterly reviews ($8,600 for the 2002 quarterly reviews) of the Consolidated Financial Statements included in Form 10-Q.



Fees billed by Arthur Andersen LLP were $47,000 in 2002 for audit of the Consolidated Financial Statements included in our Annual Report on Form 10-K.



Fees billed by Arthur Andersen LLP were $4,000 in 2002 for quarterly reviews of the Consolidated Financial Statements included in Form 10-Q.



Fees billed by Deloitte & Touche LLP, were nil in 2003 ($6,100 for 2002 for reviewing S-8 filing)



Fees billed by Arthur Andersen LLP during 2002 were $8,400 for prospectus assistance and S-1 review.



TAX FEES



Fees billed by Deloitte & Touche LLP, were $106,300 for 2003 ($1,100 for 2002) for tax return preparation assistance and tax-related consultation.



Fees billed by Arthur Andersen LLP during 2002 were $1,100 for tax return preparation

assistance and tax-related consultation.

64



ALL OTHER FEES



No other fees were billed by Deloitte & Touche LLP or Arthur Andersen LLP during 2003 or 2002.



AUDIT COMMITTEE APPROVAL

Before Deloitte & Touche LLP is engaged by NXT to render audit or non-audit services, the engagement

is approved by NXTs Audit Committee. All audit-related and tax services provided by Deloitte & Touche LLP after May 6, 2003 were approved by our Audit Committee.



PART IV





ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



(a) Exhibits



|2.1 (1)    | Reorganization Plan dated September 28, 1994 between Mega-Mart, Inc. and Auric Mining Corporation                                                     
|---------- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|2.2 (1)    | Reorganization Plan dated December 31, 1995 between Auric Mining Corporation and Fiero Mining Corporation                                             
|2.3 (1)    | Reorganization Plan dated January 20, 1996 between Auric Mining Corporation and Pinnacle Oil Inc.                                                     
|2.4 (1)    | Articles of Incorporation of Auric Mining Corporation as filed with the Nevada Secretary of State on September 27, 1994                               
|3.2 (1)    | Amendment to Articles of Incorporation of Auric Mining Corporation as filed with the Nevada Secretary of State on February 23, 1996                   
|3.3 (1)    | Certificate of Amendment to Articles of Incorporation of Pinnacle Oil International, Inc. as filed with the Nevada Secretary of State on April 1, 1998
|3.4 (6)    | Certificate of Amendment to Articles of Incorporation of Pinnacle Oil International, Inc. as filed with the Nevada Secretary of State on June 13, 2000
|3.5 (1)    | Amended Bylaws for Energy Exploration Technologies                                                                                                    
|3.6 (1)    | Pinnacle Oil International, Inc. specimen common stock certificate                                                                                    
|3.7 (1)    | Pinnacle Oil International, Inc. specimen series 'A' preferred stock certificate                                                                      
|3.8 (1)    | Energy Exploration Technologies specimen common stock certificate                                                                                     
|3.9 (1)    | Form of Non-Qualified Stock Option Agreement for grants to directors                                                                                  
|3.10 (1)   | 1997 Pinnacle Oil International, Inc. Stock Plan                                                                                                      
|3.11 (3)   | Form of Stock Option Certificate for grants to employees under the 1997 Pinnacle Oil International, Inc. Stock Plan                                   
|3.12 (1)   | Warrant certificate for 200,000 Common Shares issued to SFD Investment LLC                                                                            
|3.13 (4)   | 1999 Pinnacle Oil International, Inc. Executive Stock Option Plan                                                                                     
|3.14 (4)   | Form of Stock Option Certificate for grants to directors under the 2000 Pinnacle Oil International, Inc. Executive Stock Option Plan                  
|3.15 (7)   | 2000 Pinnacle Oil International, Inc. Directors' Stock Plan                                                                                           
|3.16 (7)   | Form of Stock Option Certificate for grants to directors under the 2000 Pinnacle Oil International, Inc. Directors' Stock Plan                        
|3.17 (1)   | Stockholder Agreement dated April 3, 1998 among Pinnacle Oil International, Inc., R. Dirk Stinson, George Liszicasz and SFD Investment LLC            
|3.18  (10) | Amended By-laws of Energy Exploration Technologies,  - Amended September 20, 2002                                                                     
|10.1 (1)   | Partnership Agreement of Messrs. Liszicasz and Stinson dated September 1, 1995                                                                        
|10.2 (1)   | Agreement between Pinnacle Oil Inc. and Mr. Liszicasz dated January 1, 1996                                                                           

65



|10.3 (1)  | Transfer Agreement by Momentum Resources Corporation dated June 18, 1996                                                                        
|--------- | ------------------------------------------------------------------------------------------------------------------------------------------------
|10.4 (1)  | Restated Technology Agreement dated August 1, 1996                                                                                              
|10.5 (1)  | Amendment to Restated Technology Agreement with Momentum Resources Corporation dated April 3, 1998                                              
|10.7 (1)  | Letter Agreement with Encal Energy Ltd. dated December 13, 1996                                                                                 
|10.8 (1)  | Exploration Joint Venture Agreement with Encal Energy Ltd. dated February 19, 1997                                                              
|10.9 (1)  | Exploration Joint Venture Agreement with Encal Energy Ltd. dated September 15, 1997                                                             
|10.10 (8) | Letter Amending Joint Venture Agreement with Encal Energy Ltd. dated April 1, 2000                                                              
|10.11 (1) | Letter Agreement with Renaissance Energy Ltd. dated April 16, 1997                                                                              
|10.12 (1) | SFD Survey Agreement with Renaissance Energy Ltd. dated November 1, 1997                                                                        
|10.13 (1) | SFD Survey Agreement with Renaissance Energy Ltd. dated February 1, 1998 (Prospect Lands #1)                                                    
|10.14 (1) | SFD Survey Agreement with Renaissance Energy Ltd. dated February 1, 1998 (Prospect Lands #2)                                                    
|10.15 (1) | Joint Exploration and Development Agreement with CamWest Limited Partnership dated April 3, 1998                                                
|10.16 (1) | Assignment of Joint Exploration and Development Agreement with CamWest Exploration LLC dated January 29, 1999                                   
|10.17 (1) | Canadian Data License Agreement with Pinnacle Oil Canada Inc. dated April 1, 1997                                                               
|10.18 (1) | American Data License Agreement with Pinnacle Oil Inc. dated April 1, 1997                                                                      
|10.19 (1) | Cost Recovery Agreement with Pinnacle Oil Canada Inc. dated April 1, 1997                                                                       
|10.20 (1) | Assignment Agreement with Pinnacle Oil Canada Inc. dated September 15, 1997                                                                     
|10.21 (1) | Assignment Agreement with Pinnacle Oil Canada Inc. dated April 1, 1997                                                                          
|10.22 (1) | Assignment Agreement with Pinnacle Oil Canada Inc. dated November 1, 1997                                                                       
|10.23 (1) | Employment Agreement dated April 1, 1997 with Mr. Dirk Stinson                                                                                  
|10.24 (1) | Employment Agreement dated April 1, 1997 with Mr. George Liszicasz                                                                              
|10.25 (1) | Unsecured Convertible Promissory Note ($500,000) in favor of Mr. Liszicasz                                                                      
|10.26 (1) | Unsecured Convertible Promissory Note ($500,000) in favor of Mr. Stinson                                                                        
|10.27 (1) | Promissory Notes of Pinnacle Oil Inc. in favor of Messrs. Liszicasz and Stinson dated October 21, 1995                                          
|10.28 (1) | Registration and Participation Rights Agreement dated April 3, 1998 between Pinnacle Oil International, Inc. and SFD Investment LLC             
|10.29 (1) | Form of Indemnification Agreement between Pinnacle Oil International, Inc. and each Director and Executive Officer                              
|10.30 (1) | Lease Agreement between Phoenix Place Ltd. and Pinnacle Oil International, Inc. dated November 25, 1997                                         
|10.31 (2) | Employment Agreement dated July 9, 1998 with John M. Woodbury, Jr.                                                                              
|10.32 (5) | Assignment Of Joint Exploration and Development Agreement between CamWest Limited Partnership and CamWest Exploration LLC dated January 29, 1999
|10.33 (5) | Settlement Agreement dated April 27, 1999                                                                                                       
|10.34 (5) | Employment Agreement dated May 1, 1999 with Daniel C. Topolinsky                                                                                
|10.35 (5) | Employment Agreement dated May 1, 1999 with James R. Ehrets                                                                                     
|10.36 (9) | Promissory Note by NXT Aero USA Inc. dated November 6, 2000 to Aviation Finance Group LLC                                                       
|10.37 (9) | Aircraft Loan Agreement by NXT Aero USA Inc. dated November 6, 2000 with Aviation Finance Group LLC                                             
|10.38 (9) | Aircraft Security Agreement by NXT Aero USA Inc. dated November 6, 2000 with Aviation Finance Group LLC                                         

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|10.39 (9) | Commercial Guaranty by Energy Exploration Technologies dated November 6, 2000 to Aviation Finance Group LLC                                                                                                      
|--------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.40 (9) | Terminating Events Addendum dated November 6, 2000 with Aviation Finance Group LLC                                                                                                                               
|10.41     | Employment Agreement dated December 1, 2002 with George Liszicasz                                                                                                                                                
|14        | Code of Ethics                                                                                                                                                                                                   
|21 (8)    | List of significant subsidiaries                                                                                                                                                                                 
|31        | Rule 13a-14(a)/15d-14(a) Certification                                                                                                                                                                           
|32        | Section 1350 Certification                                                                                                                                                                                       
|99.1 (1)  | Report captioned "Evaluation of Stress Field Detector TechnologyImplications for Oil and Gas Exploration in Western Canada" dated September 30, 1996 prepared by Rod Morris, P. geologist, A.P.E.G.G.A.         
|99.2 (1)  | Report regarding "Stress Field Detector Technology" dated May 22, 1998 prepared by Encal Energy Ltd.                                                                                                             
|99.3 (2)  | Report captioned "SFD Data Summary" dated August 26, 1998 prepared by CamWest, Inc.                                                                                                                              
|99.4 (1)  | Report captioned "Pinnacle Oil International Inc.Stress Field Detector Documentation of Certain Exploration and Evaluation Activities" dated February 27, 1998 prepared by Gilbert Laustsen Jung Associates Ltd.
|          |                                                                                                                                                                                                                  
|          | (1)                                                                                                                                                                                                              
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|          | (5)                                                                                                                                                                                                              
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|          | (7)                                                                                                                                                                                                              
|          | (9)                                                                                                                                                                                                              
|          | (10)                                                                                                                                                                                                             



(b)

Form 8-Ks



The following 8-Ks were filed subsequent to September 30, 2003:





|1. | February 17, 2004  Announcement of appointment of His Highness Sheikh Al Hassan Bin Ali Bin Rashid Al Nuaimi to the board of directors of Energy Exploration Technologies Inc.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | November 5, 2004  Announcement of shareholder approval on October 24, 2003 of the continuance of Energy Exploration Technologies Inc. from Nevada, U.S. to Alberta, Canada.   



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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on April 14, 2004.



Calgary, Alberta, Canada





| | ENERGY EXPLORATION TECHNOLOGIES INC.
an Alberta corporation                                          
| | -----------------------------------------------------------------------------------------------------
| | By:/s/George Liszicasz                   George Liszicasz,
                   Chief Executive Officer





Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on form 10-K has been signed below by the following persons on behalf of the registrant on April 14, 2004, and in the capacities indicated.

|Signature                                                                      | Title                                                                                              | Date          
|------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------- | --------------
|/s/ George Liszicasz                                                           |                                                                                                    |               
|George Liszicasz




/s/ Donald Foulkes                                        | Chief Executive Officer and Director
(Principal Executive Officer and
Principal Financial Officer) | April 14, 2004
|Donald Foulkes

/s/ His Highness Sheikh Al Hassan Bin Ali Bin Rashid Al Nuaimi | Director                                                                                           | April 14, 2004
|His Highness Sheikh Al Hassan Bin Ali Bin Rashid Al Nuaimi

/s/ Dennis Hunter  | Director                                                                                           | April14, 2004 
|Dennis Hunter


/s/ Douglas Rowe                                               | Director                                                                                           | April14, 2004 
|Douglas Rowe


/s/ Robert Van Caneghan                                         | Director                                                                                           | April 14, 2004
|Robert Van Caneghan                                                            | Director                                                                                           | April 14, 2004





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