U.S. SECURITIES AND EXCHANGE

COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28,AUGUST 31, 2023

Commission File Number 333-153168

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YesxNo o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesxNo o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 or the Exchange Act). Yes oNox

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

59,157,420As of October 16, 2023, the registrant had 67,619,066 shares of common stock issued and outstanding as of April 14, 2023.outstanding.

ITEM 1. FINANCIAL STATEMENTS

The following unaudited condensed consolidated financial statements (the “financial(“financial statements”) have been prepared by Laredo Oil, Inc. (the “Company”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such SEC rules and regulations of the SEC. Nevertheless,regulations; nevertheless, the Company believes that the disclosures in the financial statements are adequate to make the information presented not misleading. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the fiscal year ended May 31, 2023. These financial statements and the notes attached hereto should be read in conjunction with the financial statements and notes included in the Company’s annual reportAnnual Report on Form 10-K, which was filed with the SEC on September 13, 2022. Except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended May 31, 2022 included in the Form 10-K.2023. In the opinion of management of the Company, all adjustments, including normal recurring adjustments necessary to present fairly the financial position of the Company as of February 28,August 31, 2023, and the results of its operations and cash flows for the three and nine-month periodsthree-month period then ended, have been included in the financial statements.included. The results of operations for the three and nine-month periodsthree-month period ended February 28,August 31, 2023 are not necessarily indicative of the results for the full fiscal year ending May 31, 2023.2024.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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

For the three and nine months ended February 28, 2022

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

The accompanying condensed consolidated financial statements have been prepared by the management of Laredo Oil, Inc. (the “Company”(“the Company”).  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows of the Company as of and for the periods presented have been made.

The Company was incorporated under the laws of the State of Delaware on March 31, 2008 under the name of “Laredo Mining, Inc.” On October 21, 2009, the Company changed its name to “Laredo Oil, Inc.”

The Company is an oil exploration and production or E&P, company, primarily engaged in acquisition and exploration efforts forto find mineral reserves on various properties. From June 14, 2011 to December 31, 2020, the Company was a management services company, managing the acquisition and conventional operation of mature oil fields and the further recovery of stranded oil from those fields using enhanced oil recovery (“EOR”) methods for its then sole customer, Stranded Oil Resources Corporation (“SORC”), a wholly owned subsidiary of Alleghany Corporation (“Alleghany”).

From its inception in March 2008 through October 2009, the Company was primarily engaged in acquisition and exploration efforts for mineral properties. After a change in controlBeginning in October 2009, the Company shifted its focus to locating mature oil fields, with the intention of acquiring those oil fields and recovering stranded oil using EORenhanced recovery methods. However, the Company was unable to raise the capital required to purchase any suitable oil fields. OnFrom June 14, 2011 the Company entered into several agreements with SORC (collectively, the “2011 SORC Agreements”) to seek recovery of stranded crude oil from mature, declining oil fields by using the EOR method known as Underground Gravity Drainage, or UGD. The 2011 SORC Agreements consisted of (i) a license agreement between the Company and SORC (the “SORC License Agreement”), (ii) a license agreement between the Company and Mark See, the Company’s Chairman and Chief Executive Officer (the “MS-Company License Agreement”), (iii) an Additional Interests Grant Agreement between the Company and SORC, (iv) a Management Services Agreement between the Company and SORC (the “MSA”), (v) a Finder’s Fee Agreement between the Company and SORC (the “Finder’s Fee Agreement”), and a Stockholders Agreement among the Company, SORC and Alleghany Capital Corporation, a subsidiary of Alleghany (“Alleghany Capital”), each of which were dated June 14, 2011.

The 2011 SORC Agreements stipulated that the Company and Mark See would provide management services and expertise to SORC through exclusive, perpetual license agreements and the MSA. As consideration for the licenses to SORC, the Company received an interest in SORC’s net profits, as defined in the 2011 SORC Agreements (the “Royalty”). The MSA provided that the Company would provide the services of various employees, including Mark See, in exchange for monthly and quarterly management service fees. The monthly management service fees provided funding for the salaries, benefit costs, and FICA taxes for the Company employees identified in the MSA. The quarterly management fee totaled $137,500. The Company received the last such payment on October 1, 2020. Prior to December 31, 2020, SORC also reimbursed the Company for monthly expenses incurred by the Company’s employees in connection with their services to SORC under the MSA.

As consideration for the licenses made to SORC, the Company was entitled to receive an interest in SORC’s net profits, as defined ina management services company, managing the acquisition and operation of mature oil fields, focused on the recovery of “stranded” oil from those mature fields using enhanced oil recovery methods for its then sole customer, Stranded Oil Resources Corporation, or SORC, License Agreement. Under the SORC License Agreement, the Company agreed that a portion of the Royalty, equal to at least 2.25% of the net profits (“Incentive Royalty”), be used to fund a long-term incentive plan for the benefit of its employees, as determined by the Company’s board of directors. On October 11, 2012, the Company’s board of directors approved and adopted the Laredo Royalty Incentive Plan (the “Plan”), and the Incentive Royalty was assigned to the Plan. As a result of a Securities Purchase Agreement, dated December 31, 2020 (the “SORC Purchase Agreement”), by and among the Company, Alleghany, SORC, and SORC Holdings LLC,then a wholly owned subsidiary of theAlleghany Corporation. The Company (“SORC Holdings”), the Company no longer receives the Incentive Royalty that was payable pursuant to the Plan; and SORC no longer makes any such payments to the Company or the Plan.

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS – continued

Pursuant to the terms of the SORC Purchase Agreement, on December 31, 2020 the Company, through SORC Holdings, purchased all of the issued and outstanding shares of SORC (the “SORC Shares”). As considerationperformed those services in exchange for the SORC Shares, SORC Holdings paid Alleghany $72,678 (comprised of a $55,000 purchase price, plus a $17,678 working capital adjustment calculated in accordance with the SORC Purchase Agreement),quarterly management fee and the Company agreed to pay Alleghany a royalty of 5.0% of the Company’s future consolidated revenues and net profits relating to oil, gas, gas liquids and all other hydrocarbons, subject to certain adjustments, for a period of seven years. The 2011 SORC Agreements were terminated effective as of December 31, 2020 pursuant to the terms of the SORC Purchase Agreement.

Pursuant to the SORC Purchase Agreement, the Company and Alleghany also entered into a Consulting Agreement (the “Alleghany Consulting Agreement”), pursuant to which Alleghany agreed to pay the Company approximately $1.245 million during calendar year 2021 in consideration of the Company providing consulting services from Mark See and Chris Lindsey, then the Company’s General Counsel and Secretary (for a period of three years for Mr. See and one year for Mr. Lindsey).

The Company believes that its entry into the SORC Purchase Agreement was advantageous to the Company as it simplified the timely unwinding of the 2011 SORC Agreements, and allowed the Company to acquire vehicles and oil field equipment to be utilized in its future oil recovery projects.

Since the Company now owns SORC, and the 2011 SORC Agreements have been terminated, the Company no longer receives any of the payments outlined in the 2011 SORC Agreements. As a result, the Company no longer receives management fee revenue from Alleghany, or reimbursement from Alleghany for the monthlySORC of its employee related expenses, of the Company’s employees, which fees and reimbursements were effectively all of the Company’s revenues prior to the closing of the Securities Purchase Agreement with Alleghany described below.

On December 31, 2020, the Company entered into a Securities Purchase Agreement with Alleghany Corporation. Under that agreement, the Company purchased all the issued and outstanding shares of SORC. Currently, there are no ongoing operations being conducted by SORC.

Under the Securities Purchase Agreement with Alleghany, the Company also entered into a Consulting Agreement, under which Alleghany paid the SORCCompany an aggregate of approximately $1.245 million during calendar year 2021 in exchange for providing Alleghany with one to three years of consulting services from certain of the Company’s employees, including Mark See, its Chief Executive Officer.

Alleghany no longer pays the Company any management fees or reimbursement payments for the monthly expenses of its employees. Those fees and reimbursements were effectively all of the Company’s revenues prior to the closing of the Securities Purchase Agreement.Agreement with Alleghany described above.

PriorWhile the Company was providing services to Alleghany prior to December 31, 2020, while implementing UGD projects for Allegheny,it gained know-how and operational experience in evaluating, acquiring, operating and developing oil and gas properties using enhanced oil recovery methods. The Company also gained experience in designing, drilling and producing conventional oil wells using those methods.

During the period from June 14, 2011 through December 31, 2020, when the 2011 SORC Agreements were in effect, Company management gained specialized know-how and operational experience in evaluating, acquiring, operating and developing oil and gas properties while implementing UGD projects, as well as gaining expertise designing, drilling and producing conventional oil wells. Based upon that know-how,the knowledge gained, as of August 31, 2023, the Company has identified and acquired 45,24645,766 gross acres and 37,93238,153 net acres of mineral property interests in the State of Montana. The Company began drilling andrilled one exploratory well induring May 2022. That2022, which has been shut-in pending gaining access to a saltwater disposal well has not yet been completed or put into production. The Company is continuing its efforts to complete drilling the well and begin commercial production. Simultaneously, the Company is attempting to raise additional funds to continue development of the other mineral property interests it purchased.allowing economically feasible water disposal. The Company plans to have each additional well have an 80-acre footprint, so thatcontinue to develop the first ten wells would cover approximately 800 acres, or less than two percent of the Company’s leased acreage. The ability of the Company to secure furtherfield as funding will determine the extent of future production for the acreage, and the pace of field development.allows.

In connection with securing thethis acreage in Montana, described above, Lustre Oil Company LLC, a wholly ownedwholly-owned subsidiary of the Company (“Lustre”), entered into an Acquisition and Participation Agreement (the “Erehwon APA”) with Erehwon Oil & Gas, LLC (“Erehwon”). Under the Erehwon APA, the parties will to acquire oil and gas interests and drill, complete, re-enter, re-complete, sidetrack, and equip wells in Valley County, Daniels County and Roosevelt County, Montana. The Erehwon APA specifies calculations for the royalty interests and working interests for the first ten well completions and first ten well recompletions and for all additional wells and recompletions thereafter. Under the Erehwon APA, Lustre will acquire the initial mineral leases payingand pay 100% of the acquisition costs with a cap of $500,000. When the $500,000 cap is exceeded, Erehwon will have the option to acquire a 10% working interest (“WI”) in eacha lease by paying 10% of theany lease acquisition cost, of the lease, resulting in Lustre paying 90% of the lease acquisition costs, on a lease-by-lease basis. Until amounts paid to complete the first ten new wells and first ten recompletions are repaid (“Payback”), the working interestWI split between Erehwon and Lustre will beis 10% tofor Erehwon and 90% tofor Lustre. Thereafter, the split between Erehwon and Lustre will be 20%/80%. Additional wells and recompletions will have a working interestWI split equal to the parties’their respective working interest in the leases, whichleases. This will be 10% tofor Erehwon and 90% tofor Lustre, unless Erehwon exercises its option to increase its working interest,WI by ten percentage points to 20%, as described above. Under the Erehwon APA, Lustre will fund 100% of the construction costs of the first ten wells and the first ten completions. AdditionalAny additional wells will be funded 80% by Lustre and 20% by Erehwon; provided, however, that Erehwon has the option to pay 10% of the costsconstruction cost to increase its working interest from 10%WI to 20%. Royalty expense will consist of the sum of royalty interest to the landowner and an overriding royalty interest not to exceed 6% not less than 3%, to two individuals (“Prospect Generators”), not to exceed 6% nor be less than 3%. For the first ten new wells and first ten recompletions, the Prospect Generators will receive an amount equal to 5% of the cost of each completed producing well.

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS - continued

In January 2022, the Company and Lustre executed a Net Profits Interest Agreement (the “NPI Agreement”) with Erehwon and Olfert No. 11-4 Holdings, LLC (“Olfert Holdings”) for the purpose of funding the first well, Olfert #11-4, (the “Well”) under the Erehwon Acquisition and Participation Agreement (“APA”). In connection with the NPI Agreement, the Company was credited with a contribution totaling $59,935 of well development costs, as determined by agreement with Olfert on behalf of Olfert Holding representing a 5.5% interest in the entity as of May 31, 2022 based on the carrying value of assets contributed to Olfert. The total investment recorded by Laredo was $19,435 as of May 31, 2022. The difference between the $59,935 contribution recorded at the Olfert level and the investment recorded by the Company is due to the investment at the Company being recorded at the carrying value of the assets contributed. As the Company also currently serves as the manager of Olfert, it exercises significant influence. Accordingly, the amount paid by the Company is recorded as an equity method investment as of August 31, 2023. See further disclosures in Note 8.

On June 30, 2020, the Company entered into athe Limited Liability Company Agreement (the “Cat Creek Agreement”) of Cat Creek Holdings, LLC (“Cat Creek”), a Montana limited liability company formed as a joint venture with Lipson Investments LLC (“Lipson”) and Viper Oil & Gas, LLC (“Viper”) for the purposepurchase of purchasing certain oil and gas properties in the Cat Creek Field, located in Petroleum and Garfield Counties in the State of Montana (the “Cat Creek Properties”). Cat Creek entered into an Asset Purchase and Sale Agreement (the “Carrell Purchase Agreement”) with Carrell Oil Company (“Carrell Oil”) on July 1, 2020. The Carrell Purchase Agreement provided for Cat Creek’s purchase of the Cat Creek Properties from Carrell Oil. Upon the closing of that agreement, Carrell Oil received consideration of $400,000, subject to certain adjustments resulting from revenue, expense and tax allocations. In accordance with the Cat Creek Agreement, the Company invested $448,900 of cash in Cat Creek in exchange for 50% of the ownership interests in Cat Creek, using cash on hand. Each ofCreek. Lipson Investments LLC and Viper Oil & Gas, LLC, the other two members of Cat Creek, each have 25% ownership interests in Cat Creek of 25%, in consideration of their respective investments of $224,450 in cash.$224,450. Cat Creek is managed by a Board of Directors consisting of four directors, two of whomwhich are designated by the Company.

Lustre and Erehwon entered into an Exploration and Development Agreement, dated July 18, 2023 (the “Development Agreement”), with Texakoma Exploration & Production Company (“Texakoma”), for the exploration and development of the “Lustre Field Prospect,” as described in the Development Agreement. Lustre and Erehwon are parties to an existing Acquisition and Participation Agreement, under which those parties agreed to acquire certain oil and gas interests, and drill, complete, re-enter, re-complete, sidetrack, and equip wells, in certain counties in Montana.

Under the terms of the Development Agreement, Texakoma agreed to pay Lustre and Erehwon (jointly, “LOC”), the following amounts: (i) $175,000 on or before July 21, 2023; and (ii) another $175,000 upon the “spudding” of the initial test well, which is scheduled to occur prior to November 1, 2023, subject to rig availability. Upon the spudding of that test well, LOC is required to deliver to Texakoma a partial assignment of an 85% working interest in the oil and gas leases covering the first two initial drilling and spacing units. The first payment under the Development Agreement was paid by Texakoma at the end of August 2023.

Texakoma will pay 100% of the costs associated with the drilling and completion of two initial test wells. LOC will jointly have an undivided 15% working interest, carried through the tanks, in the initial two wells. Texakoma will have the option, but not the obligation, to participate in the development of the remainder of the Lustre Field Prospect, which may be exercised by Texakoma by giving Lustre and Erehwon written notice of its intent to participate within 90 days after the completion rig moves off the second test well location.

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS –- continued

If Texakoma duly exercises its option, Texakoma agrees to drill eight additional wells, with LOC having a 15% working interest carried through the tanks, and pay LOC $706,603 for an 85% leasehold interest in the next eight drill sites and a 50% leasehold interest in the balance of the Lustre Field Prospect acreage. The working and net revenue interest in any wells drilled subsequent to the first ten wells shall be shared by Texakoma and LOC on a 50:50 basis. Following the Texakoma transaction, the Company will retain a 100% leasehold interest and full control of an additional 30,556 net mineral acres in northeastern Montana at the western edge of the Williston Basin.

In January 2022, the Company and Lustre executed a Net Profits Interest Agreement (“NPI Agreement”) with Erehwon and Olfert No. 11-4 Holdings, LLC (“Olfert Holdings”) for the purpose of funding the first well, Olfert #11-4 (the “Olfert Well”), under the Erehwon APA. In connection with the NPI Agreement, the Company was credited with a contribution of $59,935, consisting of well development costs, representing a 5.5% interest in Olfert Holdings. As of May 31, 2022, the Company’s total investment in Olfert Holdings was $19,435. The difference between the $59,935 contribution recorded by Olfert Holdings and the investment recorded by the Company is due to the investment by the Company being recorded at the carrying value of the assets it contributed to Olfert Holdings. As the Company also currently serves as the manager of Olfert Holdings, the Company exercises significant influence over its operations. Accordingly, as of February 28, 2023, the amount of the Company’s recorded its investment in Olfert as an equity method investment. See further disclosures in Note 9.

Basic and Diluted Loss per Share

The Company’s basicBasic and diluted earnings/(loss) per share is computed by dividing its net income/(loss) available to common stockholdersshareholders by the weighted average number of common shares outstanding during the period. Diluted earnings/(loss) per share gives effect to all potentially dilutive outstandingpotential common shares outstanding during the period. Dilutive earnings/(loss) per share excludes all potential shares of common stockshares if their effect is anti-dilutive. As the Company realized a net loss for the nine-month periodthree-month periods ended February 28,August 31, 2023 and February 28, 2022, the Company did not includeno potentially dilutive securities were included in the calculation of diluted loss per share in those periods, as thetheir impact of their inclusion would have been anti-dilutive. e. The Company computes dilutedDiluted earnings/(loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock and dilutive common stock equivalentsequivalent shares outstanding during the period.

NOTE 2 – GOING CONCERN

These consolidated financial statements have been prepared on a going concern basis. The Company has routinely incurred losses since inception, resulting in an accumulated deficit. The Companydeficit, and historically has also been dependent on one customer for its revenue. The Company entered intoThere is no assurance that in the SORC Agreements to fund operations and to provide the Company with working capital. However, after the execution of the SORC Purchase Agreement, Alleghany no longer had any obligation to fund the Company’s operations or provides working capital to the Company or SORC. The Company is not certain thatfuture any financing will be available to meet the Company to support its proposed operations. Accordingly, there isCompany’s needs. This situation raises substantial doubt about the Company’s ability to continue as a going concern within one year followingof the issuance date of the consolidated financial statements included herein.statements.

The Company’s managementManagement has undertaken steps as part of a plan to improve the Company’s operations with the goal of sustaining operations for the next twelve months and beyond. These steps include an ongoing effort to (a) controlcontrolling overhead and expenses; (b) raiseraising funds connected with specific well development; and (b) raiseraising funds through the issuance ofnotes payable and convertible debt securities to expand and fund potentialproperty acquisitions exploration and development as well as maintaining ongoing operations. The Company has worked to attract and retain key personnel with significant experience in the industry. At the same time, in an effort to control costs, the Company has required several of its personnel to multi-task and cover a wider range of responsibilities in an effort to avoid any increase inrestrict the growth of the Company’s headcount. The Company cannot make anyThere can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations orand obtain additional financing. The Company cannot make anyThere can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates– Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Principles of Consolidation – The accompanying consolidated financial statements include the accounts of the CompanyLaredo Oil and its subsidiaries after elimination of intercompany balances and transactions.

Equity Method Investment – Investments classified as equity method consist of investments in companies in which the Company is able tocan exercise significant influence but not control. Under the equity method of accounting, the investment is initially recorded at cost, then the Company’s proportional share of investee’s underlying net income or loss is recorded as a component of “other income” with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce the Company’s carrying value of the investment. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. The Company has elected to record its portion of the equity method income (loss) with a two-month lag. Accordingly, the financial results for the equity investment are reported through December 31, 2022. The Company did not recognize anyJune 30, 2023. No impairments were recognized for itsthe Company’s equity method investment during the fiscal quarter ended February 28,August 31, 2023. See Note 12.11.

Property and Equipment – The carrying value of the Company’s property and equipment represents the cost it incurred to acquire the property and equipment, net of any impairments. For business combinations, property and equipment cost is based on the fair values at the acquisition date.

Oil and Gas Acquisition Costs – The Company’s oilOil and gas acquisition and drilling costs include expenditures representing investments in unproved and unevaluated properties and include non-producing leasehold, leasehold or drilling interest costs, and costs to drill one exploratory well. Exploratory drilling costs are deferred until the outcome of the particular well is known. If an exploratory well discoversfinds proved reserves, the deferred costs are transferred to the Company’scompany’s Wells and Related Equipment and Facilities accounts. Absent provenproved reserves, the deferred costs of the well, net of salvage, are charged to expense. All costs of wells drilled to develop proved reserves, along with all costs of equipment necessary to produce and handle the hydrocarbons, are capitalized even if a development well proves to be dry. The Company reviews costsCosts are reviewed to determine if impairment has occurred. The Company hadhas incurred oil and gas acquisition and drilling costs totaling $4,257,564$4,431,438 and $2,702,715$4,547,740 as of February 28,August 31, 2023 and May 31, 2022,2023, respectively.

NOTE 4 – REVENUE RECOGNITIONSchedule of Oil and Gas Acquisition and Drilling Cost

Other Revenue

The Company and Alleghany previously entered into the Alleghany Consulting Agreement (see Note 1), under which Alleghany was obligated to pay the Company a total of $1,144,471 in quarterly payments, beginning January 1, 2021, in consideration for the Company making certain individuals available to Allegheny for their advice, assistance and support in connection with the oil and gas industry and any questions, issues or matters arising from Alleghany’s previous ownership of SORC. One such individual is committed to provide services to Allegheny until December 31, 2023. The Company’s management believes that all necessary work under the Alleghany Consulting Agreement was completed prior to December 31, 2021, and the Company recognized revenue on a monthly basis over the year ended December 31, 2021. Accordingly, the Company recorded $95,372 as other revenue for the quarter ended February 28, 2022 and $0 for the quarter ended February 28, 2023.

NOTE 54 – RECENT AND ADOPTED ACCOUNTING STANDARDS

In August 2020, the FASB issued ASU 2020-06–Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Reporting companies should adopt the guidance as of the beginning of the fiscal year of adoption, and cannot adopt the guidance in an interim reporting period. This accounting standard update, which the Company adopted effective June 1, 2022, impacts the ongoing accounting of the Convertible Notes.

Reporting companies are allowed to adopt this standard by either a modified retrospective method of transition or a fully retrospective method of transition. Under the modified retrospective method, entities should apply the guidance to transactions outstanding as of the beginning of the fiscal year in which the standard was adopted. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings at the date of adoption. Due to the adoption of this accounting standard update under the modified retrospective method, prior periods for the Company were not restated. Upon adoption, the Company recorded a $16,200 cumulative-effect adjustment that increased the opening balance of retained earnings on the consolidated balance sheet due to the reduction in non-cash interest expense associated with the historical separation of debt and equity components for the Company’s Convertible Notes described in Note 11. The Company also recorded a $39,718 increase to convertible debt and a decrease to additional paid-in capital of $55,918, due to no longer separating the embedded conversion feature of the Convertible Notes. This adoptionhas implemented all new accounting pronouncements that are in effect. These pronouncements did not have aany material impact on the Company’s consolidated statement of cash flows.

Thefinancial statements unless otherwise disclosed, and the Company has reviewed other recently issued accounting standards and plans to adopt those that are applicable to it. It does not expect the adoption of those standards tobelieve that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations, or cash flows.operations.

NOTE 65 – ACCOUNTING FOR ASSET RETIREMENT AND ENVIRONMENTAL OBLIGATIONS

The Company accounts for its asset retirement obligations in accordance with Accounting for Asset Retirement and Environmental Obligations. This requires that legal obligations associated with the retirement of long-lived assets be recognized at fair value when incurred and capitalized as part of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized asset is depreciated over the useful life of the long-lived asset.

In the absence of quoted market prices, the Company estimates the fair value of ourits asset retirement obligations using present value techniques, in which estimates of future cash flows associated with retirement activities are discounted using a credit-adjusted risk-free rate. The Company’s estimated liability could change significantly if actual costs vary from assumptions or if governmental regulations change significantly.

The Company’s asset retirement obligation was established in May 2022 when it commenced drilling the Olfert#11-4 well in the Lustre oil field. At February 28,On August 31, 2023 and May 31, 2022,2023 the asset retirement obligation totaled $66,394$69,482 and $61,762,$67,938, respectively.

The Company’s cash flow estimate for the asset retirement obligation is based upon the assumption of a 25-year expected life of the well, discounted using a credit-adjusted risk-free interest rate of 10%.

The Company’sCompany has recorded accretion expense totaling $4,632 was recorded$1,544 in the nine months ending February 28, 2023. Since drillingeach of the Olfert#11-4 well commenced in May 2022, the Company recorded no accretion expense as of Maythree-month periods ending August 31, 2023 and 2022.

NOTE 76 – FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

The Company’s financial instruments, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825-10-50, Financial Instruments, includecarrying values of cash and cash equivalents, accounts and other receivables, equity method investments, accounts payable and accrued current liabilities and notes payable. The equity method investments approximate their fair value as a result of limited activity by the Company since formation. All other instruments are accounted for on a historical cost basis, which,values due to the short maturityshort-term nature of these financial instruments, approximates fair value as of February 28, 2023.the instruments.

Based on the borrowing rates currently available to the Company for loans with similar terms and maturities, the fair value of notes payable approximates the carrying value.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The estimated fair value of the Company’s oil and gas properties and the asset retirement obligation incurred in the drilling of such oil and gas wells or assumed in the acquisitions of additional oil and gas working interests are based on an estimated discount cash flow model and market assumptions. The significant Level 3 assumptions used by the Company in the calculation of estimated discounted cash flow model include future commodity prices, projections of estimated quantities of oil and gas reserves, expectations for timing and amount of future development, operating and asset retirement costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates. See Note 3 for additional information regarding oil and gas property acquisitions.

NOTE 7 – FAIR VALUE MEASUREMENTS – continued

The Company estimates the fair value of its asset retirement obligations based on the projected discounted future cash outflows required to settle abandonment and restoration liabilities. Such an estimate requires assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, what constitutes adequate restoration, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental and political environments. The Company determines the abandonmentAbandonment and restoration cost estimates are determined in conjunction with the Company’s reserve engineers based on historical information regarding costs incurred to abandon and restore similar well sites, information regarding current market conditions and costs, and knowledge of subject well sites and properties. The Company’s assetAsset retirement obligation fair value measurements in the current period were Level 3 fair value measurements. As further described in Note 6,5, the Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. Asset retirement obligations are not measured at fair value subsequent to initial recognition.

NOTE 87 – RELATED PARTY TRANSACTIONS

Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. FASB ASC 850, Related Party Disclosures (“FASB ASC 850”) requires that transactions with related parties that would make a difference in decision making shouldshall be disclosed so that users of the consolidated financial statements can evaluate their significance. Related party transactions typically occur within the context of the following relationships:

On April 4, 2022, Cat Creek, in which the Company has an equity investment, loaned the Company $136,479$136,479 at a market rate of interest. In August 2022, the Company repaid the principal amount of the note, and accrued interest, in an exchange for property, plant and equipment.

In accordance with the NPI Agreement, between October 2021 and August 2022, Olfert #11-4 Holdings transferred funds totaling $1,859,195 to Lustre, the Company’s wholly owned subsidiary, to provide funds for drilling expenses incurred by Lustre with respect to the development of one well.

On June 22, 2022, the Company assigned to the Company’s Chief Financial Officer the right to purchase up to 356,243 of the 500,000 membership interests in in Olfert #11-4 in exchange forto the Company’s Chief Financial Officer’sOfficer in exchange for his payment of $356,243 of the Company’s capital commitment to Olfert #11-4.

On October 26, 2022, the Company borrowed $150,000 from the Company’s Chief Financial Officer pursuant to a demand note bearing an annual interest rate of 10%. The demand note is secured by all of the Company’s interests in Lustre, pursuant to the terms of a Membership Interest Pledge Agreement.

In February through May 2023, the Company’s Chief Financial Officer made several advances to the Company, totally $50,000.totaling $142,099. The advances were not made pursuant to a promissory note, and the advances are not secured. Advances by the Company’s Chief Financial Officer currently total $292,099.

NOTE 98 – NET PROFITS INTEREST AGREEMENT

The Company and Lustre executed the NPI Agreement with Erehwon and Olfert Holdings in January 2022, to be effective as of October 2021. The NPI Agreement was executed for the purpose of funding the Olfert Well under the Erehwon APA. The NPI Agreement grants Olfert Holdings an “Applicable Percentage” of available funds from the Olfert Well in exchange for Olfert Holdings funding development of the Olfert Well. The “Applicable Percentage” is defined in the NPI Agreement as 90% prior to Payout and 50% after Payout, with “Payout” being defined as the point in time when the aggregate of all Net Profits Interest payments made to Olfert Holdings under the NPI Agreement equals 105% of the well development costs. In January 2022, the Company entered into an Amended and Restated Limited Liability Company Operating Agreement of Olfert Holdings, dated to be effective as of November 2021 (the “Olfert Holdings Operating Agreement”). Pursuant to the Olfert Holdings Operating Agreement, the Company has agreed to make a $500,000 capital contribution, out of a total of $1,500,000 to be raised by Olfert Holdings. During October and November of 2021, the Company received advance payments totaling $1.0 million from four investors, through Lustre, pursuant to the NPI Agreement. The Company was credited with $59,935 of well development costs as part of its capital contribution under the Olfert Holding Operating Agreement. In May 2022, a vendor made an in kindin-kind capital contribution of $83,822 to Olfert Holdings in the form of services rendered. In June 2022, the Company’s Chief Financial Officer invested $356,243 in Olfert Holdings pursuant to the NPI Agreement. These three contributions fulfilled the Company’s initial capital contribution commitment under the Olfert Holdings Operating Agreement. On August 3, 2022, the Company, as Manager of Olfert Holdings, issued a capital call to the investors in Olfert Holdings for payment of an additional $461,440 to cover expenses that Lustre is obligated to pay pursuant to the NPI Agreement. As of February 28,August 31, 2023, the investors had paid $358,747 of that capital call. As of February 28,August 31, 2023, Lustre had incurred approximately $3,300,000 in expenses related to the development of the Olfert Well. The Olfert Well has exceeded its original budget, and there are certain construction costs that have not been satisfied. To pay the amounts owed, the Company issued an additionalanother capital call to the investors in Olfert Holdings to pay an additional $1.7 million. The investors diddo not have an obligation to make additionalfurther investments, and Olfert Holdings did not raise the requested additional amount from that capital call. Subsequently, several unpaid contractors have attached mechanic liens on the Olfert Well. One creditor hasThree creditors have filed a lawsuit for payment against Lustre, the operator of the Olfert Well in Montana. The Company believes that the Olfert Well is still economically viable, and it intends to attempt to raise sufficient additional capital for Olfert Holdings, complete the Olfert Well, and pay all amounts owed to contractors.

NOTE 8 – NET PROFITS INTEREST AGREEMENT - continued

In connection with the NPI Agreement, the Company was credited with a contribution totaling $59,935 of well development costs under an agreement with Olfert Holdings, receiving a 5.5% interest in Olfert Holdings as of May 31, 2022.Holdings. The totalinitial investment in Olfert Holdings recorded by the Company was $19,435 as of May 31, 2022.$19,435. The difference between the $59,935 contribution recorded by Olfert Holdings and the $19,435 investment recorded by the Company is due to the Company’s investment being recorded at the carrying value of the assets contributed by the Company. In connection with the August 2022 capital call, the Company contributed an additional $18,438 to Olfert Holdings resulting in a 4.2% interest in Olfert Holdings as of August 31, 2023. As the Company alsocurrently serves as the manager of Olfert Holdings, the Company exercises significant influence over Olfert Holdings. Accordingly, the amount the Company paid to Olfert Holdings is recorded as an equity method investment as of February 28,August 31, 2023.

NOTE 109 – STOCKHOLDERS’ DEFICIT

Share Based Compensation

The Company made grants of options for the purchase of 650,00015,075,000 shares of itsthe Company’s common stock, at a strike price of $0.19$0.06 per share, during the first quarter of fiscal year 2024. The grants were issued under the Laredo Oil, Inc. 2023 Equity Incentive Plan, which became effective with the filing of a Registration Statement on Form S-8 on June 14, 2023. TheseExcept for an option to purchase 1,100,000 shares of common stock, at a price of $0.38 per share, all options previously granted under the Laredo Oil, Inc. 2011 Equity Incentive Plan, totaling 4,825,000 shares, were terminated and replaced by grants under the new incentive plan.

Options to purchase 650,000 shares of common stock at a price of $0.19 per share were granted during the first quarter of fiscal year 2023. The options vested immediately and expire on June 2, 2032. The Company madeOption grants for the purchase of 1,600,000 shares of its common stock at a strike price of $0.074 per share were made during the first quarter of fiscal year 2022. TheseThe options vest monthly over three years beginning on August 1, 2021 and expire on August 1, 2031. These options were canceled on June 29, 2023.

The Company used the Black-Scholes option pricing model is used to estimate the fair value of options granted under itsour stock incentive plan.

The grant date fair value of the stock option grants as of the respective grant date, during the ninethree months ending February 28,August 31, 2023 and 2022 amounted to approximatelytotaled $721,110 and $123,487, and $118,387, respectively. The weighted average assumptions used in calculating these values were based on the following:

Schedule of Fair Value Assumptions

The risk-free interest rate is based uponon the U.S. Treasury interest rateyield curve in effect at the time of grant for a bond with a similar term. The Company does not anticipate declaring dividends in the foreseeable future. Volatility is estimated based on the historical share prices over the same period as the expected life of the stock options.option. The Company uses the simplified method for determining the expected term of its stock options.

The Company recorded share-basedShare based compensation for stock option grants totaling $152,358$721,110 and $23,019123,487 was recorded in general, selling and administrative expense during the ninethree months ended February 28,August 31, 2023 and 2022, respectively.

NOTE 109 – STOCKHOLDERS’ DEFICIT –- continued

Restricted Stock

In May 2023 the Company received funds pursuant to a Stock Purchase Agreement with an accredited investor to purchase 6,062,886 restricted shares of the Company’s common stock at a purchase price of $0.0441 per share, totaling $267,319. The shares have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were issued to the investor in reliance upon exemptions from such registration. The investor is aware of the provisions of Rule 144 promulgated under the Securities Act.

The Company entered into a financial advisory agreement, dated July 21, 2022 (the “Advisory Agreement”), pursuant to which the Company engaged Dawson James Securities, Inc. (“Dawson”) to render services as a corporate finance consultant. The term of the Advisory Agreement is twelve months from the date of the Advisory Agreement, unless terminated by either party with 30 days prior written notice to the other party, beginning 60 days following the date of the Advisory Agreement. Under the terms of the Advisory Agreement, Dawson will provide advice to the Company concerning business and financial planning, corporate organization and structure, private and public equity and debt financing, and such other matters as the parties may mutually agree.

As compensation to Dawson for the services provided under the Advisory Agreement, the Company is obligated to pay Dawson $30,000 per calendar quarter, with the first such payment being paid one day after the date of the execution of the Advisory Agreement, and each subsequent payment being due three months after the previous payment. The Company made the first $30,000 payment in July 2022. The Company also agreed to issue to Dawson 2,600,000 shares of the Company’s common stock, payable in four installments of (i) 1,000,000 shares issued within three business days after the date of the Advisory Agreement, (ii) 550,000 shares for the subsequent quarter, and (iii) 525,000 shares for each of the remaining two quarters of the term of the Advisory Agreement. The first 1,000,000 restricted shares were issued in July 2022. During the ninetwelve months ending February 28,May 31, 2023, the Company recorded advisory service fees totaling $160,000 with respect to the 1,000,000 shares of the Company’s common stock issued pursuant to the Advisory Agreement.

If during After the termfirst $30,000 payment and issuance of 1,000,000 shares of common stock, the Advisory Agreement the Company decides to (i) finance or refinance any indebtedness using a manager or an agent, or (ii) raise funds by means of a public offering or private placement of equity or debt securities, Dawson will have the right to act as lead manager, placement agent or agent (or have any affiliate act in such role) for such financing, provided that Dawson has then secured at least $5,000,000 in equity financing for the Company. As of the date of this filing, Dawson has not secured any equity financing for the Company.been suspended indefinitely.

In April 2022, the Company entered into a consulting agreement with an individual for corporate structuring and strategic planning and compliance services. Pursuant to this agreement, the Company agreed to compensate the consultant with cash and restricted shares of the Company’s common stock, which shares vest equally over the 12-month term of the consulting agreement. During the ninetwelve months ending February 28,May 31, 2023, the Company recorded $27,257 in professional fees with respect to the issuance of the first two tranches of 272,474 restricted shares. The consulting agreement was terminated in July 2022.

The Company granted no shares of restricted stock as compensation during the first nine monthsquarter of fiscal year 2023.2024. 

Warrants

The CompanyNo warrants were issued no warrants during fiscal year 2022 or the first three quarters of fiscal yearyears 2024 or 2023.

NOTE 1110 – NOTES PAYABLE

Convertible Debt

In NovemberMarch, April and May of 2022,2023, the Company entered into Securities Purchase Agreements with twoan accredited investors,investor, pursuant to which the Company issued twothree convertible promissory notes in the aggregate principal amount of $140,250$212,025 (the “Convertible Notes”), receiving $120,000$180,000 in net cash proceeds. The Convertible Notes had an original issue discount of $12,750.$19,275. The Company deducted $7,500$12,750 in additional debt issue costs from the gross proceeds it received from the Convertible Notes. The Company is amortizing a total of $20,250$32,025 recorded as debt discount using the effective interest method through the maturity dates of the Convertible Notes. The Convertible Notes are due in one year from the date of issuance, accrue interest at 8% per annum (22% upon the occurrence of an event of default) and are convertible 180 days after issuance into shares of the Company’s common stock at a discount of 25% of the average of the three lowest trading prices during the 15 trading days immediately preceding the conversion.

In November of 2022, the Company entered into Securities Purchase Agreements with two accredited investors, pursuant to which the Company issued two convertible promissory notes in the aggregate principal amount of $140,250 (the “Convertible Notes”), receiving $120,000 in net cash proceeds. The Convertible Notes had an original issue discount of $12,750. The Company deducted $7,500 in additional debt issue costs from the gross proceeds it received from the Convertible Notes. The Company is amortizing a total of $20,250 recorded as debt discount using the effective interest method through the maturity dates of the Convertible Notes. The Convertible Notes are due one year from the date of issuance, accrue interest at 8% per annum (22% upon the occurrence of an event of default) and are convertible 180 days after issuance into shares of the Company’s common stock at a discount of 25% of the average of the three lowest trading prices during the 15 trading days immediately preceding the conversion. In May 2023, the Company repaid $140,250 in principal and $27,410 in related accrued interest and prepayment penalty interest pursuant to the two separate Convertible Notes.

In October 2022, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a convertible promissory note in the principal amount of $55,000,$55,000, receiving $45,000$45,000 in net cash proceeds. The note had an original issue discount of $5,000. An additional $5,000$5,000 in debt issue costs were deducted from the gross proceeds from the note. The total of $10,000 recorded as debt discount is being amortized using the effective interest method through the maturity dates of the note. The note is due in one year fromafter the date of issuance, accrues interest at 12% per annum (22% upon the occurrence of an event of default) and is convertible after 180 days into shares of the Company’s common stock at a discount of 30% to the average of the three lowest trading prices during the 15 trading days immediately preceding the conversion. During April and May of 2023, the Company repaid the $55,000 in principal and $10,372 in related accrued interest and prepayment penalty interest. To satisfy the obligation, in addition to the interest payments, the Company repaid $23,360 principal in cash and issued to the note holder 1,000,000 shares of the Company’s common stock at an average price of $0.03164 per share.

On September 6, 2022, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a convertible promissory note in the principal amount of $97,625,$97,625, receiving $85,000$85,000 in net cash proceeds. The convertible promissory note had an original issue discount of $8,875, and $3,750$3,750 in debt issue costs were deducted from the gross proceeds. The total of $12,625$12,625 recorded as debt discount is being amortized using the effective interest method through the maturity dates of the convertible promissory note. The convertible promissory note is due in one year from the date of issuance, accrues interest at 8% per annum (22% upon the occurrence of an event of default) and is convertible after 180 days into shares of the Company’s common stock at a discount of 25% from the average of the three lowest trading prices during the 15 trading days immediately preceding the conversion. During March and April of 2023, the Company repaid the $97,625 in principal and $4,279 in accrued interest pursuant to a Convertible Note entered into on September 6, 2022. To satisfy the obligation, the Company issued to the noteholder 1,902,039 shares of the Company’s common stock, at an average price of $0.05358 per share.

In October, November, December of 2021, and March, April and May of 2022, the Company entered into Securities Purchase Agreements with three accredited investors, pursuant to which the Company issued six convertible promissory notes in the aggregate principal amount of $608,575,$608,575, receiving $527,500$527,500 in net cash proceeds (the “Convertible Notes”). The Convertible Notes had an original issue discount of $58,575. Additional debt issue costs of $22,500$22,500 were deducted from the gross proceeds from the Convertible Notes. The Company is amortizing a total of $81,075$81,075 recorded as debt discount using the effective interest method through the maturity dates of the Convertible Notes. The Convertible Notes are due in one year from the date of issuance, accrue interest at 8% per annum (22% upon the occurrence of an event of default) and are convertible 180 days after issuance into shares of the Company’s common stock at a discount of 25% of the average of the three lowest trading prices during the 15 trading days immediately preceding the conversion. As of May 31, 2022, the Company determined the value associated with the beneficial conversion feature in connection with the issuance of the Convertible Notes resulted in a further increase in the debt discount of $55,918, which will be amortized using the effective interest method through the dates the notes are initially convertible. The additional debt discount was subsequently reversed during the first quarter of fiscal 2023 pursuant to the adoption of ASU 2020-06 as follows. During October and November 2022, the Company exchanged $114,125 of principal and $4,150 of accrued interest of the single Convertible Note entered into on April 14, 2022 for 1,468,042 shares of the Company’s common stock, at an average price of $0.0806 per share. 

On September 2, 2022 the Company repaid the single Convertible Note entered into on March 1, 2022. The repayment totaled $64,088, comprised of $53,625 principal and $10,463 in related accrued interest and prepayment penalty interest. The Company recorded the related deferred debt discount and debt issue costs, totaling $4,371, as interest expense. 

NOTE 10 – NOTES PAYABLE - continued

On June 27, 2022, the Company repaid the single Convertible Note entered into in December 2021. The repayment totaled $65,745, comprised of $55,000 in principal and $10,745 in related accrued interest and prepayment penalty interest. The Company recorded the related deferred debt discount and debt issue costs, totaling $4,435, as interest expense. 

During April and May 2022, the Company repaid the Convertible Notes entered into in October and November 2021. The repayment for the remaining Convertible Notes totaled $136,479, comprised of $114,125 in principal and $22,354 in related accrued interest and prepayment penalty interest. The Company borrowed $136,479 from Cat Creek to repay these Convertible Notes. 

The Convertible Note issued in November 2021 was repaid in an amount that totaled $85,469, comprised of $71,500 in principal and $13,969 in related accrued interest and prepayment penalty interest. 

Upon the repayment of the October 2021 and November 2021 Convertible Notes, the Company recorded the related remaining outstanding debt discount and debt issue costs, totaling $12,388, as interest expense.

In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. This accounting standard update, which was adopted by the Company effective June 1, 2022, impacts the ongoing accounting of the convertible notes.

The Company adopted this standard using the modified retrospective method of transition and applied the guidance to transactions outstanding as of the beginning of the current fiscal year on June 1, 2022. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the change is recognized as an adjustment to the opening balance of retained earnings at the date of adoption. Due to the adoption of this accounting standard update under the modified retrospective method, prior periods were not restated. Upon adoption, the Company recorded a $16,200 cumulative-effect adjustment that increased the opening balance of retained earnings on the consolidated balance sheet due to the reduction in non-cash interest expense associated with the historical separation of debt and equity components for the Company’s Convertible Notes. The Company also recorded a $39,718 increase to convertible debt and a decrease to additional paid-in capital of $55,918 due to no longer separating the embedded conversion feature of the Convertible Notes. This adoption did not have a material impact on the Company’s consolidated statement of cash flows.

The Company has the right to prepay the Convertible Notes at any time during the first six months the Convertible Notes are outstanding at the rate of (a) 110% of the unpaid principal amount of such note plus interest, during the first 120 days the note is outstanding, and (b) 115% of the unpaid principal amount of such note plus interest between days 121 and 180 after the issuance date of the note. The Convertible Notes may not be prepaid after the 180^th day following the issuance date unless the applicable note holders agree to such repayment and such terms.

NOTE 11 – NOTES PAYABLE – continued

The Company agreed to reserve the number of shares of its common stock that may be issuable upon conversion of the Convertible Notes while the Convertible Notes are outstanding.

The Convertible Notes provide for standard and customary events of default, such as failing to timely make payments under the Convertible Notes when due, the failure of the Company to timely comply with the Securities Exchange Act of 1934 reporting requirements and the failure to maintain a listing on the OTC Markets. The Convertible Notes also contain customary positive and negative covenants. The Convertible Notes include penalties and damages payable to the noteholders in the event the Company does not comply with the terms of the Convertible Notes, including in the event the Company does not issue shares of common stock to the noteholders upon conversion of the Convertible Notes within the time periods set forth therein. Additionally, upon the occurrence of certain defaults, as described in the Convertible Notes, the Company is required to pay the noteholders liquidated damages in addition to the amount owed under the Convertible Notes (including in some cases up to 300% of the amount of the applicable Convertible Note).

At no time may the Convertible Notes be converted into shares of the Company’s common stock if such conversion would result in the noteholders and their affiliates owning shares representing in excess of 4.99% of the then outstanding shares of the Company’s common stock.

The proceeds from the Convertible Notes could be used by the Company for general corporate purposes.

During October and November 2022,12% Secured Promissory Note

On March 23, 2023, an individual accredited investor paid the Company exchanged $114,125the aggregate amount of $100,000 for a Secured Promissory Note, (the “Note”). The Note will accrue interest on the outstanding principal sum at the rate of 12.0% per annum and $4,150has a maturity date of accrued interest of the single ConvertibleMarch 23, 2024. Interest will be due and payable monthly in arrears. The Note entered into on April 14, 2022 for 1,468,042 shares of the Company’s common stock, at an average price of $0.0806 per share.

On September 2, 2022is secured by certain equipment owned by the Company repaidpursuant to a Security Agreement with the single ConvertibleLender. On May 23, 2023, the Note entered into on March 1, 2022. The repayment totaled $64,088, comprisedwas increased by $83,000 to an aggregate principal amount of $53,625$183,000. During June and July, 2023, the investor contributed an additional $102,061 under the Note, bringing the aggregate principal and $10,463 in related accrued interest and prepayment penalty interest. The Company recorded the related deferred debt discount and debt issue costs, totaling $4,371, as interest expense.amount to $285,061.

On June 27, 2022, the Company repaid the single Convertible Note entered into in December 2021. The repayment totaled $65,745, comprised of $55,000 in principal and $10,745 in related accrued interest and prepayment penalty interest. The Company recorded the related deferred debt discount and debt issue costs, totaling $4,435, as interest expense.NOTE 10 – NOTES PAYABLE - continued

During April and May 2022, the Company repaid the Convertible Notes entered into in October and November 2021. The repayment for the remaining Convertible Notes totaled $136,479, comprised of $114,125 in principal and $22,354 in related accrued interest and prepayment penalty interest. The Company borrowed the $136,479 from Cat Creek to repay these Convertible Notes.

The Convertible Note issued in November 2021 was repaid in an amount that totaled $85,469, comprised of $71,500 in principal and $13,969 in related accrued interest and prepayment penalty interest.

Upon the repayment of the October 2021 and November 2021 Convertible Notes, the Company recorded the related remaining outstanding debt discount and debt issue costs, totaling $12,388, as interest expense.

12% One Year Promissory Notes

On May 20, 2022, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a promissory note in the principal amount of $200,200 and received $175,000 in net cash proceeds.   On January 5, 2023, the note was satisfied in full with a final payment of $67,266. The promissory note had an original issue discount of $21,450 and $3,750 in debt issue costs were deducted from the gross proceeds. The Company was amortizing the total of $25,200 recorded as debt discount using the effective interest method through the maturity dates of the convertible promissory note. The note was due one year following the date of issuance, and accrued interest at 12% per annum (22% upon the occurrence of an event of default). Accrued, unpaid interest and outstanding principal was due in ten equal monthly payments of $22,422.40, starting on July 15, 2022. In the event of default (including a missed payment), the note was convertible at the option of the investor into shares of the Company’s common stock at a discount of 25% from the lowest closing bid price during the ten trading days immediately preceding the conversion date.

On January 5, 2023, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a promissory note in the principal amount of $197,313, receiving $150,000 in net cash proceeds. The convertible promissory note had an original issue discount of $21,450, and an additional $3,750 in debt issue costs were deducted from the gross proceeds. The total of $25,200 recorded as debt discount is being amortized using the effective interest method through the maturity date of the convertible promissory note. The note is due one year following the date of issuance and accrues interest at 12% per annum (22% upon the occurrence of an event of default). Accrued, unpaid interest and outstanding principal is due in ten equal monthly payments of $22,099.10, starting on February 15, 2023. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 25% from the lowest closing bid price during the ten trading days immediately preceding the conversion date.