Cover
Cover - shares | 9 Months Ended | |
Nov. 30, 2019 | Jan. 13, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Nov. 30, 2019 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Current Fiscal Year End Date | --02-29 | |
Entity File Number | 000-50107 | |
Entity Registrant Name | Daybreak Oil & Gas, Inc. | |
Entity Central Index Key | 0001164256 | |
Entity Incorporation, State or Country Code | WA | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 53,532,364 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | Nov. 30, 2019 | Feb. 28, 2019 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 10,984 | $ 30,078 |
Accounts receivable: | ||
Crude oil sales | 66,470 | 75,410 |
Joint interest participants | 62,182 | 54,883 |
Prepaid expenses and other current assets | 65,195 | 23,176 |
Total current assets | 204,831 | 183,547 |
Crude oil properties, successful efforts method, net | ||
Proved properties | 615,668 | 656,624 |
Unproved properties | 55,978 | 55,768 |
Prepaid drilling costs | 16,452 | 16,452 |
Operating lease, right-of-use asset | 7,973 | |
Total long-term assets | 696,071 | 728,844 |
Total assets | 900,902 | 912,391 |
CURRENT LIABILITIES: | ||
Accounts payable and other accrued liabilities | 1,494,129 | 1,511,286 |
Accounts payable - related parties | 911,841 | 1,920,897 |
Accrued interest | 61,538 | 24,059 |
Notes payable, related party | 250,100 | |
12% Notes payable | 315,000 | 315,000 |
12% Notes payable, related party | 250,000 | 250,000 |
Line of credit | 879,477 | 826,853 |
Production revenue payable - current, net of unamortized discount | 283,315 | 247,868 |
Operating lease liability. current | 7,973 | |
Total current liabilities | 4,203,273 | 5,346,063 |
LONG TERM LIABILITIES: | ||
Note payable | 120,000 | 120,000 |
Production revenue payable, net of unamortized discount and current portion | 1,080,031 | 528,720 |
Asset retirement obligation | 32,849 | 29,595 |
Total long-term liabilities | 1,232,880 | 678,315 |
Total liabilities | 5,436,153 | 6,024,378 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' DEFICIT: | ||
Preferred stock | ||
Common stock | 53,532 | 51,532 |
Additional paid-in capital | 24,219,852 | 22,997,759 |
Accumulated deficit | (28,809,345) | (28,161,988) |
Total stockholders' deficit | (4,535,251) | (5,111,987) |
Total liabilities and stockholders' deficit | 900,902 | 912,391 |
Series A Convertible Preferred Stock | ||
STOCKHOLDERS' DEFICIT: | ||
Preferred stock | $ 710 | $ 710 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Nov. 30, 2019 | Feb. 28, 2019 |
Preferred stock, par value in dollars | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value in dollars | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 53,532,364 | 51,532,364 |
Common stock, shares outstanding | 53,532,364 | 51,532,364 |
Series A Convertible Preferred Stock | ||
Preferred stock, par value in dollars | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,400,000 | 2,400,000 |
Preferred stock, shares issued | 709,568 | 709,568 |
Preferred stock, shares outstanding | 709,568 | 709,568 |
Preferred stock, cumulative dividend rate | 6.00% | 6.00% |
Statements of Operations (Unaud
Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
REVENUE: | ||||
Crude oil sales | $ 141,964 | $ 192,436 | $ 501,377 | $ 586,139 |
OPERATING EXPENSES: | ||||
Production | 44,733 | 41,337 | 134,276 | 115,893 |
Exploration and drilling (G&G) | 9 | 123 | 992 | |
Depreciation, depletion, and amortization (DD&A) | 13,288 | 18,144 | 44,210 | 55,669 |
General and administrative | 156,622 | 214,304 | 545,055 | 661,674 |
Total operating expenses | 214,652 | 273,785 | 723,664 | 834,228 |
OPERATING LOSS | (72,688) | (81,349) | (222,287) | (248,089) |
OTHER EXPENSE: | ||||
Interest expense, net | (152,135) | (576,795) | (425,070) | (1,740,260) |
NET LOSS | (224,823) | (658,144) | (647,357) | (1,988,349) |
Cumulative convertible preferred stock dividend requirement | (31,841) | (31,841) | (96,223) | (96,223) |
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ (256,664) | $ (689,985) | $ (743,580) | $ (2,084,572) |
NET LOSS PER COMMON SHARE - basic and diluted | $ 0 | $ (0.01) | $ (0.01) | $ (0.04) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - Basic and diluted | 53,532,364 | 51,532,364 | 53,092,364 | 51,532,364 |
Statements of Changes in Stockh
Statements of Changes in Stockholders' Deficit (Unaudited) - USD ($) | Series A Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, value at Feb. 28, 2018 | $ 710 | $ 51,532 | $ 22,997,759 | $ (38,334,383) | $ (15,284,382) |
Beginning balance, shares at Feb. 28, 2018 | 709,568 | 51,532,364 | |||
Net loss | (708,663) | (708,663) | |||
Ending balance, value at May. 31, 2018 | $ 710 | $ 51,532 | 22,997,759 | (39,043,046) | (15,993,045) |
Ending balance, shares at May. 31, 2018 | 709,568 | 51,532,364 | |||
Beginning balance, value at Feb. 28, 2018 | $ 710 | $ 51,532 | 22,997,759 | (38,334,383) | (15,284,382) |
Beginning balance, shares at Feb. 28, 2018 | 709,568 | 51,532,364 | |||
Net loss | (1,988,349) | ||||
Ending balance, value at Nov. 30, 2018 | $ 710 | $ 51,532 | 22,997,759 | (40,322,732) | (17,272,731) |
Ending balance, shares at Nov. 30, 2018 | 709,568 | 51,532,364 | |||
Beginning balance, value at May. 31, 2018 | $ 710 | $ 51,532 | 22,997,759 | (39,043,046) | (15,993,045) |
Beginning balance, shares at May. 31, 2018 | 709,568 | 51,532,364 | |||
Net loss | (621,542) | (621,542) | |||
Ending balance, value at Aug. 31, 2018 | $ 710 | $ 51,532 | 22,997,759 | (39,664,588) | (16,614,587) |
Ending balance, shares at Aug. 31, 2018 | 709,568 | 51,532,364 | |||
Net loss | (658,144) | (658,144) | |||
Ending balance, value at Nov. 30, 2018 | $ 710 | $ 51,532 | 22,997,759 | (40,322,732) | (17,272,731) |
Ending balance, shares at Nov. 30, 2018 | 709,568 | 51,532,364 | |||
Beginning balance, value at Feb. 28, 2019 | $ 710 | $ 51,532 | 22,997,759 | (28,161,988) | (5,111,987) |
Beginning balance, shares at Feb. 28, 2019 | 709,568 | 51,532,364 | |||
Issuance of common stock for accounts payable settlement, value | $ 2,000 | 4,000 | 6,000 | ||
Issuance of common stock for accounts payable settlement, shares | 2,000,000 | ||||
Net loss | (263,585) | (263,585) | |||
Ending balance, value at May. 31, 2019 | $ 710 | $ 53,532 | 23,001,759 | (28,425,573) | (5,369,572) |
Ending balance, shares at May. 31, 2019 | 709,568 | 53,532,364 | |||
Beginning balance, value at Feb. 28, 2019 | $ 710 | $ 51,532 | 22,997,759 | (28,161,988) | (5,111,987) |
Beginning balance, shares at Feb. 28, 2019 | 709,568 | 51,532,364 | |||
Forgiveness of liabilities to related parties | 1,215,145 | ||||
Issuance of common stock for accounts payable settlement, value | 6,000 | ||||
Net loss | (647,357) | ||||
Ending balance, value at Nov. 30, 2019 | $ 710 | $ 53,532 | 24,219,852 | (28,809,345) | (4,535,251) |
Ending balance, shares at Nov. 30, 2019 | 709,568 | 53,532,364 | |||
Beginning balance, value at May. 31, 2019 | $ 710 | $ 53,532 | 23,001,759 | (28,425,573) | (5,369,572) |
Beginning balance, shares at May. 31, 2019 | 709,568 | 53,532,364 | |||
Forgiveness of liabilities to related parties | 1,215,145 | 1,215,145 | |||
Net loss | (158,949) | (158,949) | |||
Ending balance, value at Aug. 31, 2019 | $ 710 | $ 53,532 | 24,216,904 | (28,584,522) | (4,313,376) |
Ending balance, shares at Aug. 31, 2019 | 709,568 | 53,532,364 | |||
Issuance of warrants for investor relations services | 2,948 | 2,948 | |||
Net loss | (224,823) | (224,823) | |||
Ending balance, value at Nov. 30, 2019 | $ 710 | $ 53,532 | $ 24,219,852 | $ (28,809,345) | $ (4,535,251) |
Ending balance, shares at Nov. 30, 2019 | 709,568 | 53,532,364 |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (647,357) | $ (1,988,349) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation, depletion, amortization and impairment expense | 44,210 | 55,669 |
Amortization of debt discount | 336,658 | 10,903 |
Operating lease expense in conjunction with right of use asset | 5,814 | |
Warrant issued for investor relations services | 2,948 | |
Changes in assets and liabilities: | ||
Accounts receivable - crude oil sales | 8,940 | 13,853 |
Accounts receivable - joint interest participants | (7,299) | 2,683 |
Prepaid expenses and other current assets | (42,019) | (1,196) |
Accounts payable and other accrued liabilities | 112,048 | 1,069 |
Accounts payable - related parties | 82,674 | 180,896 |
Operating lease liability in conjunction with right of use asset | (5,814) | |
Accrued interest | 61,103 | 1,691,486 |
Net cash used in operating activities | (48,094) | (32,986) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Additions to crude oil properties | (12,227) | |
Net cash used in investing activities | (12,227) | |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Additions to line of credit | 74,000 | 33,300 |
Payments on line of credit | (45,000) | (95,000) |
Net cash provided by (used in) financing activities | 29,000 | (61,700) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (19,094) | (106,913) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 30,078 | 148,564 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 10,984 | 41,651 |
Cash paid for Interest | 26,978 | 60,568 |
Cash paid for Income taxes | ||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Unpaid additions to crude oil properties | 210 | |
Non-cash increase to line of credit due to monthly interest | 23,624 | $ 22,680 |
Operating lease - right-of-use assets and associated liabilities | 13,787 | |
Forgiveness of liabilities to related parties | 1,215,145 | |
Settlement of related party debt with production revenue interest | 250,100 | |
Common stock issued for settlement of account payable | $ 6,000 |
Organization and Basis of Prese
Organization and Basis of Presentation | 9 Months Ended |
Nov. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Basis of Presentation | NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION: Organization Originally incorporated as Daybreak Uranium, Inc., (“Daybreak Uranium”) under the laws of the State of Washington on March 11, 1955, Daybreak Uranium was organized to explore for, acquire, and develop mineral properties in the Western United States. During 2005, management of the Company decided to enter the crude oil exploration and production industry. On October 25, 2005, the Company shareholders approved a name change from Daybreak Mines, Inc. to Daybreak Oil and Gas, Inc. (referred to herein as “Daybreak” or the “Company”) to better reflect the business of the Company. All of the Company’s crude oil production is sold under contracts which are market-sensitive. Accordingly, the Company’s financial condition, results of operations, and capital resources are highly dependent upon prevailing market prices of, and demand for, crude oil. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors that are beyond the control of the Company. These factors include the level of global demand for petroleum products, foreign supply of crude oil, the establishment of and compliance with production quotas by crude oil-exporting countries, the relative strength of the U.S. dollar, weather conditions, the price and availability of alternative fuels, and overall economic conditions, both foreign and domestic. Basis of Presentation The accompanying unaudited interim financial statements and notes for the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”). Accordingly, they do not include all of the information and footnote disclosures normally required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements have been included and such adjustments are of a normal recurring nature. Operating results for the nine months ended November 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending February 29, 2020. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2019. Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions. These estimates and assumptions may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The accounting policies most affected by management’s estimates and assumptions are as follows: The reliance on estimates of proved reserves to compute the provision for depreciation, depletion and amortization (“DD&A”) and to determine the amount of any impairment of proved properties; The valuation of unproved acreage and proved crude oil properties to determine the amount of any impairment of crude oil properties; Judgment regarding the productive status of in-progress exploratory wells to determine the amount of any provision for abandonment; and Estimates regarding abandonment obligations. Earnings per Share The Company follows ASC Topic 260, Earnings per Share |
Going Concern
Going Concern | 9 Months Ended |
Nov. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | NOTE 2 — GOING CONCERN: Financial Condition The Company’s financial statements for the nine months ended November 30, 2019 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred net losses since entering the crude oil exploration industry and as of November 30, 2019 has an accumulated deficit of $28,809,345 and a working capital deficit of $3,998,442 which raises substantial doubt about the Company’s ability to continue as a going concern. Management Plans to Continue as a Going Concern The Company continues to implement plans to enhance its ability to continue as a going concern. Daybreak currently has a net revenue interest (“NRI”) in 20 producing crude oil wells in its East Slopes Project located in Kern County, California (the “East Slopes Project”). The revenue from these wells has created a steady and reliable source of revenue. The Company’s average working interest (“WI”) in these wells is 36.6% and the average net revenue interest (“NRI”) is 28.4% for these same wells. The Company anticipates its revenue will continue to increase as the Company participates in the drilling of more wells in the East Slopes Project in California and as our exploratory drilling project begins in Michigan. However, given the current volatility and instability in hydrocarbon prices, the timing of any drilling activity in California and Michigan will be dependent on a sustained improvement in hydrocarbon prices and a success in securing financing for its drilling programs. The Company believes that our liquidity will improve when there is a sustained improvement in hydrocarbon prices. Daybreak’s sources of funds in the past have included the debt or equity markets and the sale of assets. While the Company has experienced revenue growth, which has resulted in positive cash flow from its crude oil properties, it has not yet established positive cash flow on a company-wide basis. It will be necessary for the Company to obtain additional funding from the private or public debt or equity markets in the future. However, the Company cannot offer any assurance that it will be successful in executing the aforementioned plans to continue as a going concern. Daybreak’s financial statements as of November 30, 2019 do not include any adjustments that might result from the inability to implement or execute the Company’s plans to improve its ability to continue as a going concern. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 9 Months Ended |
Nov. 30, 2019 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | NOTE 3 — RECENT ACCOUNTING PRONOUNCEMENTS: Accounting Standards Issued and Adopted On June 20, 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. For public entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2018. ASC Topic 718 became effective for the Company on March 1, 2019 and did not have a material impact on the Company’s financial statements. On March 13, 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740). The ASU adds seven paragraphs to the Accounting Standards Codification (“ASC”) 740, Income Taxes, that contain SEC guidance related to Staff Accounting Bulletin 118 (“Income Tax Accounting Implications of the Tax Cuts and Jobs Act”) as a result of the tax legislation passed in 2017 known as the “Tax Cuts and Jobs Act” (the “Act”). Specifically, the staff intended to address situations where the accounting under ASC Topic 740 is incomplete for certain income tax effects of the Act upon issuance of an entity’s financial statements for the reporting period in which the Act was enacted. The Company notes that it has considered the updates to ASC 740 as a result of the Act and has prepared its financial statements in accordance with the Act. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” and subsequent amendments to the initial guidance: ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, Topic 842). ASU 2016-02 increases the transparency and comparability of leases among entities and requires an entity to recognize a right-of-use asset (“ROU”) and lease liability for all leases and provide enhanced disclosures. Recognition, measurement, and presentation of expenses depends on classification as a finance lease or an operating lease. The Company has determined that it has only operating leases. ASC 842 supersedes the lease accounting guidance in ASC 840 “Leases”. On March 1, 2019, the Company adopted Topic 842 using the modified retrospective approach and the impact of the adoption of ASC 842 resulted in the recognition of a right of use asset and lease payable obligation on the Company’s Balance Sheets of approximately $13,787. Results for reporting periods after March 1, 2019 are presented under Topic 842, while prior periods have not been adjusted. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. Refer to Note 9 — |
Concentration Risk
Concentration Risk | 9 Months Ended |
Nov. 30, 2019 | |
Risks and Uncertainties [Abstract] | |
Concentration Risk | NOTE 4 — CONCENTRATION RISK: Substantially all of the Company’s trade accounts receivable result from crude oil sales or joint interest billings to its working interest partners. This concentration of customers and joint interest owners may impact the Company’s overall credit risk as these entities could be affected by similar changes in economic conditions including lower crude oil prices as well as other related factors. Trade accounts receivable are generally not collateralized. The Company’s accounts receivable balances from California crude oil sales of $66,470 and $75,410 at November 30, 2019 and February 28, 2019, respectively were from one customer, Plains Marketing; and represent crude oil sales that occurred in November and February 2019, respectively. Joint interest participant receivables balances of $62,182 and $54,883 at November 30, 2019 and February 28, 2019, respectively represent amounts due from working interest partners in California, where the Company is the Operator. There were no allowances for doubtful accounts for the Company’s trade accounts receivable at November 30, 2019 and February 28, 2019 as the joint interest owners have a history of paying their obligations. |
Crude Oil Properties
Crude Oil Properties | 9 Months Ended |
Nov. 30, 2019 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Crude Oil Properties | NOTE 5 — CRUDE OIL PROPERTIES: Crude oil property balances at November 30, 2019 and February 28, 2019 are set forth in the table below. November 30, 2019 February 28, 2019 Proved leasehold costs $ 115,119 $ 115,119 Costs of wells and development 2,285,054 2,285,054 Capitalized exploratory well costs 1,341,494 1,341,494 Cost of proved crude oil properties 3,741,667 3,741,667 Accumulated depletion, depreciation, amortization and impairment (3,125,999) (3,085,043) Proved crude oil properties, net $ 615,668 $ 656,624 Michigan unproved crude oil properties 55,978 55,768 Total proved and unproved crude oil properties, net $ 671,646 $ 712,392 |
Accounts Payable
Accounts Payable | 9 Months Ended |
Nov. 30, 2019 | |
Payables and Accruals [Abstract] | |
Accounts Payable | NOTE 6 — ACCOUNTS PAYABLE: On March 1, 2009, the Company became the operator for its East Slopes Project in California. Additionally, the Company then assumed certain original defaulting partners’ approximate $1.5 million liability representing a 25% working interest in the drilling and completion costs associated with the East Slopes Project four earning well program. The Company subsequently sold the same 25% working interest on June 11, 2009. Of the $1.5 million liability, $244,849 remains unpaid and is included in both the November 30, 2019 and February 28, 2019 accounts payable balances. Payment of this liability has been delayed until the Company’s cash flow situation improves. On October 17, 2018, a working interest partner in California filed a UCC financing statement in regards to payables owed to the partner by the Company. At November 30, 2019, the balance owed this working interest partner was $105,144 and is included in the approximate $1.5 million accounts payable balance. |
Accounts Payable - Related Part
Accounts Payable - Related Parties | 9 Months Ended |
Nov. 30, 2019 | |
Related Party Transactions [Abstract] | |
Accounts Payable - Related Parties | NOTE 7 — ACCOUNTS PAYABLE- RELATED PARTIES: The November 30, 2019 and February 28, 2019 accounts payable – related parties balances of approximately $0.9 million and $1.9 million respectively, were comprised primarily of deferred salaries of one of the Company’s Executive Officers and certain employees; directors’ fees; expense reimbursements; and deferred interest payments on a 12% Subordinated Notes owed to the Company’s Chairman, President and Chief Executive Officer. On August 22, 2019, an agreement was reached between the Company and the Company’s Chairman, President and Chief Executive Officer whereby all deferred salary owed by the Company to this related party was forgiven. The agreement has an effective date of June 1, 2019. This agreement resulted in a decrease of approximately $882,043 in net salary payable from the prior related party payables balance. This agreement also resulted in a decrease of $123,414 in estimated payroll taxes from accounts payable balances. Additionally, on August 22, 2019 the three Non-Employee Directors of the Company to whom director fees were owed agreed to forgive 50% (fifty percent) of the amounts owed to each individual director. These agreements had an effective date of June 1, 2019 and resulted in a reduction of $209,688 in the related party payables balance. The total amount of liability forgiveness was approximately $1.2 million and was recorded as an addition to additional paid in capital (APIC). Payment of any other deferred items has been delayed until the Company’s cash flow situation improves. |
Short-Term and Long-Term Borrow
Short-Term and Long-Term Borrowings | 9 Months Ended |
Nov. 30, 2019 | |
Debt Disclosure [Abstract] | |
Short-Term and Long-Term Borrowings | NOTE 8 — SHORT-TERM AND LONG-TERM BORROWINGS: Notes Payable – Related Party 12% Subordinated Notes The Company’s 12% Subordinated Notes (“the Notes”) issued pursuant to a January 2010 private placement offering to accredited investors, resulted in $595,000 in gross proceeds (of which $250,000 was from a related party) to the Company and accrue interest at 12% per annum, payable semi-annually on January 29th and July 29th. On January 29, 2015, the Company and 12 of the 13 holders of the Notes agreed to extend the maturity date of the Notes for an additional two years to January 29, 2017. Effective January 29, 2017, the maturity date of the Notes and the expiration date of the warrants that were issued in conjunction with the Notes were extended for an additional two years to January 29, 2019. The 980,000 warrants held by ten noteholders expired on January 29, 2019. The Company has informed the Note holders that the payment of principal and final interest will be late and is subject to future financing being completed. The Notes principal of $565,000 was payable in full at the amended maturity date of the Notes, and has not been paid. Interest continues to accrue on the unpaid $565,000 principal balance. The terms of the Notes, state that should the Board of Directors decide that the payment of the principal and any unpaid interest would impair the financial condition or operations of the Company, the Company may then elect a mandatory conversion of the unpaid principal and interest into the Company’s common stock at a conversion rate equal to 75% of the average closing price of the Company’s common stock over the 20 consecutive trading days preceding December 31, 2018. There was no unamortized debt discount remaining at November 30, 2019 and February 28, 2019. 12% Note balances at November 30, 2019 and February 28, 2019 are set forth in the table below: November 30, 2019 February 28, 2019 12% Subordinated Notes $ 315,000 $ 315,000 12% Subordinated Notes, related party 250,000 250,000 Total 12% Subordinated Notes balance $ 565,000 $ 565,000 12% Note balances – accrued interest at November 30, 2019 and February 28, 2019 are set forth in the table below: November 30, 2019 February 28, 2019 Accrued interest 12% Subordinated Notes $ 50,538 $ 21,955 Accrued interest 12% Subordinated Notes – related party 204,986 182,301 Total accrued interest 12% Subordinated Notes $ 255,524 $ 204,256 The accrued interest owed on the 12% Subordinated Note to the related party is presented on the Company’s Balance Sheets under the caption Accounts payable – related party Accrued interest Line of Credit The Company has an existing $890,000 line of credit for working capital purposes with UBS Bank USA (“UBS”), established pursuant to a Credit Line Agreement dated October 24, 2011 that is secured by the personal guarantee of its Chairman, President and Chief Executive Officer. On July 10, 2017, $700,000 of the outstanding line of credit balance was converted to a 24 month fixed term annual percentage interest rate of 3.244% with interest payable monthly. On July 10, 2019, the 24 month fixed term loan amount of $700,000 was renewed at the same annual percentage interest rate of 3.244% for an additional 24 months. The remaining principal balance of the line of credit has a stated reference rate of 0.249% + 337.5 basis points with interest payable monthly. The reference rate is based on the 30 day LIBOR (“London Interbank Offered Rate”) and is subject to change from UBS. Note Payable In December 2018, the Company was able to settle an outstanding balance owed to one of its third-party vendors. This settlement resulted in a $120,000 note payable issued to the vendor. Additionally, the Company agreed to issue 2,000,000 shares of the Company’s common stock to the vendor as a part of the settlement. Based on the closing price of the Company’s common stock on the date of the settlement, the value of the common stock transaction was determined to be $6,000. The common stock shares were issued during the nine months ended November 30, 2019. The note has a maturity date of January 1, 2022 and bears an interest rate of 10% rate per annum. Monthly interest is accrued and payable on January 1 st Production Revenue Payable The production payment interest entitles the purchasers to receive production payments equal to twice their original amount paid, payable from a percentage of the Company’s future net production payments from wells drilled after the date of the purchase and until the Production Payment Target (as described below) is met. The Company shall pay fifty percent of its net production payments from the relevant wells to the purchasers until each purchaser has received two times the purchase price (the “Production Payment Target”). Once the Company pays the purchasers amounts equal to the Production Payment Target, it shall thereafter pay a pro-rated eight percent of $1.3 million on its net production payments from the relevant wells to each of the purchasers. However, if the Production Payment Target is not met within the first three years, the Company shall pay seventy-five percent of its production payments from the relevant wells to the purchasers until the Production Payment Target is met. The Company accounted for the amounts received from these sales in accordance with ASC 470-10-25 and 470-10-35 which require amounts recorded as debt to be amortized under the interest method as described in ASC 835-30, Interest Method. Consequently, the program balance of $950,100 has been recognized as a production revenue payable. The Company determined an effective interest rate based on future expected cash flows to be paid to the holders of the production payment interests. This rate represents the discount rate that equates estimated cash flows with the initial proceeds received from the sales and is used to compute the amount of interest to be recognized each period. Estimating the future cash outflows under this agreement requires the Company to make certain estimates and assumptions about future revenues and payments and such estimates are subject to significant variability. Therefore, the estimates are likely to change which may result in future adjustments to the accretion of the interest expense and the amortized cost based carrying value of the related payables. Accordingly, the Company has estimated the cash flows associated with the production revenue payments and determined a discount of $1,666,614 which is being accounted as interest expense over the estimated period over which payments will be made based on expected future revenue streams. For the nine months ended November 30, 2019, amortization of the debt discount on these payables amounted to $336,658 which has been included in interest expense in the statements of operations. Production revenue payable balances at November 30, 2019 and February 28, 2019 are set forth in the table below: November 30, 2019 February 28, 2019 Estimated payments of production revenue payable $ 2,616,714 $ 2,020,353 Less: unamortized discount (1,253,368) (1,243,765) 1,363,346 776,588 Less: current portion (283,315) (247,868) Net production revenue payable – long term $ 1,080,031 $ 528,720 Encumbrances On October 17, 2018, a working interest partner in California filed a UCC financing statement in regards to payable amounts owed to the partner by the Company. As of November 30, 2019, we had no encumbrances on our crude oil project in Michigan. |
Leases
Leases | 9 Months Ended |
Nov. 30, 2019 | |
Leases [Abstract] | |
Leases | NOTE 9 — LEASES: The Company leases approximately 988 rentable square feet of office space from an unaffiliated third party for our corporate office located in Spokane Valley, Washington. Additionally, we lease approximately 416 and 695 rentable square feet from unaffiliated third parties for our regional operations office in Friendswood, Texas and storage and auxiliary office space in Wallace, Idaho, respectively. The lease in Friendswood is a 24 month lease that expires in October 2020. The Company’s lease for Friendswood does not include an option to renew. The Spokane Valley and Wallace leases are currently on a month-to-month basis. The Company’s lease agreements do not contain any residual value guarantees, restrictive covenants or variable lease payments. The Company has not entered into any financing leases. The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease right of use assets, net, operating lease liability – current, and operating lease liability – long-term on its balance sheet. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 5.85%. Significant judgement is required when determining the Company’s incremental borrowing rate. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Balance Sheet classification of lease assets and liabilities was as follows: November 30, 2019 Assets Operating lease right-of-use assets, beginning balance $ 13,787 Current period amortization (5,814) Total operating lease right-of-use asset $ 7,973 Liabilities Operating lease liability — $ 7,973 Operating lease liability — - Total lease liabilities $ 7,973 Future minimum lease payments as of November 30, 2019 under non-cancellable operating leases are as follows: Fiscal Year Ended Annual Office Lease Obligation February 29, 2020 $ 2,325 February 28, 2021 6,200 Total lease payments 8,525 Less: imputed interest 552 Operating lease liability 7,973 Less: operating lease liability — 7,973 Operating lease liability, long-term $ - Rent expense for the nine months ended November 30, 2019 and 2018 was $17,842. |
Stockholders' Deficit
Stockholders' Deficit | 9 Months Ended |
Nov. 30, 2019 | |
Equity [Abstract] | |
Stockholders' Deficit | NOTE 10 — STOCKHOLDERS’ DEFICIT: Preferred Stock The Company is authorized to issue up to 10,000,000 shares of preferred stock with a par value of $0.001. The Company’s preferred stock may be entitled to preference over the common stock with respect to the distribution of assets of the Company in the event of liquidation, dissolution, or winding-up of the Company, whether voluntarily or involuntarily, or in the event of any other distribution of assets of the Company among its shareholders for the purpose of winding-up its affairs. The authorized but unissued shares of preferred stock may be divided into and issued in designated series from time to time by one or more resolutions adopted by the Board of Directors. The directors in their sole discretion shall have the power to determine the relative powers, preferences, and rights of each series of preferred stock. Series A Convertible Preferred Stock The Company has designated 2,400,000 shares of the 10,000,000 preferred shares as Series A Convertible Preferred Stock (“Series A Preferred”), with a $0.001 par value. At November 30, 2019 and February 28, 2019, there were 709,568 shares issued and outstanding, respectively, that had not been converted into our common stock. As of November 30, 2019, there are 44 accredited investors who have converted 690,197 Series A Preferred shares into 2,070,591 shares of Daybreak common stock. The conversions of Series A Preferred that have occurred since the Series A Preferred was first issued in July 2006 are set forth in the table below. Fiscal Period Ended Shares of Series A Preferred Converted to Common Stock Shares of Common Stock Issued from Conversion Number of Accredited Investors Periods prior to February 29, 2014 662,200 1,986,600 41 February 28, 2015 3,000 9,000 1 February 29, 2016 10,000 30,000 1 February 28, 2017 - - - February 28, 2018 14,997 44,991 1 February 28, 2019 - - - November 30, 2019 - - - Totals 690,197 2,070,591 44 Holders of Series A Preferred shall accrue dividends, in the amount of 6% of the original purchase price per annum. Dividends may be paid in cash or common stock at the discretion of the Company. Dividends are cumulative whether or not in any dividend period or periods the Company has assets legally available for the payment of such dividends. Accumulations of dividends on Series A Preferred do not bear interest. Dividends are payable upon declaration by the Board of Directors. As of November 30, 2019 no dividends have been declared or paid. Dividends earned since issuance for each fiscal year and the nine months ended November 30, 2019 are set forth in the table below: Fiscal Period Ended Shareholders at Period End Accumulated Dividends Periods prior to February 28, 2014 $ 1,447,943 February 28, 2015 58 132,634 February 29, 2016 57 130,925 February 28, 2017 57 130,415 February 28, 2018 56 128,231 February 28, 2019 56 127,714 November 30, 2019 56 96,223 $ 2,194,085 Common Stock The Company is authorized to issue up to 200,000,000 shares of $0.001 par value common stock of which 53,532,364 and 51,532,364 shares were issued and outstanding as of November 30, 2019 and February 28, 2019, respectively. Common Stock Balance Par Value Common stock, Issued and Outstanding, February 28, 2018 51,532,364 Conversion of Series A Convertible Preferred Stock to common stock - $ - Common stock, Issued and Outstanding, February 28, 2019 51,532,364 Issuance of common stock to settle accounts payable 2,000,000 $ 2,000 Common stock, Issued and Outstanding, November 30, 2019 53,532,364 |
Warrants
Warrants | 9 Months Ended |
Nov. 30, 2019 | |
Equity [Abstract] | |
Warrants | NOTE 11 — WARRANTS: Warrants Exercise Price Remaining Life (Years) Warrants Remaining Warrants issued for investor relations services 2,100,000 $0.01 4.08 2,100,000 2,100,000 2,100,000 Warrant activity for the nine months ended November 30, 2019 is set forth in the table below: Number of Warrants Weighted Average Exercise Price Warrants outstanding, February 28, 2019 - Changes during the nine months ended November 30, 2019: - - Issued 2,100,000 $0.01 Expired / Cancelled / Forfeited - Warrants outstanding, November 30, 2019 2,100,000 $0.01 Warrants exercisable, November 30, 2019 During the nine months ended November 30, 2019 there were 2.1 million warrants issued to a third party for investor relations services. The fair value of the warrants was determined by the Black-Scholes pricing model, was $14,741, and was recognized as a prepaid expense. The Black-Scholes valuation encompassed the following assumptions: a risk free interest rate of 1.68%; volatility rate of 260.23%; and a dividend yield of 0.0%. The warrants vest in equal parts over a three year period beginning on January 2, 2020 and all warrants expire on January 2, 2024. As of November 30, 2019, the outstanding warrants have a weighted average exercise price of $0.01, a weighted average remaining life of 4.08 years, and an intrinsic value of -$0-. For the nine months ended November 30, 2019, the recorded amount of warrant expense was $2,948. |
Income Taxes
Income Taxes | 9 Months Ended |
Nov. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 12 INCOME TAXES: On December 22, 2017, the federal government enacted a tax bill H.R.1, an act to provide for reconciliation pursuant to Titles II and V of the concurrent resolution on the budget for fiscal year 2018, commonly referred to as the Tax Cuts and Jobs Act. The Tax Cuts and Jobs Act contains significant changes to corporate taxation, including, but not limited to, reducing the U.S. federal corporate income tax rate from 35% to 21% and modifying or limiting many business deductions. The Company has re-measured its deferred tax liabilities based on rates at which they are expected to be utilized in the future, which is generally 21%. Reconciliation between actual tax expense (benefit) and income taxes computed by applying the U.S. federal income tax rate and state income tax rates to income from continuing operations before income taxes is set forth in the table below: November 30, 2019 February 28, 2019 Computed at U.S. and state statutory rates $ (193,171) $ 3,035,442 Permanent differences 102,562 25,116 New tax law adjustment - - Changes in valuation allowance 90,609 (3,060,558) Total $ - $ - Tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred liabilities are set forth in the table below: November 30, 2019 February 28, 2019 Deferred tax assets: Net operating loss carryforwards $ 5,443,199 $ 5,361,767 Crude oil properties 47,414 38,237 Stock based compensation 66,187 66,187 Other 27,838 27,838 Less valuation allowance (5,584,638) (5,494,029) Total $ - $ - At November 30, 2019, the Company had estimated net operating loss (“NOL”) carryforwards for federal and state income tax purposes of approximately $18,241,286 which will begin to expire, if unused, beginning in 2024. Under the Tax Cuts and Jobs Act, the NOL portion of the loss incurred in the 2018 period of $340,749 and the loss incurred for the nine months ended November 30, 2019 in the amount of $272,897 will not expire and will carry over indefinitely. The valuation allowance increased approximately $90,609 for the nine months ended November 30, 2019 and decreased approximately $3,060,558 for the year ended February 28, 2019, respectively. Section 382 of the Internal Revenue Code places annual limitations on the Company’s net operating loss (NOL) carryforward. The above estimates are based on management’s decisions concerning elections which could change the relationship between net income and taxable income. Management decisions are made annually and could cause estimates to vary significantly. The Company files federal income tax returns with the United States Internal Revenue Service and state income tax returns in various state tax jurisdictions. As a general rule the Company’s tax returns for the fiscal years after 2014 currently remain subject to examinations by appropriate tax authorities. None of our tax returns are under examination at this time. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Nov. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 13 — COMMITMENTS AND CONTINGENCIES: Various lawsuits, claims and other contingencies arise in the ordinary course of the Company’s business activities. While the ultimate outcome of any future contingency is not determinable at this time, management believes that any liability or loss resulting therefrom will not materially affect the financial position, results of operations or cash flows of the Company. The Company, as an owner or lessee and operator of crude oil properties, is subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under a crude oil lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. The Company maintains insurance coverage that is customary in the industry, although the Company is not fully insured against all environmental risks. The Company is not aware of any environmental claims existing as of November 30, 2019. There can be no assurance, however, that current regulatory requirements will not change or that past non-compliance with environmental issues will not be discovered on the Company’s crude oil properties. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 9 Months Ended |
Nov. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim financial statements and notes for the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”). Accordingly, they do not include all of the information and footnote disclosures normally required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements have been included and such adjustments are of a normal recurring nature. Operating results for the nine months ended November 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending February 29, 2020. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2019. |
Use of Estimates | Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions. These estimates and assumptions may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The accounting policies most affected by management’s estimates and assumptions are as follows: The reliance on estimates of proved reserves to compute the provision for depreciation, depletion and amortization (“DD&A”) and to determine the amount of any impairment of proved properties; The valuation of unproved acreage and proved crude oil properties to determine the amount of any impairment of crude oil properties; Judgment regarding the productive status of in-progress exploratory wells to determine the amount of any provision for abandonment; and Estimates regarding abandonment obligations. |
Earnings Per Share | Earnings per Share The Company follows ASC Topic 260, Earnings per Share |
Accounting Standards Issued and Adopted | Accounting Standards Issued and Adopted On June 20, 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. For public entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2018. ASC Topic 718 became effective for the Company on March 1, 2019 and did not have a material impact on the Company’s financial statements. On March 13, 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740). The ASU adds seven paragraphs to the Accounting Standards Codification (“ASC”) 740, Income Taxes, that contain SEC guidance related to Staff Accounting Bulletin 118 (“Income Tax Accounting Implications of the Tax Cuts and Jobs Act”) as a result of the tax legislation passed in 2017 known as the “Tax Cuts and Jobs Act” (the “Act”). Specifically, the staff intended to address situations where the accounting under ASC Topic 740 is incomplete for certain income tax effects of the Act upon issuance of an entity’s financial statements for the reporting period in which the Act was enacted. The Company notes that it has considered the updates to ASC 740 as a result of the Act and has prepared its financial statements in accordance with the Act. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” and subsequent amendments to the initial guidance: ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, Topic 842). ASU 2016-02 increases the transparency and comparability of leases among entities and requires an entity to recognize a right-of-use asset (“ROU”) and lease liability for all leases and provide enhanced disclosures. Recognition, measurement, and presentation of expenses depends on classification as a finance lease or an operating lease. The Company has determined that it has only operating leases. ASC 842 supersedes the lease accounting guidance in ASC 840 “Leases”. On March 1, 2019, the Company adopted Topic 842 using the modified retrospective approach and the impact of the adoption of ASC 842 resulted in the recognition of a right of use asset and lease payable obligation on the Company’s Balance Sheets of approximately $13,787. Results for reporting periods after March 1, 2019 are presented under Topic 842, while prior periods have not been adjusted. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. Refer to Note 9 — |
Crude Oil Properties (Tables)
Crude Oil Properties (Tables) | 9 Months Ended |
Nov. 30, 2019 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Capitalized Costs Relating to Crude Oil Activities | November 30, 2019 February 28, 2019 Proved leasehold costs $ 115,119 $ 115,119 Costs of wells and development 2,285,054 2,285,054 Capitalized exploratory well costs 1,341,494 1,341,494 Cost of proved crude oil properties 3,741,667 3,741,667 Accumulated depletion, depreciation, amortization and impairment (3,125,999) (3,085,043) Proved crude oil properties, net $ 615,668 $ 656,624 Michigan unproved crude oil properties 55,978 55,768 Total proved and unproved crude oil properties, net $ 671,646 $ 712,392 |
Short-Term and Long-Term Borr_2
Short-Term and Long-Term Borrowings (Tables) | 9 Months Ended |
Nov. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Short-Term Debt | November 30, 2019 February 28, 2019 12% Subordinated Notes $ 315,000 $ 315,000 12% Subordinated Notes, related party 250,000 250,000 Total 12% Subordinated Notes balance $ 565,000 $ 565,000 November 30, 2019 February 28, 2019 Accrued interest 12% Subordinated Notes $ 50,538 $ 21,955 Accrued interest 12% Subordinated Notes – related party 204,986 182,301 Total accrued interest 12% Subordinated Notes $ 255,524 $ 204,256 |
Schedule of Accounts Payable and Accrued Liabilities | November 30, 2019 February 28, 2019 Estimated payments of production revenue payable $ 2,616,714 $ 2,020,353 Less: unamortized discount (1,253,368) (1,243,765) 1,363,346 776,588 Less: current portion (283,315) (247,868) Net production revenue payable – long term $ 1,080,031 $ 528,720 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Nov. 30, 2019 | |
Leases [Abstract] | |
Schedule of Operating Lease Assets and Liabilities | November 30, 2019 Assets Operating lease right-of-use assets, beginning balance $ 13,787 Current period amortization (5,814) Total operating lease right-of-use asset $ 7,973 Liabilities Operating lease liability — $ 7,973 Operating lease liability — - Total lease liabilities $ 7,973 |
Schedule of Future Minimum Lease Payments | Fiscal Year Ended Annual Office Lease Obligation February 29, 2020 $ 2,325 February 28, 2021 6,200 Total lease payments 8,525 Less: imputed interest 552 Operating lease liability 7,973 Less: operating lease liability — 7,973 Operating lease liability, long-term $ - |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 9 Months Ended |
Nov. 30, 2019 | |
Equity [Abstract] | |
Schedule of Stockholder's Equity | Fiscal Period Ended Shares of Series A Preferred Converted to Common Stock Shares of Common Stock Issued from Conversion Number of Accredited Investors Periods prior to February 29, 2014 662,200 1,986,600 41 February 28, 2015 3,000 9,000 1 February 29, 2016 10,000 30,000 1 February 28, 2017 - - - February 28, 2018 14,997 44,991 1 February 28, 2019 - - - November 30, 2019 - - - Totals 690,197 2,070,591 44 |
Schedule of Dividends Payable | Fiscal Period Ended Shareholders at Period End Accumulated Dividends Periods prior to February 28, 2014 $ 1,447,943 February 28, 2015 58 132,634 February 29, 2016 57 130,925 February 28, 2017 57 130,415 February 28, 2018 56 128,231 February 28, 2019 56 127,714 November 30, 2019 56 96,223 $ 2,194,085 |
Schedule of Common Stock Outstanding | Common Stock Balance Par Value Common stock, Issued and Outstanding, February 28, 2018 51,532,364 Conversion of Series A Convertible Preferred Stock to common stock - $ - Common stock, Issued and Outstanding, February 28, 2019 51,532,364 Issuance of common stock to settle accounts payable 2,000,000 $ 2,000 Common stock, Issued and Outstanding, November 30, 2019 53,532,364 |
Warrants (Tables)
Warrants (Tables) | 9 Months Ended |
Nov. 30, 2019 | |
Equity [Abstract] | |
Schedule of Warrants Outstanding | Warrants Exercise Price Remaining Life (Years) Warrants Remaining Warrants issued for investor relations services 2,100,000 $0.01 4.08 2,100,000 2,100,000 2,100,000 |
Schedule of Warrant Activity | Number of Warrants Weighted Average Exercise Price Warrants outstanding, February 28, 2019 - Changes during the nine months ended November 30, 2019: - - Issued 2,100,000 $0.01 Expired / Cancelled / Forfeited - Warrants outstanding, November 30, 2019 2,100,000 $0.01 Warrants exercisable, November 30, 2019 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Nov. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of Reconciliation Between Actual Tax Expense Benefit and Income Taxes Computed by Applying Income Tax Rate | November 30, 2019 February 28, 2019 Computed at U.S. and state statutory rates $ (193,171) $ 3,035,442 Permanent differences 102,562 25,116 New tax law adjustment - - Changes in valuation allowance 90,609 (3,060,558) Total $ - $ - |
Schedule of Deferred Tax Assets and Liabilities | November 30, 2019 February 28, 2019 Deferred tax assets: Net operating loss carryforwards $ 5,443,199 $ 5,361,767 Crude oil properties 47,414 38,237 Stock based compensation 66,187 66,187 Other 27,838 27,838 Less valuation allowance (5,584,638) (5,494,029) Total $ - $ - |
Going Concern (Details Narrativ
Going Concern (Details Narrative) | Nov. 30, 2019USD ($)Number | Feb. 28, 2019USD ($) |
Accumulated deficit | $ (28,809,345) | $ (28,161,988) |
Working capital deficit | $ 3,998,442 | |
Average Working and Net Revenue Interest | East Slopes Project | ||
Number of producing oil wells, net revenue interest | Number | 20 | |
Average working interest | 36.60% | |
Average net revenue interest | 28.40% |
Recent Accounting Pronounceme_2
Recent Accounting Pronouncements (Details Narrative) - Accounting Standards Update 2016-02 | Nov. 30, 2019USD ($) |
Right of use asset and lease payable obligation | $ 13,787 |
Transition option | Modified Retrospective |
Concentration Risk (Details Nar
Concentration Risk (Details Narrative) - USD ($) | 9 Months Ended | |
Nov. 30, 2019 | Feb. 28, 2019 | |
Risks and Uncertainties [Abstract] | ||
Concentration of risk, description | At the Company's East Slopes project in California there is only one buyer available for the purchase of all crude oil production. The Company has no natural gas production in California. At November 30, 2019 and February 28, 2019 this one customer represented 100.0% of crude oil sales receivable balance. If this buyer is unable to resell its products or if they lose a significant sales contract, the Company may incur difficulties in selling its crude oil production. | |
Concentration risk, percent | 100.00% | |
Accounts receivable balances | $ 66,470 | $ 75,410 |
Joint interest participant receivable balances | $ 62,182 | $ 54,883 |
Crude Oil Properties - Capitali
Crude Oil Properties - Capitalized Costs Relating to Crude Oil and Natural Gas Activities (Details) - USD ($) | Nov. 30, 2019 | Feb. 28, 2019 |
Oil and Natural Gas Property, Successful Effort Method, Net | ||
Proved leasehold costs | $ 115,119 | $ 115,119 |
Costs of wells and development | 2,285,054 | 2,285,054 |
Capitalized exploratory well costs | 1,341,494 | 1,341,494 |
Cost of proved crude oil properties | 3,741,667 | 3,741,667 |
Accumulated depletion, depreciation, amortization and impairment | (3,125,999) | (3,085,043) |
Proved crude oil properties, net | 615,668 | 656,624 |
Michigan unproved crude oil properties | 55,978 | 55,768 |
Total proved and unproved crude oil properties, net | $ 671,646 | $ 712,392 |
Accounts Payable (Details Narra
Accounts Payable (Details Narrative) - USD ($) | 9 Months Ended | |
Nov. 30, 2019 | Feb. 28, 2019 | |
Acquisition and disposition of East Slopes Project | On March 1, 2009, the Company became the operator for the East Slopes Project. The Company assumed certain original defaulting partners' approximate $1.5 million liability representing a 25% working interest in the drilling and completion costs associated with the East Slopes Project four earning well program. The Company subsequently sold the 25% working interest on June 11, 2009. | |
Accounts payable balance | $ 244,849 | $ 244,849 |
Working Interest Partner, California | ||
Accounts payable balance | $ 105,144 |
Accounts Payable - Related Pa_2
Accounts Payable - Related Parties (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |
Aug. 31, 2019 | Nov. 30, 2019 | Feb. 28, 2019 | |
Related Party Transactions [Abstract] | |||
Accounts payable, related parties | $ 911,841 | $ 1,920,897 | |
Decrease in related party payable | (882,043) | ||
Decrease in estimated payroll taxes | (123,414) | ||
Reduction in related party payable | (209,688) | ||
Forgiveness of liabilities to related parties | $ 1,215,145 | $ 1,215,145 |
Short-Term and Long-Term Borr_3
Short-Term and Long-Term Borrowings - Schedule of Short-Term Debt (Details) - USD ($) | Nov. 30, 2019 | Feb. 28, 2019 |
Short-term Debt [Line Items] | ||
Total accrued interest 12% Subordinated Notes | $ 552 | |
12% Subordinated Notes | ||
Short-term Debt [Line Items] | ||
12% Subordinated Notes | 315,000 | $ 315,000 |
Total 12% Subordinated Notes balance | 565,000 | 565,000 |
Accrued interest 12% Subordinated Notes | 50,538 | 21,955 |
Total accrued interest 12% Subordinated Notes | 255,524 | 204,256 |
12% Subordinated Notes | Chief Executive Officer | ||
Short-term Debt [Line Items] | ||
12% Subordinated Notes | 250,000 | 250,000 |
Accrued interest 12% Subordinated Notes | $ 204,986 | $ 182,301 |
Short-Term and Long-Term Borr_4
Short-Term and Long-Term Borrowings - Schedule of Production Revenue Payable Balances (Details) - USD ($) | Nov. 30, 2019 | Feb. 28, 2019 |
Less: current portion | $ (283,315) | $ (247,868) |
Net production revenue payable, long-term | 1,080,031 | 528,720 |
Production | ||
Estimated payments of production revenue payable | 2,616,714 | 2,020,353 |
Less: unamortized discount | (1,253,368) | (1,243,765) |
Production revenue payable, net | 1,363,346 | 776,588 |
Less: current portion | (283,315) | (247,868) |
Net production revenue payable, long-term | $ 1,080,031 | $ 528,720 |
Short-Term and Long-Term Borr_5
Short-Term and Long-Term Borrowings (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
May 31, 2019 | Nov. 30, 2019 | Nov. 30, 2018 | Feb. 28, 2019 | Feb. 28, 2018 | Feb. 28, 2017 | Feb. 28, 2010 | Feb. 29, 2012 | |
Debt Instrument [Line Items] | ||||||||
Warrants expired | ||||||||
Amortization of debt discount | $ 336,658 | $ 10,903 | ||||||
Credit facility, advances | 74,000 | 33,300 | ||||||
Line of credit, amount outstanding | 879,477 | $ 826,853 | ||||||
Payments on line of credit | 45,000 | 95,000 | ||||||
Notes payable, related party | 250,100 | |||||||
Related party, extinguishment of debt | $ 250,100 | |||||||
Fundraising program, description | The Company has been conducting a fundraising program to fund the drilling of future wells in California and Michigan and to settle some of its historical debt. The investors in this program are offered a production revenue payment on future wells to be drilled in California and Michigan in exchange for their investment. The production payment interests entitle the purchasers to a return of twice their original investment and a percentage of the Company's future net production payments from wells drilled after the date of the agreement and before the Production Payment Target is met. The Company shall pay fifty percent of its net production payments from the relevant wells to the purchasers until each purchaser has received two times the purchase price (the "Production Payment Target"). Once the Company pays the purchasers amounts equal to the Production Payment Target, it shall thereafter pay a pro-rated eight percent of $1.3 million on its net production payments from the relevant wells to each of the purchasers. However, if the Production Payment Target is not met within the first three years, the Company shall pay seventy-five percent of its production payments from the relevant wells to the purchasers until the Production Payment Target is met. | |||||||
Proceeds from production revenue payment program | $ 950,100 | |||||||
Shares issued, value | $ 6,000 | 6,000 | ||||||
Interest expense on production revenue payments | $ 1,666,614 | |||||||
Third-Party Vendors | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest rate | 10.00% | |||||||
Maturity date | Jan. 1, 2022 | |||||||
Note payable | $ 120,000 | |||||||
Shares issued | 2,000,000 | |||||||
Shares issued, value | $ 6,000 | |||||||
Accrued interest | 11,000 | |||||||
Line of Credit | UBS Bank USA | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing | $ 890,000 | |||||||
Credit facility, advances | 74,000 | 33,300 | ||||||
Line of credit, amount outstanding | 879,477 | $ 826,853 | $ 700,000 | |||||
Payments on line of credit | 45,000 | 95,000 | ||||||
Line of credit, interest converted to to principal | $ 23,624 | $ 22,680 | ||||||
Line of credit, interest rate description | On July 10, 2019 the 24 monthly fixed term loan amount of $700,000 was renewed at the same annual percentage interest rate of 3.244% for an additional 24 months. The remaining balance of the credit line has a stated reference rate of 0.249% + 337.5 basis points with interest payable monthly. The reference rate is based on the 30 day LIBOR ("London Interbank Offered Rate") and is subject to change from UBS. | On July 10, 2017, $700,000 of the outstanding line of credit balance was converted to a 24 month fixed term annual percentage interest rate of 3.244% with interest payable monthly. | ||||||
12% Subordinated Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest rate | 12.00% | |||||||
Maturity date | Jan. 29, 2019 | Jan. 29, 2017 | ||||||
Payment terms | Payable semi-annually on January 29th and July 29th. Should the Board of Directors, on the maturity date, decide that the payment of the principal and any unpaid interest would impair the financial condition or operations of the Company, the Company may then elect a mandatory conversion of the unpaid principal and interest into the Company’s common stock at a conversion rate equal to 75% of the average closing price of the Company’s common stock over the 20 consecutive trading days preceding December 31, 2018. | |||||||
Proceeds from subordinate notes | $ 595,000 | |||||||
Subordinate note, principal | $ 565,000 | |||||||
Warrants expired | 980,000 | |||||||
Accrued interest | 50,538 | $ 21,955 | ||||||
Chief Executive Officer | ||||||||
Debt Instrument [Line Items] | ||||||||
Notes payable, related party | 250,100 | |||||||
Related party, extinguishment of debt | 250,100 | |||||||
Chief Executive Officer | 12% Subordinated Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Accrued interest | $ 204,986 | $ 182,301 |
Leases - Schedule of Operating
Leases - Schedule of Operating Lease Assets and Liabilities (Details) | Nov. 30, 2019USD ($) |
Assets | |
Total operating lease right-of-use asset | $ 7,973 |
Liabilities | |
Operating lease liability, current | 7,973 |
Operating lease liability, long-term | |
Total lease liabilities | 7,973 |
Operating Lease Right-Of-Use Asset | |
Assets | |
Operating lease right-of-use assets, beginning balance | 13,787 |
Current period amortization | (5,814) |
Total operating lease right-of-use asset | 7,973 |
Operating Lease Liabilities | |
Liabilities | |
Operating lease liability, current | 7,973 |
Operating lease liability, long-term | |
Total lease liabilities | $ 7,973 |
Leases - Schedule of Future Min
Leases - Schedule of Future Minimum Lease Payments (Details) | Nov. 30, 2019USD ($) |
Leases [Abstract] | |
February 29, 2020 | $ 2,325 |
February 28, 2021 | 6,200 |
Total lease payments | 8,525 |
Less: imputed interest | 552 |
Operating lease liability | 7,973 |
Less: operating lease liability - current | 7,973 |
Operating lease liability, long-term |
Leases (Details Narrative)
Leases (Details Narrative) | 9 Months Ended | |
Nov. 30, 2019USD ($)ft² | Nov. 30, 2018USD ($) | |
Lease rate | 5.85% | |
Rent expense | $ | $ 17,842 | $ 17,842 |
Spokane Valley, Washington | ||
Leased properties, square feet | 988 | |
Friendswood, Texas | ||
Leased properties, square feet | 416 | |
Lease, term of contract | 24 months | |
Lease, maturity | Oct. 31, 2020 | |
Wallace, Idaho | ||
Leased properties, square feet | 695 |
Stockholders' Deficit - Convers
Stockholders' Deficit - Conversions of Series A Preferred Stock (Details) | 9 Months Ended | 12 Months Ended | |||||
Nov. 30, 2019Numbershares | Feb. 28, 2019Numbershares | Feb. 28, 2018Numbershares | Feb. 28, 2017Numbershares | Feb. 29, 2016Numbershares | Feb. 28, 2015Numbershares | Feb. 28, 2014Numbershares | |
Series A preferred shares converted to common stock | 690,197 | ||||||
Shares of common stock issued from conversion | 2,070,591 | ||||||
Accredited investors | Number | 44 | ||||||
Series A Convertible Preferred Stock | |||||||
Series A preferred shares converted to common stock | 0 | 0 | 14,997 | 0 | 10,000 | 3,000 | 662,200 |
Shares of common stock issued from conversion | 0 | 0 | 44,991 | 0 | 30,000 | 9,000 | 1,986,600 |
Accredited investors | Number | 0 | 0 | 1 | 0 | 1 | 1 | 41 |
Stockholders' Deficit - Preferr
Stockholders' Deficit - Preferred Stock Dividends Earned (Details) | 9 Months Ended | 12 Months Ended | |||||
Nov. 30, 2019USD ($)Number | Feb. 28, 2019USD ($)Number | Feb. 28, 2018USD ($)Number | Feb. 28, 2017USD ($)Number | Feb. 29, 2016USD ($)Number | Feb. 28, 2015USD ($)Number | Feb. 28, 2014USD ($) | |
Equity [Abstract] | |||||||
Preferred shareholders at period end | Number | 56 | 56 | 56 | 57 | 57 | 58 | |
Earned dividends | $ 96,223 | $ 127,714 | $ 128,231 | $ 130,415 | $ 130,925 | $ 132,634 | $ 1,447,943 |
Total accumulated dividends | $ 2,194,085 |
Stockholders' Deficit - Schedul
Stockholders' Deficit - Schedule of Common Stock Outstanding (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Nov. 30, 2019 | Feb. 28, 2019 | |
Equity [Abstract] | ||
Common stock, Issued and Outstanding, beginning of period | 51,532,364 | 51,532,364 |
Issuance of common stock to settle accounts payable | 2,000,000 | |
Common stock, Issued and Outstanding, end of period | 53,532,364 | 51,532,364 |
Issuance of common stock to settle accounts payable, par value | $ 2,000 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) | 9 Months Ended | 12 Months Ended | |||||
Nov. 30, 2019Number$ / sharesshares | Feb. 28, 2019Number$ / sharesshares | Feb. 28, 2018Numbershares | Feb. 28, 2017Numbershares | Feb. 29, 2016Numbershares | Feb. 28, 2015Numbershares | Feb. 28, 2014Numbershares | |
Preferred stock, par value in dollars | $ / shares | $ 0.001 | $ 0.001 | |||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |||||
Preferred stock, shares issued | 0 | 0 | |||||
Preferred stock, shares outstanding | 0 | 0 | |||||
Series A preferred shares converted to common stock | 690,197 | ||||||
Shares of common stock issued from conversion | 2,070,591 | ||||||
Accredited investors | Number | 44 | ||||||
Common stock, par value in dollars | $ / shares | $ 0.001 | $ 0.001 | |||||
Common stock, shares authorized | 200,000,000 | 200,000,000 | |||||
Common stock, shares issued | 53,532,364 | 51,532,364 | |||||
Common stock, shares outstanding | 53,532,364 | 51,532,364 | 51,532,364 | ||||
Series A Convertible Preferred Stock | |||||||
Preferred stock, par value in dollars | $ / shares | $ 0.001 | $ 0.001 | |||||
Preferred stock, shares authorized | 2,400,000 | 2,400,000 | |||||
Preferred stock, shares issued | 709,568 | 709,568 | |||||
Preferred stock, shares outstanding | 709,568 | 709,568 | |||||
Series A preferred shares converted to common stock | 0 | 0 | 14,997 | 0 | 10,000 | 3,000 | 662,200 |
Shares of common stock issued from conversion | 0 | 0 | 44,991 | 0 | 30,000 | 9,000 | 1,986,600 |
Preferred stock, cumulative dividend rate | 6.00% | 6.00% | |||||
Accredited investors | Number | 0 | 0 | 1 | 0 | 1 | 1 | 41 |
Warrants - Schedule of Warrants
Warrants - Schedule of Warrants Outstanding (Details) - $ / shares | 9 Months Ended | |
Nov. 30, 2019 | Feb. 28, 2019 | |
Equity [Abstract] | ||
Warrants issued for investor relations services | 2,100,000 | |
Exercise price | $ 0.01 | |
Remaining life (years) | 4 years 1 month | |
Warrants outstanding | 2,100,000 | 0 |
Warrants - Schedule of Warrant
Warrants - Schedule of Warrant Activity (Details) | 9 Months Ended |
Nov. 30, 2019$ / sharesshares | |
Equity [Abstract] | |
Warrants outstanding, February 28, 2019 | 0 |
Issued | 2,100,000 |
Expired / Cancelled / Forfeited | |
Warrants outstanding, November 30, 2019 | 2,100,000 |
Warrants exercisable, November 30, 2019 | |
Weighted average exercise price, issued | $ / shares | $ 0.01 |
Weighted average exercise price of warrants outstanding, November 30, 2019 | $ / shares | $ 0.01 |
Warrants (Details Narrative)
Warrants (Details Narrative) | 9 Months Ended |
Nov. 30, 2019USD ($)$ / sharesshares | |
Warrants issued for investor relations services | shares | 2,100,000 |
Fair value of warrants | $ | $ 2,948 |
Remaining life (years) | 4 years 1 month |
Third Party | |
Warrants issued for investor relations services | shares | 2,100,000 |
Fair value of warrants | $ | $ 14,741 |
Risk free interest rate | 1.68% |
Volatility rate | 260.23% |
Dividend yield | 0.00% |
Vesting period | 3 years |
Warrants expiration | Jan. 2, 2024 |
Weighted average exercise price | $ / shares | $ 0.01 |
Remaining life (years) | 4 years 1 month |
Income Taxes - Reconciliation B
Income Taxes - Reconciliation Between Actual Tax Expense Benefit and Income Tax Computed by Applying Income Tax Rate (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Nov. 30, 2019 | Feb. 28, 2019 | |
Income Tax Expense Benefit Continuing Operations Income Tax Reconciliation | ||
Computed at U.S. and state statutory rates | $ (193,171) | $ 3,035,442 |
Permanent differences | 102,562 | 25,116 |
New tax law adjustment | ||
Changes in valuation allowance | 90,609 | (3,060,558) |
Income tax expense (benefit) | $ 0 | $ 0 |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Nov. 30, 2019 | Feb. 28, 2019 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 5,443,199 | $ 5,361,767 |
Crude oil properties | 47,414 | 38,237 |
Stock based compensation | 66,187 | 66,187 |
Other | 27,838 | 27,838 |
Less valuation allowance | (5,584,638) | (5,494,029) |
Deferred tax assets, net | $ 0 | $ 0 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Nov. 30, 2019 | Feb. 28, 2019 | Feb. 28, 2018 | |
Net operating loss carryforwards, federal and state, approximate | $ 18,241,286 | ||
Net operating loss carryforwards, expiration date | Feb. 28, 2024 | ||
Increase (Decrease) in valuation allowance, approximate | $ 90,609 | $ (3,060,558) | |
Tax Cuts and Jobs Act | |||
Reduction in corporate income tax rate | 21.00% | 35.00% | |
Net operating loss carryforwards, federal and state, approximate | $ 272,897 | $ 340,749 |