Cover
Cover - shares | 3 Months Ended | |
May 31, 2020 | Jul. 13, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | May 31, 2020 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 | |
Current Fiscal Year End Date | --02-28 | |
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 ($) | May 31, 2020 | Feb. 29, 2020 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 31,161 | $ 94,043 |
Accounts receivable: | ||
Crude oil sales | 37,691 | 56,910 |
Joint interest participants | 52,622 | 38,366 |
Prepaid expenses and other current assets | 28,732 | 51,115 |
Total current assets | 150,206 | 240,434 |
Crude oil properties, successful efforts method, net | ||
Proved properties | 585,536 | 598,735 |
Unproved properties | 55,978 | 55,978 |
Prepaid drilling costs | 16,452 | 16,452 |
Operating lease, right-of-use asset | 3,661 | 5,857 |
Total long-term assets | 661,627 | 677,022 |
Total assets | 811,833 | 917,456 |
CURRENT LIABILITIES: | ||
Accounts payable and other accrued liabilities | 1,528,554 | 1,555,700 |
Accounts payable - related parties | 927,032 | 919,888 |
Accrued interest | 86,386 | 73,962 |
Convertible Notes payable, related party | 27,835 | 27,835 |
12% Notes payable | 315,000 | 315,000 |
12% Notes payable, related party | 250,000 | 250,000 |
Production revenue payable, net of unamortized discount | 43,660 | 43,069 |
Paycheck protection program (PPP) loan | 74,355 | |
Line of credit | 864,790 | 872,401 |
Operating lease liability, current | 3,661 | 5,857 |
Total current liabilities | 4,121,273 | 4,063,712 |
LONG TERM LIABILITIES: | ||
Note payable | 120,000 | 120,000 |
Production revenue payable, net of unamortized discount and current portion | 1,376,581 | 1,345,202 |
Asset retirement obligation | 28,109 | 27,149 |
Total long-term liabilities | 1,524,690 | 1,492,351 |
Total liabilities | 5,645,963 | 5,556,063 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' DEFICIT: | ||
Preferred stock | ||
Common stock | 53,532 | 53,532 |
Additional paid-in capital | 24,225,257 | 24,223,783 |
Accumulated deficit | (29,113,629) | (28,916,632) |
Total stockholders' deficit | (4,834,130) | (4,638,607) |
Total liabilities and stockholders' deficit | 811,833 | 917,456 |
Series A Convertible Preferred Stock | ||
STOCKHOLDERS' DEFICIT: | ||
Preferred stock | $ 710 | $ 710 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | May 31, 2020 | Feb. 29, 2020 |
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 | 53,532,364 |
Common stock, shares outstanding | 53,532,364 | 53,532,364 |
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 | |
May 31, 2020 | May 31, 2019 | |
REVENUE: | ||
Crude oil sales | $ 69,199 | $ 196,358 |
OPERATING EXPENSES: | ||
Production | 39,195 | 43,717 |
Exploration, drilling and abandonment | 98 | |
Depreciation, depletion, and amortization | 14,159 | 16,066 |
General and administrative | 152,369 | 245,968 |
Total operating expenses | 205,723 | 305,849 |
OPERATING LOSS | (136,524) | (109,491) |
OTHER INCOME (EXPENSE): | ||
Interest expense, net | (60,473) | (154,094) |
NET LOSS | (196,997) | (263,585) |
Cumulative convertible preferred stock dividend requirement | (32,191) | (32,191) |
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ (229,188) | $ (295,776) |
NET LOSS PER COMMON SHARE - Basic and diluted | $ (0.004) | $ (0.01) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - Basic | 53,532,364 | 52,212,364 |
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, 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 | |||
Ending balance, value at Feb. 29, 2020 | $ 710 | $ 53,532 | 24,223,783 | (28,916,632) | (4,638,607) |
Ending balance, shares at Feb. 29, 2020 | 709,568 | 53,532,364 | |||
Issuance of common stock for accounts payable settlement, value | |||||
Recognition of warrants for investor relations services | 1,474 | 1,474 | |||
Net loss | (196,997) | (196,997) | |||
Ending balance, value at May. 31, 2020 | $ 710 | $ 53,532 | $ 24,225,257 | $ (29,113,629) | $ (4,834,130) |
Ending balance, shares at May. 31, 2020 | 709,568 | 53,532,364 |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | Feb. 29, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income (loss) | $ (196,997) | $ (263,585) | |
Adjustments to reconcile net cash used in operating activities: | |||
Depreciation, depletion and ARO expense | 14,159 | 16,066 | |
Amortization of debt discount | 31,970 | 124,923 | |
Operating lease expense in conjunction with right of use asset | 2,196 | ||
Warrant issued for investor relations services | 1,474 | ||
Changes in assets and liabilities: | |||
Accounts receivable - crude oil sales | 19,219 | (41,572) | |
Accounts receivable - joint interest participants | (14,256) | 3,616 | |
Prepaid expenses and other current assets | 22,383 | 5,138 | |
Accounts payable and other accrued liabilities | (10,186) | 36,390 | |
Accounts payable - related parties | 7,144 | 67,444 | |
Operating lease liability in conjunction with right of use asset | (2,196) | ||
Accrued interest | 19,813 | 20,314 | |
Net cash used in operating activities | (105,277) | (31,266) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Advances from line of credit | 29,000 | ||
Proceeds from paycheck protection program (PPP) loan | 74,355 | ||
Insurance financing repayments | (16,960) | ||
Payments to line of credit | (15,000) | (15,000) | |
Net cash provided by financing activities | 42,395 | 14,000 | |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (62,882) | (17,266) | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 94,043 | 30,078 | $ 30,078 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 31,161 | 12,812 | $ 94,043 |
Cash paid for Interest | 1,224 | 8,517 | |
Cash paid for Income taxes | |||
SUPPLEMENTAL CASH FLOW INFORMATION: | |||
Non-cash increase to line of credit due to monthly interest | 7,389 | 7,787 | |
Unpaid additions to O&G properties | 210 | ||
Operating lease - right-of-use assets and associated liabilities | 12,204 | ||
Common stock issued for settlement of accounts payable | $ 6,000 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
May 31, 2020 | |
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. In August 1955, the assets of Morning Sun Uranium, Inc. were acquired by Daybreak Uranium. In May 1964, Daybreak Uranium changed its name to Daybreak Mines, Inc. During 2005, management of the Company decided to enter the crude oil and 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 oil-exporting countries; the relative strength of the U.S. dollar; weather conditions; the price and availability of alternative fuels; overall economic conditions, both foreign and domestic; crude oil price disputes between Russia and Saudi Arabia; and national and international pandemics like the coronavirus outbreak. . 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 three months ended May 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2021. 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 29, 2020. 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 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; · Estimates regarding abandonment obligations; and · Estimates regarding projected cash flows used in determining the production payable discount. Earnings per Share The Company follows ASC Topic 260, Earnings per Share |
Going Concern
Going Concern | 3 Months Ended |
May 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | NOTE 2 — GOING CONCERN: Financial Condition The Company’s financial statements for the three months ended May 31, 2020 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 operating losses since entering the crude oil exploration industry and as of May 31, 2020 has an accumulated deficit of $29.1 million and a working capital deficit of $4.0 million, 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 income for the Company. The Company’s average working interest in these wells is 36.6% and the average net revenue interest (“NRI”) is 28.4% for these same wells. In December 2019, the 2019 novel coronavirus (“COVID-19") surfaced in Wuhan, China. The World Health Organization declared a global emergency on January 30, 2020, with respect to the outbreak and several countries, including the United States, Japan and Australia have initiated travel restrictions to and from China. The impacts of the outbreak are unknown and rapidly evolving. This widespread health crisis and the governmental restrictions associated with it, have adversely affected demand for crude oil, depressed crude oil prices, and affected our ability to access capital. These factors, in turn, have had a negative impact on our operations, and financial condition as evidenced by the unprecedented decline in crude oil prices and our revenues during this same time period. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act commonly referred to as the CARES Act. One component of the CARES Act was the paycheck protection program (“PPP”) which provides small business with the resources needed to maintain their payroll and cover applicable overhead. The PPP is implemented by the Small Business Administration (“SBA”) with support from the Department of the Treasury. The PPP provides funds to pay up to eight weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. The Company applied for, and was accepted to participate in this program. On May 11, 2020, the Company received funding for approximately $74,355. We plan on participating in any future plans that become available to help businesses deal with the negative impact of this outbreak. 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 success in securing financing for its drilling programs. The Company believes that its 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. 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 May 31, 2020 do not include any adjustments that might result from the inability to implement or execute Daybreak’s plans to improve our ability to continue as a going concern. |
Concentration of Credit Risk
Concentration of Credit Risk | 3 Months Ended |
May 31, 2020 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk | NOTE 3 — CONCENTRATION OF CREDIT RISK: Substantially all of the Company’s trade accounts receivable consists of receivables from the sale of crude oil production from operations by the Company and receivables from the Company’s working interest partners in crude oil projects in which the Company acts as Operator of the project. 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. At the Company’s East Slopes project in California, there is only one buyer for the purchase of crude oil production. The Company has no natural gas production in California. At May 31, 2020 and February 29, 2020 this one customer represented 100.0% of crude oil sales receivable. 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. Crude oil sales receivables balances of $37,691 and $56,910 at May 31, 2020 and February 29, 2020, were from one customer, Plains Marketing; and represent crude oil sales that occurred in May and February 2020, respectively. Joint interest participant receivables balances of $52,622 and $38,366 at May 31, 2020 and February 29, 2020, 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 May 31, 2020 and February 29, 2020, as the joint interest owners have a history of paying their obligations. |
Crude Oil Properties
Crude Oil Properties | 3 Months Ended |
May 31, 2020 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Crude Oil Properties | NOTE 4 — CRUDE OIL PROPERTIES: Crude oil property balances at May 31, 2020 and February 29, 2020 are set forth in the table below. May 31, 2020 February 29, 2020 Proved leasehold costs $ 115,119 $ 115,119 Costs of wells and development 2,278,190 2,278,190 Capitalized exploratory well costs 1,341,494 1,341,494 Cost of proved crude oil properties 3,734,803 3,734,803 Accumulated depletion, depreciation, amortization and impairment (3,149,267 ) (3,136,068 ) Total proved crude oil properties, net $ 585,536 $ 598,735 Unproved leasehold costs 55,978 55,978 Total proved and unproved crude oil properties, net $ 641,514 $ 654,713 |
Accounts Payable
Accounts Payable | 3 Months Ended |
May 31, 2020 | |
Payables and Accruals [Abstract] | |
Accounts Payable | NOTE 5 — ACCOUNTS PAYABLE: On March 1, 2009, the Company became the operator for its East Slopes Project located in Kern County, 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 wells program. The Company subsequently sold the same 25% working interest on June 11, 2009. Of the original $1.5 million liability, approximately $244,849 remains unpaid and is included in the May 31, 2020 and February 29, 2020, accounts payable balance. 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 May 31, 2020 and February 29, 2020, the balance owed this working interest partner was $97,945 and $101,544, respectively, and is included in the approximate $1.53 million and $1.56 million accounts payable balances at May 31, 2020 and February 29, 2020, respectively. |
Accounts Payable - Related Part
Accounts Payable - Related Parties | 3 Months Ended |
May 31, 2020 | |
Related Party Transactions [Abstract] | |
Accounts Payable - Related Parties | NOTE 6 — ACCOUNTS PAYABLE- RELATED PARTIES: The May 31, 2020 and February 29, 2020 accounts payable – related parties balances of approximately $0.93 million and $0.92 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. Payment of any of these 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 | 3 Months Ended |
May 31, 2020 | |
Debt Disclosure [Abstract] | |
Short-Term and Long-Term Borrowings | NOTE 7 — SHORT-TERM AND LONG-TERM BORROWINGS: Convertible Promissory Note Payable – Related Party During the twelve months ended February 29, 2020, the Company’s Chairman, President and Chief Executive Officer loaned the Company $27,835 for general operating expenses under a Convertible Note Purchase Agreement. The Note has a maturity date of 180 days, or July 12, 2020 and carries no interest, fees or penalties. By the terms of the Convertible Note Purchase Agreement, Mr. Westmoreland had also agreed to loan up to an additional $22,165 in funding for the Company, if and when agreed upon, but this additional amount was not ever loaned pursuant to the Note. The Company may prepay the Note at any time. If the Note is not repaid in full on or before the maturity date then, on the day following the maturity date, the Note will automatically convert into that number of conversion shares equal to the quotient obtained by dividing (x) the outstanding principal balance of the Note on the date of such conversion by (y) a conversion price of $0.004. The balance of the Note was $27,835 and $27,835 at May 31, 2020 and February 29, 2020, respectively. 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. 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. As of May 31, 2020, no conversion of the unpaid principal and interest into the Company’s common stock has occurred. The accrued interest on the 12% Notes at May 31, 2020 and February 29, 2020 was $289,332 and $272,428, respectively. There was no unamortized debt discount remaining at May 31, 2020 and February 29, 2020, respectively. 12% Note balances at May 31, 2020 and February 29, 2020 are set forth in the table below: May 31, 2020 February 29, 2020 12% Subordinated Notes $ 315,000 $ 315,000 12% Subordinated Notes, related party 250,000 250,000 Total 12% Subordinated Note balance $ 565,000 $ 565,000 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 Production Revenue Payable Since December 2018, 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 purchasers of production payment interests will receive a production revenue payment on future wells to be drilled in California and Michigan in exchange for their purchase. As of May 31, 2020, the production revenue payment program balance was $950,100 of which $550,100 was owed to a related party - the Company’s Chairman, President and Chief Executive Officer. 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 (8%) of $1.3 million on its net production payments from the relevant wells to each of the purchasers. However, if the total raised is less than the target $1.3 million, then the payment will be a proportionate amount of the eight percent (8%). Additionally, 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 $1,139,305 as of May 31, 2020, 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 three months ended May 31, 2020 and 2019, amortization of the debt discount on these payables amounted to $31,970 and $124,923, respectively, which has been included in interest expense in the statements of operations. Production revenue payable balances at May 31, 2020 and February 29, 2020 are set forth in the table below: May 31, 2020 February 29, 2020 Estimated payments of production revenue payable $ 2,089,405 $ 2,054,766 Less: unamortized discount (669,164 ) (666,495 ) 1,420,241 1,388,271 Less: current portion (43,660 ) (43,069 ) Net production revenue payable – long term $ 1,376,581 $ 1,345,202 Paycheck Protection Program (PPP) Loan On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act commonly referred to as the CARES Act. One component of the CARES Act was the paycheck protection program (“PPP”) which provides small business with the resources needed to maintain their payroll and cover applicable overhead. The PPP is implemented by the Small Business Administration (“SBA”) with support from the Department of the Treasury. The PPP provides funds to pay up to eight weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. The Company applied for, and was accepted to participate in this program. On May 11, 2020, the Company received funding for approximately $74,355. The loan is a two-year loan with a maturity date of May 5, 2022. The loan bears an annual interest rate of 1%. The loan shall be payable monthly with the first six monthly payments deferred. It is the Company’s intent to apply for loan forgiveness under the provisions of Section 1106 of the CARES Act. Loan forgiveness is subject to the sole approval of the SBA. The Company is eligible for loan forgiveness in an amount equal to payments made during the 8-week period beginning on the Loan date, with the exception that no more than 25.0% of the amount of loan forgiveness may be for expenses other than payroll expenses. The Company used all loan proceeds to partially subsidize direct payroll expenses. 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, a $700,000 portion of the outstanding line of credit balance was converted to a 24 month fixed term annual 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. During the three months ended May 31, 2020 and 2019, the Company received advances on the line of credit of $-0- and $29,000, respectively. During the three months ended May 31, 2020 and 2019, the Company made payments to the line of credit of $15,000 and $15,000, respectively. Interest converted to principal for the three months ended May 31, 2020 and 2019 was $7,389 and $7,787, respectively. At May 31, 2020 and February 29, 2020, the line of credit had an outstanding balance of $864,790 and $872,401, respectively. 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 as a part of the settlement agreement. Based on the closing price of the Company’s common stock on the date of the settlement agreement, the value of the common stock transaction was determined to be $6,000. The common stock shares were issued during the twelve months ended February 29, 2020. 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 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 May 31, 2020, we had no encumbrances on our crude oil project in Michigan. |
Leases
Leases | 3 Months Ended |
May 31, 2020 | |
Leases [Abstract] | |
Leases | NOTE 8 — 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 is as follows: May 31, 2020 February 29, 2020 Assets Operating lease right-of use assets, beginning balance $ 5,857 $ 13,787 Current period amortization (2,196 ) (7,930 ) Total operating lease right-of-use asset 3,661 5,857 Liabilities Operating lease liability - current 3,661 5,857 Operating lease liability – long term — — Total lease liabilities $ 3,661 $ 5,857 Future minimum lease payments as of February 29, 2020 under non-cancellable operating leases are as follows: Fiscal Year Ended Annual Office Lease Obligation February 28, 2021 $ 5,250 Total lease payments 5,250 Less: imputed interest (1,589 ) Operating lease liability 3,661 Less: operating lease liability — (3,661 ) Operating lease liability, long-term $ — Rent expense for the three months ended May 31, 2020 and 2019 was $5,872 and $5,879, respectively. |
Stockholders' Deficit
Stockholders' Deficit | 3 Months Ended |
May 31, 2020 | |
Equity [Abstract] | |
Stockholders' Deficit | NOTE 9 — 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 May 31, 2020 and February 29, 2020, there were 709,568 shares issued and outstanding, that had not been converted into our common stock. As of May 31, 2020 and February 29, 2020, there were 44 accredited investors who had 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 — — — February 29, 2020 — — — May 31, 2020 — — — 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 we have 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 May 31, 2020 no dividends have been declared or paid. Dividends earned since issuance by fiscal year and the three months ended May 31, 2020 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 February 29, 2020 56 128,063 May 31, 2020 56 32,191 $ 2,258,116 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 shares were issued and outstanding as of May 31, 2020 and February 29, 2020, respectively. |
Warrants
Warrants | 3 Months Ended |
May 31, 2020 | |
Equity [Abstract] | |
Warrants | NOTE 10 — WARRANTS: During the twelve months ended February 29, 2020 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 $17,689, and is being amortized over the three year vesting period of the warrants. 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 warrant contains a vesting blocking provision that prevents the vesting of any warrants that such vesting would cause the warrant holder’s beneficial ownership (as such term is defined in Section 13d-3 of the Securities Exchange Act of 1934, as amended) to exceed more than four and ninety-nine one-hundredths percent (4.99%) of the Company’s outstanding Common Stock. The foregoing restriction may not be waived by either party. The warrants vest in equal parts over a three year period beginning on January 2, 2020 and all warrants expire on January 2, 2024. At May 31, 2020, both the outstanding warrants and the exercisable have a weighted average exercise price of $0.01, a weighted average remaining life of 3.6 years, and an intrinsic value of -$0-. For the three months ended May 31, 2020 and 2019, the recorded amount of warrant expense was $1,474 and $-0-, respectively. Warrant activity for the three months ended May 31, 2020 is set forth in the table below: Warrants Weighted Average Exercise Price Warrants outstanding, February 29, 2020 2,100,000 $ 0.01 Changes during the three months ended May 31, 2020: Issued — $ — Warrants outstanding, May 31, 2020 2,100,000 $ 0.01 Warrants exercisable, May 31, 2020 190,000 $ 0.01 |
Income Taxes
Income Taxes | 3 Months Ended |
May 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 11 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. We re-measured 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: May 31, 2020 February 29, 2020 Computed at U.S. and state statutory rates (40%) $ (58,784 ) $ (225,186 ) Permanent differences 10,228 111,854 Changes in valuation allowance 48,556 113,332 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: May 31, 2020 February 29, 2020 Deferred tax assets: Net operating loss carryforwards $ 5,508,200 $ 5,463,014 Crude oil properties 53,692 50,322 Stock based compensation 66,187 66,187 Other 27,838 27,838 Less valuation allowance (5,655,917 ) (5,607,361 ) Total $ — $ — At May 31, 2020, Daybreak had estimated net operating loss (“NOL”) carryforwards for federal and state income tax purposes of approximately $18,459,115 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 year ended February 28, 2018 of $340,749; the loss incurred for the year ended February 29, 2020 of $339,299 and the loss incurred for three months ended May 31, 2020 in the amount of $151,427 will not expire and will carry over indefinitely. The valuation allowance increased $48,556 for the three months ended May 31, 2020 and increased approximately $113,332 for the year ended February 29, 2020, 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 2015 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 | 3 Months Ended |
May 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 12 — 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 May 31, 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. |
Subsequent Events
Subsequent Events | 3 Months Ended |
May 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 13 — SUBSEQUENT EVENTS: On July 12, 2020, the Convertible Promissory Note issued on January 14, 2020 and held by the Company’s Chairman, President and Chief Executive Officer matured. The Note was not repaid in full on or prior to the maturity date, so, pursuant to the terms of the conversion feature of the Convertible Promissory Note, the $27,835 balance of the Convertible Note was automatically converted into the Company’s Common Stock Shares. The conversion price was $0.004 per share resulting in 6,958,758 shares being issued. Refer to Note 7 above for further discussion about this Convertible Note Agreement. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 3 Months Ended |
May 31, 2020 | |
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 three months ended May 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2021. 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 29, 2020. |
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 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; · Estimates regarding abandonment obligations; and · Estimates regarding projected cash flows used in determining the production payable discount. |
Earnings Per Share | Earnings per Share The Company follows ASC Topic 260, Earnings per Share |
Crude Oil Properties (Tables)
Crude Oil Properties (Tables) | 3 Months Ended |
May 31, 2020 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Capitalized Costs Relating to Crude Oil Activities | May 31, 2020 February 29, 2020 Proved leasehold costs $ 115,119 $ 115,119 Costs of wells and development 2,278,190 2,278,190 Capitalized exploratory well costs 1,341,494 1,341,494 Cost of proved crude oil properties 3,734,803 3,734,803 Accumulated depletion, depreciation, amortization and impairment (3,149,267 ) (3,136,068 ) Total proved crude oil properties, net $ 585,536 $ 598,735 Unproved leasehold costs 55,978 55,978 Total proved and unproved crude oil properties, net $ 641,514 $ 654,713 |
Short-Term and Long-Term Borr_2
Short-Term and Long-Term Borrowings (Tables) | 3 Months Ended |
May 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Short-Term Debt | May 31, 2020 February 29, 2020 12% Subordinated Notes $ 315,000 $ 315,000 12% Subordinated Notes, related party 250,000 250,000 Total 12% Subordinated Note balance $ 565,000 $ 565,000 |
Schedule of Accounts Payable and Accrued Liabilities | May 31, 2020 February 29, 2020 Estimated payments of production revenue payable $ 2,089,405 $ 2,054,766 Less: unamortized discount (669,164 ) (666,495 ) 1,420,241 1,388,271 Less: current portion (43,660 ) (43,069 ) Net production revenue payable – long term $ 1,376,581 $ 1,345,202 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
May 31, 2020 | |
Leases [Abstract] | |
Schedule of Operating Lease Assets and Liabilities | May 31, 2020 February 29, 2020 Assets Operating lease right-of use assets, beginning balance $ 5,857 $ 13,787 Current period amortization (2,196 ) (7,930 ) Total operating lease right-of-use asset 3,661 5,857 Liabilities Operating lease liability - current 3,661 5,857 Operating lease liability – long term — — Total lease liabilities $ 3,661 $ 5,857 |
Schedule of Future Minimum Lease Payments | Fiscal Year Ended Annual Office Lease Obligation February 28, 2021 $ 5,250 Total lease payments 5,250 Less: imputed interest (1,589 ) Operating lease liability 3,661 Less: operating lease liability — (3,661 ) Operating lease liability, long-term $ — |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 3 Months Ended |
May 31, 2020 | |
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 — — — February 29, 2020 — — — May 31, 2020 — — — 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 February 29, 2020 56 128,063 May 31, 2020 56 32,191 $ 2,258,116 |
Warrants (Tables)
Warrants (Tables) | 3 Months Ended |
May 31, 2020 | |
Equity [Abstract] | |
Schedule of Warrants Outstanding | Warrants Weighted Average Exercise Price Warrants outstanding, February 29, 2020 2,100,000 $ 0.01 Changes during the three months ended May 31, 2020: Issued — $ — Warrants outstanding, May 31, 2020 2,100,000 $ 0.01 Warrants exercisable, May 31, 2020 190,000 $ 0.01 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
May 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Reconciliation Between Actual Tax Expense Benefit and Income Taxes Computed by Applying Income Tax Rate | May 31, 2020 February 29, 2020 Computed at U.S. and state statutory rates (40%) $ (58,784 ) $ (225,186 ) Permanent differences 10,228 111,854 Changes in valuation allowance 48,556 113,332 Total $ — $ — |
Schedule of Deferred Tax Assets and Liabilities | May 31, 2020 February 29, 2020 Deferred tax assets: Net operating loss carryforwards $ 5,508,200 $ 5,463,014 Crude oil properties 53,692 50,322 Stock based compensation 66,187 66,187 Other 27,838 27,838 Less valuation allowance (5,655,917 ) (5,607,361 ) Total $ — $ — |
Going Concern (Details Narrativ
Going Concern (Details Narrative) | 3 Months Ended | ||
May 31, 2020USD ($)Number | May 31, 2019USD ($) | Feb. 29, 2020USD ($) | |
Accumulated deficit | $ (29,113,629) | $ (28,916,632) | |
Working capital deficit | 4,000,000 | ||
Proceeds received from SBA's Paycheck Protection Program | $ 74,355 | ||
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% |
Concentration Risk (Details Nar
Concentration Risk (Details Narrative) - USD ($) | 3 Months Ended | |
May 31, 2020 | Feb. 29, 2020 | |
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 May 31, 2020 and February 29, 2020 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 | $ 37,691 | $ 56,910 |
Joint interest participant receivable balances | $ 52,622 | $ 38,366 |
Crude Oil Properties - Capitali
Crude Oil Properties - Capitalized Costs Relating to Crude Oil and Natural Gas Activities (Details) - USD ($) | May 31, 2020 | Feb. 29, 2020 |
Oil and Natural Gas Property, Successful Effort Method, Net | ||
Proved leasehold costs | $ 115,119 | $ 115,119 |
Costs of wells and development | 2,278,190 | 2,278,190 |
Capitalized exploratory well costs | 1,341,494 | 1,341,494 |
Cost of proved crude oil properties | 3,734,803 | 3,734,803 |
Accumulated depletion, depreciation, amortization and impairment | (3,149,267) | (3,136,068) |
Proved crude oil properties, net | 585,536 | 598,735 |
Unproved leasehold costs | 55,978 | 55,978 |
Total proved and unproved crude oil properties, net | $ 641,514 | $ 654,713 |
Accounts Payable (Details Narra
Accounts Payable (Details Narrative) - USD ($) | 3 Months Ended | |
May 31, 2020 | Feb. 29, 2020 | |
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 | $ 1,530,000 | $ 1,560,000 |
Working Interest Partner, California | ||
Accounts payable balance | 97,945 | 101,544 |
East Slopes Project | ||
Accounts payable balance | $ 244,849 | $ 244,849 |
Accounts Payable - Related Pa_2
Accounts Payable - Related Parties (Details Narrative) - USD ($) | May 31, 2020 | Feb. 29, 2020 |
Related Party Transactions [Abstract] | ||
Accounts payable, related parties | $ 927,032 | $ 919,888 |
Short-Term and Long-Term Borr_3
Short-Term and Long-Term Borrowings - Schedule of Short-Term Debt (Details) - 12% Subordinated Notes - USD ($) | May 31, 2020 | Feb. 29, 2020 |
Short-term Debt [Line Items] | ||
12% Subordinated Notes | $ 315,000 | $ 315,000 |
Total 12% Subordinated Notes balance | 565,000 | 565,000 |
Chief Executive Officer | ||
Short-term Debt [Line Items] | ||
12% Subordinated Notes | $ 250,000 | $ 250,000 |
Short-Term and Long-Term Borr_4
Short-Term and Long-Term Borrowings - Schedule of Production Revenue Payable Balances (Details) - USD ($) | May 31, 2020 | Feb. 29, 2020 |
Less: current portion | $ (43,660) | $ (43,069) |
Net production revenue payable, long-term | 1,376,581 | 1,345,202 |
Production | ||
Estimated payments of production revenue payable | 2,089,405 | 2,054,766 |
Less: unamortized discount | (669,164) | (666,495) |
Production revenue payable, net | 1,420,241 | 1,388,271 |
Less: current portion | (43,660) | (43,069) |
Net production revenue payable, long-term | $ 1,376,581 | $ 1,345,202 |
Short-Term and Long-Term Borr_5
Short-Term and Long-Term Borrowings (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||
May 31, 2020 | May 31, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | Feb. 28, 2018 | Feb. 28, 2017 | Feb. 28, 2010 | Feb. 29, 2012 | ||
Debt Instrument [Line Items] | |||||||||
Amortization of debt discount | $ 31,970 | $ 124,923 | |||||||
Credit facility, advances | 29,000 | ||||||||
Line of credit, amount outstanding | 864,790 | $ 872,401 | |||||||
Payments on line of credit | 15,000 | 15,000 | |||||||
Shares issued, value | 6,000 | ||||||||
Convertible note payable | 27,835 | $ 27,835 | |||||||
Paycheck protection program (PPP) loan | 74,355 | ||||||||
Third-Party Vendors | |||||||||
Debt Instrument [Line Items] | |||||||||
Interest rate | 10.00% | ||||||||
Maturity date | Jan. 1, 2022 | ||||||||
Note payable | 120,000 | $ 120,000 | |||||||
Shares issued | 2,000,000 | ||||||||
Shares issued, value | 6,000 | ||||||||
Accrued interest | 17,000 | $ 14,000 | |||||||
Line of Credit | UBS Bank USA | |||||||||
Debt Instrument [Line Items] | |||||||||
Maximum borrowing | $ 890,000 | ||||||||
Credit facility, advances | 0 | 29,000 | |||||||
Line of credit, amount outstanding | 864,790 | $ 872,401 | $ 700,000 | ||||||
Payments on line of credit | 15,000 | 15,000 | |||||||
Line of credit, interest converted to to principal | 7,389 | 7,787 | |||||||
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. | |||||||
Production Payment Program | |||||||||
Debt Instrument [Line Items] | |||||||||
Amortization of debt discount | 31,970 | $ 124,923 | |||||||
Unamortized debt discount | 1,139,305 | ||||||||
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 entitles the purchasers to receive production payments equal to 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 (8%) of $1.3 million on its net production payments from the relevant wells to each of the purchasers. However, if the total raised is less than the target $1.3 million, then the payment will be a proportionate amount of the eight percent (8%). Additionally, 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. | ||||||||
Production revenue payable | [1] | 950,100 | |||||||
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 | $ 289,332 | $ 272,428 | |||||||
SBA's Paycheck Protection Program | |||||||||
Debt Instrument [Line Items] | |||||||||
Interest rate | 1.00% | ||||||||
Maturity date | May 5, 2022 | ||||||||
Paycheck protection program (PPP) loan | $ 74,355 | ||||||||
Chief Executive Officer | Convertible Note Purchase Agreement | |||||||||
Debt Instrument [Line Items] | |||||||||
Maturity date | Jul. 12, 2020 | ||||||||
Convertible note payable | $ 27,835 | $ 27,835 | |||||||
Convertible note payable, conversion price | $ 0.004 | ||||||||
Convertible note purchase agreement, description | By the terms of the Convertible Note Purchase Agreement, Mr. Westmoreland had also agreed to loan up to an additional $22,165 in funding for the Company, if and when agreed upon, but this additional amount was not ever loaned pursuant to the Note. | ||||||||
[1] | $550,100 is owed to related party |
Leases - Schedule of Operating
Leases - Schedule of Operating Lease Assets and Liabilities (Details) - USD ($) | May 31, 2020 | Feb. 29, 2020 |
Assets | ||
Total operating lease right-of-use asset | $ 3,661 | $ 5,857 |
Liabilities | ||
Operating lease liability, current | 3,661 | 5,857 |
Operating lease liability, long-term | ||
Total lease liabilities | 3,661 | |
Operating Lease Right-Of-Use Asset | ||
Assets | ||
Operating lease right-of-use assets, beginning balance | 5,857 | 13,787 |
Current period amortization | (2,196) | (7,930) |
Total operating lease right-of-use asset | 3,661 | 5,857 |
Operating Lease Liabilities | ||
Liabilities | ||
Operating lease liability, current | 3,661 | 5,857 |
Operating lease liability, long-term | ||
Total lease liabilities | $ 3,661 | $ 5,857 |
Leases - Schedule of Future Min
Leases - Schedule of Future Minimum Lease Payments (Details) - USD ($) | May 31, 2020 | Feb. 29, 2020 |
Leases [Abstract] | ||
February 28, 2021 | $ 5,250 | |
Total lease payments | 5,250 | |
Less: imputed interest | (1,589) | |
Operating lease liability | 3,661 | |
Less: operating lease liability - current | 3,661 | $ 5,857 |
Operating lease liability, long-term |
Leases (Details Narrative)
Leases (Details Narrative) | 3 Months Ended | |
May 31, 2020USD ($)ft² | May 31, 2019USD ($) | |
Lease rate | 5.85% | |
Rent expense | $ | $ 5,872 | $ 5,879 |
Spokane Valley, Washington | ||
Leased properties, square feet | 988 | |
Friendswood, Texas | ||
Leased properties, square feet | 416 | |
Lease, term of contract | 24 months | |
Lease, maturity | 5 months | |
Wallace, Idaho | ||
Leased properties, square feet | 695 |
Stockholders' Deficit - Convers
Stockholders' Deficit - Conversions of Series A Preferred Stock (Details) | 3 Months Ended | 12 Months Ended | |||||
May 31, 2020Numbershares | Feb. 29, 2020Numbershares | 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 | 690,197 | |||||
Shares of common stock issued from conversion | 2,070,591 | 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) | 3 Months Ended | 12 Months Ended | ||||||
May 31, 2020USD ($)Number | Feb. 29, 2020USD ($)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 | 56 | 57 | 57 | 58 | |
Earned dividends | $ 32,191 | $ 128,063 | $ 127,714 | $ 128,231 | $ 130,415 | $ 130,925 | $ 132,634 | $ 1,447,943 |
Total accumulated dividends | $ 2,258,116 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) | 3 Months Ended | 12 Months Ended | |||||
May 31, 2020Number$ / sharesshares | Feb. 29, 2020Number$ / 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 | 690,197 | |||||
Shares of common stock issued from conversion | 2,070,591 | 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 | 53,532,364 | |||||
Common stock, shares outstanding | 53,532,364 | 53,532,364 | |||||
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 Warrant
Warrants - Schedule of Warrant Activity (Details) | 3 Months Ended |
May 31, 2020$ / sharesshares | |
Equity [Abstract] | |
Warrants outstanding, beginning of period | 2,100,000 |
Issued | 0 |
Warrants outstanding, end of period | 2,100,000 |
Warrants exercisable, end of period | 190,000 |
Weighted average exercise price of warrants outstanding, beginning of period | $ / shares | $ 0.01 |
Weighted average exercise price of warrants outstanding, end of period | $ / shares | 0.01 |
Weighted average exercise price of warrants exercisable, end of period | $ / shares | $ 0.01 |
Warrants (Details Narrative)
Warrants (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | Feb. 29, 2020 | |
Warrants issued for investor relations services | 0 | ||
Fair value of warrants | $ 1,474 | ||
Third Party | |||
Warrants issued for investor relations services | 2,100,000 | ||
Fair value of warrants | $ 17,689 | ||
Risk free interest rate | 1.68% | ||
Volatility rate | 260.23% | ||
Dividend yield | 0.00% | ||
Vesting period | 3 years | ||
Vesting description | The warrant contains a vesting blocking provision that prevents the vesting of any warrants that such vesting would cause the warrant holder’s beneficial ownership (as such term is defined in Section 13d-3 of the Securities Exchange Act of 1934, as amended) to exceed more than four and ninety-nine one-hundredths percent (4.99%) of the Company’s outstanding Common Stock. The foregoing restriction may not be waived by either party. The warrants vest in equal parts over a three year period beginning on January 2, 2020 and all warrants expire on January 2, 2024. | ||
Warrants expiration | Jan. 2, 2024 | ||
Weighted average exercise price | $ 0.01 | $ 0.01 | |
Remaining life (years) | 3 years 6 months | ||
Intrinsic value | $ 0 | ||
Warrant expense | $ 1,474 | $ 0 |
Income Taxes - Reconciliation B
Income Taxes - Reconciliation Between Actual Tax Expense Benefit and Income Tax Computed by Applying Income Tax Rate (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
May 31, 2020 | Feb. 29, 2020 | |
Income Tax Expense Benefit Continuing Operations Income Tax Reconciliation | ||
Computed at U.S. and state statutory rates | $ (58,784) | $ (225,186) |
Permanent differences | 10,228 | 111,854 |
Changes in valuation allowance | 48,556 | 113,332 |
Income tax expense (benefit) | $ 0 | $ 0 |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | May 31, 2020 | Feb. 29, 2020 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 5,508,200 | $ 5,463,014 |
Crude oil properties | 53,692 | 50,322 |
Stock based compensation | 66,187 | 66,187 |
Other | 27,838 | 27,838 |
Less valuation allowance | (5,655,917) | (5,607,361) |
Deferred tax assets, net | $ 0 | $ 0 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
May 31, 2020 | Feb. 29, 2020 | Feb. 28, 2018 | |
Net operating loss carryforwards, federal and state, approximate | $ 18,459,115 | ||
Operating loss carryforwards, not subject to expiration | $ 151,427 | $ 339,299 | |
Net operating loss carryforwards, expiration date | Feb. 28, 2024 | ||
Increase (Decrease) in valuation allowance, approximate | $ 48,556 | $ 113,332 | |
Tax Cuts and Jobs Act | |||
Reduction in corporate income tax rate | 21.00% | ||
Operating loss carryforwards, not subject to expiration | $ 340,749 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event - Chief Executive Officer - Convertible Promissory Note | Jul. 12, 2020USD ($)$ / sharesshares |
Subsequent Event [Line Items] | |
Debt converted into common stock shares, value | $ | $ 27,835 |
Shares issued upon conversion of debt | shares | 6,958,758 |
Conversion price per share | $ / shares | $ 0.004 |