Laredo Oil (LRDC) 10-Q 14 Jan 14 2014 Q2 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	6 Months Ended
	Nov. 30, 2013	Jan. 14, 2014
Document And Entity Information	'	'
Entity Registrant Name	'Laredo Oil, Inc.	'
Entity Central Index Key	'0001442492	'
Document Type	'10-Q	'
Document Period End Date	30-Nov-13	'
Amendment Flag	'false	'
Current Fiscal Year End Date	'--05-31	'
Is Entity a Well-known Seasoned Issuer?	'No	'
Is Entity a Voluntary Filer?	'No	'
Is Entity's Reporting Status Current?	'Yes	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Common Stock, Shares Outstanding	'	53,650,013
Document Fiscal Period Focus	'Q2	'
Document Fiscal Year Focus	'2014	'

Balance_Sheets_Unaudited

Balance Sheets (Unaudited) (USD $)	Nov. 30, 2013	31-May-13
Current Assets	'	'
Cash and cash equivalents	$63,181	$107,674
Prepaid expenses and other current assets	51,575	35,690
Total Current Assets	114,756	143,364
Current Liabilities	'	'
Accounts payable	30,383	27,963
Accrued payroll liabilities	311,538	222,631
Accrued interest	64,476	50,293
Deferred management fee revenue	45,833	40,833
Warrant liabilities	266,377	140,365
Total Current Liabilities	718,607	482,085
Long term notes payable	350,000	350,000
Total Liabilities	1,068,607	832,085
Commitments and Contingencies	'	'
Stockholders' Deficit	'	'
Preferred stock: $0.001 par value; 10,000,000 shares authorized; none issued and outstanding	0	0
Common stock: $0.0001 par value; 90,000,000 shares authorized; 53,650,013 and 53,500,013 issued and outstanding, respectively	5,365	5,350
Additional paid in capital	6,374,856	6,163,086
Accumulated deficit	-7,334,072	-6,857,157
Total stockholders' Deficit	-953,851	-688,721
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$114,756	$143,364

Balance_Sheets_Unaudited_Paren

Balance Sheets (Unaudited) (Parenthetical) (USD $)	Nov. 30, 2013	31-May-13
Stockholders equity:	'	'
Preferred stock, par value	$0.00	$0.00
Preferred stock, authorized shares	10,000,000	10,000,000
Preferred stock, issued shares	0	0
Common stock, par value	$0.00	$0.00
Common stock, authorized shares	90,000,000	90,000,000
Common stock, issued shares	53,650,013	53,500,013
Common stock, outstanding shares	53,650,013	53,500,013

Statements_of_Operations_Unaud

Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Nov. 30, 2013	Nov. 30, 2012	Nov. 30, 2013	Nov. 30, 2012
Income Statement [Abstract]	'	'	'	'
Management fee revenue	$768,651	$490,593	$1,468,848	$961,886
Direct costs	742,972	423,242	1,391,490	792,596
Gross profit	25,679	67,351	77,358	169,290
General, selling and administrative expenses	125,665	134,089	256,397	275,350
Consulting and professional services	72,843	86,148	157,505	169,564
Total Operating Expense	198,508	220,237	413,902	444,914
Operating loss	-172,829	-152,886	-336,544	-275,624
Non-operating income (expense)	'	'	'	'
Gain on revaluation of warrant liability	-77,136	7,551	-126,012	28,620
Interest expense	-8,925	-5,268	-14,359	-10,690
Net loss	($258,890)	($150,603)	($476,915)	($257,694)
Net loss per share, basic and diluted	$0	$0	($0.01)	$0
Weighted average number of common shares outstanding	53,650,013	53,500,013	53,594,275	53,327,882

Statements_of_Cash_Flows_Unaud

Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Nov. 30, 2013	Nov. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES	'	'
Net loss	($476,915)	($257,694)
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities	'	'
Stock issued for services	28,333	20,556
Warrants issued for services	0	0
Share based compensation	183,452	191,646
Loss/(Gain) on revaluation of warrant liability	126,012	-28,620
(Increase) decrease in prepaid expenses and other current assets	-15,885	4,402
Increase in accounts payable and accrued liabilities	105,510	54,646
Increase in deferred management fee revenue	5,000	0
NET CASH USED BY OPERATING ACTIVITIES	-44,493	-15,064
CASH FLOWS FROM INVESTING ACTIVITIES	0	0
CASH FLOW FROM FINANCING ACTIVITIES	0	0
Net decrease in cash and cash equivalents	-44,493	-15,064
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	107,674	114,563
CASH AND CASH EQUIVALENTS AT END OF PERIOD	63,181	99,499
NON-CASH FINANCING ACTIVITIES:	'	'
Reclassification of warrant liability to equity	$0	($107,091)

1_ORGANIZATION_AND_DESCRIPTION

1. ORGANIZATION AND DESCRIPTION OF BUSINESS	6 Months Ended
	Nov. 30, 2013
Accounting Policies [Abstract]	'
1. ORGANIZATION AND DESCRIPTION OF BUSINESS	'
	On June 14, 2011, the Company entered into agreements with Stranded Oil Resources Corporation (“SORC”) to seek recovery of stranded crude oil from mature, declining oil fields by using the Enhanced Oil Recovery (“EOR”) method known as Underground Gravity Drainage (“UGD”).  Such agreements include license agreements, management services agreements, and other agreements (collectively the “Agreements”).  SORC is a subsidiary of Alleghany Capital Corporation (“Alleghany Capital”) which is a subsidiary of Alleghany Corporation (“Alleghany”).
	The Agreements stipulate that the Company and Mark See, the Company’s Chairman and Chief Executive Officer (“CEO”), will provide to SORC management services and expertise through exclusive, perpetual license agreements and a management services agreement  (the “Management Service Agreement”) with SORC.  As consideration for the licenses to SORC, the Company will receive an interest in SORC’s net profits as defined in the Agreements (the “Royalty”). The Management Service Agreement outlines that the Company will provide the services of key employees (“Key Persons”), including Mark See, in exchange for monthly and quarterly management service fees.  The monthly and quarterly management service fees provide funding for the salaries, benefit costs, and FICA taxes for the Key Persons identified in the Management Services Agreement. The quarterly management fee was raised from $122,500 per quarter to $137,500 per quarter in August 2013 and is paid on the first day of each calendar quarter, and, as such, $45,833 has been recorded as deferred management fee revenue at November 30, 2013.  In addition, SORC will reimburse the Company for monthly expenses incurred by the Key Persons in connection with their rendition of services under the Management Services Agreement.  The Company may submit written requests to SORC for additional funding for payment of the Company’s operating costs and expenses, which SORC, in its sole and absolute discretion, will determine whether or not to fund.
	As consideration for the licenses to SORC, the Company will receive a 19.49% interest in SORC net profits as defined in the SORC License Agreement (the “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 Laredo Royalty Incentive Plan (the “Plan”) was approved and adopted by the Board and the Incentive Royalty was assigned by the Company to Laredo Royalty Incentive Plan, LLC, a special purpose Delaware limited liability company and wholly owned subsidiary of Laredo Oil, Inc. formed to carry out the purposes of the Plan (the “Plan Entity”). Through November 30, 2013 the subsidiary has had no activity.  As a result of the assignment of the Incentive Royalty to the Plan Entity, the Royalty retained by the Company has been reduced from 19.49% to 17.24% subject to reduction to 15% under certain events stipulated in the SORC License Agreement. Additionally, in the event of a SORC initial public offering or certain other defined corporate events, the Company will receive 17.24%, subject to reduction to 15% under the SORC License Agreement, of the SORC common equity or proceeds emanating from the event in exchange for termination of the Royalty. Under certain circumstances regarding termination of exclusivity and license terminations, the Royalty could be reduced to 7.25%. If any Incentive Royalty is funded as a result of those conditions being met, the Company may record compensation expense for the fair value of the Incentive Royalty, once all pertinent factors are known and considered probable.
	Basic and Diluted Loss per Share
	The Company’s basic and diluted loss per share amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period.  As the Company realized a net loss for the three and six month periods ended November 30, 2013 and 2012, no potentially dilutive securities were included in the calculation of diluted loss per share as their impact would have been anti-dilutive.

2_GOING_CONCERN

2. GOING CONCERN	6 Months Ended
	Nov. 30, 2013
Text Block [Abstract]	'
2. GOING CONCERN	'
	These financial statements have been prepared on a going concern basis.  The Company has no significant operating history as of November 30, 2013, and has a net loss of approximately $476,915 for the six months ended November 30, 2013. The Company entered into the Agreements with SORC to fund operations and to provide working capital.  However, there is no assurance that in the future such financing will be available to meet the Company’s needs.
	Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond.  These steps include (a) providing services and expertise under the Agreements to expand operations; and (b) controlling overhead and expenses.  There 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 and obtain additional financing.  There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.
	The accompanying 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.

3_RECENT_AND_ADOPTED_ACCOUNTIN

3. RECENT AND ADOPTED ACCOUNTING STANDARDS	6 Months Ended
	Nov. 30, 2013
Accounting Changes and Error Corrections [Abstract]	'
RECENT AND ADOPTED ACCOUNTING STANDARDS	'
	The Company has reviewed recently issued accounting standards and plans to adopt those that are applicable to it.  It does not expect the adoption of those standards to have a material impact on its financial position, results of operations, or cash flows.

4_FAIR_VALUE_OF_FINANCIAL_INST

4. FAIR VALUE OF FINANCIAL INSTRUMENTS	6 Months Ended
	Nov. 30, 2013
Fair Value Disclosures [Abstract]	'
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, include cash, trade accounts receivable, accounts payable, accrued liabilities, warrant liabilities and notes payable.  All instruments, with the exception of the warrant liabilities which are measured at fair value, are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at November 30, 2013.  Based on the borrowing rates currently available to the Company for loans with similar terms and maturities, the fair value of long term notes payable approximates the carrying value.
	FASB ASC 820, Fair Value Measurements (“FASB ASC 820”), defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. FASB ASC 820 provides a framework for measuring fair value, establishes a three level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires consideration of the counterparty’s creditworthiness when valuing certain assets.
	The three level fair value hierarchies for disclosure of fair value measurements defined by FASB ASC 820 are as follows:
	Level 1 – Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
	Level 2 – Inputs, other than quoted prices in active markets, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
	Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Valuation under level 3 generally involves a significant degree of judgment from management.
	A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
	The Company has warrant liabilities which are measured at fair value on a recurring basis at November 30, 2013 and 2012. The Company recorded a loss on revaluation of warrant liability of $77,136 and $126,012 and a gain on revaluation of warrant liability of $7,551 and $28,620 for the three and six months ended November 30, 2013 and 2012, respectively.  The Company measures the fair value of the warrant liabilities using the Black Scholes method.  Inputs used to determine fair value under this method include the Company’s stock, volatility and expected remaining life as disclosed in Note 6.
	The following table presents the fair value hierarchy for those assets measured at fair value on a recurring basis as of November 30, 2013 and 2012:
	Fair Value Measurements on a Recurring Basis
	Current Liability	Level 1		Level 2		Level 3		Total
	Warrant Liabilities – November 30, 2013	$	-	$	266,377	$	-	$	266,377
	Warrant Liabilities – November 30, 2012	$	-	$	44,736	$	-	$	44,736

5_RELATED_PARTY_TRANSACTIONS

5. RELATED PARTY TRANSACTIONS	6 Months Ended
	Nov. 30, 2013
Related Party Transactions [Abstract]	'
5. 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 shall be disclosed so that users of the financial statements can evaluate their significance. Related party transactions typically occur within the context of the following relationships:
	●           Affiliates of the entity;
	●           Entities for which investments in their equity securities is typically accounted for under the equity method by the investing entity;
	●           Trusts for the benefit of employees;
	●           Principal owners of the entity and members of their immediate families;
	●           Management of the entity and members of their immediate families;
	Other parties that can significantly influence the management or operating policies of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
	SORC and Alleghany are considered related parties under FASB ASC 850. All management fee revenue reported by the Company for the three and six months ended November 30, 2013 and 2012 is generated from charges to SORC. All outstanding long term notes payable at November 30, 2013 and May 31, 2013 are held by Alleghany Capital.  See Note 8.

6_STOCKHOLDERS_DEFICIT

6. STOCKHOLDERS' DEFICIT	6 Months Ended
	Nov. 30, 2013
Equity [Abstract]	'
6. STOCKHOLDERS' DEFICIT	'
	Share Based Compensation
	The Black-Scholes option pricing model is used to estimate the fair value of options granted under our stock incentive plan.
	The following table summarizes share-based compensation:
		Six Months Ended
		30-Nov-13		30-Nov-12
	Share-based compensation:
	General, selling and administrative expenses	$	183,452	$	191,646
	Consulting and professional services		28,333		20,556
			211,785		212,202
	Share-based compensation by type of award:
	Stock options		183,452		191,646
	Restricted stock		28,333		20,556
		$	211,785	$	212,202
	Stock Options
	On August 8, 2013, the Company granted 1,540,000 stock options to employees with an exercise price of $0.25 per share, the fair market value on the date of grant.  The options vest monthly over three years beginning September 1, 2013 and expire on August 8, 2023.   The grant date fair value of this employee stock option grant amounted to approximately $380,000.  The assumptions used in calculating these values were based on an expected term of 7.0 years, volatility of 187% and a 1.98% risk free interest rate at the date of grant.
	On November 22, 2013, the Company granted 1,200,000 stock options to employees with an exercise price of $0.36 per share, the fair market value on the date of grant.  The options vest monthly over three years beginning December 1, 2013 and expire on November 22, 2023.   The grant date fair value of this employee stock option grant amounted to approximately $427,000.  The assumptions used in calculating these values were based on an expected term of 7.0 years, volatility of 186% and a 2.1% risk free interest rate at the date of grant.  On November 22, 2013, the Company reduced the number of stock options previously granted to an employee with an exercise price of $2.00, resulting in a forfeiture of 400,000 stock options. As a result of this forfeiture, the Company recorded a reversal of compensation cost of approximately $40,000.
	Restricted Stock
	On August 8, 2013, the three independent board members were each granted 50,000 restricted shares which vest in equal annual installments over three years beginning on the grant date.
	The fair value of the restricted stock granted is the market value as of the respective grant date since the restricted stock is granted at no cost to the directors. The grant date fair value of restricted stock granted during the first quarter of fiscal year 2014 was $37,500, using $0.25 per share.
	In August 2012, Laredo Oil granted 500,000 shares of restricted stock to its new independent board member at a grant date fair value of $65,000 using $0.13 per share. The shares vest over three years.
	Warrants
	No warrants have been issued during the first half of fiscal year 2014 or 2013.
	All outstanding warrants are currently exercisable.

7_CONVERTIBLE_NOTES_PAYABLE

7. CONVERTIBLE NOTES PAYABLE	6 Months Ended
	Nov. 30, 2013
Debt Disclosure [Abstract]	'
7. CONVERTIBLE NOTES PAYABLE	'
	During May and June 2010, the Company issued ten convertible notes totaling $300,000, with an interest rate of 10% per annum, related to the Purchase Agreement. During June and July 2011, the ten convertible notes and accrued interest were repaid in full.
	In addition, the Company issued warrants to purchase 770,000 aggregate shares of capital stock. These warrants are exercisable for five years from the date of the Notes and warrants. The exercise price of each warrant will be equal to the lesser of the conversion price of the corresponding Note or $2.00. Accordingly, these warrants contain anti-dilution provisions that adjust the exercise price of the warrants in the event additional shares of common stock or securities convertible into common stock are issued by the Company at a price less than the then applicable exercise price of the warrants. Pursuant to FASB ASC 815-40, Derivatives and Hedging, these warrants are treated as a liability measured at fair value at inception, with the calculated increase or decrease in fair value each quarter being recognized in the Statement of Operations. The fair value of the warrants was determined during the three months ending November 30, 2013 and 2012 using the Black-Scholes option pricing model based on the following weighted average assumptions:
		2013			2012
	Risk-free interest rates		0.28	%		1.18	%
	Contractual life	1.7 years			2.5 years
	Expected volatility		202.5	%		184.7	%
	Dividend yield		0	%		0	%

8_LONG_TERM_NOTES_PAYABLE

8. LONG TERM NOTES PAYABLE	6 Months Ended
	Nov. 30, 2013
Debt Disclosure [Abstract]	'
8. LONG TERM NOTES PAYABLE	'
	During the fiscal year ended May 31, 2011, the Company entered into two Loan Agreements with Alleghany Capital for a combined available borrowing limit of $350,000.  The notes accrue interest on the outstanding principal of $350,000 at the rate of 6% per annum.  As of November 30, 2013, accrued interest totaling $64,476 is recorded in current liabilities.  The interest is payable in either cash or in kind.  The notes have been amended and restated and now have a maturity date of December 31, 2014 and are classified as long term notes payable.  The loan agreements require any stock issuances for cash be utilized to pay down the outstanding loan balance unless written consent is obtained from Alleghany Capital.

4_FAIR_VALUE_OF_FINANCIAL_INST1

4. FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)	6 Months Ended
	Nov. 30, 2013
Fair Value Disclosures [Abstract]	'
Fair Value Measurements on a Recurring Basis	'
	Current Liability	Level 1		Level 2		Level 3		Total
	Warrant Liabilities – November 30, 2013	$	-	$	266,377	$	-	$	266,377
	Warrant Liabilities – November 30, 2012	$	-	$	44,736	$	-	$	44,736

6_STOCKHOLDERS_DEFICIT_Tables

6. STOCKHOLDERS' DEFICIT (Tables)	6 Months Ended
	Nov. 30, 2013
Stockholders Deficit Tables	'
Share-based compensation	'
		Six Months Ended
		30-Nov-13		30-Nov-12
	Share-based compensation:
	General, selling and administrative expenses	$	183,452	$	191,646
	Consulting and professional services		28,333		20,556
			211,785		212,202
	Share-based compensation by type of award:
	Stock options		183,452		191,646
	Restricted stock		28,333		20,556
		$	211,785	$	212,202

7_CONVERTIBLE_NOTES_PAYABLE_Ta

7. CONVERTIBLE NOTES PAYABLE (Tables)	6 Months Ended
	Nov. 30, 2013
Convertible Notes Payable Tables	'
Warrants fair value assumptions	'
		2013			2012
	Risk-free interest rates		0.28	%		1.18	%
	Contractual life	1.7 years			2.5 years
	Expected volatility		202.5	%		184.7	%
	Dividend yield		0	%		0	%

4_FAIR_VALUE_OF_FINANCIAL_INST2

4. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) (USD $)	Nov. 30, 2013	31-May-13	Nov. 30, 2012
Warrant Liabilities	$266,377	$140,365	$44,736
Level 1	'	'	'
Warrant Liabilities	0	'	0
Level 2	'	'	'
Warrant Liabilities	266,377	'	44,736
Level 3	'	'	'
Warrant Liabilities	$0	'	$0

6_STOCKHOLDERS_DEFICIT_Details

6. STOCKHOLDERS' DEFICIT (Details) (USD $)	6 Months Ended
	Nov. 30, 2013	Nov. 30, 2012
Share-based compensation	$211,785	$212,202
General, selling and administrative expenses	'	'
Share-based compensation	183,452	191,646
Consulting and professional services	'	'
Share-based compensation	28,333	20,556
Stock options	'	'
Share-based compensation	183,452	191,646
Restricted stock	'	'
Share-based compensation	$28,333	$20,556

7_CONVERTIBLE_NOTES_PAYABLE_De

7. CONVERTIBLE NOTES PAYABLE (Details)	6 Months Ended
	Nov. 30, 2013	Nov. 30, 2012
Convertible Notes Payable Details	'	'
Risk-free interest rates	0.28%	1.18%
Contractual life	'1 year 8 months 12 days	'2 years 6 months
Expected volatility	202.50%	184.70%
Dividend yield	0.00%	0.00%

1_ORGANIZATION_AND_DESCRIPTION1

1. ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) (USD $)	Nov. 30, 2013	31-May-13
Organization And Description Of Business Details Narrative	'	'
Deferred management fee revenue	$45,833	$40,833

2_GOING_CONCERN_Details_Narrat

2. GOING CONCERN (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Nov. 30, 2013	Nov. 30, 2012	Nov. 30, 2013	Nov. 30, 2012
Going Concern Details Narrative	'	'	'	'
Net loss	($258,890)	($150,603)	($476,915)	($257,694)

8_LONG_TERM_NOTES_PAYABLE_Deta

8. LONG TERM NOTES PAYABLE (Details Narrative) (USD $)	Nov. 30, 2013
Long Term Notes Payable Details Narrative	'
Accrued interest	$64,476