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<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>1.  Nature of Operations, Continuance of Business</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The principal business of Discovery Energy, Inc. (the “Company”) is the proposed exploration and development of the 584,651 gross acres (the “Prospect”) in the State of South Australia covered by Petroleum Exploration License (PEL) 512 (the “License”). The Prospect involves a 100% working interest in the preceding acreage, which overlies portions of the Cooper and Eromanga basins. The Company has not presently determined whether the Prospect contains any crude oil and natural gas reserves that are economically recoverable. While the Company’s present focus is on the Prospect, the Company may consider the acquisition of other attractive oil and gas properties under the right circumstances.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px 0pt 4.3pt; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">In May 2012, the Company incorporated a wholly-owned Australian subsidiary, Discovery Energy SA Pty Ltd (f/k/a Discovery Energy Ltd) for purposes of acquiring the License.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>2.  Going Concern</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The accompanying financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and has never paid dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity or debt financing to continue operations, the successful development of the Prospect or one or more alternative oil and gas properties, and the attainment of profitable operations. As of February 29, 2016, the Company has not generated any revenues and has an accumulated loss of $2,543,592 since inception. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>3.  Summary of Significant Accounting Policies</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-indent: 0.5in;"><b> </b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>a) Principles of Consolidation</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b> </b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b> </b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>b) Use of Estimates</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b> </b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>c) Basic and Diluted Net Income (Loss) Per Share</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company computes net income (loss) per share in accordance with FASB accounting standards for "Earnings <i>per Share",</i> which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period would be used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. There were no dilutive instruments outstanding at February 29, 2016 and February 28, 2015.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>d) Comprehensive Loss</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">FASB accounting standard for "Reporting Comprehensive Income," establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of February 29, 2016 the Company has recognized Currency translation adjustments as a component of Comprehensive loss (See Item i).</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>e) Cash and Cash Equivalents</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">The Company considers all highly liquid instruments with maturity of three months or less at the time of acquisition to be cash equivalents.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>f) Oil and Gas Property and Exploration Costs</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company is in the exploration stage and has not yet realized any revenue from its planned operations. It is primarily engaged in the proposed exploration and development of the Prospect and the extraction of crude oil and natural gas located there under. The Company applies the successful efforts method of accounting for oil and gas properties. Under this method, exploration costs such as exploratory geological and geophysical costs, delay rentals and exploratory overhead are expensed as incurred. Costs to acquire mineral interests in crude oil and natural gas properties, drill and equip exploratory wells that find proved reserves, and drill and equip development wells are capitalized. Acquisition costs of unproved leaseholds are assessed for impairment during the holding period and transferred to proved oil and gas properties to the extent associated with successful exploration activities. Significant undeveloped leases are assessed individually for impairment, based on the Company’s current exploration plans, and a valuation allowance is provided if impairment is indicated. Capitalized costs of producing crude oil and natural gas properties, along with support equipment and facilities, are amortized to expense by the unit-of-production method based on proved crude oil and natural gas reserves on a field-by-field basis, as estimated by qualified petroleum engineers.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>g) Long-lived Assets</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">In accordance with FASB accounting standard "Accounting <i>for the Impairment or Disposal of Long-Lived Assets",</i> the carrying value of long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>h) Fair Value of Financial Instruments and Derivative Financial Instruments</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company has adopted FASB’s accounting standards for Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments. The carrying amounts of cash, receivables, accounts payable and accrued liabilities, and shareholder loan approximate their fair values because of the short maturity of these items. Certain fair value estimates may be subject to and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments in the management of its foreign exchange, commodity price, or interest rate market risks.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>i) Income Taxes</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with FASB’s accounting standard for income taxes, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides a valuation allowance for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is not more likely than not.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company accounts for uncertain income tax positions in accordance with FASB’s accounting standard for Accounting for Uncertainty in Income Taxes, which requires that the Company recognize in the financial statements, the impact of a tax position, if that position is more likely than not of being sustained on examination by taxation authorities, based on the technical merits of the position.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>j) Foreign Currency Translation</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company's functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with FASB’s accounting standard for "Foreign <i>Currency Translation",</i> using the exchange rate prevailing at the balance sheet date. Non-monetary assets are translated at historical exchange rates, and revenue and expense items at the average rate of exchange prevailing during the period. Differences resulting from translation are presented in equity as Accumulated Other Comprehensive Income. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian and Australian dollars. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>k) Recent Accounting Pronouncements</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant effect on its financial statements.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>4. Related Party Transactions</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b> </b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">As of February 29, 2016 and February 28, 2015, the Company owed $123,508 and $134,299, respectively, to certain Company directors for reimbursement of expenses paid on behalf of the Company. In addition, as of February 29, 2016 and February 28, 2015, the Company owed $139,953 and $143,600, respectively, for promissory notes issued to various related parties. These amounts are unsecured, non-interest bearing and due on demand.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On December 29, 2014, the Company issued 302,000 shares of its common stock to related parties in exchange for the cancellation of $90,200 in debt. The conversion prices of the notes was $0.30 per share on the date of the transaction. The fair market value of the Company’s common stock was $0.40 on the date of the transaction. Accordingly, the Company recognized a loss of $30,200 on the exchange.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On January 6th, 2014, the Company entered into an unsecured demand note with Keith Spickelmier. See Note 6 below.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On January 15th, 2015, the Company entered into an unsecured demand note with William Begley. See Note 6 below.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On February 21st, 2015, the Company entered into an unsecured demand note with William Begley. See Note 6 below.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">During the fiscal year ended February 29, 2016, the Company entered into a series of notes with its two of its directors. These transactions are summarized in the table below and are further described in Note 6.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; border-collapse: collapse; width: 1248px; font-stretch: normal; font-size: 10pt;">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">Director</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">No. of Transactions</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">Transaction Type & Dates</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">Total Transaction Amount</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td></tr>
<tr style="vertical-align: bottom;">
<td style="text-align: justify;"> </td>
<td> </td>
<td style="text-align: center;"> </td>
<td> </td>
<td style="text-align: justify;"> </td>
<td> </td>
<td colspan="2" style="text-align: center;"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="width: 313px; text-align: justify;">Keith Spickelmier</td>
<td style="width: 13px;"> </td>
<td style="width: 200px; text-align: center;">1</td>
<td style="width: 13px;"> </td>
<td style="width: 449px; text-align: justify;">Company payment of 3 prior notes; 3/31/15</td>
<td style="width: 12px;"> </td>
<td style="width: 12px;">$</td>
<td style="width: 224px; text-align: right;">(50,000</td>
<td style="width: 12px;">)</td></tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: justify;">Keith Spickelmier</td>
<td> </td>
<td style="text-align: center;">4</td>
<td> </td>
<td>Additional notes; 11/20/15, 8/12/15, 12/2&4/16</td>
<td> </td>
<td>$</td>
<td style="text-align: right;">29,000</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="text-align: justify;">William E. Begley</td>
<td> </td>
<td style="text-align: center;">2</td>
<td> </td>
<td>Company payment of 3 prior notes; 6/9/15 & 7/3/15</td>
<td> </td>
<td>$</td>
<td style="text-align: right;">(14,000</td>
<td>)</td></tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: justify;">William E. Begley</td>
<td> </td>
<td style="text-align: center;">7</td>
<td> </td>
<td>Additional notes; 3/9/15, 1/19/16, 12/16/15, 1/15/16, 1/19/16, 2/3&4/16</td>
<td> </td>
<td>$</td>
<td style="text-align: right;">31,353</td>
<td> </td></tr></table>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>5. Oil and Gas Properties</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On May 19, 2014, the Company received notice from the Government of South Australia that this government had issued certain modifications to the License and suspended the License for a period of six months. Such a suspension functions like an extension. Under the amended License, the Company will be required to drill 7 exploratory wells rather than 12, as originally required. These required wells must be drilled in years 3, 4, and 5 (2, 2, and 3 wells, respectively). The amount of required 2D seismic was also reduced to 100 kilometers (in year 3) from 250 kilometers (in year 2) but the total 3D seismic work guaranteed increased to 500 square kilometers from 400 square kilometers. However, the 3D seismic survey requirement is spread over years 2, 3 and 4 (100, 200 and 200 sq. km. respectively). Subsequent to this modification and suspension, the Company received two additional six-month suspensions, one in February 2015 and in July 2015 and a one-year suspension effective in January 2016. In view of these modifications and suspensions, the Company’s remaining work commitment involves the following:</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">In view of these modifications and suspensions, the Company’s remaining work commitments involve the following:</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify; text-indent: 0.5in;"> </p>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; font-stretch: normal; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;" width="100%">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"> </td>
<td style="width: 0.25in;">*</td>
<td style="text-align: justify;">Year 2 ending April 27, 2017 - Conduct a new 3D seismic survey totaling at least 100 kilometers.</td></tr></table>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; font-stretch: normal; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;" width="100%">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"> </td>
<td style="width: 0.25in;">*</td>
<td style="text-align: justify;">Year 3 ending April 27, 2018 - Acquire new 2D seismic data totaling at least 100 kilometers, acquire 3D seismic data totaling at least 200 square kilometers and drill two wells.</td></tr></table>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; font-stretch: normal; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;" width="100%">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"> </td>
<td style="width: 0.25in;">*</td>
<td style="text-align: justify;">Year 4 ending April 27, 2019 - Acquire new 3D seismic data totaling at least 200 square kilometers and drill two wells.</td></tr></table>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; font-stretch: normal; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;" width="100%">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"> </td>
<td style="width: 0.25in;">*</td>
<td style="text-align: justify;">Year 5 ending April 27, 2020 - Drill three wells</td></tr></table>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>6. Notes Payable</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b> </b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">Two promissory notes were issued on October 26, 2012 to Liberty upon delivery of the License with aggregate principal amount of $650,000. The original terms of the notes were:</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px 0pt 56.1pt; text-indent: -27.5pt;"> </p>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; font-stretch: normal; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;" width="100%">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"> </td>
<td style="width: 0.25in;">(i)</td>
<td style="text-align: justify;">One note in the original principal amount of $500,000 originally due on April 26, 2013.</td></tr></table>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px 0pt 0.5in; text-align: justify; text-indent: -0.25in;"> </p>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; font-stretch: normal; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;" width="100%">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"> </td>
<td style="width: 0.25in;">(ii)</td>
<td style="text-align: justify;">The other note in the original principal amount of $150,000 originally due on July 26, 2013.</td></tr></table>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px 0pt 0.5in; text-align: justify; text-indent: -0.25in;"> </p>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; font-stretch: normal; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;" width="100%">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"> </td>
<td style="width: 0.25in;">(iii)</td>
<td style="text-align: justify;">Both notes accrued interest at a floating rate equal to the one-month term LIBOR rate, plus an additional 3%. Accrued interest amounting $24,426 to $7,290 is included in other liabilities as of February 29, 2016 and February 28, 2015, respectively.</td></tr></table>
<p style="font-family: "Times New Roman", Times, serif; font-size: 13.3333px; margin-top: 0px; margin-bottom: 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 13.3333px; margin-top: 0px; margin-bottom: 0px;">On March 10, 2014, the Liberty note with a total remaining balance of $542,294 was further amended wherein the maturity date was extended to May 12, 2014 (the “Initial Due Date”); provided, however, that if the Company makes prepayments in the aggregate amount of $250,000 prior to the Initial Due Date, then the due date for the remainder of the principal amount of and accrued interest on the consolidation note shall be extended until June 30, 2014. The note bears interest at a floating rate equal to the one-month term LIBOR rate, plus an additional 3%.  The Company considered whether the transaction was within the scope of ASC 470-60-55 <i>Accounting for <b>Troubled Debt</b> <b>Restructuring</b></i>, which states that if a Company is experiencing financial difficulties and a concession is granted, troubled debt restructuring accounting should be applied. The Company concluded the revised terms constituted a debt modification, rather than a debt extinguishment or a troubled debt restructuring.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">On March 18, 2014, the Company entered into an unsecured corporate demand note with related party, William Begley. The note was in the amount of $45,500, which included the amounts advanced by Mr. Begley in December 2013 and January 2014. Repayment of this note can be demanded, with 5-day’s notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first annual anniversary. The note is non-interest bearing.  On December 29, 2014 this note was converted into 151,667 shares of the Company’s common stock.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On March 31, 2014, the Company entered into unsecured corporate demand notes with two related parties, William Begley and Keith Spickelmier. Each note was in the amount of $25,000, and repayment can be demanded, with 5-day’s notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The notes are non-interest bearing. On December 29, 2014, Mr. Begley’s note in the amount of $25,000 was converted into 83,333 shares of the Company’s common stock.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On May 5, 2014, the Company entered into unsecured corporate demand notes with two related parties, William Begley and Keith Spickelmier. Each note was in the amount of $3,100, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The notes are non-interest bearing. On December 29, 2014, Mr. Begley’s note in the amount of $3,100 was converted into 10,333 shares of the Company’s common stock.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On May 8, 2014, the Liberty note with a total remaining balance of $542,294 was further amended wherein the maturity date was extended to July 11, 2014 (the “Initial Due Date”); provided, however, that if the Company makes prepayments in the aggregate amount of $250,000 prior to the Initial Due Date, then the due date for the remainder of the principal amount of and accrued interest on the consolidation note shall be extended until August 29, 2014. The note bears interest at a floating rate equal to the one-month term LIBOR rate, plus an additional 3%.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 13.3333px; margin: 0px;">On July 16, 2014, the Company entered into unsecured corporate demand note with a related party, Keith Spickelmier. The note was in the amount of $10,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 13.3333px; margin: 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><font style="font-size: 10pt; text-align: justify;">On July 18, 2014, the Company entered into an unsecured corporate demand note with a related parties, William Begley. The note was in the amount of $6,000, and repayment can be demanded, with 5-day’s notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The notes are non-interest bearing. On December 29, 2014, the note was converted into 20,000 shares of the Company’s common stock.</font></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On September 26, 2014, the Company entered into amendments of two previous unsecured corporate demand notes with related parties Keith Spickelmier and William Begley. Each note was in the amount of $7,500 and the maximum term was amended and extended to the second anniversary from the date of the note. None of the other provisions of the original notes were changed.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On September 29, 2014, the Company entered into unsecured corporate demand note with a related party, Keith Spickelmier. The note was in the amount of $16,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On December 16, 2014, the Company entered into an amendment of a previous unsecured corporate demand note with related party, Keith Spickelmier. The note was in the amount of $17,500 and the maximum term was amended and extended to the second anniversary from the date of the note. None of the other provisions of the original notes were changed.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On December 17, 2014, the Company entered into unsecured corporate demand note with two related parties, William Begley and Keith Spickelmier. Both of the notes were in the amount of $6,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px 0px 0px 4.4pt; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On December 20, 2014, the Company entered into an amendment of a previous unsecured corporate demand note with related party, Mark Thompson. The note was in the amount of $17,000 and the maximum term was amended and extended to the second anniversary from the date of the note. None of the other provisions of the original notes were changed.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On December 29, 2014 the Company issued 302,000 common shares at a deemed fair market value of $0.30 per share to William Begley, in exchange for the cancellation of all Promissory Notes owed, amounting to a $90,600 reduction in Promissory notes-related parties. The Company recognized a loss on the conversion of $30,200 as a result of the difference between the market price on the date of conversion of $0.40 per share and the deemed fair market value of $0.30 per share on the date of conversion.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On January 6, 2015, the Company entered into an amendment of a previous unsecured corporate demand note with related party, Keith Spickelmier. The note was in the amount of $25,000 and the maximum term was amended and extended to the second anniversary from the date of the note. None of the other provisions of the original notes were changed.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On January 12, 2015, the Company and Liberty amended the Consolidation Note so that the Initial Due Date will be March 2, 2015, and provided that if the Company makes prepayments in the aggregate amount of $250,000 prior to the new Initial Due Date of March 2, 2015, then the due date for the remainder of the principal amount of and accrued interest on the Consolidation Note would be extended until April 21, 2015. The Company considered whether the transaction was within the scope of ASC 470-60-55 <i>Accounting for <b>Troubled</b> <b>Debt</b> <b>Restructuring</b></i>, which states that if a Company is experiencing financial difficulties and a concession is granted, troubled debt restructuring accounting should be applied. The Company concluded the revised terms constituted a debt modification, rather than a debt extinguishment or a troubled debt restructuring.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">On January 15, 2015, the Company entered into an unsecured corporate demand note with William Begley. The note was in the amount of $6,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-align: justify;">On January 29, 2015, the Company entered into an unsecured corporate demand note with Keith Spickelmier, a related party. The note was in the amount of $2,500, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0px; text-indent: 0.5in;"><b> </b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 13.3333px; margin: 0px;">On February 21, 2015, the Company entered into an unsecured corporate demand note with William Begley, a related party. The note was in the amount of $2,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 13.3333px; margin: 0px;">   </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">These promissory notes had undergone a number of amendments, including extensions of the due dates. On September 26, 2013, these promissory notes were combined into a single consolidation promissory note (the “Consolidated Note”) in the original principal amount of $542,294, as some of the principal had been reduced and some interest had accrued. Effective January 5, 2016, the Company and Liberty Petroleum Corporation amended the Consolidated Note so that the initial due date will be May 5, 2016, and provided that if the Company makes prepayments in the aggregate amount of $250,000 prior to the new initial due date of May 5, 2016, then the due date for the remainder of the principal amount of and accrued interest on the Consolidated Note would be extended until July 5, 2016..</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On March 9, 2015, the Company entered into an unsecured corporate demand note with William Begley, a related party. The note was in the amount of $4,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On March 31, 2015, the Company repaid three unsecured corporate demand notes with Keith Spickelmier, a related party, totaling $50,000. The notes were dated September 26, 2013, December 16, 2013, and January 8, 2014 for $7,500, $17,500, and $25,000, respectively.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On May 5, 2015, the Company entered into an amendment of a previous unsecured corporate demand note with Keith Spickelmier. The note was in the amount of $3,100 and the maximum term was amended and extended to the second anniversary from the date of the note. None of the other provisions of the original notes were changed.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On June 9, 2015, the Company repaid an unsecured corporate demand note with William Begley totaling $2,000. The note was dated February 21, 2015.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">On July 3, 2015, the Company repaid two unsecured corporate demand notes with William Begley totaling $12,000. The notes were dated December 17, 2014 and January 1, 2015 for $6,000 each.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On August 11, 2015, the Company entered into an unsecured corporate demand note with William Begley. The note was in the amount of $3,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On November 20, 2015, the Company entered into an unsecured corporate demand note with Keith Spickelmier. The note was in the amount of $10,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On December 16, 2015, the Company entered into an unsecured corporate demand note with William E. Begley. The note was in the amount of $5,353, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On January 15, 2016, the Company entered into an unsecured corporate demand note with Keith Spickelmier. The note was in the amount of $5,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On January 15, 2016, the Company entered into an unsecured corporate demand note with William E. Begley. The note was in the amount of $1,500, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On January 19, 2016, the Company entered into an unsecured corporate demand note with William E. Begley. The note was in the amount of $3,500, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On February 2, 2016, the Company entered into an unsecured corporate demand note with Keith Spickelmier. The note was in the amount of $7,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On February 3, 2016, the Company entered into an unsecured corporate demand note with William E. Begley. The note was in the amount of $4,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On February 4, 2016, the Company entered into an unsecured corporate demand note with William E. Begley. The note was in the amount of $10,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On February 4, 2016, the Company entered into an unsecured corporate demand note with Keith Spickelmier. The note was in the amount of $7,000, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>7. Income Taxes</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">The significant components of deferred income tax assets at February 29, 2016 and February 28, 2015 are as follows:</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-indent: 0.5in;"> </p>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; border-collapse: collapse; width: 1248px; font-stretch: normal; font-size: 10pt;">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap" style="text-align: justify;"> </td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">February 29,<br/>
2016</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">February 28,<br/>
2015</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="text-align: justify;">Deferred Tax Asset</td>
<td> </td>
<td> </td>
<td style="text-align: right;"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="width: 874px; text-align: justify;">Capitalized Geological/Geophysical</td>
<td style="width: 13px;"> </td>
<td style="width: 13px;"> </td>
<td style="width: 150px; text-align: right;">18,728</td>
<td style="width: 13px;"> </td>
<td style="width: 12px;"> </td>
<td style="width: 12px;"> </td>
<td style="width: 149px; text-align: right;">18,618</td>
<td style="width: 12px;"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="text-align: justify;">Federal Net Operating Loss</td>
<td> </td>
<td> </td>
<td style="text-align: right;">713,027</td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;">632,368</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: justify; padding-bottom: 1pt;">Less: Valuation Allowance</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">$</td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black; text-align: right;">(731,755</td>
<td style="padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">$</td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black; text-align: right;">(650,986</td>
<td style="padding-bottom: 1pt;">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="text-align: justify; padding-bottom: 1pt;">Net Deferred Tax Asset</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">$</td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black; text-align: right;">-</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">$</td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black; text-align: right;">-</td>
<td style="padding-bottom: 1pt;"> </td></tr></table>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The amount taken into income as deferred income tax assets must reflect that portion of the income tax loss carry forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide a full valuation allowance against all available income tax loss carry forwards. The Company has recognized a valuation allowance for the deferred income tax asset since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The valuation allowance is reviewed annually. When circumstances change and which cause a change in management's judgment about the realize-ability of deferred income tax assets, the impact of the change on the valuation allowance is generally reflected in current income.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">Management has considered the likelihood and significance of possible penalties associated with its current and intended filing positions and has determined, based on their assessment, that such penalties, if any, would not be expected to be material.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">No provision for income taxes has been provided in these financial statements due to the net loss for the years ended February 29, 2016 and February 28, 2015. At February 29, 2016, the Company has net operating loss carry forwards, which expire commencing in 2030, totaling approximately $2,097,137.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>8. Common stock</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">In connection with its agreement with Chrystal (see footnote 1 above), the Company issued 6,472,425 shares of its common stock pursuant to a Restricted Share Award Agreement. Generally, if Chrystal fails to present timely a fund raising transaction that the Company accepts, these shares will be forfeited and returned to the Company. As the delivery of these shares is contingent, they are not considered outstanding within the context of these financial statements nor are they considered in the computation of fully diluted earnings per share. On May 14, 2014, the Company entered into a second amendment of its agreement with Chrystal Capital Partners LLP. This amendment eliminated from success fee consideration certain parties that had previously been eligible for such treatment had any one of them invested in Discovery’s equity, debt or other capital instrument before October 31, 2014. It also provides for the return to the Company of Share Certificate No. 1070, representing 6,472,425 Common Shares. Following such return, this Share Certificate will be canceled and a new certificate for 248,800 Common Shares will be issued to Chrystal, which will have the full power of ownership over this new certificate. The cancelation and reissuance occurred on May 21, 2014. The fair market value of the Common Shares was $99,519 on the date of issuance.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On May 8, 2014, the board of directors approved a private placement program offering of up to 750,000 Common Shares at a price of $0.40 per share. As of May 23, 2014, the Company had received from three separate investors funds totaling $95,000 pursuant to this offering and issued 237,500 Common Shares.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On December 29, 2014 the Company agreed to convert $90,600 in unsecured promissory notes held by William Begley into 302,000 shares of the Company’s common stock.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On March 20, 2015, the Company received $200,000 from a private investor. The 666,667 Common Shares were issued on March 23, 2015 at a price of $0.30.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On June 15, 2015, the board of directors approved a private placement of up to 3,000,000 Common Shares at a price of $0.50 per share. On June 26, 2015, the Company received $50,000 from a private investor and subsequently issued 100,000 Common Shares at a price of $0.50 per share pursuant to this private placement.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On August 25, 2015, the Company received $50,000 from a private investor. The 83,334 Common Shares were issues on September 4, 2015 at a price of $0.60 per share.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On February 15, 2016, the Company received $20,000 from a private investor. The 100,000 Common Shares were issued on February 22, 2016 at a price of $0.20 per share.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>9. Subsequent Events</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On April 20, 2016, the Company entered into an unsecured corporate demand note with William E. Begley. The note was in the amount of $1,800, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">Effective May 5, 2016, the Company and Liberty amended the Consolidation Note so that the all outstanding principal of this Note and interest that has accrued or hereafter accrues on such Note shall be due in a single balloon payment on July 20, 2016, and provided that on or prior to the Due Date of July 20, 2016, the Note can be paid in its entirety by Maker’s a) payment in cash of $300,000, plus the amount of accrued interest and b) issuance of 1,150,895 restricted shares of Maker’s common stock.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">On May 13, 2016, the Company entered into an unsecured corporate demand note with Keith Spickelmier. The note was in the amount of $4,600, and repayment can be demanded, with 5-days notice, at any time after the passage of 20 business days from the date of the note. If no demand is made on the note, the note becomes due and payable in full on its first anniversary. The note is non-interest bearing.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">One May 27, 2016, the Company sold $3.5 million senior secured convertible debentures to DEC Funding LLC. Among other provisions, the sale transaction included warrants to purchase 13,125,000 shares of the Company’s common stock at $0.20. Further information regarding the details of this transaction is found in Form 8K filed with the Securities and Exchange Commission on June 3, 2016.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>a) Principles of Consolidation</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b> </b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>b) Use of Estimates</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b> </b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>c) Basic and Diluted Net Income (Loss) Per Share</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company computes net income (loss) per share in accordance with FASB accounting standards for "Earnings <i>per Share",</i> which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period would be used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. There were no dilutive instruments outstanding at February 29, 2016 and February 28, 2015.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>d) Comprehensive Loss</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">FASB accounting standard for "Reporting Comprehensive Income," establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of February 29, 2016 the Company has recognized Currency translation adjustments as a component of Comprehensive loss (See Item i).</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>e) Cash and Cash Equivalents</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">The Company considers all highly liquid instruments with maturity of three months or less at the time of acquisition to be cash equivalents.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>f) Oil and Gas Property and Exploration Costs</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company is in the exploration stage and has not yet realized any revenue from its planned operations. It is primarily engaged in the proposed exploration and development of the Prospect and the extraction of crude oil and natural gas located there under. The Company applies the successful efforts method of accounting for oil and gas properties. Under this method, exploration costs such as exploratory geological and geophysical costs, delay rentals and exploratory overhead are expensed as incurred. Costs to acquire mineral interests in crude oil and natural gas properties, drill and equip exploratory wells that find proved reserves, and drill and equip development wells are capitalized. Acquisition costs of unproved leaseholds are assessed for impairment during the holding period and transferred to proved oil and gas properties to the extent associated with successful exploration activities. Significant undeveloped leases are assessed individually for impairment, based on the Company’s current exploration plans, and a valuation allowance is provided if impairment is indicated. Capitalized costs of producing crude oil and natural gas properties, along with support equipment and facilities, are amortized to expense by the unit-of-production method based on proved crude oil and natural gas reserves on a field-by-field basis, as estimated by qualified petroleum engineers.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>g) Long-lived Assets</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">In accordance with FASB accounting standard "Accounting <i>for the Impairment or Disposal of Long-Lived Assets",</i> the carrying value of long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>h) Fair Value of Financial Instruments and Derivative Financial Instruments</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company has adopted FASB’s accounting standards for Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments. The carrying amounts of cash, receivables, accounts payable and accrued liabilities, and shareholder loan approximate their fair values because of the short maturity of these items. Certain fair value estimates may be subject to and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments in the management of its foreign exchange, commodity price, or interest rate market risks.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify; text-indent: 0.5in;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>i) Income Taxes</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with FASB’s accounting standard for income taxes, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides a valuation allowance for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is not more likely than not.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company accounts for uncertain income tax positions in accordance with FASB’s accounting standard for Accounting for Uncertainty in Income Taxes, which requires that the Company recognize in the financial statements, the impact of a tax position, if that position is more likely than not of being sustained on examination by taxation authorities, based on the technical merits of the position.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>j) Foreign Currency Translation</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">The Company's functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with FASB’s accounting standard for "Foreign <i>Currency Translation",</i> using the exchange rate prevailing at the balance sheet date. Non-monetary assets are translated at historical exchange rates, and revenue and expense items at the average rate of exchange prevailing during the period. Differences resulting from translation are presented in equity as Accumulated Other Comprehensive Income. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian and Australian dollars. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"><b>k) Recent Accounting Pronouncements</b></p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant effect on its financial statements.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;">During the fiscal year ended February 29, 2016, the Company entered into a series of notes with its two of its directors. These transactions are summarized in the table below and are further described in Note 6.</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-align: justify;"> </p>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; border-collapse: collapse; width: 1248px; font-stretch: normal; font-size: 10pt;">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">Director</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">No. of Transactions</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">Transaction Type & Dates</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">Total Transaction Amount</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td></tr>
<tr style="vertical-align: bottom;">
<td style="text-align: justify;"> </td>
<td> </td>
<td style="text-align: center;"> </td>
<td> </td>
<td style="text-align: justify;"> </td>
<td> </td>
<td colspan="2" style="text-align: center;"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="width: 313px; text-align: justify;">Keith Spickelmier</td>
<td style="width: 13px;"> </td>
<td style="width: 200px; text-align: center;">1</td>
<td style="width: 13px;"> </td>
<td style="width: 449px; text-align: justify;">Company payment of 3 prior notes; 3/31/15</td>
<td style="width: 12px;"> </td>
<td style="width: 12px;">$</td>
<td style="width: 224px; text-align: right;">(50,000</td>
<td style="width: 12px;">)</td></tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: justify;">Keith Spickelmier</td>
<td> </td>
<td style="text-align: center;">4</td>
<td> </td>
<td>Additional notes; 11/20/15, 8/12/15, 12/2&4/16</td>
<td> </td>
<td>$</td>
<td style="text-align: right;">29,000</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="text-align: justify;">William E. Begley</td>
<td> </td>
<td style="text-align: center;">2</td>
<td> </td>
<td>Company payment of 3 prior notes; 6/9/15 & 7/3/15</td>
<td> </td>
<td>$</td>
<td style="text-align: right;">(14,000</td>
<td>)</td></tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: justify;">William E. Begley</td>
<td> </td>
<td style="text-align: center;">7</td>
<td> </td>
<td>Additional notes; 3/9/15, 1/19/16, 12/16/15, 1/15/16, 1/19/16, 2/3&4/16</td>
<td> </td>
<td>$</td>
<td style="text-align: right;">31,353</td>
<td> </td></tr></table>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;">The significant components of deferred income tax assets at February 29, 2016 and February 28, 2015 are as follows:</p>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px; text-indent: 0.5in;"> </p>
<table cellpadding="0" cellspacing="0" style="font-family: "Times New Roman", Times, serif; border-collapse: collapse; width: 1248px; font-stretch: normal; font-size: 10pt;">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap" style="text-align: justify;"> </td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">February 29,<br/>
2016</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">February 28,<br/>
2015</td>
<td nowrap="nowrap" style="padding-bottom: 1pt;"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="text-align: justify;">Deferred Tax Asset</td>
<td> </td>
<td> </td>
<td style="text-align: right;"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="width: 874px; text-align: justify;">Capitalized Geological/Geophysical</td>
<td style="width: 13px;"> </td>
<td style="width: 13px;"> </td>
<td style="width: 150px; text-align: right;">18,728</td>
<td style="width: 13px;"> </td>
<td style="width: 12px;"> </td>
<td style="width: 12px;"> </td>
<td style="width: 149px; text-align: right;">18,618</td>
<td style="width: 12px;"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="text-align: justify;">Federal Net Operating Loss</td>
<td> </td>
<td> </td>
<td style="text-align: right;">713,027</td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;">632,368</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white;">
<td style="text-align: justify; padding-bottom: 1pt;">Less: Valuation Allowance</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">$</td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black; text-align: right;">(731,755</td>
<td style="padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">$</td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black; text-align: right;">(650,986</td>
<td style="padding-bottom: 1pt;">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);">
<td style="text-align: justify; padding-bottom: 1pt;">Net Deferred Tax Asset</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">$</td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black; text-align: right;">-</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black;">$</td>
<td style="border-bottom-width: 1pt; border-bottom-style: solid; border-bottom-color: black; text-align: right;">-</td>
<td style="padding-bottom: 1pt;"> </td></tr></table>
<p style="font-family: "Times New Roman", Times, serif; font-size: 10pt; font-stretch: normal; margin: 0pt 0px;"> </p>
2
650000
LIBOR
.03
500000
150000
2013-04-26
2013-07-26
24426
7290
2014-05-12
LIBOR
.03
250000
2014-06-30
542294
45500
151667
83333
10333
20000
302000
.30
90600
30200
.40
25000
25000
3100
3100
2014-07-11
LIBOR
.03
542294
250000
2014-08-29
10000
7500
7500
17500
6000
17000
25000
2015-03-02
250000
2015-04-21
6000
2500
2000
250000
542294
2016-05-05
250000
2016-07-05
4000
50000
7500
17500
25000
12000
3000
10000
5353
5000
3500
7000
4000
10000
7000
0
2097137
2030
18728
18618
713027
731755
632368
650986
6472425
248800
99519
750000
.40
95000
237500
90600
302000
200000
666667
.30
3000000
.50
50000
100000
.50
.60
50000
83334
.20
20000
100000
1800
4600
300000
1150895
3500000
13125000
.20
140189501
90600
2000