1164256--5/28/2010--DAYBREAK_OIL_&_GAS

related topics

{gas, price, oil}

{stock, price, share}

{personnel, key, retain}

{control, financial, internal}

{loss, insurance, financial}

{interest, director, officer}

{cost, regulation, environmental}

{cost, contract, operation}

{debt, indebtedness, cash}

{investment, property, distribution}

We have a limited operating history on which to base an investment decision. The oil and gas business is highly competitive, placing Daybreak at an operating disadvantage. Oil and gas prices are volatile. Declines in commodity prices have adversely affected, and in the future may adversely affect, our financial condition, liquidity, results of operations, cash flows, access to the capital markets, and ability to grow. Our ability to reach and maintain profitable operating results is dependant on our ability to find, acquire, and develop oil and gas properties. Our oil and gas exploration and production, and related activities are subject to extensive environmental regulations, and to laws that can give rise to substantial liabilities from environmental contamination. Certain U.S. federal income tax deductions currently available with respect to oil and gas exploration and development may be eliminated as a result of future legislation. The adoption of climate change legislation by Congress could result in increased operating costs and reduced demand for the oil and natural gas we produce. To execute our business plan we will need to develop current projects and expand our operations requiring significant capital expenditures which we may be unable to fund. When we make the determination to invest in oil or gas properties we rely upon geological and engineering estimates which involve a high level of uncertainty. Our financial condition will deteriorate if we are unable to retain our interests in our leased oil and gas properties. Title deficiencies could render our oil and gas leases worthless; thus damaging the financial condition of our business. If we as operators, or the operator of our oil and gas projects fail to maintain adequate insurance, our business could be exposed to significant losses. We may lose key management personnel which could endanger the future success of our oil and gas operations. We may be unable to continue as a going concern in which case our securities will have little or no value. We have experienced significant operating losses in the past and there can be no assurance that we will become profitable in the future. In the past, we have disclosed material weakness in our internal controls and procedures which could erode investor confidence, jeopardize our ability to obtain insurance and limit our ability to attract qualified persons to serve at Daybreak. The market price of our Common Stock could be volatile, which may cause the investment value of our stock to decline. Pursuant to SEC Rules our Common Stock is classified as a penny stock increasing the risk of investment in these shares. The resale of shares offered in private placements could depress the value of the shares. Privately placed issuances of our Common Stock, preferred stock and warrants have and may continue to dilute ownership interests which could have an adverse effect on our stock prices. Preferred stock has been issued with greater rights than the Common Stock issued which may dilute and depress the investment value of the Common Stock investments. We may seek to raise additional funds in the future through debt financing which may impose operational restrictions and may further dilute existing ownership interests. We do not anticipate paying dividends on our Common Stock which could devalue the market value of these securities.

Full 10-K form ▸

1164256--5/28/2010--DAYBREAK_OIL_&_GAS_INC