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As filed with the Securities and Exchange Commission on November 22, 2004

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Commission File No. 0-24027

ENERGY EXPLORATION TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)

840 7^th Avenue S.W., Suite 700, Calgary, Alberta, Canada T2P 3G2
(Address of principal executive offices) (Zip Code)

(403) 264–7020
(Registrant’s telephone number, including area code)

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 registration was required to file such Reports), and (2) has been subject to such filing requirements for the past 90 days:   YES  [√]   NO  [  ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  YES [  ]  NO  [   ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

20,451,742 common shares, no par value, as of October 31, 2004

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ENERGY EXPLORATION TECHNOLOGIES INC.

INDEX TO THE FORM 10-Q

For the nine month period ended September 30, 2004

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PART I

ITEM 1. FINANCIAL INFORMATION

ENERGY EXPLORATION TECHNOLOGIES INC. 

Consolidated Balance Sheets 

(Unaudited) (expressed in U.S. dollars except share data)

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ENERGY EXPLORATION TECHNOLOGIES INC. 

Consolidated Statements Of Loss And Comprehensive Loss 

(Unaudited)  (expressed in U.S. dollars except share data)

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

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ENERGY EXPLORATION TECHNOLOGIES INC.

Consolidated Statements Of Shareholders' Equity 

(Unaudited) (expressed in U.S. dollars except share data)

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

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

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ENERGY EXPLORATION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(expressed in U.S. dollars)
(unaudited)

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.

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 and we utilize 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.

These consolidated financial statements are prepared using generally accepted accounting principles in the United States of America that are applicable to a going concern, which assumes the realization of assets and the settlement of liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time. These consolidated financial statements do not include any adjustments to amounts and classifications of assets and liabilities that may be necessary should we be unable to continue as going concern.

In the nine months ended September 30, 2004, we incurred a loss of $2,473,521, have an accumulated deficit of $25,275,628  and have a working capital deficiency of $19,208 as at the end of the period. We have capital comments of $203,400 related to flow-through share obligations that must be met in 2004 and an additional $72,000 that must be utilized by the end of 2005. We have identified an investment opportunity that will utilize $208,553 of that flow-through share obligation in 2004, leaving us with a balance of $66,847 to be utilized by the end of 2005.

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We expect to continue incurring net losses from operation and have negative operating cash flows until we can secure revenue generating activities. These circumstances raise substantial doubt about our ability to continue as a going concern.

We have taken the following measures to ensure the ongoing viability of the company:

• On November 3, 2004, we entered into a loan agreement with our CEO and largest shareholder, Mr. George Liszicasz, in which we borrowed $250,000 CDN. On November 16, 2004, we amended the loan agreement whereby we borrowed an additional $31,000 USD. On November 17, 2004, we entered into an additional loan agreement with  Mr. Liszicasz and borrowed a further $100,000 CDN. These agreements provide that the loans accrue ineterest at the rate of  0.58% per month (7.0% per annum). On November 19, 2004, we entered into a loan agreement Amendment with Mr. Liszicasz, whereby the maturity date for all three (3) loans was extended to November 17, 2005.  In consideration of these loan agreements, we have pledged the title and interest of the company in the Stress Field Detectors to Mr. Liszcasz.

• On November 20, 2004, we received a subscription agreement from one of the members of our Board of Directors, His Highness, Sheikh Al Hassin Bin Ali Bin Rashid Al Nuaimi, to purchase 250,000 units at a price of $2.00 per unit.  Each unit consists of one common share and a warrant to purchase one additional common share for $2.75 within the next year.  We expect to close on this subscription agreement and receive the committed funds by November 29, 2004.

• We have undertaken a variety of cost reduction activities including but not limited to termination of contract employees, reduction of officer's salary and reduction of corporate travel. 

There is no assurance we will be able to successfully close the subscription agreement or secure other sources of financing at terms acceptable to us.  In this event, it is unlikely we will be able to meet our obligations beginning in February 2005 and we may be forced to cease operations and liquidate our assets.

2.

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

We have prepared these consolidated financial statements for our three month and nine month interim periods as at September 30, 2004 and ended September 30, 2004 and 2003 in accordance with accounting principles generally accepted in the United States of America for interim financial reporting.  While these financial statements for these interim periods reflect all normal recurring adjustments which, in the opinion of our management, are necessary for fair presentation of the results of the interim period, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. The results of operations for the nine months ended September 30, 2004 are not necessarily indicative of the results to be expected for the full year.  Refer to our consolidated financial statements included in our a nnual report on Form 10-K for our fiscal year ended December 31, 2003.

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 these estimates.

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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.

The following table illustrates the effect of net loss and loss per share if the company had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to stock-based employee compensation.

Accounting for Asset Retirement Obligations

In September 2004, the SEC released SAB 106, which expresses the staff’s views on the application of SFAS 143 by oil and gas producing companies following the full cost accounting method.  SAB 106 provides interpretive responses related to computing the full cost ceiling to avoid double-counting the expected future cash outlaws associated with asset retirement obligations, required disclosures relating to the interaction of SFAS 143 and the full cost rules, and the impact of SFAS 143 on the calculation of depreciation, depletion and amortization. This has no impact on our company at this time.

3.

NOTE RECEIVABLE FROM 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 our company in 2002 and we are pursuing repayment of the note

4.

OIL AND NATURAL GAS PROPERTIES

Summarized below are the oil and natural gas property costs we capitalized for the nine months ended September 30, 2004 and 2003 and as of September 30, 2004 and December 31, 2003:

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Net oil and natural gas property costs at September 30, 2004 and December 31, 2003 are all Canadian unproved properties.  At September 30, 2004 there were no impairments of our Canadian full cost center.

The impairment amounts in the table above of oil and natural gas properties also include 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. While, as noted below, our management believes in the prospective commercial viability and non-impairment of the overall prospects of which each of these wells are a part and is continuing active exploration and development activities with respect to each of these prospects, we have nevertheless 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 has been subject to any impairment in value.  Based upon these evaluations, our management has determined that each of our oil and natural gas properties continued to have prospective commercial viability as of these dates.    While we are currently conducting active exploration and development programs with respect to each of these unproved oil and natural gas properties, we anticipate that all of these properties will be evaluated and the associated costs transferred into the amortization base or be impaired over the next five years.

5.

OTHER PROPERTY AND EQUIPMENT

Summarized below are our capitalized costs for other property and equipment as of September 30, 2004 and December 31, 2003:

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6.

COMMON SHARES

The loss per share is presented in accordance with the provision of SFAS No. 128, Earnings Per Share (“EPS”).  Basic EPS is calculated by dividing the income or loss available to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  Basic and diluted EPS were the same for the three and nine months ended September 30, 2004 and 2003 because the company had losses from operations and therefore, the effect of all potential common stocks was anti-dilutive.

In calculating diluted earnings per common share for the nine month periods ended September 30, 2004 and 2003, we excluded all options and warrants, either because the exercise price was greater than the average market price of our common shares in those quarters or the exercise of the options or warrants would have been anti-dilutive. During these periods, outstanding stock options and warrants were the only potentially dilutive instruments.

On February 12, 2004, we raised $1,143,633 in gross proceeds through a private placement of 573,269 units. Each unit consisted of a common share at $2.00 ($2.60 CDN) per share and a warrant with a strike price of $2.75 and a one year life.  Net proceeds to our company were $1,063,277 after deducting $80,356 in offering expenses and finders’ fees. In addition, we had also received $377,320 in gross proceeds at September 30, 2004 for which shares had not been issued at September 30, 2004 and this amount is shown as subscriptions payable on the balance sheet.

On April 18, 2004 we issued 30,000 common shares in full payment of an invoice for $54,000 for services provided by a consultant to NXT to assist us with corporate strategy and planning.

On July 22, 2004, we issued 200,000 common shares in full payment of an invoice for $400,000 for services to establish a branch office in the United Arab Emirates and market the company’s SFD Technology in the region.

On July 22, 2004, we raised $264,245 in gross proceeds through a private placement of 133,000 units.  Each unit consisted of a commons hare at $2.00 ($2.60 CDN) per share and a warrant with a strike price of $2.75 and a one year life.  Net proceeds to our company were $255,618 after deducting $8,627 in offering expenses and finder’s fees.

7.

PREFERRED SHARES

The preferred shares are not entitled to payment of any dividends, although they are entitled under certain circumstances to participate in dividends on the same basis as if converted into common shares.  Preferred shares carry liquidation preferences should our company wind-up and dissolve.  

The preferred shares were all returned to treasury effective May 9, 2003 as part of the compensation received for the sale of the U.S. properties.

8.

PERFORMANCE WARRANTS

On August 1, 1996, we granted Momentum Resources Corporation a performance-based contractual right to acquire NXT warrants in connection with our use of the SFD Technology for hydrocarbon exploration.  The initial term of the contract with Momentum Resources expires on December 31, 2005 and  can be cancelled by NXT providing written notice to Momentum Resources no later than 60 days prior to the expiration of the pending term.   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 September 30, 2004.

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9.

EMPLOYEE AND DIRECTOR OPTIONS

We have summarized below all outstanding options under our various stock option plans and arrangements as of September 30, 2004:

The employee options outstanding as of September 30, 2004 will vest over the next three years, based upon the continued provision of services as an employee or consultant. The options vest one-third each on the first through third anniversaries of the grant date, respectively, based upon the continued provision of services. The options generally lapse, if unexercised, five years from the date of vesting.

10.

COMMITMENTS AND CONTINGENCIES

We have a sub-lease which ends January 31, 2005.  The space is approximately 6,600 square feet and our monthly cost is about $13,100 CDN. We have decided to seek an extension of our sub-lease through to the end of the term of the “head lease”, which ends January 31, 2006.

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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 that the claim against us is contentious because of the ambiguity of the arrangements and we are vigorously defending 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 Plaintiff s 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. The legal process is continuing and an Examination for Discovery will be held on Monday, November 29, 2004.

11.

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 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.  

12.

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 market value.  For reporting purposes, the results of operations and the financial position of the properties have been presented as discontinued operations.

The gain in 2004 from discontinued operations amounted to $35,825 and was a gain on the sale of aircraft equipment, which had previously been written off.

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13.

SEGMENT INFORMATION

We operate in only one business segment, oil and natural gas exploration.  We intend to develop all oil and natural gas exploration prospects identified using our proprietary SFD airborne survey technology either directly or with joint venture partners.

Summarized below with respect to our three month and nine month periods ended September 30, 2004 and 2003 is geographic information relating to:

• revenues we have received during the period from our external customers, allocated amongst the geographic areas in which the revenue was generated;

• our net income (loss) from continuing operations for the period, allocated amongst the geographic areas in which the revenue and associated expenses were generated; and

• our net income (loss) from discontinued operations for the period, allocated amongst the geographic areas in which the revenue and associated expenses were generated.

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Summarized below is geographic information relating to our assets as of September 30, 2004 and December 31, 2003, allocated amongst the geographic areas in which the assets were physically located or principally connected:

IN PREPARING THE ABOVE TABLES, WE HAVE ELIMINATED ALL INTER-SEGMENT REVENUES, EXPENSES AND ASSETS.

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ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

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. The interpretation of the SFD sensor signals identifies and prioritize oil and gas prospects for further evaluation and potential drilling.  The Company utilizes leased aircraft for the purpose of conducting the SFD surveys. Our survey equipment racks have been aircraft type certified by the Canadian Ministry of Transport for both the Piper Cheyenne and Piaggio aircraft models.  

In March 2004 NXT successfully completed a SFD survey technology evaluation test in cooperation with the Syrian Petroleum Company (“SPC”).  The objective of the SFD survey technology evaluation test was to demonstrate that the technology could perform in new geological and logistical environments.  We completed the acquisition, processing and interpretation of the SFD survey in 32 days.  The survey covered 23,800 square miles (61,000 km²) with 3,625 miles (5,800 km) of survey.  SPC agreed to compare the results of NXT’s SFD signal interpretation with their internal information and databases of the location and size geologically identified structures and producing oil and gas fields.  NXT provided the location and size of “Prospect Areas” and geological structures from our interpretation of the SFD signal data.  We defined “Prospect Areas” as having the highest potential for hydrocarbon bearing reservoirs.  The results of the comparison are that 92% of the drilled “Prospect Areas” coincided with existing and producing oil and gas fields.  The SFD survey grid was designed by SPC to pass over 137 structures whose location was known only to SPC.  The results obtained in Syria supported the results of successful field tests for independent geologist and joint venture partners conducted in North America.  Once the location of potential hydrocarbon deposits are identified through the analysis and interpretation of the SFD data, the company uses conventional geophysical technologies to further confirm and qualify the prospects prior to selection of drilling sites.

We now conduct our activities primarily through our wholly owned subsidiary, NXT Energy Canada Inc., which focuses on Canadian and Middle East exploration. We have a division office in the United Arab Emirates, which is staffed by one consultant. 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.

Our rights to use our SFD technology arises from the technology agreement that we entered into with Momentum Resources Corporation in 1996 and the subsequent development by NXT of the second generation of operational SFD sensors.  We use the SFD technology on an exclusive worldwide basis to use, possess and control the SFD data for hydrocarbon identification and exploration purposes.

Unless otherwise stated, all dollar references in this report are in U.S. dollars.

RESULTS OF OPERATIONS

Operating revenues

On February 4, 2004, a well at Entice, Alberta, in which we have a 22.5% working interest, commenced production. Our share of production averaged 35 thousand cubic feet (mcf) per day during the quarter ended September 30, 2004.  Revenues, net of royalty expense, for the period were $16,181. The average price received was $4.66 per mcf and the operating cost was $0.65 per mcf.

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Operating loss from continuing operations

We incurred an operating loss of $416,450 for our quarter ended September 30, 2004, as compared to a loss of $485,469 for the corresponding period in 2003, representing a $69,019 (14%) overall decrease.  This decrease was attributable to the following changes:  

• Administrative costs decreased $32,255 (7%) in 2004 compared to the same period in 2003 due to the completion of the continuance of Energy Exploration Technologies Inc. into Alberta.

• Survey operations and support decreased by $25,136 (132%) in 2004 compared to 2003.  In the third quarter of 2004 there was no survey flights completed, but in 2003 we had completed a small survey flight.
  

Interest income

Interest income for the quarter ended September 30, 2004 was $831 compared to the 2003 loss of $1,017.  This increase is attributable to the interest received on the money held in escrow for the prepaid rent on our office space.

Income (loss) from discontinued operations

The income from discontinued operations for the quarter ended September 30, 2004 was $5,052 compared to the 2003 loss of $26,660. In 2004 the income is due to the sale of aircraft equipment which had previously been written off. The loss in 2003 was attributable to our write-off of the remaining aircraft equipment held for sale.

Other comprehensive income

The foreign currency exchange gain of $64,413 for the quarter ended September 30, 2004 was caused by the change in the United States – Canadian currency rates from $1.3338 at June 30, 2004 to $1.2616 at September 30, 2004. The foreign currency exchange loss of $13,128 for the same period in 2003 was due to the change in rates from $1.3475 at June 30, 2003 to $1.3499 at September 30, 2003.  Comprehensive gains or losses arise in consolidating our accounting records for financial reporting purposes as a result of the fluctuations in during the period.

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

On November 3, 2004 we entered into a loan agreement with our CEO and largest shareholder, Mr. George Lizicasz in which we borrowed $250,000 CDN.  On November 16, 2004, we amended the loan agreement whereby we borrowed an additional $31,000 USD.  On November 17, 2004, we entered into an additional loan agreement with Mr. Liszicasz and borrowed a further $100,000 CDN.  These agreements provide that the loans accrue interest at a rate of 0.58% per month (7.0% per annum).  On November 19, 2004, we entered into a Loan Agreement Amendment, whereby the maturity date for all three (3) loans was extended to November 17, 2005.   In consideration of these loan agreements, we have pledged the title and interest of the company in the Stress Field Detectors to Mr. Liszicasz

On November 20, 2004, we received a subscription agreement from one of the members opf our Board of Directors, His Highness Sheikh Al Hassan Bin Ali Bin Rashid Al Nuaimi, to purchase 250,000 units at a priceof $2.00 per unit.  Each unit consists of one common share and a warrant to purchase one additional common share for $2.75 within the next year.  We expect to close on this subscription agreement and receive the committed funds by November 29, 2004.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash

In the quarter ended September 30, 2004 we had a net cash outflow of $218,062 compared to the third quarter of 2003 when we had a cash inflow of $46,402. The 2004 results were entirely due to the operating activities use of cash of $883,259, and the effects of the fluctuations in foreign exchange on the oil and gas properties book values in 2004 of $72,292, partially offset by funds received from options exercised of $27,067, the funds received from the issuance of shares of $655,617 and exchange

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 gains of $64,413. The 2003 results were due to the funds received from the private placement of $740,815, partially offset by the operating activities of $450,439 and the funds invested in Canadian oil and natural gas properties of $221,005.  Net cash used by our operating activities during the three month period ended September 30, 2004 of $883,259 was an increase of $432,820 over the same period from 2003 and was caused by the reduction of current liabilities.

Current Cash Position and Changes in Cash Position

Our cash position as of September 30, 2004 was $308,151 as compared to $1,024,201 as of December 31, 2003.  This decrease in our cash position was attributable to the cash used in operating activities of $2,470,216, cash increase from financing activities of $1,913,058, net cash used in investing activities of $92,160, net cash used by discontinued operations of $13,100 and the net comprehensive loss of $53,632. Our cash position as of September 30, 2003 was $1,009,289 as compared to $585,070 as of December 31, 2002.

Our working capital deficiency of $19,208 as of September 30, 2004 was a decrease of $583,065 compared to working capital of $563,857 as of December 31, 2003. The subscriptions payable of $377,320, which is the main cause of the deficiency, will be extinguished by the issue of shares in the fourth quarter.

Cash used in operating activities in the quarter ended September 30, 2004 increased by $432,820 (96%) to $883,259 for 2004 as compared to the same period in 2003. The increased cash draws were attributable to the reduction of current liabilities.

Financing activities in 2004 generated $655,617 from the issue of common shares and $27,067 from the exercise of stock options, compared to financing activities in 2003, which generated $740,815 from the issue of common shares.

Investing activities used cash of $86,592 for the quarter ended September 30, 2004 as compared to $225,255 used in the quarter ended September 30, 2003. The reason for the increase was attributable to the effects of fluctuations in foreign exchange on the oil and gas properties book values in 2004.  In 2003 we had invested in oil and natural gas properties.

Discontinued operations generated cash of  $5,025 in the quarter for the actual billing as compared to the tax accruals.  The quarter ended September 30, 2003 used $5,591 of cash from discontinued operations for small on-going administrative expenses.

Other comprehensive income, specifically currency exchange, was a gain of $64,413 in the quarter ended September 30, 2004 as compared to the loss $13,128 in the quarter ended September 30, 2003. The reasons for the change are explained above.

Plan of Operation and Prospective Capital Requirements

We have approximately $107,000 in cash on hand as of November 10, 2004 to fund our plans and to contribute toward our administration, operational and research and development requirements for the next twelve months.  We will be required to raise additional financing through equity issues, borrowings or property dispositions.

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In nine months ended September, 2004 we incurred a loss of $2,473,52, have an accumulated deficit of $25,275,628, and have a working capital deficiency of $19,208 as at the end of the period.  We have capital commitments of $203,400 related to flow-through share obligations that must be met in 2004 and an additional $72,000 that must be utilized by the end of 2005.  We have identified an investment opportunity that will utilize $208,553 of that flow-through share obligation in 2004, leaving us with a balance of $66,847 to be utilized by the end of 2005.

We expect to continue incurring net losses from operation and have negative operating cash flows until we can secure revenue generating activities. These circumstances raise substantial doubt about our ability to continue as a going concern.

We have taken the following measures to ensure the ongoing viability of the company:

• On November 3, 2004, we entered into a loan agreement with our CEO and largest shareholder, George Liszicasz, in which we borrowed $250,000 CDN. On November 16, 2004, we amended the loan agreement whereby we borrowed an additional $31,000 USD. On November 17, 2004, we entered into an additional loan agreement with Mr. Liszicasz and borrowed a further $100,000 CDN. These agreements provide that the loans accrue interest at the rate of 0.58% per month (7.0% per annum) On November 19, 2004, we entered into a loan agreement Amendment, whereby the maturity date for all three (3) loans was extended to November 17, 2005.  In consideration of these loan agreements, we have pledged the title and interest of the company in the Stress Field Detectors to Mr. Liszicasz.

• On November 20, 2004 we received a subscription agreement from one of the members of our Board of Directors, His Highness Sheikh Al Hassan Bin Ali Bin Rashid Al Nuaimi, to purchase 250,000 units at a price of $2.00 per unit.  Each unit consists of one common share and a warrant to purchase one additional share for $2.75 within the next year.  We expect to close on this subscription agreement and receive the committed funds by November 29, 2004.

• We have undertaken a variety of cost reduction activities including but not limited to termination of contract employees, reduction of officer's salary  and reduction of  corporate travel. 

There is no assurance we will be able to successfully close the subscription agreement or secure other sources of financing at terms acceptable to us.  In this event, it is unlikely we will be able to meet our obligations beginning in February 2005 and we may be forced to cease operations and liquidate our assets

Summarized below are the capital commitments:

We can give no assurance that any or all projects in our pending programs will be commercial, or if commercial will generate sufficient revenues in time 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.  

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OTHER MATTERS

Foreign Exchange

Foreign currency translation gains or losses are included as a comprehensive income (loss) 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 during the third quarter of 2004 or 2003 by inflation or changing prices.

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:

• 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 necessar ily 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.

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Management

Our success is dependent upon the continuing efforts of Mr. George Liszicasz, the inventor of the SFD technology and our Chief Executive Officer/Chief Financial Officer, who is responsible for the SFD technology and SFD interpretation activities.  The loss of Mr. Liszicasz would likely have a material adverse effect on our business, consolidated financial condition and results of operations.  While we have entered into an employment and non-competition agreement with Mr. Liszicasz, he nevertheless cannot be prevented from leaving NXT so long as he does not employ SFD technology for oil and natural gas exploration purposes.  

Our success will depend to a significant extent on our ability to engage one or more qualified oil and gas professionals. Our inability to fill these positions could have a material adverse effect on our business, consolidated financial condition and results of operations.

ITEM 3.   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.  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 foreig n currency. At our current levels of activity, a U.S. $0.01 change in the U.S. / Canadian exchange rate will have very little impact on our net income.

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.

ITEM 4.   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/Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.   

As of September 30, 2004, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer/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 internal control over financial reporting are effective in the timely alerting of management to material information relating to us which is required to be included in our periodic SEC filings.  

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There were no significant changes in our internal control over financial reporting or in other factors that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

During our most recently completed fiscal quarter ended September 30, 2004, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant's principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant's assets that could have a material effect on the financial statements.

PART II

ITEM 1.   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 fro m 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 that the claim against us is contentious because of the ambiguity of the arrangements and we are vigorously defending the claim.

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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, amon g 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.  The legal process is continuing and an Examination for Discovery will be held on Monday, November 29, 2004.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

On February 12, 2004, NXT completed a private placement of 573,269 units at $2.00 per unit for gross proceeds of $1,143,633. Each unit consisted of one (1) common share and a warrant to purchase an additional share for $2.75, with a term of one (1) year. No underwriters were utilized in this offering. NXT paid finders fees of $80,356 in connection with this offering. The offering was sold to a total of 56 investors, who are employees, former employees and consultants of NXT as well as certain accredited investors introduced to NXT by its management and employees.

On July 22, 2004, NXT raised $264,245 in gross proceeds through a private placement of 133,000 units.  Each unit consisted of a common share at $2.00 ($2.60 CDN) per share and a warrant with a strike price of $2.75 and a one year life.  No underwriters were utilized in this offering.  NXT paid finders fees of $8,480 in connection with this offering.  The offerings were sold to a total of 18 investors, who are employees, former employees and consultants of NXT as well as certain accredited investors introduced to NXT by its management and employees.

Of the 706,269 units sold, 380,269 were exempt from registration due to the exemption found in Regulation S promulgated by the Securities and Exchange Commission under the Securities Act of 1933. These sales were offshore transactions since all of the offerees were not in the United States and the purchasers were outside the United States at the time of the purchase. Moreover, there were no directed selling efforts of any kind made in the United States neither by us nor by any affiliate or any person acting on our behalf in connection with any of these offerings. All offering materials and documents used in connection with the offers and sales of the securities included statements to the effect that the securities have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States or to U.S. persons unless the securities are registered under the Act or an exemption there from is available and that no hedging transactions involving those securities may not be conducted unless in compliance with the Act. Each purchaser under Regulation S certified that it is not a U.S. person and is not acquiring the securities for the account or benefit of any U.S. person and agreed to resell such securities only in accordance with the provisions of Regulation S, pursuant to registration under the Act or pursuant to an available exemption from registration. The shares sold are restricted securities and the certificates representing these shares have been affixed with a standard restrictive legend, which states that the securities cannot be sold without registration under the Securities Act of 1933 or an exemption there from and we are required to refuse to register any transfer that does not comply with such requirements.

Of the remaining 326,000 units, such units were exempt from registration pursuant to Rule 506 of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933. Neither we nor any person acting on our behalf offered or sold these securities by any form of general solicitation or general advertising. The shares sold are restricted

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 securities and the certificates representing these shares have been affixed with a standard restrictive legend, which states that the securities cannot be sold without registration under the Securities Act of 1933 or an exemption there from. Each purchaser represented to us that he was purchasing the securities for his own account and not for the account of any other persons. Each purchaser was provided with written disclosure that the securities have not been registered under the Securities Act of 1933 and therefore cannot be sold without registration under the Securities Act of 1933 or an exemption therefrom.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.   OTHER INFORMATION

None.

ITEM 5.   EXHIBITS 

a) Exhibits

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SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this quarterly report on form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated at Calgary, Alberta, this 22^th day of November, 2004.

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