| SHORT-TERM AND LONG-TERM BORROWINGS | NOTE 8 — SHORT-TERM AND LONG-TERM BORROWINGS 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 2,000,000 6,000 January 1, 2022 10 st 44,000 38,000 Note Payable – Related Party On December 22, 2020, the Company entered into a Secured
Promissory Note (the “ Note Noteholder 155,548 10,929 144,619 2.25 December 21, 2035 4,384 364 Secured Debt Chief Executive Officer The Company may prepay the Note at any time. Upon
the occurrence of any Event of Default and expiration of any applicable cure period, and at any time thereafter during the continuance
of such Event of Default, the Noteholder may at its option, by written notice to the Company: (a) declare the entire principal amount
of the Note, together with all accrued interest thereon and all other amounts payable hereunder, immediately due and payable; (b) exercise
any of its remedies with respect to the collateral set forth in the Deed of Trust; and/or (c) exercise any or all of its other rights,
powers or remedies under applicable law. Current portion of note payable – related party
balances at August 31, 2022 and February 28, 2022 are set forth in the table below: Short-Term and Long-Term Borrowings - Schedule
of Related Party Notes Payable
August 31, 2022 February 28, 2022
Note payable – related party, current portion $ 8,946 $ 8,829
Unamortized debt issuance expenses (729 ) (729 )
Note payable – related party, current portion, net $ 8,218 $ 8,100 Note payable – related party long-term balances
at August 31, 2022 and February 28, 2022 are set forth in the table below:
August 31, 2022 February 28, 2022
Note payable – related party, non-current $ 132,207 $ 136,710
Unamortized debt issuance expenses (8,985 ) (9,350 )
Note payable – related party, non-current, net $ 123,222 $ 127,360 Future estimated payments on the outstanding note
payable – related party are set forth in the table below: Short-Term and Long-Term Borrowings - Schedule of Future Estimated Payments
Twelve month periods ending August 31,
2023 $ 8,946
2024 9,186
2025 9,433
2026 9,686
2027 9,945
Thereafter 93,957
Total $ 141,153 Short-term Convertible Note Payable Convertible Debt During the twelve months ended February 28, 2022,
the Company executed a convertible promissory note with a third party for $ 200,000 18 36,000 0.0085 27,764,706 12% Subordinated Notes Private Placement Subordinated Debt The Company’s 12% Subordinated Notes (“the
Notes”) issued pursuant to a January 2010 private placement offering to accredited investors, resulted in $ 595,000 250,000 12 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. As a result of the Company restructuring its balance
sheet through conversions of related party debt to common stock, the related party 12% Noteholder, James F. Westmoreland, the Company’s President and Chief Executive Officer, chose to convert the principal and accrued
interest of their Notes to the Company’s common stock. The related party Note for $ 250,000 264,986 0.45 1,144,415 During the six months ended August 31, 2022, one 12%
Note holder chose to convert the principal balance and accrued interest in to the Company’s common stock. The $ 25,000 10,520 0.45 78,934 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 and the Company’s cash flow.
The Notes principal of $ 290,000 142,251 135,229 12% Note balances at August 31, 2022 and February
28, 2022 are set forth in the table below: Short-Term and Long-Term Borrowings - Schedule
of Subordinated Notes 12% Subordinated Notes Related Party Notes
August 31, 2022 February 28, 2022
12% Subordinated Notes $ 290,000 $ 315,000
12% Subordinated Notes – related party — —
Total 12% Subordinated Note balance $ 290,000 $ 315,000 Line of Credit Line of Credit The Company had an existing $ 890,000 809,930 Production Revenue Payable Beginning in December 2018, the Company conducted
a fundraising program to fund the drilling of future wells in California and Michigan and to settle some of its historical debt. The purchaser(s)
of a production revenue payment interest received a production revenue payment on future wells to be drilled in California and Michigan
in exchange for their purchase. 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 $ 885,606 Accordingly, the Company has estimated the cash flows
associated with the production revenue payments of $ 984,601 98,995 68,482 54,304 Production revenue payable balances at August 31,
2022 and February 28, 2022 are set forth in the table below: Short-Term and Long-Term Borrowings - Schedule
of Production Revenue Payable Balances
August 31, 2022 February 28, 2022
Estimated payments of production revenue payable $ 984,601 $ 941,259
Less: unamortized discount (98,994 ) (124,134 )
885,607 817,125
Less: current portion (251,734 ) (78,877 )
Net production revenue payable – long-term $ 633,873 $ 738,248 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. |
