Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 31, 2019 | Jul. 12, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Norris Industries, Inc. | |
Entity Central Index Key | 0001603793 | |
Document Type | 10-Q | |
Document Period End Date | May 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-28 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 89,443,013 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | May 31, 2019 | Feb. 28, 2019 |
Current Assets | ||
Cash | $ 141,226 | $ 125,755 |
Account receivable - oil & gas | 82,918 | 71,132 |
Total Current Assets | 224,144 | 196,887 |
Oil and Gas Property - Full Cost Method | ||
Properties subject to amortization | 2,709,129 | 2,716,102 |
Less: accumulated depletion | (294,892) | (259,292) |
Total Oil and Gas Property, net | 2,414,237 | 2,456,810 |
Equipment, net | 7,746 | |
Total Assets | 2,638,381 | 2,661,443 |
Current Liabilities | ||
Accounts payable and accrued expenses | 40,964 | 32,549 |
Accounts payable and accrued expenses - related parties | 83,704 | 69,189 |
Total Current Liabilities | 124,668 | 101,738 |
Convertible note payable - related party | 2,050,000 | 1,850,000 |
Asset retirement obligations | 85,933 | 92,850 |
Total Liabilities | 2,260,601 | 2,044,588 |
Commitments and Contingencies | ||
Stockholders’ Equity | ||
Preferred stock, $0.001 par value per share 20,000,000 shares authorized | ||
Common stock, $0.001 par value per share, 150,000,000 shares authorized; 89,443,013 and 89,443,013 shares issued and outstanding | 89,443 | 89,443 |
Additional paid-in capital | 6,237,483 | 6,183,483 |
Accumulated deficit | (5,950,146) | (5,657,071) |
Total Stockholder’s Equity | 377,780 | 616,855 |
Total Liabilities and Stockholders’ Equity | 2,638,381 | 2,661,443 |
Series A Convertible Preferred Stock [Member] | ||
Stockholders’ Equity | ||
Preferred stock, $0.001 par value per share 20,000,000 shares authorized | $ 1,000 | $ 1,000 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | May 31, 2019 | Feb. 28, 2019 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
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, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 1,000,000 | 1,000,000 |
Preferred stock, liquidation preference | $ 2,250,000 | $ 2,250,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Revenues | ||
Total Revenues | $ 119,359 | $ 126,072 |
Operating Expenses | ||
Lease operating expenses | 154,921 | 70,673 |
General and administrative expenses | 209,596 | 220,933 |
Depletion, depreciation and accretion | 35,656 | 25,060 |
Total Operating Expenses | 400,173 | 316,666 |
Loss from Operations | (280,814) | (190,594) |
Other Income (Expenses) | ||
Gain on sale of equipment | 2,254 | |
Interest expense | (14,515) | (11,721) |
Total Other Expense | (12,261) | (11,721) |
Net Loss | $ (293,075) | $ (202,315) |
Net loss per common share - basic and diluted | $ 0 | $ 0 |
Weighted average number of common shares outstanding - basic and diluted | 89,443,013 | 89,443,013 |
Oil and Gas Sales [Member] | ||
Revenues | ||
Total Revenues | $ 119,359 | $ 126,072 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) | Series A Convertible Preferred Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Feb. 28, 2018 | $ 1,000 | $ 89,443 | $ 5,967,483 | $ (4,735,386) | $ 1,322,540 |
Balance, shares at Feb. 28, 2018 | 1,000,000 | 89,443,013 | |||
Stock-based compensation | 54,000 | 54,000 | |||
Net loss | (202,315) | (202,315) | |||
Balance at May. 31, 2018 | $ 1,000 | $ 89,443 | 6,021,483 | (4,937,701) | 1,174,225 |
Balance, shares at May. 31, 2018 | 1,000,000 | 89,443,013 | |||
Balance at Feb. 28, 2018 | $ 1,000 | $ 89,443 | 5,967,483 | (4,735,386) | 1,322,540 |
Balance, shares at Feb. 28, 2018 | 1,000,000 | 89,443,013 | |||
Net loss | 922,000 | ||||
Balance at Feb. 28, 2019 | $ 1,000 | $ 89,443 | 6,183,483 | (5,657,071) | 616,855 |
Balance, shares at Feb. 28, 2019 | 1,000,000 | 89,443,013 | |||
Stock-based compensation | 54,000 | 54,000 | |||
Net loss | (293,075) | (293,075) | |||
Balance at May. 31, 2019 | $ 1,000 | $ 89,443 | $ 6,237,483 | $ (5,950,146) | $ 377,780 |
Balance, shares at May. 31, 2019 | 1,000,000 | 89,443,013 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | 12 Months Ended | |
May 31, 2019 | May 31, 2018 | Feb. 28, 2019 | |
Cash Flow from Operating Activities | |||
Net loss | $ (293,075) | $ (202,315) | $ 922,000 |
Adjustments to reconcile net loss to net cash from operating activities: | |||
Depletion, depreciation and accretion | 35,656 | 25,060 | |
Stock-based compensation | 54,000 | 54,000 | |
Gain on sale of equipment | (2,254) | ||
Changes in operating assets and liabilities: | |||
Accounts receivable - oil & gas | (11,786) | 32,881 | |
Accounts payable and accrued expenses | 8,415 | 39,381 | |
Accounts payable and accrued expenses - related parties | 14,515 | 11,721 | |
Net Cash Used in Operating Activities | (194,529) | (39,272) | |
Cash Flow from Investing Activities | |||
Proceeds from sale of equipment | 10,000 | ||
Net Cash used in Investing Activities | 10,000 | ||
Cash Flow from Financing Activities | |||
Proceeds from related party loan | 200,000 | ||
Net Cash provided by Financing Activities | 200,000 | ||
Net Increase (Decrease) in Cash | 15,471 | (39,272) | |
Cash – beginning of period | 125,755 | 244,997 | 244,997 |
Cash – end of period | 141,226 | 205,725 | $ 125,755 |
Supplemental Cash Flow Information | |||
Cash paid for income taxes | |||
Cash paid for interest | |||
Noncash Investing and Financing Activities | |||
Change in estimate of asset retirement obligations | $ 6,973 |
Organization, Nature of Operati
Organization, Nature of Operations and Summary of Significant Accounting Policies | 3 Months Ended |
May 31, 2019 | |
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, and in Jack County and Palo-Pinto County. Texas. The Company’s production operations are all located in the State of Texas. On April 25, 2018, the Company incorporated a Texas registered subsidiary, Norris Petroleum, Inc., as an operating entity. Basis of Presentation The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report filed with the SEC on Form 10-K for the year ended February 28, 2019. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of 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. The Company’s consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and entities in which the Company has a controlling financial interest. All significant inter-company accounts and transactions have been eliminated in consolidation. Liquidity and Capital Considerations The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the issuance date of these consolidated financial statements. The Company has incurred continuing losses since 2016, including a loss of approximately $922,000 for the fiscal year ended February 28, 2019. During the three months ended May 31, 2019, the Company received $200,000 in funding from its credit line and incurred cash losses of approximately $195,000 from its operating activities. As of May 31, 2019, the Company had $500,000 available to borrow under its existing credit line with JBB Partners, Inc. (“JBB”), an affiliate of the Company’s Chief Executive Officer, and a cash balance of approximately $141,000 and net working capital of approximately $99,000. Subsequent to the quarter end, in June 2019, the Company secured a separate term loan of $250,000 from JBB to purchase full ownership of the Marshall-Walden oil and gas property. The Company’s principal capital and exploration expenditures during next fiscal year are expected to relate to selected well workovers on its Jack and Palo Pinto County acreages. The Company believes that it has the ability to fund its costs for such expenditures from cash on-hand and available funds from its line of credit. The Company believes that it has sufficient working capital and in-place financing to fund its expected operational losses for fiscal year 2020. In the event that the Company requires additional capital to fund higher operational losses or oil and gas property lease purchases for fiscal year ending February 28, 2020, the Company expects to seek additional capital from one or more sources via restricted private placement sales of equity and debt securities from those other than JBB. However, there can be no assurance that the Company would be able to secure the necessary capital to fund its costs on acceptable terms, or at all. If, for any reason, the Company is unable to fund its operations, it would have to undertake other aggressive cost cutting measures and then be subject to possible loss of some of its rights and interests in prospects to curtail operations and forced to forego opportunities or in worst case, cease operations. 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. Risks and Uncertainties The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating an emerging business, including the potential risk of business failure. 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 . Oil and Gas Properties, Full Cost Method The Company follows the full cost method of accounting for its oil gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil 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 and gas, in which case the gain or loss is recognized in the statement of operations. Depletion and depreciation of proved oil properties are calculated on the units-of-production method based upon estimates of proved reserves. Such calculations include the estimated future costs to develop proved reserves. Costs of unproved properties are not included in the costs subject to depletion. These costs are assessed periodically for impairment. At the end of each quarter, the unamortized cost of oil and 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. Costs in excess of the present value of estimated future net revenues are charged to impairment expense. This limitation is known as the “ceiling test,” and is based on SEC rules for the full cost oil and gas accounting method. The Company capitalizes pre-acquisition costs directly identifiable with specific properties when the acquisition of such properties is probable. Capitalized pre-acquisition costs are presented in the balance sheet. Equipment Equipment is stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred. Renewals and betterments which extend the life or improve existing equipment are capitalized. Upon disposition or retirement of equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 3 to 10 years. 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. 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. Share-based Compensation The Company estimates the fair value of each share-based compensation award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. Share-based compensation expense is recognized based on awards ultimately expected to vest. Excess tax benefits, if any, are recognized as an addition to paid-in capital. Net Loss per Common Share Basic net loss per common share amounts are computed by dividing the net loss available to Norris Industries, Inc. 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. The following table summarizes the common stock equivalents excluded from the calculation of diluted net loss per as the inclusion of these shares would be anti-dilutive for the three months ended May 31, 2019 and 2018: 2019 2018 Stock options 1,440,000 1,440,000 Series A Convertible Preferred Stock 66,666,667 66,666,667 Convertible debt 10,250,000 7,750,000 Total common shares to be issued 78,356,667 75,856,667 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 May 31, 2019, $0 of the Company’s cash balances was uninsured. The Company has not experienced any losses on such accounts. Recent Adopted Accounting Pronouncements Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases (Topic 842)” Leases (Topic 842): Targeted Improvements” In addition, the Company elected practical expedients provided by the new standard whereby, the Company has elected to not reassess its prior conclusions about lease identification, lease classification, and initial direct costs and to retain off-balance sheet treatment of short-term leases (i.e., 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise). As a result of the short-term expedient election, the Company has no leases that require the recording of a net lease asset and lease liability on the Company’s consolidated balance sheet or have a material impact on consolidated earnings or cash flows as of May 31, 2019. Moving forward, the Company will evaluate any new lease commitments for application of Topic 842. Compensation-Stock Compensation In June 2018, the FASB issued ASU 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”. Recent Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on its financial position, results of operations, or cash flows. Subsequent Events The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration. |
Revenue from Contracts with Cus
Revenue from Contracts with Customers | 3 Months Ended |
May 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | Note 2 – Revenue from Contracts with Customers Change in Accounting Policy Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” Revenue Recognition (Topic 605) 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 months ended May 31, 2019 and 2018: 2019 2018 Oil sales $ 98,929 $ 70,075 Natural gas sales 20,430 55,997 Natural gas liquids sales - - Total $ 119,359 $ 126,072 There were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of May 31, 2019 and February 28, 2019. |
Oil and Gas Properties
Oil and Gas Properties | 3 Months Ended |
May 31, 2019 | |
Extractive Industries [Abstract] | |
Oil and Gas Properties | Note 3 – Oil and Gas Properties The following table summarizes the Company’s oil and gas activities by classification for the three months ended May 31, 2019: February 28, 2019 Additions Change in Estimates May 31, 2019 Oil and gas properties, subject to depletion $ 2,646,878 $ - $ - $ 2,646,878 Asset retirement costs 69,224 - (6,973 ) 62,251 Accumulated depletion (259,292 ) (35,600 ) - (294,892 ) Total oil and gas assets $ 2,456,810 $ (35,600 ) $ (6,973 ) $ 2,414,237 The depletion recorded for production on proved properties for the three months ended May 31, 2019 and 2018, amounted to $35,600 and $14,030, respectively. During the three months ended May 31, 2019 and 2018, there were no ceiling test write-downs of the Company’s oil and gas properties. |
Asset Retirement Obligations
Asset Retirement Obligations | 3 Months Ended |
May 31, 2019 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligations | Note 4 – Asset Retirement Obligations The following table summarizes the change in the Company’s asset retirement obligations during the three months ended May 31, 2019: Asset retirement obligations as of February 28, 2019 $ 92,850 Additions - Current year revision of previous estimates (6,973 ) Accretion during the three months ended May 31, 2019 56 Asset retirement obligations as of May 31, 2019 $ 85,933 During the three months ended May 31, 2019 and 2018, the Company recognized accretion expense of $56 and $9,805, respectively. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
May 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 5 – Related Party Transactions Promissory Note to JBB On December 28, 2017, the Company borrowed $1,550,000 from JBB to complete the purchases of a series of oil and gas leases. 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 to the Company’s common stock at the conversion rate of $0.20 per share. 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 additional 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. 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 May 21, 2019, the Company entered into an extension agreement with JBB to extend the maturity of its outstanding promissory note to September 30, 2020. During the three months ended May 31, 2019, JBB advanced $200,000 to the Company. The Company recognized interest expense of $14,515 and $11,721 for the three months ended May 31, 2019 and 2018, respectively. As of May 31, 2019, and February 28, 2019, there was $2,050,000 and $1,850,000, respectively, of outstanding under this note. Equipment Sale During the three months ended May 31, 2019, the Company sold one used vehicle, a work truck, for proceeds $10,000 to affiliate operator of IWO. As a result of this sale, the Company recognized a gain on sale of equipment on its statement of operations of $2,254. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
May 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 6 – Commitments and Contingencies Office Lease Change in Accounting Policy – “Leases (Topic 842)” and Leases (Topic 842): Targeted Improvements” As of September 1, 2018, the Company 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. During the three months ended May 31, 2019, the Company incurred $2,850 of rent expense under this lease that is included in general and administrative expenses on the statement of operations. 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 where it is able. |
Equity Transactions
Equity Transactions | 3 Months Ended |
May 31, 2019 | |
Equity [Abstract] | |
Equity Transactions | Note 7 – Equity Transactions During the year ended February 28, 2018, the Company granted two of its 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, a term of 2 years until August 3, 2019, and a vesting period of 2 years. The options had 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 is being amortized over their respective vesting periods. These options had an intrinsic value of $76,464 as of May 31, 2019. During the three months ended May 31, 2019, the Company recorded total option expense of $54,000 related to the vesting of these options. The unrecognized compensation expense on these options at May 31, 2019 was approximately $36,000. As of May 31, 2019, these options have a weighted-average remaining life of 0.18 years, and a weighted-average exercise price at $0.01 per share, with total of 1,440,000 options outstanding, of which approximately 1,320,000 options were fully vested as of May 31, 2019. |
Subsequent Events
Subsequent Events | 3 Months Ended |
May 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 8 – Subsequent Events On June 13, 2019, JBB lent the Company $250,000 under a secured promissory note. The funds were used to acquire the remaining working interest in the Marshall Walden oil and gas property from Odyssey Enterprises LLC. The loan has an interest rate of 5% per annum, a maturity date of June 30, 2022, 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. |
Organization, Nature of Opera_2
Organization, Nature of Operations and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
May 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report filed with the SEC on Form 10-K for the year ended February 28, 2019. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of 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. The Company’s consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and entities in which the Company has a controlling financial interest. All significant inter-company accounts and transactions have been eliminated in consolidation. |
Liquidity and Capital Considerations | Liquidity and Capital Considerations The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the issuance date of these consolidated financial statements. The Company has incurred continuing losses since 2016, including a loss of approximately $922,000 for the fiscal year ended February 28, 2019. During the three months ended May 31, 2019, the Company received $200,000 in funding from its credit line and incurred cash losses of approximately $195,000 from its operating activities. As of May 31, 2019, the Company had $500,000 available to borrow under its existing credit line with JBB Partners, Inc. (“JBB”), an affiliate of the Company’s Chief Executive Officer, and a cash balance of approximately $141,000 and net working capital of approximately $99,000. Subsequent to the quarter end, in June 2019, the Company secured a separate term loan of $250,000 from JBB to purchase full ownership of the Marshall-Walden oil and gas property. The Company’s principal capital and exploration expenditures during next fiscal year are expected to relate to selected well workovers on its Jack and Palo Pinto County acreages. The Company believes that it has the ability to fund its costs for such expenditures from cash on-hand and available funds from its line of credit. The Company believes that it has sufficient working capital and in-place financing to fund its expected operational losses for fiscal year 2020. In the event that the Company requires additional capital to fund higher operational losses or oil and gas property lease purchases for fiscal year ending February 28, 2020, the Company expects to seek additional capital from one or more sources via restricted private placement sales of equity and debt securities from those other than JBB. However, there can be no assurance that the Company would be able to secure the necessary capital to fund its costs on acceptable terms, or at all. If, for any reason, the Company is unable to fund its operations, it would have to undertake other aggressive cost cutting measures and then be subject to possible loss of some of its rights and interests in prospects to curtail operations and forced to forego opportunities or in worst case, cease operations. |
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. |
Risks and Uncertainties | Risks and Uncertainties The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating an emerging business, including the potential risk of business failure. |
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 . |
Oil and Gas Properties, Full Cost Method | Oil and Gas Properties, Full Cost Method The Company follows the full cost method of accounting for its oil gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil 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 and gas, in which case the gain or loss is recognized in the statement of operations. Depletion and depreciation of proved oil properties are calculated on the units-of-production method based upon estimates of proved reserves. Such calculations include the estimated future costs to develop proved reserves. Costs of unproved properties are not included in the costs subject to depletion. These costs are assessed periodically for impairment. At the end of each quarter, the unamortized cost of oil and 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. Costs in excess of the present value of estimated future net revenues are charged to impairment expense. This limitation is known as the “ceiling test,” and is based on SEC rules for the full cost oil and gas accounting method. The Company capitalizes pre-acquisition costs directly identifiable with specific properties when the acquisition of such properties is probable. Capitalized pre-acquisition costs are presented in the balance sheet. |
Equipment | Equipment Equipment is stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred. Renewals and betterments which extend the life or improve existing equipment are capitalized. Upon disposition or retirement of equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 3 to 10 years. |
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. |
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. |
Stock-Based Compensation | Share-based Compensation The Company estimates the fair value of each share-based compensation award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. Share-based compensation expense is recognized based on awards ultimately expected to vest. Excess tax benefits, if any, are recognized as an addition to paid-in capital. |
Net Loss Per Common Share | Net Loss per Common Share Basic net loss per common share amounts are computed by dividing the net loss available to Norris Industries, Inc. 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. The following table summarizes the common stock equivalents excluded from the calculation of diluted net loss per as the inclusion of these shares would be anti-dilutive for the three months ended May 31, 2019 and 2018: 2019 2018 Stock options 1,440,000 1,440,000 Series A Convertible Preferred Stock 66,666,667 66,666,667 Convertible debt 10,250,000 7,750,000 Total common shares to be issued 78,356,667 75,856,667 |
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 May 31, 2019, $0 of the Company’s cash balances was uninsured. The Company has not experienced any losses on such accounts. |
Recent Adopted Accounting Pronouncements | Recent Adopted Accounting Pronouncements Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases (Topic 842)” Leases (Topic 842): Targeted Improvements” In addition, the Company elected practical expedients provided by the new standard whereby, the Company has elected to not reassess its prior conclusions about lease identification, lease classification, and initial direct costs and to retain off-balance sheet treatment of short-term leases (i.e., 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise). As a result of the short-term expedient election, the Company has no leases that require the recording of a net lease asset and lease liability on the Company’s consolidated balance sheet or have a material impact on consolidated earnings or cash flows as of May 31, 2019. Moving forward, the Company will evaluate any new lease commitments for application of Topic 842. Compensation-Stock Compensation In June 2018, the FASB issued ASU 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”. |
Recent Issued Accounting Pronouncements | Recent Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on its financial position, results of operations, or cash flows. |
Subsequent Events | Subsequent Events The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration. |
Organization, Nature of Opera_3
Organization, Nature of Operations and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
May 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following table summarizes the common stock equivalents excluded from the calculation of diluted net loss per as the inclusion of these shares would be anti-dilutive for the three months ended May 31, 2019 and 2018: 2019 2018 Stock options 1,440,000 1,440,000 Series A Convertible Preferred Stock 66,666,667 66,666,667 Convertible debt 10,250,000 7,750,000 Total common shares to be issued 78,356,667 75,856,667 |
Revenue from Contracts with C_2
Revenue from Contracts with Customers (Tables) | 3 Months Ended |
May 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregation of Revenue | The following table disaggregates revenue by significant product type for the three months ended May 31, 2019 and 2018: 2019 2018 Oil sales $ 98,929 $ 70,075 Natural gas sales 20,430 55,997 Natural gas liquids sales - - Total $ 119,359 $ 126,072 |
Oil and Gas Properties (Tables)
Oil and Gas Properties (Tables) | 3 Months Ended |
May 31, 2019 | |
Extractive Industries [Abstract] | |
Summary of Oil and Gas Activities | The following table summarizes the Company’s oil and gas activities by classification for the three months ended May 31, 2019: February 28, 2019 Additions Change in Estimates May 31, 2019 Oil and gas properties, subject to depletion $ 2,646,878 $ - $ - $ 2,646,878 Asset retirement costs 69,224 - (6,973 ) 62,251 Accumulated depletion (259,292 ) (35,600 ) - (294,892 ) Total oil and gas assets $ 2,456,810 $ (35,600 ) $ (6,973 ) $ 2,414,237 |
Asset Retirement Obligations (T
Asset Retirement Obligations (Tables) | 3 Months Ended |
May 31, 2019 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Schedule of Asset Retirement Obligations | The following table summarizes the change in the Company’s asset retirement obligations during the three months ended May 31, 2019: Asset retirement obligations as of February 28, 2019 $ 92,850 Additions - Current year revision of previous estimates (6,973 ) Accretion during the three months ended May 31, 2019 56 Asset retirement obligations as of May 31, 2019 $ 85,933 |
Organization, Nature of Opera_4
Organization, Nature of Operations and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
May 31, 2019 | May 31, 2018 | Feb. 28, 2019 | Jun. 13, 2019 | |
Organization Consolidation And Presentation Of Financial Statements Disclosure And Significant Accounting Policies [Line Items] | ||||
Net Loss | $ (293,075) | $ (202,315) | $ 922,000 | |
Amount accessed for funding expenses | 200,000 | |||
Net cash used in operating activities | (194,529) | $ (39,272) | ||
Cash | 141,226 | $ 125,755 | ||
Working capital | $ 99,000 | |||
Cash flow hedge, discount | 10.00% | |||
Uninsured cash balances | $ 0 | |||
Equipment [Member] | Minimum [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements Disclosure And Significant Accounting Policies [Line Items] | ||||
Estimated useful lives | 3 years | |||
Equipment [Member] | Maximum [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements Disclosure And Significant Accounting Policies [Line Items] | ||||
Estimated useful lives | 10 years | |||
JBB Partners, Ltd [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements Disclosure And Significant Accounting Policies [Line Items] | ||||
Availability of existing credit line | $ 500,000 | |||
JBB Partners, Inc. [Member] | Subsequent Event [Member] | Promissory Note [Member] | ||||
Organization Consolidation And Presentation Of Financial Statements Disclosure And Significant Accounting Policies [Line Items] | ||||
Secured term loan | $ 250,000 |
Organization, Nature of Opera_5
Organization, Nature of Operations and Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Total Common Shares to be issued | 78,356,667 | 75,856,667 |
Stock Options [Member] | ||
Total Common Shares to be issued | 1,440,000 | 1,440,000 |
Series A Convertible Preferred Stock [Member] | ||
Total Common Shares to be issued | 66,666,667 | 66,666,667 |
Convertible Debt [Member] | ||
Total Common Shares to be issued | 10,250,000 | 7,750,000 |
Revenue from Contracts with C_3
Revenue from Contracts with Customers - Schedule of Disaggregation of Revenue (Details) - USD ($) | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Total revenue from customers | $ 119,359 | $ 126,072 |
Oil Sales [Member] | ||
Total revenue from customers | 98,929 | 70,075 |
Natural Gas Sales [Member] | ||
Total revenue from customers | 20,430 | 55,997 |
Natural Gas Liquids Sales [Member] | ||
Total revenue from customers |
Oil and Gas Properties (Details
Oil and Gas Properties (Details Narrative) - USD ($) | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Extractive Industries [Abstract] | ||
Accumulated depletion of oil and gas properties | $ 35,600 | $ 14,030 |
Impairment of oil and gas properties |
Oil and Gas Properties - Summar
Oil and Gas Properties - Summary of Oil and Gas Activities (Details) - USD ($) | May 31, 2019 | Feb. 28, 2019 |
Oil and gas properties, subject to depletion | $ 2,646,878 | $ 2,646,878 |
Asset retirement costs | 62,251 | 69,224 |
Accumulated depletion | (294,892) | (259,292) |
Total oil and gas assets | 2,414,237 | $ 2,456,810 |
Additions [Member] | ||
Oil and gas properties, subject to depletion | ||
Asset retirement costs | ||
Accumulated depletion | (35,600) | |
Total oil and gas assets | (35,600) | |
Change in Estimates [Member] | ||
Oil and gas properties, subject to depletion | ||
Asset retirement costs | (6,973) | |
Accumulated depletion | ||
Total oil and gas assets | $ (6,973) |
Asset Retirement Obligations (D
Asset Retirement Obligations (Details Narrative) - USD ($) | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Asset Retirement Obligation Disclosure [Abstract] | ||
Accretion expense | $ 56 | $ 9,805 |
Asset Retirement Obligations -
Asset Retirement Obligations - Schedule of Asset Retirement Obligations (Details) | 3 Months Ended |
May 31, 2019USD ($) | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset retirement obligations as of February 28, 2019 | $ 92,850 |
Additions | |
Current year revision of previous estimates | (6,973) |
Accretion during the three months ended May 31, 2019 | 56 |
Asset retirement obligations as of May 31, 2019 | $ 85,933 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | May 21, 2019 | Oct. 11, 2018 | Jun. 26, 2018 | Dec. 28, 2017 | May 31, 2019 | May 31, 2018 | Feb. 28, 2019 |
Interest expense | $ 14,515 | $ 11,721 | |||||
Long term note payable, outstanding | 2,050,000 | $ 1,850,000 | |||||
Proceeds from sale of equipment | 10,000 | ||||||
Gain on sale of equipment | 2,254 | ||||||
JBB Partners, Inc. [Member] | |||||||
Proceeds from advances | 200,000 | ||||||
Interest expense | $ 14,515 | $ 11,721 | |||||
Promissory Note [Member] | JBB Partners, Inc. [Member] | |||||||
Proceed from loan payable | $ 1,550,000 | ||||||
Loan bears interest rate | 3.00% | ||||||
Loan maturity date | Dec. 28, 2018 | ||||||
Debt conversion price per share | $ 0.20 | ||||||
Debt maturity date description | 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 May 21, 2019, the Company entered into an extension agreement with JBB to extend the maturity of its outstanding promissory note to September 30, 2020. | ||||||
Promissory Note [Member] | JBB Partners, Inc. [Member] | Extended Maturity [Member] | |||||||
Loan maturity date | Sep. 30, 2020 | Dec. 31, 2019 | |||||
Promissory Note [Member] | JBB Partners, Inc. [Member] | Modification of Existing Loan Note [Member] | |||||||
Maximum of amount permitted to obtain advances | $ 1,000,000 | ||||||
Advance amount | $ 100,000 | ||||||
Debt conversion of price, shares | 0.20 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | Sep. 01, 2018USD ($) | May 31, 2019USD ($)a | May 31, 2018USD ($) |
Monthly rent | $ 950 | ||
Operating lease, rent expense | $ 154,921 | $ 70,673 | |
Area of land | a | 640 | ||
Lease expire description | In the King County, Texas lease acreage, 640 acres are due to expire in June 2021. | ||
General and Administrative Expense [Member] | |||
Operating lease, rent expense | $ 2,850 |
Equity Transactions (Details Na
Equity Transactions (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
May 31, 2019 | Feb. 28, 2018 | |
Stock option intrinsic value | $ 76,464 | |
Stock option expense | 54,000 | |
Unrecognized compensation expense | $ 36,000 | |
Stock option remaining life term | 2 months 5 days | |
Options outstanding, weighted average exercise price | $ 0.01 | |
Options outstanding | 1,440,000 | |
Options fully vested, shares | 1,320,000 | |
Two Officers [Member] | Stock Options [Member] | ||
Stock options granted to purchase common stock | 1,440,000 | |
Stock option exercise price per share | $ 0.01 | |
Stock option term | 2 years | |
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% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - JBB Partners, Inc. [Member] - Promissory Note [Member] - USD ($) | Jun. 13, 2019 | Dec. 28, 2017 |
Loan bears interest rate | 3.00% | |
Loan maturity date | Dec. 28, 2018 | |
Debt conversion price per share | $ 0.20 | |
Subsequent Event [Member] | ||
Secured term loan | $ 250,000 | |
Loan bears interest rate | 5.00% | |
Loan maturity date | Jun. 30, 2022 | |
Debt conversion price per share | $ 0.20 |