Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 31, 2018 | Jul. 12, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Daybreak Oil & Gas, Inc. | |
Entity Central Index Key | 1,164,256 | |
Document Type | 10-Q | |
Document Period End Date | May 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-28 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 51,532,364 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | May 31, 2018 | Feb. 28, 2018 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 25,070 | $ 48,535 |
Restricted cash (short-term time deposit) | 0 | 100,029 |
Accounts receivable: | ||
Crude oil and natural gas sales | 106,652 | 104,840 |
Joint interest participants | 96,464 | 58,452 |
Prepaid expenses and other current assets | 18,086 | 21,796 |
Total current assets | 246,272 | 333,652 |
CRUDE OIL AND NATURAL GAS PROPERTIES, successful efforts method, net | ||
Proved properties | 707,612 | 714,609 |
Unproved properties | 31,187 | 31,187 |
PREPAID DRILLING COSTS | 16,452 | 16,452 |
Total assets | 1,001,523 | 1,095,900 |
CURRENT LIABILITIES: | ||
Accounts payable and other accrued liabilities | 2,065,819 | 2,022,672 |
Accounts payable - related parties | 1,718,931 | 1,664,845 |
Accrued interest | 2,392,213 | 1,822,673 |
Notes payable, related party | 250,100 | 250,100 |
12% Notes payable, net of discount | 309,597 | 307,571 |
12% Notes payable, related party, net of discount | 245,711 | 244,103 |
Debt, current | 9,157,794 | 9,157,794 |
Line of credit | 815,913 | 873,350 |
Total current liabilities | 16,956,078 | 16,343,108 |
LONG TERM LIABILITIES: | ||
Asset retirement obligation | 38,490 | 37,174 |
Total liabilities | 16,994,568 | 16,380,282 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' DEFICIT: | ||
Preferred stock | 0 | 0 |
Common stock | 51,532 | 51,532 |
Additional paid-in capital | 22,997,759 | 22,997,759 |
Accumulated deficit | (39,043,046) | (38,334,383) |
Total stockholders' deficit | (15,993,045) | (15,284,382) |
Total liabilities and stockholders' deficit | 1,001,523 | 1,095,900 |
Series A Convertible Preferred Stock | ||
STOCKHOLDERS' DEFICIT: | ||
Preferred stock | $ 710 | $ 710 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | May 31, 2018 | Feb. 28, 2018 |
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 | 51,532,364 | 51,532,364 |
Common stock, shares outstanding | 51,532,364 | 51,532,364 |
Unearned debt discount, current | $ 5,403 | $ 7,429 |
Unearned debt discount, related party, current | $ 4,289 | $ 5,897 |
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, 2018 | May 31, 2017 | |
REVENUE: | ||
Crude oil sales | $ 176,933 | $ 133,724 |
OPERATING EXPENSES: | ||
Production | 42,807 | 47,768 |
Exploration, drilling and abandonment | 129 | 92,347 |
Depreciation, depletion, and amortization | 17,290 | 25,719 |
General and administrative | 243,462 | 255,299 |
Total operating expenses | 303,688 | 421,133 |
OPERATING LOSS | (126,755) | (287,409) |
OTHER EXPENSE: | ||
Interest expense, net | (581,908) | (479,879) |
NET LOSS | (708,663) | (767,288) |
Cumulative convertible preferred stock dividend requirement | (32,191) | (32,709) |
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ (740,854) | $ (799,997) |
NET LOSS PER COMMON SHARE, Basic and diluted | $ (0.01) | $ (0.02) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, Basic and diluted | 51,532,364 | 51,521,566 |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
May 31, 2018 | May 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Loss | $ (708,663) | $ (767,288) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Depreciation, depletion, and ARO expense | 17,290 | 25,719 |
Amortization of debt discount | 3,634 | 3,635 |
Amortization of deferred financing costs | 0 | 102,450 |
Reclass of unproved crude oil and natural gas properties to exploration expenses | 0 | 51,486 |
Changes in assets and liabilities: | ||
Accounts receivable - crude oil and natural gas sales | (1,812) | 7,518 |
Accounts receivable - joint interest participants | (38,012) | (23,325) |
Accounts receivable - other | 0 | (278) |
Prepaid expenses and other current assets | 3,710 | 3,459 |
Accounts payable and other accrued liabilities | 43,147 | 144,828 |
Accounts payable - related parties | 54,086 | 58,793 |
Accrued interest | 577,103 | 370,833 |
Net cash used in operating activities | (49,517) | (22,170) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Additions to crude oil and natural gas properties | (8,977) | 0 |
Net cash used in investing activities | (8,977) | 0 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from debt | 0 | 35,000 |
Payments to line of credit | (65,000) | (15,000) |
Net cash provided by (used in) financing activities | (65,000) | 20,000 |
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (123,494) | (2,170) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | 148,564 | 142,063 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | 25,070 | 139,893 |
Cash paid for Interest | 8,744 | 12,034 |
Cash paid for Income taxes | 0 | 0 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Non-cash increase to line of credit due to monthly interest | 7,563 | 9,059 |
Proceeds from debt paid directly to accounts payable vendor | 0 | 10,650 |
Revision to asset retirement obligation | 0 | 40,108 |
Conversion of preferred stock to common stock | $ 0 | $ 45 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
May 31, 2018 | |
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 and natural gas 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 and natural gas 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 and natural gas. 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 and natural gas, 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, 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 three months ended May 31, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2019. 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, 2018. 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 and natural gas properties to determine the amount of any impairment of crude oil and natural gas 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. Reclassifications Certain reclassifications have been made to conform the prior period’s financial information to the current period’s presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit. |
Going Concern
Going Concern | 3 Months Ended |
May 31, 2018 | |
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, 2018 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 and natural gas exploration industry and as of May 31, 2018 has an accumulated deficit of $39,043,046 and a working capital deficit of $16,709,806, 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. 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 successful refinancing or restructuring of our credit facility. 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 and natural gas properties, it has not yet established a 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 May 31, 2018 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. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
May 31, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | NOTE 3 — RECENT ACCOUNTING PRONOUNCEMENTS: Accounting Standards Issued and Adopted In May 2014, the FASB issued ASC updated No. 2014-09, Revenue from Contracts with Customers (Topic 606 (ASU 2014-09) In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). The update is effective for years beginning December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. The purpose of Update 216-18 is to clarify guidance and presentation related to restricted cash in the Statements of Cash Flows. The amendment requires beginning-of-period and end-of-period total amounts shown on the Statements of Cash Flows to include cash and cash equivalents as well as restricted cash and restricted cash equivalents. Adoption of this new standard did not have a material impact on the Company’s financial statements. |
Restricted Cash
Restricted Cash | 3 Months Ended |
May 31, 2018 | |
Cash and Cash Equivalents [Abstract] | |
Restricted Cash | NOTE 4 — RESTRICTED CASH: A reconciliation of cash, cash equivalents and restricted cash reported within the statement of financial position that sum to the total of the same such cash amounts shown in the statement of cash flows is set forth in the table below. May 31, 2018 February 28, 2018 Cash and cash equivalents $ 25,070 $ 48,535 Restricted cash - 100,029 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 25,070 $ 148,564 Amounts included in restricted cash represent those required to be set aside in the form of a short-term time deposit (CD) pledged as collateral in connection with any obligation for plugging, abandonment and site remediation requirements for our crude oil operations in California. Effective March 19, 2018, the collateral requirement obligation was rescinded. These funds then became available for the Company to use for regular business purposes. |
Concentration of Credit Risk
Concentration of Credit Risk | 3 Months Ended |
May 31, 2018 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk | NOTE 5 — CONCENTRATION OF CREDIT RISK: Substantially all of the Company’s trade accounts receivable result from crude oil and natural gas 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 $106,652 and $104,840 at May 31, 2018 and February 28, 2018, respectively were from one customer, Plains Marketing. Crude oil sales receivables balances at May 31, 2018 and February 28, 2018 represent crude oil sales that occurred in May and February 2018, respectively. Joint interest participant receivables balances of $96,464 and $58,452 at May 31, 2018 and February 28, 2018, 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, 2018 and February 28, 2018, as the joint interest owners have a history of paying their obligations. At May 31, 2018, the Company owed its principal lender, Maximilian Resources LLC, a Delaware limited liability company and successor by assignment to Maximilian Investors LLC (either party, as appropriate, is referred to in these notes to the financial statements as “Maximilian”), an aggregate $11.5 million or approximately 67.8% of the Company’s total debt. The Company is currently considered to be in default on its credit facility loan with Maximilian. As a result of this concentration of debt, the Company may be susceptible to any economic challenges faced by Maximilian, which is currently in receivership. For further information on the Maximilian credit facility and loan balances refer to Note 9. |
Crude Oil and Natural Gas Prope
Crude Oil and Natural Gas Properties | 3 Months Ended |
May 31, 2018 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Crude Oil and Natural Gas Properties | NOTE 6 — CRUDE OIL AND NATURAL GAS PROPERTIES: Crude oil and natural gas property balances at May 31, 2018 and February 28, 2018 are set forth in the table below. May 31, 2018 February 28, 2018 Proved leasehold costs $ 115,119 $ 115,119 Costs of wells and development 2,302,645 2,293,668 Capitalized exploratory well costs 1,333,785 1,333,785 Cost of proved crude oil and natural gas properties 3,751,549 3,742,572 Accumulated depletion, depreciation, amortization and impairment (3,043,937) (3,027,963) Total proved crude oil and natural gas properties, net $ 707,612 $ 714,609 Michigan unproved crude oil and natural gas properties 31,187 31,187 Total proved and unproved crude oil and natural gas properties, net $ 738,799 $ 745,796 |
Accounts Payable
Accounts Payable | 3 Months Ended |
May 31, 2018 | |
Payables and Accruals [Abstract] | |
Accounts Payable | NOTE 7 — ACCOUNTS PAYABLE: On March 1, 2009, the Company became the operator for its East Slopes Project. 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 the May 31, 2018 accounts payable balance. Payment of this liability has been delayed until the Company’s cash flow situation improves. |
Accounts Payable - Related Part
Accounts Payable - Related Parties | 3 Months Ended |
May 31, 2018 | |
Related Party Transactions [Abstract] | |
Accounts Payable - Related Parties | NOTE 8 — ACCOUNTS PAYABLE- RELATED PARTIES: The May 31, 2018 and February 28, 2018 accounts payable – related parties balances of $1,718,931 and $1,664,845 respectively, comprised primarily of deferred salaries 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 President and Chief Executive Officer. Payment 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, 2018 | |
Debt Disclosure [Abstract] | |
Short-Term and Long-Term Borrowings | NOTE 9 — SHORT-TERM AND LONG-TERM BORROWINGS: Current debt (Short-term borrowings) Note 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. There are ten noteholders, holding 980,000 warrants, who have not yet exercised their warrants. The exercise price of the associated warrants was lowered from $0.14 to $0.07 as part of the Note maturity extension. The Notes principal of $565,000 is payable in full at the amended maturity date of the Notes. The fair value of the warrant modification, as determined by the Black-Scholes option pricing model, was $29,075 and was recognized as a discount to debt and is being amortized over the extended maturity date of the Notes. The Black-Scholes valuation encompassed the following weighted average assumptions: a risk free interest rate of 1.22%; volatility of 378.73%; and dividend yield of 0.0%. The Notes principal of $565,000 is payable in full at the amended maturity date of the Notes. 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. Amortization expense was $3,634 and $3,635, respectively at May 31, 2018 and 2017. The unamortized debt discount at May 31, 2018 and February 28, 2018 was $9,692 and $13,326, respectively. 12% Note balances at May 31, 2018 and February 28, 2018 are set forth in the table below: May 31, 2018 February 28, 2018 12% Subordinated notes $ 315,000 $ 315,000 Debt discount (5,403) (7,429) 12% Subordinated notes balance, net $ 309,597 $ 307,571 12% Note balances – related parties at May 31, 2018 and February 28, 2018 are set forth in the table below: May 31, 2018 February 28, 2018 12% Subordinated notes – related party $ 250,000 $ 250,000 Debt discount (4,289) (5,897) 12% Subordinated notes – related party balance, net $ 245,711 $ 244,103 In conjunction with the Notes private placement, a total of 1,190,000 common stock purchase warrants were issued at a rate of two warrants for every dollar raised through the private placement. The warrants have an amended exercise price of $0.07 and an amended expiration date of January 29, 2019. The 12% Note warrants that have been exercised are set forth in the table below. At February 28, 2018, there were 980,000 warrants that were not exercised and had not expired. Fiscal Period Warrants Exercised Shares of Common Stock Issued Number of Accredited Investors Year Ended February 28, 2014 100,000 100,000 1 Year Ended February 28, 2015 50,000 50,000 1 Year Ended February 29, 2016 - - - Year Ended February 28, 2017 - - - Year Ended February 28, 2018 - - - Three Months May 31, 2018 - - - Totals 150,000 150,000 2 Maximilian Loan Agreement (Credit Facility) On October 31, 2012, the Company entered into a loan agreement with Maximilian Resources LLC, a Delaware limited liability company and successor by assignment to Maximilian Investors LLC (either party, as appropriate, is referred to in these notes to the financial statements as “Maximilian”), which provided for a revolving credit facility of up to $20 million, that matured on October 31, 2016, with a minimum commitment of $2.5 million. On October 31, 2016 through the Fourth Amendment to the Amended and Restated Loan and Security Agreement, the maturity date of the loan was changed to February 28, 2020. In August 2013, the Company amended its loan agreement with Maximilian thereby increasing the amount of the credit facility to $90 million and reduced the annual interest rate to 12%. The Company evaluated the amendment of the revolving credit facility under ASC 470-50-40 and determined that the Company’s borrowing capacity under the amended loan agreement exceeded its borrowing capacity under the old loan agreement. Consequently, the unamortized discount and deferred financing costs as of the date of amendment were amortized over the term of the loan agreement. Due to the Company’s default on the Maximilian loan, all unamortized discount and deferred financing costs were fully amortized during the twelve months ended February 28, 2018. On October 31, 2016, the Company entered into a Fourth Amendment to the Amended and Restated Loan and Security Agreement with Maximilian, which amended the Company’s loan agreement with Maximilian (the “Restructuring Agreement”). Pursuant to the Restructuring Agreement, in exchange for the proceeds it received from the Kentucky Sale, Maximilian and the Company have agreed to a commitment by Maximilian to advance up to $250,000 in financing to the Company over the following six month period and the pursuit of the Michigan exploratory joint drilling project using the $250,000 set aside from the Kentucky Sale. As a result of the decline in hydrocarbon prices that started in June of 2014, the Company has been unable to make any type of interest or principal payments required under the amended terms of its credit facility with Maximilian since December of 2015. Under the terms of the Restructuring Amendment all unpaid interest is currently being accrued. Accrued interest on the credit facility loan at May 31, 2018 and February 28, 2018 was $2,363,369 and $1,812,128, respectively. The Company is currently considered to be in default under the terms of its credit facility loan and interest is being accrued at the rate of 23.8% since March 1, 2018. Maximilian is currently in receivership. The United States District Court for the Eastern District of New York, Southern Division has hired consultants to assist in finding a new lender to assume the Maximilian credit facility. No assurances can be made as to who the new lender will be or how the structure of the loan will affect the Company. Maximilian Promissory Note – Michigan Exploratory Joint Drilling Project The Company has a note payable loan balance to Maximilian of $94,650 as of May 31, 2018 and February 28, 2018. The Company has received $94,650 in aggregate from multiple advances since January 2017 from Maximilian under a separate promissory note agreement dated January 17, 2017 and amended on February 10, 2017 regarding the development of an exploratory joint drilling project in Michigan. Advances under this agreement are subject to a 5% (five percent) per annum interest rate. In the event of a default of any of the Company’s obligations under the promissory note, the amounts due may be called immediately due and payable at Maximilian’s option. Due to a lack of available funding from Maximilian, we have been unable to spud a well on the Michigan project. The Company is currently considered to be in default under the terms of its loan agreement. Maximilian is currently in receivership. The United States District Court for the Eastern District of New York, Southern Division has hired consultants to assist in finding a new lender. No assurances can be made as to who the new lender will be or how the structure of the loan will affect the Company. Accrued interest on the Michigan promissory note at May 31, 2018 and February 28, 2018 was $6,368 and $5,158, respectively. During the three months ended May 31, 2018 and 2017, the Company received advances of $-0- and $10,650. The $10,650 was paid directly to the Operator of the Michigan project by Maximilian on the Company’s behalf. In accordance with the guidance found in ASC-470-10-45, the entire balance of both the Maximilian credit facility loan and the Michigan loan is presented under the current liabilities section of the balance sheets. Current debt balances at May 31, 2018 and February 28, 2018 are set forth in the table below: May 31, 2018 February 28, 2018 Credit facility balance $ 9,063,144 $ 9,063,144 Michigan exploratory joint drilling debt 94,650 94,650 Subtotal debt 9,157,794 9,157,794 Accrued interest on credit facility and Michigan exploratory joint drilling debt 2,369,737 1,817,287 Total Maximilian debt $ 11,527,531 $ 10,975.081 Encumbrances The Company’s debt obligations, pursuant to the above mentioned credit facility loan agreement and promissory notes entered into by and between Maximilian and the Company are secured by a perfected first priority security interest in substantially all of the personal property of the Company, and two mortgages; one covering its leases in California and the other covering its leases in Michigan. 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 interest rate of 3.244% with interest payable monthly. 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. At May 31, 2018 and February 28, 2018, the line of credit had an outstanding balance of $815,913 and $873,350, respectively. During the three months ended May 31, 2018 and 2017, the Company made payments to the line of credit of $65,000 and $15,000, respectively. Interest incurred for the three months ended May 31, 2018 and 2017 was $7,564 and $9,059, respectively. |
Stockholders' Deficit
Stockholders' Deficit | 3 Months Ended |
May 31, 2018 | |
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 May 31, 2018 and February 28, 2018, there were 709,568 shares issued and outstanding, respectively, that had not been converted into our common stock. As of May 31, 2018, 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 February 29, 2008 102,300 306,900 10 February 28, 2009 237,000 711,000 12 February 28, 2010 51,900 155,700 4 February 28, 2011 102,000 306,000 4 February 29, 2012 - - - February 28, 2013 18,000 54,000 2 February 28, 2014 151,000 453,000 9 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 May 31, 2018 - - - 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, 2018 no dividends have been declared or paid. Dividends earned since issuance for each fiscal year and the three months ended May 31, 2018 are set forth in the table below: Fiscal Period Ended Shareholders at Period End Accumulated Dividends February 28, 2007 100 $ 155,311 February 29, 2008 90 242,126 February 28, 2009 78 209,973 February 28, 2010 74 189,973 February 28, 2011 70 173,707 February 29, 2012 70 163,624 February 28, 2013 68 161,906 February 28, 2014 59 151,323 February 28, 2015 58 132,634 February 29, 2016 57 130,925 February 28, 2017 57 130,415 February 28, 2018 56 128,231 May 31, 2018 56 32,191 $ 2,002,339 Common Stock The Company is authorized to issue up to 200,000,000 shares of $0.001 par value common stock of which 51,532,364 shares were issued and outstanding as of May 31, 2018 and February 28, 2018, respectively. Common Stock Balance Par Value Common stock, Issued and Outstanding, February 28, 2017 51,487,373 Conversion of Series A Convertible Preferred Stock to common stock 44,991 $ 45 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, May 31, 2018 51,532,364 |
Warrants
Warrants | 3 Months Ended |
May 31, 2018 | |
Equity [Abstract] | |
Warrants | NOTE 11 WARRANTS: Warrants outstanding and exercisable as of May 31, 2018 are set forth in the table below: Warrants Exercise Price Remaining Life (Years) Exercisable Warrants Remaining 12% Subordinated notes 980,000 $0.07 0.67 980,000 Warrants issued for Kentucky oil project 3,498,601 $0.04 0.25 3,498,601 Warrants issued for Kentucky debt financing 2,623,951 $0.04 0.25 2,623,951 Warrants issued for Kentucky debt financing 309,503 $0.214 0.25 309,503 Warrants issued in share-for-warrant exchange 427,729 $0.04 0.25 427,729 7,839,784 7,839,784 Warrant activity for the three months ended May 31, 2018 is set forth in the table below: Number of Warrants Weighted Average Exercise Price Warrants outstanding, February 28, 2018 7,839,784 $0.05 Changes during the three months ended May 31, 2018: Issued - Expired / Cancelled / Forfeited - Warrants outstanding, May 31, 2018 7,839,784 $0.05 Warrants exercisable, May 31, 2018 7,839,784 $0.05 During the three months ended May 31, 2018, there were no warrants issued, exercised, cancelled or that expired. The remaining outstanding warrants as of May 31, 2018, have a weighted average exercise price of $0.05, a weighted average remaining life of 0.3 years, and an intrinsic value of $-0-. |
Income Taxes
Income Taxes | 3 Months Ended |
May 31, 2018 | |
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. 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, 2018 February 28, 2018 Computed at U.S. and state statutory rates $ (211,652) $ (981,966) Permanent differences 93 29,060 New tax law adjustment - 2,912,689 Changes in valuation allowance 211,559 (1,959,783) 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, 2018 February 28, 2018 Deferred tax assets: Net operating loss carryforwards $ 8,636,371 $ 8,413,128 Crude oil and natural gas properties 35,751 47,434 Stock based compensation 66,187 66,187 Other 27,838 27,838 Less valuation allowance (8,766,147) (8,554,587) Total $ - $ - At May 31, 2018, Daybreak had estimated net operating loss (“NOL”) carryforwards for federal and state income tax purposes of approximately $28,942,265 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 $1,088,884 will not expire and will carry over indefinitely. The valuation allowance increased $211,559 and $1,959,783 for the three months ended May 31, 2018 and the year ended February 28, 2018, 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 2012 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, 2018 | |
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 and natural gas 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 and natural gas 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, 2018. 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 and natural gas properties. The Company’s minimum annual office rental lease commitments by fiscal year as of May 31, 2018 is shown in the table below: Fiscal Year Ended Annual Office Lease Obligation February 28, 2019 $ 6,897 February 29, 2020 - February 28, 2021 - February 28, 2022 - February 28, 2023 and thereafter - Totals $ 6,897 |
Accounting Policies (Policies)
Accounting Policies (Policies) | 3 Months Ended |
May 31, 2018 | |
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, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2019. 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, 2018. |
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 and natural gas properties to determine the amount of any impairment of crude oil and natural gas 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. |
Reclassifications | Reclassifications Certain reclassifications have been made to conform the prior period’s financial information to the current period’s presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit. |
Accounting Standards Issued and Adopted | Accounting Standards Issued and Adopted In May 2014, the FASB issued ASC updated No. 2014-09, Revenue from Contracts with Customers (Topic 606 (ASU 2014-09) In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). The update is effective for years beginning December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. The purpose of Update 216-18 is to clarify guidance and presentation related to restricted cash in the Statements of Cash Flows. The amendment requires beginning-of-period and end-of-period total amounts shown on the Statements of Cash Flows to include cash and cash equivalents as well as restricted cash and restricted cash equivalents. The Company has evaluated the impact and timing of the adoption of ASU 2016-18 and has concluded it will not have a material impact on its financial statements. |
Restricted Cash (Tables)
Restricted Cash (Tables) | 3 Months Ended |
May 31, 2018 | |
Cash and Cash Equivalents [Abstract] | |
Schedule of Restricted Cash and Cash Equivalents | May 31, 2018 February 28, 2018 Cash and cash equivalents $ 25,070 $ 48,535 Restricted cash - 100,029 Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 25,070 $ 148,564 |
Crude Oil and Natural Gas Pro21
Crude Oil and Natural Gas Properties (Tables) | 3 Months Ended |
May 31, 2018 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Capitalized Costs Relating to Crude Oil and Natural Gas Activities | May 31, 2018 February 28, 2018 Proved leasehold costs $ 115,119 $ 115,119 Costs of wells and development 2,302,645 2,293,668 Capitalized exploratory well costs 1,333,785 1,333,785 Cost of proved crude oil and natural gas properties 3,751,549 3,742,572 Accumulated depletion, depreciation, amortization and impairment (3,043,937) (3,027,963) Total proved crude oil and natural gas properties, net $ 707,612 $ 714,609 Michigan unproved crude oil and natural gas properties 31,187 31,187 Total proved and unproved crude oil and natural gas properties, net $ 738,799 $ 745,796 |
Short-Term and Long-Term Borr22
Short-Term and Long-Term Borrowings (Tables) | 3 Months Ended |
May 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Short-Term Debt | May 31, 2018 February 28, 2018 12% Subordinated notes $ 315,000 $ 315,000 Debt discount (5,403) (7,429) 12% Subordinated notes balance, net $ 309,597 $ 307,571 May 31, 2018 February 28, 2018 12% Subordinated notes – related party $ 250,000 $ 250,000 Debt discount (4,289) (5,897) 12% Subordinated notes – related party balance, net $ 245,711 $ 244,103 |
Schedule of Shares Issued and Warrants Exercised in Conjunction with Private Placement | Fiscal Period Warrants Exercised Shares of Common Stock Issued Number of Accredited Investors Year Ended February 28, 2014 100,000 100,000 1 Year Ended February 28, 2015 50,000 50,000 1 Year Ended February 29, 2016 - - - Year Ended February 28, 2017 - - - Year Ended February 28, 2018 - - - Three Months May 31, 2018 - - - Totals 150,000 150,000 2 |
Schedule of Line of Credit Facilities | May 31, 2018 February 28, 2018 Credit facility balance $ 9,063,144 $ 9,063,144 Michigan exploratory joint drilling debt 94,650 94,650 Subtotal debt 9,157,794 9,157,794 Accrued interest on credit facility and Michigan exploratory joint drilling debt 2,369,737 1,817,287 Total Maximilian debt $ 11,527,531 $ 10,975.081 |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 3 Months Ended |
May 31, 2018 | |
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 February 29, 2008 102,300 306,900 10 February 28, 2009 237,000 711,000 12 February 28, 2010 51,900 155,700 4 February 28, 2011 102,000 306,000 4 February 29, 2012 - - - February 28, 2013 18,000 54,000 2 February 28, 2014 151,000 453,000 9 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 May 31, 2018 - - - Totals 690,197 2,070,591 44 |
Schedule of Dividends Payable | Fiscal Period Ended Shareholders at Period End Accumulated Dividends February 28, 2007 100 $ 155,311 February 29, 2008 90 242,126 February 28, 2009 78 209,973 February 28, 2010 74 189,973 February 28, 2011 70 173,707 February 29, 2012 70 163,624 February 28, 2013 68 161,906 February 28, 2014 59 151,323 February 28, 2015 58 132,634 February 29, 2016 57 130,925 February 28, 2017 57 130,415 February 28, 2018 56 128,231 May 31, 2018 56 32,191 $ 2,002,339 |
Schedule of Common Stock Outstanding | Common Stock Balance Par Value Common stock, Issued and Outstanding, February 28, 2017 51,487,373 Conversion of Series A Convertible Preferred Stock to common stock 44,991 $ 45 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, May 31, 2018 51,532,364 |
Warrants (Tables)
Warrants (Tables) | 3 Months Ended |
May 31, 2018 | |
Equity [Abstract] | |
Schedule of Stockholders' Equity Note Warrants and Rights | Warrants Exercise Price Remaining Life (Years) Exercisable Warrants Remaining 12% Subordinated notes 980,000 $0.07 0.67 980,000 Warrants issued for Kentucky oil project 3,498,601 $0.04 0.25 3,498,601 Warrants issued for Kentucky debt financing 2,623,951 $0.04 0.25 2,623,951 Warrants issued for Kentucky debt financing 309,503 $0.214 0.25 309,503 Warrants issued in share-for-warrant exchange 427,729 $0.04 0.25 427,729 7,839,784 7,839,784 |
Schedule of Warrant Activity | Number of Warrants Weighted Average Exercise Price Warrants outstanding, February 28, 2018 7,839,784 $0.05 Changes during the three months ended May 31, 2018: Issued - Expired / Cancelled / Forfeited - Warrants outstanding, May 31, 2018 7,839,784 $0.05 Warrants exercisable, May 31, 2018 7,839,784 $0.05 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
May 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense Benefit | May 31, 2018 February 28, 2018 Computed at U.S. and state statutory rates $ (211,652) $ (981,966) Permanent differences 93 29,060 New tax law adjustment - 2,912,689 Changes in valuation allowance 211,559 (1,959,783) Total $ - $ - |
Schedule of Deferred Tax Assets and Liabilities | May 31, 2018 February 28, 2018 Deferred tax assets: Net operating loss carryforwards $ 8,636,371 $ 8,413,128 Crude oil and natural gas properties 35,751 47,434 Stock based compensation 66,187 66,187 Other 27,838 27,838 Less valuation allowance (8,766,147) (8,554,587) Total $ - $ - |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
May 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | Fiscal Year Ended Annual Office Lease Obligation February 28, 2019 $ 6,897 February 29, 2020 - February 28, 2021 - February 28, 2022 - February 28, 2023 and thereafter - Totals $ 6,897 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) | May 31, 2018USD ($)Number | Feb. 28, 2018USD ($) |
Accumulated deficit | $ (39,043,046) | $ (38,334,383) |
Working capital deficit | $ 16,709,806 | |
Average Working and Net Revenue Interest | East Slopes Project | ||
Number of producing wells, net revenue interest | Number | 20 | |
Average working interest | 36.60% | |
Average net revenue interest | 28.40% |
Restricted Cash - Schedule of R
Restricted Cash - Schedule of Restricted Cash and Cash Equivalents (Details) - USD ($) | May 31, 2018 | Feb. 28, 2018 | May 31, 2017 | Feb. 28, 2017 |
Cash and Cash Equivalents [Abstract] | ||||
Cash and cash equivalents | $ 25,070 | $ 48,535 | ||
Restricted cash | 0 | 100,029 | ||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ 25,070 | $ 148,564 | $ 139,893 | $ 142,063 |
Concentration of Credit Risk (D
Concentration of Credit Risk (Details Narrative) - USD ($) | 3 Months Ended | |
May 31, 2018 | Feb. 28, 2018 | |
Concentration of risk, description | At the Companys 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, 2018 and February 28, 2018 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 then the Company may incur difficulties in selling its crude oil production. | |
Concentration risk, percent | 100.00% | |
Sales receivables | $ 106,652 | $ 104,840 |
Joint interest participants receivables | $ 96,464 | $ 58,452 |
Maximilian Investors LLC | ||
Concentration risk, percent | 67.80% | |
Line of credit | $ 11,500,000 |
Crude Oil and Natural Gas Pro30
Crude Oil and Natural Gas Properties - Capitalized Costs Relating to Crude Oil and Natural Gas Activities (Details) - USD ($) | May 31, 2018 | Feb. 28, 2018 |
Oil and Natural Gas Property, Successful Effort Method, Net | ||
Proved leasehold costs | $ 115,119 | $ 115,119 |
Costs of wells and development | 2,302,645 | 2,293,668 |
Capitalized exploratory well costs | 1,333,785 | 1,333,785 |
Cost of proved crude oil and natural gas properties | 3,751,549 | 3,742,572 |
Accumulated depletion, depreciation, amortization and impairment | (3,043,937) | (3,027,963) |
Total proved crude oil and natural gas properties, net | 707,612 | 714,609 |
Michigan unproved crude oil and natural gas properties | 31,187 | 31,187 |
Total proved and unproved crude oil and natural gas properties, net | $ 738,799 | $ 745,796 |
Accounts Payable (Details Narra
Accounts Payable (Details Narrative) | 3 Months Ended |
May 31, 2018USD ($) | |
Payables and Accruals [Abstract] | |
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 |
Accounts Payable - Related Pa32
Accounts Payable - Related Parties (Details Narrative) - USD ($) | May 31, 2018 | Feb. 28, 2018 |
Related Party Transactions [Abstract] | ||
Accounts payable, related parties | $ 1,718,931 | $ 1,664,845 |
Short-Term and Long-Term Borr33
Short-Term and Long-Term Borrowings - Schedule of Short-Term Debt (Details) - USD ($) | May 31, 2018 | Feb. 28, 2018 |
Short-term Debt [Line Items] | ||
12% Notes payable, net | $ 309,597 | $ 307,571 |
12% Subordinated Notes | ||
Short-term Debt [Line Items] | ||
Convertible subordinated debt, current | 315,000 | 315,000 |
Debt discount | (5,403) | (7,429) |
12% Notes payable, net | 309,597 | 307,571 |
12% Subordinated Notes | Chief Executive Officer | ||
Short-term Debt [Line Items] | ||
Convertible subordinated debt, current | 250,000 | 250,000 |
Debt discount | (4,289) | (5,897) |
12% Notes payable, net | $ 245,711 | $ 244,103 |
Short-Term and Long-Term Borr34
Short-Term and Long-Term Borrowings - Schedule of Shares Issued and Warrants Exercised with Private Placement (Details) | 3 Months Ended | 12 Months Ended | ||||
May 31, 2018Numbershares | Feb. 28, 2018Numbershares | Feb. 28, 2017Numbershares | Feb. 29, 2016Numbershares | Feb. 28, 2015Numbershares | Feb. 28, 2014Numbershares | |
Warrants exercised | 150,000 | |||||
Shares of common stock issued | 150,000 | |||||
Accredited investors | Number | 44 | 44 | ||||
12% Subordinated Notes | ||||||
Warrants exercised | 0 | 0 | 0 | 50,000 | 100,000 | |
Shares of common stock issued | 0 | 0 | 0 | 50,000 | 100,000 | |
Accredited investors | Number | 0 | 0 | 0 | 1 | 1 |
Short-Term and Long-Term Borr35
Short-Term and Long-Term Borrowings - Schedule of Line of Credit Facilities (Details) - USD ($) | May 31, 2018 | Feb. 28, 2018 |
Line of Credit Facility [Line Items] | ||
Subtotal debt | $ 9,157,794 | $ 9,157,794 |
Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Credit facility balance | 9,063,144 | 9,063,144 |
Michigan exploratory joint drilling debt | 94,650 | 94,650 |
Subtotal debt | 9,157,794 | 9,157,794 |
Accrued interest on credit facility and Michigan exploratory joint drilling debt | 2,369,737 | 1,817,287 |
Total maximum debt | $ 11,527,531 | $ 10,975,081 |
Short-Term and Long-Term Borr36
Short-Term and Long-Term Borrowings (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |||||
May 31, 2018 | May 31, 2017 | Feb. 28, 2018 | Feb. 28, 2017 | Feb. 28, 2014 | Feb. 28, 2013 | Feb. 28, 2010 | |
Debt Instrument [Line Items] | |||||||
Warrants outstanding | 7,839,784 | ||||||
Amortization of debt discount | $ 3,634 | $ 3,635 | |||||
Unamortized debt discount | 5,403 | $ 7,429 | |||||
Line of credit, amount outstanding | 815,913 | 873,350 | |||||
Payments on line of credit | 65,000 | 15,000 | |||||
Notes payable, related party | 250,100 | 250,100 | |||||
Revolving Credit Facility | Maximilian Loan | |||||||
Debt Instrument [Line Items] | |||||||
Maximum borrowing | $ 20,000,000 | ||||||
Credit facility, advances | 0 | 35,000 | |||||
Credit facility, expiration date | Feb. 28, 2020 | ||||||
Minimum commitment fee | $ 2,500,000 | ||||||
Accrued interest | 2,363,396 | 1,812,128 | |||||
Revolving Credit Facility | Maximilian Loan | Michigan Exploratory Joint Drilling Project | |||||||
Debt Instrument [Line Items] | |||||||
Line of credit, amount outstanding | $ 94,650 | $ 94,650 | |||||
Line of credit, interest rate description | Advances under this agreement are subject to a 5% per annum interest rate. | Advances under this agreement are subject to a 5% per annum interest rate. | |||||
Payments made on behalf of the company | $ 10,650 | ||||||
Accrued interest | $ 6,368 | 5,158 | |||||
Revolving Credit Facility | Maximilian - Amended and Restated Loan Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Maximum borrowing | $ 90,000,000 | ||||||
Line of credit facility, interest rate | 12.00% | ||||||
Revolving Credit Facility | Maximilian - Fourth Amendment to Amended and Restated Loan Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Credit facility, description | Pursuant to the Restructuring Agreement, in exchange for the proceeds it received from the Kentucky Sale, Maximilian and the Company have agreed to a commitment by Maximilian to advance up to $250,000 in financing to the Company over the next six months and the pursuit of the Michigan exploratory joint drilling project using the $250,000 set aside from the Kentucky Sale. | ||||||
Maximum borrowing | $ 250,000 | ||||||
Line of Credit | UBS Bank USA | |||||||
Debt Instrument [Line Items] | |||||||
Maximum borrowing | 890,000 | 890,000 | |||||
Line of credit, amount outstanding | 815,913 | $ 873,350 | |||||
Payments on line of credit | 65,000 | 15,000 | |||||
Line of credit, interest expense | $ 7,564 | $ 9,059 | |||||
Line of credit, interest rate description | Payable monthly at a stated reference rate of 0.249% + 337.5 basis points. 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 a portion of the outstanding credit line balance, $700,000, was converted to a 24 month fixed term annual interest rate of 3.244% with interest payable monthly. 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. | |||||
12% Subordinated Notes | |||||||
Debt Instrument [Line Items] | |||||||
Interest rate | 12.00% | ||||||
Maturity date | Jan. 29, 2019 | 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 Companys common stock at a conversion rate equal to 75% of the average closing price of the Companys common stock over the 20 consecutive trading days preceding December 31, 2018. | ||||||
Proceeds from subordinate notes | $ 595,000 | ||||||
Subordinate note, principal | $ 565,000 | ||||||
Warrants issued | 1,190,000 | 1,190,000 | |||||
Warrants outstanding | 980,000 | 980,000 | |||||
Warrants, exercise price | $ 0.07 | $ 0.07 | |||||
Fair value of warrants | $ 29,075 | ||||||
Weighted average risk free interest rate | 1.22% | ||||||
Weighted average volatility rate | 378.73% | ||||||
Amortization of debt discount | $ 3,634 | $ 14,538 | $ 3,635 | ||||
Unamortized debt discount | 9,692 | 13,326 | |||||
Chief Executive Officer | |||||||
Debt Instrument [Line Items] | |||||||
Notes payable, related party | $ 250,100 | $ 250,100 |
Stockholders' Deficit - Convers
Stockholders' Deficit - Conversions of Series A Preferred Stock (Details) | 3 Months Ended | 12 Months Ended | ||||||||||
May 31, 2018Numbershares | Feb. 28, 2018Numbershares | Feb. 28, 2017Numbershares | Feb. 29, 2016Numbershares | Feb. 28, 2015Numbershares | Feb. 28, 2014Numbershares | Feb. 28, 2013Numbershares | Feb. 29, 2012Numbershares | Feb. 28, 2011Numbershares | Feb. 28, 2010Numbershares | Feb. 28, 2009Numbershares | Feb. 29, 2008Numbershares | |
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 | 44 | ||||||||||
Series A Convertible Preferred Stock | ||||||||||||
Series A preferred shares converted to common stock | 0 | 14,997 | 0 | 10,000 | 3,000 | 151,000 | 18,000 | 0 | 102,000 | 51,900 | 237,000 | 102,300 |
Shares of common stock issued from conversion | 0 | 44,991 | 0 | 30,000 | 9,000 | 453,000 | 54,000 | 0 | 306,000 | 155,700 | 711,000 | 306,900 |
Accredited investors | Number | 0 | 1 | 0 | 1 | 1 | 9 | 2 | 0 | 4 | 4 | 12 | 10 |
Stockholders' Deficit - Preferr
Stockholders' Deficit - Preferred Stock Dividends Earned (Details) | 3 Months Ended | 12 Months Ended | |||||||||||
May 31, 2018USD ($)Number | Feb. 28, 2018USD ($)Number | Feb. 28, 2017USD ($)Number | Feb. 29, 2016USD ($)Number | Feb. 28, 2015USD ($)Number | Feb. 28, 2014USD ($)Number | Feb. 28, 2013USD ($)Number | Feb. 29, 2012USD ($)Number | Feb. 28, 2011USD ($)Number | Feb. 28, 2010USD ($)Number | Feb. 28, 2009USD ($)Number | Feb. 29, 2008USD ($)Number | Feb. 28, 2007USD ($)Number | |
Equity [Abstract] | |||||||||||||
Preferred shareholders at period end | Number | 56 | 56 | 57 | 57 | 58 | 59 | 68 | 70 | 70 | 74 | 78 | 90 | 100 |
Earned dividends | $ 32,191 | $ 128,231 | $ 130,415 | $ 130,925 | $ 132,634 | $ 151,323 | $ 161,906 | $ 163,624 | $ 173,707 | $ 189,973 | $ 209,973 | $ 242,126 | $ 155,311 |
Total accumulated dividends | $ 2,002,339 |
Stockholders' Deficit - Schedul
Stockholders' Deficit - Schedule of Common Stock Outstanding (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
May 31, 2018 | Feb. 28, 2018 | |
Equity [Abstract] | ||
Common stock, Issued and Outstanding, beginning of period | 51,532,364 | 51,487,373 |
Conversion of Series A Convertible Preferred Stock to common stock | 0 | 44,991 |
Common stock, Issued and Outstanding, end of period | 51,532,364 | 51,532,364 |
Conversion of Series A Convertible Preferred Stock to common stock, par value | $ 45 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) | 3 Months Ended | 12 Months Ended | ||||||||||
May 31, 2018Number$ / sharesshares | Feb. 28, 2018Number$ / sharesshares | Feb. 28, 2017Numbershares | Feb. 29, 2016Numbershares | Feb. 28, 2015Numbershares | Feb. 28, 2014Numbershares | Feb. 28, 2013Numbershares | Feb. 29, 2012Numbershares | Feb. 28, 2011Numbershares | Feb. 28, 2010Numbershares | Feb. 28, 2009Numbershares | Feb. 29, 2008Numbershares | |
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 | 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 | 51,532,364 | 51,532,364 | ||||||||||
Common stock, shares outstanding | 51,532,364 | 51,532,364 | 51,487,373 | |||||||||
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 | 14,997 | 0 | 10,000 | 3,000 | 151,000 | 18,000 | 0 | 102,000 | 51,900 | 237,000 | 102,300 |
Shares of common stock issued from conversion | 0 | 44,991 | 0 | 30,000 | 9,000 | 453,000 | 54,000 | 0 | 306,000 | 155,700 | 711,000 | 306,900 |
Preferred stock, cumulative dividend rate | 6.00% | 6.00% | ||||||||||
Accredited investors | Number | 0 | 1 | 0 | 1 | 1 | 9 | 2 | 0 | 4 | 4 | 12 | 10 |
Warrants - Schedule of Stockhol
Warrants - Schedule of Stockholders' Equity Note Warrants and Rights (Details) - $ / shares | 3 Months Ended | |
May 31, 2018 | Feb. 28, 2018 | |
Class of Warrant or Right [Line Items] | ||
Warrants | 7,839,784 | |
Exercisable warrants remaining | 7,839,784 | |
Share-for-Warrant Exchange | ||
Class of Warrant or Right [Line Items] | ||
Warrants | 427,729 | |
Exercise price | $ 0.04 | |
Remaining life (years) | 3 months | |
Exercisable warrants remaining | 427,729 | |
Warrants | Kentucky Debt Financing #2 | ||
Class of Warrant or Right [Line Items] | ||
Warrants | 309,503 | |
Exercise price | $ 0.214 | |
Remaining life (years) | 3 months | |
Exercisable warrants remaining | 309,503 | |
Warrants | Kentucky Debt Financing #1 | ||
Class of Warrant or Right [Line Items] | ||
Warrants | 2,623,951 | |
Exercise price | $ 0.04 | |
Remaining life (years) | 3 months | |
Exercisable warrants remaining | 2,623,951 | |
Warrants | Kentucky Crude Oil Project | ||
Class of Warrant or Right [Line Items] | ||
Warrants | 3,498,601 | |
Exercise price | $ 0.04 | |
Remaining life (years) | 3 months | |
Exercisable warrants remaining | 3,498,601 | |
12% Subordinated Notes | ||
Class of Warrant or Right [Line Items] | ||
Warrants | 980,000 | 980,000 |
Exercise price | $ 0.07 | $ 0.07 |
Remaining life (years) | 7 months | |
Exercisable warrants remaining | 980,000 |
Warrants - Schedule of Warrant
Warrants - Schedule of Warrant Activity (Details) | 3 Months Ended |
May 31, 2018$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward] | |
Warrants outstanding, beginning of period | 7,839,784 |
Issued | 0 |
Expired / Cancelled / Forfeited | 0 |
Warrants outstanding, end of period | 7,839,784 |
Warrants exercisable, end of period | 7,839,784 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date | |
Weighted average exercise price of warrants outstanding, beginning of period | $ / shares | $ 0.05 |
Weighted average exercise price of warrants outstanding, end of period | $ / shares | 0.05 |
Weighted average exercise price of warrants exercisable, end of period | $ / shares | $ 0.05 |
Warrants (Details Narrative)
Warrants (Details Narrative) - 12% Subordinated Notes | 3 Months Ended |
May 31, 2018USD ($)$ / shares | |
Weighted average exercise price | $ / shares | $ 0.05 |
Weighted average remaining life | 7 months |
Intrinsic value | $ | $ 0 |
Income Taxes - Income Tax Expen
Income Taxes - Income Tax Expense Benefit Reconciliation (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
May 31, 2018 | Feb. 28, 2018 | |
Income Tax Expense Benefit Continuing Operations Income Tax Reconciliation | ||
Computed at U.S. and state statutory rates | $ (211,652) | $ (981,966) |
Permanent differences | 93 | 29,060 |
New tax law adjustment | 0 | 2,912,689 |
Changes in valuation allowance | 211,559 | (1,959,783) |
Income tax expense (benefit) | $ 0 | $ 0 |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) | May 31, 2018 | Feb. 28, 2018 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 8,636,371 | $ 8,413,128 |
Crude oil and natural gas properties | 35,751 | 47,434 |
Stock based compensation | 66,187 | 66,187 |
Other | 27,838 | 27,838 |
Less valuation allowance | (8,766,147) | (8,554,587) |
Deferred tax assets, net | $ 0 | $ 0 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
May 31, 2018 | Feb. 28, 2018 | |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards, federal and state, approximate | $ 28,942,265 | |
NOL portion of loss incurred under the Tax Cuts and Jobs Act | $ 1,088,884 | |
Net operating loss carryforwards, expiration date | Feb. 28, 2024 | |
Approximate increase in valuation allowance | $ 211,559 | $ 1,959,783 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Rental Payments for Operating Leases (Details) | May 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
February 28, 2019 | $ 6,897 |
February 29, 2020 | 0 |
February 28, 2021 | 0 |
February 28, 2022 | 0 |
February 28, 2023 and thereafter | 0 |
Totals | $ 6,897 |