EX-99 4 exhibit993.htm EXHIBIT 99.3 Exhibit 99.3

Exhibit 99.3

 

 

DAYBREAK OIL AND GAS, INC.

AND

REABOLD CALIFORNIA, LLC.

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

as of

FEBRUARY 28, 2022

 

 

TABLE OF CONTENTS

 

 

 

   
  Page No.
   
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET as of FEBRUARY 28, 2022 2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE TWO MONTHS ENDED FEBRUARY 28, 2022 4
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED FEBRUARY 28, 2022 5
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6

 

 

 

 

 

1 

 

 

 

 

  (b) Pro forma financial information

 

DAYBREAK OIL AND GAS, INC. AND REABOLD CALIFORNIA, LLC

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

FEBRUARY 28, 2022

 

    Daybreak     Reabold    

Pro Forma

Adjustment

     Notes   Combined  
ASSETS                                    
CURRENT ASSETS:                                    
Cash and cash equivalents   $ 139,573     $ 324,484     $ —         $ 464,057  
Restricted cash     —         250,000       —           250,000  
Accounts receivable:     203,066       93,469       —           296,535  
Prepaid expenses and other current assets     74,012       30,262       (27,462 )   (1)     76,812  
Total current assets     416,651       698,215       (27,462 )         1,087,404  
                                     
LONG-TERM ASSETS:                                    
Crude oil & natural gas properties     536,032       6,702,130       (2,007,567 )   (2)     5,230,595  
Goodwill crude oil and natural gas properties     —         —         2,168,600     (3)     2,168,000  
Other long-term assets     23,021       —         —             23,021  
Total long-term assets     559,053       6,702,130       161,033         7,422,216  
Total assets   $ 975,704     $ 7,400,345     $ 133,571       $ 8,509,620  
                                     
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)                                    
CURRENT LIABILITIES:                                    
Accounts payable and other accrued liabilities   $ 1,874,576     $ 258,165       263,619     (4)     2,396,360  
Notes payable     721,977       —         —             721,977  
Notes payable – related party     —       6,455,606       (6,455,606 )   (5)     —  
Line of credit     808,182       —         (808,182     (6)     —  
Total current liabilities     3,404,735       6,713,771       (7,000,169 )         3,118,337  
                                     
LONG TERM LIABILITIES:                                    
Notes payable     865,608       —         —             865,608  
Asset retirement obligation     52,565       56,100       98,033     (7)     206,698  
Total long-term liabilities     918,173       56,100       98,033           1,072,306  
Total liabilities     4,322,908       6,769,871       (6,902,136 )         4,190,643  
                                     
COMMITMENTS AND CONTINGENCIES                                    
                                     
STOCKHOLDER’S / MEMBERS’ EQUITY (DEFICIT):                                    
Common stock     67,802       —       289,089     (8)     356,891  
Additional paid-in capital     26,115,450       —       8,938,580     (9)     35,054,030  
Member’s Equity     —         2,208,939       (2,208,939 )   (10)     —  
Accumulated deficit (retained earnings)     (29,530,456 )     (1,578,465 )     16,977     (11)     (31,091,944 )
Total stockholders’ / member’s equity (deficit)     (3,347,204 )     630,474       7,035,707           4,318,977  
Total liabilities and stockholders’ equity   $ 975,704     $ 7,400,345     $ 133,571         $ 8,509,620  

 

  

The accompanying notes are an integral part of these unaudited pro forma financial statements.

 

2 

 

 

  

  (1) Adjustment represents value of oil inventory that will no longer be presented in keeping with standard industry practices.

  (2) Adjustment represents the change in valuation of O&G properties acquired in the transaction (see Note 2).

  (3) Adjustment represents the goodwill in O&G properties from the transaction (see Note 2).

  (4) Adjustment represents the reimbursement ($263,619) owed to Reabold per terms of the acquisition (see Note 2).

  (5) Adjustment represents the elimination of the Reabold related party debt ($6,455,606) from the sale of O&G properties.

  (6) Adjustment represents the payoff of the Daybreak line of credit balance ($808,182) with proceeds from the stock sale.

  (7) Adjustment represents recognition of increase in ARO liability ($98,033) from the acquisition of O&G properties.

  (8) Adjustment represents the par value of the common stock issued for the acquisition of O&G properties and sale of stock for funding (see Note 5).

  (9) Adjustment represents the excess of capital received over the par value of the common stock issued for the acquisition of O&G properties and sale of stock for funding (see Note 5).

  (10) Adjustment represents elimination of the acquired company’s member’s equity ($2,208,939) through the acquisition.

  (11) Adjustment represents the recognition of the elimination of the acquired company’s accumulated deficit ($1,578,465) and the change in oil inventory reporting ($27,462) and the net valuation adjustment ($1,622,904) and change in valuation of O&G properties.

 

 

 

 

 

 

 

3 

 

 

 

 

DAYBREAK OIL AND GAS, INC. AND REABOLD CALIFORNIA, LLC

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE TWO MONTHS ENDED FEBRUARY 28, 2022

 

    Daybreak     Reabold    

Pro Forma

Adjustment

     Notes     Combined  
REVENUE:                                        
Crude oil sales   $ 150,883     $ 209,888     $ —               $ 360,771  
Natural gas sales     —         3,436       —                 3,436  
Total crude oil and natural gas sales     150,883       213,324       —                 364,207  
                                         
OPERATING EXPENSES:                                        
Production     44,000       138,953       —                 182,953  
Exploration and drilling     55,978       —         —                 55,978  
Depreciation, depletion and amortization     5,327       —         —                 5,327  
General and administrative     100,100       (1,730 )     —                 98,370  
Total operating expenses     205,405       137,223       —                 342,628  
OPERATING LOSS     (54,522 )     76,101       —               21,579  
                                         
OTHER INCOME (EXPENSE):                                        
Total other expenses     (28,398 )     —         —                 (28,398 )
                                         
NET LOSS     (82,920 )     76,101       —               (6,819 )
                                         
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS   $ (82,920 )   $ 76,101     $ —             $ (6,819 )
                                         
NET LOSS PER COMMON SHARE                                        
Basic and diluted   $ (0.001 )   $ —       $ —             $ (0.0001 )
                                         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                                        
Basic and diluted     64,956,636       —         4,899,821       (1)       69,856,457  

 

 

The accompanying notes are an integral part of these unaudited pro forma financial statements.

 

 

  (1) Adjustment represents the increase in the weighted average shares outstanding because of the 289,089,489 common stock shares issued related to the acquisition and stock sale for the acquisition.

 

 

4 

 

 

 

DAYBREAK OIL AND GAS, INC. AND REABOLD CALIFORNIA, LLC

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE TWELVE MONTHS ENDED FEBRUARY 28, 2022

 

    Daybreak     Reabold    

Pro Forma

Adjustment

     Notes     Combined  
REVENUE:                                      
Crude oil sales   $ 680,107     $ 1,286,559     $ —           $ 1,966,666  
Natural gas sales     —         24,434       —             24,434  
Total crude oil and natural gas sales     680,107       1,310,993       —             1,991,100  
                                       
OPERATING EXPENSES:                                      
Production     231,275       983,565       —             1,214,840  
Exploration and drilling     56,213       —         —             56,213  
Depreciation, depletion and amortization     49,590       492,330       —             541,920  
General and administrative     603,808       110,679       —             714,487  
Total operating expenses     940,886       1,586,574       —             2,527,460  
OPERATING LOSS     (260,779 )     (275,581 )     —             (536,360 )
                                       
OTHER INCOME (EXPENSE):                                      
Interest expense, net     (220,085 )     (12,378 )     —             (232,463 )
Gain on asset disposal and debt forgiveness     82,414       —       —             82,414  
Total other expenses     (137,671 )     (12,378 )     —             (150,049 )
                                       
NET LOSS     (398,450 )     (287,959 )     —             (686,409 )
                                       
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS   $ (398,450 )   $ —       $ —           $ (686,409 )
                                       
NET LOSS PER COMMON SHARE                                      
Basic and diluted   $ (0.01 )   $ —       $ —           $ (0.011 )
                                       
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                                      
Basic and diluted     61,548,414       —         792,100     (1)       62,340,514  

 

 

The accompanying notes are an integral part of these unaudited pro forma statements.

 

 

  (1) Adjustment represents the increase in the weighted average shares outstanding because of the 289,089,489 common stock shares issued related to the acquisition and stock sale for the acquisition.

 

5 

 

 

  

DAYBREAK OIL AND GAS, INC. AND REABOLD CALIFORNIA, LLC

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 — BASIS OF PRESENTATION:

 

The unaudited pro forma condensed consolidated balance sheet has been prepared by applying pro forma adjustments to Daybreak Oil and Gas, Inc. (the “Company”) and Reabold California, LLC (“Reabold”) unaudited consolidated balance sheets as of February 28, 2022.

 

The unaudited pro forma condensed consolidated statement of operations for the two months ended February 28, 2022 has been prepared from the Company’s and Reabold’s unaudited consolidated statement of operations for the two months ended February 28, 2022.

 

The Company’s audited consolidated financial statements and Reabold’s audited financial statements have been used in the preparation of the unaudited pro forma consolidated statement of operations for the twelve months ended February 28, 2022.

 

 

NOTE 2 — BUSINESS ACQUISITION:

 

On October 20, 2021, the Company entered into an Equity Exchange Agreement and Amended on February 14, 2022 for the acquisition of Reabold, a wholly owned subsidiary of Gaelic Resources Ltd. The acquisition was finalized by the Company on May 25, 2022. The aggregate purchase price consisted of (i) 160,964,489 shares of Daybreak common stock valued at $6,599,544 and (ii) reimbursement to Reabold Resources Plc of $263,619 which had previously been expended in well workover projects by Reabold.

 

Recognized Amount of Identifiable Assets to be Acquired and Liabilities Assumed

 

The Company has performed a preliminary valuation analysis of the fair market value of the Reabold assets to be acquired and the liabilities to be assumed. Using the total consideration for the acquisition, the Company has estimated the allocation to such assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as if the acquisition closed on February 28, 2022.

 

Identifiable Assets:

 

Valuation of proved developed crude oil and natural gas properties   $ 4,144,828  
Valuation of proved undeveloped crude oil and natural gas properties     549,735  
Total valuation of proved crude oil and natural gas properties     4,694,563  
         
Intangible asset – Goodwill O&G properties     2,168,600  
Total Identifiable Assets Acquired     6,863,163  
         
Notes payable     263,619  
         
Total Liabilities Assumed     263,619  
         
Total Identifiable Net Assets   $ 6,599,544  

 

This preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma condensed consolidated balance sheet and pro forma condensed consolidated statement of operations. The pro forma condensed consolidated balance sheet includes the impact of the transaction cost of $6,599,544, but is not included in the pro forma condensed consolidated statement of operations as this is a non-recurring charge. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (1) changes in fair value of property and equipment, (2) changes in allocations to intangible assets such as permits and/or goodwill and (3) other changes to assets and liabilities.

 

6 

 

 

Depreciation, amortization and abandonment costs have been provided for property and equipment and finite tangible assets based on the preliminary purchase price allocation.

 

All significant intercompany balances have been eliminated in consolidation.

 

 

NOTE 3 — RESERVES ACQUIRED:

 

The table below contains our estimates of the net quantities of proved developed reserves, and estimates of future net cash flows covering the interests that were acquired. Additionally, we did acquire undeveloped locations that are believed to have reserves that are not shown below in accordance with following the guidance provided by Rule 4-10 of Regulation S-K. The estimates below are derived from a reserve report dated May 31, 2022 that was prepared for the Company by a third party.

 

    Net Oil, Bbl   Net Gas, Mcf   Future Net Revenue   Present Worth 10%
Proved developed   269,530   46,970   $12,078,990   $7,650,080

 

 

NOTE 4 — CASH TRANSACTION EXPENSES RELATED TO ACQUISITION:

 

Purpose   Amount  
Acquisition consulting   $ 384,916  
Funding fees     640,625  
Total cash transaction fees   $ 1,025,541  

 

 

NOTE 5 — COMMON STOCK ISSUANCES RELATED TO ACQUISITION:

 

The table below shows the purpose and number of shares issued for the acquisition of oil and gas properties and the related funding received in regards to the acquisition transaction from the sale of common stock.

 

    Approximate     Common Stock     Additional     Total  
Purpose   Price per Share     Shares     Par Value     Paid-In Capital     Valuation  
Acquisition of O&G properties   $ 0.04       160,964,489     $ 160,964     $ 6,438,580     $ 6,599,544  
Sale of common stock     0.02       128,125,000       128,125       2,500,000       2,628,125  
Total stock issuance for acquisition   $ 0.03       289,089,489     $ 289,089     $ 8,938,580     $ 9,227,669  

 

The issuance of common stock for the acquisition of oil and gas properties and the sale of common stock for funding purposes as a part of the terms of the acquisition were to different unrelated parties.

 

 

 

 

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