Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Aug. 31, 2018 | Oct. 12, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Norris Industries, Inc. | |
Entity Central Index Key | 1,603,793 | |
Document Type | 10-Q | |
Document Period End Date | Aug. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-28 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 89,443,013 | |
Trading Symbol | NRIS | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,019 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | Aug. 31, 2018 | Feb. 28, 2018 |
Current Assets | ||
Cash | $ 69,912 | $ 244,997 |
Accounts receivable - oil & gas | 130,669 | 108,644 |
Accounts receivable - other | 33,359 | |
Total Current Assets | 233,940 | 353,641 |
Oil and Gas Property - Full Cost Method | ||
Properties subject to depletion | 2,716,102 | 2,716,102 |
Less: accumulated depletion | (97,756) | (69,760) |
Total Oil and Gas Property, net | 2,618,346 | 2,646,342 |
Equipment, net | 10,196 | 12,646 |
Total Assets | 2,862,482 | 3,012,629 |
Current Liabilities | ||
Accounts payable and accrued expenses | 60,808 | 43,020 |
Accounts payable and accrued expenses - related party | 44,141 | 20,412 |
Total Current Liabilities | 104,949 | 63,432 |
Convertible note payable - related party | 1,650,000 | 1,550,000 |
Asset retirement obligations | 88,564 | 76,657 |
Total Liabilities | 1,843,513 | 1,690,089 |
Commitments and Contingencies | ||
Stockholders' Equity | ||
Preferred stock, value | ||
Common stock, $0.001 par value per share, 150,000,000 shares authorized, 89,443,013 shares issued and outstanding | 89,443 | 89,443 |
Additional paid-in capital | 6,075,483 | 5,967,483 |
Accumulated deficit | (5,146,957) | (4,735,386) |
Total Stockholders' Equity | 1,018,969 | 1,322,540 |
Total Liabilities and Stockholders' Equity | 2,862,482 | 3,012,629 |
Series A Convertible Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred stock, value | $ 1,000 | $ 1,000 |
Balance Sheets (Unaudited) (Par
Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Aug. 31, 2018 | Feb. 28, 2018 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 89,443,013 | 89,443,013 |
Common stock, shares outstanding | 89,443,013 | 89,443,013 |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, shares issued | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 1,000,000 | 1,000,000 |
Statements of Operations (Unaud
Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2018 | Aug. 31, 2017 | Aug. 31, 2018 | Aug. 31, 2017 | |
Revenues | ||||
Total Revenues | $ 147,891 | $ 18,683 | $ 273,963 | $ 38,662 |
Operating Expenses | ||||
Lease operating expenses | 56,079 | 15,597 | 126,752 | 19,773 |
General and administrative | 271,767 | 575,191 | 492,700 | 902,095 |
Depletion, depreciation and accretion | 17,293 | 2,902 | 42,353 | 5,717 |
Total Operating Expenses | 345,139 | 593,690 | 661,805 | 927,585 |
Loss from Operations | (197,248) | (575,007) | (387,842) | (888,923) |
Other Income (Expense) | ||||
Loss on extinguishment of debt | (1,228,322) | (1,228,322) | ||
Interest expense - related party | (12,008) | (23,729) | (3,000) | |
Total Other Expense | (12,008) | (1,228,322) | (23,729) | (1,231,322) |
Net Loss | $ (209,256) | $ (1,803,329) | $ (411,571) | $ (2,120,245) |
Net loss per common share - basic and diluted | $ 0 | $ (0.03) | $ 0 | $ (0.04) |
Weighted average number of common shares outstanding - basic and diluted | 89,443,013 | 61,539,926 | 89,443,013 | 55,172,535 |
Oil and Gas Sales [Member] | ||||
Revenues | ||||
Total Revenues | $ 147,891 | $ 18,683 | $ 273,963 | $ 38,662 |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Aug. 31, 2018 | Aug. 31, 2017 | |
Cash Flows from Operating Activities | ||
Net loss | $ (411,571) | $ (2,120,245) |
Adjustments to reconcile net loss to net cash from operating activities: | ||
Depletion, depreciation and accretion | 42,353 | 8,161 |
Share-based compensation | 108,000 | 496,361 |
Loss on extinguishment of debt | 1,228,322 | |
Changes in operating assets and liabilities | ||
Accounts receivable - oil and gas | (22,025) | (2,342) |
Accounts receivable - other | (33,359) | |
Accounts payable and accrued expenses | 17,788 | 1,000 |
Accounts payable and accrued expenses - related party | 23,729 | |
Net Cash used in Operating Activities | (275,085) | (388,743) |
Cash Flows from Investing Activities | ||
Deposit on purchase of oil and gas properties | (195,320) | |
Net Cash used in Investing Activities | (195,320) | |
Cash Flows from Financing Activities | ||
Proceeds from loan payable - related party | 100,000 | 700,000 |
Proceeds from sale of common stock | 345,000 | |
Common stock subscribed | 20,000 | |
Net Cash provided by Financing Activities | 100,000 | 1,065,000 |
Net Increase (Decrease) in Cash | (175,085) | 480,937 |
Cash - beginning of period | 244,997 | 76,365 |
Cash - end of period | 69,912 | 557,302 |
Supplemental Cash Flows Information | ||
Interest paid | ||
Income tax paid | ||
Noncash Investing and Financing Activities | ||
Common stock issued for conversion of debt | $ 59,000 |
Organization, Nature of Operati
Organization, Nature of Operations and Summary of Significant Accounting Policies | 6 Months Ended |
Aug. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Nature of Operations and Summary of Significant Accounting Policies | Note 1 – Organization, Nature of Operations and Summary of Significant Accounting Policies Norris Industries, Inc. (“NRIS” or the “Company”) (formerly International Western Petroleum, Inc.), was incorporated on February 19, 2014 as a Nevada corporation. The Company was formed to conduct operations in the oil and gas industry. The Company’s principal operating properties are in the Ellenberger formation in Coleman County, Texas, and in the Jack and Palo-Pinto Counties, Texas. The Company’s production operations are all located in the State of Texas. The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended February 28, 2018. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Form 10-K have been omitted. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expense during the period. Actual results could differ from those estimates. Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk include cash deposits placed with financial institutions. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (“FDIC”). At August 31, 2018, $0 of the Company’s cash balances were uninsured. The Company has not experienced any losses on such accounts. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of the year or less to be cash equivalents. The Company has not experienced any losses on its deposits of cash and cash equivalents . Accounts Receivable Accounts receivable typically consist of oil and gas receivables. The Company has classified these as short-term assets in the balance sheet because the Company expects repayment or recovery within the next 12 months. The Company evaluates these accounts receivable for collectability considering the results of operations of these related entities and when necessary records allowances for expected unrecoverable amounts. To date, no allowances have been recorded. Oil & Gas Properties The Company follows the full cost method of accounting for its investments in oil and gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves, including unproductive wells, are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities, and asset retirement costs. General and administrative costs related to production and general overhead are expensed as incurred. Dispositions of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil, in which case the gain or loss is recognized in the statement of operations. Future development, site restoration, dismantlement and abandonment costs, are estimated property by property, based upon current economic conditions and regulatory requirements, and are included in amortization of our oil and natural gas property costs. Depletion of capitalized oil properties and estimated future development costs, excluding unproved properties, are based on the unit-of-production method based on proved reserves. At the end of each quarter, the unamortized cost of oil and natural gas properties, net of related deferred income taxes, is limited to the sum of the estimated future after-tax net revenues from proved properties, after giving effect to cash flow hedge positions, discounted at 10%, and the lower of cost or fair value of unproved properties, adjusted for related income tax effects. This limitation is known as the “ceiling test,” and is based on SEC rules for the full cost oil and gas accounting method. There was no ceiling test write-down recorded during the six months ended August 31, 2018 and 2017. The Company assesses the carrying value of its unproved properties for impairment periodically. If the results of an assessment indicate that an unproved property is impaired (which was assessed in connection with the Company’s evaluation of goodwill impairment), then the carrying value of the unproved properties is added to the proved oil property costs to be amortized and subject to the ceiling test. Asset Retirement Obligations If a reasonable estimate of the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells can be made, the Company will record a liability (an asset retirement obligation or “ARO”) on its consolidated balance sheet and capitalize the present value of the asset retirement cost in oil and gas properties in the period in which the retirement obligation is incurred. In general, the amount of an ARO and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation assuming the normal operation of the asset, using current prices that are escalated by an assumed inflation factor up to the estimated settlement date, which is then discounted back to the date that the abandonment obligation was incurred using an assumed cost of funds for the Company. After recording these amounts, the ARO will be accreted to its future estimated value using the same assumed cost of funds and the capitalized costs are depreciated on a unit-of-production basis over the estimated proved developed reserves. Both the accretion and the depreciation will be included in depreciation, depletion and amortization expense on our consolidated statements of operations. Revenue Recognition ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” Revenue Recognition (Topic 605) The Company’s revenue is comprised entirely of revenue from exploration and production activities. The Company’s oil is sold primarily to wholesalers and others that sell product to end use customers. Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, various end-users, local distribution companies, and natural-gas marketers. NGLs are sold primarily to various end-users. Payment is generally received from the customer in the month following delivery. Contracts with customers have varying terms, including spot sales or month-to-month contracts, or contracts with a finite term, where the production from a well or group of wells is sold to one or more customers. The Company recognizes sales revenues for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer. Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed. Revenue is measured based on the contract price, which may be index-based or fixed, and may include adjustments for market differentials and downstream costs incurred by the customer, including gathering, transportation, and fuel costs. Revenues are recognized for the sale of the Company’s net share of production volumes. Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenues. The Company does not hedge nor forward sell any of its current production via derivative financial contracts. Income Taxes Income taxes are accounted for in accordance with the provisions of ASC Topic No. 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. Stock-Based Compensation The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense, over the vesting or service period, as applicable, of the stock award. Basic and Diluted Net Income (Loss) per Common Share Basic net loss per common share amounts are computed by dividing the net loss available to the Company’s common shareholders by the weighted average number of common shares outstanding over the reporting period. In periods in which the Company reports a net loss, dilutive securities are excluded from the calculation of diluted earnings per share as the effect would be anti-dilutive. For the six months ended August 31, 2018, the Company’s potentially dilutive shares, which include outstanding common stock options representing 1,440,000 common stock equivalents have not been included in the computation of diluted net loss per share as the result would have been anti-dilutive. The Company did not have any potentially dilutive shares for the six months ended August 31, 2017. Subsequent Events On October 11, 2018, the Company entered into an amendment of its promissory note to JBB to extend the maturity date to December 31, 2019. Recently Adopted Accounting Pronouncements See discussion of the adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” In August 2016, the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)” In August 2017, the FASB issued ASU 2017-09, Modification Accounting for Share-Based Payment Arrangements Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its financial position, results of operations or cash flows. |
Revenue from Contracts with Cus
Revenue from Contracts with Customers | 6 Months Ended |
Aug. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | Note 2 – Revenue from Contracts with Customers Change in Accounting Policy The Company adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, on March 1, 2018, using the modified retrospective method applied to contracts that were not completed as of March 1, 2018. Refer to Note 1 – Organization, Nature of Operations and Summary of Significant Accounting Policies for additional information. Exploration and Production There were no significant changes to the timing or valuation of revenue recognized for sales of production from exploration and production activities. Disaggregation of Revenue from Contracts with Customers The following table disaggregates revenue by significant product type for the three and six months ended August 31, 2018: Three Months Ended August 31, 2018 Six Months Ended August 31, 2018 Oil sales $ 57,755 $ 127,830 Natural gas sales 90,136 146,133 Natural gas liquids sales - - Total revenue from customers $ 147,891 $ 273,963 There were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of August 31, 2018 or February 28, 2018. |
Oil & Gas Properties
Oil & Gas Properties | 6 Months Ended |
Aug. 31, 2018 | |
Extractive Industries [Abstract] | |
Oil & Gas Properties | Note 3 – Oil & Gas Properties The following table summarizes the Company’s oil and gas activities by classification for the six months ended August 31, 2018: February 28, 2018 Additions August 31, 2018 Oil and gas properties, subject to amortization $ 2,646,878 $ - $ 2,646,878 Asset retirement costs 69,224 - 69,224 Accumulated depletion (69,760 ) (27,996 ) (97,756 ) Total oil and gas assets $ 2,646,342 $ (27,996 ) $ 2,618,346 For the six months ended August 31, 2018 and 2017, the Company recorded depletion of $27,996 and $5,227, respectively, for production on proved properties. For the three months ended August 31, 2018 and 2017, the Company recorded depletion of $13,966 and $2,157, respectively, for production on proved properties. The Company recorded no impairment of its oil and gas properties during the three and six months ended August 31, 2018 and 2017. |
Equipment
Equipment | 6 Months Ended |
Aug. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Equipment | Note 4 – Equipment The Company’s fixed asset consisted of a used vehicle and has an estimated useful life of five years. Fixed assets consisted of the following at August 31, 2018 and February 28, 2018: August 31, 2018 February 28, 2018 Vehicle $ 24,500 $ 24,500 Accumulated depreciation (14,304 ) (11,854 ) Total $ 10,196 $ 12,646 The Company recorded depreciation expense of $2,450 and $2,444, respectively, during the six months ended August 31, 2018 and 2017. The Company recorded depreciation expense of $1,225and $1,235, respectively, during the three months ended August 31, 2018 and 2017. |
Asset Retirement Obligations
Asset Retirement Obligations | 6 Months Ended |
Aug. 31, 2018 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligations | Note 5 – Asset Retirement Obligations The following table summarizes the change in the Company’s asset retirement obligations during the six months ended August 31, 2018: Asset retirement obligations as of February 28, 2018 $ 76,657 Additions - Current year revision of previous estimates - Accretion during the six months ended August 31, 2018 11,907 Asset retirement obligations as of August 31, 2018 $ 88,564 During the six months ended August 31, 2018 and 2017, the Company recognized accretion expense of $11,907 and $490, respectively. During the three months ended August 31, 2018 and 2017, the Company recognized accretion expense of $2,102 and $248, respectively. |
Convertible Note Payable - Rela
Convertible Note Payable - Related Party | 6 Months Ended |
Aug. 31, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Note Payable - Related Party | Note 6 – Convertible Note Payable – Related Party On December 28, 2017, the Company borrowed $1,550,000 from JBB Partners (“JBB”) to complete the purchases of a series of oil and gas leases (“Loan Note”). The loan has an interest rate of 3% per annum, a maturity date of December 28, 2018 and is secured by all assets of the Company. The loan is convertible into the Company’s common stock at the conversion rate of $0.20 per share. On October 11, 2018, the Company entered into an amendment of its promissory note to JBB to extend the maturity date to December 31, 2019. On June 26, 2018, the Company and JBB entered into a modification of the existing Loan Note, to add provisions to permit the Company to obtain advances under the Loan Note up to a maximum of $1,000,000. The Company may request an advance in increments of $100,000 no more frequently than every 30 days, provided that (i) it provides a description of the use of proceeds for the advance reasonably acceptable to JBB, and (ii) the Company is not otherwise in default of the Loan Note. The original loan amount and the advances are secured by all the assets of the Company and are convertible into common stock of the Company at the rate of $0.20 per share, subject to adjustment for any reverse and forward stock splits. The Loan Note may be repaid at any time, without penalty, however, any advance that is repaid before maturity may not be re-borrowed as a further advance. The maturity date of the original amount and all the advances were extended to December 31, 2019. During the six months ended August 31, 2018, JBB advanced an additional $100,000 to the Company and the Company recognized interest expense of $23,729 related to the $1,650,000 promissory note to JBB during that period. During the three months ended August 31, 2018 and 2017, the Company recognized interest expense of $12,008 and $0, respectively. The balance of this promissory note was $1,650,000 at August 31, 2018, plus accrued interest of $44,141. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Aug. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 7 – Commitments and Contingencies Office Lease In March 2015, the Company entered into an amendment to extend the term of its office lease to August 31, 2018. During the six months ended August 31, 2018, the Company had total rent expense of $12,919. As of September 1, 2018, the Company did not renew its Dallas office lease, and moved to the offices of International Western Oil Corp. (“IWO”), a related party, in Weatherford, TX that is being rented on a month-to-month sublease basis at rate of $950 per month from IWO. Leasehold Drilling Commitments The Company’s oil and gas leasehold acreage is subject to expiration of leases if the Company does not drill and hold such acreage by production or otherwise exercises options to extend such leases, if available, in exchange for payment of additional cash consideration. In the King County, Texas lease acreage, 640 acres are due to expire in June 2021. The Company plans to hold significantly all of this acreage through a program of drilling and completing producing wells. Where the Company is not able to drill and complete a well before lease expiration, the Company may seek to extend leases if possible. |
Equity
Equity | 6 Months Ended |
Aug. 31, 2018 | |
Equity [Abstract] | |
Equity | Note 8 – Equity Preferred Stock As of August 31, 2018, and February 28, 2018, the Company had 1,000,000 shares of its Series A Convertible Preferred Stock issued and outstanding. Holders of the Series A Convertible Preferred Stock have the right to convert shares of Series A Convertible Preferred Stock, at any time and from time to time, into such number of fully paid and non-assessable shares of common stock as is determined by the number of shares Series A Convertible Preferred Stock, divided by the product of (i) the Preferred Stock Conversion Price in effect at the time of conversion and (ii) 0.02. The “Preferred Stock Conversion Price” is initially equal to $0.75 which will equal 666,666.66 shares of common stock upon conversion. The Preferred Stock Conversion Price is subject to adjustment in the event of a stock split, merger, reorganization and certain dividend and distribution events. There is no mandatory conversion or redemption right by the Company. Common Stock As of August 31, 2018 and February 28, 2018, the Company had 89,443,013 shares of its common stock outstanding. Stock Option During the year ended February 28, 2018, the Company granted two officers options to purchase a total of 1,440,000 shares the Company’s common stock with an exercise price of $0.01 per share, with a term of 2 years which expire on August 3, 2019, and are subject to a vesting period of 2 years. The options have an aggregate fair value of $431,956 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.34%; (2) expected life of 2 years; (3) expected volatility of 482.51%; and (4) zero expected dividends. The fair value of all options issued and outstanding are being amortized over their respective service periods, which equal their vesting periods. These options had an intrinsic value of $273,600 as of August 31, 2018. During the six months ended August 31, 2018, the Company recorded total option expense of $108,000 related to the vesting of these options. The unrecognized compensation expense on these options at August 31, 2018 was $197,956. As of August 31, 2018, these options have a remaining life of 0.92 years and there are 720,000 options exercisable. |
Organization, Nature of Opera_2
Organization, Nature of Operations and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Aug. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expense during the period. Actual results could differ from those estimates. |
Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk include cash deposits placed with financial institutions. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (“FDIC”). At August 31, 2018, $0 of the Company’s cash balances were uninsured. The Company has not experienced any losses on such accounts. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of the year or less to be cash equivalents. The Company has not experienced any losses on its deposits of cash and cash equivalents . |
Accounts Receivable | Accounts Receivable Accounts receivable typically consist of oil and gas receivables. The Company has classified these as short-term assets in the balance sheet because the Company expects repayment or recovery within the next 12 months. The Company evaluates these accounts receivable for collectability considering the results of operations of these related entities and when necessary records allowances for expected unrecoverable amounts. To date, no allowances have been recorded. |
Oil & Gas Properties | Oil & Gas Properties The Company follows the full cost method of accounting for its investments in oil and gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves, including unproductive wells, are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities, and asset retirement costs. General and administrative costs related to production and general overhead are expensed as incurred. Dispositions of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil, in which case the gain or loss is recognized in the statement of operations. Future development, site restoration, dismantlement and abandonment costs, are estimated property by property, based upon current economic conditions and regulatory requirements, and are included in amortization of our oil and natural gas property costs. Depletion of capitalized oil properties and estimated future development costs, excluding unproved properties, are based on the unit-of-production method based on proved reserves. At the end of each quarter, the unamortized cost of oil and natural gas properties, net of related deferred income taxes, is limited to the sum of the estimated future after-tax net revenues from proved properties, after giving effect to cash flow hedge positions, discounted at 10%, and the lower of cost or fair value of unproved properties, adjusted for related income tax effects. This limitation is known as the “ceiling test,” and is based on SEC rules for the full cost oil and gas accounting method. There was no ceiling test write-down recorded during the six months ended August 31, 2018 and 2017. The Company assesses the carrying value of its unproved properties for impairment periodically. If the results of an assessment indicate that an unproved property is impaired (which was assessed in connection with the Company’s evaluation of goodwill impairment), then the carrying value of the unproved properties is added to the proved oil property costs to be amortized and subject to the ceiling test. |
Asset Retirement Obligations | Asset Retirement Obligations If a reasonable estimate of the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells can be made, the Company will record a liability (an asset retirement obligation or “ARO”) on its consolidated balance sheet and capitalize the present value of the asset retirement cost in oil and gas properties in the period in which the retirement obligation is incurred. In general, the amount of an ARO and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation assuming the normal operation of the asset, using current prices that are escalated by an assumed inflation factor up to the estimated settlement date, which is then discounted back to the date that the abandonment obligation was incurred using an assumed cost of funds for the Company. After recording these amounts, the ARO will be accreted to its future estimated value using the same assumed cost of funds and the capitalized costs are depreciated on a unit-of-production basis over the estimated proved developed reserves. Both the accretion and the depreciation will be included in depreciation, depletion and amortization expense on our consolidated statements of operations. |
Revenue Recognition | Revenue Recognition ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” Revenue Recognition (Topic 605) The Company’s revenue is comprised entirely of revenue from exploration and production activities. The Company’s oil is sold primarily to wholesalers and others that sell product to end use customers. Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, various end-users, local distribution companies, and natural-gas marketers. NGLs are sold primarily to various end-users. Payment is generally received from the customer in the month following delivery. Contracts with customers have varying terms, including spot sales or month-to-month contracts, or contracts with a finite term, where the production from a well or group of wells is sold to one or more customers. The Company recognizes sales revenues for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer. Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed. Revenue is measured based on the contract price, which may be index-based or fixed, and may include adjustments for market differentials and downstream costs incurred by the customer, including gathering, transportation, and fuel costs. Revenues are recognized for the sale of the Company’s net share of production volumes. Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenues. The Company does not hedge nor forward sell any of its current production via derivative financial contracts. |
Income Taxes | Income Taxes Income taxes are accounted for in accordance with the provisions of ASC Topic No. 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. |
Stock-Based Compensation | Stock-Based Compensation The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense, over the vesting or service period, as applicable, of the stock award. |
Basic and Diluted Net Income (Loss) Per Common Share | Basic and Diluted Net Income (Loss) per Common Share Basic net loss per common share amounts are computed by dividing the net loss available to the Company’s common shareholders by the weighted average number of common shares outstanding over the reporting period. In periods in which the Company reports a net loss, dilutive securities are excluded from the calculation of diluted earnings per share as the effect would be anti-dilutive. For the six months ended August 31, 2018, the Company’s potentially dilutive shares, which include outstanding common stock options representing 1,440,000 common stock equivalents have not been included in the computation of diluted net loss per share as the result would have been anti-dilutive. The Company did not have any potentially dilutive shares for the six months ended August 31, 2017. |
Subsequent Events | Subsequent Events On October 11, 2018, the Company entered into an amendment of its promissory note to JBB to extend the maturity date to December 31, 2019. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements See discussion of the adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” In August 2016, the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)” In August 2017, the FASB issued ASU 2017-09, Modification Accounting for Share-Based Payment Arrangements |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its financial position, results of operations or cash flows. |
Revenue from Contracts with C_2
Revenue from Contracts with Customers (Tables) | 6 Months Ended |
Aug. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregation of Revenue | The following table disaggregates revenue by significant product type for the three and six months ended August 31, 2018: Three Months Ended August 31, 2018 Six Months Ended August 31, 2018 Oil sales $ 57,755 $ 127,830 Natural gas sales 90,136 146,133 Natural gas liquids sales - - Total revenue from customers $ 147,891 $ 273,963 |
Oil & Gas Properties (Tables)
Oil & Gas Properties (Tables) | 6 Months Ended |
Aug. 31, 2018 | |
Extractive Industries [Abstract] | |
Summary of Oil and Gas Activities | The following table summarizes the Company’s oil and gas activities by classification for the six months ended August 31, 2018: February 28, 2018 Additions August 31, 2018 Oil and gas properties, subject to amortization $ 2,646,878 $ - $ 2,646,878 Asset retirement costs 69,224 - 69,224 Accumulated depletion (69,760 ) (27,996 ) (97,756 ) Total oil and gas assets $ 2,646,342 $ (27,996 ) $ 2,618,346 |
Equipment (Tables)
Equipment (Tables) | 6 Months Ended |
Aug. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Fixed Assets | The Company’s fixed asset consisted of a used vehicle and has an estimated useful life of five years. Fixed assets consisted of the following at August 31, 2018 and February 28, 2018: August 31, 2018 February 28, 2018 Vehicle $ 24,500 $ 24,500 Accumulated depreciation (14,304 ) (11,854 ) Total $ 10,196 $ 12,646 |
Asset Retirement Obligations (T
Asset Retirement Obligations (Tables) | 6 Months Ended |
Aug. 31, 2018 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Schedule of Asset Retirement Obligation | The following table summarizes the change in the Company’s asset retirement obligations during the six months ended August 31, 2018: Asset retirement obligations as of February 28, 2018 $ 76,657 Additions - Current year revision of previous estimates - Accretion during the six months ended August 31, 2018 11,907 Asset retirement obligations as of August 31, 2018 $ 88,564 |
Organization, Nature of Opera_3
Organization, Nature of Operations and Summary of Significant Accounting Policies (Details Narrative) | 6 Months Ended |
Aug. 31, 2018USD ($)shares | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Cash balances were uninsured | $ | $ 0 |
Cash flow hedge, discount | 10.00% |
Potentially dilutive securities outstanding | shares | 1,440,000 |
Revenue from Contracts with C_3
Revenue from Contracts with Customers - Schedule of Disaggregation of Revenue (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2018 | Aug. 31, 2017 | Aug. 31, 2018 | Aug. 31, 2017 | |
Total revenue from customers | $ 147,891 | $ 18,683 | $ 273,963 | $ 38,662 |
Oil Sales [Member] | ||||
Total revenue from customers | 57,755 | 127,830 | ||
Natural Gas Sales [Member] | ||||
Total revenue from customers | 90,136 | 146,133 | ||
Natural Gas Liquids Sales [Member] | ||||
Total revenue from customers |
Oil & Gas Properties (Details N
Oil & Gas Properties (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2018 | Aug. 31, 2017 | Aug. 31, 2018 | Aug. 31, 2017 | |
Extractive Industries [Abstract] | ||||
Accumulated depletion | $ 13,966 | $ 2,157 | $ 27,996 | $ 5,227 |
Impairment of oil and gas properties |
Oil & Gas Properties - Summary
Oil & Gas Properties - Summary of Oil and Gas Activities (Details) - USD ($) | Aug. 31, 2018 | Feb. 28, 2018 |
Oil and gas properties, subject to amortization | $ 2,646,878 | $ 2,646,878 |
Asset retirement costs | 69,224 | 69,224 |
Accumulated depletion | (97,756) | (69,760) |
Total oil and gas assets | 2,618,346 | $ 2,646,342 |
Additions [Member] | ||
Oil and gas properties, subject to amortization | ||
Asset retirement costs | ||
Accumulated depletion | (27,996) | |
Total oil and gas assets | $ (27,996) |
Equipment (Details Narrative)
Equipment (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2018 | Aug. 31, 2017 | Aug. 31, 2018 | Aug. 31, 2017 | |
Depreciation expense | $ 1,225 | $ 1,235 | $ 2,450 | $ 2,444 |
Used Vehicle [Member] | ||||
Fixed assets estimated useful life | 5 years |
Equipment - Schedule of Fixed A
Equipment - Schedule of Fixed Assets (Details) - USD ($) | Aug. 31, 2018 | Feb. 28, 2018 |
Property, Plant and Equipment [Abstract] | ||
Vehicle | $ 24,500 | $ 24,500 |
Accumulated depreciation | (14,304) | (11,854) |
Total | $ 10,196 | $ 12,646 |
Asset Retirement Obligations (D
Asset Retirement Obligations (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2018 | Aug. 31, 2017 | Aug. 31, 2018 | Aug. 31, 2017 | |
Asset Retirement Obligation Disclosure [Abstract] | ||||
Accretion expense | $ 2,102 | $ 248 | $ 11,907 | $ 490 |
Asset Retirement Obligations -
Asset Retirement Obligations - Schedule of Asset Retirement Obligation (Details) | 6 Months Ended |
Aug. 31, 2018USD ($) | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset retirement obligations as of February 28, 2018 | $ 76,657 |
Additions | |
Current year revision of previous estimates | |
Accretion during the six months ended August 31, 2018 | 11,907 |
Asset retirement obligations as of August 31, 2018 | $ 88,564 |
Convertible Note Payable - Re_2
Convertible Note Payable - Related Party (Details Narrative) - USD ($) | Jun. 26, 2018 | Dec. 28, 2017 | Aug. 31, 2018 | Aug. 31, 2017 | Aug. 31, 2018 |
Promissory notes payable | $ 1,650,000 | $ 1,650,000 | |||
Accrued interest | 44,141 | 44,141 | |||
JBB Partners, Inc. [Member] | |||||
Advance amount | 100,000 | ||||
Interest expense | 12,008 | $ 0 | 23,729 | ||
Promissory notes payable | $ 1,650,000 | $ 1,650,000 | |||
Loan Note [Member] | JBB Partners, Inc. [Member] | |||||
Proceed from loan payable | $ 1,550,000 | ||||
Loan bears interest rate | 3.00% | ||||
Loan maturity date | Dec. 31, 2019 | Dec. 28, 2018 | |||
Debt conversion price per share | $ 0.20 | $ 0.20 | |||
Advance amount | $ 100,000 | ||||
Loan Note [Member] | JBB Partners, Inc. [Member] | Maximum [Member] | |||||
Maximum loan amount | $ 1,000,000 | ||||
Loan Note [Member] | JBB Partners, Inc. [Member] | October 11, 2018 [Member] | |||||
Extended maturity date | Dec. 31, 2019 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | 6 Months Ended |
Aug. 31, 2018USD ($)a | |
Commitments and Contingencies Disclosure [Abstract] | |
Rent expense | $ 12,919 |
Monthly rent | $ 950 |
Area of land | a | 640 |
Lease expire description | In the King County, Texas lease acreage, 640 acres are due to expire in June 2021. |
Equity (Details Narrative)
Equity (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended |
Aug. 31, 2018 | Feb. 28, 2018 | |
Debt conversion of price, shares | ||
Common stock, shares outstanding | 89,443,013 | 89,443,013 |
Options to purchase common stock shares | 1,440,000 | |
Stock option exercise price per share | $ 0.01 | |
Stock option term | 2 years | |
Stock option, maturity date | Aug. 3, 2019 | |
Options vesting period | 2 years | |
Fair value of stock option granted | $ 431,956 | |
Discount rate | 1.34% | |
Expected life of years | 2 years | |
Expected volatility | 482.51% | |
Expected dividend | 0.00% | |
Stock option intrinsic value | $ 273,600 | |
Stock option expense | 108,000 | |
Unrecognized compensation expense | $ 197,956 | |
Stock option remaining life term | 11 months 1 day | |
Options exercisable | 720,000 | |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, shares issued | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 1,000,000 | 1,000,000 |
Debt conversion of price per share | $ 0.02 | |
Shares issued, price per share | $ 0.75 | |
Debt conversion of price, shares | 666,666.66 |