Item 1.01 Entry into a Material Definitive Agreement.
Effective as of May 24, 2022, Daybreak Oil and Gas, Inc. (OCT PINK:DBRM), a
Washington corporation ("Daybreak" or the "Company"), entered into an amendment
(the "Amendment") with Gaelic Resources Ltd., a private company incorporated in
the Isle of Man and the 100% owner of Reabold ("Gaelic"), to amend the Equity
Exchange Agreement (the "Exchange Agreement") dated as of October 20, 2021 and
amended on February 22, 2022 by and between Daybreak, Reabold California, LLC, a
California limited liability company ("Reabold"), and Gaelic. Pursuant to the
Amendment, Daybreak and Gaelic agreed to amend the "Long-Stop Date" set forth in
the Exchange Agreement from April 29, 2022 to May 31, 2022 (the "Long-Stop
Date"), meaning Daybreak will not be obligated to issue $500,000 worth of its
common stock to Gaelic at the closing due to the transaction closing after the
Long-Stop Date. The parties also agreed that, in lieu of Daybreak's prior
agreement to pay Gaelic $250,000 following the closing of the transactions
contemplated by the Exchange Agreement, it would instead, within 60 days
following the closing, pay an amount equal to Reabold's cash balance at closing
plus $81,000 of approved capital expenditures, for a total payment of
$263,619.24.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The information in Item 1.01 is incorporated by reference herein. On May 25,
2022, Daybreak, Reabold, and Gaelic closed the transactions contemplated by the
Exchange Agreement. At the closing, (i) Gaelic irrevocably assigned and
transferred all of its ownership interests in Reabold to Daybreak, and (ii)
Daybreak authorized the issuance of 160,964,489 shares of its common stock to
Gaelic, as a result of which Reabold became a wholly-owned subsidiary of
Daybreak and Gaelic became the largest shareholder of Daybreak (the foregoing
transaction, the "Equity Exchange"). At the closing, the parties also entered
into (a) a voting agreement by and among Daybreak, Gaelic and Daybreak's
President and Chief Executive Officer, James F. Westmoreland, where, on the
terms therein, Daybreak and the shareholder parties thereto agree to nominate a
person designated by Gaelic and a person designated by James F. Westmoreland to
Daybreak's board of directors, and the parties thereto agree to vote their
shares in favor of such candidates, (b) a registration rights agreement between
Daybreak, Gaelic, Portillion Capital Ltd., a private company incorporated in the
United Kingdom ("Portillion"), and Kamran Sattar, the principal of Portillion
and the holder of 27,764,706 shares of common stock of Daybreak due to his
conversion of a previously disclosed convertible promissory note issued by the
Company on February 15, 2022, and (c) indemnification agreements between Company
and its directors. The closing of the Equity Exchange and the transactions
contemplated thereby was approved by the shareholders of the Company at the
Special Meeting of Shareholders held on May 20, 2022.
Item 3.02 Unregistered Sales of Equity Securities.
On May 26, 2022, Daybreak completed the sale of 125,000,000 shares of its common
stock, par value $0.001, to Portillion for a purchase price of $0.02 per share,
or $2,500,000 in the aggregate, pursuant to the previously disclosed
Subscription Agreement dated May 5, 2022 (the "Capital Raise"). In connection
with the closing of the Capital Raise, Daybreak also paid Portillion (1) an
incentive fee equal to 20% of the subscription amount, payable 17.5% in cash
($437,000) and 2.5% in additional shares of common stock (3,125,000 shares); and
(2) an equity exchange fee equal to 3% of the subscription amount.
The common stock was issued pursuant to the exemption from registration
promulgated under Regulation S of the Securities Act of 1933, as amended. The
sale and purchase of the shares did not involve any public offering, the offer
and sale of the shares took place outside the United States, Daybreak reasonably
believes the purchaser to be an "accredited investor" as that term is defined
under Rule 501 of Regulation D, the purchaser had access to information about
Daybreak and its investment, the purchaser took the securities for investment
and not resale, and Daybreak took appropriate measures to restrict the transfer
of the securities.
Item 5.01 Changes in Control of the Registrant.
The information in Items 1.01, 2.01, and 3.02 are incorporated by reference
herein. As a result of the closings of the Equity Exchange and the Capital
Raise, a change in control of Daybreak has occurred, in that more than 50% of
the issued and outstanding shares of common stock of Daybreak are now held by
persons other than the shareholders of Daybreak immediately prior to the
closings of the transactions. The shares of common stock previously owned, and
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issued pursuant to the transactions contemplated by the Equity Exchange and the
Capital Raise as of May 26, 2022, are as follows:
Shares of Common Stock Owned Percentage Ownership
Daybreak Existing Shareholders 67,802,273 18%
Gaelic Resources Ltd 160,964,489 42%
Portillion Capital Ltd 128,125,000 33%
Kamran Sattar (affiliate of 27,764,706 7%
Portillion Capital Ltd)
Total 384,656,468 100%
The source of funds of Portillion's purchase of shares of the Company was
CitiBank.
Gaelic is a party to the Voting Agreement described under Item 2.01 above.
Daybreak is not aware of any arrangements, including any pledge by any person of
securities of the Company or any of its parents, the operation of which may at a
subsequent date result in another change in control of the Company.
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Item 9.01 Financial Statements and Exhibits.
The financial statements and pro forma financial information required by Item
9.01(a) and (b) will be filed by an amendment to this report not later than
71calendar days after the date of this report.
(d) Exhibits.
Number Exhibit
99.1* Press Release issued by Daybreak Oil and Gas, Inc., on May 26, 2022 .
104 Cover Page Interactive Data File (formatted in Inline XBRL)
* Filed herewith.
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